mortgage rates

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Want a loan modification? Get your paperwork ready.

Your woes do not end with delinquency.  You now need to get better at your paper work too, if you want to avail the administration’s mortgage modification program. With effect from June 1, New Treasury Department guidelines require loan servicers to verify applicants’ income and financial hardship before placing them into trial modifications. This will make it much tougher to get temporary relief from unaffordable mortgage payments. But if you make it into a trial modification, you’re more likely to get long-term assistance, providing you send in your check on time.  Of the 1.2 million people who’ve started trial modifications, fewer than 300,000 have received permanent assistance. Another 278,000 have washed out of the program either because they didn’t send in timely payments, hand in the required documents or meet the eligibility criteria.

Paperwork has caused all sorts of problems for the president’s signature foreclosure rescue program. In order to get the effort off the ground quickly, administration officials allowed servicers to place people in trial modifications before verifying that they were indeed eligible for the program.  Many homeowners have been stuck in trial modifications for months and months while they wrestle with servicers over the documentation requirements. The financial institutions say that borrowers aren’t sending in the needed forms; homeowners contend the servicers are losing them.  Many loans didn’t require much documentation when they were originated, which makes gathering the paperwork during the modification process that much more difficult, said Paul Koches, executive vice president at Ocwen.  The pace of people entering trial modifications has already slowed as servicers have started requiring the paperwork in advance. Only 47,160 trials were started in April, down from more than 72,000 in February.  Among the documents Chase and other servicers require are hardship affidavits, two recent pay stubs, a bank statement, a tax return, proof of occupancy and a 4506T-EZ form.

Congress Has Hands Full With FinReg Compromise Bill

The upcoming conference to merge the House and Senate bills on sweeping financial reform, has the potential to be both fractious and divisive with a number of minefields to cross. Amendments–tacked on or ignored during earlier rounds—will be disposed of, adding to the existing frustration of Senate members in particular.  “There are too many issues to horse trade on,” says bank analyst Bert Ely. “What’s going to happen is that because the Senate bill was so poorly drafted—there was no committee markup…is that many portions of the bill will be substantially rewritten in resolving the differences.”  Meanwhile, additions will be made, even though the bills already run 1,400-1500 pages. 

Republican conference members are also already setting the table. Sen. Bob Corker of Tennessee—who negotiated with Dodd for weeks at the committee level and is a conference member—has already criticized the President for taking a non-partisan approach, while Sen. Judd Gregg has called the bill “a disaster.”  And, if all this weren’t enough, extraneous events and personal circumstances may play a sizable role in the negotiations and their outcome.  Potential minefields include, the Derivatives Regulation that covers personal fortune, politics and policy converge, the so-called Volcker rule—whose primary purpose is to limit the proprietary trading of big firms, Capital Requirements amendment by Maine Republican Susan Collins, that would essentially tighten capital requirements for banks and Consumer Agency Exemption by Sen. Sam Brownback of Kansas, who wants auto dealers exempted from new regulations that would protect consumers from abusive practices in the sale of financial products.

Diana Olick – Are Investors Souring on Housing?

“Last year, when the rest of the nation’s housing was still reeling from recession, California started to show signs of life. Sales increased and prices stabilized, despite the fact that it was one of the hardest hit states with one of the highest foreclosure rates. California’s savior was investors. They came in fast, cash in hand, and started snatching up distressed properties at a fast pace. That interest appears to be waning. While sales of existing homes shot up across most of the nation in April, they fell in the West, down 6.2 percent. “The sales are lower because of lack of inventory on lower-priced homes,” says Lawrence Yun of the National Association of Realtors. “The California market was one of the first markets to go down sharply but also the first market to rebound.” The inventory of low-priced homes is low because of big investor demand initially and because banks are being very careful with REO (bank owned) properties, releasing them slowly onto the market so as not to tank prices. But that’s not all of it. “We know the tax-credit has pushed low-priced houses up sharply and investors have backed away big-time in recent months, not wanting to compete with a bunch of first-timers and their Obama coupons,” says mortgage analyst Mark Hanson. “Perhaps this is the end of the demand cycle from first timers and investors who have had their fill.”

On the other hand, some of the numbers may be skewed due to the increasing prevalence of short sales, where the bank allows the home to be sold for less than the value of the mortgage. “The proportion of damaged foreclosed properties or so-called real estate owned (REO) sold during April plunged,” according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. “Damaged REO accounted for 15.4 percent of transactions in March, but only 12.8 percent in April. One reason for the drop in damaged REO may be increasing numbers of short sales.” Now that the tax credit is over, and foreclosures are moving through the bank pipelines more quickly, perhaps investors will come back in larger numbers. Prices are certainly low enough!”

Consumers Hold Their Wallets Tight

U.S. consumer spending was unexpectedly flat in April, a government report showed on Friday. The Commerce Department said spending was the weakest since September, when it fell 0.6 percent, after increasing by an unrevised 0.6 percent in March. Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of U.S. economic activity, to increase 0.3 percent last month. Spending adjusted for inflation was also flat in April after a 0.5 percent increase the prior month, the Commerce Department said. Personal income rose 0.4 percent, the report showed, after rising by the same margin in March. Markets had expected income to rise 0.5 percent last month. The saving rate rose to 3.6 percent from 3.1 percent in March. Savings rose to an annual rate of $398.5 billion. The report also showed the personal consumption expenditures price index, excluding food and energy, rising 1.2 percent in the 12 months to April, the smallest rise since September. The index, which is a key inflation gauge monitored by the Federal Reserve, increased 1.3 percent in March.

Mortgage Lenders Seek Relief on Bad Debt Repurchases

Mortgage lenders are seeking relief from Fannie Mae and Freddie Mac as the government-supported companies force them to buy back more soured debt, said John Courson, president of the industry’s largest trade group. The Mortgage Bankers Association has started to “aggressively” push the two companies and their regulator to ease up.  Fannie Mae and Freddie Mac, propped up by unlimited taxpayer capital, should acknowledge lenders are unfairly absorbing too many losses, with unemployment that reached a 27- year high among the causes of defaults unrelated to loan quality.  Last quarter, the companies forced lenders to repurchase $3.1 billion of loans, up 63 percent from a year earlier, after defaults surged to the highest since the Great Depression, according to regulatory filings. Bank of America Corp. and JPMorgan Chase & Co. are among banks that reported setting aside money to cover such demands.

Freddie Mac, based in McLean, Virginia, had $4.8 billion of repurchase requests pending as of March 31, up from $3.8 billion on Dec. 31. Washington-based Fannie Mae hasn’t made a similar disclosure.  The company is creating new upfront lender requirements to “promote improved loan delivery data that is complete, accurate, and fully reflective of the terms of the mortgage,” which should reduce future repurchase demands, said Janis Smith, a Fannie Mae spokeswoman. The so- called loan quality initiative takes effect June 1.  The U.S. government seized Fannie Mae and Freddie Mac, which own or guarantee almost $5 trillion of U.S. housing debt, in September 2008, and has guided their actions during their so called conservatorships. They’ve drawn $145 billion in aid from the Treasury Department. 

State Group Estimates 37% of California Foreclosures Involved Renters

The foreclosure crisis in California has taken a toll on not only homeowners, but a large number of tenants in the state. According to a new study from Tenants Together, California’s statewide organization for renters’ rights, at least 37 percent of residential units in foreclosure in the Golden State last year were rentals, directly affecting over 200,000 tenants – most of whom were displaced. Tenant Together’s research is based on California property records for every foreclosure in 2009, and the organization says its estimates are “conservative.” The report – California Tenants in the Foreclosure Crisis Report – concludes that while the largest percentage of renter-occupied foreclosed properties were single-family homes, the percentage of renter-occupied, multi-unit buildings is growing at a faster pace. The organization says this trend is likely to increase as more loan modification programs target owner-occupied properties, which are primarily single-family homes and condominiums, while multi-unit rental properties continue to fall by the wayside and into foreclosure.  Tenants Together says that the new federal law Protecting Tenants at Foreclosure Act comes short of providing long-term security for tenants and has been mired by implementation problems arising from banks’ non-compliance with the new law.  Among the various proposals, the report notes that ‘just cause for eviction’ laws are a particularly effective and cost-free way to stop the displacement of tenants whose lenders have been foreclosed on and provide greater stability to California communities.

Now on to our real estate education section…

Friday File – Assessing a Mobile Home Park

This week we have explored the commercial side of short sales with a special look at the use of mobile home parks as one easy entry into a frequently ignored alternative. For today’s Friday file we will show a quick and easy way to assess whether or not a mobile home park would enhance your portfolio. Not only are a large number of “mom and pop” parks wanting to retire but many larger properties are coming on the market thanks to REO and generalized foreclosures. Use these quick calculations to compare the cost and outcome:

1. Determine the Density. Expect an average density of roughly 4 to 10 units per acre. Long term residential areas tend to be less dense while part-time, resort and/or RV rental areas tend to be more dense.

2. Decide who will be responsible for utilities? If tenants will pay for the utilities, multiple the average monthly lot rent by 70. If the investor will pay for utilities, multiple the average monthly lot rent by 60. These are industry norms with a built-in “cushion”.

Tip: Average monthly lot rent for most mobile home parks average $250 to $400 per month. So, if you own a ten acre mobile home park that has 40 units and rents for $300 per month with tenants paying utilities, the park would generate an anticipated $12,000 per month  multiplied by .70 or $8,400 anticipated monthly net.

3. Evaluate the “Break Even” point. As a general rule of thumb some mobile home park investors like to cap the cost at an arbitrary number such as $5,000 per $100 of lot rent (less for vacant lots) however, it’s often possible to find a diamond in the rough for significantly less especially if it has been poorly managed or the owners are looking to liquidate. Using the same example from above, a 40 unit park with rents of $300 per month would expect to sell somewhere in the neighborhood of $600,000 before taking vacancies into account. Discount for average vacancy rates, assess the impact of accelerated depreciation and other tax advantages plus down payment to determine your “break even” point.

4. Add in the cost of appreciation, rentals and other ancillary services such as laundry, RV lots, sales of mobile homes, rentals of mobile homes, wi-fi or other potential sources of income.

Many investors are surprised to learn how affordable and easy investing in a mobile home park can be; it’s just one quick example of another alternative to breaking into commercial real estate investments. This week, perform a quick search for a small mobile home or RV park to see what’s available in your area. Remember, it’s easy to trade free lot rent for an on-site manager to keep the headache and hassle down while rapidly increasing the income and appreciation.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2009.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * 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/

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

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

FIX A FLIP OPENS TODAY AT 3 PM ET, NOON PST!

We’re bringing it back! Fix-a-Flip funding will re-open

up this Thursday with even more updated fast-flipping

strategies and new partnerships with capital

providers.  And we’ll be sold out again in record time.

 

Go here to get what you’re missing out on in a fr-ee

webinar Thursday at 3 PM ET, NOON PST:

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

Delinquencies, Foreclosure Starts Increase in Latest MBA National Delinquency Survey

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 10.06 percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 106 basis points from 10.44 percent in the fourth quarter of 2009 to 9.38 percent this quarter. The percentage of loans on which foreclosure actions were started during the first quarter was 1.23 percent, up three basis points from last quarter but down 14 basis points from one year ago. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. 

The percentage of loans in the foreclosure process at the end of the first quarter was 4.63 percent, an increase of five basis points from the fourth quarter of 2009 and 78 basis points from one year ago. This represents another record high.  The combined percentage of loans in foreclosure or at least one payment past due was 14.01 percent on a non-seasonally adjusted basis, a decline from 15.02 percent last quarter.  “The issue this quarter is that the seasonally adjusted delinquency rates went up while the unadjusted rates went down. Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter and we saw that first quarter drop in the data.  The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement.  Most importantly, the normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which,” said Jay Brinkmann, MBA’s chief economist. He adds, “Simply put, fundamental market factors may be having a greater influence on the delinquency rates than is normally the case, but mathematical models have difficulty discerning the difference over a short period of time.“

Regulators Testify on Market Dive, New Rules

Two weeks after the stock market’s epic dive, federal regulators and U.S. securities exchanges have a new plan to keep it from happening again, proposing that essentially markets call a “time out” when trading gets too chaotic. The question is whether it will work. The big stock exchanges say that new curbs on trading known as “circuit breakers” will help prevent runaway market drops. But not everyone is convinced. To some market watchers, the rules are too limited. To others, the rules go too far. The government’s two top market regulators are appearing before a Senate panel Thursday in the aftermath of the wild trading day that stunned Wall Street, and Washington, on May 6. Mary Schapiro, chairman of the Securities and Exchange Commission, and Gary Gensler, head of the Commodity Futures Trading Commission, will testify at the hearing. 

The SEC on Tuesday unveiled the new plan for circuit breakers, which was agreed upon with the exchanges. Under the plan, trading of any Standard & Poor’s 500 stock that rises or falls 10 percent or more within a five-minute period would be halted for five minutes. The rules would be applied if the price swing occurs between 9:45 am and 3:35 pm New York time — nearly the entire trading day. The reality, however, is that it may not be know whether the new curbs are effective, too limited or too extreme until there is another day like May 6, when intense selling sent the Dow Jones industrials down to a loss of almost 1,000 points in less than a half-hour. The idea behind the circuit breakers is that by giving investors a break during extreme market dips, they’ll be less likely to set off a chain reaction of human and computerized selling. That’s one of several possible causes of the May 6 plunge, dubbed as  “flash crash,” briefly wiped out $1 trillion in market value as some stocks traded as low as a penny. Meanwhile investigators are focusing on, among other things, a possible link between the steep decline in prices of stock indexes, and “simultaneous and subsequent” waves of selling in individual stocks.

Diana Olick – Mortgage Crisis Creating Drag on Economic Recovery

“The mortgage crisis is dragging on the economic recovery as more homeowners fall behind on their payments. Analysts expect improvement soon, but the number of homeowners in default or at risk of foreclosure will have a lingering effect on the broader economy. More than 10 percent of homeowners had missed at least one mortgage payment in the January-March period, the Mortgage Bankers Association said Wednesday. That’s a record high.  A big jump in the number of borrowers who have missed three months of mortgage payments drove the increase. There was one encouraging sign: The number of homeowners just starting to show trouble is trending downward as the economy improves. As of March, nearly 3.5 percent of homeowners had missed one month of mortgage payments. Around 4.3 million homeowners, or about 8 percent of all Americans with a mortgage, are at risk of losing their homes, the trade group’s top economist estimates.

They have either missed at least three months of payments or are in foreclosure. Should loan modification programs fail to help, their homes will go up for sale either as a foreclosure or short sale—when the bank agrees to sell the property for less than the original mortgage amount. Many analysts have been forecasting home prices will dip again as more of these homes go up for sale at deeply discounted prices. “It’s certainly a weight on the economy,” said Mark Zandi, chief economist at Moody’s Analytics, who predicts home prices will fall about 5 percent and hit the bottom next spring.  Federal tax credits boosted home sales this spring but they expired last month.  As a result, mortgage applications to purchase homes fell to the lowest level in 13 years this week, the Mortgage Bankers Association said in a separate report Wednesday. The latest foreclosure figures from the trade group are adjusted for seasonal factors. For example, heating bills and holiday expenses tend to push mortgage delinquencies up near the end of the year. Many of those borrowers become current on their loans again by spring. More than 4.6 percent of homeowners were in foreclosure, also a record. But that number, which is not adjusted for seasonal factors, was up only slightly from the end of last year.

Stocks slid Wednesday as investors remain concerned with the European debt crisis. The rising number of mortgages also drew some attention. The Dow Jones industrial average fell more than 100 points in midday trading. The Obama administration’s $75 billion foreclosure prevention program has barely dented the problem. Many homeowners are still in limbo. Economic woes, such as unemployment or reduced income, are the main catalysts for foreclosures this year. Initially, lax lending standards were the culprit. But homeowners with good credit who took out conventional, fixed-rate loans are now the fastest growing group of foreclosures. The risky subprime adjustable-rate loans that kicked off the foreclosure crisis are making up a smaller share of new foreclosures. They made up 14 percent of new foreclosures in the January-March period, down from 27 percent a year earlier. ”

Fed in No Rush to Sell Mortgage Assets, Minutes Show

Federal Reserve policy makers last month said they were in no rush to sell $1.1 trillion of mortgage-backed securities, with a majority preferring to wait until after the central bank starts raising interest rates. “Most participants favored deferring asset sales for some time,” while others wanted to announce a schedule or start sales soon, the Fed said in minutes of its April 27-28 meeting in Washington, released today. Officials lowered their projections for inflation, excluding food and fuel, while keeping forecasts little changed for economic growth and unemployment in 2011 and 2012. The minutes show that Chairman Ben S. Bernanke and his colleagues are still trying to each a consensus over when and how fast to reduce the Fed’s balance sheet as the economy recovers. The Fed aimed to lower home-loan costs and boost growth by buying mortgage securities through last March after cutting the benchmark interest rate almost to zero in December 2008. 

“Even though the recovery appeared to be continuing and was expected to strengthen gradually over time, most members projected that economic slack would continue to be quite elevated for some time,” according to the Federal Open Market Committee report, which doesn’t identify the specific  governors or regional-bank presidents making comments. Some policy makers said at the meeting they were concerned about potential spillover to the U.S. from the Greek debt crisis, more than a week before European officials stepped in with an almost $1 trillion aid package and the Fed decided to restart emergency currency swaps. Former Fed Governor Lyle Gramley, now senior economic adviser at Potomac Research Group in Washington, said in an interview with Bloomberg Radio, “Asset sales won’t occur for a while because the housing market is still “very fragile.”

DSNews.com – FBI’s Mortgage Fraud Cases up 400% since 2005

Of all frauds perpetrated against financial institutions, mortgage fraud, in particular, has spiked, the Office of Thrift Supervision (OTS) said in a report released this week. During 2009, the Federal Bureau of Investigation (FBI) delved into more than 2,100 mortgage fraud cases, up 400 percent from five years ago. According to the OTS report, the increase can be attributed to declining economic conditions, liberal underwritings, and declining home values. With the rapid growth of real estate markets and the development of new technology associated with refinancing and computer-driven underwriting methods, the opportunity for mortgage fraud continues to escalate. The OTS says warehouse lines have been particularly vulnerable, with their 90-day window of “purchasing” mortgages and awaiting ultimate repayments from final investors.

The FBI reports that equity stripping and property flipping are common schemes. The FBI estimates that 80 percent of all mortgage fraud involves collaboration or collusion by industry insiders. The FBI reports that mortgage fraud schemes continue to adapt as the economy changes and that individuals are victimized even as they are about to lose their homes. Foreclosure rescue scams take several forms but usually involve payment of an upfront fee in exchange for a promise to resolve a pending foreclosure, the OTS report explained.  While this type of fraud is not perpetrated directly against the bank or thrift, the end result can still have a negative impact on the lender, according to the federal regulator. The OTS noted red flags for a number of fraudulent mortgage schemes, including straw borrower schemes, “builder bailout” schemes and flipping schemes.

Investor fear is back

Roughly four weeks ago, the Dow (INDU) was at an 18-month high, Wall Street’s fear gauge, the VIX (VIX), was at a three-year low and the yield on the 10-year Treasury note was flirting with 4% as investors poured money into stocks. Meanwhile, the euro was still falling apart on worries about Greece and the European debt crisis. Gold and other commodity prices were still rising. But investors weren’t panicked. Strong corporate earnings and signs that the recovery was underway tempered worries about global markets, currencies and commodities. One month later and investors have done a complete 180. And the recent record run on gold “is a vote of no confidence in the euro.”

U.S. stocks are down: Markets were already wobbling ahead of the flash crash of May 6, when the Dow plunged nearly 1,000 points during its worst intraday session ever. Since then, stocks have zigzagged, with the Dow posting a series of triple-digit swings as investors struggle to find their footing.  Since peaking at 17-month highs in late April, the Dow has lost 6% and the broader S&P 500 has lost 8%. The Nasdaq reached a 22-month high in late April and has since fallen 9%. Global markets have had it even worse than markets in the United States. Volatility is rising: After a relatively calm period following the 2008-early 2009 whiplash, volatility has returned. Wall Street’s fear factor, the CBOE Volatility index (the VIX), closed at a 13-month high of  $40.95 two weeks ago and has seesawed since then.

Now on to our real estate investing education section …

Finding Freedom

Learning how to buy and sell short sales and other real estate investments for profit is actually pretty simple; like many of the most important things in life, the important lesson isn’t understanding the process or even figuring out the math…it’s understanding the identity traps and negative thinking that keep you from success.

Over the years a lot has been written about the power of positive thinking but one of the most enduring classics is the out of print book “How I Found Freedom in an Unfree World”. Although originally penned in the 70’s, the content is still as fresh and relevant today as it was 30 years ago. Short Sale investors and real estate pro’s alike would do well to contemplate how these mind games and identity traps restrain growth and keep you from living the life you love. For those who haven’t managed to track down a copy of this somewhat elusive book, here are just a few of the primary reasons “Why you are not free” according to the former Harry Browne:

1. Identity Traps – do you have a negative self image? Believe you can never be “rich” or associate a certain lifestyle or stereotype with the trappings of success? Forget everything you think you know about wealth. Instead, learn to live life on your terms.

2. Intellectual & Emotional Traps – Fear, anxiety, guilt. These are just a few of the most common intellectual and emotional traps the trip people up. You have choices – get counseling or start interacting with others that have learned how to leave these behind.

3. The Morality Trap – This is actually a big one for short sale investors. The popular media like to paint a very negative picture about evil investors or greedy landlords…in fact, being a victim is all the rage but woe to those that pull themselves up by their own bootstraps. Don’t fall for it! It’s not immoral to take control of your financial future.

4. The Government Trap – Fear “Big Brothers” control over you? You aren’t alone. Research shows that many high net worth individuals, investors and small business owners are increasingly weary/leery of good old Uncle Sam. Take appropriate steps to stay informed while understanding the real rates of risk involved in investing.

5. The Despair Trap – It’s easy to fall into a state of despair especially if life has tossed a few set-backs your direction. On the other hand, learning to overcome and accept these as a natural course of action is part of thriving rather than barely surviving. Surround yourself with the news, information and examples that are relevant to a life of success.

6. The Rights Trap – Modern society is literally suffocating from the number of individuals with an entitlement attitude. You have two choices in life…take responsibility for your life or wait until someone decides to take notice and do it all for you. Just remember the old adage “beggars can’t be choosers”.

7. The Previous Investment Trap – This works for and against investors every day. The fallacy of believing the future can be determined from the past is simply that…a fallacy. Whether you won or lost – this time it really is different because every transaction is individualized.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2009.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * 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/ 

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

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

FIX A FLIP OPENS AGAIN THIS THURSDAY!

We’re bringing it back! Fix-a-Flip funding will re-open

up this Thursday with even more updated fast-flipping

strategies and new partnerships with capital

providers.  And we’ll be sold out again in record time.

 

Go here to get what you’re missing out on in a fr-ee

webinar Thursday at 3 PM ET, NOON PST:

https://www2.gotomeeting.com/register/899839235

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

Home Loan Demand Sinks to 13-Year Low

Demand for loans to buy U.S. homes shriveled to a 13-year low last week, following the expiration of federal tax credits, while near-record low mortgage rates stoked refinancing, the Mortgage Bankers Association said on Wednesday. Mortgage purchase applications sank 27.1 percent to the lowest level since May 1997 in the absence of the popular government support, the group said. U.S. housing groped for footing after more than a year of homebuyer tax credits worth up to $8,000 expired on April 30. Requests for home purchase loans have fallen almost 20 percent over the past month despite low borrowing costs. “The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season,” Michael Fratantoni, the industry group’s vice president of research and economics, said in a statement.

Overall loan requests were down 1.5 percent, on a seasonally adjusted basis, in the week ended May 14, cushioned by a 14.5 percent jump in mortgage refinancing applications as home loan rates neared historic lows. Average 30-year mortgage rates fell 0.13 percentage point last week to 4.83 percent, the lowest since last November, the MBA said. The record low was 4.61 percent in March 2009, based on the group’s survey, which has been conducted since 1990. Low borrowing costs and stabilizing home prices are being offset by near double-digit U.S. unemployment and a looming supply of foreclosed properties yet to hit the market. The worst of the housing crisis is over but recovery will be long and slow, most economists agree.

SEC moves to expand stock circuit breakers

The Securities and Exchange Commission proposed new rules Tuesday that would pause trading in certain stocks that experience extreme swings.  The move is in response to the brief but historic stock market crash of May 6, in which the Dow Jones industrial average fell nearly 1,000 points, its biggest intra-day drop on record, before the index rebounded within a matter of minutes. Under the proposed rules, trading in an individual stock would pause across all U.S. stock markets for a five-minute period in the event that the stock experiences a 10% change in price over the preceding five minutes.

The pause, also called a circuit breaker, would give the markets the opportunity to attract new trading interest, establish a reasonable market price, and resume trading of an affected stock in a fair and orderly fashion, according to the SEC. The proposal would create uniform, market-wide standards for individual securities in the S&P 500 stock index. In the current system, circuit breakers are triggered under various circumstances depending on which exchange a stock trades on.  The SEC said about 30 stocks in the S&P 500 (SPX) fell at least 10% in a five-minute period in an event which has become known as the “flash crash.” The new rules reflect a “consensus” that was achieved in that meeting, the SEC said. The new rules, which are subject to Commission approval following the completion of a comment period, will be rolled out as a pilot program running through Dec. 10, 2010. The SEC did not state when the program would start.

DSNews.com – Moody’s: Distressed Sales Key to Speed of Recovery

The future of U.S. home prices is acutely tied to the speed and the manner in which distressed sales work through the system, Moody’s Economy.com stressed in a report issued this week. “We expect that house prices will continue to decline because the pipeline of distressed mortgages is substantial and because the price discounts for distress sales weaken all house prices,” the forecasting and credit risk unit of Moody’s Analytics wrote. While the overall housing market has largely bottomed, Moody’s Economy.com says home prices aren’t there just yet. The company projects home sales and new construction to rise slowly this year, but “[n]onetheless, we foresee a 5 percent additional house price decline nationally. Regions with increasing foreclosure volumes will suffer more,” Moody’s said in its report. During the course of this housing correction, home price trends have been closely tied to distressed transactions, including foreclosure sales and short sales.

The greater the number of foreclosures in a market relative to total home sales, the greater the downward pressure on prices, Moody’s says. Banks discount the price of foreclosed properties in order to dispose of them quickly, and Moody’s says the typical markdown has doubled since the beginning of the housing bust. The report noted that short sales have a more muted impact on the downward pace of home prices since the discount is far smaller than price cuts associated with a foreclosure sale. The administration’s Home Affordable Foreclosure Alternatives (HAFA) program is expected to drive up the number of short sales this year as compared to last year. 

Mortgage Default Rates Lower as Consumers Choose Property Over Plastic

The monthly default rates for first and second mortgages fell in April, but climbed for bank card loans for the third consecutive month, according to the latest data from credit-rating agency Standard & Poor’s and national credit bureau Experian. Defaulting balances of bank card loans rose to 9.1% in April, from 8.9% in March and from 7.7% a year earlier, according to S&P. First and second mortgage default rates slipped to 3.7% and 2.5%, respectively down 6% and 11% from March levels. At the same time, the share of borrowers delinquent on credit cards but current on their mortgages slipped to 3.6% from 4.1%.

“Consumer defaults continue to moderate in the key big ticket items of first and second mortgages and auto loans,” said David Blitzer, managing director and chairman of  the index committee at S&P Indices. “In these areas, defaults bottomed out around the same time as the stock market in the first half of 2009. Bank cards on the other hand continue to worsen and are at levels not seen in the history of these indices.” The S&P/Experian default index for first mortgages fell 6.2% from last month and 31.1% from the same time last year, while that of second mortgages posted similar declines of 11% and 45.4%. At the same time, however, the default index for credit cards grew 2.4% from last month and 19.3% from last year. According to the S&P/Experian indices, consumer credit defaults vary across major cities and regions of the US.  Among the five major Metropolitan Statistical Areas (MSAs) studied for the April report, Chicago showed the smallest decrease of 5.8% in the past year. The sharpest decline was in Miami where defaults declined 40.5% in the last 12 months and 7.9% in the past month. It marks a reversal of recent trends of borrowers paying down credit cards before mortgages, as seen by national credit bureau TransUnion.

Investor confidence takes a hit

U.S. futures and European shares fell sharply early Wednesday after Germany announced restrictions that prevent traders from betting against some government debt securities and financial shares.  Germany’s DAX lost 1.7%, the FTSE 100 in Britain fell 1.7% and the CAC 40 in France declined 1.9% in morning trading in Europe. In the United States, Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were all lower.  Futures measure current index values against perceived future performance and offer an indication of how markets may open when trading begins in New York. 

Companies: Target reported Wednesday that net earnings for its most recent quarter were $671 million, up from $522 million in the year-ago quarter. The retailer also reported earnings per share of 90 cents, up 30% from 69 cents in the same quarter last year. This fell just short of the 91 cents EPS expected by a Thomson Financial’s analyst consensus. Dollar and commodities: The euro partly pulled out of its slump, after hitting a four-year low on Tuesday. Against the shared currency, the dollar fell 0.5%. The greenback was down 0.3% on the British pound and fell 1% versus the Japanese yen. Bonds: Treasury prices were higher early Wednesday, pushing the benchmark 10-year note’s yield down to 3.36%. Bond prices and yields move in opposite directions.

Now on to our real estate investing education section …

Commercial Real Estate Jargon Buster

Real estate can be a complex and confusing area but in our ever expanding effort to follow the KISS directive, we are proud to present a real life interpretation for modern day real estate lingo. While you may not find these definitions in sync with the latest version of Webster’s Dictionary, we think you will agree they accurately reflect the state of affairs.

PAD: A stand alone building in a prime location of a large shopping center…or, what banks are doing with bail-out funding while waiting for the next shoe to drop.

Anchored Tenants: A big brand-name national tenant…or a commercial tenant that can’t afford to relocate across the street much less across town.

Gross Lease: A lease where the tenants are supposed to pay the rent while the landlord or property owner pays the taxes, insurance and maintenance. Given the rising cost of property taxes and insurance, the standard definition will suffice.

GRM: Gross Rent Multiplier or the ratio of purchase price over annual income. In many commercial divisions that bought during the boom, the GRM can perform the rare and somewhat elusive feat of  multiplying negative numbers.

LOI: Typically this stands for Letter of Intent or a non-binding offer letter use to purchase a commercial property. In today’s tough commercial market it could also stand for “Loss of Interest” as short sales continue to climb among many retail spaces.

Absorption: The amount of inventory or units of a specific commercial property type that become occupied during a specified time period…or the amount of money being soaked up by the under-performing property.

Cash Flow After Taxes/ES – The net operating income less mortgage, improvements, property taxes etc…or, a non-existent state among many retail operations bought over the past several years.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2009.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * 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
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Dropouts Rise In Gov’t Loan Modification Program

The Treasury Department’s latest report reads like a dashboard of the problems in the Obama administration’s $75 billion program. While officials summarize it as a helping hand that can help the housing market turn around, critics see that as something that merely delays an inevitable surge of foreclosures.  The critics seem to be right, as there is growing evidence that the number of homeowners dropping out of main mortgage assistance program is almost equal to the number who have received permanent relief.  And the drop outs are on the rise.  More than 299,000 homeowners had received permanent loan modifications as of last month, Treasury said. That’s about 25 percent of the 1.2 million who started the program since its March 2009 launch. They are paying, on average, $516 less each month. However, the number of people who started the process but failed to get their mortgages permanently modified rose dramatically in April. 

To complete the program, borrowers must make at least three payments on time. About 277,000 homeowners, or 23 percent of those enrolled, have dropped out during this trial phase. That’s up from about 155,000 a month earlier, or a 79 percent increase. The many reasons for the failure include, borrowers’ inability to complete the process and tough burequcracy. Treasury officials acknowledge that long delays have been a problem. “Homeowners are waiting. We want them to get answers as rapidly as possible,” said Herbert Allison, an assistant Treasury secretary.  Treasury officials have now directed lenders to shift to a new system. Starting with loan modifications that go into effect June 1, they are required to collect two recent pay stubs at the start of the process. Many borrowers who don’t get help will end up losing their homes. That can happen through foreclosure or short sales. Mortgage companies will now have to set their minimum bid before the house is listed for sale. If the offer is above that, the lender must accept it. But, generally, lenders calculate the money only after they have an offer on hand, which can lead to more delays. The new program is expected to boost short sales this year, but 80 percent of distressed sales this year are still likely to be foreclosures, estimates Celia Chen, senior director of Moody’s Economy.com.

Wall Street reform finale expected this week

The Senate is entering the final stretch of its work on the Wall Street reform bill, which aims to stop bailouts, shine a light on complex financial products and strengthen consumer protection.  The legislation, which has been through numerous ups and downs over many months, remains a moving target. But many lobbyists and veteran congressional watchers say they expect it to pass the Senate by Friday. If that happens, leaders of the Senate and House — which passed its own bill in December — would likely hole up behind closed doors to negotiate differences between the two bills next week. A couple hundred amendments have been filed to the already massive Senate bill.

On Monday night, lawmakers approved an amendment mandating that credit bureaus provide free credit scores to consumers in some cases. Later in the week, the Senate will likely vote to strip the bill of a provision that would bar banks from trading derivatives if they want access to cheap emergency loans that the Federal Reserve makes available. The Senate is also expected to vote on a controversial amendment that would exempt auto loans from tougher rules governing other consumer financial products. It would also create a council of regulators that would sound an alarm before companies are in position to trigger a financial crisis. Finally, the bill would establish new procedures for shutting down giant financial firms that are collapsing.

Diana Olick – Mortgage Mods Doomed by Back End Debt

Much like America’s waistlines, the Treasury Department’s monthly report on the Home Affordable Modification Program continues to grow. What started as a four-page report has now reached ten pages, with the latest addition to the “lender accountability” category: Conversion Rate and Aged Trials as Share of Active Trials. These provide a lot of insight into why so many borrowers are not getting permanent modifications. The top four lenders (Bank of America, JP Morgan Chase, Wells Fargo and CitiMortgage) take up the bulk of the bottom slots on the Conversion Rate chart. All four convert less than 26 percent of trial mods to permanent mods. Bank of America’s Rick Simon says initially, “All the major banks, at Treasury’s suggestion, went to non-verified income for verification. 

That seems to be the crux of the problem. Imagine that: Folks who didn’t have to show any proof of anything to get a trial modification, weren’t able to sustain that modification. The big guys have now changed that, requiring full documentation. So big surprise the report now shows a drop in the number of new modifications, because if you have to get all that documentation up front, then it’s likely going to take longer.  So now we get the delay, but why are the permanent mods failing at all if they’ve barely begun, and if the front-end debt to income formula is supposedly so perfect? I asked the banking folks and expected to hear “unemployment” as the answer. I was wrong. They cite the back-end DTI, which is your mortgage debt in addition to all your other debt, like car, credit cards, etc. P. 5 of the HAMP report puts that at 64.3 percent, meaning you’ve got 35.7 percent of your income to spend once you’ve paid all debt-related bills—not to mention your income taxes! Last month it was 61.3 percent, the month before, 59.8 percent, so it’s getting progressively worse. In the fine print, it says “Borrowers who have a back-end debt-to-income ratio of greater than 55 percent are required to seek housing counseling under program guidelines.”  So how is it that the “Median Characteristics of Permanent Modifications”, shows the back end DTI (64.3 percent) at a level that would require counseling? i.e. risky?? And that’s the “Median”, which by definition means half the permanent mod borrowers have and even HIGHER back end DTI.  I have to wonder if any mortgage originator today would even offer a new loan to anyone with those kinds of stats. My guess is no.

FHA Set to Reduce Closing Cost Assistance This Summer

The real estate industry is still waiting to see how the market will adjust after the expiration of the first-time homebuyer tax credit, but more consumer incentives are about to be cut, this time from the Federal Housing Administration (FHA).  The FHA will reduce allowable seller concessions — the percentage sellers can take from the sales price of a home to fund closing costs — from 6% to 3%. According to an announcement in January, the current level of 6% exposes the FHA to excess risk by creating incentives for appraisers to increase the value of these homes. The change will take place in “early summer,” according to the FHA, but a spokesperson said no specific date has been set.

The closing costs include fees for origination, attorneys, appraisal and inspections, title search, title insurance, credit reports, and more. Down payment assistance is not included as a closing cost.  Anthony Askowitz, broker and owner of RE/MAX Advance Realty II in Miami, Florida, said the FHA 6% level was also a big incentive to homebuyers looking for reasons to buy a home after the tax credit expired.  Askowitz said on a $100,000 house, 6% is $6,000, which is one way of overcoming the tax credit expiration going forward. He said he is seeing some sellers offering an $8,000 credit to new homebuyers, especially for homes that have been on the market for an extended period of time. “I think the seller is going to be much more apt to agree to a seller contribution in order to get it sold. Being creative, there are other ways to do it, other than the government doing it,” Askowitz said.

NAR Proposes Solutions to Congress to Combat Commercial Real Estate Crisis

The commercial real estate market is experiencing its worst liquidity challenge in almost 20 years, and it is vital that Congress take action to prevent a deepening crisis, the National Association of Realtors® said in testimony to the U.S. House of Representatives Subcommittee on Oversight and Investigations, yesterday. Cosenza said the crisis is driven by a confluence of high unemployment, a slow economy, weakening commercial property fundamentals, and an increase in commercial loan delinquencies.  Cosenza outlined a number of proposals urging the congressional panel to consider. First, NAR supports changes that will boost lending to the commercial real estate and small business markets, he said. Currently, due to the slumping economy and falling commercial real estate values, many commercial banks have tightened their credit standards and reduced their loan volumes. NAR strongly supports H.R. 3380, “Promoting Lending to America’s Small Businesses Act,” which would increase the cap on credit union lending to 25 percent of total assets, from its current business lending cap of 12.25 percent of total assets.

Cosenza also pointed out that commercial loans are often short term, and property owners must refinance frequently. In addition, lenders should be encouraged to extend the term of current loans, he said, but they have been wary of offering extensions because of oversight and regulatory concerns. He said incentives like generous depreciation allowances, and improved cash flow for investors of commercial property would help fend off some of the challenges the market faces and soften some of the commercial liquidity crisis.  NAR also supports developing a mortgage insurance program for commercial debt and an extension of the Term Asset-Backed Securities Loan Facility (TALF) program. NAR believes an extension of TALF will help stimulate the commercial mortgage-backed securities market and that the program requirements should be less burdensome for investors, and urged Congress to act quickly on these crucial issues.

Now on to our real estate investing education section …

Finding Freedom

Learning how to buy and sell short sales and other real estate investments for profit is actually pretty simple; like many of the most important things in life, the important lesson isn’t understanding the process or even figuring out the math…it’s understanding the identity traps and negative thinking that keep you from success.

Over the years a lot has been written about the power of positive thinking but one of the most enduring classics is the out of print book “How I Found Freedom in an Unfree World”. Although originally penned in the 70’s, the content is still as fresh and relevant today as it was 30 years ago. Short Sale investors and real estate pro’s alike would do well to contemplate how these mind games and identity traps restrain growth and keep you from living the life you love. For those who haven’t managed to track down a copy of this somewhat elusive book, here are just a few of the primary reasons “Why you are not free” according to the former Harry Browne:

1. Identity Traps – do you have a negative self image? Believe you can never be “rich” or associate a certain lifestyle or stereotype with the trappings of success? Forget everything you think you know about wealth. Instead, learn to live life on your terms.

2. Intellectual & Emotional Traps – Fear, anxiety, guilt. These are just a few of the most common intellectual and emotional traps the trip people up. You have choices – get counseling or start interacting with others that have learned how to leave these behind.

3. The Morality Trap – This is actually a big one for short sale investors. The popular media like to paint a very negative picture about evil investors or greedy landlords…in fact, being a victim is all the rage but woe to those that pull themselves up by their own bootstraps. Don’t fall for it! It’s not immoral to take control of your financial future.

4. The Government Trap – Fear “Big Brothers” control over you? You aren’t alone. Research shows that many high net worth individuals, investors and small business owners are increasingly weary/leery of good old Uncle Sam. Take appropriate steps to stay informed while understanding the real rates of risk involved in investing.

5. The Despair Trap – It’s easy to fall into a state of despair especially if life has tossed a few set-backs your direction. On the other hand, learning to overcome and accept these as a natural course of action is part of thriving rather than barely surviving. Surround yourself with the news, information and examples that are relevant to a life of success.

6. The Rights Trap – Modern society is literally suffocating from the number of individuals with an entitlement attitude. You have two choices in life…take responsibility for your life or wait until someone decides to take notice and do it all for you. Just remember the old adage “beggars can’t be choosers”.

7. The Previous Investment Trap – This works for and against investors every day. The fallacy of believing the future can be determined from the past is simply that…a fallacy. Whether you won or lost – this time it really is different because every transaction is individualized.

See you at the top!

Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2009.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * 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
–