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

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

Banks ramping up short sales

Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.  Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.  Losses for lenders are about 15% lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody’s. The deals accounted for 33% of financially distressed transactions in November, up from 24% a year earlier, said CoreLogic Inc., a Santa Ana, California-based real estate information company. A mountain of pending repossessions is holding back a recovery in the housing market, where prices have fallen for six straight years, and damping economic growth. Owners of more than 14 million homes are in foreclosure, behind on their mortgages or owe more than their properties are worth, said RealtyTrac Inc., a property-data company in Irvine, California.

Short sales represented 9% of all US residential transactions in November, the most recent month for which data is available, up from 2% in January 2008, according to Corelogic. Bank-owned foreclosures and short sales sold at a discount of 34% to non-distressed properties in the third quarter, according to RealtyTrac.  As lenders shift their focus to sales, they are finding that some borrowers would rather risk repossession while they wait for a loan modification, according to Guy Cecala, publisher of Inside Mortgage Finance, a trade journal. In a loan modification, the monthly payment, and sometimes principal, is reduced to help prevent seizure. Homeowners facing foreclosure may live rent-free for years before they are forced out.  “That’s why the banks have got to pay the big bucks,” Cecala said. “The real question is why is the bribe so big? Is that what it takes to get somebody out of their home?”

Obama returning money, better late than never…

Two American brothers of a Mexican casino magnate who fled drug and fraud charges in the United States and has been seeking a pardon enabling him to return have emerged as major fund-raisers and donors for President Obama’s re-election campaign.  The casino owner, Juan Jose Rojas Cardona, known as Pepe, jumped bail in Iowa in 1994 and disappeared, and has since been linked to violence and corruption in Mexico. A State Department cable in 2009 said he was suspected of orchestrating the assassination of a business rival and making illegal campaign donations to Mexican officials.  As recently as January of last year, one of Cardona’s brothers in Chicago, Carlos Rojas Cardona, arranged for the former chairman of the Iowa Democratic Party to seek a pardon from the governor for Pepe Cardona, according to prosecutors in that state.  Last fall, Carlos Cardona and another brother in Chicago, Alberto Rojas Cardona, began raising money for the Obama campaign and the Democratic National Committee. The Cardona brothers, who have no prior history of political giving, appeared seemingly out of nowhere in the world of Democratic fund-raising, Democratic activists said.

The money Alberto Cardona raised put him in the upper tiers of fund-raisers known as bundlers, according to a list released last month by the campaign. He and Carlos Cardona each gave the maximum $30,800 to the Democratic National Committee, and a lesser amount to a state victory fund. A sister, Leticia Rojas Cardona of Tennessee, donated $13,000 to the national committee, and another relative in Illinois gave $12,600, records show. There is no record of Pepe Cardona making a donation.  Although the two brothers live and work in Chicago, they maintain ties to Pepe Cardona in Mexico. Alberto Cardona operates an advertising agency in Mexico that has worked for political candidates backed by his brother, according to public records and Mexican news reports. Public records also show that the domain name for the Web site of a restaurant Pepe Cardona owns is registered to Alberto Cardona.  When The New York Times asked the Obama campaign early yesterday about the Cardonas, officials said they were unaware of the brother in Mexico. Later in the day, the campaign said it was refunding the money raised by the family, which totaled more than $200,000.

Olick – 40 states sign on to robo-deal

“After more than a year of negotiations, attorneys general from more than 40 states signed on to a proposed settlement agreement with five of the nation’s largest mortgage servicers over ‘robo-signing’ foreclosure processing abuses, according to the lead negotiator, Iowa Attorney General Tom Miller.  ‘This enables us to move forward into the very final stages of remaining work. Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement,’ Miller said in a statement released late Monday.  The deal with Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, and Ally Financial will reportedly total $25 billion. Some $17 billion of that would go toward writing down mortgage principal for an estimated 850,000 troubled borrowers, $3 billion could go toward restitution payments of $1,500 each to borrowers who lost their homes to foreclosure, and the rest could go to state funds for foreclosure relief, according to reports and estimates by Inside Mortgage Finance.  The total could be less, however, if California does not sign on. As of late Monday, officials there said Attorney General Kamala Harris had not agreed to the proposal.

New York did not sign on to the deal either, according to sources in Attorney General Eric Schneiderman’s office. Schneiderman had said he would not sign, but reports earlier in the week suggested he was reconsidering, given his new roll as co-chair of a Justice Department task force to investigate mortgage-related abuses.  Attorneys general from Delaware and Nevada also have reportedly not agreed to the deal. Despite the Feb. 6 deadline, states can still sign on and the expectation is that more will.  So-called robo-signing, where thousands of foreclosure documents are signed by one employee without proper verification, came to light in the fall of 2010. Miller formed the coalition of attorneys general to investigate major bank servicers in October 2010. Allegations of forgery and abuse in the documentation process ground foreclosures nearly to a halt for much of 2011, as servicers reviewed and changed the way they process foreclosure documents. They are just now ramping up again in states where foreclosures are not required to go before a judge, or non-judicial states. In judicial states, foreclosures can now take up to three years.  Miller’s office would give no details as to the agreement, or the states that committed to it.”

After pipeline rebuke, Canada turns to Asia

Speaking ahead of Canada’s most high-powered trade mission to Beijing for almost 15 years, Prime Minister Stephen Harper said that Canada must focus on markets that are growing, regardless of the fate of the Keystone XL pipeline, which is proposed to carry crude from the Alberta oil sands to Texas refineries.  The US State Department blocked Keystone last month, saying they didn’t have time for a thorough environmental review.  Harper told Reuters in an interview: “I think we need to be clear. As much as I want to see that Keystone project proceed, I think this incident … underscore(s) the fact that it is in this country’s national interest to be able to sell products beyond the United States.  And I don’t think a reversal of an American decision can change that fundamental reality. So I think it is absolutely essential that we find ways of being able to sell our products to the biggest growing markets in the world, and those are in Asia.”

Canada — the largest supplier of energy to the United States — was profoundly disappointed by Washington’s decision to veto TransCanada’s Keystone project. The United States — which is by far Canada’s largest trading partner — is unlikely to look at it again until after the election.  At 170 billion barrels, Canada’s oil sands are the third-largest crude deposit in the world, and Canadian exports to bigger markets will be a focal point of Harper’s meetings in China, where he will be accompanied by five cabinet ministers and the heads of major corporations seeking business.  China has already made clear it would like to import Canadian oil to help power its rapidly expanding economy.  It’s not clear to most people why the Obama government would rather import oil from the Middle East than from its own backyard.

MBA – Q4 2011 commercial/multifamily up 13% from 2010, but…

Commercial/multifamily originations during the fourth quarter of 2011 were up 13% over the fourth quarter of 2010, but fell 7% from the third quarter of 2011, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.  “MBA’s Commercial/Multifamily Mortgage Bankers Origination Index hit record levels for life insurance companies in the second and third quarters of 2011,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “In the fourth quarter, multifamily originations for Fannie Mae and Freddie Mac hit a new all-time high. While the CMBS market continued to be held back by broader capital markets uncertainty during the past year, others – like the GSEs, life companies and many bank portfolios – increased their appetite for commercial and multifamily loans.”  The 13% overall increase in commercial/multifamily lending activity over the fourth quarter of 2010 was driven by increases in originations for industrial and multifamily property types. The increase included a 43% increase in loans for industrial properties, a 31% increase in loans for multifamily properties, an 8% decrease in loans for retail properties, a 24% decrease in loans for health care properties, a 29% decrease in office property loans and a 44% decrease in hotel property loans.

Among investor types, loans for commercial bank portfolios increased by 122% compared to last year’s fourth quarter. There was also a 17% increase in loans for Government Sponsored Enterprises (or GSEs – Fannie Mae and Freddie Mac), a 13% decrease in loans for life insurance companies and a 50% decrease in loans for conduits for CMBS.  Fourth quarter 2011 commercial and multifamily mortgage originations were 7% lower than originations in the third quarter of 2011. Compared to the third quarter, fourth quarter originations for hotel properties saw a 52% decrease. There was a 39% decrease for office properties, a 24% decrease for retail properties, a 29% increase for multifamily properties, a 51% increase for industrial properties, and a 153% increase for health care properties.  Among investor types, between the third and fourth quarters of 2011, loans for conduits for CMBS saw a decrease in loan volume of 26%, loans for life insurance companies saw a decrease in loan volume of 23%, originations for commercial bank portfolios decreased 16% and loans for GSEs increased by 34%.

Greek problems escalate

Greek party leaders face crunch talks on Tuesday to secure a new international bailout and avoid a chaotic debt default, caught between European Union (EU) demands that they accept painful reforms now and a national strike against more austerity.  Prime Minister Lucas Papademos negotiated through most of the night with Greece’s European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when the 24-hour strike was about to begin, closing ports and tourist sites and disrupting public transport.  Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.  An official said the government was preparing a text to put to the leaders for their approval, suggesting some movement in the process.

With Greece’s future in the euro zone in question, German Chancellor Angela Merkel said time was of the essence and there are growing signs that euro zone officials have lost patience.  They say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15.  This is to allow time for complex legal procedures involved in a bond swap deal – under which the value of private investors’ holdings of Greek debt will be cut radically in value – so Athens can get rescue funds before March 20 when it has to meet heavy debt repayments or suffer a chaotic default.

Better inventory levels, fragile prices

Home prices and sales remained fragile in January even as housing inventory levels and foreclosure starts improved during the same month, the Obama administration said in its latest Housing Scorecard Report.  Inventories of existing homes for sale declined from 3.2 million in the second quarter of 2011 to 2.4 million in the fourth quarter, according to data from the US Department of Housing and Urban Development and the Treasury.  Overall, housing results were a mixed bag, the scorecard said. Inventory levels improved in the last two quarters while the number of housing units held off market fell from 3.9 million in the first quarter to 3.6 million in 4Q, the scorecard said. Foreclosure starts also fell in December, suggesting some signs of improvement.

Still, home prices are weak and foreclosure completions edged higher.  Home prices hit $138,500 on average for November 2011, compared to $140,300 in October 2011, according to Case-Shiller data cited in the report. New home sales hit 25,600 in December 2011, down from 27,600 a year ago. Meanwhile, the number of existing home sales hit 384,200 in December 2011, up from 370,800 in the year-ago period. First-time homebuyer numbers grew to 204,900 in December 2011, up from 196,000 in November 2011, according to the scorecard.  Foreclosure starts fell to 58,300 in December 2011, from 71,700 in November 2011. Foreclosure completions declined during the same period hit 61,800 in December 2011, up from 56,100 in the month before that.  While mortgage originations for the purchase of new homes declined to 431,500 from 498,000 in the year-ago period, but refinance originations rose to 1.3 million in 4Q from 950,000 during 3Q. Mortgage delinquency rates were mostly falling, dropping to 4.4% in December from 4.7% in the year-ago period.

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

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

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

Home prices declined almost 5% in 2011

Home prices decreased 4.7% in 2011 compared to the year before, marking the fifth consecutive year-end decrease in the CoreLogic home price index. Excluding distressed sales, home prices decreased 0.9% last year, which CoreLogic said gives an indication “of the impact of distressed sales on home prices in 2011.” Home sales last year also show month-over-month declines. December showed the fifth consecutive monthly decline with a drop of 1.4%, but rose 0.2% when distressed sales were removed from the equation.

The December decline followed a much larger drop of 4.3% in November, compared to November 2010. “While overall prices declined by almost 5% in 2011, nondistressed prices showed only a small decrease. Until distressed sales in the market recede, we will see continued downward pressure on prices,” said Mark Fleming, chief economist for CoreLogic. While national statistics may be bleak, a few states posted increases in the price of homes last year. Montana came in first with 4.4% appreciation with distressed sales included, followed by Vermont (+4%), South Dakota (+3.1%), Nebraska (+2.5%) and New York (+1.7%). Illinois had the biggest 2011 decline in prices, 11.3%, followed by Nevada at 10.6%. Nevada’s peak-to-current decrease stands at 60% (including distressed homes), compared with a national decrease of 33.7%.

Employment up

The pace of job creation surged in January, with the US economy generating 243,000 new positions while the unemployment rate dropped to 8.3%, according to government data released today. Both numbers were far better than consensus, which expected a growth of 150,000 jobs and a steady unemployment rate of 8.5%. The overall work week remained unchanged at 34.5 hours while wages rose an average of four cents an hour to $23.29. The closely watched labor-force participation number, which can skew the unemployment rate, fell to 63.7%, the lowest since May 1983. The number of those working part-time for economic reasons rose 1.2%. Job gains have been concentrated primarily in the service sector, particularly in retail and the food and beverage industries. Warehousing, manufacturing, mining and health care also have participated. True to form, services were responsible for 162,000 of the January swell, with manufacturing payrolls growing 50,000. Government cuts subtracted 14,000 from the total. The total number of unemployed fell below 13 million for the first time since February 2009, while the total amount of employed Americans rose to 141.6 million, an increase of 847,000 from December. The unemployment rate was last this low in February 2009. The so-called real unemployment rate, which measures discouraged workers as well and is referred to as the U-6, nudged lower to 15.1%.

Long-term unemployment, though, remains a problem, with the duration dropping from a near-record 40.8 weeks to 40.1 weeks. Also, the level of discouraged workers surged, rising 7% to its highest level since December 2010. Job growth remains one of the two missing pieces of the recovery puzzle, even though the rate has been on a steady trek lower. In December, the economy created 203,000 jobs and the unemployment rate slipped to 8.5%, well off its 10.1% cycle peak. The monthly jobs report generally draws considerable trader reaction, which as of late has been all negative.

Olick – rent vs own riles government policy

“Fannie Mae and Freddie Mac, the mortgage giants under government conservatorship, together owned 182,212 foreclosed properties as of the end of September. While they aggressively market and sell these homes to investors and owner-occupants alike, the numbers are still too high; these number could go far higher, as foreclosures previously stalled by paperwork issues come back into process. That’s why the federal regulator overseeing the two is launching a bulk sale program, offering investors the chance to buy foreclosed properties at a discount, as long as those investors turn the properties into viable rentals for a specified number of years. ‘This rental period could provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets,’ according to a release from the regulator, the Federal Housing Finance Agency (FHFA).

The FHFA launched the initial phase of pre-qualification. Investors must prove they have ‘(a) the financial wherewithal to acquire the assets; (b) sufficient experience and knowledge in financial and business matters to analyze and bear the risks of the investment opportunity; and (c) agreement to keep certain information about the REO [Real Estate Owned, i.e. bank owned] and related matters confidential.’ That last part is to keep the prices competitive as the market starts to improve. Giving investors the opportunity to help clear the massive amount of distress in the housing market is crucial. The inventory of foreclosed properties is large, getting larger, and making it impossible for the overall market to achieve price stability. Witness a report today from CoreLogic which shows that home prices in December fell 4.7% year-over-year including sales of distressed properties. Excluding those properties, home prices fell less than one%.

Some, however, think the program is a negative: ‘People are brainwashed to think foreclosures are a bad thing for the housing market. Perhaps four years ago when a million loans all went into default and Foreclosure at the same time but not today. Today, 1st timers and investors — with an insatiable appetite for foreclosures, REO resales, and short sales — are the bedrock of this housing market.’ – Mark Hanson, Mortgage Analyst

‘Foreclosed homes are already meeting strong demand from investors when they come to market. We think these buyers are willing to pay a relatively full price, as they know the specific locations, and a large number of buyers have the ability to bid on the individual homes (doesn’t require significant capital)… Additionally, it will be difficult/expensive for investors to scale up operations given the broad geographic dispersion of properties vs. more traditional rental units, potentially limiting participation.’ – Dan Oppenheim, Credit-Suisse

Oppenheim also asks a valid question as to why the government would offer discounts to large investors buying in bulk, but not to individual investors buying perhaps a single property. There are plenty of Americans out there salivating over incredibly low-priced homes; rental income could be as much of a boon to them as perhaps a tax cut or a refinance. It was interesting yesterday, during his speech touting a proposed new government mortgage refinance program, President Obama, caught up in the moment, exclaimed, ‘No more renting!’ Putting aside the public relations blunder that was, given the fact that the FHFA had announced its REO to rent program not two hours before, it just drove home the conflict our government has between what it thinks Americans want to hear and what our economic reality dictates.

A few simple facts: There is not enough buyer demand to meet the number of homes for sale. A huge number of the homes for sale are empty, foreclosed properties. Too many Americans either cannot afford to buy a home or do not have the credit necessary to finance a home. Too many Americans cannot afford to sell their current homes in order to move or step up to a larger home. Rental demand is therefore strong and getting stronger. While homeownership may be a tenet of the ‘American Dream,’ renting is today’s actuality for a growing number of Americans. Whether it is large investor bulk programs or single investor incentives, adding to rental supply, thereby lowering rents, while at the same time clearing the market of foreclosed properties is a win. It may not be as politically palatable as offering ‘responsible’ borrowers a veiled tax credit in the form of a mortgage refinance, but it is good medicine for what ails housing.”

Pension threat for market investors

It’s no secret that the financial crisis and resulting malaise has taken its toll on bank stocks, commodities and Treasury yields. But it may be have triggered another ripple – one that has gone somewhat unnoticed. Pension funds have become seriously underfunded. According to a recent report from Credit Suisse some of the nation’s largest companies owe their pensions more than 25% of their market cap (after taxes). Although the problem is complex, at its core is simple math. Many firms forecast returns of 8% annually, and that just hasn’t happened. This developing situation is potentially market moving because it could require companies to make larger contributions – much larger. And if contributions ‘do’ go up, the money will have to come from someplace on the balance sheet.

“A pension accounting change at UPS will result in $527 million after tax charge in 2011,” says Joe Terranova. “And Sunoco said they have to contribute $80 million into their pension funds.” In other words, the need to fund pensions could drag down profits and, in turn, share price. In fact, the pension liability at AK Steel was cited by BofA as a reason behind their recent decision to downgrade the stock to ‘Underperform’ from ‘Neutral.” “I think in 2012 it will be a recurring issue,” Terranova says. John Ehrhardt of Milliman confirms the thesis. He tells us that investors should expect record numbers of earnings charges in 2012. “Record low interest rates result in historically high liabilities and the only remaining lever may be employer contributions.” And according to Ehrhardt this may be just the tip of the iceberg. “These companies are going to need 20-30% returns to fill the kinds of gaps we’re talking about.”

WSJ – Ally financial swings to loss

Ally Financial Inc., the US government-owned auto lender, swung to a $250 million net loss in the fourth quarter after taking a charge for regulatory penalties stemming from foreclosure matters. The Detroit-based lender, which provides financing for General Motors Co. and Chrysler Group LLC dealers and customers, continued to make money from its auto-lending operations, but the results were weighed down again by its mortgage unit, which is saddled with lawsuits over foreclosures and soured mortgage investments. The loss compares to a year-ago profit of $79 million. It had a core pretax loss, which reflects results from continuing operations before taxes and other expenses, of $24 million, down from $526 million. Excluding a $270 million foreclosure-related charge, core pretax income would have been $246 million.

“One of our key priorities remains aggressively addressing the risks related to the mortgage business and taking steps to protect the key franchises at Ally,” Michael Carpenter, the company’s chief executive, said in a statement. “This will be critical to advance plans to repay the US taxpayer.” Ally, which was formerly owned by GM, is one of at least five major mortgage servicers in discussions with state and federal regulators over a potential settlement of “robo-signing” and other alleged foreclosure offenses. Regulators are close to finalizing a deal worth as much as $25 billion that could also include Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. On Tuesday, Ally said it would record the $270 million charge in the fourth quarter for penalties from regulators and other government agencies related to foreclosure issues.

The charge was mainly related to its mortgage subsidiary, Residential Capital, which has been the subject of bankruptcy speculation for several months. The charge caused a temporary decline in ResCap’s tangible net worth below $250 million, breaching debt covenants of some of its lenders, Ally said. Ally has been trying to scale back its mortgage operations as it focuses on building up its auto business and online retail bank. In November, the company said it would significantly curtail its correspondent lending operations, which comprise the bulk of its mortgage originations.

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

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

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

OC Register – investors are the answer

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

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

Income up, spending down

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

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

LPS – 2010-2011 originations good quality

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

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

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

Total US loan delinquency rate:  8.15%

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

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

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

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

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

Big banks hedge against EU

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

Olick – foreclosure pipeline swells

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

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

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

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

Replacements to help drive economy

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

FHA – originations down, delinquencies up

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

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

Bakersfield.com – no kudos for the POTUS

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

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

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Foreclosures fell 12% in California, but…

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

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

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

GOP says Obama economic plan is a failure

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

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

Olick – more plans from the president

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

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

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

Americans lead in debt reduction

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

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

MBA – mortgages down 5%

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

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

Markets down on possible Obama re-election

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

Huffington post – Romney on mortgages

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

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

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

* In 2010, Chris’ 4 Central Florida real estate offices
closed 2,786 sides for a closed sales volume of
$392,912,927!

* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Join my Facebook Fan Page: http://www.mclaughlinchris.com

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

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

2012 to be the best year for short sales?

The Mortgage Debt Forgiveness Act of 2007 allows an income tax exemption for a homeowner whose mortgage debt is partly or entirely forgiven by a bank.  It’s set to expire Dec. 31, 2012.  Matt Alegi, a partner with the Potomac law firm Shulman Rogers and chair of the firm’s residential real estate practice group, says the tax break has meant a savings in the tens of thousands of dollars for individuals.  Typically, if someone were to have $150,000 forgiven by the bank, Alegi says, “you just made another $150,000 of income for tax purposes in that year.”  So, say someone makes $50,000 but had $150,000 forgiven by the bank. That person is now paying taxes on a $200,000 income, and included in a much higher tax bracket.  The loss of the relief will plunge homeowners further into debt, Alegi says.

He also thinks the expiration of the Debt Forgiveness Act will have an impact on short sales themselves. Homeowners could try to push the short sale through this year to take advantage of the tax break.  Alegi believes there will be strong lobbying to extend the tax break. If it isn’t extended, the appeal of a short sale could greatly diminish for the homeowner.  To take advantage of the Debt Relief Act, you need to fall under very specific guidelines outlined by the IRS.  For example, the debt forgiven is only for primary residences and the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.  Alegi says homeowners who spent the forgiven money on education or other bills do not qualify.

Gridlock an Obama strategy?

When President Obama outlines his goals for 2012 during Tuesday’s State of the Union address, he shouldn’t expect a lot of cooperation from Republicans, senate Minority Leader Mitch McConnell (R-Ky.) said yesterday.  “With the Obama economy established now…unemployment is still at 8 ½%,” McConnell said. “It didn’t work, and we’re not interested in doing more of the things that don’t work.”  He said Obama was “AWOL” last year on his bus tour when Republicans wanted to tackle tax reform and entitlements, and he expects more of the same this year.   “He was not involved whatsoever,” McConnell said. “So I’m not optimistic, frankly, that in an election year that he’s likely to be any more engaged than he was last year.”  What’s more, he thinks the logjam in the nation’s capital is part of Obama’s agenda.  “That’s his strategy…to demonize Congress, to complain because he can’t continue to get everything he wants, like he did the first two years,” he said. “It’s all about his re-election and not about the country.”  One thing that McConnell thinks will get done is the payroll tax cut extension, which was extended for only two months in December when Congress couldn’t come to an agreement.  “We’ll be back at trying to figure out how to do that for the balance of the year and how to pay for it,” he said. “We don’t want to add to the deficit.”

What the $25 billion bank deal means

According to an Associated Press report, five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial — and US state attorneys general could adopt the agreement within weeks. It’s expected President Barack Obama will mention new developments in the negotiations in his State of the Union address today.  A settlement between the banks and the states doesn’t mean homeowners who lost their homes to foreclosure will get them back. In fact, they’re unlikely to benefit much at all financially, though the total financial settlement could be as high as $25 billion.  What’s worse is the settlement does not apply to loans held by Fannie Mae or Freddie Mac. Since Fannie and Freddie own about half of all US mortgages – or 31 million US home loans – that means a lot of homeowners who have been hurt by the banks’ deceptive foreclosure practices won’t be getting much-needed assistance.  Nearly 11 million people – one in four homeowners – owe more than their home is worth. According to current guidelines, these underwater homeowners have few options and little chance at refinancing.  Here’s how the settlement could shape up:

-  $17 billion would go toward reducing the principal balance struggling homeowners owe on their mortgages.

-  $5 billion would be put into a reserve account for various state and federal programs. A portion of this money would cover the $1,800 checks that would be sent to homeowners affected by deceptive practices. Only about 750,000 Americans, or half of the households who might be eligible for assistance under the deal, will likely receive checks.

-  About $3 billion would be used to help homeowners refinance at 5.25%, far below current mortgage interest rates.

If the proposed settlement terms are accepted, roughly 1 million of these homeowners could see the principal amount of their mortgages reduced by an average of $20,000. That’s good news for some, but bad news for the other 10 million homeowners who would like to claim a principal reduction but won’t qualify.  The better news is this settlement has the potential to reshape long-standing lending guidelines and make things easier for at-risk and underwater homeowners across the board. But critics say it doesn’t do enough. Sen. Sherrod Brown (D-Ohio) tells the Associated Press: “Wall Street is again trying to pass the buck. Instead of criminal prosecutions, we’re talking about something that’s not more than a slap on the wrist.”  Some states have disagreed over what to offer banks, with states like New York, Delaware, Nevada and Massachusetts arguing banks should not be “protected from future civil liability.” The deal will not fully release banks from future criminal lawsuits by individual states, and a few of those states’ attorneys general have already promised to pursue their own investigations.  Bank officials have argued few, if any, foreclosures wrongfully took place as a result of documentation issues. Ally Financial CEO Michael Carpenter has been among the most vocal, claiming the company found no instances of wrongful foreclosure after its own internal audit. Carpenter has said he will fight the government in court if need be.

US Treasurys edge higher after Greek setback

US Treasurys edged higher today, after euro zone finance ministers rejected an offer by private creditors to restructure Greek debt, keeping alive fears of a default.  Benchmark 10-year note’s yield was at 2.06%, compared with 2.058% in late US trade on Monday. The yield rose as high as 2.094% on Friday, its highest since early December. The 30-year bond yield was at 3.14%.  Demand for safe-haven US debt was further boosted after a report rekindled fears that Portugal, seen as the second most risky country in the euro zone, could be the next potential default candidate after Greece.  Further dousing optimism, Germany denied a report that it was ready to boost the combined firepower of the euro zone’s rescue funds to 750 billion euros ($979 billion).  During its two-day policy meeting starting on Tuesday the Federal Reserve is expected to push out expectations on when it will next raise interest rates until at least 2014, and the meeting will also be closely watched for any hints of new QE, which analysts expect would focus on mortgage-backed bonds.  The Treasury Department will sell four-week bills and two-year notes later in the day. The Treasury will sell a total of $99 billion in new two-year, five-year, and seven-year notes this week.

Mortgage writedowns to cost taxpayers $100 billion

Forgiving mortgage debt on Fannie Mae and Freddie Mac loans would cost the taxpayer-funded companies almost $100 billion, their regulator said.   The Federal Housing Finance Agency (FHFA) said that as of June 30, the companies guaranteed nearly 3 million mortgages on single- family homes that are underwater, or worth less than the loans they secure.  “FHFA estimates that principal forgiveness for all of these mortgages would require funding of almost $100 billion,” FHFA Acting Director Edward J. DeMarco said in a Jan. 20 letter to Representative Elijah Cummings, a Maryland Democrat who had threatened to subpoena the information. The FHFA posted the letter on its website today.  Nearly 80% of the Fannie Mae and Freddie Mac borrowers with negative equity were current on their payments, DeMarco said.

DeMarco, whose agency was created by Congress to minimize losses at Fannie Mae and Freddie Mac and is independent of President Barack Obama’s administration, has maintained that principal forgiveness would increase the size of the government’s bailout of the companies, which have cost taxpayers more than $153 billion since they were taken under government control in 2008.  The agency compared the cost of principal forgiveness to the companies’ current practice of forbearance, which allows delinquent borrowers to defer payments.  “Given that any money spent on this endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac (FMCC) substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” he said.

WSJ – EU tries to revive Greek talks

European Union finance ministers today piled pressure on Greece and its private-sector creditors to do more to ensure that a proposed deal to restructure Greece’s private-sector debt will be enough to put the country back on a firm fiscal footing.  The International Monetary Fund (IMF) and the euro zone’s four triple-A-rated countries-—Germany, the Netherlands, Finland and Luxembourg—are pushing for a low average interest rate on new bonds to be issued as part of the restructuring, in order to ensure the government can pay its debts in the future.  But as they were heading to a meeting Tuesday, EU finance ministers also urged Greece to implement tough austerity and structural reforms and provide more written assurances to its partners that it would commit to its pledges before further aid can be released.  Austrian Finance Minister Maria Fekter said she’s “not pleased” with progress so far. “We’re sending a very direct message to Greece that the community expects more, also in terms of structural reform,” she told reporters. “We’re not pleased and only when there’s a written message on the table in front of us, can further assistance be discussed.”

Greece’s debt restructuring is planned to take the form of a bond exchange in which creditors holding some €200 billion ($260.32 billion) in debt would swap their securities for new instruments with half the face value. The key sticking point is how much interest the new bonds should pay.  The restructuring is part and parcel of the second bailout program for Greece amounting to €130 billion. Without this loan, Greece will default on a €14.4 billion bond maturing March 20.  But talks in Athens with the Institute of International Finance, which represents the majority of Greece’s private-sector creditors, have dragged on for three weeks and stalled over the weekend. Private-sector creditors said in a final offer that they won’t accept an average interest rate of less than 4%.  The IMF voiced concerns yesterday that the deal being discussed by Greece and the creditors would leave the country with a higher-than-expected debt burden in the years ahead, people familiar with the matter said.  That sets up a difficult choice: press bondholders to accept more losses, or accept that Greece’s peers and the IMF will have to kick in more support.

Olick – foreclosure investors a double edged sword

“The best and most expeditious way to clear the vast inventory of foreclosed properties weighing down today’s housing market is to get more investors in and sell them these properties at bulk discounts.  That’s what the Obama administration and Federal regulators are currently considering for the thousands of homes currently owned by Fannie Mae, Freddie Mac and the FHA.  While big private equity funds are still largely in a very tedious deal-making stage with banks or waiting on the sidelines for a government program, smaller individual investors are getting in. Nearly 23% of home purchases in December were by investors, according to a new survey from Campbell/Inside Mortgage Finance. That is a slight increase from November, but the share has remained largely unchanged for the past year.  What has changed dramatically is how many of these investors are using all-cash…74% according to the survey, which also found that, ‘cash buyers are able to bid significantly lower—and successfully—on many properties because they offer a shorter and more reliable closing timeline.’ That is precisely what mortgage servicers want.

‘While investor bids may not be the first offers accepted, they often end up winning properties after other homebuyers are eliminated because of mortgage approval or timeline problems,’ according to the survey authors. ‘Appraisals below the contracted price are a common reason for mortgage denials. Most mortgage financing timelines are now in excess of 30 days.’  There has been a lot of concern among industry analysts that bulk foreclosure sales would push home prices down further, but it appears that is already happening, as investors usually offer 10-20% below list price, while first time home buyers and current homeowners are generally offering list. If the offers are competitive, cash will prevail.”

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

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

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

BOA short sale program to expand?

Bank of America’s (BOA) cash-back incentive, which tempted delinquent borrowers to do a short sale over a lengthy foreclosure, ended Dec. 12 with mixed reviews. The Florida-only program offered between $5,000 and $20,000 in relocation expenses to qualified homeowners who agreed to vacate their homes through a short sale in lieu of the average two-year foreclosure process.  But as of early December, only about 3,000 homeowners of 20,000 solicited by the bank had expressed interest in the plan, which one real estate consultant said was unthinkable before the robo-signing scandal heightened the foreclosure chaos.  “A year ago, banks weren’t making offers like this. Now, it’s a complete reversal in that they are proactively soliciting short sales,” said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach. “They are offering unbelievable deals.”

Realtors say banks, including Wells Fargo and JPMorgan Chase, began offering cash incentives about six months ago to homeowners who agree to do short sales. With foreclosures taking an average of 749 days in Florida, according to a November RealtyTrac report, it’s cheaper to pay off an owner than take them to court, Realtors say.  BOA spokeswoman Jumana Bauwens said she couldn’t comment on concerns unless they dealt with a specific case, but that the company was “pleased” with the homeowner response.  Bauwens said Florida was chosen to test the program because of its high number of foreclosures. If it’s ultimately deemed successful, it could be expanded to other states.  To qualify, homeowners had to submit their short sales for approval by Dec. 12 – an extended deadline from an original Nov. 30 date. The homes could not have offers on them already, and the closing needed to occur before Aug. 31.

Ford hits 2 million mark in 2011

The Ford brand passed the 2-million mark, said Erich Merkle, Ford US sales analyst.  Ford’s small cars sales posted an increase of more than 20% this year, while its utility vehicles hit a 30-percent gain, the company said.  Overall, including its Lincoln luxury brand and now-defunct Mercury brand, Ford company sales were up about 11% through November, and the Ford brand’s sales were up about 18%.  As gasoline prices rose in 2011, customers continued to move toward smaller, more fuel-efficient vehicles. In recent years, Ford has emphasized fuel efficiency, including adding its “EcoBoost” engines that include turbocharging and fewer cylinders, particularly on utility vehicles and pickup trucks.  US auto sales in December are expected to top 13 million on an annual rate, J.D. Power and Associates and LMC Automotive said.  Once again, as it has each year for more than three decades, the Ford F-Series pickup trucks are the best-selling vehicle in the US market. Through November, Ford sold 516,639 F-Series pickup trucks, according to Autodata.

Olick – housing’s new hope

“I’m not sure if it’s that usual New Year’s Eve optimism evoked by the generic philosophy that the grass is always greener on the other side of the calendar year, or perhaps the emotional need to dig ourselves out of what has surely been one of the more lugubrious periods in the US economy, but there is some hope in housing.  A few positive readings in home sales and housing starts recently, topped off by today’s 7.4% monthly jump in contracts to buy existing homes, are fueling what I dare say is a spark, albeit not a fire. They are also managing to trump what was a particularly opposing reading in home prices from the number crunchers at S&P/Case-Shiller this week.  Don’t worry, I’m not going to dump a bunch of coal on the numbers and claim they’re all spurious in some way; I’m all prepared to be munificent, while chary (did I mention my new year’s resolution is to improve my family’s vocabulary, as well as banish ‘like’ from my kids’ lexicon.) I will note that even the Realtors, while touting affordability and pent-up demand, note that many of these new signed contracts are the result of delayed transactions.  ‘Contract failures have been running unusually high,’ notes National Association of Realtors chief economist Lawrence Yun. ‘Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,’ he said.

Then there is a big story in the Wall Street Journal [on Friday] of hedge funds putting their money back in housing, suggesting that while the numbers aren’t all there for a big win, these funds are usually ahead of big market shifts, so the housing surge must be on its way. I’ve spoken to some of these hedge fund types as well, and they seem to be playing on the surging rental market for now, getting the bargains but not expecting any big ‘flipping’ returns any time soon.  ‘Bottom line, whether due to even lower prices, historically low mortgage rates, falling inventory and a better tone to the labor market or a combination of all, the housing market is showing signs of stabilizing,’ says Peter Boockvar at Miller Tabak. ‘I say stabilize instead of bottom, as its too early to make that claim just yet with still a huge amount of foreclosures that hasn’t worked its way through the judicial system and prices that haven’t likely stopped going down as a result.’  Some are predicting that foreclosures will push home prices down another five to ten% before hitting a true bottom.

In addition, those rock-bottom mortgage rates that everyone is touting this week may be heading up, as the conservator of Fannie Mae and Freddie Mac today directed the two mortgage behemoths to inform servicers that guarantee fees would rise ten basis points next week. That, if you recall, is to pay for the temporary extension of the payroll tax cut. Yep, that money heads to the US Treasury, not to the troubled balance sheets of Fannie and Freddie. This accused nostrum will likely raise rates a tad, but rates are still close to historical lows. And we should remember that.  It’s all relative. Are things getting a bit better? Probably. I heard (or read…can’t remember) someone today say that housing has gone from a negative to a nothing for the US economy. So when we tout and rave about today’s pending home sales numbers, we mustn’t forget where we’ve been:  ‘It’s not going to keep 2011 from being the worst on record for new home sales, for single family permits and single family housing starts. Next year is going to be better, but that’s not saying much because this has been the worst year, probably since 1945,’ said IHS Global Insight’s Patrick Newport. In other words, housing ain’t exactly fecund, but it’s at least inching off life support.”

Employers offer weird benefits

Pet insurance, at-your-desk meditation services, jewelry discounts and funeral planning — from the quirky to the somber, workplaces are providing a range of unique benefits in 2012.  The options come as many firms try to placate employees frustrated by pay cuts, heavy workloads, high health insurance costs and reduced 401(k) matches.  “Companies are trying to have it feel like it’s not one big take-away,” said John Bremen, a managing director at employer consultancy Towers Watson. “They are trying to find ways to appeal to the workforce.”  Many voluntary benefits — such as reduced-price computers and pet insurance due to group-buying discounts — won’t gouge a corporate budget.  “On the employer side, there’s a recognition that they can’t always add to the benefits program in a way they have in the past,” said Ronald Leopold, national medical director at MetLife. “But they want to offer employees different things and a broader set of (choices).”

Among the many options offered: free tickets to theme parks, cellphone plan discounts and at-work massages.  Benefits at drug manufacturer Allergan include adoption assistance and auto insurance discounts. It also has a free concierge service for workers to acquire theater tickets, drop off laundry and get restaurant reservations.  Firms such as S.C. Johnson, TD Bank and Travelocity provide discounted health coverage for workers’ pets through Petplan Pet Insurance. Petplan “has seen tremendous growth in this area of voluntary benefits,” co-CEO Chris Ashton said. “In this struggling economy, employers are increasingly looking for low-cost options to keep their employees happy.”

WSJ – 2011 ends with near record mortgage rate lows

Average fixed mortgage rates in the US over the past week finished the year near all-time lows, with the 30-year home loan at 3.95%.  According Freddie Mac’s weekly survey of mortgage rates, the rate for a 30-year fixed-rate mortgage has been at or below 4% for the past nine consecutive weeks and only twice in 2011 did it average above 5%.  The 30-year fixed-rate mortgage averaged 3.95% for the week ended Thursday, up from 3.91% the previous week and below 4.86% a year ago. Rates on 15-year fixed-rate mortgages averaged 3.24%, up from 3.21% last week and below 4.20% a year earlier.  Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARM, averaged 2.88%, up from 2.85% yet below 3.77% of a year ago. One-year Treasury-indexed ARM rates averaged 2.78%, up from 2.77% in the prior week and below 3.26% last year.  To obtain the rates, 30-year and 15-year fixed-rate mortgages required payments of 0.7 percentage point and 0.8 percentage point, respectively. Five-year and one-year adjustable rate mortgages required an average payment of 0.6 percentage point. A point is 1% of the mortgage amount, charged as prepaid interest.

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Foreclosures up in New York

In the New York metro area, the foreclosure rate rose to 7.5% in June, up 2.1 percentage points from the previous peak in December 2009, according to Foreclosure-Response.org, a joint project by the Local Initiatives Support Corp., the Urban Institute and the Center for Housing Policy. The rate is up 3.7 percentage points from March 2009, when the group started tracking the data in 100 US metro areas.  “New York is a judicial state, so it takes a long time for properties that enter foreclosure to exit the process,” said Rob Pitingolo, a research assistant for Urban Institute. “The backlog of foreclosures in the system is driving the foreclosure rates up.”  Judicial states require a lengthy and formal court proceeding to carry out a foreclosure, and in New York that process can take up to two years for a loan to complete foreclosure, according to experts.  “At the current pace of foreclosure sales, we are looking at a process that could take decades to complete,” said Leah Hendey, a research associate at Urban Institute, in a statement. “It is critical that the status of these properties be resolved quickly if we want to stabilize communities and housing markets.”

The increasing foreclosure rate contributed to New York’s serious delinquency rate of 10.8% in June, much higher than the average 9.3%. In fact, while the serious delinquency rate has improved across the largest metro areas in the nation, falling 1.1 percentage points from its December 2009 peak of 10.4%, delinquency got worse in New York, where the rate rose 0.6 percentage points. The serious delinquency rate covers first-lien mortgages in foreclosure as well as loans that are delinquent for 90 or more days.  The good news is fewer homeowners in the New York metro area are falling behind on their mortgage payments, according to the data. The New York area’s 90-day-plus delinquency rate dropped 1.2 percentage points to 3.4% in June, compared with the same time a year ago. Delinquent loans in the New York metro area came in slightly below the average rate of 3.7%. The 90-day-plus delinquency rate represents the percentage of all mortgages that have not yet entered a foreclosure but are 90 or more days overdue.

Treasury to charge banks for risk monitoring

The US Treasury Department plans to start charging large banks a fee to cover the costs of the financial risk council it leads and a research office tasked with measuring threats to financial markets.  The Financial Stability Oversight Council and the Office of Financial Research were created by the 2010 Dodd-Frank financial oversight law, which instructs the government to bill banks for their operations.  On Thursday the Treasury Dept. released a proposed rule that would apply to banks with more than $50 billion in total assets, starting in the middle of next year.  The department is proposing charging these banks a flat rate that would be applied to an institution’s total consolidated assets, and would be collected twice a year.  The department has yet to announce the specific fee banks will be charged because the budget for the council and research office will not be known until President Barack Obama releases his fiscal 2013 budget proposal early next year.  The Treasury Dept. said it plans to have a final fee rule out no later than the end of May and will let banks know what their tab is in June. The fees will first be collected in July.  Treasury said the collected fees will be enough to cover six months of OFR and FSOC operating expenses and 12 months of capital expenses.  The proposed rule will be subject to 60 days of public comment.

Olick – housing’s new hope

“I’m not sure if it’s that usual New Year’s Eve optimism evoked by the generic philosophy that the grass is always greener on the other side of the calendar year, or perhaps the emotional need to dig ourselves out of what has surely been one of the more lugubrious periods in the US economy, but there is some hope in housing.  A few positive readings in home sales and housing starts recently, topped off by today’s 7.4% monthly jump in contracts to buy existing homes, are fueling what I dare say is a spark, albeit not a fire. They are also managing to trump what was a particularly opposing reading in home prices from the number crunchers at S&P/Case-Shiller this week.  Don’t worry, I’m not going to dump a bunch of coal on the numbers and claim they’re all spurious in some way; I’m all prepared to be munificent, while chary (did I mention my new year’s resolution is to improve my family’s vocabulary, as well as banish ‘like’ from my kids’ lexicon.) I will note that even the Realtors, while touting affordability and pent-up demand, note that many of these new signed contracts are the result of delayed transactions.

‘Contract failures have been running unusually high,’ notes National Association of Realtors chief economist Lawrence Yun. ‘Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,’ he said. Then there is a big story in the Wall Street Journal today of hedge funds putting their money back in housing, suggesting that while the numbers aren’t all there for a big win, these funds are usually ahead of big market shifts, so the housing surge must be on its way. I’ve spoken to some of these hedge fund types as well, and they seem to be playing on the surging rental market for now, getting the bargains but not expecting any big ‘flipping’ returns any time soon.  ‘Bottom line, whether due to even lower prices, historically low mortgage rates, falling inventory and a better tone to the labor market or a combination of all, the housing market is showing signs of stabilizing,’ says Peter Boockvar at Miller Tabak. ‘I say stabilize instead of bottom, as its too early to make that claim just yet with still a huge amount of foreclosures that hasn’t worked its way through the judicial system and prices that haven’t likely stopped going down as a result.’  Some are predicting that foreclosures will push home prices down another five to ten% before hitting a true bottom.

In addition, those rock-bottom mortgage rates that everyone is touting this week may be heading up, as the conservator of Fannie Mae and Freddie Mac today directed the two mortgage behemoths to inform servicers that guarantee fees would rise ten basis points next week. That, if you recall, is to pay for the temporary extension of the payroll tax cut. Yep, that money heads to the US Treasury, not to the troubled balance sheets of Fannie and Freddie. This accused nostrum will likely raise rates a tad, but rates are still close to historical lows. And we should remember that.

It’s all relative. Are things getting a bit better? Probably. I heard (or read…can’t remember) someone today say that housing has gone from a negative to a nothing for the US economy. So when we tout and rave about today’s pending home sales numbers, we mustn’t forget where we’ve been:  ‘It’s not going to keep 2011 from being the worst on record for new home sales, for single family permits and single family housing starts. Next year is going to be better, but that’s not saying much because this has been the worst year, probably since 1945,’ said IHS Global Insight’s Patrick Newport. In other words, housing ain’t exactly fecund, but it’s at least inching off life support.”

Oil up

Oil prices inched higher toward $100 a barrel Friday amid encouraging signs the US economy is slowly improving and continuing tensions between Western powers and Iran.  By early afternoon in Europe, benchmark crude for February delivery was up 13 cents to $99.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 29 cents to settle at $99.65 in New York on Thursday.  In London, Brent crude was down 48 cents at $107.53 a barrel on the ICE Futures exchange.  Crude has traded near $100 since mid-November after jumping from $75 in October as investors eye growing evidence the US economy could avoid a recession next year. The government reported Thursday that claims for jobless benefits fell to a four-week average of 375,000, the lowest level in three and a half years.

Energy trader Blue Ocean Brokerage said oil prices would likely eventually jump by about $50 if Iran, OPEC’s second-biggest crude exporter, tried to close the strait.  “Let’s start with an easy $20 spike, then add in a risk premium for insurance costs, delays, costs to push oil through alternative routes and the obvious loss of 3.5 million barrels a day from Iran,” energy trader Blue Ocean Brokerage said in a report.  “Crude oil prices have managed to outperform the commodity complex this year, with geopolitical risk premiums and seemingly resurgent US economy offsetting a worsening situation in the eurozone,” said analysts at Sucden Financial in London. “With regard to Iranian tensions specifically, an EU foreign ministers’ meeting on Jan. 30 to consider further sanctions on the country will likely prove an important focus in early 2012 trade.”  Trading volume was low this week as many investors take vacations around the Christmas and New Year’s Day holidays.  In other Nymex trading, heating oil rose 0.4 cent to $2.9241 per gallon and gasoline futures lost 0.7 cents at $2.6624 per gallon. Natural gas futures were down 2.2 cents to $3.005 per 1,000 cubic feet.

NAR – pending home sales up

Pending home sales continued to gain in November and reached the highest level in 19 months, according to the National Association of Realtors (NAR).  The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, increased 7.3% to 100.1 in November from an upwardly revised 93.3 in October and is 5.9% above November 2010 when it stood at 94.5. The October upward revision resulted in a 10.4% monthly gain.  The last time the index was higher was in April 2010 when it reached 111.5 as buyers rushed to beat the deadline for the home buyer tax credit. The data reflects contracts but not closings.  The PHSI in the Northeast rose 8.1% to 77.1 in November but is 0.3% below November 2010. In the Midwest the index increased 3.3% to 91.6 in November and is 9.5% above a year ago. Pending home sales in the South rose 4.3% in November to an index of 103.8 and remain 8.7% above November 2010. In the West the index surged 14.9% to 121.2 in November and is 2.9% higher than a year ago.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.  The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

Foreclosure backlog to take “decades” to clear

The number of seriously delinquent mortgages in the nation’s largest metropolitan areas slowed this year, according to a new study from the Urban Institute. But foreclosures remain a burden on the housing market, prompting the policy research group to call for a resolution to the housing crisis to ensure the foreclosure backlog is cleared out in a reasonable time period.  The institute said the serious delinquency rate in the 100 largest metro areas slowed to 9.3% in June from 10.4% in December 2009, according to data from Foreclosure-Response.org. The Urban Institute said the serious delinquency rate is classified as the share of loans in foreclosure, plus all of those that are more than 90 days in arrears.  “The foreclosure inventory that is building up is going to take an incredibly long time for lenders to clear,” said Leah Hendey, research associate at the Washington firm. “At the current pace of foreclosure sales, we are looking at a process that could take decades to complete. It is critical that the status of these properties be resolved quickly if we want to stabilize communities and housing markets.”  This decline was driven by a drop in delinquent loans, which fell to 3.7% in June from 5.5% in December 2009.

In hard-hit areas like Riverside and Stockton, Calif., the foreclosure rate declined significantly, dropping 1.9 percentage points and 1.7 percentage points from the peak two years ago.  Florida, New York and Illinois experienced a different shift in the market with foreclosure rates climbing in cities throughout those states.  In Tampa, the foreclosure rate jumped 2.8 percentage points, and in Chicago, it grew 2.3 percentage points. Those three states are judicial foreclosure states, which force a court to make a final decision before a property can leave the process. This leads to a growing backlog, the Urban Institute said.  Mortgage originations are down in all of the 100 metro areas surveyed, as well. Some of the largest drops occurred in Buffalo, N.Y., where originations fell 39% this year, and Miami, where new home loans fell 82%, 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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Foreclosures 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

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

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

WSJ – tracking down alleged victims

The Justice Department faces the daunting task of tracking down more than 210,000 alleged victims and determining how to compensate them, following last week’s $335 million fair-lending settlement with Bank of America Corp.’s Countrywide unit.  Minority borrowers who suffered the greatest harm from Countrywide’s allegedly discriminatory mortgage-lending practices could be the most difficult to locate, observers say, because they are the victims most likely to have lost their homes to foreclosure and subsequently moved several times.  The landmark case is also the first by the Justice Department that accuses a lender of steering borrowers to more costly mortgages, creating novel and possibly difficult questions on setting monetary payments for some victims. For example, how should the government compensate a family that both lost its home and was unfairly steered into a more costly subprime loan?

The agreement, announced last Wednesday, was the largest residential fair-lending settlement in history. It resolved allegations that Countrywide and its subsidiaries engaged in a widespread pattern of discrimination against black and Hispanic borrowers from 2004 to 2008.  Home borrowers allegedly were charged higher fees and costs. Others allegedly were steered into costly subprime loans, even though they could have qualified for a prime mortgage, the type of loan offered to borrowers with the best credit histories.  Bank of America said it reached the settlement “to resolve issues about Countrywide’s alleged historic practices” before it acquired the company in 2008. The bank also said it discontinued Countrywide products and practices that “were not in keeping” with its commitment to fair and equal treatment of customers.

As the Justice Department’s settlement administrator begins to track down victims, the recent experience of the Federal Trade Commission, which inked its own settlement with Countrywide last year, offers a possible road map. Bank of America paid the FTC $108 million to settle charges that Countrywide took advantage of more than 450,000 distressed homeowners by inflating the cost of services relating to their defaults.  The FTC began mailing refund checks this summer, but 18 months after the agreement, the agency still holds about 25% of the money because it can’t find some people. Officials there are also concerned that at least some victims haven’t cashed the checks out of worries the refunds are part of a scam. The agency is preparing to conduct another round of searches for remaining victims.  The Justice Department is confident its settlement administrator “will be successful in locating the vast majority of the victims and is committed to ensuring that best efforts are made to do so,” spokeswoman Xochitl Hinojosa said.

SEARS  to close 120 stores

Sears Holdings said today that between 100 and 120 Sears and Kmart stores will be closed after terrible holiday sales during what is the most crucial time of the year for retailers.  Sears  has yet to determine which stores will be closed, but there has been a clear shift in where the retailer will devote its resources.  The company is moving away from its practice of propping up “marginally performing” stores in hopes of improving their performance. Sears said it will now concentrate on cash-generating stores.  “Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce ongoing expenses, adjust our asset base, and accelerate the transformation of our business model,” said CEO Louis D’Ambrosio. “These actions will better enable us to focus our investments on serving our customers.”  Sears would not discuss how many, if any, jobs would be cut.  Sears Holdings has more than 4,000 stores in the US and Canada.

Housing sector lifted by rent demand

The percentage of Americans who own their home dropped from a peak of 69.2% in late 2004 to a 13-year low of 65.9% in the second quarter.  It edged up to 66.3% in the third quarter of this year. On the flip side, the percentage of rental properties that are empty fell to 9.8% in the third quarter from 10.3% a year earlier.  In a recent report, Oliver Chang, an analyst at Morgan Stanley, dubbed 2012 “The Year of the Landlord.” “Rents are rising, vacancies are falling, household formations are growing and rental supply is limited,” the Morgan Stanley report stated.  “We believe the demand for rental properties will continue to grow.”  Groundbreaking for new housing jumped 9.3% in November to the highest level in 19 months, fueling optimism that the battered housing market was regaining its footing.  The gains, however, were almost solely in multifamily housing. Groundbreaking for structures with five or more units shot up more than 30% from October to now stand at nearly double the year-ago level.  Prices reflect the shift in demand. Rental costs are up 2.4% over the last year, compared with an increase of just 0.6% in 2010.  Steve Blitz, senior economist at ITG Investment Research, says the lure of higher returns is spurring the development of apartment buildings. He argued the next “boom” in residential construction has already started.  “The reason rents were rising is that through the past 15 years there has been an under-building of rental properties because typical renters were increasingly able to garner cheap financing to buy a house,” he wrote in a research note.

Double dip for big pharma

Pharmaceutical giants’ profits could take a “double-dip” hit next year from patent expirations on blockbuster drugs and President Barack Obama’s healthcare reforms, according to a report from CreditSights, a credit market research firm.  Patent expiries are set to cost pharmaceutical firms $54 billion in sales between 2011 and 2012, with the cost reaching over $255 billion by 2016, according to EvaluatePharma, a research firm.  “We could see a double-dip effect in 2012, due to lower sales and earnings from loss of exclusivity, and healthcare reform costs that have not yet been reduced,” said Diya Sawhny senior pharmaceuticals analyst at CreditSights.  “A significant slate of prescription products lose patent protection in 2011 and 2012, and their sales will decline,” she added.

Obama’s healthcare reforms include increases to the sales taxes pharmaceutical firms pay for their drugs used in government health programs. Those taxes are based on prior year sales, so firms with blockbusters going off-patent in 2012 may face both higher taxes and a drop-off in sales.  Obama’s Affordable Care Act was enacted in March 2010 with the intention of improving healthcare for the uninsured. Changes include expanding the number of people who are eligible for Medicaid, the state-run insurance program aimed at low-income individuals, with 16 million extra enrollees expected by 2019.  A pre-existing tax on prescription drugs sold to Medicaid recipients was increased from 15.1% to 23.1%, and was expanded to include drugs given in care organizations.  Between 2011 and 2018, pharmaceutical firms must pay an additional federal tax based on their market share of sales to government health programs. The cost of the tax to the pharmaceutical sector is fixed by law, and rises from $2.5 billion in 2011 to $3 billion from 2012 until 2016.

Home prices fall in most major cities

Home prices in October declined in 19 American cities, as the Standard & Poor’s/Case Shiller home price index showed drops in both the 10-city and 20-city composites.  According to the latest S&P report, home prices declined 1.1% and 1.2% for the 10- and 20-city composite indexes.  “There was weakness in the monthly statistics, as 19 of the cities posted price declines in October over September,” said David Blitzer, chairman of the Index Committee at S&P Indices. “Eleven of the cities and both composites fell by 1.0% or more during the month. And even though some of the annual rates are improving, 18 cities and both composites are still negative. Nationally, home prices are still below where they were a year ago. The 10-city composite is down 3.0% and the 20-City is down 3.4% compared to October 2010.” S&P said fourteen of 20 metropolitan statistical areas and both the 10 and 20-city composite indexes had improved annual returns up from September.

Miami experienced no change in annual returns in terms of pricing during the month of October, while Atlanta, Detroit, Las Vegas, Los Angeles and Minneapolis saw their annual rates worsen. Atlanta experienced the lowest annual pricing return, with prices down 11.7%.  “Atlanta and the Midwest are regions that really stand out in terms of recent relative weakness. Atlanta was down 5% over the month, after having fallen by 5.9% in September,” the report said.  “It also has the weakest annual return, down 11.7%. Chicago, Cleveland Detroit and Minneapolis all posted monthly declines of 1.0% or more in October. These markets were some of the strongest during the spring/summer buying season. However, Detroit is the healthiest when viewed on an annual basis. It is up 2.5% versus October 2010.”  The only metropolitan statistical area to record a positive monthly change was Phoenix, which saw home prices edge up 0.3% from September to October.

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