Smart Real Estate News & Commentary by Chris McLaughlin April 26, 2011

Forward this e-mail to your friends!  Then they can subscribe directly at the following link:  http://www.smartrealestatenews.com/

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

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

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

New home sales up slightly

The Census Bureau reported an annual sales rate of 300,000 new homes in March. That was an 11% increase from February’s all-time low of 270,000, but new home sales remained near the lowest levels recorded since the government started tracking the data in 1963.  Compared to March of last year, the annual rate was down a 21.9%.  Still though, the monthly gain was a bit better than expected. Economists surveyed by Briefing.com had forecast a sales rate of 280,000 in March.  The report comes on the heels of slightly encouraging reports on existing home sales and new home construction and permits last week.

Economists cautioned that one decent month of data doesn’t mean the housing market has turned around.  Even though both home prices and mortgage rates are at attractive lows, demand for mortgages remains weak.  Economists at Barclays Capital predict home prices could fall another 2% through the end of the year, as foreclosures continue to weigh on the market. But at the same time, they expect home sales to slowly improve.  “We’re expecting a very gradual rebound in the housing market, related to ongoing, gradual improvement in the job market,” said Michael Gapen, senior US economist with Barclays Capital. “But I stress it’s gradual. There’s still a long tunnel in front of us.”

Ford has best quarter in a decade

Ford earned $2.6 billion, or 61 cents a share, up 22% from a year earlier, the company said Tuesday. The earnings not only topped the consensus forecast of 50 cents a share, they were better than the most bullish estimate of any analyst surveyed by earning tracker Thomson Reuters.  The last time Ford earned this much in the first quarter was in 1998, when the company sold part of its financial services unit. The past quarter’s performance underlined the continued turnaround at the company, which has now posted seven straight quarters of profit after years of losses.  Revenue rose 18% to $33.1 billion, which also easily topped the most optimistic forecasts, as the number of vehicles Ford sold worldwide climbed 12%. In March, Ford’s US sales topped those of rival General Motors for the first time since 1998.  Ford did not give a specific earnings target for the rest of the year, although it said it expects to continue to post improved results. But it warned that lower profit from its Ford Credit unit, higher commodity prices, seasonal factors and the need for increased investments and costs related to its longer-term plans will make it difficult to match the first quarter’s strong results later this year.  Still, Ford said it expects to continue to gain market share in both the US and European markets.

MBA – commercial originations up

Commercial and multifamily mortgage origination volumes increased 44% in 2010 over the previous year, with mortgage bankers reporting $118.8 billion of closed commercial and multifamily loans, according to the Mortgage Bankers Association’s 2010 Commercial Real Estate/Multifamily Finance: Annual Origination Volume Summation.  “Coming off of the 2009 lows, commercial and multifamily originations increased by a strong 44% in 2010,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research.  “Low interest rates coupled with improving economic fundamentals have the potential to draw out even more borrowers in 2011.” 

Fannie Mae, Freddie Mac and FHA, collectively, were the largest investor group in 2010, responsible for $42.8 billion of the total, followed closely by life insurance companies and pension funds at $30.6 billion.  In terms of property types, multifamily properties saw the highest volume, $48.9 billion, followed by office properties with $22.6 billion of originations.  First liens accounted for 92% of the total dollar volume closed.  Lending for office properties had the largest percentage increase in originations by property type, followed closely by hotel/motel properties and retail.  Year-over-year changes are based on the changes in volume among “repeat reporters” that participated in both the 2009 and 2010 surveys.

Boehner looks at oil tax breaks

Congress should consider cutting multibillion-dollar subsidies to oil companies amid rising concern over skyrocketing gas prices, House Speaker John Boehner said yesterday.  “It’s certainly something we should be looking at,” Boehner said in an ABC News interview.  “We’re in a time when the federal government’s short on revenues. They ought to be paying their fair share.”  “Everybody wants to go after the oil companies and frankly, they’ve got some part of this to blame,” he said.  But Boehner, an Ohio Republican, said he also wanted to “see all the facts” first.  A New York Times-CBS News poll found that 70% of Americans believe the country is on the wrong track and analysts believe gas prices are a main reason for this. 

The Obama administration tried unsuccessfully during the last Congress to cut tax breaks and subsidies for fossil fuels.  The attempt to end the subsidies has been strongly condemned by oil and gas companies, which argue that abolishing the tax breaks would reduce domestic drilling, cost jobs and increase US reliance on foreign energy suppliers.  “This is a tired old argument we’ve been hearing for two years now. If the president were serious about job creation, he would be working with us to develop American oil and gas by American workers for American consumers,” the American Petroleum Institute’s chief economist John Felmy said.  Unrest in the Middle East has pushed crude oil prices above $110 a barrel.  US retail gasoline prices hit $3.88 a gallon over the last week, the highest level since the summer of 2008 when prices reached a record $4.11 a gallon, the Energy Department said Monday.  Asked who the American people should blame for high gas prices, Boehner pointed the finger at Obama and said the president won’t win re-election if gas prices are “$5 or $6″ a gallon.

Olick – optimism in housing?

“Thanks to all the streaming feeds of constant news I’m subjected to, I just clicked on a CNBC story titled, Four Years Later, Housing Market Shows Signs of Life.’ I was curious, seeing as I write about housing for CNBC, and I didn’t write that. It’s a Reuters piece, and I don’t buy it.  But wait, what about this morning’s report of an 11% jump in sales of newly built homes and last week’s report of a 4% jump in sales of existing homes; March was a great month, right? A little perspective, please.  Yes, the numbers are going in the right direction, but only after big, albeit partially revised, drops in February. We’re working off a bottom here, and we’re still bumping around it. My concern, as it has been for years now, is distressed properties. Foreclosures and short sales (where the home is sold for less than the value of the mortgage) are ruling the roost, and that is not good news for home prices, which are still dropping, despite this one month of rising sales. Sales are all well and good, but prices are key in so many ways. 

For existing homes in March, the bulk of the market, 35% of all transactions were all-cash (that’s a new record), and 22% were sales to investors; investors don’t necessarily want to hold on to these properties for very long, so they may come back on the market again soon.  But back to the distressed properties. While the National Association of Realtors says 40% of March sales were distressed properties (up from 39% in February and 35% a year ago), another survey from Campbell/Inside Mortgage Finance finds nearly half of all homes on the market are distressed. Short sales are ‘booming’ according to the same report up to nearly 20% of sales. But short sales are a double-edged sword. Yes, they’re better for the banks and the sellers because there is less of a financial loss to the bank and less of a credit loss to the seller, but they make comps and appraisals even murkier than they already are.

From the Campbell/IMF report:  ‘Home values continue to decline, making normal sale homes worth much less than they should be. Appraisers continue to use distressed property sales to establish value on non-distressed listings. Further, these same appraisers will not make any adjustments for amenities, (pools, spas, solar, etc.), when compiling a normal sale vs. distressed comps. I have had at least one appraiser tell me that his firm has been given marching orders to calculate the current value based on all properties sold within the last 3 to 6 months and only use the average square footage minus 10% to establish neighborhood value comps. If this is indeed standard practice, it will take a mighty long time to realize any increases in property values,’ complained an agent in Arizona.  It’s not just in Arizona either.

Builders complain that tight credit, poor appraisals and lack of buyer confidence are still standing in the way of real recovery. Realtors complain the same, and both say home prices have further down to go. Home buyer traffic is still not where it should be right now, in the heat of the Spring market, and that’s primarily due to confidence. With gas prices over $4/gallon, and concern over rising interest rates and inflation, big ticket purchases are moving to the back burner.  Another survey out today from First Command Financial Behaviors in Ft. Worth, TX finds a big drop in Q1 in the percentage of middle-class Americans who feel financially secure. The survey of 1000 consumers found more than a third of respondents said they plan to focus on debt payment and 19% on savings.  Don’t get me wrong, I’m thrilled to see the sales numbers going in the right direction; I just question whether ‘optimism’ is the right word right now. I’m not even sure about ‘recovery.’ Tomorrow we get the latest home price report from the folks at S&P/Case Shiller. Let’s see how that goes. Oh, and that Reuters piece was all about sales gains on the high and low end of the market. Rich folks with cash and investors with cash.”

US economy losing steam

In 2010, the economy seemed to be on firmer footing, finishing out the year with a 3.1% growth rate in the final three months, compared to the same period last year.  Only three weeks ago, expectations were for 2.7%, while some forecasts ran as high as 4.3% just one month earlier.  Now expectations are lower.  The government is set to announce first-quarter gross domestic product — the broadest measure of the nation’s economic health — on Thursday.  But the good news is that economists don’t expect the sluggish quarter to drag down growth for the entire year.

They’re forecasting the economy to grow at a healthy 3.1% pace for all of 2011, just slightly below the 3.5% growth rate they were forecasting earlier in the year.  “We view the first quarter as being a pause in the pace of expansion,” said David Berson, chief economist for the PMI Group. “That won’t stand in the way of a modest expansion over the remainder of the year.”  The cause of this sudden wave of pessimism? Rising oil and gas prices. High pump prices act like a tax on consumers, forcing them to cut back spending on other items. In addition, the large amount of oil the United States imports means that higher prices cause the trade gap to widen, which also cuts into GDP.  Other factors include businesses holding back on increasing their inventories and less construction activity than previously expected.

Home prices near double dip

Well, here’s the report Olick was waiting for:  According to the S&P/Case-Shiller index of home prices in 20 cities, home values are down 32% from their peak set in May of 2006,.  “There is very little, if any, good news about housing,” said David Blitzer, spokesman for S&P. “Prices continue to weaken, trends in sales and construction are disappointing.”  The drop has come in two stages. First, the index recorded 36 months of nearly uninterrupted declines after reaching the spring 2006 peak.

Then came a 13-month upswing during which the index recorded a 5% gain. That rebound ended last June.  Since then, the index has recorded losses every month and it has now edged closer to a new bottom — the dreaded double-dip.  The index now stands at 139.27, just a whisker above the first low, which came in April of 2009, when the index was at 139.26.  All of the major areas saw prices decline from a month earlier, with Minneapolis seeing the biggest drop at 3.1%, followed by San Francisco at 2.6%.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

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 September 27, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

http://www.smartrealestatenews.com/ 

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

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

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

What if I could show you how to not only have the

deals coming in automated, but also show you how to

automate your buyers list as well and have all the

money you need for you deals all in one spot?

Let me show you how in our no–charge class this Tuesday

at 3 PM ET, NOON PST:

Click below to reserve your spot now! —->

https://www2.gotomeeting.com/register/479566067
*********************************************************
22% of private mortgages default

Nearly 11% of mortgages modified under the government’s Home Affordable Modification Program, known as HAMP, have fallen two months behind in payments, according to a banking regulators’ report issued Friday. By contrast, just more than 22% of non-HAMP adjustments redefaulted.  The reason for the gap is pretty clear, regulators said. HAMP modifications reduce a borrowers’ monthly payment by an average of $608, while bank modifications lower it only by $307. “There is a correlation between sustainability of payment and the reduction in the payment,” said Joe Evers, deputy comptroller at the Office of the Comptroller of the Currency, which put out the report along with the Office of Thrift Supervision.

Under HAMP, eligible borrowers can have their monthly payments lowered to 31% of their pre-tax income as long as its more profitable for the bank to modify the loan than to foreclose. The federal government pays servicers an incentive to participate in the program.  Also, proprietary bank modifications are outpacing HAMP adjustments by more than 2-to-1. Many troubled homeowners are falling out of the government program and 44.5% of them are receiving bank modifications. Housing counselors have been wary of proprietary modifications, mainly because there is not a lot of information about them. They caution homeowners to make sure they understand the terms of the adjustment. A Chase spokesman said HAMP is always the first program the bank considers for troubled borrowers “because it lowers the payment more than most other programs.” If they don’t qualify for HAMP, they are reviewed for a proprietary modification.

Tax bill comes under fire

Sen. Dick Durbin of Illinois and other Democrats plan to bring a tax bill called “Creating American Jobs and Ending Offshoring Act” up for a vote tomorrow, but the legislation has already come under attack from Republicans and business groups. The U.S. Chamber of Commerce called on lawmakers to oppose the bill, saying it would hurt the economy and lead to job cuts. Instead, the group urged lawmakers to extend all of the Bush tax cuts set to expire on Dec. 31 — an issue Congress is unlikely to resolve until after congressional elections on Nov. 2.  Tax policy analysts say the bill is politically-motivated and doubt that it will have a meaningful impact on hiring.  “I don’t think this package is going to be successful,” said Anne Mathias, a tax analyst at Concept Capital’s Washington Research Group. “Politically it makes sense, but economically I’m not sure it will work.”  The bill would give U.S. employers a two-year break from payroll taxes on wages paid to new U.S. workers performing services in the United States, according to a summary of the legislation.  0:00 /4:24′Car Czar’: Bailout saved GM, Chrysler

To be eligible, businesses would have to certify that the U.S. employee is replacing an employee who had been performing similar duties overseas. 

Experts said the amount of money companies could save as a result of the tax holiday may not be enough to offset the benefit hiring workers in cheaper labor markets. In addition, analysts said many questions remain about how the provision would work if the bill is passed.  “How do you identify the jobs that have come home?” asked Roberton Williams, senior fellow at the Tax Policy Center. “How does the firm prove that a job has moved from overseas to home? How do they prove that the job wouldn’t have been created here anyway?” In addition, businesses would be blocked from taking any deduction, loss or credit for costs related to reducing or ending U.S. operations while expanding similar operations outside of the United States.  Critics, like the Chamber of Commerce, say ending deferral would subject American companies to “double taxation” on the earnings of their foreign subsidies. “Limiting deferral would hinder the global competitiveness of these American companies, impede U.S. economic growth, and ultimately result in the loss of jobs,” Bruce Josten, an executive vice president at the Chamber, wrote in a letter to Senators last week.

New home sales near lows

Sales of new homes were flat in August at a seasonally adjusted annual rate of 288,000, the second lowest level since the Commerce Department started tracking new home sales in 1963. Sales year-over-year are down 28.9%. Home sales were expected to jump to an annual rate of 291,000 in August, according to a consensus estimate of economists surveyed by Briefing.com. “It would have been nice to finally see a nice upward blip, but this is not surprising at all,” said Leif Thomsen, CEO of Mortgage Master. “Builders are unable to get financing for new homes in this economy, and buyers aren’t in a hurry to buy because they know nothing is really selling.”  Reports earlier this week on existing home sales and new home construction indicated slightly improving housing market conditions. But until hiring picks up and more people start shopping for houses, a significant rebound is unlikely. The median price of new homes sold in July was $204,700, a 0.5% decline from July and down more than 1% from August 2009. At the end of August, 206,000 new homes were for sale. At the current sales pace, the government expects the supply to last 8.6 months.  Sales soared in the West, rising 54.3% in August. The Northeast saw sales rise by 16.7%. Sales in the Midwest fell the most, by 26.1%, while sales in the South fell 10.8%.

MBA – Variety of Alternative Mortgage Loan Products Around the World

According to a study released today by the Mortgage Bankers Association (MBA), mortgage features like longer terms, interest-only periods and flexible payment designs are quite common in other countries and are not associated with higher rates of default.  The study entitled, “International Comparison of Mortgage Product Offerings”, which was conducted by Dr. Michael Lea, Director of the Corky McMillin Center for Real Estate at San Diego State University and sponsored by MBA’s Research Institute for Housing America (RIHA), examines the predominant mortgage designs and characteristics that exist in different international markets and how they have performed prior to and during the crisis.

The study examined 12 developed countries with distinctly different mortgage market and product configurations.  The study results showed that 95% of new loans made in the U.S. in 2009 were long-term fixed-rate products compared to various other countries with a lower share including 1% in Spain, 2% in Korea, 10% in Canada, 19% in the Netherlands and 22% in Japan. In addition, 5% of new loans made in the U.S. in 2009 were variable rate, which compares to the higher shares found in other countries including, 92% in Australia and Korea, 91% in Ireland, 47% in the UK and 38% in Japan. Key findings:

- of the countries sampled, all typically subject fixed rate mortgages to an early repayment penalty except Denmark, Japan and the U.S.  In Australia, Canada, Denmark, Germany, the Netherlands and Switzerland the penalties are designed to compensate the lender for lost interest over the remaining term of the fixed rate.

- while some believe that the fixed-rate mortgage (FRM) is the ideal consumer mortgage instrument for all borrowers, its use does have significant drawbacks. In effect, the cost of the pre-payment option is socialized, with everyone paying a premium in the mortgage rate for the option. This contrasts with the European view that only borrowers who exercise the option for financial advantage should pay the cost.

- the U.S. has an unusually high proportion of long-term FRMs as well as use of securitization in the finance of housing. The dominance of the FRM and securitization is driven in part by the presence of government-backed secondary mortgage market institutions that lower the relative price of this type of mortgage.

- the U.S. is unusual in the banning or restriction of prepayment penalties on FRMs. Most countries in the survey allow such penalties to compensate lenders for loss associated with the financing of mortgages. As a result, mortgage rates in those countries do not include a significant pre-payment option premium and other financing techniques, such as covered bonds, are more common.

- according to an EMF study on the efficiency of mortgage collateral, borrowers remain liable for deficiencies in Belgium, Germany, Greece, the Netherlands, Spain, France, Ireland, Portugal and the U.K.

Now for our real estate education section…

Behind the Headlines – News You Can Really Use

Despite a less than enthusiastic response from Democrats or Republicans, President Obama has recently proposed a tax incentive that would allow business owners and corporations to write-off 100% of new plant and equipment expenditures through 2011. So, what does that mean for real estate professionals and/or investors?

Let’s take a few minutes to crunch the numbers and see how this will work in “real life” should the provision actually be passed (which remains to be seen). For the sake of brevity, let’s assume Joe the Plumber’s small business generates an additional $100,000 above and beyond ordinary expenses which would normally be taxed at 35%. Although Joe would love to purchase a new plant or equipment that happened to cost $100,000, he has been sitting on the sideline because he would be forced to depreciate the purchase over a period of several years. Under the new tax incentive, Joe would be able to fully depreciate the purchase in only one year, resulting in a substantial offset of taxes.

Let’s take a look at the hard numbers:

$100,000 property depreciated over  as long as 27 years =$3700 per year tax offset (standard policy). Remaining tax liability at 35% = $33,700.

$100,000 property depreciated over 1 year = $100,000 tax offset (proposed policy). Remaining tax liability at 35% = 0.

In the first example it is easy to see why small business owners are reluctant to invest; they must spend $100,000 and still pay a hefty tax of nearly $34,000. Plain and simple, they may not be able to afford it. Given the current economic climate, it can be risky to use up surplus cash reserves that may be needed in the event of a continued economic downturn.

On the other hand, by accelerating the depreciation schedule, the tax savings allow Joe the Plumber to purchase the additional capital investment provides a long term advantage to his business and still leave the business with some excess cash on hand in the event of an emergency need. New plant and equipment purchases help keep jobs here at home, update aging equipment and provide a much needed push to help revitalize the economy; does it have a real chance of passing?  Only time will tell. Prudent short sale and real estate professionals will begin preparing now.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin July 26, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

http://www.smartrealestatenews.com/ 

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

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

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

Come learn from Nathan J.’s mentor who will do all your deals for you…

TODAY at 3 PM ET, NOON PST:

https://www2.gotomeeting.com/register/331982995

**********************************************************
New home sales will be up?

According to outlook and commentary services firm Econoday, new home sales should total 310,000 units in June, up from May’s record-low 300,000.  The Census Bureau is scheduled to release its monthly new home sales data later this morning. The error ratio, however, could swing the new home sales into negative territory, month-on-month, as the possible range is listed between 280,000 to 350,000 home sales.  Months’ supply of new homes on the market surged to 8.5 months in May, from 5.8 months in April, due to the drop in sales, Econoday noted in commentary. But the actual number of new homes on the market was down 1,000 in the month to an adjusted 213,000 — to its lowest level in 40 years, since 1970, the firm said.  Econoday noted that lower interest rates are likely to boost sales for the June data. Employment and income growth, however, also have an impact on the decision to buy housing.

More magic numbers from the WH

The numbers, projections, and estimates that come out of the White House under this administration are famous for their inaccuracy and fantasy-like quality, but even it is slowly coming around to reality, admitting that unemployment will stay at or above 9% until 2012. Of course, we can expect the truth to be varnished at least a little bit…well, maybe a lot:  it now believes the 10-year deficit will be $58 billion less than projected in February when the budget blueprint was first released, and that the economy will grow by at least 4% in 2011 and 2012.   Under the revised estimates, Uncle Sam will ring up $8.474 trillion in deficits between 2011 and 2020, down from the $8.532 trillion estimated in February.  In the near-term, the administration expects the 2010 deficit to come in at $1.47 trillion — slightly lower than originally forecast and slightly above last year’s deficit of $1.41 trillion. Meanwhile, the 2011 and 2012 deficits will come in somewhat higher than the White House forecast in February. 

“The economy is still weaker than we’d like, and [there is] a medium-term and long-term fiscal situation that requires attention,” outgoing White House Budget Director Peter Orszag said in a call with reporters.  In terms of taxes, the administration now expects that the Treasury will take in $402 billion less over the next 10 years than originally expected, but at the same time will also spend $461 billion less than was forecast.  The tax revenue collected will average 18.7% a year, slightly above the 40-year historical average. Federal spending, however, will average 23.2%, above the 20.7% historical average.  When asked what accounted for the White House’s relatively optimistic growth estimates relative to other economists’ forecasts, Christina Romer, who chairs the president’s Council of Economic Advisers, said the administration believes rapid growth in business investment and an emphasis on U.S. exports is “what we think makes these numbers completely reasonable.”  In other words she has no real basis for any of it…business as usual.

Freddie’s mortgage and issuance $179bn in H110

Mortgage purchase and issuance at Freddie Mac rose to $30.9 billion in June, from $25.1 billion in May, bringing the year-to-date total to $179 billion for the first half of 2010 (HI10), according to a monthly volume summary.  Freddie’s total mortgage portfolio decreased at an annualized rate of 0.9% in June. Total guaranteed Participation Certificates (PCs) and structured securities issued fell at an annualized rate of 0.6%.  The monthly contraction in the portfolio arrives after Freddie wrapped up an initiative announced in February to purchase essentially all the single-family mortgages delinquent by 120 or more days out of its PC pools.  The single-family delinquency rate decreased to 3.96% in June from 4.06% in May, and the multifamily delinquency rate fell to 0.28% from 0.32%.  Refinance-loan purchase and guarantee volume was $19.1 billion in June, up from $17.1 billion in May. Freddie reported 21,367 modifications in June, for a total 93,558 in the first six months of 2010.  The aggregate unpaid principal balance of the mortgage-related investments portfolio slipped by $8.6 billion.

Soak the rich

Treasury Secretary Timothy Geithner said yesterday that the economy is not likely to slip back into recession, but letting tax cuts for the wealthiest Americans expire is necessary to show commitment to cutting budget deficits.  “We think that’s the responsible thing to do because we need to make sure we can show the world that (we’re) willing as a country now to start to make some progress bringing down our long-term deficits,” he said on ABC’s “This Week” program.  In other words, pretend the economy is great, soak the people most likely to invest in private enterprise, and call it “responsible.”  Geithner said only 2 to 3 percent of Americans — those making $250,000 or more a year — will be affected when tax cuts enacted under former President George W. Bush end on schedule this year. 

Republicans want to extend the tax cuts and Democrats are divided but Geithner said reductions for top earners should end.  There’s another way to be responsible, of course, and that’s by not driving the country into the wall at exactly the wrong time with programs we can’t afford, but no one in the administration has stumbled on that idea yet.  “I think the most likely thing is you’ll see an economy that gradually strengthens over the next year or two, you’ll see job growth start to come back, investments expanding … but we’ve got a long way to go still,” Geithner said.  Indeed.  In fact, for some reason this administration is intent upon making it as long as possible…

DSNews.com – GSEs next?

Now that the Obama administration is finished “fixing” financial regulatory reform, it’s setting its sights on restructuring the housing finance system, namely the GSEs.  The White House says it will put forth a formal proposal by early next year, and some say its focus will be a departure from the age-old adage of homeownership as everyone’s “American Dream,” and shift support for the housing market from Fannie Mae and Freddie Mac to the private sector.  There’s no doubt change is coming for the nation’s two largest mortgage companies. Many were disconcerted that the Dodd-Frank Wall Street Reform and Consumer Protections Act didn’t include a new blueprint, or at least new rules, for Fannie and Freddie. 

Rep. Darrell Issa (R-California), ranking member of the House Oversight and Government Reform Committee, called the president’s signing of the Dodd-Frank bill a “charade” on true reform, particularly in light of Issa’s recent investigation that revealed former executives at both Fannie Mae and Freddie Mac accepted so-called sweetheart loans from subprime mortgage lender Countrywide before it imploded.  Since the federal government took control of the GSEs in September 2008, the two companies have had to draw $146 billion in federal funding to stay afloat, giving taxpayers an 80 percent ownership stake in the mortgage financiers. Fannie and Freddie’s rescue has become the costliest of all the government bailouts, making the fact that the two companies were never mentioned in a bill that promises to end “too-big-to-fail” even that much more ironic.  Recent estimates from the Congressional Budget Office (CBO) put the tab for subsidizing Fannie and Freddie at $389 billion, when all is said and done.

Now for our real estate education section…

Bills, Bills, Bills – How Reform is Changing the Face of Real Estate

Whether you like him or not, one thing everyone can agree upon is that President Obama has indeed kept his promise to bring change to the nation. From healthcare reform to finance reform, some of the most radical changes in decades have come to pass with profound implications for the future of real estate.

Although superficially healthcare reform may not seem to have a direct impact on real estate, upon closer examination it becomes clear additional taxes (including the 3.8 percent premium on investment earnings for high net worth individuals, the upcoming requirement to send 1099′s to every company or service provider which you do more than $600 of business with annually and other upcoming changes) required to fund the measure will indeed directly affect investors. Finance reform presents a myriad of new taxes, decreased write-offs and stringent lending regulations likely to transform the mortgage and banking industry for decades.

But the worst may be yet to come in the form of the upcoming energy bill. “What energy bill?” you ask…the one that has been in the works since the Supreme Court ruled that carbon dioxide is a poison which must be cleaned up. As an environmental pollutant, the ruling gave the EPA (Environmental Protection Agency) oversight that directly affects business and industry throughout the nation with or without a new bill. However, experts and politicians alike expect an energy bill to be put through sooner rather than later.

What possible implications could this hold for the future of real estate?

Apparently a lot especially when “Carbon credits” are taxed into the equation of a new home, roads and other improvements. The cost  of electricity and other fuel based services are also likely to increase…along with the cost of goods which use fuel or electricity.

What other areas should savvy short sale and real estate investors keep an eye on? How about VAT taxes, Cap & Trade modifications, Climate bill, Privacy bill and a new living wage bill just for starters. In fact, even proposed revisions to the “No Child Left Behind” law is expected to impact real estate since one of the major predictors of home value and neighborhood desirability is related to school performance. Under the proposed changes, a single federal formula will be used to calculate and report high school graduation rates and other statistics…including the federal funding and ability of parents to remove children from schools or obtain vouchers….all of which are likely to impact the desirability of any given home or neighborhood.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Real Estate News & Commentary by Chris McLaughlin, June 25, 2009
http://www.shortsalesriches.com

* Add me on Facebook: http://www.facebook.com/mclaughlinchris

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live Thursday at
8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/792140858

Why would I do that for no charge?  Because
I want a chance to tell you about the other
high-income opportunity, too.

And I can’t do it in an email.

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early.  See if there’re any spots left:

https://www2.gotomeeting.com/register/792140858

New-home sales drop slightly

According to the Commerce Department, new-home sales dropped 0.6% in May over April, to an annual pace of 342,000 units. This is below what economists had estimated, and well below the 509,000 annual pace of May 2008. The median home price rose from $212,600 in April to $221,600 in May. Inventories of new homes fell to 292,000 units in May. At the current rate of sales, it would take over 10 months to clear the stock of unsold homes. Economists believe that home prices have to fall further to clear unsold home inventory. Joshua Shapiro, chief economist with MFR, says the inventory of homes for sale “will remain enormous, particularly with increased competition coming from distressed sales of existing homes.” Michael Moran, chief economist at Daiwa Securities America, said homebuyers are seeing more attractive opportunities in the existing-home market than in the new-home market. “Builders are less inclined to offer discounts and throw in amenities now that inventories are better under control,” said Moran.

Is HVCC hurting the housing industry?

The Home Valuation Code of Conduct (HVCC), a guideline which introduces a firewall between lending institutions and appraisers, came into effect on the first of May this year. According to Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, HVCC is meant to “improve the reliability of home appraisals,” by preventing fraud in the appraisal process. Lenders and brokers who wish to sell loans to Fannie Mae and Freddie Mac can no longer select an appraiser themselves, instead, they should approach an independent appraisal management company which will assign an appraiser for each deal. This would effectively stop collusion between lenders and appraisers leading to inflated home values. Appraisers and lenders say that HVCC, instead of helping the industry, is hurting it. A number of honest and efficient appraisers have been hit because the appraisal fee should now be shared between the appraisal management company and appraisers, instead of appraisers taking the entire fee. There have been instances of appraisal management companies assigning appraisers who have no familiarity with local conditions and data to appraise properties. This leads to incorrect estimates, and incorrect estimates, in turn, lead to buyers and sellers walking away from deals. Lawrence Yun, chief economist of the National Association of Realtors, has warned that the housing market recovery can get delayed and there could be a rise in foreclosures, if problems related to appraisal are not quickly corrected.

Orders for durable goods surge for the second straight month

Durable goods orders rose 1.8% in May, surprising economists who had predicted a 0.6% decline. The rise in May follows a rise in April and the back-to-back monthly gains indicate that the recession may be coming to an end. “Economic figures, such as the durable goods orders, show that we’re not falling off a cliff”, said Frank Ingarra, a fund manager at Hennessy Funds. Orders for non-defense goods, excluding aircraft, rose 4.8% while orders for computers and related products rose 9.4%. Orders for machinery rose 7.7% percent, the most in more than a year. Dean Maki, chief U.S. economist at Barclays Capital, said: “The government stimulus has helped income, stabilizing consumer spending, and that’s showing through in better orders.”

Rebecca Blank, undersecretary of commerce for economic affairs, said that the durable goods orders data can be volatile, and cautioned against reading too much into it. Economists say they are yet to see convincing signs of recovery. “The U.S. factory sector still has a long way to go and is facing the headwind of one of the deepest global contractions in a generation,” said Cliff Waldman, an economist with the Manufacturers Alliance/MAPI.

Energy Department to lend $8 billion to 3 automakers

The government has expressed its commitment to support energy efficient vehicles by announcing an $8 billion loan to Ford, Nissan, and Tesla Motors. The Energy Department will provide the loan out a $25 billion fund, to develop fuel-efficient vehicles. Energy secretary Steven Chu said: “By supporting key technologies and sound business plans, we can jump-start the production of fuel efficient vehicles in America. These investments will come back to our country many times over by creating new jobs, reducing our dependence on oil, and reducing our greenhouse gas emissions.” Ford will receive $5.9 billion to upgrade its 11 factories in the Midwest to produce hybrids and electric vehicles. Nissan will receive $1.6 billion to build advanced vehicles and a battery manufacturing facility, while Tesla would get $465 million to build electric vehicles and electric drive powertrains in California. “This is a tremendous development,” said Alan Mulally, Chief Executive Officer of Ford. Tesla CEO Elon Musk said the Tesla would use the loan “precisely the way that Congress intended — as the capital needed to build sustainable transport.” General Motors and Chrysler failed to qualify for the loan program since they were not considered “financially viable” by the Energy Department.

Hedge funds too want to be left out of new regulations

The Obama administration proposes to include hedge funds along with venture capital funds in its financial overhaul plan. The venture capital industry has already said it is “relatively inconsequential” and should be exempted from the new regulations. Now hedge funds have joined the chorus. Hedge funds have had a terrible time in the recent past with dwindling returns and large capital outflows. After battling markets, hedge funds are now looking at battling Washington. Richard Baker, who heads the Managed Funds Association (MFA), the industry’s lobbying body, is leading the charge. The MFA has been meeting with Treasury officials with idea of pushing its agenda to make changes to the financial reform proposal. Baker says hedge funds should not be deemed “systemically important,” and hence should not be subjected to greater scrutiny by the government. Many analysts disagree. “It’s disingenuous for anyone to claim in this day and age that no hedge fund is systemically important,” said Andrew Lo, a professor at the Massachusetts Institute of Technology and an expert on hedge funds. “Frankly I don’t think any hedge fund manager in his right mind could argue that the industry needs no oversight.”

Now on to our real estate investor education section…

The Problem of PMI and Short Sales

A lot of short sale investors become very confused as soon as PMI is mentioned. PMI or Private Mortgage Insurance is that monthly fee many homeowners pay each and every month for what appears like no apparent reason (in their opinion). Of course, there was a reason for it and if you are contemplating a short sale deal, that reason was a valid concern. PMI was created for the express purpose of insuring against default by home buyers that didn’t put at least 20 percent down when purchasing a home. The idea was simple enough; real estate rarely ever falls and when it does, it rarely falls by much more than 20 percent. Because the majority of mortgages are amortized, the closing costs and larger up-front payments effectively reduce the risk even more. To compensate for the difference between anticipated losses and the actual loss of any profit (after taking amortization etc into account) the homeowner would be forced to pay for PMI until the loan to debt ratio fell below 80 percent. Sounds like a good plan of protection so what could be the problem when it comes to short sales?

Well, the thought process is like this…if the PMI or private mortgage insurance will cough up a higher cost in the event of a default than the short sale offer then it’s less likely they will want to negotiate below a given amount. However, this isn’t always the situation. In some instances the primary mortgage holder will accept a short sale offer if there is a second mortgage or promise of future payment – a controversial but relatively common situation since legally the current homeowner is responsible for any gap. Of course, faced with the prospect of losing their home and still owing money, most homeowners tend to either walk away entirely or simply file for bankruptcy protection. Because of the drama associated with PMI and short sales, many investors simply opt to avoid them altogether.  Before making that decision it’s important to clear up a few myths surrounding PMI and short sales…

1. PMI pays up to 20 percent…not 80 percent. The private mortgage insurance was put into place because the original owner didn’t put at least 20 percent down…it’s the difference between 100 percent financing and 80 percent (or whatever amount above 80 percent financing obtained for the original loan).
2. Transactions costs, maintenance fees and other expenses must also be taken into account.
3. AIG United Guaranty is one of the larger entities holding many of these issues. As you know (or should know), AIG is facing just a few problems of their own to the point that some mortgage companies no longer want to negotiate directly with the PMI during the course of a short sale.

So, the bottom line is this; when making an offer for short sales on any property be sure to find out for sure (don’t leave it to the homeowner to know or understand if they pay PMI) if the property is impacted by PMI. If so, realize that some of the loss will be mitigated by the PMI and plan your calculations accordingly. Should you decide to continue the negotiation process, be sure you fully understand the additional level of complexity added by the existence of PMI into the equation.

See you at the top!
Chris McLaughlin

http://www.shortsalesriches.com

PS:

“2 Careers That Boom in a Recession!”
I’ll tell you about one of these for fr*ee
in my no-charge, no-cost, no-obligation
webinar right here live Thursday at
8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/792140858

Why would I do that for no charge?  Because
I want a chance to tell you about the other
high-income opportunity, too.

And I can’t do it in an email.

But if you’re finally ready to blast out of
this economic mess, then get a move on… I’d
hate for you to miss out, because we always fill
up a day or so early.  See if there’re any spots left:

https://www2.gotomeeting.com/register/792140858

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

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

About the author:

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

* As the top Florida foreclosure and pre-
foreclosure expert, he oversees more than
100 short sale & REO closings each month
* Long-time authority on real estate investing
and rapid reselling of distressed homes.  Owns
portfolio of nearly 100 high-value, high-profit
properties
* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting nearly

450 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!
* Highly sought-after speaker, consultant, and
seminar leader for current trends and hot topics
in Real Estate Investing, Entrepreneurship, and
Wealth Building
* Add me on Twitter: http://twitter.com/mclaughlinchris
* Add me on Facebook: http://www.facebook.com/mclaughlinchris