mortgage rates

Smart Real Estate News & Commentary by Chris McLaughlin December 30, 2011

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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)

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About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Smart Real Estate News & Commentary by Chris McLaughlin December 29, 2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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*** Join Chris’ Facebook Fan Page–>

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*** Follow Chris on Twitter–>

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RealtyTrac:  2012 – the year of the streamlined short sale

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

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

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

Stock losses hit public pensions

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

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

Equator sees 1.17 million short sales

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

Jobless claims up

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

WSJ – cracked foundation threatens housing recovery

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

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

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

Expanding government role in mortgages

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

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

Fewer delinquencies, more foreclosures coming

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

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

* Follow me on Twitter: http://twitter.com/mclaughlinchris

* Join my Facebook Fan Page: http://www.mclaughlinchris.com

Smart Real Estate News & Commentary by Chris McLaughlin December 28,2011

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

Smart Real Estate News & Commentary by Chris McLaughlin December 27, 2011

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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