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Oklahoma crafts its own mortgage settlement

by admin on February 10, 2012

Smart Real Estate News & Commentary by Chris McLaughlin February 10, 2012

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Oklahoma crafts its own mortgage settlement

Oklahoma Attorney General Scott Pruitt reached his own settlement with top mortgage servicers. Pruitt was the only Attorney General (AG) not to sign the $26 billion multistate deal that included the Justice Department and the Department of Housing and Urban Development. The negotiations launched in October 2010 after evidence surfaced of foreclosure documents signed en masse and filings on borrowers being considered for modifications. As details emerged of a preliminary settlement in 2011, Pruitt and three other Republicans Florida AG Pam Bondi, Texas AG Greg Abbott, and Virginia AG Kenneth Cuccinelli sent a letter to lead AG Tom Miller of Iowa saying any deal that involved principal reduction would only promote strategic default. “We had concerns that what started as an effort to correct specific practices harmful to consumers, morphed into an attempt by President Obama to establish an overarching regulatory scheme, which Congress had previously rejected, to fundamentally restructure the mortgage industry in the United States,” Pruitt said yesterday.

Pruitt’s $18.6 million settlement will resolve claims of any unfair and unlawful practices he found. His public protection unit will process relief applications from borrowers. “Oklahoma is fortunate to have a stronger housing market and economy than many other states that are struggling. This settlement will provide damages to those Oklahomans who did fall victim to unfair and unlawful misconduct of mortgage servicing companies, while not exceeding the appropriate role and authority of state attorneys general,” Pruitt said.

US trade deficit leaps

The monthly trade gap swelled to $48.8 billion as goods imports climbed to the highest level since July 2008, just before the financial crisis caused world trade to plunge, a report from the Commerce Department showed today. Analysts surveyed before the report had expected the December trade deficit at $48.0 billion, up from a revised estimate of $47.1 billion in November. US exports grew slightly in December, with records set for petroleum, services and advance technology goods. For the year, the US trade gap rose 11.6% to $558.0 billion, the highest since 2008. Exports last year rose 14.5% to a record $2.1 trillion, keeping the United States on pace to meet President Obama’s goal of doubling exports in five years. Imports grew 13.8% to a record $2.7 trillion, with records set in several categories. Auto imports rose to the highest since 2007 and petroleum the highest since 2008. The average price for imported oil in 2011 was a record high $99.78 per barrel.

The record trade deficit last year with China is certain to reinforce concerns in Congress about Beijing’s currency and trade practice ahead of a meeting next week between Obama and the Asian giant’s expected next leader, Vice President Xi Jinping. US exports to China jumped 13.1% to $103.9 billion. But that was overwhelmed by a 9.4% increase in imports from China, which pushed the tally to a record $399.3 billion. Last year, the Democratic-controlled Senate passed legislation to pressure China to raise the value of its currency, but that bill hit a dead end in the Republican-controlled House of Representatives. Many lawmakers believe that China deliberately undervalues its currency to give its companies an unfair price advantage, contributing to the huge bilateral deficit. The US trade deficits with the European Union and Canada also expanded in 2011.

Olick – robo-deal about lowering principal

“It took more than a year to strike a deal, but here it is, the biggest government-industry settlement in history, surpassing even big tobacco. Five of the nation’s largest servicers will cough up more than $25 billion, the bulk of which will go toward lowering mortgage principal for borrowers who are behind on their mortgage payments. Wait a minute. What does that have to do with faulty foreclosure documents? Nothing. But that’s how it started, and now that government got what it wanted, i.e. mortgage principal reduction for about a million borrowers, they are likely, quietly whispering a big thank you to all those so-called ‘robo-signers.’ Let’s take a step back for a second to remember the fall of 2010, when ‘robo-signing’ came to light. The idea that one low-paid guy sitting in a room was signing his, or perhaps somebody else’s, name to thousands of foreclosure documents was appalling. It is appalling, no question. But let us not forget that the vast, vast majority of those foreclosures being processed were in fact legitimate foreclosures; it was the documentation process that was fraudulent. Banks didn’t foreclose on borrowers for no reason, they foreclosed because borrowers weren’t paying their mortgages.

So fast-forward to 2011 when the housing market is still in deep despair. Home prices are still falling, eleven million borrowers owe more on their mortgages than their homes are worth, home construction sees its worst year ever, and government relief programs are doing very little to help. Cries arise that the only way to help housing is to reduce the principal on all those underwater mortgages, give borrowers their equity back! But how does government force the banks to do that? Robo. The last thing the banks need are fifty state lawsuits over bad foreclosure documents, plus they need to be able to get all these legitimate foreclosures through the courts, so they can stem some losses by reselling the homes. The ‘robo’ scandal has ground foreclosure processing to a veritable halt in much of the county and slowed it everywhere else. Borrowers are sitting in their homes paying nothing. So the banks agree to the deal, any deal, because they have no other choice. You can hear it in their statements today:

‘We believe this settlement will help provide additional support for homeowners who need assistance, brings more certainty to the housing market and aligns to our ongoing commitment to help rebuild our neighborhoods and get the housing market back on track.’ — Bank of America.

‘Today’s agreement represents a very important step toward restoring confidence in mortgage servicing and stability in the housing market.’ — Wells Fargo Home Mortgage.

Getting the housing market back on track. Restoring stability in the housing market. That’s what they want. They’ve already stopped ‘robo-signing’ long ago. Now what they need is closure. Move the foreclosure process along again, so that the housing market can clear all the distress and move ahead. Let the bank black eye begin to heal. Sure, they will get hit with plenty more lawsuits over mortgage securitizations, but that has little to do with their customers on the street, the average consumers. That has to do with investors, and federal regulators and all kinds of complicated Wall Street products that are lost on average Americans. Robo-signing was more personal; it had to do with real people’s mortgage papers that they signed at their kitchen tables.”

Trail going cold at MF Global

When commodities brokerage MF Global imploded, the FBI and federal prosecutors were quick to launch an investigation to pursue what seemed obvious to outspoken regulators and lawmakers: laws were broken and crimes were committed. More than three months later, it is far from clear that anyone will face criminal charges over the disappearance of more than $600 million in customer money as MF Global spiraled towards bankruptcy in the brokerage’s final, frantic days in the last week of October. So far, the MF Global investigation is not tracking the early progress of other high-profile financial scandals such as RefCo, where former Chairman Phil Bennett was arrested within days of the disclosure that the futures firm had been hiding losses for years.

Lawyers and people familiar with the MF Global investigation of the firm that was run by former Goldman Sachs head Jon Corzine say that even though the hunt is still on to find out whether or not officials at MF Global intended to pilfer customer money in a desperate bid to keep the brokerage from failing, the trail at this point is growing cold. To date, scant evidence of criminal intent has emerged in company emails, no former or current employees have sought to cut a deal to provide testimony about potential wrongdoing and seasoned defense lawyers say they are not seeing the tell-tale signs of a hot criminal investigation. Ellen Davis, a spokeswoman for the office of the Manhattan US Attorney, declined to comment. Randall Samborn, a spokesman for the office of the US Attorney in Chicago, also declined to comment.

MBA statement on foreclosure deal

The Mortgage Bankers Association (MBA), issued the following statement upon news of an agreement between state and federal officials and five large residential mortgage servicers.

“A final agreement can play an important role stabilizing and providing certainty and confidence to the housing and mortgage markets. With all the rumors and speculation surrounding these negotiations behind us, it is now imperative that policymakers, lenders, servicers and other stakeholders work together on policies and initiatives that will allow us to get the housing market on the road to recovery. I would caution, though, that, while a positive step, this will not be a panacea for all that ails housing. There are a number of other issues that we need to resolve. This includes striking the appropriate balance between consumer protection and access to affordable credit for qualified borrowers in the QM and QRM rulemakings, and facilitating the return of private capital to the mortgage market by comprehensively addressing the future of the GSEs and the government’s role in the secondary market.” – David H. Stevens, President and CEO of MBA.

Debra W. Still, CMB, Chairman of MBA’s Council on the Future of Residential Mortgage Servicing in the 21st Century added: “The standards in this settlement can provide a framework for a national servicing standard that would provide borrowers with equal protections, regardless of where they live, and would give lenders a single set of rules governing how they interact with their customers. If done properly, and in recognition of different business models, a nationwide standard would provide renewed confidence in the system and encourage qualified borrowers to jump back into the housing market.”

Citigroup takes $50 million loss

Citigroup was forced to write off $50 million after two traders accused of attempting to influence global lending rates left the bank, according to people familiar with a worldwide investigation that is gathering pace. Nine separate enforcement agencies in the US, Europe and Japan have been probing whether US and European banks manipulated the London Interbank Offered Rate or Libor, the benchmark reference rate for $350 trillion worth of financial products, and other interbank lending rates. So far, only Japan’s Financial Services Agency has formally sanctioned banks in connection with the probe. In December, regulators found that two former Citigroup employees in Tokyo attempted to pressure colleagues and employees at other banks involved in the rate-setting process for the Tokyo Interbank Offered Rate, or Tibor. While the regulator did not publicly name the traders involved, people familiar with the case identified them as Thomas Hayes, a trader of yen-related products, and Christopher Cecere, his former boss.

According to those people, the alleged attempts to influence Tibor were uncovered after another Citi employee in London reported the activity. Citi took a $50 million loss when it unwound the traders’ positions and reported the matter to regulators, according to people familiar with the case. However, other Citi sources suggested the losses were significantly in excess of that amount. The investigation into possible manipulation of global interbank lending rates has accelerated in recent weeks, with more than a dozen traders at various banks fired, suspended or placed on administrative leave. A former Barclays trader, Philippe Moryoussef, is being investigated in connection with the setting of Euribor, the rate at which banks lend euros, according to people familiar with the case. Mr. Moryoussef left Barclays in 2007, long before US, European and Japanese regulators launched their probe into interbank lending rates and now works in an unrelated position for Nomura in Singapore. Barclays took the information to European Commission officials, who are now investigating and declined to comment.

NAR – prices boost affordability

Housing affordability conditions improved in most metropolitan areas from softer existing-home prices and record-low mortgage interest rates in the fourth quarter, with rising sales and lower inventory creating more balanced conditions, according to the latest quarterly report by the National Association of Realtors (NAR). Introduced with this release is a new annual metro-level housing affordability index, with historically favorable conditions dominating across the country.

The median existing single-family home price rose in 29 out of 149 metropolitan statistical areas (MSAs) in the fourth quarter from a year earlier; two were unchanged and 118 areas had price declines. The national median existing single-family home price was $163,500 in the fourth quarter, down 4.2% from $170,600 in the fourth quarter of 2010. The median is where half sold for more and half sold for less. Distressed homes – foreclosures and short sales which sold at discounts averaging 15 to 20% – accounted for 30% of fourth quarter sales; they were 34% a year earlier. Total existing-home sales, including single-family and condo, increased 5.9% to a seasonally adjusted annual rate of 4.42 million in the fourth quarter from 4.17 million in the third quarter, and were 9.2% above the 4.04 million pace during the fourth quarter of 2010. All regions rose from the third quarter and from a year ago. At the end of the fourth quarter there were 2.38 million existing homes available for sale, which is 21.2% lower than the close of the fourth quarter of 2010 when there were 3.02 million homes on the market.

NAR’s national Housing Affordability Index rose to a record high 184.5 in 2011, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power; recordkeeping began in 1970. An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20% down payment and 25% of gross income devoted to mortgage principal and interest payments. For first-time buyers making small down payments, the affordability levels are relatively lower. Metro areas with the greatest housing affordability conditions in 2011 include the Detroit-Warren-Livonia area of Michigan, with an index of 383.4; Toledo, Ohio, at 242.9; and Decatur, Ill., at 236.8. Only 24 out of 152 metros measured had an affordability index below 100 in 2011.

Between 2010 and 2011, in markets where comparisons are available, all but 2 out of 148 areas showed improvement in housing affordability, and 69 MSAs had double-digit increases in affordability conditions. The share of all-cash home purchases in the fourth quarter was 29%, unchanged from the third quarter; they were 30% in the fourth quarter of 2010. Investors, who are drawn by bargain prices and account for the bulk of cash purchases, accounted for 19% of transactions in the third quarter; they were 20% in the third quarter and 19% a year ago. First-time buyers purchased 33% of homes in the fourth quarter; they were 32% in both the third quarter and the fourth quarter of 2010. In the condo sector, metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $160,800 in the fourth quarter, which is 1.7% below the fourth quarter of 2010. Ten metros showed increases in their median condo price from a year ago, one was unchanged and 43 areas had declines.

Regionally, existing-home sales in the Northeast rose 6.3% in the fourth quarter and are 3.7% above the fourth quarter of 2010. The median existing single-family home price in the Northeast fell 4.6% to $229,200 in the fourth quarter from a year ago. In the Midwest, existing-home sales increased 7.0% in the fourth quarter and are 14.1% higher than a year ago. The median existing single-family home price in the Midwest declined 3.3% to $134,100 in the fourth quarter from the fourth quarter in 2010. Existing-home sales in the South rose 3.8% in the fourth quarter and are 9.1% above the same quarter in 2010. The median existing single-family home price in the South was $146,500 in the fourth quarter, down 3.8% from a year earlier. Existing-home sales in the West increased 8.1% in the fourth quarter and are 8.4% higher than a year ago. The median existing single-family home price in the West declined 4.2% to $205,200 in the fourth quarter from the fourth quarter of 2010.

Greece still not bailed out

Stock markets fell Friday after Greece’s crucial international bailout was put on hold by its partners in the 17-nation eurozone, a day after it seemed that the country’s tortuous journey to pacifying its creditors had reached a conclusion. Greek Prime Minister Lucas Papademos and heads of the three parties backing his government agreed to deep private sector wage cuts, civil service layoffs, and significant reductions in health, social security and military spending. Investors breathed a sigh of relief that the agreement would allow Greece to get a euro130 billion ($173 billion) bailout package and avoid a bankruptcy next month that could send shockwaves around the financial markets. But finance ministers from the other 16 eurozone states threw a spanner in the works late Thursday and insisted that Greece had to save an extra euro325 million ($430 million), pass the cuts through a restive parliament and guarantee in writing that they will be implemented even after planned elections in April.

Amherst – foreclosure deal penalizes investors

The $26 billion settlement between government officials and the five largest mortgage servicers will exacerbate servicer conflict of interest by allowing the banks to use investor dollars to foot the bill, according to Amherst Securities Group. The analysis comes as representatives from mortgage banks, trade groups and organizations expressed relief as the settlement with state attorneys general and federal prosecutors finally arrived. By receiving credit for principal write downs on the loans owned by investors, servicers can settle their liability claims with private investor money, Laurie Goodman and her team of analysts at Amherst noted. The settlement includes $17 billion in required credits for principal reduction and other foreclosure initiatives, including short sales, anti-blight measures and borrower transition efforts. These credits are put toward loans both in bank portfolios and in private label securitizations.

“We believe that this settlement will further exacerbate the conflicts of interest in the foreclosure process, highlighting the fact that first liens are often poorly treated,” the analysts said. “We are deeply concerned that such a settlement will significantly raise the cost and delay the return of private capital to the US single-family mortgage market.” They compare the settlement to charging a patient, or investor, an extra fine when his doctor, or bank, is found guilty of malpractice. The already wounded patient is hurt again, and the doctor does not have much incentive to change his behavior. “The settlement has missed the opportunity to correct some of the huge conflicts of interest that are embedded in the foreclosure process,” the analysts said.

It’s not all bad news, however. “On the positive side, we are pleased to see that the changes in servicing practices address the fact that servicers often own companies that provide ancillary foreclosure services, or mark-up third-party services with no disclosure to borrowers or investors,” they said. The increased foreclosure timeline due to robo-signing issues is likely to extend further because of the settlement, Amherst analysts said, and the costs of will fall disproportionately on private investors.

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

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Mortgage deal closer

by admin on February 7, 2012

Smart Real Estate News & Commentary by Chris McLaughlin February 6, 2012

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Mortgage deal closer

With a deadline looming today for state officials to sign onto a landmark multibillion-dollar settlement to address foreclosure abuses, the Obama administration is close to winning support from crucial states that would significantly expand the breadth of the deal.  The biggest remaining holdout, California, has returned to the negotiating table after a four-month absence, a change of heart that could increase the pot for mortgage relief nationwide to $25 billion from $19 billion.  Another important potential backer, Attorney General Eric T. Schneiderman of New York, has also signaled that he sees progress on provisions that prevented him from supporting it in the past.  The potential support from California and New York comes in exchange for tightening provisions of the settlement to preserve the right to investigate past misdeeds by the banks, and stepping up oversight to ensure that the financial institutions live up to the deal and distribute the money to the hardest-hit homeowners.

The settlement would require banks to provide billions of dollars in aid to homeowners who have lost their homes to foreclosure or who are still at risk, after years of failed attempts by the White House and other government officials to alter the behavior of the biggest banks.  The banks — led by the five biggest mortgage servicers, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — want to settle an investigation into abuses set off in 2010 by evidence that they foreclosed on borrowers with only a cursory examination of the relevant documents, a practice known as robo-signing. Four million families have lost their homes to foreclosure since the beginning of 2007.  If banks fall short of the multibillion-dollar benchmarks set out for principal reduction and other benefits for homeowners, they will have to pay the difference plus a penalty of up to 40% directly to the federal government, according to Mr. Madigan.  The settlement, if all states participate, will also include $3 billion to lower the rates of mortgage holders who are current. Banks will get more credit for reducing principal owed and helping families keep their homes, and less for short sales or taking losses on loans that were likely to go bad, like those that were severely delinquent.

102% tax?

James Ross, 58, is a founder and managing member of Rossrock, a Manhattan-based private investment firm that focuses on commercial real estate and distressed commercial mortgages.  “I realize I am very fortunate, and in fact I am a member of the 1%,” Mr. Ross wrote in an email. His résumé is studded with elite institutions: Yale, Columbia Law School and stints at the law firms Cravath, Swaine & Moore in New York, and Holland & Hart in Denver. Since his company fits the category of private equity, he has even carried interest.  Yet Mr. Ross told me that he paid 102% of his taxable income in federal, state, and local taxes for 2010.  “My entire taxable income, plus some, went to the payment of taxes,” Mr. Ross said. “This does not include real estate taxes, sales taxes, and other taxes I paid for 2010.” When he told friends and family, they were “astounded,” he said.

That doesn’t mean Mr. Ross pays more in taxes than he earns. His total tax as a percentage of his adjusted gross income was 20%, which is much lower than mine.  That’s because Mr. Ross has so many itemized deductions. Since taxable income is what’s left after itemized deductions like mortgage interest, charitable contributions, and state and local taxes are subtracted, it will nearly always be smaller than adjusted gross income and demonstrates how someone can pay more than 100% of taxable income in tax. Mr. Ross must hope that his interest expense will pay off down the road and generate some capital gains.  Still, all of Mr. Ross’s itemized deductions are money out of his pocket, which is why he’s had to draw on his savings to pay his taxes. Robert Willens, a tax expert and New York attorney, made the argument that taxable income, therefore, may be a better basis for measuring the tax burden.  Mr. Ross’s plight illustrates something that came through in nearly every response and cuts across nearly all income levels: The disparities of the tax code don’t just pit rich against poor or middle class. It taxes people within the same income brackets at grossly unequal rates.  “I cannot help but reflect on the unfairness of the current tax regime,” Mr. Ross wrote. “Why should I pay 102% of my taxable income in taxes when others, with far greater wealth than mine, pay a fraction of that?”

Bulk sales begin soon

The government is starting to shed foreclosed, single-family homes it owns — by selling them in bulk to investors, who would turn them into rental properties.  Officials, however, are saying only that test sales will occur “in the near-term” with a focus on the areas hardest hit by foreclosures. They declined to comment beyond a news release they issued.  The test comes after the government in summer 2011 asked for proposals on what to do with more than 90,000 foreclosed properties it then held. The government typically sells foreclosed properties one at a time, but officials specifically asked for ways to move homes in bulk because of the size of the backlog.  About 4,000 groups or individuals submitted ideas on how the government could unload the properties. After The Enquirer filed a Freedom of Information Act request, the government released a list of 423 companies, groups and individuals that submitted responsive proposals, but no details on their proposals.

The test sale of the foreclosures and conversion of them into rental housing is being supervised by the Federal Housing Finance Agency (FHFA). The agency has acted since 2008 as the federal conservator for Fannie and Freddie, which are public companies although they were created by Congress.  In a news release Wednesday, the finance agency said “Fannie Mae will offer for sale pools of various types of assets including rental properties, vacant properties and non-performing loans” under the test. It also asked investors to pre-qualify to participate in the test.  The investors will be required “to rent the purchased properties for a specified number of years.” FHFA officials hope the rental period will “provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets.”

To qualify, investors will have to show the financial wherewithal to buy the assets, sufficient experience and knowledge to bear the risks and manage of the investment and agree to “keep certain information about the REO (real estate) and related matters confidential.”  Nationwide, the 83,000 homes currently up for sale and potential conversion into rental units are among more than 200,000 foreclosures of all kinds that the government holds, apparently making it the nation’s largest owner of foreclosed properties. The 200,000 is almost a third of foreclosed properties across the nation.  Moving the backlog would get them off the books of the Federal Housing Administration. It also would clear the books of Fannie Mae and Freddie Mac, which buy mortgages, bundle them and then sell mortgage-backed securities to investors.  The FHA, Fannie and Freddie became owners of the properties as hundreds of thousands of owners defaulted on their mortgages during the real estate meltdown.  Clearing the backlog would limit the loss to taxpayers, who already have bailed out Fannie and Freddie at a cost of $169 billion and counting. The losses are expected to total $220 billion to $311 billion by the end of 2014, according to latest projections in December by the Federal Housing Finance Agency.

Greece misses another deadline

Greece let yet another deadline slip on Monday for responding to painful terms for a new EU/IMF bailout, as German Chancellor Angela Merkel made clear Europe’s patience is wearing thin over drawn-out negotiations among its feuding political leaders.  Failure to strike a deal to secure the 130 billion euro ($170 billion) rescue risks pushing Athens into a chaotic debt default which could threaten its future in the euro zone.  Merkel turned up the heat, saying Athens had to come to terms with the “troika” of lenders – the European Commission, European Central Bank and IMF – to get the funds it needs to meet big debt repayments in March.  Greek political leaders, positioning themselves for a likely general election in April, have baulked at accepting another package of deeply unpopular wage and pension reductions, job cuts and tougher tax enforcement measures.

US Treasury prices pared gains notched in today’s European session that were a response to the lack of a political agreement in Greece to make reforms necessary to avoid default. Limiting gains, traders are preparing for the government’s quarterly refunding auctions, which will include sales of 10-year notes and 30-year bonds . Yields on 10-year notes, which move inversely to prices, fell 1 basis point to 1.92%. “Treasurys are modestly higher as discord among Greek coalition members over the terms of the second bailout raises the threat of default and has sent the euro and European stocks lower,” said bond strategists at RBS Securities. “We have a very quiet week of economic data up ahead and the market’s focus will be on the Treasury refunding auctions which begin tomorrow.”

New FHA standards increase Ginnie Mae risk

The Federal Housing Administration’s (FHA) recently announced plans to tighten its standards for approving lenders will increase prepayment risks for investors who own Ginnie Mae-back securities, say analysts at Barclays Capital.  The agency’s plans to eliminate the consideration of a lender’s compare ratio when deciding whether to streamline-refinance its loans will accelerate refinancing activity, they say, causing higher prepayment speeds, and, in turn, reduce investor profits.  The compare ratio is the serious delinquency rate of all loans originated by a lender during a two-year period relative to the average of all lenders operating in the same region. Higher coupon and seasoned loans have a weaker credit and greater default risks, therefore, streamline-refinancing them could lift ratio passed 150%. And if it does, the lender could lose the ability to originate FHA-backed loans.  The change is part of a larger attempt by the FHA to protect its Mutual Mortgage Insurance Fund, which many say is in danger of requiring a multibillion dollar government bailout.

Disregarding a lender’s compare ratio calculation creates an incentive for streamline-refinancing higher-risk borrowers, analysts say. This will speed up Ginnie Mae prepayments, particularly on higher coupons and pre-2009 originations since these have the worst credit quality.  “That said, we expect the effect on speeds to be modest,” they say. “We believe that this plan will be implemented and has the potential to raise GNMA speeds by a few CPR.”  The effect should be even less for pre-2010 vintages because their much better credit quality suggests they have not been constrained by the compare ratios.

Data from the Department of Housing and Urban Development (HUD) suggest that the compare ratios of most national lenders are now significantly below the 150% threshold.  In December, HUD Secretary Shaun Donovan, said as a result of an October analysis by an independent actuary of FHA’s insurance fund, HUD plans to announce how it will address premium prices in its fiscal year 2013 budget proposal.  Since then, Congress has enacted a 10 basis-point increase to the FHA annual mortgage-insurance-premium, and President Barack Obama has called on the FHA to shoulder a larger role in helping responsible home owners and the housing market.  “Given the circumstances, we think more changes to the FHA program could be in the works, and since the budgetary proposal should be released over the next few weeks, the timing is peculiar,” they said. “Therefore, Ginnie Mae faces heightened risks in the near term.”

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

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OC Register – investors are the answer

by admin on February 1, 2012

Smart Real Estate News & Commentary by Chris McLaughlin January 30, 2012

Forward this e-mail to your friends!

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*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

OC Register – investors are the answer

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

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

Income up, spending down

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

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

LPS – 2010-2011 originations good quality

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

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

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

Total US loan delinquency rate:  8.15%

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

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

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

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

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

Big banks hedge against EU

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

Olick – foreclosure pipeline swells

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

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

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

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

Replacements to help drive economy

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

FHA – originations down, delinquencies up

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

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

Bakersfield.com – no kudos for the POTUS

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

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

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

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

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

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

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

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

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

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

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BOA short sale program to expand?

by admin on January 6, 2012

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

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BOA short sale program to expand?

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

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

Ford hits 2 million mark in 2011

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

Olick – housing’s new hope

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

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

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

Employers offer weird benefits

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

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

WSJ – 2011 ends with near record mortgage rate lows

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

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

{ 0 comments }

WSJ – tracking down alleged victims

by admin on January 6, 2012

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

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WSJ – tracking down alleged victims

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

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

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

SEARS  to close 120 stores

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

Housing sector lifted by rent demand

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

Double dip for big pharma

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

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

Home prices fall in most major cities

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

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

See you at the top!

Chris McLaughlin

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Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

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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

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