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Smart Real Estate News & Commentary by Chris McLaughlin January 5, 2012

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California homeowners sue Capital One over short sales

Homeowners say in a class action that Capital One illegally made them pay thousands of dollars in deficiency contributions after short sales of their homes, though the state prohibited that in 2010.       Then-Gov. Arnold Schwarzenegger signed Senate Bill 931 into law in late 2010 to reduce foreclosures and boost short sales.  Before the law took effect in January 2011, homeowners had no incentive to short sell their homes because while lenders could not obtain a deficiency judgment on foreclosed properties, they could go after homeowners who sold short.

“However, it quickly became apparent that where there was a second mortgage, the junior lien holder often refused to release the lien and the short sale never went through,” according to the complaint.  “In February 2011, SB 458 was introduced, and on July 15, 2011, it was signed into law on an emergency basis. Section (a) of SB 458 expanded SB 931′s prohibition on obtaining a deficiency judgment to junior lien holders. Additionally, Section (b) of SB 458 further mandate that a ‘holder of a note shall not require the trustor, mortgagor, or maker of the note to pay any additional compensation, aside from the proceeds of the sale, in exchange for the written consent to the sale.’…Capital One has refused to comply with SB 458. In clear violation of the statute’s unambiguous prohibition, Capital One has illegally required California borrowers to pay the deficiency on their mortgages, in addition to ‘the proceeds of the sale, in exchange for [Capital One's] written consent to the sale.’ As a result, Capital One has generated substantial revenues from the collection of deficiencies from California-based borrowers in connection with completing short sales”.

The plaintiffs are represented by Mary Blasy with Scott+Scott of San Diego.  They seek damages for violations of California’s Code of Civil Procedure, violations of California’s Business and Professional Code, conversion and unjust enrichment.  A Capital One spokeswoman would not comment on the lawsuit.

Job claims and layoffs down, hiring up

The news is all good for the jobs market so far in 2012: Separate reports Thursday showed a surge in private-sector job creation, a sharp drop in weekly unemployment claims and planned layoffs at their lowest level in six months.  Private-sector jobs surged by 325,000, according to ADP and Macroeconomic Advisors, while the government said weekly jobless claims fell 15,000 to 372,000 — still at an elevated level but consistent with recent data showing a consistent if grudging turnaround.  Goods-producing businesses created 176,000 positions in the month, according to ADP’s payrolls count, while the goods-producing sector rose 52,000 and manufacturing increased 22,000.  For the government’s weekly claims tabulation, it was the fourth drop in five weeks. The four-week average, which smooths fluctuations, declined to 373,250, the lowest level since June 2008.  Applications have declined steadily over the past three months.  The four-week average fell 11% in 2011, evidence that companies are laying off fewer workers. But many employers have been slow to add jobs.

The reports come a day ahead of the Labor Department’s monthly report expected to show 150,000 total jobs created in the public and private sectors.  In a related report, the number of planned layoffs at US firms declined to its lowest level since June, suggesting ongoing improvement in the labor market although unemployment remains historically high, a report on Thursday showed.  Employers announced 41,785 planned job cuts last month, down 1.6% from 42,474 in November, according to the report from consultants Challenger, Gray & Christmas.  But December’s job cuts were up from the same time a year ago, rising 31% from the 32,004 job cuts announced in December 2010. For all of 2011, employers announced 606,082 cuts, up 14% from the 529,973 layoffs in 2010.  The 183,064 government job cuts in 2011 represented a record high for that sector since Challenger began tracking it in 2002. And while the financial sector did not come close to its record high, annual cuts for the sector were 63,624, up 165% from 2010.  The report showing a further decline in job cuts comes one day ahead of the US Labor Department’s key US jobs report, which is forecast to show a 150,000 increase in non-farm payrolls.  Challenger said planned hirings in December totaled 14,074, down from 63,527 in November but up from 10,575 a year earlier. For all of 2011, announced new jobs totaled 537,572, up from 402,638 in 2010.

Fed – foreclosure is not the best solution

More than four years into the housing crisis, and after millions of Americans have lost their homes, Federal Reserve Chairman Ben Bernanke is finally taking a stand.  Bernanke sent a Federal Reserve paper to the leaders of the House of Representatives’ Committee on Financial Services arguing that relying heavily on foreclosures to deal with mortgage borrowers that can’t meet their obligations is “costly and inefficient” for the housing market because they can lead to deteriorating homes and weigh on the property values in the surrounding community.  Instead, the paper encourages lenders to “aggressively” pursue loan modifications and for servicers to be given more incentives to seek alternatives to foreclosure. Foreclosures “can result in ‘deadweight losses,’ or costs that do not benefit anyone, including the neglect and deterioration of properties that often sit vacant for months (or even years) and the associated negative effects on neighborhoods,” the paper said. “These deadweight losses compound the losses that households and creditors already bear and can result in further downward pressure on house prices.”

The paper mirrors findings from regional Fed banks indicating that foreclosures can be detrimental to more Americans than just those who are losing their homes. Properties that are occupied, but in foreclosure, drive down the surrounding property values twice as much as vacant properties, an October study from the Cleveland Federal Reserve found.  And with millions of foreclosed properties already in the pipeline, the foreclosure process is already taking longer than in recent memory — a situation that may only be exacerbated if lenders don’t take the Fed’s advice. The average foreclosure process now takes 674 days, almost triple the time necessary in 2007.

Sales mixed in December

Although analysts were expecting sales at stores open at least 12 months to rise an average of 3.3%, according to Thomson Reuters Same-Store Sales Index. There were plenty of headwinds including mild winter weather and high levels of unemployment that retailers grappled with during December.  The results were a mixed bag, with retailers such as Macy’s Limited and Zumiez, posting solid results and raising their earnings forecast. But the results were different for others such as discounter Target, which fell short of analysts’ expectations and cut its outlook for the fourth quarter.  Target said same-store sales rose 1.6%, far short of the 3.1% average analyst estimate from Thomson Reuters. As a result of its weak sales, Target cut its fourth-quarter earnings estimate to a range of $1.35 to $1.43 a share, from a prior estimate of $1.43 to $1.53 a share.  “December sales were below our expectations as growth in grocery and beauty offset softness in electronics and music, movies and books,” said Gregg Steinhafel, chairman, president and chief executive officer of Target, in a press release. “Sales and traffic were strongest in the week leading up to Christmas as guests waited to shop for last-minute gifts.”  Others who posted weak results blamed the mild winter temperatures, which hurt sales of winter apparel and other winter merchandise.

Olick – Richard Cordray appointment to have big impact

“Barely a few hours after the White House confirmed that President Obama would use a controversial recess appointment to install former Ohio Attorney General Richard Cordray as the director of the Consumer Financial Protection Bureau (CFPB), both Obama and Cordray were sitting at the dining room table of Endia and William Eason; the Easons, both in their 90s, nearly lost their home due to ‘trickery and abuse’ by a non-bank mortgage broker.  ‘The Easons need someone who will stand up for them,’ President Obama told a crowd later at a Cleveland high school. ‘Millions of Americans need someone who will look out for their interests. They need someone like Richard.’  Part of Richard Cordray’s job will be to increase oversight of mortgage brokers, which has already started with new underwriting standards mandated by the Dodd-Frank financial reform legislation. His appointment will finally allow the CFPB to start regulating non-depository firms (non-bank lenders), which up to now it could not.  ‘And that could have a big impact,’ says Guy Cecala, CEO and Publisher of Inside Mortgage Finance. ‘A lot of these firms – ranging from mortgage brokers to large lenders like PHH – have effectively escaped regulation in the past. Now they will not only have to submit to reporting but also lending regulations previously only extended to depository institutions.’

That will likely take a while, as Cordray settles in, but there are more near-term implications of the appointment, like that he could potentially help finalize a deal with the state attorneys general and the big banks over the so-called ‘robo-signing’ scandal.  ‘As a former AG, he could use that to his advantage in the ongoing negotiations with the AGs,’ notes Edward Mills, policy analyst at FBR. ‘Beyond a settlement, what we would be looking for are updated disclosure documents that are easier for consumers to understand and a definition of what is a ‘qualified mortgage’ – which sets in place new consumer protections on all mortgages.’  And even beyond the short and long term implications of Cordray’s new role at the CFPB is the significance of the recess appointment itself on something even more crucial to housing: The Federal Housing Finance Agency (FHFA), overseer of Fannie Mae and Freddie Mac. The FHFA has been run by an acting director, Edward DeMarco, for several years.  DeMarco has stood in the way of various government attempts to use Fannie Mae, Freddie Mac and the FHA to help troubled borrowers and resuscitate the overall housing market. He has consistently argued that his job is to protect the books of these mortgage giants, not to ameliorate the dyspeptic housing market.  If the President can use the recess appointment for Cordray, then he could potentially use it to replace the very controversial DeMarco.  ‘A different FHFA director might take a more expansive view of what is needed to help housing,’ notes Jaret Seiberg, financial services policy analyst at Guggenheim Securities. ‘That opens the door to much bigger refinancing programs than what have been adopted so far. For borrowers, that means lower rates which helps the economy, helps housing and helps the President’s re-election effort.’”

Regional banks to improve in 2012?

This year should be a better one for regional banks than 2011, Barclays Capital banking analyst Jason Goldberg said yesterday.  Goldberg, who predicted in October that the banks will improve as long as the US economy improves, said that last year was “clearly disappointing” since 2011 started with expectations of 3% gross domestic product growth and ended with only a 1.7% rise.  There was also uncertainty about how the international Basel 3 bank solvency requirements and the US Dodd-Frank financial services law would affect regionals, plus the concerns about Europe’s solvency. Goldberg expects those factors to have less of an impact on the banks in 2012.  He is “overweight” on regional banks that “used the economic downturn to improve their franchises,” including bigger Wells Fargo, US Bancorp and PNC Financial. These banks, he said, “made acquisitions to improve their franchise and took market share from their struggling peers.”  Goldberg also likes Capital One, which “clearly benefited in 2011 from a much improved environment, in terms of credit quality for credit cards.” He says it will see a “modest pickup in growth” this year, thanks to two pending acquisitions.

Housing starts to rise in 2012?

Housing starts have hit their low point and will gradually pick up this year, Goldman Sachs chief economist Jan Hatzius said yesterday.  “We’re pretty confident that housing starts have bottomed at this point,” he said. “It’s going to gradually pick up as the still large amount of vacancies and excess supply comes down.”  Housing prices, however, will continue to fall until hitting bottom in the second half of the year, according to Goldman’s forecast.  Hatzius said the price bubble of 2006 has finally disappeared, and housing is now “fairly valued,” but there will be “some small declines in house prices for most of this year basically because of the excess supply that’s still out there. But we’re pretty confident that we’re pretty close to the bottom here.”

Hatzius is also confident the Federal Reserve will have some form of quantitative easing later this year.  “We think they’re still missing their dual mandate significantly on the weak side, even with all the policy measures that they’ve already taken,” he said of the Fed.  There is still a “big gap” between the current unemployment rate of 8.6% and the Fed’s estimate of “sustainable unemployment” of 6%, Hatzius said.  ”We don’t think that gap is going to significantly diminish in the course of this year, so I think they’re going to target that.”  He also thinks inflation is going to go below the Fed’s target by the end of the year. The Fed said in November it was comfortable with the current inflation level of 3.9%, which includes food and energy prices, or 2% excluding them.  Hatzius also reiterated Goldman’s forecast for a still sluggish recovery of 2% or so in 2012. the year “won’t look that different from 2011,” he said, with the first half of this year slower than the second half of last year.

Factory orders up in November

Orders to US factories rose sharply November on a surge in demand for airplanes. But demand for goods that signal business investment plans fell for the second straight month.  The Commerce Department said orders to US factories rose 1.8% in November, following two months of declines. It was the best showing since a 2.1% gain in July.  But orders for so-called core capital goods, such as computers and electronic equipment, dropped 1.2% following a 0.9% decline in October. The category is closely watched because it is a good proxy for business investment.  Manufacturing has been one of the bright spots in this sub-par recovery but there is concern that US exports could falter if debt problems in Europe push that region into a severe recession.

HUD suspends affordable housing firm

The Department of Housing and Urban Development (HUD) suspended James Grier and Philadelphia-based Mantua Gardens East Inc., a Section 8 apartment complex, from doing business with the government, alleging the company improperly threatened tenants with eviction and withdrew thousands of dollars from reserves without permission.  HUD also proposed their debarments to prevent Grier and the company from participating in government-related business for five years. Grier could not be reached for comment. A phone number for Mantua Gardens East was disconnected and a management firm connected with the apartment complex was closed Wednesday evening when a reporter called.  HUD said Grier and MGE improperly withdrew $325,000 from reserves without HUD approval and submitted false and misleading financial reports to HUD. MGE also failed to provide sufficient notice to tenants of its intention to opt out of the Section 8 project-based program, denying them adequate time to make housing arrangements and threatening them with eviction. Section 8 is a HUD affordable housing program. It includes housing vouchers for low-income residents as well as project-based financing such as that provided to MGE.

MGE agreed to a $720,000 mortgage loan in 1970 insured by the Federal Housing Administration (FHA). As an FHA mortgagor, MGE is required to establish and maintain a reserve account to meet emergency needs at the apartment complex, which comprises 10 buildings in Philadelphia’s University City neighborhood.  In 2008, Grier and MGE improperly withdrew reserves without HUD approval and then refused to restore the funds, HUD said. Grier and MGE pledged the funds, along with one of the development’s buildings and future rent payments, as collateral for a separate loan from a lending institution, according to HUD.  MGE received project-based Section 8 subsidies for nearly 30 years. Under the terms of the contract, MGE was entitled to opt out of the contract, but was first required to provide one year’s notice to the tenants. In October 2011, MGE notified HUD that it was opting out of the program but failed to properly notify tenants, HUD said.

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 3, 2012

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Details – anti-flipping rule waiver

I reported last week that the waiver on the anti-flipping rule was extended by the Federal Housing Administration (FHA)  through the end of 2012, but here are some more details, courtesy of DSNews.com.  The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned and bank-owned properties, no matter how long the homeowner has held the title, through December 31, 2012.  FHA says the waiver will allow homes to resell as quickly as possible, helping to stabilize real estate prices and revitalize communities experiencing high foreclosure activity.  “This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Carol Galante, FHA’s Acting Commissioner. “FHAremains a critical source of mortgage financing and stability and we must make every effort that to promote recovery in every responsible way we can.”

According to the FHA, the waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.  Among these conditions, all transactions must be arms-length, with no link between the buying and selling parties.  In addition, in cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will apply only if the lender meets specific conditions, and documents the justification for the increase in value.  FHA’s property-flipping waiver is limited to forward mortgages, and does not apply to the agency’s Home Equity Conversion Mortgage (HECM) for purchase program.  Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.  The agency says its own research has found that in today’s market, acquiring, rehabilitating, and reselling foreclosed properties to prospective homeowners often takes less than 90 days.  As a result, FHA says prohibiting the use of its mortgage insurance for a subsequent resale within 90 days would adversely impact the willingness of sellers to consider offers from potential FHA buyers, namely because they would be required to cover holding costs and the risk of vandalism that comes with allowing a property to sit vacant over a 90-day period of time.

Consumer spending tepid

After a strong start on Thanksgiving weekend, a pronounced lull followed, causing retailers to mark down products heavily in the week before Christmas. While final numbers for the season are not in, analysts say they are worried that retailers had to eat into profits to generate high revenues.  Consumer spending makes up 70% of the economy, so until it ignites, general growth is likely to be sluggish.  Macroeconomic Advisers, a forecasting company, projects growth of around 2% for the first half of this year, down from an estimate of 3.6% in the fourth quarter of 2011 and just 1.8% in the third quarter.  For consumers, the reasons for the sluggishness are clear: incomes are essentially flat, job growth is modest, and more than 40% of the new jobs in the last two years have been in low-paying sectors like retail and hospitality.  While consumer spending is not “going to collapse,” said Joel Prakken, senior managing director at Macroeconomic Advisers, “there are some headwinds there.”

DSNews.com – broad-based price decline

Data released last week by Standard & Poor’s indicates the fourth quarter of 2011 started with broad-based declines in home prices.   The 20-city composite of S&P’s closely watched Case-Shiller index was down 1.2% in October versus September, while the 10-city composite reading registered a 1.1% drop.  Home prices fell in 19 of the 20 cities covered by the S&P/Case-Shiller index. Phoenix was the only metro area to see a month-over-month increase, with prices there rising 0.3%.  David M. Blitzer, chairman of the index committee at S&P Indices, says Atlanta and the Midwest are regions that really stand out in terms of recent relative weakness.  He notes that Atlanta was down 5.0% over the month of October, after having fallen by 5.9% in September.  Chicago, Cleveland, and Minneapolis – some of the strongest markets during the spring and summer buying season – all saw monthly declines of 1.0% or more in October.  On a year-over-year basis, the 10- and 20-city composites posted declines of 3.0% and 3.4%, respectively, when compared to October 2010.

Detroit (+2.5%) and Washington D.C. (+1.3%) were the only two cities to record positive annual returns. Atlanta posted the worst year-over-year result with an 11.7% decline.  S&P notes, however, that 14 of the 20 metros and both composite readings recorded improved annual returns when compared to the agency’s previous report. Miami saw no change, while Atlanta, Detroit, Las Vegas, Los Angeles, and Minneapolis saw their annual rates worsen.  According to the S&P/Case Shiller index, the crisis low for the 20-city composite was back in March 2011. The 20-city reading in October is about 1.9% above that recent double-dip mark.  The index’s 10-city composite hit its crisis low quite earlier in the cycle, in April 2009, S&P says. October’s 10-city assessment is about 2.4% above its relative low.

Shhh – the US is broke, but don’t tell anyone!

The General Accounting Office has released its fiscal 2011 annual report.  When companies and governments have bad news to release, they try to release it at the moment when journalists and the public are paying the least amount of attention — thus, hopefully, generating the least possible amount of grumbling and complaints.  So it’s no surprise that the GAO released its 2011 report on the Friday before Christmas, possibly the day of the year on which the country was paying the least amount of attention.  As you might expect, the GAO’s annual report on the financial condition of the United States contains tons of bad news.  The country can print its own money, so it’s not “broke” in the classic sense of the word (can’t pay its debts, can’t fund its operations).  But the country is also clearly on an unsustainable course.

Here are the highlights:

-  The US ran a $1.3 trillion budget deficit in 2011, flat with 2010 and the third year in a row of deficits over $1.3 trillion

-  The US federal debt load continues to climb as a percentage of GDP and is expected to explode over the next few decades

-  The big problem in our current and future finances is NOT spending on Defense, Education, the Environment, and the other government programs that Democrats and Republicans love to fight about.

The big problem in our budget is a combination of:

-  Taxes that are currently off their peak as a percentage of GDP

-  Future unfunded commitments to Medicare and Social Security

To be perfectly clear: The amount of the “unfunded liability” for our Social Insurance programs (Medicare and Social Security) is now $34 Trillion. This is an increase of $3 Trillion from last year. This number has increased at about $1.7 Trillion per year for the past 10 years. If not for some absurd assumptions about how Congress is going to eventually chop the cost of Medicare (the so-called “doc-fix” that pays doctors more for Medicare procedures that Congress passes every year), the liability would be $46 Trillion.  So, what’s the implication and solution?  Over the long haul, the intelligent solution is a combination of modestly higher taxes and reductions in Medicare and Social Security benefits.  The other option is bankruptcy.

Miami-Dade sales up 25%

Pending home sales in Miami-Dade County jumped 25% in November from a year earlier, the Miami Association of Realtors said Tuesday.   The number of listings hit 3,348, up from 2,598 a year ago, the trade group said.  Single-family home and condo sales pending during the month jumped 43% and 14%, respectively, over their November 2010 levels.  “Miami pending home sales have consistently increased over the past couple of years,” said Jack Levine, 2011 chairman of the Miami Association of Realtors. “We continue to see increasing pending sales, which points to increased future closed sales, price appreciation, and market strengthening.”  The pending sales home index nationally increased 7.3% to 101.1 during the same month, showing a greater deal of confidence from an level of 83.3 a year earlier, the report said.

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 December 29, 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

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

RealtyTrac:  2012 – the year of the streamlined short sale

RealtyTrac is calling 2011 the year of foreclosure litigation, strategic default, failing foreclosure law firms and shadow inventory.  It also was a year of infighting between regulators, underwater mortgages and the year when Mortgage Electronic Registration Systems faced suits over everything from its business model to its assignment procedures.  Joel Cone, staff writer for RealtyTrac’s Foreclosure News Report, released a lengthy report on what this year brought for the mortgage, real estate and default servicing industries.  So what did we learn in 2011?  Cone says more borrowers learned to lean on strategic default, choosing to walk away from distressed or underwater loans instead of continuing to make payments on their mortgages.  Other borrowers discovered the system is moving at a snail’s pace, giving them more room to float by without making payments on mortgages. As banks struggled to catch up from 2010′s robo-signing-induced foreclosure moratorium, Cone says borrowers learned to gain a strategic advantage from the delays.  Cone writes that “armed with knowledge that the financial institutions are so far behind the eight ball playing catch-up with the delayed foreclosures, homeowners have no motivation to move on.” He added, “There are documented cases now of homeowners who are simply staying in their homes without making a mortgage payment for as long as three years, figuring they can stay until the bank gets around to foreclosing on them. In the meantime, they are living rent-free.”

RealtyTrac data shows it took on average 336 days to complete a foreclosure on properties that made it through the process in the third quarter of 2011, that’s up 180% from the first quarter of 2007 when it took an average 120 days, Cone said.  The states with the longest foreclosure timelines include New York, where it takes an average of 986 days to foreclose; New Jersey, where it takes about 974 days; and Florida, where it can take up to 749 days to complete a foreclosure.  As homeowners and foreclosure firms continue to sort through the mess, Cone noted several major foreclosure law firms shut down and others to pick up new business.  Casualties included heavy hitters David J. Stern in Plantation, Fla., the Amherst, New York-based law firm Steven J. Baum PC (which paid $2 million to settle allegations from a Department of Justice probe into its allegedly misleading foreclosure documents), and Fort-Lauderdale, Fla.- based Ben-Ezra & Katz, which shuttered its foreclosure practice.

While some firms stumbled, others saw an opportunity to grab market share. Cone quotes Law.com data, which shows Atlanta-based McCalla Raymer opening new branches and adding foreclosure divisions in the Southeast to handle up to 5,000 transfer files from foreclosure giants that have shuttered their doors.  So what’s Cone’s take on 2012? He believes short sales will play a huge role.  “The dysfunctional and delayed foreclosure process may finally be leading lenders to usher in the much-anticipated ‘year of the streamlined short sale’ in 2012,” he wrote.

Stock losses hit public pensions

Total investments held by pension systems administered by state and local governments fell 8.5% from the second quarter, although investments did inch up 1.1% from the same period a year earlier.  The total holdings reached $2.5 trillion in what was the eighth consecutive quarter of year-on-year growth.  After being battered by the financial crisis and recession, public pensions had seen four straight quarterly increases starting in 2010.  But in the third quarter, pensions’ corporate stock holdings fell 14.9% from the second quarter to $134.7 billion. That marked a 6.6% drop from the third quarter of 2010.  And international securities declined for the first time since the second quarter of 2010, falling 14.2% from the second quarter to $448.9 billion. It was the largest decline in international securities since the fourth quarter of 2008, in the midst of the Great Recession, according to the Census.

Public retirement systems depend on contributions from employees and employers to pay benefits, but the lion’s share of their revenue comes from investment returns.  A year ago, concerns about public pensions’ soundness reached a fever pitch. Conservative members of the US Congress called for the systems to lower their expected rates of return — a metric that is used to determine the systems’ abilities to meet their obligations — and for states to have the unprecedented option of filing for bankruptcy to escape public employee contracts.  The bankruptcy idea has largely disappeared, although earlier this month a leading Republican US senator, Jim DeMint of South Carolina, hinted other legislation changing public pensions could be coming soon.

Equator sees 1.17 million short sales

Default servicing technology company Equator says nearly 1.2 million short sales were initiated through its module over the past two years.  The company tracks this data through its default servicing platform, which helps mortgage industry clients deal with loan modifications, short sales, deeds-in-lieu, foreclosure processing and REOs.  Los Angeles-based Equator said Wednesday that more than $150 billion in assets have been sold using its technology platform over the past eight years. Analyzing trends from the recent fourth quarter, Equator said servicers heading into 2012 are focused on compliance issues.  “The needs of our clients have focused on the demands for stricter compliance and infrastructure security,” said Chief Operating Officer John Vella.  As the firm transitions into 2012, it’s prepping the launch of the REvolution software program, which will provide real estate professionals with a system to track both distressed and traditional properties.  The company said the software gives agents enough flexibility to automate their daily work-flow cycles from a single portal, removing the need for agents to employ more than one software system to handle various asset types and sales functions.

Jobless claims up

Initial jobless claims rose last week after a few weeks of declines and remain at levels last since in 2008.  The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Dec. 25 increased to 381,000 from 366,000 the previous week, which was revised upward 2,000.  Analysts surveyed by Econoday expected 372,000 new jobless claims last week with a range of estimates between 370,000 and 383,000. Most economists believe weekly claims lower than 400,000 indicate the economy is expanding and jobs growth is strengthening. Initial claims have been lower than this threshold for most of the past two months.  The four-week moving average, which is considered a less volatile indicator than weekly claims, declined by 5,750 claims to 375,000 — the lowest in more than three years — from the prior week’s slightly revised 380,270.  The seasonally adjusted insured unemployment rate for the week ended Dec. 17 inched higher to 2.9% from 2.8% the previous week, according to the Labor Department.  The total number of people receiving some sort of federal unemployment benefits for the week ended Dec. 10 rose to 7.23 million from 7.15 million the prior week.

WSJ – cracked foundation threatens housing recovery

A house is only as good as its foundation.  The same is true of the housing market. Unfortunately, its foundation, the housing-finance system, still has big cracks in it. Until those are fixed, any hoped-for recovery may prove difficult to sustain.  That isn’t to say housing won’t show signs of improvement. Recent data, such as new-home starts and existing-home sales, have offered some glimmers of hope. Tuesday’s release of the S&P/Case-Shiller index for October is likely to show further slippage of prices. But the rate of decline in the index, which tracks home prices in 20 metropolitan areas, is expected to continue slowing, to less than 3% year over year. That trend, some economists expect, presages prices finding a floor in 2012.  Meanwhile, mortgage rates hit a new low last week; Freddie Mac said the average for a 30-year fixed-rate loan was 3.91%. Such super-low rates and the resulting increased affordability of homes may spur more housing activity.

Still, the challenge of housing-finance overhaul remains a long-term headwind. As things now stand, housing finance remains almost completely dependent on government support via proxies like Fannie Mae and Freddie Mac.  That isn’t likely to change soon. Both Congress and the administration essentially punted in 2011 on hard decisions about the future of those firms and are likely to do so again in the coming presidential-election year.  Washington’s inaction is somewhat understandable, if disappointing. Any overhaul will force the government to decide if it wants a housing market where risk is taken by home buyers and private investors, or by the taxpayer. Any action also may threaten the existence of 30-year, fixed-rate mortgages with a prepay option and require a rethink of subsidies such as the deductibility for tax purposes of mortgage interest.

But the dithering isn’t only over big issues. Many small decisions about changes to housing-finance rules haven’t been finalized. Regulators, for example, have yet to give banks concrete guidance about how they will have to handle mortgages if they want to sell them to private investors.  Speaking at a conference earlier this month, J.P. Morgan Chase Chief Executive James Dimon lamented such a lack of progress saying it is “holding back the mortgage market.”  Continued delay means that any gains in housing may be built on shaky ground.

Expanding government role in mortgages

Washington lawmakers, who began 2011 with sweeping plans to shrink the US government’s role in mortgage finance, are heading into 2012 after enacting policies that expand it.  An 11th-hour payroll tax cut extension signed into law last week would for the first time divert funds directly from Fannie Mae and Freddie Mac, the two mortgage-finance companies under US conservatorship, to pay for general government expenses.  That move came after two others that also are expected to increase government involvement: Lawmakers allowed a tax break on private mortgage insurance to expire and raised loan limits for mortgages insured by the Federal Housing Administration. Advocates of private mortgage finance say they are concerned that using fees from Fannie Mae and Freddie Mac is setting a precedent that will keep the government in the mortgage business for a decade or more.  Fannie Mae, Freddie Mac and the FHA currently back more than 90% of loan originations, about double what they did during the subprime lending boom, according to Inside Mortgage Finance, a trade publication.

Earlier in the year, both the Obama administration and members of Congress outlined plans to reverse that trend. In February, US Treasury Secretary Timothy F. Geithner released three options for reducing government’s role in housing finance. Shortly afterward, Republicans introduced bills to wind down Fannie Mae and Freddie Mac, which have cost taxpayers about $153 billion since 2008 because of defaults on loans they guaranteed. The legislation never moved forward because there was no agreement even within the Republican caucus on the best way to proceed.  In December, pushing to find about $36 billion in revenue to offset the payroll tax cut for two months, Congress instituted a decade-long increase in the premiums that Fannie Mae and Freddie Mac charge lenders, known as “g fees,” to guarantee principal and interest on home loans. Lenders typically pass on the cost of the fees to borrowers as higher interest rates.  The move is drawing criticism: It relies on long-term revenues from entities both Democrats and Republicans want to shrink, and the money won’t be spent to offset the risk of loan defaults.  “In effect, this is a tax on Fannie and Freddie mortgages,” said Bert Ely, a banking consultant in Alexandria, Virginia. “When you go to privatize or take any action to wind them down, you have a budget effect that you didn’t have before.”

Fewer delinquencies, more foreclosures coming

Real estate research and marketing firm Trulia said employment figures improved slightly at the end of 2011, making it possible for more borrowers to pay their mortgages next year.  While Trulia says this trend could reduce 2012 delinquencies, the company expects foreclosures to continue to climb as banks sort through a backlog of distressed properties and foreclosures that stalled in the wake of robo-signing and increased regulatory oversight.  The firm says once a settlement between mortgage servicers and state attorneys general is finalized, many delayed defaults will plunge through the process.  As for what this means for real estate agents, Trulia said an increase in “foreclosures will depress prices for several reasons — foreclosed homes are often sold at a discount and used as comps for non-distressed homes.”  In turn, this will kill seller motivation even though buyers stand to benefit from affordable pricing structures.  “Agents should be gearing up with competitive pricing strategies to catch buyers and preparing to counsel their traditional seller-clients about the depressed prices to come in high-foreclosure areas,” Trulia said.  For those Americans now confined to the rental market, costs will be rising in 2012 as people losing their homes move toward the rental model. To resolve the issue, high-cost cities need to address the rental shortage directly by having local governments get rid of restrictions and permitting processes that are too stringent, according to Trulia.

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 December 28,2011

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Foreclosures down, short sales up in 2011

While data on the number of loans either seriously delinquent or in the foreclosure process suggested that an increase in the number of residential properties lost to foreclosure this year was a “slam dunk,” incoming data suggest that in fact the numbers will be down significantly from 2010, and will in fact probably come in at the lowest level since 2007!  Short sales and DILs, in contrast are likely to be up in 2011 compared to 2010, at least according to estimates derived from Hope Now data. Unfortunately, Hope Now data doesn’t allow for an estimate of SS/DILs by occupancy type, and HN didn’t start releasing data that allowed one to derive estimated short sales/DILs until early 2010. Given the number of loans either seriously delinquent or in the process of foreclosure at the beginning of the year, the number of completed foreclosure sales in 2011 is almost absurdly low, reflecting the complete screw-up of the mortgage servicing industry, and the resulting dramatic slowdown in foreclosure resolutions. As of the end of October, 2011 LPS estimated that there were 1.759 million seriously delinquent loans with the average number of days delinquent at 388 (compared to 192 days in January 2008), and there were 2.210 million loans in the foreclosure process that had been on average delinquent for 631 days.

Consumer confidence surges

The New York-based Conference Board says Tuesday that its Consumer Confidence Index rose almost 10 points to 64.5, up from a revised 55.2 in November. Analysts had expected 59.  The surge builds on another big increase in November, when the index rose almost 15 points from the month before.  Improving confidence is in line with retail reports of a decent holiday shopping season. Still, the December confidence reading is below the 90 level that indicates an economy on solid footing.  Economists watch the confidence numbers closely because consumer spending — including items like health care — accounts for about 70% of US

WSJ – 2011 in commercial real estate

For the commercial real-estate market, 2011 was a year that began with a boom and ended with a question mark.  After two years in the doldrums, commercial real estate came to life in the first half of 2011. Values rose in top markets, deal activity increased and financing became more plentiful. But the market hit the brakes in the summer when turmoil in Europe threatened to stall an already-shaky economic recovery. As the year comes to an end, the outlook continues to look uncertain.  But along the way in 2011, there were ups and downs, winners and losers and tears and high-fives. Here is a look at a few standouts:

Biggest Fight

Three years after taking apartment company Archstone private in a $22 billion leveraged buyout, the three owners—Bank of America Corp., Barclays PLC, and the estate of Lehman Brothers Holdings Inc.—spent much of 2011 fighting over how to unwind their soured investment. Now the two banks are trying to sell half their stake to Sam Zell’s Equity Residential, Archstone’s largest competitor, which wants to control all the property. This is unwelcome news to the Lehman estate, which is trying—in court and by raising funds—to block the purchase.

Worst Tenant-Landlord Relations

This fall, giant office landlord Brookfield Office Properties Inc. became the unexpected and extremely reluctant host of the Occupy Wall Street movement in Lower Manhattan. Thanks to its ownership of Zuccotti Park, the small plaza near Wall Street, the firm’s executives wished the movement had chosen to make a home base in a space they didn’t control. Still, they deferred to City Hall, waiting until the mayor gave his okay until they and the New York Police Department put an end to the occupation.

Most-Unexpected Comebacks

Two high-profile names associated with the boom-turned-bust of a few years prior reemerged earlier this year. New York developer Harry Macklowe, who lost his extensive office holdings in 2008 after a poorly timed $7 billion attempt to double down on his portfolio, led ventures to buy and convert two rental apartment buildings on Manhattan’s Upper East Side, totaling over $400 million in investment. Meanwhile Mark Walsh, Lehman Brothers’ head of real estate, whose insatiable appetite for commercial property during the boom helped sink the investment bank, reemerged. His Silverpeak Real Estate Partners won control of the $1.1 billion US real-estate portfolio of Dubai Investment Group.

Off the Beaten Path

While investors spent much of the year climbing over each other to buy apartments and top office towers in major cities, Blackstone Group LP waded deep in the muck of the commercial-property sector: strip malls and suburban office buildings. Put off by the unusually high price tags of the standard fare, the giant private-equity fund put its money into higher-yield major deals such as the $9.4 billion purchase of 588 US shopping centers from Centro Properties Group, a $1.1 billion suburban office portfolio from Duke Realty Corp., and a $473 million shopping-center portfolio concentrated in Florida and Georgia from Equity One Inc.

Best Sovereign Exit

Once big lenders during the real-estate boom, the three largest banks in Ireland all made a near-complete exit from the US market. Starting in the summer, Bank of Ireland, Allied Irish Banks PLC and Anglo Irish Bank Corp., each of which are mostly owned by the Irish government, nearly cleared their books of US loans, totaling sales of more than $12 billion, face value.

Change in Course

Donald Trump went from a public dalliance with a White House run to working on his golf handicap. In what would be its largest US property investment in years, Trump Organization agreed to pay $150 million to buy the Doral Golf Resort and Spa, a deluxe resort near Miami, often a stop on the PGA tour. While the deal isn’t done yet—other bidders could top Mr. Trump in a bankruptcy-court auction—it marks a shift from the years in which the high profile Trump buildings were licensing deals with other developers.

Worst Day in Court

In hindsight, bankruptcy might not have been the clean outcome it seemed for the Extended Stay hotel chain. David Lichstenstein, the New York investor who led the $8 billion purchase of the chain in 2007, put it into Chapter 11 when the investment soured. But this year, lenders went after a “bad-boy” provision, which can subject owners to large recourse penalties if they take certain actions, such as putting properties into bankruptcy. A New York state court ruled against him, exposing him to $100 million in personal liability, which he’s now appealing.

Biggest Optimist

At a time when few are building condominiums or office buildings, New York developer Gary Barnett, president of Extell Development Co., is betting big on a strong recovery in Manhattan. He has two giant Manhattan construction projects underway: the International Gem Tower, a mostly speculative tower aimed at both diamond dealers and traditional office tenants, as well as One57, a 1,004-foot condo tower aimed at a set of super-luxury foreign buyers. Neither started 2011 with a construction loan.

Biggest Ratings Snafu

Just as investors were about to buy bonds on a $1.5 billion batch of securities tied to commercial mortgages, Standard & Poor’s Ratings Services pulled its rating on the deal, being sold by Goldman Sachs Group Inc. and Citigroup Inc., citing potential problems with its ratings formula. The action was a shock to the commercial mortgage-backed securities world, shaking trust lenders and investors had put in the common financing tool.

Looking Ahead

With lenders wary of funding new construction, few major developments are expected to kick off in 2012, although a few developers are trying. Among those seeking to start building are Triple Five, which wants to re-start construction on a retail and entertainment mega-center in New Jersey previously named Xanadu, and Related Cos., which plans to start construction on its first tower in its $15 billion Hudson Yards project on Manhattan’s far West Side.

Iran threatens top block oil – prices rise

A senior Iranian official delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.  The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weapons program.  Apparently fearful of the expanded sanctions’ possible impact on the already-stressed economy of Iran, the world’s third-largest energy exporter, Rahimi said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” according to Iran’s official news agency. Iran just began a 10-day naval exercise in the area.

In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii, where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets.  But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response.  Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.  Oil prices rose above $100 a barrel in trading after the threat was issued, though it was unclear how much that could be attributed to investors’ concern that confrontation in the Persian Gulf could disrupt oil flows.

Freddie delinquency rate up

The delinquency rate of single-family mortgages held by Freddie Mac edged up to 3.57% in November from 3.54% in October, the government-sponsored enterprise said.  The multifamily delinquency rate fell to 0.28% in November from 0.31% the prior month, and the GSE’s total mortgage portfolio decreased at an annualized rate of 6.9% in November. A year ago, the single-family delinquency rate was 3.85% and the multifamily rate was about 0.34%.  Freddie completed 6,886 loan modifications during November, up from 6,571 a month earlier and 6,465 in September.  The single-family guarantee volume hit $27 billion in November, making up 71% of the mortgage giant’s total portfolio. That compares to $24.1 billion in October.  In addition, the unpaid principal balance of Freddie’s mortgage-related investment portfolio decreased by $5.8 billion in November.

Hiring up in 2012?

Employers expect to add new jobs in the new year, but are still cautious about their businesses, according to CareerBuilder‘s annual job forecast. Nearly one of every four hiring managers plans to hire full-time, permanent employees in 2012, similar to 2011 and employers said they expect to raise salaries.  “Barring any major economic upsets, we expect 2012 to bring a better hiring picture than 2011, especially in the second half of the year,” said Matt Ferguson, CEO of CareerBuilder. ”Many companies have been operating lean and have already pushed productivity limits. We’re likely to see gradual improvements in hiring across categories as companies respond to increased market demands.”  Ferguson said companies typically are more conservative in their survey answers than in their actual hiring.  Overall, CareerBuilder said 23% of employers surveyed plan to hire full-time, permanent employees next year, relatively unchanged from 24% for 2011 and up from 20% in 2010.  About 7% of respondents expect to decrease headcount, the same as 2011 and an improvement from 9% for 2010. Another 59% anticipate no change in staffing and 11% are unsure.

Small businesses reported more confidence in both hiring and retaining staff in 2012 with plans to downsize dropping two percentage points across small business segments while plans to hire increased two percentage points among companies with 50 or fewer workers. In that segment, 16% of respondents plan to add full-time, permanent staff in 2012, up from 14% for 2011.  For companies with fewer than 250 employees, 20% plan to add full-time, permanent staff in 2012, up from 19% this year and those reducing headcount fell to 4% for next year from 6% for 2011.  Of companies with 500 or fewer employees, 21% plan to add full-time, permanent staff, on par with 2011; those reducing headcount fell to 4% from 6%.

CareerBuilder said more employers in the West plan to recruit new employees in 2012 than other regions. Twenty-four% of employers in the West reported they plan to add full-time, permanent headcount.  However, the West also reported the highest number of companies planning to downsize in 2012 at 9%, reflecting the uncertainty businesses still feel about the economy.  Employers expect compensation levels to increase for both current staff and prospective employees as recruiting for skilled talent becomes more competitive.  Sixty-two% of employers plan to increase compensation for their existing employee base while 32% will offer higher starting salaries for new employees.  The survey, conducted by Harris Interactive from Nov. 9 to Dec. 5, included more than 3,000 hiring managers and human resources professionals across industries and company sizes.

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