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Smart Real Estate News & Commentary by Chris McLaughlin February 2, 2012

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Foreclosure deal deadline postponed

The deadline for states to decide whether to join a proposed nationwide foreclosure settlement with banks was delayed to Feb. 6 from Feb. 3, the Iowa Attorney General’s Office said. States were given more time to evaluate the proposal, which may total $25 billion, after at least one asked for a delay, Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, said yesterday in a phone interview. Miller is helping to lead negotiations. State and federal officials have been negotiating an agreement with mortgage servicers that would provide mortgage relief to homeowners and set requirements for how banks conduct foreclosures.

State officials are reviewing the agreement with Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc., and are being asked to sign on. Greenwood declined to name the state that asked for more time or comment on state support for the deal. Nevada Attorney General Catherine Cortez Masto said in a Jan. 27 letter to Miller, the Justice Department and US Housing and Urban Development Secretary Shaun Donovan that she needed answers to 38 questions to evaluate the deal. The deadline was changed as Oregon Attorney General John Kroger said today in a statement that he would sign on to the settlement, joining Connecticut Attorney General George Jepsen, who also supports it. Delaware Attorney General Beau Biden has said he won’t sign on to the settlement.

Job cuts jump in January

The number of job cuts announced by employers jumped 28% in January, led by retailers and financial firms, according to the latest report by global outplacement firm Challenger, Gray & Christmas. Still, job losses announced last month were the lowest on record for a January, the month that typically sees the greatest number of layoffs, the firm said. Employers last month said they planned to cut 53,486 positions, compared with 41,785 job cuts announced in December. The January job cuts were 39% higher than during the same period a year earlier, when employers said they planned 38,519 cuts. Retailers and financial firms saw the greatest cuts, losing 12,426 and 7,611 jobs, respectively.

Challenger said the retail job losses were not related to seasonal hiring, and instead were the result of restructurings, store closings, and other cost-cutting measures. The financial sector saw the most job losses since September, when 31,167 cuts were announced. Challenger noted that most of those layoffs came from. Government job cuts continued to dwindle for a second straight month, with just 3,021 layoffs announced in January. “Of course, it is far too early to say whether we will continue to see low job-cut figures in government. It is highly unlikely, considering that many cities and states continue to struggle with budget deficits,” Challenger said in a statement. “And, then there is the federal level of government, which remains under intense pressure to cut costs. As a result, we expect government layoffs to be heavy again this year.”

LPS – house prices slow decline

Lender Processing Services, Inc. (LPS),  today announced that its LPS Applied Analytics division updated its home price index (LPS HPI) with residential sales concluded during November 2011. The LPS HPI summarizes home price trends nationwide by tracking sales each month in more than 13,500 ZIP codes. Within each ZIP code, the LPS HPI tracks five price levels from low to high. “Since the post-bubble drop in home prices eased in January of 2009, we’ve generally seen that prices for homes in the lowest 20% of local markets in the metropolitan areas covered by the LPS HPI now differ by more than the highest 20% from their levels 10 years ago,” said Kyle Lundstedt, managing director of LPS Applied Analytics. “In those metropolitan areas where lowest-priced homes have increased in value, the differences between the high and low ends of the market have usually shrunk; where they have decreased in value, the differences have grown.”

The LPS HPI national average home price for transactions during November 2011 was $199,000 – a decline of 0.6% during the month relative to October 2011, reaching a price level not seen since October 2002 (Figure 1, Table 1). This is the fifth consecutive month of price decreases. The partial data available for December suggests further price declines of approximately 0.8%. LPS reported partial data from November transactions in its December release, which proved a reasonable indicator for November’s performance: it showed a preliminary 0.5% estimated decline, compared to the 0.6% for the full month’s data. LPS HPI average national home prices continue the downward trend begun after the market peak in June 2006, when the total value of US housing inventory covered by the LPS HPI stood at $10.8 trillion. Since that peak, the value has declined 30.6% to $7.5 trillion. During the period of most rapid price declines, from June 2007 through December 2008, the LPS HPI national average home price dropped $56,000 from $282,000, which corresponds to an average annual decline of 13.8%. Since December 2008, prices have fallen more slowly, interrupted by brief seasonal intervals of rising prices. During this period of more slowly declining prices, the national average home price has fallen approximately $26,000 from $226,000.

The November national average price is down 3.4% from the average price at the beginning of the year. Home prices in November were consistent with the seasonal pattern that has been occurring since 2009. Each year, prices have risen in the spring, but have reverted in autumn to a downward trend that has not only erased the gains, but has led to an average 4.4% annual drop in prices to date. The national average home price has declined 4.8% over the most recent year to November 2011. Price changes were largely consistent across the country during November, increasing in 13% of the ZIP codes in the LPS HPI. Higher-priced homes had somewhat smaller declines: 0.55% for the top 20% of homes (prices above $311,000), compared to 0.60% for the bottom 20% (below $100,000). The highest-priced homes, the top 1% (prices above $839,000), declined 0.47%.

Claims and productivity both easing

New US claims for unemployment benefits fell last week, a government report showed today, pointing to more healing in the nations battered jobs market. Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 367,000, the Labor Department said. The prior week’s figure was revised up to 379,000 from the previously reported 377,000. Economists polled by Reuters had forecast claims falling to 375,000. Claims have been lower than 400,000 for eight of the last 10 weeks, holding below a level associated with labor market healing. The four-week moving average for initial claims, a trend measure that smooths out volatility, fell 2,000 to 375,750. A Labor Department official said there was nothing unusual in the state-level data and that no state had been estimated. Job growth has gained momentum in recent months and the unemployment rate dropped to a near three-year low of 8.5% in December. The number of people still receiving benefits under regular state programs after an initial week of aid fell 130,000 to 3.437 million in the week ended January 21, the lowest since September 2008. Economists had forecast so-called continuing claims at 3.55 million. The number of Americans on emergency unemployment benefits rose 100,392 to 3.022 million in the week ended January 14, the latest week for which data is available. A total of 7.67 million people were claiming unemployment benefits during that period under all programs, little changed from the prior week.

Meanwhile, productivity increased at a 0.7% annual rate, the Labor Department said today. Economists polled by Reuters had forecast productivity, which measures hourly output per worker, rising at a 0.8% rate. Productivity rose at a 1.9% pace in the third quarter. Over the entire year, productivity rose 0.7%, the slowest since 2008. Hourly compensation rose at a 1.9% rate in the last three months of the year after contracting in the previous two quarters. That is well below the US inflation rate, with consumer prices rising 3.0% in the 12 months through December. Subdued wage growth supports the US Federal Reserve’s view of a low inflation environment. This likely gives the US central bank more room to try to boost growth and tackle stubbornly high unemployment. Though productivity has slowed after growing rapidly as the economy emerged from the 2007-09 recession, businesses have maintained the bulk of the gains made during the recovery. Businesses, estimated to be sitting on a cash pile of about $2 trillion, continue to hold the line on costs. Unit labor costs rose at a 1.2% rate in the fourth quarter. Economists had expected fourth-quarter unit labor costs would increase at a 0.8% rate.

WSJ – GOP discusses Obama’s mortgage plan

President Barack Obama, in announcing a program to help struggling homeowners refinance their mortgages, is betting this plan will fare better than his administration’s earlier efforts to fix the housing market. But House Speaker John Boehner (R., Ohio) questioned why this program would work when others have failed. “One more time? One more time? How many times have we done this?” he asked reporters. “I don’t know why anyone would think that this next idea is going to work.” He added that the previous programs have led to a delay in “the clearing of the market,” or letting housing prices hit bottom by allowing foreclosures to happen more rapidly. Republicans see additional government intervention as doing little to improve the housing situation. Mitt Romney, the front-runner for the GOP presidential nomination, said in October that the government should not try to stop foreclosures but let the housing market “hit the bottom.” He has argued that Mr. Obama’s housing policies have failed.

The government already has programs that allow some homeowners who are current on their payments to refinance at lower interest rates, even if they owe more than their homes are worth or wouldn’t otherwise qualify. Those programs are limited to borrowers with mortgages backed by Fannie Mae and Freddie Mac. The latest proposal would extend that option to all homeowners, allowing borrowers who are current on payments to refinance into new loans backed by the Federal Housing Administration. That requires congressional approval, partly because it would cost money. Economists said the latest proposal—at least on paper—is more ambitious than previous plans because it would allow more borrowers to qualify. Until now, policy makers and elected officials have been hesitant to take bolder steps because the political will simply isn’t there, analysts said. Many of those solutions would mean spending more money or forcing banks and investors to take bigger losses. Instead, policy makers tried to steer a middle course. Many have worried that rewarding irresponsible behavior would create a “moral hazard” that might encourage more defaults.

The hitch is that the programs were designed to make sure they didn’t help borrowers who took on more debt than they could afford. And that “made these programs very complicated,” said David Stevens, chief executive of the Mortgage Bankers Association who spent two years as a top Obama administration housing official. Using the FHA to refinance at-risk borrowers isn’t a new idea. The Bush administration and Congress passed a program in 2008 called for Hope for Homeowners that also employed the agency to refinance at-risk homeowners. It included many restrictions and resulted in just a few hundred refinanced loans. The Obama administration rolled out a similar initiative without Congress two years ago. It resulted in around 700 refinances. “The banks decided not to participate,” said Peter Swire, a former housing adviser to Mr. Obama. “So now the administration is looking for another way to achieve the same goals.”

US still risks recession

In the United States, the manufacturing sector grew at its fastest pace in seven months in January as new orders improved, but Jim Walker, Founder and Managing Director of independent research firm, Asianomics, said that the US economy is going to face a slowdown this year owing to fiscal tightening.

“There’s going to be a significant slowdown in fiscal expenditure in the US, they’re going to have to control the fiscal side much more as the year goes on,” he said. On Wednesday, the US House of Representatives voted overwhelmingly to freeze wages for federal civilian workers until 2013, a move that will save taxpayers $26 billion. According to Walker, pullbacks in government spending will cut between 1 and 1.5% from US GDP in 2012. Walker also believes corporate investment is likely to slow after the federal depreciation allowance expired at the end of 2011. In a report for clients released in December, Walker said there was a 55% chance of a US recession.

He also argued that US consumers were due for another “period of reckoning”, despite improving consumer confidence and spending numbers. He listed a litany of reasons: “Home prices are still falling (on a mild deflation path), equity prices are still off their highs of the year, household credit outstanding is still contracting, real hourly compensation growth is still negative, employment growth is still sub par – and up until November – consumer confidence was fast approaching the recession lows of 2008.” Walker is much more bearish on Europe, which he says is destined for a recession, with GDP contracting 2 to 5% in 2012. He expects further monetary easing from global central banks, which he says will boost precious metals, most notably silver. But he says investors should short the Euro and avoid industrial metals such as copper, which will suffer from a global downturn.

Atlanta lags in housing recovery

Housing prices continue to fall nationwide, despite a few modest signs of improvement. But not all markets are equal. A sprawling Southern metropolis, Atlanta has become one of the biggest laggards in the economic recovery. In November, prices of single-family homes were down close to 12% compared with a year earlier, the largest decline among major metropolitan areas, according to data released on Tuesday in the Standard & Poor’s/Case-Shiller Home Price Index. Home prices regionally are now below their levels of 2000, making Atlanta one of only four metro areas to have experienced such a slide. The price of entry-level housing in the area — the lowest tier of the market, valued at just under $96,600 — fell by close to a third last year.

Even though the national economy shows signs of strengthening, the beleaguered housing market remains a significant drag on the recovery. Across a group of 20 metropolitan areas measured by S&P/Case-Shiller, prices of single-family homes were 3.7% lower in November compared with a year earlier, with average prices at their 2003 levels. Economists say prices are unlikely to hit a nadir until at least late spring. Tom Porcelli, chief United States economist at RBC Capital Markets in New York, projects that average prices could slip by as much as 5% nationally this year because of the large amount of distressed properties for sale and a shortage of buyers. Although Mr. Porcelli describes a “generally better outlook on housing” than he has over the last few years, he added, “we still have a long way to go.”

The reasons for Atlanta’s housing woes are both representative of the nation’s troubles and special to this former boomtown, where housing appreciated handsomely, though not to the lofty heights of Las Vegas, Miami and New York. Where the region once attracted thousands of prospective home buyers drawn by plentiful jobs and more affordable living, that influx has dwindled. Local unemployment, at 9.2%, is slightly higher than the national rate, in part because one in every four jobs lost was connected to real estate, a much higher rate than in the rest of the country. Those jobs have yet to return, while even people with work are having trouble qualifying for loans. The region, plagued by mortgage fraud and developers who dotted the exurban landscape with large luxury homes that never sold, is inundated with foreclosed properties. In fact, Atlanta has the most government-owned foreclosed properties for sale of any large city, according to the Federal Reserve.

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 10, 2012

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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Senate committee approves statewide guidelines for foreclosures

The Banking and Finance Committee voted 5-2 in favor of sending the substitute to House Bill 110 to a full vote, which could happen as soon as this week.  According to the proposal, the bill would authorize cities and counties to create foreclosure registries that would have statewide requirements. The fee to register a property would not exceed $175, and the penalties for failing to register properties would be limited to $500 a month and $2,000 total.  The proposal does not preempt city or county ordinances requiring registration of foreclosed properties for repeated violations that remain uncorrected for at least 60 days, but would it would stop any other local foreclosure registries currently in existence.  Banking Committee Chairman Sen. Jack Murphy said such a law is needed to prevent cities and counties from treating fees associated with foreclosures and vacant properties as a cash cow.  “It can’t become a revenue source,” Murphy said. “That’s a tax. We need something standardized that everybody has to go by. That will keep abuse from occurring.”  Murphy cited reports that DeKalb County raked in more than $550,000 in fees in less than a year.

The original legislation was sponsored by state Rep. Mike Jacobs, a Republican lawmaker whose district includes DeKalb County.  The bill is a carryover from last year, when it stalled as lobbyists for cities and counties raised concerns that the bill could have unintended consequences. Several people representing groups who opposed the original version remarked that they had not seen the updated proposal until Monday’s committee hearing and were still evaluating whether it is an improvement.  “County and city elected officials are hearing a lot from the public about this,” said Clint Mueller, a spokesman for the Association of County Commissioners of Georgia. “There are a lot of foreclosed and properties that are not being taken care of. We have no idea where to even begin to find out who is responsible.”  Still, Mueller said it is important to ensure that municipalities are not punished in an effort to address the issue through state legislation.  “It could have far-reaching effects if it’s not done right,” he said.  If approved, the law would take effect July 1.

Small business optimism edges up

The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose 1.8 points to 93.8.  Eight of the index’s 10 components were either improved or flat. About half the gain was due to reduced concern about business conditions six months into the future, the NFIB said.  The index is still in recession territory, however, 6 points below the pre-recession average and more than 10 points below the same point in the recovery from the 2001 recession.  The gains in the index are supportive of the view that economic growth will pick up in 2012, but the gains are not likely to be substantial unless the index rises more sharply, the business group said.  The NFIB reported earlier this month that small businesses cut staff in December. The% of businesses reporting reductions in employment remained relatively low, but the percentage increasing employment, though larger, did not offset the losses and remains historically low for an expansion.

Zillow – 3 – 5 years away from normal

Real estate website Zillow.com on Tuesday released a report that shows South Florida home values were flat in November.  Zillow’s Home Value Index for Palm Beach, Broward and Miami-Dade counties was $137,000 – up 0.1% from October.  Values here have been flat or positive for seven of the past nine months. Prior to that, though, values had declined in 66 of the previous 67 months.  Zillow said home values in South Florida have fallen about 4% from a year ago and 55% from the 2006 peak.  Zillow’s report comes a day after a mostly encouraging forecast from the Clear Capital research firm.  Stan Humphries, chief economist for Zillow, said in a statement that supply and demand are still out of whack in many markets, and more foreclosures in 2012 are expected to hurt home values.  “Even with the anticipated increase in foreclosures, look for 2012 to be a transitional year in which home values fall modestly followed by a prolonged period of flat home values,” he said. “We’re still three to five years away from ‘normal’ housing market conditions.”

New details for MF Global

The investigation into MF Global is intensifying as federal authorities unearth new details and confront potential obstacles in their hunt for roughly $1.2 billion in customer money that disappeared from the brokerage firm.  While prosecutors and regulators have jointly conducted dozens of depositions with former and current employees, a senior official in the Chicago office of MF Global recently declined to meet with the federal authorities, people briefed on the investigation said.  That official, Edith O’Brien, a treasurer at MF Global, is considered a “person of interest” in the investigation, the people said. Federal authorities suspect that she transferred about $200 million to JPMorgan Chase in London on the eve of the bankruptcy of MF Global, money that turned out to be customer cash.  Authorities had expected to interview Ms. O’Brien last month. She instead balked at meeting voluntarily, asking first to strike a deal with criminal authorities that would excuse her from prosecution, the people said. The criminal investigation is led by the Federal Bureau of Investigation and federal prosecutors in Chicago and Manhattan.  The request by Ms. O’Brien is the first in this case, one person briefed on the investigation said. Still, such requests are common in federal investigations and it does not suggest that she violated Wall Street regulations. Ms. O’Brien has not been accused of any wrongdoing, and there is no indication that she intentionally transferred customer money to JPMorgan.  Ms. O’Brien’s lawyer, Reid H. Weingarten, did not respond to requests for comment.

WSJ – mall occupancy up slightly

US malls and shopping centers experienced a slight improvement in occupancy during the fourth quarter, a relief for landlords that have been battling lackluster demand from retailers for most of the downturn.  But data service Reis Inc. cautioned that any recovery remains precarious and the outlook for this year is mixed, given the clouds hovering over the economy. While some retailers are expanding—such as Forever 21 Inc., Dick’s Sporting Goods Inc. and Dollar General Corp.—landlords can expect more headaches from high-profile store closures by companies such as Sears Holdings Corp. and Gap Inc.  The fourth quarter typically is the strongest for retail landlords as well as their tenants. Still, the fourth quarter of last year was one of the strongest since the recession hit, in terms of rising rents and occupancies.

Malls in the top 80 US markets posted an average vacancy rate of 9.2% in the quarter, down from the 11-year high of 9.4% in the third quarter, according to Reis, which began tracking mall data in 2000. Mall vacancies had been climbing steadily for most of the downturn since 2007, when the vacancy rate fell as low as 5.5%.  Demand for space at neighborhood and community shopping centers also strengthened in the quarter, with stores occupying an additional 3.1 million square feet in the top 80 markets. Because of new construction, vacancy in this category remained at 11%, where it has been for three quarters, a level last seen in 1991.  Owners of retail property have been hit hard during the downturn by overbuilding, consumer caution and competition from online shopping. In the three years covering 2008 through 2010, retailers at neighborhood and community shopping centers vacated a total of 31.6 million square feet, according to Reis.  But the most recent quarter’s results indicate that the worst might be over, especially with the economy adding jobs. A decent holiday shopping season also gave the retail property sector a boost, with 23 national chains reporting an average sales gain of 3.4% in November and December at stores open at least a year, according to Retail Metrics Inc.

The average annual rent at US malls rose to $38.92 a square foot in the fourth quarter, a 0.3% increase from the third quarter and the second consecutive quarterly gain, according to Reis. Mall rents had been mostly flat or declining since 2008.  Average annual rents at US strip centers increased 0.1% in the fourth quarter to $19.04 a square foot after 13 consecutive quarters of remaining flat or declining.  Retail landlords also have been helped by a virtual shutdown in new store construction, meaning they face less competition for tenants. Only 4.5 million square feet of shopping-center space opened in 2010, the lowest figure in 31 years, according to Reis. Last year was slightly higher, with only 4.9 million square feet being delivered.

HARP 2.0 effects to be seen soon

Effects of the retooled Home Affordable Refinance Program (HARP) may start to appear next month, analysts said yesterday.  Since the Federal Housing Finance Agency (FHFA) announced changes to HARP in October, servicers have been adjusting operations. Upfront fees, loan-to-value ratio caps and representation and warranty claims on the old loan file were eliminated for eligible borrowers.  The program launched in March 2009. Roughly 838,000 Fannie Mae and Freddie Mac borrowers were able to refinance into lower rates, but only about 7% of them had LTVs above 105%.

Prepayments slowed in December, according to Bank of America Merrill Lynch (BOAML) analysts, dropping 6% on Fannie Mae securities backed by 30-year fixed-rate mortgages.  “We anticipate another uneventful month in January before February provides the first glimpse into the new program’s prospects. Even before then, it is interesting to note that HARP-eligible pools — which responded slowly at the start of the current refinancing wave — continued to show slow, steady prepayment increases this month,” BOAML analysts said.

Rumors stirred of another plan from the White House to boost more refinancing. A white paper from the Federal Reserve made the case for one, along with other suggestions to address still lingering housing problems.  Analysts at JPMorgan Chase said Monday that modifying all coupon stacks of mortgage-backed securities would violate the prospectus. The loans, analysts said, need to be at risk of imminent default for such an action. If Washington started a refi wave on GSE loans and everything was moved into a 4% mortgage, Chase analysts believe it would only result in a total of $25 billion to $30 billion in annual savings for borrowers.  “The dollar savings of such a move are modest in light of the overall economy,” the analysts said and would merely be a transfer of wealth from investors to borrowers. “HARP 2.0 theoretically addresses many refi hurdles, and we will learn over the next six months how successful it will be.”

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 9, 2012

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

LPS – foreclosures stagnant

The November Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that while mortgage delinquencies at the end of November 2011 were nearly 25% less than the January 2010 peak, the  trend toward fewer loans becoming delinquent, which dominated 2010 and the first quarter of 2011, appears to have halted. At the same time, new problem loans – those loans seriously delinquent as of the end of November that were current six months prior – have not improved significantly in the last year. This degree of stagnation indicates that while the situation is not getting markedly worse, it is not improving either, and inventories of troubled loans remain significantly higher than pre-crisis levels across the board.  The November mortgage performance data also showed both new and repeat foreclosure starts dropped sharply in November, down nearly 30% from the month prior. As late-stage delinquencies in the pipeline still number close to 2 million, the sharp drop is more indicative of the impact of ongoing document reviews, additional state legislation and new regulatory requirements rather than a shift in trend.

Prepayment activity – a key indicator of refinances – remained strong after several consecutive months of growth; however the October origination data showed a month-over-month drop of nearly 12%. While still the second highest level for the year, originations through October 2011 were down 21% vs. the same period in 2010 and down almost 30% vs. 2009.

Other key results from LPS’ latest Mortgage Monitor report include:

​Total US loan delinquency rate:  ​8.15%

​Month-over-month change in delinquency rate:  2.7%

​Total US foreclosure pre-sale inventory rate:  ​4.16%

​Month-over-month change in foreclosure pre-sale inventory rate:-  3.0%

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

​States with the lowest percentage of non-current* loans:  ​ND, AK, WY, SD, MT
*Non-current totals combine foreclosures and delinquencies as a% of active loans in that state.

Notes:

(1)    Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets.

(2)    All whole numbers are rounded to the nearest thousand.

Service sector up

The services sector—long the engine of the US economic growth but an unusual drag in the recovery this time around—is finally showing signs of sustained strength, from job creation to overall output.  The trend has been underscored in nonfarm payroll data over the past few months, including the better-than-forecast December data released Friday, which showed healthy gains again in retail trade and leisure and hospitality.  The jobs recovery in the service sector — long overdue and anxiously expected — is most pronounced over the past six months, during which time private sector service employment rose some 850,000 to almost 92 million. Over the past 12 months, payrolls are up more 1.5 million.  The pickup is in stark contrast to the first year of the recovery, when services payrolls were essentially flat, following a deep decline during the 2007-2009 recession.  In the four recessions prior to the recent one, the number of services jobs held steady or rose slightly. In the Great Recession, some 3.4 million were lost.  During the 1990-2000 period—the longest peacetime expansion in US history—services counted for some 80% of net private sector payroll growth. In the previous US expansion, the economy added more than 6 million service jobs in the 2003-2007 period, but lost 2.5 million manufacturing ones during that time.

WSJ – mortgage rates hold near lows

Average fixed mortgage rates in the US over the past week kicked off the new year at or near record lows, according to Freddie Mac’s weekly survey of mortgage rates.  The firm noted the rate for a 30-year fixed-rate mortgage during the period matched its all-time low, making it the fifth straight week the rate has averaged below 4%.  The 30-year fixed-rate mortgage averaged 3.91% for the week ended Thursday, down from 3.95% the previous week and 4.77% a year ago. Rates on 15-year fixed-rate mortgages averaged 3.23%, down from 3.24% last week and 4.13% a year earlier.  The five-year Treasury-indexed hybrid adjustable-rate mortgage, or ARM, averaged 2.86%, down from 2.88% last week and 3.75% a year ago. One-year Treasury-indexed ARM rates averaged 2.8%, up from 2.78% the prior week, though below 3.24% last year.  To obtain the rates, 30-year and 15-year fixed-rate mortgages required an average payment of 0.8 percentage point. Five-year and one-year adjustable-rate mortgages required an average 0.7 percentage point and 0.6 percentage point payment, respectively. A point is 1% of the mortgage amount, charged as prepaid interest.

Job crisis to last years

Despite an upswing in hiring during 2011, the jobs crisis could last many more years as millions of Americans struggle to find work.  The US Labor department said employers added 200,000 jobs during December, many more than expected by Wall Street. In 2011 as a whole, 1.64 million jobs were created, well above the 940,000 in 2010 and the best showing since 2006.  But the number of jobs in the economy is still about 6.1 million lower than before the brutal 2007-2009 recession. At December’s pace of gains, it would take about 2 1/2 years just to get back to pre-recession levels of employment.  That means many people will be in for an agonizing wait.  In December, 5.6 million of the nation’s unemployed had been out of work for at least six months, the Labor Department data showed, only slightly lower than the previous month.  While job creation certainly picked up in the United States during the end of the year, economists point out that even a gain of 200,000 is underwhelming considering constant growth in the population and the still-high 8.5% unemployment rate.  In December, the construction industry added 17,000 jobs. But that sector, devastated by a burst housing bubble that helped trigger the last recession, has even farther to go than the rest of the economy before it can recover.  There were still almost a third fewer construction jobs in December than at the industry’s pre-recession peak in August 2006.

Olick – selling foreclosures in bulk

“The Obama Administration, in conjunction with federal regulators and led by the overseer of Fannie Mae and Freddie Mac, are very close to announcing a pilot program to sell government-owned foreclosures in bulk to investors as rentals, according to administration officials.  There are currently about a quarter of a million foreclosed properties on the books of Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) and millions more are coming.  The foreclosure processing delays of last year created a mammoth backlog of properties yet to be processed, which are just now being re-started. One of the initiatives of this program is for the federal government to be in the position to mitigate and manage any new wave of foreclosures, sources say. Late stage delinquencies still in the pipeline number close to two million, according to a new report from Lender Processing Services. Foreclosure starts outnumber foreclosure sales by two to one, and, ‘the trend toward fewer loans becoming delinquent, which dominated 2010 and the first quarter of 2011, appears to have halted,’ according to LPS.  Knowing this all too well, the Treasury Department, Federal Reserve, HUD, FDIC, Fannie Mae and Freddie Mac, with their conservator, the Federal Housing Finance Agency (FHFA) at the helm, are engaged in a collaborative effort to face this new wave of foreclosures head on and figure out a way to keep these properties from sitting heavily on the books of the government and sitting empty in the nation’s neighborhoods.

As the Federal Reserve alluded to in its white paper on housing last week, ‘A government-facilitated REO-to-rental program has the potential to help the housing market and improve loss recoveries on reo portfolios.’ REO’s (Real Estate Owned) are bank-owned properties, or, in this case, properties owned by the GSE’s and the FHA. Three Fed governors pushed for similar plans in speeches last week as well.  A pilot sales program will be starting in the very near future, according to administration officials. They are working on what the market potential is, what pricing would be, how government can partner with private investors, and who has the operational experience to manage so many properties.  ‘I think there is a fair amount of money in the wings waiting to buy, investors doing cash raises to buy properties on a large scale,’ says Laurie Goodman of Amherst Securities. ‘But that means they have to build out a rental organization; it means they build out a management company because if you’re accumulating a hundred homes in Dallas that’s very different than running a multi-family building.’  A number of institutional investors have shown appetite and interest in bulk REO deals, according to officials, but the plan has to incorporate ways to help facilitate financing. That has been one of the biggest roadblocks to deals already in the works between hedge funds and the major banks. Sources close to these private bank negotiations say there is plenty of cash to buy properties, but building out a management structure for the rentals is pricey, and some investors are finding the math doesn’t add up to make it worth their while.

Larger investors want to be able to get real scale in any government program, in the range of 50, 100, 500 properties per deal, or one billion plus in assets, say officials close to the plan. That’s why the government is looking to test a combination of different approaches. Fannie Mae did a fifty million dollar sale last June, but that was on the small side. Officials are evaluating at what larger asset sales beyond that would look like.  ‘We expect several pilots that will involve both local investors and institutional investors. The goal here is to reduce supply by converting foreclosed homes into rental units,’ says Jaret Seiberg of Guggenheim Securities. ‘Less supply – even less fear about a flood of foreclosed homes hitting the market – could stabilize [home] prices.’  While much of this program will focus on local areas of distress, largely in the sand states, officials say they are looking at where the assets are today but are really more focused on where all the foreclosures will be in the future. It’s not about the stock of foreclosures currently, it’s about the flow of them over time and alternative ways to manage that flow.  Officials say they want to bring back private capital and help support rental opportunities for households, particularly when rent rates are up at the same time home prices are down.”

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 6, 2012

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NAR – short sales key to solving crisis

Stabilizing and restoring the health of the housing market is critical to a broader economic recovery, according to a white paper released yesterday by the Federal Reserve Board. Many of the issues and recommendations outlined in the paper support key principles established by the National Association of Realtors (NAR) to help revitalize the housing industry and economy.

The white paper, The US Housing Market: Current Conditions and Policy Considerations, calls for increased lending to creditworthy home buyers and more loan modifications, mortgage refinancings, and short sales to reduce the rising inventory of foreclosed homes and help stabilize and revitalize the housing industry; an approach long recommended by NAR to help spur the housing market recovery.  “As the nation’s leading advocate for homeownership and housing issues, NAR knows that a strong housing market recovery is key to the nation’s future economic strength,” said NAR President Moe Veissi. “Improving access to affordable mortgage financing for qualified home buyers and investors and aggressively pursuing more loan modifications and short sales is necessary to help reenergize the housing market and spur an economic recovery.”

For homeowners who are unable to meet their mortgage obligations, NAR has urged lenders and servicers to quickly approve reasonable short sale offers so these people can avoid foreclosure. The short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from the transaction.  “Loan modifications and short sales help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers, which is good for everyone,” said Veissi.

Jobs report strong

Non-farm payrolls jumped 200,000 in December, according to the Labor Department, pushing the jobless rate to a near three-year low of 8.5%. Economists polled by Reuters expected a gain of 150,000.  “Today’s figure should not come as a great surprise,” said Todd Schoenberger, managing director of LandColt Trading, adding that recent macro data had been pointing to good results. “The wildcard is January as retailers trim seasonal staff. An upside surprise for this month will validate the argument that an economic recovery is, indeed, talking place.”  The report comes after a handful of employment reports on Thursday that boosted sentiment as the number of planned layoffs at US firms fell to its lowest level since June last year, according to the report from consultants Challenger, Gray & Christmas. Private sector employment climbed 325,000 in December, much stronger than expected, according to payrolls processor ADP.

Bove – mortgage refinancing will hurt banks

Speculation that a new mortgage refinancing plan may be introduced drove bank stocks higher Thursday, but noted banking analyst Dick Bove believes investors actually got it wrong. He told Larry Kudlow that a program like that would actually “harm” banks.  “It’s bad for banks, it doesn’t help them in any way, shape or form,” Bove said.  The speculation was fueled by reports that suggested the White House may be preparing a new trillion-dollar plan to refinance home loans. However, administration officials told CNBC’s Dana Olick that they are not considering a $1 trillion refinancing program.  The fact that bank stocks went up on the possibility of such a program makes no sense whatsoever, Bove said. In fact, he thinks a mortgage refinancing plan would cause banks to lose money.  “If you add up all the sources of profit or loss,” he said, “they lose more than they gain.”  So why did the banks, like Bank of America, shoot up higher? Bove thinks it was a simple misreading of what a mortgage refinancing program would do for the banking industry.

He believes investors may have thought it might affect foreclosures, putbacks to the banking industry and the service income of the industry. However, Bove said it would do none of that.  “It harms the banking industry,” he said. “All it is, is taking a lot money from one class of people and giving it to another class of people under the theory that the second class of people would spend the money more than the first class.”  And banks aren’t the only ones which could be hurt, Bove said. Only 21% of the mortgages in the US are held by the banks. 55% held by Fannie Mae, Freddie Mac and mortgage pools, and the remainder is held by investors, he said.  “So the net affect is the people you are taking the money away from are the taxpayers and the investors.”

Unemployment down

The Labor Department said Friday that employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5%, the lowest since February 2009. The rate has dropped for four straight months.  The hiring gains cap a six-month stretch in which the economy generated 100,000 jobs or more in each month. That hasn’t happened since April 2006.  For all of 2011, the economy added 1.6 million jobs, better than the 940,000 added in 2010. The unemployment rate averaged 8.9% last year, down from 9.6% the previous year.  Economists forecast that the job gains will top 2.1 million this year.

The December report painted a picture of a broadly improving job market. Average hourly pay rose, providing consumers with more income to spend. The average work week lengthened, a sign that business is picking up and companies may soon need more workers. And hiring was strong across almost all major industries.  Manufacturing added 23,000 jobs. Transportation and warehousing added 50,000 jobs. Retailers added 28,000 jobs. Even the beleaguered construction industry added 17,000 workers.  A more robust hiring market coincides with other positive data that show the economy ended the year with some momentum.  Weekly applications for unemployment benefits have fallen to levels last seen more than three years ago. Holiday sales were solid. And November and December were the strongest months of 2011 for US auto sales.  Many businesses say they are ready to step up hiring in early 2012 after seeing stronger consumer confidence and greater demand for their products.

Olick – renter nation

“Despite record low mortgage rates reported today and rising affordability in most US housing markets, rent is the new reality for former home owners and new households alike.  For some it is post-traumatic stress from the housing crash, for others it is the inability to get financing to buy a home. Either way, the rental market continues on its tear.  In the last quarter of 2011, the apartment sector saw its largest quarterly increase in occupied stock of the year, according to Reis, Inc.  The vacancy rate dropped to 5.2%, the lowest since 2001 and lower than the last cyclical drop in 2006.  This bucks the historical seasonal weakness typical of the colder months of the year. The fourth quarter also tends to be a weaker leasing period, according to Reis, given that most households make moving decisions in the second and third quarters.

This surge in occupancy pushed asking and effective rents up 0.4 and 0.5% respectively, which Reis calls the only disappointing figures for the sector, missing expectations. Reis blames that on slow economic growth and still high unemployment.  ‘Higher quality properties in the most desirable locations posted rent gains in excess of 5-10%, while class B/C properties, catering to lower income tenants, found it relatively more difficult to raise rents,’ notes Victor Calanog, head of research at Reis.  Nowhere is that more evident than in the Washington, DC metro area where rents are way up across the city, and developers are rushing to erect new multi-family buildings and rehab old ones.  ‘Everybody wants to be in DC,’ beams Richard Key, district manager for Camden Property Trust, one of the largest publicly traded multifamily REITs in the nation. ‘Whereas in other markets there are deals, when you get to DC area, all the REITs want to be here, and so we’re all competing for the same piece of land, and that’s driving the price up. That is really is a challenge for us.’  Key is convinced that there has been a fundamental shift in attitudes toward home ownership that will last for several more years. He is not concerned that the pendulum will swing back to buying, just as all that new rental stock hits the market around 2014. Camden has seen rents on its DC properties rise over 5% in just the past year.  ‘The nice part is we haven’t seen a drop in occupancies with that rent growth, and so the hope is that we’re able to maintain our historical occupancies and continue to see that 5, 6, gosh, 7% is not out of the question in the next couple of years,’ says Key.

Washington, DC will likely see those higher rents because home prices didn’t fall very high during the housing crash and are already rebounding. It and Detroit were the only major markets posting annual gains on the latest S&P/Case-Shiller Home Price Index.  Other markets, like Las Vegas, where home prices are rock-bottom thanks to a huge supply of foreclosures, the rental market is tougher for developers and landlords.  As for renter society, it is also being fueled by tight mortgage underwriting. Rates may be at record lows, but only if you can get them. In a paper released Wednesday, Federal Reserve Chairman Ben Bernanke noted, ‘Continued efforts are needed to find an appropriate balance between prudent lending and appropriate consumer protection, on the one hand, and not unduly restricting mortgage credit, on the other hand.’  Until that balance is found, potential home buyers will stay on the sidelines, those sidelines being rental apartments. A new twist to watch, however, may be that rental nation will go single family.  With so many bank owned homes left to clear, and so many in government and the private sector looking at bulk rental investments, apartments may have big competition in the same neighborhoods where they used to compete against single family buyers.”

IRS audits millionaires

The Internal Revenue Service (IRS) audited one in eight millionaires who filed taxes last year while only auditing 1 in 100 individuals earning less than $200,000 in an effort to “assure that there’s equity in the system.”  Just 1 in 100 individuals earning less than $200,000 had their income tax returns examined, the IRS said.  The 12% of millionaire earners audited in 2011 was appreciably higher than the 8% who were audited in 2010. IRS officials said the high ratio was part of an effort to demonstrate that tax laws are applied fairly.  “That has been something we’ve concentrated on to assure that there’s equity in the system, to assure that those at the lower end of the spectrum know that those at the higher end of the spectrum are subject to the same rules and enforcement as everyone else,” Steven Miller, deputy IRS commissioner for services and enforcement, said in an interview.  In recent weeks, President Barack Obama and congressional Democrats have sought to boost taxes on the wealthy as a way to pay for jobs programs, a theme they are expected to continue in this presidential and congressional election year. IRS spokeswoman Michelle Eldridge said the growing portion of millionaire earners’ returns audited is not related to politics.  Yeah right.  Message to Americans:  Achieve the American dream and we’ll audit you.

WSJ – business using more space

The US office market showed modest signs of improvement in the last three months of 2011, as employers slowly expanded in an uncertain economic climate.  The national office-vacancy rate stood at 17.3% in the fourth quarter, slightly down from 17.4% three months earlier, according to real-estate research firm Reis Inc. But the rate remains stubbornly high, down just slightly from the post-downturn peak of 17.6%, reached in mid-2010.  The office market generally reflects employment trends and companies’ views on growth over the next few years. With job growth slow, companies have been reluctant to add new space.

The sector is still struggling with high levels of vacancy not seen since the early 1990s, a hangover from the sharp pullback by businesses during the downturn. The amount of space occupied by businesses fell by 137 million square feet from 2008 to 2010, according to Reis, which tracks 79 metropolitan areas.  By contrast, employers occupied just an additional 20.7 million square feet in all of 2011. “We’re not seeing huge moves down in vacancy,” said Chris Connelly, who heads the Chicago office for CBRE Group, a commercial-real-estate brokerage. “We’re just niggling away at it.”  Overall rents have been creeping up, with landlords seeking an average rent of $27.97 per square foot per year in the fourth quarter, up 0.4% from the third quarter.

Still, markets vary widely, depending on whether they are home to growing industries. Cities hard-hit by the housing crisis, such as Las Vegas and Phoenix, have among the highest vacancy rates in the country, above 25%.  Meanwhile, growth in the technology and energy sectors has accelerated a recovery in areas such as Northern California and cities in Texas. Last month, landlord Brookfield Office Properties Inc. signed a 141,000-square-foot lease in Houston with Italian energy company Eni SpA, which is taking a space that is 42% larger than its current lease, according to Brookfield.  “If those drivers aren’t there, you’re probably pretty much seeing a very slow, gradual recovery,” said John Sikaitis, director of office research for brokerage Jones Lang LaSalle.

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