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Smart Real Estate News & Commentary by Chris McLaughlin December 12, 2011

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NAR – housing and jobs are voters’ main concerns

A recent survey by Houselogic.com, the consumer website from the National Association of Realtors (NAR), finds that jobs and the housing market will be two of the most important issues for voters in the 2012 election. Nearly one-third of respondents said housing will be the top issue on their mind when they head to the polls next November.  Respondents were asked “What issue area will have the greatest impact on your vote in 2012?” National security, healthcare, and energy/environment trailed housing and unemployment by wide margins.  With unemployment still high, it is easy to see why so many Americans are concerned about the job market. However, employment and the housing market are inextricably linked because economic growth and job creation cannot occur without a housing recovery.

Housing accounts for more than 15% of the US. Gross Domestic Product – it’s a key driver of the national economy. Home sales generate jobs. NAR estimates that for every two homes sold, one job is created. New spending on homebuilding products, furniture, and other residential investments also have a significant economic impact.  Some recent indicators show that the economy might be starting to rebound, with pending home sales rising strongly in October, according to NAR’s Pending Home Sales Index. However, any changes to current programs or incentives must not jeopardize a housing and economic recovery. Unemployment, consumer confidence and consumer spending will not rebound until a number of issues are addressed.

Shopping strong into December

For the week ending Dec. 9, consumers spent $5.9 billion online, up 15% from the same period a year earlier, according to comScore, which tracks Internet activity.  E-commerce spending for the first 39 days of the 2011 holiday season reached $24.6 billion, also up 15% versus the corresponding days last year, comScore added.  Earlier in the season, the day that has become known as ”Cyber Monday” saw a record $1.25 billion spent online in the United States, up 22% from last year. Other early season shopping days were also strong, with “Black Friday” e-commerce sales jumping 26% from a year ago.  That sparked concern that sales could weaken later in the season, but so far that has not happened, comScore Chairman Gian Fulgoni said on Sunday. “These highlights represent another very positive sign for the holiday shopping season, as the week following ‘Cyber Week’ often experiences relative softness in spending momentum due to retailers pulling back on their promotional activity,” he said.

BOA develops rental program

Bank of America is looking at a new program to rent a home back to the borrower after foreclosure.  “There are programs that we are quite interested in,” said Ron Sturzenegger, who leads the bank’s legacy asset servicing division. “We are talking with investors that would come in and buy these houses and would lease them back to who would now be the now tenant.”  In February, BOA formed the division to handle the servicing for delinquent mortgages, loans no longer being written, and to sort out outstanding representation and warranty claims.  Currently, more than 35,000 employees at the bank are sorting through 1.1 million loans 60 days delinquent or worse, according to its third-quarter financial statement.   The Federal Housing Finance Agency (FHFA)  is working on an REO rental program for Fannie Mae and Freddie Mac. It received more than 4,000 ideas on how to do it.  But private banks own $50.4 billion worth of REO properties, too, according to the Federal Deposit Insurance Corp., and millions of these homes are sitting vacant. Sturzenegger described how their idea would work.

“We are looking at programs where you can capture somebody before the REO process and offer a deed-for-lease. We would go to the customer and say, ‘We’ll do a short sale. Will you be interested in leasing your property back? We’re still going to sell the property. You will no longer be the owner. But you can be a tenant now in that same property and save you from moving on,’” he said.  Sturzenegger stressed the bank would still sell the REO as before in areas where there is a market for them and they can still get reasonable bids. But some areas are so saturated with inventory, there isn’t enough investor or homebuyer demand and properties can sit for years uninhabited.  Rick Sharga, the executive vice president at Carrington Mortgage Holdings, said in an interview that many firms, including Carrington are preparing to participate.  “We already have the infrastructure and assets in place to participate effectively,” he said. “Everyone is waiting on final direction from the FHFA.”  Sturzenegger stressed the private program at BOA is in its infancy.  “It’s in the very early stages,” he said.

US stocks down

US. stocks fell Monday after Moody’s Investors Service said last week’s European fiscal pact will not deter it from reconsidering the credit ratings of all European Union nations.  The Dow Jones industrial average fell 170 points in the first hour of trading. The euro weakened against the dollar and the yields on Italian and Spanish government bonds rose as investors became more nervous about holding the debt of those countries. European stock indexes fell broadly.  Moody’s said that last week’s summit of European leaders produced “few new measures” and that Europe’s financial crisis remains in a “critical and volatile stage.”  The 17 nations that use the shared currency and the region in general remains “prone to further shocks and the cohesion of the euro under continued threat,” Moody’s said. As a result, the agency said it would still review the creditworthiness of European countries in the first three months of 2012.  The warning from the credit rating agency deflated optimism about last week’s pact, which called for tougher fiscal discipline in countries the euro and greater oversight of national budgets by a central authority.

Hot markets to cool

Top real estate markets in the United States are beginning to cool down, according to Clear Capital, a provider of housing data and valuation services. The markets are still growing and improving, its latest report finds, but not at the rates seen in recent memory.  “Even though as a whole, this group hasn’t experienced returns this low since June 2011, each of the 15 markets continued to post quarterly gains,” the Clear Capital report states. “The overall performance of the group has stabilized and tightened, with only 3.1% separating the highest performing market, Washington, D.C., from the 15th place market, Cleveland.”  Four Florida markets — Orlando, Tampa, Jacksonville and Miami — continue to keep their positions among the highest performing markets quarter-over-quarter, rebounding from the steep drops and high levels of foreclosures they experienced over the past two years, the report states.  According to Clear Capital, Orlando and Miami also show strong year-over-year performance, topping the list with 5.9% and 5.4% growth respectively.  “The strong upward price movement for these Florida markets has correlated with a 12% drop in REO saturation over the last year at the state level,” the report says. “The growth in Florida’s MSAs must be described in proper perspective against the state’s precipitous -59.1% drop in prices from peak values in 2006 to today.”  Atlanta is now the market feeling the most acute drop in housing. The city is down nearly 20% year-over-year and the REO saturation rate is reaching 43%, second only to Las Vegas and Detroit.

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 5, 2011

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WSJ – top 5 mortgage servicers face charges

Massachusetts Attorney General Martha Coakley sued the five biggest mortgage servicers Thursday, in the first government lawsuit targeting all five for alleged improper foreclosure practices including so-called robo-signing.  The 57-page civil suit, filed in Superior Court in Suffolk County, alleges that the banks’ foreclosure practices were unlawful and deceptive. The suit, which doesn’t specify damages, contends the banks — Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. — “charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law.”

The banks have in the past acknowledged problems with their foreclosure processes, but said they haven’t found anyone who was wrongly foreclosed on. Several said Thursday that they were disappointed by the suit.  The action by Massachusetts comes as the five large banks and state and federal officials try to hammer out what some hope could be a $25 billion settlement related to the handling of troubled mortgage loans. The suit could be yet another blow to the long-running talks, by highlighting Massachusetts’s objections to terms under discussion.  The Massachusetts lawsuit is likely to be closely scrutinized by other states looking at what action they might take if a deal collapses. Other states that have raised objections include California, Delaware and New York.  Still, Iowa Attorney General Tom Miller, who is spearheading the multistate effort, said in a statement that he is “optimistic that we’ll settle on terms that will be in the interests of Massachusetts.”

Online sales reach $6 billion

US shoppers are still spending heavily online after a record-busting ”Cyber Monday,” research firm comScore said.  On Cyber Monday itself, sales reached $1.25 billion, the biggest online shopping day in history. Online sales on Tuesday and Wednesday also broke $1 billion.  Cyber Monday sales topped $1 billion for the first time last year.  ComScore says online sales are up 15% to $18.7 billion in November and the first two days of December, compared with the same period last year.  The holiday shopping season can make up to 40% of retailers’ annual revenue. This year’s holiday shopping has risen with help from discounting and promotions.

Free shipping also appears to be a big draw, applying to 63% of sales, up from 52% a year ago.  “Consumers have come to expect free shipping during the holiday promotion periods, and retailers, in turn, have realized that they must offer this incentive,” said comScore chairman Gian Fulgoni in a statement.  Online shopping accounts for between 8 and 10% of overall holiday spending, by various estimates. ComScore’s spending figures exclude travel, auctions and large corporate purchases.  Spending on items including clothing, general merchandise, toys and electronics and in department stores, rose 4.7% to $125 billion in the Oct. 30 to Nov. 26 period, according to MasterCard Advisor’s SpendingPulse. That includes online buying and spending in physical stores.

DSNews.com – owner/occupiers decline

New Vista Asset Management has published the results of a three-year study on buyers of foreclosed homes, covering 18 counties hit hardest by the mortgage crisis.  The company says the percentage of REO homes sold to owner-occupant buyers has decreased in almost every market.  In Los Angeles County, California, for example, owner-occupant REO buyers have dropped from 80% in 2009 to 60% by the third quarter of 2011.  New Vista’s study uses data extracted from local recorder, courthouse, and tax assessment records – looking at foreclosed homes sold by banks, HUD, Fannie Mae, and Freddie Mac – to determine whether the purchasers were owner-occupants or absentee owners using single-family homes as rental or vacation properties.  The company began tracking real estate sales transactions closed in the first quarter of 2009 and includes consecutive quarterly data through the third quarter of 2011.

“Although, quarter-by-quarter, we have observed some market-specific increases, over the entire period, owner occupancy rates for REO sales have broadly weakened,” said Brian Hurley, New Vista’s president and COO.  Hurley notes that with eleven consecutive quarters of data, the company can look beyond both seasonality and the temporary impact of demand stimuli such as the homebuyer tax credit, and observe “a clear pattern of decline.”  Wayne County, Michigan is the only market of the 18 analyzed that has seen the percentage of owner-occupant REO buyers increase over the last three years, albeit from extremely low levels.  In 2009, owner-occupants accounted for nearly 33% of REO purchases in Wayne County. By the third quarter of this year, their share had risen to just over 37%.  Wayne County was the only market that had an owner occupancy rate for single-family REO sales below 50% in 2009.  By the third quarter of 2011, owner occupancy rates forREO sales in an additional four of the studied counties had fallen below 50%, including Maricopa County, Arizona; Osceola County, Florida; Miami-Dade County, Florida; and Clark County, Nevada.

Most markets included in the study saw their share of owner-occupant REO buyers drop by double-digits over the three-year period.  Kevin Stein is with the California Reinvestment Coalition, a nonprofit organization that advocates for increased access to credit on behalf of California’s low-income communities.  Commenting on New Vista’s results, Stein said, “We are troubled by the significant drop in owner occupant purchases of REO properties in these hard hit markets, which is no doubt compounded by decreased access to credit and a failure to repair foreclosed properties to move-in condition.”  Stein says the increased investor acquisition of REOs is reversing the years of community development progress that nonprofits have facilitated.  “We need to ensure that lenders, nonprofits and government agencies are working together to give qualified homebuyers a fair chance to purchase REOproperties and help stabilize residential neighborhoods,” Stein added.

While New Vista has been tracking the study’s findings since the first quarter of 2009, company management elected to formally publish the index in response to a growing focus on investor-driven solutions to the nation’s residential real estate crisis.  “Several initiatives now under consideration promise to channel more houses to investors rather than to owner-occupant purchasers,” Hurley noted.  “We timed the first release of our study to raise awareness of the community impacts that current REO disposition practices are already having,” he explained.  Hurley says bulk sales, drop-bid foreclosure auctions, and proposals under review by the Federal Housing Finance Agency (FHFA) to facilitate the sale of government-owned REOs for rental purposes all promise to move more REOs out of local real estate markets.  “Before the market adopts new strategies to address an expected surge in foreclosure volumes, we wanted the owner-occupancy impact of current approaches to be well understood,” Hurley said.  New Vista’s “Index of the percentage of Single Family REOProperties Sold to Owner-Occupant Buyers” will now be published quarterly.  The company plans to increase coverage to include additional markets in 2012.

Unemployment benefits cost taxpayers billions

Jobless Americans have collected $434 billion in unemployment benefits over the past four years.  Taxpayers have footed $184.7 billion of the tab incurred during the federal government’s unparalleled response to the Great Recession, according to Labor Department data. State and federal taxes on employers cover the rest.  The cost of continuing this safety net will be the subject of intense debate in Congress in coming weeks as lawmakers decide whether to extend the deadline to file for federal benefits beyond year’s end. Keeping this lifeline in place through 2012 would cost $44 billion.  Here’s how the system works: The jobless collect up to 26 weeks of state benefits before shifting to the federal program. Federal benefits consist of up to 53 weeks of emergency compensation, which is divided into four tiers, and up to another 20 weeks of extended benefits.  Those who reach the end of their state benefits or federal tier will not be able to apply for additional benefits unless the deadline to file is extended.  Some 17.6 million Americans have collected federal benefits over the past four years. The most recent extension, passed last December, kept 7 million people on the rolls.

While extending the safety net generally has bipartisan support, lawmakers are deeply divided over how to pay for it. Republicans have insisted the cost be covered through steps such as spending reductions, while Democrats want it considered emergency spending so it would not have to be offset by other measures.  “Some lawmakers say that we cannot afford to extend unemployment benefits and payroll tax relief in the current fiscal environment. But I say we can’t afford not to,” Labor Secretary Hilda Solis said at a press conference Wednesday.  Federal emergency benefits began in June 2008 and have been increased or extended eight times since then. When Congress passed a 13-month extension last December, it was thought by some to be the last.  The cost of jobless benefits has been dropping as the unemployment rolls contract. Some $156 billion was doled out in fiscal 2010, boosted in part by a $25 weekly supplement that ended in the middle of that year. The unemployed collected only $116 billion in the past fiscal year.  As of early November, 6.7 million people were collecting state or federal unemployment benefits, down from a height of 12.1 million in January 2010.

Fitch downgrades JPMorgan

Eight classes of JPMorgan Chase Commercial Mortgage Securities Corp. securities certificates were downgraded by Fitch Ratings.  The downgrade involves series 2006-LDP7 commercial mortgage pass-through securities certificates. They were downgraded based on greater uncertainty about losses on specially serviced loans.  Fitch said it has designated 60 loans as “loans of concern.”  The total pool of loans has an aggregate balance of $3.5 billion, down from $3.9 billion at issuance.  The largest contributor to the pool’s losses is a portfolio secured by four regional malls. The portfolio is spread across Ohio, Connecticut, Missouri, California and Colorado, Fitch said. The Midway Mall in Elyria, Ohio, is one of the largest contributors to the decline in the portfolio’s performance. The mall remains only 62% occupied, Fitch said. It continues to battle falling income levels, low market rents, tenant issues and the nation’s current economic woes.  A 393,000-square-foot office property in Atlanta is the second largest contributor to the loss. The property was built in 1980 and ended up in special servicing in June 2010 due to imminent default after to large tenants left the office property. CB Richard Ellis is the property manager and leasing agent for the property. It’s occupancy levels remain at 40%.

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 November 2, 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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************************************************************

MBA – mortgage applications up

Mortgage applications increased 0.2% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 28, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 0.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index remained unchanged from the previous week. The Refinance Index decreased 0.2% from the previous week. The seasonally adjusted Purchase Index increased 1.8% from one week earlier. The unadjusted Purchase Index increased 0.8% compared with the previous week and was 2.1% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.50%. The four week moving average is down 0.06% for the seasonally adjusted Purchase Index, while this average is down 3.19% for the Refinance Index.

The refinance share of conventional activity decreased to 83.8 from 84.1 the previous week. The refinance share of government activity increased from 48.6 to 49.4 this week. The refinance share of mortgage activity decreased to 77.1% of total applications from 77.3% the previous week, the fourth straight week of decline. The adjustable-rate mortgage (ARM) share of activity decreased to 5.8% from 5.9% of total applications from the previous week. By region, the number of applications in the Pacific region increased the most, rising by 7.5% in September while the number of purchase applications in the Mid-Atlantic region decreased the most, falling by 1.9%. The number of refinance applications increased the most in the East North Central region, rising by 8.6% while the Pacific region increased the least, rising by 0.5%. Vermont had the largest increase in refinance applications in September but also the largest decrease in purchase applications. Conversely, Wyoming had the largest increase in purchase applications but the largest decrease in refinance applications.

Private sector adds jobs, slows planned layoffs

The private sector added 110,000 jobs in October, a bit better than expected but still indicative that the labor market is showing little improvement. Coupled with a report showing that planned layoffs at US firms dropped in October after hitting a more than two-year high the month before, unemployment is showing only grudging signs of improvement. Macroeconomic Advisors and ADP compile the monthly report on private sector job creation that serves as a warmup for the government’s nonfarm jobs report, which will come on Friday. Consensus is for the government’s report to show a net of 93,000 jobs created in October and for the unemployment rate to remain at 9.1%. The service sector provided 114,000 jobs for the month, a decrease from 122,000 in September, while the goods-producing sector fell 4,000 and manufacturing lost 8,000 positions.

Smaller firms did better at creating jobs. Companies with between 50 and 499 workers saw the job count go up 53,000, while those with 500 or more workers lost 1,000 jobs. Small goods-producing companies saw no not job increase. Employers announced 42,759 planned job cuts last month, tumbling 63.1% from 115,730 the month before, according to a report from consultants Challenger, Gray & Christmas. It was the lowest level in four months. Still, October’s job cuts were up 12.6% from the same time a year ago, when 37,986 layoffs were announced. For 2011 so far, employers have announced 521,823 cuts, outpacing the 449,258 layoffs announced during the first 10 months of 2010. The total for the year remains well off recession levels, the report said. In 2009, layoffs stood at 1,192,587 by October. Meanwhile, hiring plans surged to 159,177 last month from 76,551 in September, as companies announced seasonal positions. Retail jobs led the way with 133,940 openings. The release comes two days ahead of the key US jobs report from the government, which is forecast to show the economy created 95,000 jobs last month.

Olick – challenge your foreclosure

“It’s late, and it’s limited, but for borrowers who feel their homes were wrongly or inappropriately foreclosed upon in 2009 and 2010, there is now recourse. As part of a larger enforcement action (so-called ‘consent orders’) taken last April against fourteen of the nation’s largest mortgage banks/servicers following the so-called ‘robo-signing’ scandal, the Office of the Comptroller of the Currency is beginning a ‘multi-faceted independent review of foreclosure actions.’ The major banks, including Bank of America, Chase, Citibank, Wells Fargo, GMAC, and EMC, will have to fund these independent reviews to evaluate, ‘whether borrowers suffered financial injury through errors, misrepresentations, or other deficiencies in foreclosure practices.’ If they did, those borrowers get some kind of ‘remediation.’ ‘The challenge is substantial, but the steps we have required the servicers to take are vitally important to resolving these issues in a way that respects the rights of those who have been harmed and helps to restore confidence in the system,’ said John Walsh, Comptroller of the Currency in a statement.

The major mortgage servicers began sending out letters to eligible borrowers today to explain the process. The requests for the reviews must be received by April 30, 2012. So how many do they expect will request these reviews, given that there are potentially four and a quarter million eligible borrowers according to the OCC? ‘It could be hundreds of thousands,’ Walsh told me in an interview this morning. ‘We are certainly hopeful they will have the capacity to handle it,’ he added with regards to the servicers. Walsh also admitted that if the volumes are very high, it could have an impact on the current foreclosure process at major servicers, ‘to the extent that capacity that servicers have that they’d otherwise devote to other parts of the business are affected.’ But he stressed that this is a backward looking, remedial piece and ‘shouldn’t’ affect current foreclosure cases.

So could a borrower get his or her home back? It’s not out of the realm of possibility, although that is pretty unlikely given the home was probably already legally sold to someone else. Remediation would more likely involve fees that could be paid back or some other type of monetary compensation. No question it will be highly case-specific. ‘The participating mortgage servicers remain committed to helping borrowers remain in their homes and have been working with federal banking regulators to resolve the issues raised in the consent orders,’ explained Paul Leonard of the Financial Services Roundtable in a release. The reviews, he adds, could take several months to complete.”

Europe headed for recession

The downturn in euro zone manufacturing in October was even deeper than previously thought, according to “grim” business surveys on Wednesday that showed the currency union’s debt crisis is dragging its economy back into recession. The final Markit Eurozone Manufacturing Purchasing Managers Index (PMI) for October, which gauges changes in activity levels across thousands of euro zone manufacturers, fell to 47. 1, revised down from a preliminary reading of 47.3 and down from 48.5 in September. This marks the third consecutive month the manufacturing PMI has been the 50 level that divides contraction from growth. Output and new orders indexes plunged to levels not seen since mid-2009.

The survey suggests the crisis is putting a chokehold on euro area business and, along with news that German unemployment unexpectedly rose for the first time in nearly two years to 7%, it adds pressure on the European Central Bank to cut interest rates. The latest Reuters ECB poll from last week showed a rate cut was already on the cards by December and possibly as early as Thursday. “It makes grim reading,” said Alan Clarke, economist at Scotia Capital. “If there was any doubt that the euro zone was headed for recession, these data should confirm it.” The survey’s factory output measure plunged to 46.6 in October from 49.6. “Output, new orders and new export orders all suffered their fastest declines since mid-2009, against a backdrop of weak domestic market conditions, the ongoing debt crisis and a darkening outlook for the global economy,” said Rob Dobson, senior economist at Markit.

Broken down by country, in Germany, the economic engine of the euro zone economy, manufacturing activity contracted for the first time in just over two years. But the euro rose 15 pips to $1.3780 after the German data were released, on slight relief the figures weren’t worse. Spanish factory activity shrank for a sixth straight month, while conditions in Italy, increasingly the focal point of worry in the still-raging euro zone debt crisis, deteriorated much more sharply than expected to a 28-month low. The Italy manufacturing PMI fell 5 points to 43.3, the biggest one-month fall since the survey began in 1997, suggesting an economy deep in recession. French manufacturing was also on the back foot in October, with new orders drying up and a fall in output. Ireland was the only euro zone economy not to report a fall in factory activity. For the euro zone as a whole, the new orders index fell for the fifth month running, plummeting to 43.4, the fastest rate of decline since May 2009. As a reliable forward-looking indicator, that bodes poorly for factory activity in November. While firms hired more workers for the 18th consecutive month, hiring was the weakest since June 2010. Euro zone unemployment rose to 10.2% in September, nudged up by Spain, where unemployment reached 22.6%.

WSJ – foreclosure price tag climbs

The price tag to settle the state and federal investigation of bank foreclosure practices has increased by at least $5 billion in recent weeks, people familiar with the negotiations say. The proposal on the table now puts a $25 billion value on a settlement by the nation’s five largest mortgage servicing companies—Ally Financial Inc., Bank of America Corp.,Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. In exchange for picking up a bigger tab, banks would be released from certain legal claims tied to mortgage originations. Representatives of the five banks declined to comment.

The price tag could go as high as $29 billion if the agreement includes a longer list of servicers, sources familiar with the discussions said. Earlier discussions had revolved around $20 billion in cash penalties and homeowner assistance programs, sources familiar with the discussions said. There was confusion in those talks as to whether that figure applied only to the five big banks or to as many as 14 large mortgage servicers that agreed with regulators this past spring to fix their foreclosure practices. Banks and government officials have been negotiating for months over a pact in which the banks would pay to settle some legal claims, but it’s still not clear that a deal will be reached. Reaching an agreement with the $25 billion price tag for the five biggest banks depends on the participation of California Attorney General Kamala D. Harris, who bolted from the talks in early October. At the time, Ms. Harris called the terms on the table “inadequate.” A spokesman for Ms. Harris declined to comment.

Other key issues also remain in flux. Negotiators must still finalize how the cost of the settlement will be allocated among the banks. The two sides must also agree on the selection of a monitor charged with overseeing the agreement. The selection of a monitor is considered a critical part of the deal because it provides a way to ensure that banks comply with the terms of the settlement. The agreement would require banks to pay a substantial financial penalty if they fall short of the settlement’s requirements, these sources added. Administration officials have viewed the broader foreclosure settlement as a chance to break the foreclosure log jam, increase the number of financially troubled borrowers who receive principal reductions and provide other assistance to homeowners.

The deal would include $5 billion in cash penalties. In addition, banks would be required to do refinancings worth $3 billion. The refinance program is considered particularly costly for the banks because they would be forced to give up expected interest income on loans for which borrowers are current on their loan payments and deemed unlikely to default. The rest of the settlement’s value would come from principal reductions and other aid to homeowners. Banks would get credit for various types of assistance based on a set of formulas being finalized by negotiators. After Ms. Harris left the talks, negotiators came up with a plan to help certain “underwater” borrowers get refinancing assistance. The plan would apply only to mortgages owned by the banks; it would allow borrowers whose houses are worth less than their loans but are current on their mortgage payments to refinance into a loan with a lower interest rate, people familiar with the discussions said. Allowing more underwater borrowers to refinance could have an outsize impact on California, which has more than 2 million underwater borrowers, more than any other state, according to CoreLogic.

In exchange for the refinancing piece, banks would be released from certain claims related to loan servicing and origination, sources familiar with the discussions say. Banks wouldn’t be released from claims related to the securitization of mortgage loans, these sources add. The exact details of any release are still under discussion. Ms. Harris has a limited ability to bring legal claims related to originations and servicing practices if she decides not to agree to a settlement, sources familiar with the negotiations say. The statute for filing cases related to loan originations is four years in her state, meaning any legal action could only cover mortgages originated in 2007 and after. California allows foreclosures to proceed through a non-judicial process, limiting the state’s ability to argue that banks lied to the courts, these sources add.

Fannie Mae delinquencies down
The serious delinquency rate on mortgages backed by Fannie Mae dropped to 4%, the lowest level since June 2009. The rate fell every month since the 5.59% peak in February 2009 except for July when it went unchanged. Fannie said the rate fell 3 basis points from August. Fannie purchases from lenders and servicers totaled $55.3 billion in September, up 24% from the previous month but down 33% from the same month last year. It is the highest volume since the $57 billion reported in March. Fannie’s gross mortgage portfolio dropped to $722.1 billion in September, down 10% from one year ago. Under the conservatorship agreements established in September 2008, the Treasury Department capped this portfolio at $900 billion at the end of 2009 and scheduled it to be wound down by 10% each year, reaching $250 billion by 2018.

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 October 27, 2011

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New foreclosure plan

Big investors are showing interest in an evolving Obama administration plan to sell off foreclosed homes, although the government will have to make the offer sweet enough to coax private funds. The White House is assessing how best to encourage private companies and investors to snap up foreclosed properties held by the government and convert them into rentals. Officials want private partners to take over as much as $30 billion in single-family properties that are currently on the books of government-run Fannie Mae, Freddie Mac and the Federal Housing Administration. Several money managers with large fixed income funds are interested, according to sources, and a request for ideas on how to construct a program received nearly 4,000 responses. The foreclosure conversion program would come as the next step to complement other government supports for housing, including an expanded refinance program announced on Monday.

The main question for prospective investors, which include broker-dealers and firms already overseeing similar rental programs, is the type of financing the government will make available—an issue officials are still struggling with. “In order to get a better bid, there has to be some incentive involved to get qualified investors involved,” said Ron D’Vari, co-founder and chief executive of NewOak Capital. “The reality is not a lack of interest, but so far it looks like a lack of financing.” Incentives could include low interest rates, tax benefits or some type of rental assistance, said D’Vari, a portfolio adviser who has been involved in mini-bulk auctions of real estate-owned properties, or REOs, in California. REO properties are those acquired by a lender, whether a bank or the government, after an unsuccessful auction attempt. Fannie Mae, Freddie Mac and the FHA own about 250,000 properties, close to a third of the country’s REO pool.

One key challenge would be finding big enough blocks of properties in specific geographic areas that could be sold at one time. Analysts say this is what it would take to make the program attractive to large institutional investors. The transaction and liability costs property managers will face as they try to bring deserted units back up to code also pose a hurdle. The government also needs to determine how it will protect taxpayers, and it might explore ways to pair up with investors and allow Fannie Mae, Freddie Mac and FHA to keep some type of an ownership stake in the rental properties. A public-private partnership, somewhat along the lines of a program the Treasury tried to use to soak up toxic bank assets during the financial crisis, would allow the government to gain from the sales. Fannie Mae, Freddie Mac and the FHA have already undertaken some small efforts to reduce the backlog of foreclosed homes. They have donated a few vacant properties for demolition and have held some small auctions. Having already received $141 billion in taxpayer support since being seized by the government in 2008, Fannie Mae and Freddie are under enormous pressure to make sure they maximize the returns from the properties they hold. “This has got to be thought out. Fannie and Freddie would need to assess if they are getting the return they need from a rental,” said Ken H. Johnson, a real estate professor at Florida International University. Johnson said one way to get over the hurdle would be for the two agencies to be given an explicit mission of market stabilization.

2.5% growth, jobless claims hold steady

US economic growth increased at its fastest in a year in the third quarter as consumers and businesses set aside fears about the recovery and stepped up spending, creating momentum that could carry into the final three months of the year. At the same time, slightly fewer people sought unemployment benefits last week, though level remains elevated above 400,000. Though part of the increase came from the reversal of temporary factors that had restrained growth, the expansion was a welcome relief for an economy that looked on the brink of recession just weeks ago. U.S. gross domestic product expanded at a 2.5% annual rate in the third quarter, the Commerce Department said in its first estimate on Thursday. That was a big acceleration from the 1.3% pace in the April-June quarter and matched economists’ expectations. Consumer spending in the last quarter was the strongest since the fourth quarter of 2010, while business investment spending was the fastest in more than a year. Even though consumer spending was stronger, businesses were slow in stocking up their warehouses. The peppier spending and a slower pace of inventory accumulation by businesses will lay a base for a solid fourth quarter, but a slowdown in Europe and the exhaustion of pent-up U.S. demand could leave a weak spot early in 2012. And the recovery’s pace is still too weak to lower a jobless rate that has been stuck above 9% for five straight months.

Olick – new sales increase, prices tank

“Sales of newly built homes in September came in well over expectations, and stocks of the big builders took a little tick up on the news. They then dropped off pretty precipitously, as analysts weighed in on what is behind that nice headline number. First of all, these particular monthly numbers are based on signed contracts to buy a home, not closings, which provide the numbers for existing home sales. This data set is extremely volatile due to how small the survey pool is. And then of course you have these huge seasonal adjustments, which are important given housing’s distinct seasonality, but they can really skew the reality. So, the headline number is that sales (signed contracts) rose 5.7% from a seasonally adjusted annualized rate of 296,000 in August to 313,000 in September. Take out the seasonal adjustment, and don’t annualize (the expectation of how many homes will sell this year based on the monthly rate) and according to the report, builders sold 25,000 homes in August and 25,000 homes in September. No change. The good news is that builders usually sell fewer homes in September than August, and they sold the same, hence the seasonal bump up, the bad news is that 25,000 is a pitifully low number of sales, actually tying a record low.

We can haggle over sales numbers ’til the cows come home (if their home isn’t in foreclosure), but we really need to focus on the pricing numbers. The price of a newly built home fell 10.4% in September year over year to $204,400.00, which is about $200 higher than the low of 2003. Builders are being forced to compete with existing home sale prices, one third of which are distressed properties (foreclosures and short sales). The median existing home sale price in September was $165,400, so that’s still a pretty big premium. Unfortunately, given the high cost of materials these days and difficulty in obtaining construction loans, builders take every dollar drop pretty hard. ‘The pricing issue would generally hit everyone and would result in lower margins (and some additional impairments),’ notes Dan Oppenheim at Credit Suisse. Of course the pricing numbers also have noise in them. ‘Those particular price figures are not adjusted for the mix of new homes being built, so the rate of decline probably also reflects the switch to building smaller homes rather than the so-called ‘McMansions’ that were popular during the boom years,’ writes Paul Ashworth at Capital Economics, who says a turnaround in the new home market may still be a couple of years away.”

Will the super-committee slow spending this Christmas?
The Super Committee has been negotiating behind closed doors since September, and they have until Nov. 23 — that’s the day before Thanksgiving — to reach an agreement on at least $1.2 trillion in deficit reduction measures. Some retail experts fear that further political gridlock in Washington will make American consumers even more hesitant to spend during the busiest shopping period of the year. When the Super Committee was forged out of the debate on whether to raise the debt ceiling, consumers reigned in spending. One of the problems plaguing retailers is a lack of exciting new products to inspire consumers to shop, says Marshal Cohen, chief industry analyst at NPD Group. “There is almost nothing new…to get the consumer excited beyond just the traditional holiday categories,” Cohen says. Against this backdrop, the political discussions could create a big distraction for consumers. And that’s something retailers don’t want when most analysts, including Cohen, expect marginal growth at best this holiday season. It also may be yet another reason for consumers to be downbeat. Numerous consumer surveys have shown that consumers are worried about the economy and about their rising household expenses. One of the latest, a survey conducted by Deloitte, showed that two-thirds of consumers expect the economy to stay the same or weaken next year. As a result many consumers reported that they would be trimming their gift list and 42% said they planned to spend less this year.

Underwater mortgages in Las Vegas fall further

The September median home price in Las Vegas fell 11.5% from one year ago and remains 63% below the peak, according to analytics firm DataQuick. A home that sold for $312,000 during the peak of the housing bubble in November 2006 is now worth $115,000. September was the 12th straight month the median home price fell from the year before. The decline has fallen to levels not seen since the mid-1990s, DataQuick said. “This can be attributed to several factors: home price depreciation; robust sales of low-cost foreclosures; robust sales to investors, who mainly target low-cost properties; extraordinarily low new-home sales (new homes tend to sell for more than resale homes); and higher-than-usual condo resales (condos tend to be the least expensive homes),” DataQuick said.

President Obama gave a speech Monday in Vegas, promoting changes to help more underwater borrowers refinance announced the same day. The Federal Housing Finance Agency will waive some representation and warranty risk, appraisal requirements, and negative equity caps for the Home Affordable Refinance Program. How effective the program is remains in question for the nearly 4 million Fannie Mae and Freddie Mac borrowers underwater. In Vegas, 80% of the local homeowners owe more on their mortgage than the home is worth, according to RealtyTrac. Principal reduction remains the largest tool yet to be taken up by the largest banks or by any government agency on a large scale to combat the negative equity problem in the U.S.

Department of Housing and Urban Development Secretary Shaun Donovan said principal reduction will be a major function of the still pending attorneys general settlement with the largest mortgage servicers. Many Republican AGs and lawmakers say such lengths would only promote strategic default, not entice more people to stay current on their mortgage. Meanwhile, the number of default notices in Vegas increased 190% from July to August, according to DataQuick. More than 4,700 default notices were filed, led by Bank of America, the same findings states along the West Coast found. “It is unclear whether the higher levels of NODs seen in August and September are the beginning of a longer-term upward trend in default filings, which could mean far more distressed properties on the market and more downward pressure on home prices,” DataQuick said.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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