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

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NAR – short sales key to solving crisis

Stabilizing and restoring the health of the housing market is critical to a broader economic recovery, according to a white paper released yesterday by the Federal Reserve Board. Many of the issues and recommendations outlined in the paper support key principles established by the National Association of Realtors (NAR) to help revitalize the housing industry and economy.

The white paper, The US Housing Market: Current Conditions and Policy Considerations, calls for increased lending to creditworthy home buyers and more loan modifications, mortgage refinancings, and short sales to reduce the rising inventory of foreclosed homes and help stabilize and revitalize the housing industry; an approach long recommended by NAR to help spur the housing market recovery.  “As the nation’s leading advocate for homeownership and housing issues, NAR knows that a strong housing market recovery is key to the nation’s future economic strength,” said NAR President Moe Veissi. “Improving access to affordable mortgage financing for qualified home buyers and investors and aggressively pursuing more loan modifications and short sales is necessary to help reenergize the housing market and spur an economic recovery.”

For homeowners who are unable to meet their mortgage obligations, NAR has urged lenders and servicers to quickly approve reasonable short sale offers so these people can avoid foreclosure. The short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from the transaction.  “Loan modifications and short sales help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers, which is good for everyone,” said Veissi.

Jobs report strong

Non-farm payrolls jumped 200,000 in December, according to the Labor Department, pushing the jobless rate to a near three-year low of 8.5%. Economists polled by Reuters expected a gain of 150,000.  “Today’s figure should not come as a great surprise,” said Todd Schoenberger, managing director of LandColt Trading, adding that recent macro data had been pointing to good results. “The wildcard is January as retailers trim seasonal staff. An upside surprise for this month will validate the argument that an economic recovery is, indeed, talking place.”  The report comes after a handful of employment reports on Thursday that boosted sentiment as the number of planned layoffs at US firms fell to its lowest level since June last year, according to the report from consultants Challenger, Gray & Christmas. Private sector employment climbed 325,000 in December, much stronger than expected, according to payrolls processor ADP.

Bove – mortgage refinancing will hurt banks

Speculation that a new mortgage refinancing plan may be introduced drove bank stocks higher Thursday, but noted banking analyst Dick Bove believes investors actually got it wrong. He told Larry Kudlow that a program like that would actually “harm” banks.  “It’s bad for banks, it doesn’t help them in any way, shape or form,” Bove said.  The speculation was fueled by reports that suggested the White House may be preparing a new trillion-dollar plan to refinance home loans. However, administration officials told CNBC’s Dana Olick that they are not considering a $1 trillion refinancing program.  The fact that bank stocks went up on the possibility of such a program makes no sense whatsoever, Bove said. In fact, he thinks a mortgage refinancing plan would cause banks to lose money.  “If you add up all the sources of profit or loss,” he said, “they lose more than they gain.”  So why did the banks, like Bank of America, shoot up higher? Bove thinks it was a simple misreading of what a mortgage refinancing program would do for the banking industry.

He believes investors may have thought it might affect foreclosures, putbacks to the banking industry and the service income of the industry. However, Bove said it would do none of that.  “It harms the banking industry,” he said. “All it is, is taking a lot money from one class of people and giving it to another class of people under the theory that the second class of people would spend the money more than the first class.”  And banks aren’t the only ones which could be hurt, Bove said. Only 21% of the mortgages in the US are held by the banks. 55% held by Fannie Mae, Freddie Mac and mortgage pools, and the remainder is held by investors, he said.  “So the net affect is the people you are taking the money away from are the taxpayers and the investors.”

Unemployment down

The Labor Department said Friday that employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5%, the lowest since February 2009. The rate has dropped for four straight months.  The hiring gains cap a six-month stretch in which the economy generated 100,000 jobs or more in each month. That hasn’t happened since April 2006.  For all of 2011, the economy added 1.6 million jobs, better than the 940,000 added in 2010. The unemployment rate averaged 8.9% last year, down from 9.6% the previous year.  Economists forecast that the job gains will top 2.1 million this year.

The December report painted a picture of a broadly improving job market. Average hourly pay rose, providing consumers with more income to spend. The average work week lengthened, a sign that business is picking up and companies may soon need more workers. And hiring was strong across almost all major industries.  Manufacturing added 23,000 jobs. Transportation and warehousing added 50,000 jobs. Retailers added 28,000 jobs. Even the beleaguered construction industry added 17,000 workers.  A more robust hiring market coincides with other positive data that show the economy ended the year with some momentum.  Weekly applications for unemployment benefits have fallen to levels last seen more than three years ago. Holiday sales were solid. And November and December were the strongest months of 2011 for US auto sales.  Many businesses say they are ready to step up hiring in early 2012 after seeing stronger consumer confidence and greater demand for their products.

Olick – renter nation

“Despite record low mortgage rates reported today and rising affordability in most US housing markets, rent is the new reality for former home owners and new households alike.  For some it is post-traumatic stress from the housing crash, for others it is the inability to get financing to buy a home. Either way, the rental market continues on its tear.  In the last quarter of 2011, the apartment sector saw its largest quarterly increase in occupied stock of the year, according to Reis, Inc.  The vacancy rate dropped to 5.2%, the lowest since 2001 and lower than the last cyclical drop in 2006.  This bucks the historical seasonal weakness typical of the colder months of the year. The fourth quarter also tends to be a weaker leasing period, according to Reis, given that most households make moving decisions in the second and third quarters.

This surge in occupancy pushed asking and effective rents up 0.4 and 0.5% respectively, which Reis calls the only disappointing figures for the sector, missing expectations. Reis blames that on slow economic growth and still high unemployment.  ‘Higher quality properties in the most desirable locations posted rent gains in excess of 5-10%, while class B/C properties, catering to lower income tenants, found it relatively more difficult to raise rents,’ notes Victor Calanog, head of research at Reis.  Nowhere is that more evident than in the Washington, DC metro area where rents are way up across the city, and developers are rushing to erect new multi-family buildings and rehab old ones.  ‘Everybody wants to be in DC,’ beams Richard Key, district manager for Camden Property Trust, one of the largest publicly traded multifamily REITs in the nation. ‘Whereas in other markets there are deals, when you get to DC area, all the REITs want to be here, and so we’re all competing for the same piece of land, and that’s driving the price up. That is really is a challenge for us.’  Key is convinced that there has been a fundamental shift in attitudes toward home ownership that will last for several more years. He is not concerned that the pendulum will swing back to buying, just as all that new rental stock hits the market around 2014. Camden has seen rents on its DC properties rise over 5% in just the past year.  ‘The nice part is we haven’t seen a drop in occupancies with that rent growth, and so the hope is that we’re able to maintain our historical occupancies and continue to see that 5, 6, gosh, 7% is not out of the question in the next couple of years,’ says Key.

Washington, DC will likely see those higher rents because home prices didn’t fall very high during the housing crash and are already rebounding. It and Detroit were the only major markets posting annual gains on the latest S&P/Case-Shiller Home Price Index.  Other markets, like Las Vegas, where home prices are rock-bottom thanks to a huge supply of foreclosures, the rental market is tougher for developers and landlords.  As for renter society, it is also being fueled by tight mortgage underwriting. Rates may be at record lows, but only if you can get them. In a paper released Wednesday, Federal Reserve Chairman Ben Bernanke noted, ‘Continued efforts are needed to find an appropriate balance between prudent lending and appropriate consumer protection, on the one hand, and not unduly restricting mortgage credit, on the other hand.’  Until that balance is found, potential home buyers will stay on the sidelines, those sidelines being rental apartments. A new twist to watch, however, may be that rental nation will go single family.  With so many bank owned homes left to clear, and so many in government and the private sector looking at bulk rental investments, apartments may have big competition in the same neighborhoods where they used to compete against single family buyers.”

IRS audits millionaires

The Internal Revenue Service (IRS) audited one in eight millionaires who filed taxes last year while only auditing 1 in 100 individuals earning less than $200,000 in an effort to “assure that there’s equity in the system.”  Just 1 in 100 individuals earning less than $200,000 had their income tax returns examined, the IRS said.  The 12% of millionaire earners audited in 2011 was appreciably higher than the 8% who were audited in 2010. IRS officials said the high ratio was part of an effort to demonstrate that tax laws are applied fairly.  “That has been something we’ve concentrated on to assure that there’s equity in the system, to assure that those at the lower end of the spectrum know that those at the higher end of the spectrum are subject to the same rules and enforcement as everyone else,” Steven Miller, deputy IRS commissioner for services and enforcement, said in an interview.  In recent weeks, President Barack Obama and congressional Democrats have sought to boost taxes on the wealthy as a way to pay for jobs programs, a theme they are expected to continue in this presidential and congressional election year. IRS spokeswoman Michelle Eldridge said the growing portion of millionaire earners’ returns audited is not related to politics.  Yeah right.  Message to Americans:  Achieve the American dream and we’ll audit you.

WSJ – business using more space

The US office market showed modest signs of improvement in the last three months of 2011, as employers slowly expanded in an uncertain economic climate.  The national office-vacancy rate stood at 17.3% in the fourth quarter, slightly down from 17.4% three months earlier, according to real-estate research firm Reis Inc. But the rate remains stubbornly high, down just slightly from the post-downturn peak of 17.6%, reached in mid-2010.  The office market generally reflects employment trends and companies’ views on growth over the next few years. With job growth slow, companies have been reluctant to add new space.

The sector is still struggling with high levels of vacancy not seen since the early 1990s, a hangover from the sharp pullback by businesses during the downturn. The amount of space occupied by businesses fell by 137 million square feet from 2008 to 2010, according to Reis, which tracks 79 metropolitan areas.  By contrast, employers occupied just an additional 20.7 million square feet in all of 2011. “We’re not seeing huge moves down in vacancy,” said Chris Connelly, who heads the Chicago office for CBRE Group, a commercial-real-estate brokerage. “We’re just niggling away at it.”  Overall rents have been creeping up, with landlords seeking an average rent of $27.97 per square foot per year in the fourth quarter, up 0.4% from the third quarter.

Still, markets vary widely, depending on whether they are home to growing industries. Cities hard-hit by the housing crisis, such as Las Vegas and Phoenix, have among the highest vacancy rates in the country, above 25%.  Meanwhile, growth in the technology and energy sectors has accelerated a recovery in areas such as Northern California and cities in Texas. Last month, landlord Brookfield Office Properties Inc. signed a 141,000-square-foot lease in Houston with Italian energy company Eni SpA, which is taking a space that is 42% larger than its current lease, according to Brookfield.  “If those drivers aren’t there, you’re probably pretty much seeing a very slow, gradual recovery,” said John Sikaitis, director of office research for brokerage Jones Lang LaSalle.

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 January 5, 2012

Forward this e-mail to your friends!

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California homeowners sue Capital One over short sales

Homeowners say in a class action that Capital One illegally made them pay thousands of dollars in deficiency contributions after short sales of their homes, though the state prohibited that in 2010.       Then-Gov. Arnold Schwarzenegger signed Senate Bill 931 into law in late 2010 to reduce foreclosures and boost short sales.  Before the law took effect in January 2011, homeowners had no incentive to short sell their homes because while lenders could not obtain a deficiency judgment on foreclosed properties, they could go after homeowners who sold short.

“However, it quickly became apparent that where there was a second mortgage, the junior lien holder often refused to release the lien and the short sale never went through,” according to the complaint.  “In February 2011, SB 458 was introduced, and on July 15, 2011, it was signed into law on an emergency basis. Section (a) of SB 458 expanded SB 931′s prohibition on obtaining a deficiency judgment to junior lien holders. Additionally, Section (b) of SB 458 further mandate that a ‘holder of a note shall not require the trustor, mortgagor, or maker of the note to pay any additional compensation, aside from the proceeds of the sale, in exchange for the written consent to the sale.’…Capital One has refused to comply with SB 458. In clear violation of the statute’s unambiguous prohibition, Capital One has illegally required California borrowers to pay the deficiency on their mortgages, in addition to ‘the proceeds of the sale, in exchange for [Capital One's] written consent to the sale.’ As a result, Capital One has generated substantial revenues from the collection of deficiencies from California-based borrowers in connection with completing short sales”.

The plaintiffs are represented by Mary Blasy with Scott+Scott of San Diego.  They seek damages for violations of California’s Code of Civil Procedure, violations of California’s Business and Professional Code, conversion and unjust enrichment.  A Capital One spokeswoman would not comment on the lawsuit.

Job claims and layoffs down, hiring up

The news is all good for the jobs market so far in 2012: Separate reports Thursday showed a surge in private-sector job creation, a sharp drop in weekly unemployment claims and planned layoffs at their lowest level in six months.  Private-sector jobs surged by 325,000, according to ADP and Macroeconomic Advisors, while the government said weekly jobless claims fell 15,000 to 372,000 — still at an elevated level but consistent with recent data showing a consistent if grudging turnaround.  Goods-producing businesses created 176,000 positions in the month, according to ADP’s payrolls count, while the goods-producing sector rose 52,000 and manufacturing increased 22,000.  For the government’s weekly claims tabulation, it was the fourth drop in five weeks. The four-week average, which smooths fluctuations, declined to 373,250, the lowest level since June 2008.  Applications have declined steadily over the past three months.  The four-week average fell 11% in 2011, evidence that companies are laying off fewer workers. But many employers have been slow to add jobs.

The reports come a day ahead of the Labor Department’s monthly report expected to show 150,000 total jobs created in the public and private sectors.  In a related report, the number of planned layoffs at US firms declined to its lowest level since June, suggesting ongoing improvement in the labor market although unemployment remains historically high, a report on Thursday showed.  Employers announced 41,785 planned job cuts last month, down 1.6% from 42,474 in November, according to the report from consultants Challenger, Gray & Christmas.  But December’s job cuts were up from the same time a year ago, rising 31% from the 32,004 job cuts announced in December 2010. For all of 2011, employers announced 606,082 cuts, up 14% from the 529,973 layoffs in 2010.  The 183,064 government job cuts in 2011 represented a record high for that sector since Challenger began tracking it in 2002. And while the financial sector did not come close to its record high, annual cuts for the sector were 63,624, up 165% from 2010.  The report showing a further decline in job cuts comes one day ahead of the US Labor Department’s key US jobs report, which is forecast to show a 150,000 increase in non-farm payrolls.  Challenger said planned hirings in December totaled 14,074, down from 63,527 in November but up from 10,575 a year earlier. For all of 2011, announced new jobs totaled 537,572, up from 402,638 in 2010.

Fed – foreclosure is not the best solution

More than four years into the housing crisis, and after millions of Americans have lost their homes, Federal Reserve Chairman Ben Bernanke is finally taking a stand.  Bernanke sent a Federal Reserve paper to the leaders of the House of Representatives’ Committee on Financial Services arguing that relying heavily on foreclosures to deal with mortgage borrowers that can’t meet their obligations is “costly and inefficient” for the housing market because they can lead to deteriorating homes and weigh on the property values in the surrounding community.  Instead, the paper encourages lenders to “aggressively” pursue loan modifications and for servicers to be given more incentives to seek alternatives to foreclosure. Foreclosures “can result in ‘deadweight losses,’ or costs that do not benefit anyone, including the neglect and deterioration of properties that often sit vacant for months (or even years) and the associated negative effects on neighborhoods,” the paper said. “These deadweight losses compound the losses that households and creditors already bear and can result in further downward pressure on house prices.”

The paper mirrors findings from regional Fed banks indicating that foreclosures can be detrimental to more Americans than just those who are losing their homes. Properties that are occupied, but in foreclosure, drive down the surrounding property values twice as much as vacant properties, an October study from the Cleveland Federal Reserve found.  And with millions of foreclosed properties already in the pipeline, the foreclosure process is already taking longer than in recent memory — a situation that may only be exacerbated if lenders don’t take the Fed’s advice. The average foreclosure process now takes 674 days, almost triple the time necessary in 2007.

Sales mixed in December

Although analysts were expecting sales at stores open at least 12 months to rise an average of 3.3%, according to Thomson Reuters Same-Store Sales Index. There were plenty of headwinds including mild winter weather and high levels of unemployment that retailers grappled with during December.  The results were a mixed bag, with retailers such as Macy’s Limited and Zumiez, posting solid results and raising their earnings forecast. But the results were different for others such as discounter Target, which fell short of analysts’ expectations and cut its outlook for the fourth quarter.  Target said same-store sales rose 1.6%, far short of the 3.1% average analyst estimate from Thomson Reuters. As a result of its weak sales, Target cut its fourth-quarter earnings estimate to a range of $1.35 to $1.43 a share, from a prior estimate of $1.43 to $1.53 a share.  “December sales were below our expectations as growth in grocery and beauty offset softness in electronics and music, movies and books,” said Gregg Steinhafel, chairman, president and chief executive officer of Target, in a press release. “Sales and traffic were strongest in the week leading up to Christmas as guests waited to shop for last-minute gifts.”  Others who posted weak results blamed the mild winter temperatures, which hurt sales of winter apparel and other winter merchandise.

Olick – Richard Cordray appointment to have big impact

“Barely a few hours after the White House confirmed that President Obama would use a controversial recess appointment to install former Ohio Attorney General Richard Cordray as the director of the Consumer Financial Protection Bureau (CFPB), both Obama and Cordray were sitting at the dining room table of Endia and William Eason; the Easons, both in their 90s, nearly lost their home due to ‘trickery and abuse’ by a non-bank mortgage broker.  ‘The Easons need someone who will stand up for them,’ President Obama told a crowd later at a Cleveland high school. ‘Millions of Americans need someone who will look out for their interests. They need someone like Richard.’  Part of Richard Cordray’s job will be to increase oversight of mortgage brokers, which has already started with new underwriting standards mandated by the Dodd-Frank financial reform legislation. His appointment will finally allow the CFPB to start regulating non-depository firms (non-bank lenders), which up to now it could not.  ‘And that could have a big impact,’ says Guy Cecala, CEO and Publisher of Inside Mortgage Finance. ‘A lot of these firms – ranging from mortgage brokers to large lenders like PHH – have effectively escaped regulation in the past. Now they will not only have to submit to reporting but also lending regulations previously only extended to depository institutions.’

That will likely take a while, as Cordray settles in, but there are more near-term implications of the appointment, like that he could potentially help finalize a deal with the state attorneys general and the big banks over the so-called ‘robo-signing’ scandal.  ‘As a former AG, he could use that to his advantage in the ongoing negotiations with the AGs,’ notes Edward Mills, policy analyst at FBR. ‘Beyond a settlement, what we would be looking for are updated disclosure documents that are easier for consumers to understand and a definition of what is a ‘qualified mortgage’ – which sets in place new consumer protections on all mortgages.’  And even beyond the short and long term implications of Cordray’s new role at the CFPB is the significance of the recess appointment itself on something even more crucial to housing: The Federal Housing Finance Agency (FHFA), overseer of Fannie Mae and Freddie Mac. The FHFA has been run by an acting director, Edward DeMarco, for several years.  DeMarco has stood in the way of various government attempts to use Fannie Mae, Freddie Mac and the FHA to help troubled borrowers and resuscitate the overall housing market. He has consistently argued that his job is to protect the books of these mortgage giants, not to ameliorate the dyspeptic housing market.  If the President can use the recess appointment for Cordray, then he could potentially use it to replace the very controversial DeMarco.  ‘A different FHFA director might take a more expansive view of what is needed to help housing,’ notes Jaret Seiberg, financial services policy analyst at Guggenheim Securities. ‘That opens the door to much bigger refinancing programs than what have been adopted so far. For borrowers, that means lower rates which helps the economy, helps housing and helps the President’s re-election effort.’”

Regional banks to improve in 2012?

This year should be a better one for regional banks than 2011, Barclays Capital banking analyst Jason Goldberg said yesterday.  Goldberg, who predicted in October that the banks will improve as long as the US economy improves, said that last year was “clearly disappointing” since 2011 started with expectations of 3% gross domestic product growth and ended with only a 1.7% rise.  There was also uncertainty about how the international Basel 3 bank solvency requirements and the US Dodd-Frank financial services law would affect regionals, plus the concerns about Europe’s solvency. Goldberg expects those factors to have less of an impact on the banks in 2012.  He is “overweight” on regional banks that “used the economic downturn to improve their franchises,” including bigger Wells Fargo, US Bancorp and PNC Financial. These banks, he said, “made acquisitions to improve their franchise and took market share from their struggling peers.”  Goldberg also likes Capital One, which “clearly benefited in 2011 from a much improved environment, in terms of credit quality for credit cards.” He says it will see a “modest pickup in growth” this year, thanks to two pending acquisitions.

Housing starts to rise in 2012?

Housing starts have hit their low point and will gradually pick up this year, Goldman Sachs chief economist Jan Hatzius said yesterday.  “We’re pretty confident that housing starts have bottomed at this point,” he said. “It’s going to gradually pick up as the still large amount of vacancies and excess supply comes down.”  Housing prices, however, will continue to fall until hitting bottom in the second half of the year, according to Goldman’s forecast.  Hatzius said the price bubble of 2006 has finally disappeared, and housing is now “fairly valued,” but there will be “some small declines in house prices for most of this year basically because of the excess supply that’s still out there. But we’re pretty confident that we’re pretty close to the bottom here.”

Hatzius is also confident the Federal Reserve will have some form of quantitative easing later this year.  “We think they’re still missing their dual mandate significantly on the weak side, even with all the policy measures that they’ve already taken,” he said of the Fed.  There is still a “big gap” between the current unemployment rate of 8.6% and the Fed’s estimate of “sustainable unemployment” of 6%, Hatzius said.  ”We don’t think that gap is going to significantly diminish in the course of this year, so I think they’re going to target that.”  He also thinks inflation is going to go below the Fed’s target by the end of the year. The Fed said in November it was comfortable with the current inflation level of 3.9%, which includes food and energy prices, or 2% excluding them.  Hatzius also reiterated Goldman’s forecast for a still sluggish recovery of 2% or so in 2012. the year “won’t look that different from 2011,” he said, with the first half of this year slower than the second half of last year.

Factory orders up in November

Orders to US factories rose sharply November on a surge in demand for airplanes. But demand for goods that signal business investment plans fell for the second straight month.  The Commerce Department said orders to US factories rose 1.8% in November, following two months of declines. It was the best showing since a 2.1% gain in July.  But orders for so-called core capital goods, such as computers and electronic equipment, dropped 1.2% following a 0.9% decline in October. The category is closely watched because it is a good proxy for business investment.  Manufacturing has been one of the bright spots in this sub-par recovery but there is concern that US exports could falter if debt problems in Europe push that region into a severe recession.

HUD suspends affordable housing firm

The Department of Housing and Urban Development (HUD) suspended James Grier and Philadelphia-based Mantua Gardens East Inc., a Section 8 apartment complex, from doing business with the government, alleging the company improperly threatened tenants with eviction and withdrew thousands of dollars from reserves without permission.  HUD also proposed their debarments to prevent Grier and the company from participating in government-related business for five years. Grier could not be reached for comment. A phone number for Mantua Gardens East was disconnected and a management firm connected with the apartment complex was closed Wednesday evening when a reporter called.  HUD said Grier and MGE improperly withdrew $325,000 from reserves without HUD approval and submitted false and misleading financial reports to HUD. MGE also failed to provide sufficient notice to tenants of its intention to opt out of the Section 8 project-based program, denying them adequate time to make housing arrangements and threatening them with eviction. Section 8 is a HUD affordable housing program. It includes housing vouchers for low-income residents as well as project-based financing such as that provided to MGE.

MGE agreed to a $720,000 mortgage loan in 1970 insured by the Federal Housing Administration (FHA). As an FHA mortgagor, MGE is required to establish and maintain a reserve account to meet emergency needs at the apartment complex, which comprises 10 buildings in Philadelphia’s University City neighborhood.  In 2008, Grier and MGE improperly withdrew reserves without HUD approval and then refused to restore the funds, HUD said. Grier and MGE pledged the funds, along with one of the development’s buildings and future rent payments, as collateral for a separate loan from a lending institution, according to HUD.  MGE received project-based Section 8 subsidies for nearly 30 years. Under the terms of the contract, MGE was entitled to opt out of the contract, but was first required to provide one year’s notice to the tenants. In October 2011, MGE notified HUD that it was opting out of the program but failed to properly notify tenants, HUD 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

Smart Real Estate News & Commentary by Chris McLaughlin January 4, 2012

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–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

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

Short sales surged in second quarter: RealtyTrac

Second-quarter pre-foreclosure sales jumped 19% from the previous quarter, suggesting more banks and distressed borrowers are searching for efficient ways to offload properties that are near foreclosure, RealtyTrac said. Third parties acquired 102,407 pre-foreclosures in the second quarter, while 162,680 bank-owned homes were sold in the same period. Pre-foreclosure sales are generally short sales and properties sold within the foreclosure process. As for who is nabbing up distressed and bank-owned properties, RealtyTrac said third parties acquired 265,087 homes classified as in foreclosure or bank-owned in the second quarter. That is up 6% from the revised first quarter figure and down 11% from the second quarter of last year. The average sales price for foreclosures or bank-owned properties hit $164,217 in 2Q, down less than one percent from 1Q and 5% from the second quarter of 2010.  The sales price for distressed real estate was 32% below the average sales price of homes not in foreclosure. States with the largest quarterly increase in pre-foreclosure home sales included Nevada, which experienced a 43% increase; Washington (39%), California (38%); and Texas (34%). The states with the highest number of foreclosure sales included Nevada, Arizona and California.

Budget Deficit Estimate Cut to $1.28 Trillion: CBO

The federal budget deficit will hit $1.28 trillion this year, down slightly from the previous two years, with even bigger savings to come over the next decade, according to congressional projections released Wednesday.  The nonpartisan Congressional Budget Office says budget deficits will be reduced by a total $3.3 trillion over the next decade, largely because of the deficit reduction package passed by Congress earlier this month. Nevertheless, the federal budget will continue to be awash in red ink for years to come. Even with the savings, budget deficits will total nearly $3.5 trillion over the next decade—more if Bush-era tax cuts scheduled to expire at the end of 2012 are extended.  There is more bad news in the report: CBO projects only modest economic growth over the next few years, with the unemployment rate falling only slightly by the end of 2012. The agency projects an unemployment rate of 8.5 percent for the last four months of 2012. The presidential election is in November of that year.

“The United States is facing profound budgetary and economic challenges,” the new CBO report says. “With modest economic growth anticipated for the next few years, CBO expects employment to expand slowly.” Failure to pass a package would trigger $1.2 trillion in automatic spending cuts, affecting the Pentagon as well as domestic programs.  The new CBO report projects that the legislation will reduce deficits by a total of $2.1 trillion over the next decade. The agency also projects savings of $600 billion over the next decade from lower interest rates.

Diana Olick: Higher-End Housing Hits a Wall

Most of America won’t shed a tear for those who own higher-priced homes, especially given that the median home price in the nation has now fallen to just $174,000, but investors and homeowners alike should take note: Higher priced homes are taking a hit and the outlook for them is worse than the overall market.  That will have ramifications for recovery.  Despite the fact that just eight percent of US loans are currently jumbo, according to Inside Mortgage Finance, and that share will rise to just 10-12 percent when the conforming loan limit is lowered October 1st, high-end housing is already being hit harder than the overall market, which isn’t exactly doing so well itself. For one, weekly mortgage applications to purchase a home have been falling steadily, down 5.7 percent last week. But jumbo loan purchase applications fell 15 percent.

While sales of homes below $250,000 rose nearly 25 percent in July year over year according to the National Association of Realtors (June 2010 was the end of the home buyer tax credit, so July 2010 was artificially low, still….) sales of homes over $500,000 were basically flat.  Demand on the low end of the housing market is boosted by investors largely buying distressed properties; they either fix up and flip the homes or rent them out, waiting for the market to recover. Higher end homes have far fewer investors and may be more sensitive to a volatile stock market, as potential buyers are more likely to be invested there. Suffice it to say, we need all segments of the housing market pushing forward in order to get the full market back to health.

Markets not impacted by rise in jobless claims

Initial jobless claims rose last week, increasing by 5,000 filings for a total of 417,000 claims on a seasonally adjusted basis. That is up from the previous week’s revised figure of 403,500 claims. The Labor Department noted the numbers for the week ending Aug. 20 were impacted by 8,500 claims stemming from a labor dispute between the Communications Workers of America and Verizon Communications. Meanwhile, the advance seasonally adjusted insured unemployment rate hit 2.9% for the week ending Aug. 13, a slight decrease from the previous week’s revised rate of 3% Despite recent volatility in the stock market, analysts with Econoday said Thursday the markets “are showing little reaction to the report, which outside of the Verizon strike, points to mildly improving conditions in the labor market.”

Pre-Foreclosure Short Sales Jump 19% in Second Quarter

Short sales shot up 19 percent between the first and second quarters, with 102,407 transactions completed during the April-to-June period, according to RealtyTrac. Over the same timeframe, a total of 162,680 bank-owned REO homes sold to third parties, virtually unchanged from the first quarter. RealtyTrac’s study also found that the time to complete a short sale is down, while the time it takes to sell an REO has increased. Pre-foreclosure short sales took an average of 245 days to sell after receiving the initial foreclosure notice during the second quarter, RealtyTrac says. That’s down from an average of 256 days in the first quarter and follows three straight quarters in which the sales cycle has increased.  Nationally, REOs had an average sales price of $145,211, a discount of nearly 40 percent below the average sales price of non-distressed homes. The REO discount was 36 percent in the previous quarter and 34 percent in the second quarter of 2010.  Together, REOs and short sales accounted for 31 percent of all U.S. residential sales in the second quarter, RealtyTrac reports. That’s down from nearly 36 percent of all sales in the first quarter but up from 24 percent of all sales in the second quarter of 2010.

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 January 3, 2012

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Details – anti-flipping rule waiver

I reported last week that the waiver on the anti-flipping rule was extended by the Federal Housing Administration (FHA)  through the end of 2012, but here are some more details, courtesy of DSNews.com.  The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned and bank-owned properties, no matter how long the homeowner has held the title, through December 31, 2012.  FHA says the waiver will allow homes to resell as quickly as possible, helping to stabilize real estate prices and revitalize communities experiencing high foreclosure activity.  “This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Carol Galante, FHA’s Acting Commissioner. “FHAremains a critical source of mortgage financing and stability and we must make every effort that to promote recovery in every responsible way we can.”

According to the FHA, the waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.  Among these conditions, all transactions must be arms-length, with no link between the buying and selling parties.  In addition, in cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will apply only if the lender meets specific conditions, and documents the justification for the increase in value.  FHA’s property-flipping waiver is limited to forward mortgages, and does not apply to the agency’s Home Equity Conversion Mortgage (HECM) for purchase program.  Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.  The agency says its own research has found that in today’s market, acquiring, rehabilitating, and reselling foreclosed properties to prospective homeowners often takes less than 90 days.  As a result, FHA says prohibiting the use of its mortgage insurance for a subsequent resale within 90 days would adversely impact the willingness of sellers to consider offers from potential FHA buyers, namely because they would be required to cover holding costs and the risk of vandalism that comes with allowing a property to sit vacant over a 90-day period of time.

Consumer spending tepid

After a strong start on Thanksgiving weekend, a pronounced lull followed, causing retailers to mark down products heavily in the week before Christmas. While final numbers for the season are not in, analysts say they are worried that retailers had to eat into profits to generate high revenues.  Consumer spending makes up 70% of the economy, so until it ignites, general growth is likely to be sluggish.  Macroeconomic Advisers, a forecasting company, projects growth of around 2% for the first half of this year, down from an estimate of 3.6% in the fourth quarter of 2011 and just 1.8% in the third quarter.  For consumers, the reasons for the sluggishness are clear: incomes are essentially flat, job growth is modest, and more than 40% of the new jobs in the last two years have been in low-paying sectors like retail and hospitality.  While consumer spending is not “going to collapse,” said Joel Prakken, senior managing director at Macroeconomic Advisers, “there are some headwinds there.”

DSNews.com – broad-based price decline

Data released last week by Standard & Poor’s indicates the fourth quarter of 2011 started with broad-based declines in home prices.   The 20-city composite of S&P’s closely watched Case-Shiller index was down 1.2% in October versus September, while the 10-city composite reading registered a 1.1% drop.  Home prices fell in 19 of the 20 cities covered by the S&P/Case-Shiller index. Phoenix was the only metro area to see a month-over-month increase, with prices there rising 0.3%.  David M. Blitzer, chairman of the index committee at S&P Indices, says Atlanta and the Midwest are regions that really stand out in terms of recent relative weakness.  He notes that Atlanta was down 5.0% over the month of October, after having fallen by 5.9% in September.  Chicago, Cleveland, and Minneapolis – some of the strongest markets during the spring and summer buying season – all saw monthly declines of 1.0% or more in October.  On a year-over-year basis, the 10- and 20-city composites posted declines of 3.0% and 3.4%, respectively, when compared to October 2010.

Detroit (+2.5%) and Washington D.C. (+1.3%) were the only two cities to record positive annual returns. Atlanta posted the worst year-over-year result with an 11.7% decline.  S&P notes, however, that 14 of the 20 metros and both composite readings recorded improved annual returns when compared to the agency’s previous report. Miami saw no change, while Atlanta, Detroit, Las Vegas, Los Angeles, and Minneapolis saw their annual rates worsen.  According to the S&P/Case Shiller index, the crisis low for the 20-city composite was back in March 2011. The 20-city reading in October is about 1.9% above that recent double-dip mark.  The index’s 10-city composite hit its crisis low quite earlier in the cycle, in April 2009, S&P says. October’s 10-city assessment is about 2.4% above its relative low.

Shhh – the US is broke, but don’t tell anyone!

The General Accounting Office has released its fiscal 2011 annual report.  When companies and governments have bad news to release, they try to release it at the moment when journalists and the public are paying the least amount of attention — thus, hopefully, generating the least possible amount of grumbling and complaints.  So it’s no surprise that the GAO released its 2011 report on the Friday before Christmas, possibly the day of the year on which the country was paying the least amount of attention.  As you might expect, the GAO’s annual report on the financial condition of the United States contains tons of bad news.  The country can print its own money, so it’s not “broke” in the classic sense of the word (can’t pay its debts, can’t fund its operations).  But the country is also clearly on an unsustainable course.

Here are the highlights:

-  The US ran a $1.3 trillion budget deficit in 2011, flat with 2010 and the third year in a row of deficits over $1.3 trillion

-  The US federal debt load continues to climb as a percentage of GDP and is expected to explode over the next few decades

-  The big problem in our current and future finances is NOT spending on Defense, Education, the Environment, and the other government programs that Democrats and Republicans love to fight about.

The big problem in our budget is a combination of:

-  Taxes that are currently off their peak as a percentage of GDP

-  Future unfunded commitments to Medicare and Social Security

To be perfectly clear: The amount of the “unfunded liability” for our Social Insurance programs (Medicare and Social Security) is now $34 Trillion. This is an increase of $3 Trillion from last year. This number has increased at about $1.7 Trillion per year for the past 10 years. If not for some absurd assumptions about how Congress is going to eventually chop the cost of Medicare (the so-called “doc-fix” that pays doctors more for Medicare procedures that Congress passes every year), the liability would be $46 Trillion.  So, what’s the implication and solution?  Over the long haul, the intelligent solution is a combination of modestly higher taxes and reductions in Medicare and Social Security benefits.  The other option is bankruptcy.

Miami-Dade sales up 25%

Pending home sales in Miami-Dade County jumped 25% in November from a year earlier, the Miami Association of Realtors said Tuesday.   The number of listings hit 3,348, up from 2,598 a year ago, the trade group said.  Single-family home and condo sales pending during the month jumped 43% and 14%, respectively, over their November 2010 levels.  “Miami pending home sales have consistently increased over the past couple of years,” said Jack Levine, 2011 chairman of the Miami Association of Realtors. “We continue to see increasing pending sales, which points to increased future closed sales, price appreciation, and market strengthening.”  The pending sales home index nationally increased 7.3% to 101.1 during the same month, showing a greater deal of confidence from an level of 83.3 a year earlier, the report said.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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