Smart Real Estate News & Commentary by Chris McLaughlin December 23, 2011
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Governors signs new foreclosure laws
A law signed into effect this week will regulate the foreclosure industry and require foreclosure consultants to be licensed by the state Department of Banking and Insurance. Governor Chris Christie signed the Foreclosure Rescue Fraud Prevention Act on Tuesday. In the scams, “counselors” would, for high upfront fees, claim to raise a homeowner’s credit rating or change the terms of their existing mortgage, or sign over a deed to someone who promises to rent back the residence and in the future sell it back to the original owner. The companies would then take out additional mortgages on the properties without the homeowners’ knowledge, and in some cases falsify information on the loan application.
The homeowners lose their fees, any equity they have built in the house and frequently ownership of the house itself. Under the law, the foreclosure consultants are prohibited from collecting any fees — and are limited from charging excessive rates — before completing the terms of the written contract and securing relief for the homeowner. The consultant companies must also post a bond with the state before conducting business, and are subject to a $10,000 fine for the first offense and $20,000 for each subsequent offense. The bill initially passed both the state Senate and Assembly in June. But Governor Chris Christie conditionally vetoed it over concerns a stipulation that would require distressed properties to be sold for 82% of their fair market value because it could inadvertently affect nearly all distressed home sales. Now, the law states that only those sales involving participation with foreclosure consultants qualify.
Governor Rick Snyder of Michigan also signed a series of bills that clarify and improve the pre-foreclosure and foreclosure process and will help keep Michigan residents in their homes. It is a bipartisan legislative package that passed both chambers unanimously. “This legislation helps protect families and ensures the stability of Michigan communities,” said Snyder. “When foreclosures are prevented, homes are not vacated, families are not displaced and townships, cities and counties do not lose the tax base provided by home ownership.” In September 2011, there was one foreclosure filing for every 149 homes in Michigan. Michigan also had the seventh highest foreclosure rates and foreclosure filing totals in the US The related bills signed Thursday include House Bill 4542, 4543, and 4544, which are now Public Acts 301, 302 and 303. Lenders are now required to provide written notice that includes a list of housing counselors when foreclosure proceedings begin so homeowners can seek immediate advice. Also, additional time has been added so homeowners can potentially arrange for loan modifications in order to prevent foreclosure. The legislation also removes the mandate to publish pre-foreclosure notices in newspapers to help prevent homeowners from being solicited by foreclosure rescue and mortgage modification scams.
Obama’s hand forced on Keystone pipeline
President Obama will be required to make a decision on the Keystone pipeline project now that Congress appears to have worked out a deal to extend the payroll-tax cut. The tax cut bill includes language that would require Obama to make a decision on the pipeline, now stalled in the approval process, in 60 days. The Canada-to-Texas oil sands pipeline, which would run down the spine of the country, is strongly supported by Republicans and the oil industry but loathed by many Democrats. Keystone XL pipeline would move oil sands crude from the western Canadian province of Alberta 1,661 miles2,673 km, to Port Arthur, Texas. In between, it would cross Saskatchewan, Montana, South Dakota, Nebraska, Oklahoma and Texas. The $7 billion project, which involves linking up with an existing network, would feed 700,000 barrels a day of oil to various destinations, but chiefly to refineries in the US Gulf Coast. The line could also help drain growing oil supplies from the booming Bakken shale oil field in North Dakota. Keystone XL received Canadian approval in March 2010, but the US State Department, which had been widely expected to approve the project by year-end, said in November it needs to study new routes. That effectively delayed its decision past the 2012 US presidential election. Obama was accused of punting after facing grassroots opposition to the project from an important segment of his base, the environmental lobby.
Republicans in the House of Representatives, incensed that the White House was turning its back on a job-creating project, introduced language in the payroll tax cut extension bill to force Obama to make a decision on the pipeline. The Democratic-led Senate agreed, including language in its bill. The project would improve US energy security. These include the Canadian government, the oil industry, some US Republican lawmakers and politicians of all stripes from energy-producing states, as well as unions such as the Teamsters. TransCanada has said the project, which will result in the most advanced pipeline ever built, will create 20,000 jobs in the United States at a time of high unemployment. Getting more oil from Canada, already the largest US crude supplier, would reduce reliance on the Middle East and could make up for expected future shortfalls from Mexico and Venezuela.
Foreclosures up 21%
Mortgage delinquencies stabilized in the third quarter, though new foreclosures jumped 21.1% from last quarter according to the Office of the Comptroller of the Currency. The OCC said mortgage servicers “lifted voluntarily moratoria implemented in late 2010,” when the robo-signing controversy initially came to light. Newly initiated foreclosures, however, declined 11.8% from third quarter 2010. Foreclosures in process made up about 4.1%, or 1.3 million loans, of the overall mortgage portfolio measured by the OCC. That’s up 0.5% from the second quarter and 7.6% from a year earlier. First-lien mortgages current and performing changed little in the third quarter, down 0.1 percentage points to 88% of all loans in the OCC portfolio. Those loans made up about 87.5% of the portfolio a year ago. Modifications declined 8.5% from the second quarter to about 138,000. That includes a 23% drop in mods through the Home Affordable Modification Program. Third-quarter modifications reduced monthly principal and interest payments by 24.4%, or $382. HAMP mods cut payments by 35.1%, or $567. The OCC report includes about 62%, or 32.4 million, of all first-lien mortgages in the US worth $5.6 trillion in outstanding balances.
Spending and incomes weak
Consumer spending rose just 0.1% in November, matching the modest October increase, the Commerce Department reported today. Incomes also rose 0.1%. That was the weakest showing since a 0.1% decline in August. Both the spending and income gains fell below expectations. Economists have said that solid increases in spending could boost economic growth in the final three months of what has been a disappointing year. Paul Ashworth, chief US economist at Capital Economics, called the consumer spending figure disappointing. He said it would probably mean lower economic growth than had been expected. Rather than grow at an annual rate of up to 3% in the October-December quarter, the economy will likely expand at a rate of about 2.5% this quarter, Ashworth says. That would still be an improvement from the 1.8% growth in the July-September quarter. The weakness in incomes reflected a decline in wages and salaries, the biggest component of incomes, in November. The sluggish gain in spending was held back by a 0.3% fall in spending on non-durable goods such as food, clothing and gasoline. Spending on durable goods jumped 0.8%. It reflected the solid auto sales during the month. Spending on services, which includes such items as medical treatments and rent, rose a modest 0.1%. After-tax incomes showed no growth in November.
The savings rate dipped to 3.5% of after-tax incomes, down from 3.6% in October. Both months marked the lowest savings rate since late 2007. They show that consumers are having to tap their savings to finance their spending because of the weak income growth. The small rise in overall consumer spending was puzzling given that other reports have shown solid holiday shopping this season. Those reports had caused many economists to revise up their growth forecasts for the current quarter. Analysts at JPMorgan think the economy is growing at an annual rate of 3.5% in the current October-December quarter. That would be up from 1.8% growth in the July-September quarter and would be the best quarterly gain since the spring of 2010. Economists still expect that growth to be driven by an improvement in consumer spending, which accounts for 70% of economic activity. Spending rose at a 1.7% rate in the third quarter, more than double the second-quarter gain. JPMorgan analysts expect consumer spending to grow at a 3% pace in the current quarter. Even with the spurt of activity at the end of the year, economists think growth for all of 2011 will be a lackluster 1.7%.
Home prices dip in October
Home prices dropped 0.2% in October from the previous month, the Federal Housing Finance Agency (FHFA) said yesterday. The agency’s seasonally adjusted house price index decreased 2.8% from a year ago. The September measure was adjusted lower to a 0.4% increase from an initial 0.9% reading. The home price index, calculated using data from Fannie Mae and Freddie Mac mortgages, rose 0.2% in the third quarter on a seasonally adjusted basis. October prices were 19.2% lower than the April 2007 peak for the index and are at levels comparable to February 2004. Only two regions, as measured by the FHFA, saw yearly increases, albeit minimal. Prices rose 0.7% collectively in Arkansas, Louisiana, Oklahoma and Texas, and inched higher by 0.1% in Alabama, Kentucky, Mississippi and Tennessee. Values dipped the most from October 2010 at 5.5% in the Pacific region, made up of Alaska, California, Hawaii, Oregon and Washington. The FHFA is the regulator and conservator for Fannie Mae and Freddie Mac.
Banks ready for Euro-crisis?
Banks in the United States are expected to survive any type of financial crisis brought on by the euro in 2012, Capital Economics said yesterday. But the Fed is prepared to step in and prevent any meltdown akin to Lehman Brothers, if Europe’s troubles began washing up stateside, according to analysts at the Toronto-based firm. The central bank “has a number of liquidity facilities that were established during the financial crisis that it can restart at a moment’s notice if banks need short-term cash,” analysts Paul Ashworth and Paul Dales wrote in a Capital Economics report. “Indeed, through the currency swaps with other central banks re-established at the end of November, the Fed is already helping to provide dollars to European banks,” they said. The good news is banks have increased overall lending since March, Capital Economics said. Even foreign banks are getting into the act, boosting lending in America at a faster rate than domestic banks. One indication of trouble would be a pull bank in lending. “Any sign that they are turning south again would be troubling,” the research firm wrote.
Still, Capital Economics does not expect banks to suffer through any euro crisis. The analysts expect US GDP growth to slow to 1.5% next year, not on euro-zone concerns, but on shaky US consumer confidence. “The modest slowdown in economic growth that we expect next year has more to do with less support from fiscal policy and a belief that consumption won’t continue to grow at a faster rate than incomes,” Ashworth and Dales wrote. The analysts said US banks do not hold a large share of assets in the eurozone and possess an even smaller share in European countries that are in deep trouble. Still, the analysts are watching US bank stocks and earnings to ensure their capital is not shaken by shocks in the global financial system.
See you at the top!
Chris McLaughlin
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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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