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Banks ramping up short sales

Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.  Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.  Losses for lenders are about 15% lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody’s. The deals accounted for 33% of financially distressed transactions in November, up from 24% a year earlier, said CoreLogic Inc., a Santa Ana, California-based real estate information company. A mountain of pending repossessions is holding back a recovery in the housing market, where prices have fallen for six straight years, and damping economic growth. Owners of more than 14 million homes are in foreclosure, behind on their mortgages or owe more than their properties are worth, said RealtyTrac Inc., a property-data company in Irvine, California.

Short sales represented 9% of all US residential transactions in November, the most recent month for which data is available, up from 2% in January 2008, according to Corelogic. Bank-owned foreclosures and short sales sold at a discount of 34% to non-distressed properties in the third quarter, according to RealtyTrac.  As lenders shift their focus to sales, they are finding that some borrowers would rather risk repossession while they wait for a loan modification, according to Guy Cecala, publisher of Inside Mortgage Finance, a trade journal. In a loan modification, the monthly payment, and sometimes principal, is reduced to help prevent seizure. Homeowners facing foreclosure may live rent-free for years before they are forced out.  “That’s why the banks have got to pay the big bucks,” Cecala said. “The real question is why is the bribe so big? Is that what it takes to get somebody out of their home?”

Obama returning money, better late than never…

Two American brothers of a Mexican casino magnate who fled drug and fraud charges in the United States and has been seeking a pardon enabling him to return have emerged as major fund-raisers and donors for President Obama’s re-election campaign.  The casino owner, Juan Jose Rojas Cardona, known as Pepe, jumped bail in Iowa in 1994 and disappeared, and has since been linked to violence and corruption in Mexico. A State Department cable in 2009 said he was suspected of orchestrating the assassination of a business rival and making illegal campaign donations to Mexican officials.  As recently as January of last year, one of Cardona’s brothers in Chicago, Carlos Rojas Cardona, arranged for the former chairman of the Iowa Democratic Party to seek a pardon from the governor for Pepe Cardona, according to prosecutors in that state.  Last fall, Carlos Cardona and another brother in Chicago, Alberto Rojas Cardona, began raising money for the Obama campaign and the Democratic National Committee. The Cardona brothers, who have no prior history of political giving, appeared seemingly out of nowhere in the world of Democratic fund-raising, Democratic activists said.

The money Alberto Cardona raised put him in the upper tiers of fund-raisers known as bundlers, according to a list released last month by the campaign. He and Carlos Cardona each gave the maximum $30,800 to the Democratic National Committee, and a lesser amount to a state victory fund. A sister, Leticia Rojas Cardona of Tennessee, donated $13,000 to the national committee, and another relative in Illinois gave $12,600, records show. There is no record of Pepe Cardona making a donation.  Although the two brothers live and work in Chicago, they maintain ties to Pepe Cardona in Mexico. Alberto Cardona operates an advertising agency in Mexico that has worked for political candidates backed by his brother, according to public records and Mexican news reports. Public records also show that the domain name for the Web site of a restaurant Pepe Cardona owns is registered to Alberto Cardona.  When The New York Times asked the Obama campaign early yesterday about the Cardonas, officials said they were unaware of the brother in Mexico. Later in the day, the campaign said it was refunding the money raised by the family, which totaled more than $200,000.

Olick – 40 states sign on to robo-deal

“After more than a year of negotiations, attorneys general from more than 40 states signed on to a proposed settlement agreement with five of the nation’s largest mortgage servicers over ‘robo-signing’ foreclosure processing abuses, according to the lead negotiator, Iowa Attorney General Tom Miller.  ‘This enables us to move forward into the very final stages of remaining work. Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement,’ Miller said in a statement released late Monday.  The deal with Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, and Ally Financial will reportedly total $25 billion. Some $17 billion of that would go toward writing down mortgage principal for an estimated 850,000 troubled borrowers, $3 billion could go toward restitution payments of $1,500 each to borrowers who lost their homes to foreclosure, and the rest could go to state funds for foreclosure relief, according to reports and estimates by Inside Mortgage Finance.  The total could be less, however, if California does not sign on. As of late Monday, officials there said Attorney General Kamala Harris had not agreed to the proposal.

New York did not sign on to the deal either, according to sources in Attorney General Eric Schneiderman’s office. Schneiderman had said he would not sign, but reports earlier in the week suggested he was reconsidering, given his new roll as co-chair of a Justice Department task force to investigate mortgage-related abuses.  Attorneys general from Delaware and Nevada also have reportedly not agreed to the deal. Despite the Feb. 6 deadline, states can still sign on and the expectation is that more will.  So-called robo-signing, where thousands of foreclosure documents are signed by one employee without proper verification, came to light in the fall of 2010. Miller formed the coalition of attorneys general to investigate major bank servicers in October 2010. Allegations of forgery and abuse in the documentation process ground foreclosures nearly to a halt for much of 2011, as servicers reviewed and changed the way they process foreclosure documents. They are just now ramping up again in states where foreclosures are not required to go before a judge, or non-judicial states. In judicial states, foreclosures can now take up to three years.  Miller’s office would give no details as to the agreement, or the states that committed to it.”

After pipeline rebuke, Canada turns to Asia

Speaking ahead of Canada’s most high-powered trade mission to Beijing for almost 15 years, Prime Minister Stephen Harper said that Canada must focus on markets that are growing, regardless of the fate of the Keystone XL pipeline, which is proposed to carry crude from the Alberta oil sands to Texas refineries.  The US State Department blocked Keystone last month, saying they didn’t have time for a thorough environmental review.  Harper told Reuters in an interview: “I think we need to be clear. As much as I want to see that Keystone project proceed, I think this incident … underscore(s) the fact that it is in this country’s national interest to be able to sell products beyond the United States.  And I don’t think a reversal of an American decision can change that fundamental reality. So I think it is absolutely essential that we find ways of being able to sell our products to the biggest growing markets in the world, and those are in Asia.”

Canada — the largest supplier of energy to the United States — was profoundly disappointed by Washington’s decision to veto TransCanada’s Keystone project. The United States — which is by far Canada’s largest trading partner — is unlikely to look at it again until after the election.  At 170 billion barrels, Canada’s oil sands are the third-largest crude deposit in the world, and Canadian exports to bigger markets will be a focal point of Harper’s meetings in China, where he will be accompanied by five cabinet ministers and the heads of major corporations seeking business.  China has already made clear it would like to import Canadian oil to help power its rapidly expanding economy.  It’s not clear to most people why the Obama government would rather import oil from the Middle East than from its own backyard.

MBA – Q4 2011 commercial/multifamily up 13% from 2010, but…

Commercial/multifamily originations during the fourth quarter of 2011 were up 13% over the fourth quarter of 2010, but fell 7% from the third quarter of 2011, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.  “MBA’s Commercial/Multifamily Mortgage Bankers Origination Index hit record levels for life insurance companies in the second and third quarters of 2011,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “In the fourth quarter, multifamily originations for Fannie Mae and Freddie Mac hit a new all-time high. While the CMBS market continued to be held back by broader capital markets uncertainty during the past year, others – like the GSEs, life companies and many bank portfolios – increased their appetite for commercial and multifamily loans.”  The 13% overall increase in commercial/multifamily lending activity over the fourth quarter of 2010 was driven by increases in originations for industrial and multifamily property types. The increase included a 43% increase in loans for industrial properties, a 31% increase in loans for multifamily properties, an 8% decrease in loans for retail properties, a 24% decrease in loans for health care properties, a 29% decrease in office property loans and a 44% decrease in hotel property loans.

Among investor types, loans for commercial bank portfolios increased by 122% compared to last year’s fourth quarter. There was also a 17% increase in loans for Government Sponsored Enterprises (or GSEs – Fannie Mae and Freddie Mac), a 13% decrease in loans for life insurance companies and a 50% decrease in loans for conduits for CMBS.  Fourth quarter 2011 commercial and multifamily mortgage originations were 7% lower than originations in the third quarter of 2011. Compared to the third quarter, fourth quarter originations for hotel properties saw a 52% decrease. There was a 39% decrease for office properties, a 24% decrease for retail properties, a 29% increase for multifamily properties, a 51% increase for industrial properties, and a 153% increase for health care properties.  Among investor types, between the third and fourth quarters of 2011, loans for conduits for CMBS saw a decrease in loan volume of 26%, loans for life insurance companies saw a decrease in loan volume of 23%, originations for commercial bank portfolios decreased 16% and loans for GSEs increased by 34%.

Greek problems escalate

Greek party leaders face crunch talks on Tuesday to secure a new international bailout and avoid a chaotic debt default, caught between European Union (EU) demands that they accept painful reforms now and a national strike against more austerity.  Prime Minister Lucas Papademos negotiated through most of the night with Greece’s European Union and IMF lenders, ending at 4 a.m. (0200 GMT) when the 24-hour strike was about to begin, closing ports and tourist sites and disrupting public transport.  Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.  An official said the government was preparing a text to put to the leaders for their approval, suggesting some movement in the process.

With Greece’s future in the euro zone in question, German Chancellor Angela Merkel said time was of the essence and there are growing signs that euro zone officials have lost patience.  They say the full package must be agreed with Greece and approved by the euro zone, European Central Bank and International Monetary Fund before February 15.  This is to allow time for complex legal procedures involved in a bond swap deal – under which the value of private investors’ holdings of Greek debt will be cut radically in value – so Athens can get rescue funds before March 20 when it has to meet heavy debt repayments or suffer a chaotic default.

Better inventory levels, fragile prices

Home prices and sales remained fragile in January even as housing inventory levels and foreclosure starts improved during the same month, the Obama administration said in its latest Housing Scorecard Report.  Inventories of existing homes for sale declined from 3.2 million in the second quarter of 2011 to 2.4 million in the fourth quarter, according to data from the US Department of Housing and Urban Development and the Treasury.  Overall, housing results were a mixed bag, the scorecard said. Inventory levels improved in the last two quarters while the number of housing units held off market fell from 3.9 million in the first quarter to 3.6 million in 4Q, the scorecard said. Foreclosure starts also fell in December, suggesting some signs of improvement.

Still, home prices are weak and foreclosure completions edged higher.  Home prices hit $138,500 on average for November 2011, compared to $140,300 in October 2011, according to Case-Shiller data cited in the report. New home sales hit 25,600 in December 2011, down from 27,600 a year ago. Meanwhile, the number of existing home sales hit 384,200 in December 2011, up from 370,800 in the year-ago period. First-time homebuyer numbers grew to 204,900 in December 2011, up from 196,000 in November 2011, according to the scorecard.  Foreclosure starts fell to 58,300 in December 2011, from 71,700 in November 2011. Foreclosure completions declined during the same period hit 61,800 in December 2011, up from 56,100 in the month before that.  While mortgage originations for the purchase of new homes declined to 431,500 from 498,000 in the year-ago period, but refinance originations rose to 1.3 million in 4Q from 950,000 during 3Q. Mortgage delinquency rates were mostly falling, dropping to 4.4% in December from 4.7% in the year-ago period.

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

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–>

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

Home prices declined almost 5% in 2011

Home prices decreased 4.7% in 2011 compared to the year before, marking the fifth consecutive year-end decrease in the CoreLogic home price index. Excluding distressed sales, home prices decreased 0.9% last year, which CoreLogic said gives an indication “of the impact of distressed sales on home prices in 2011.” Home sales last year also show month-over-month declines. December showed the fifth consecutive monthly decline with a drop of 1.4%, but rose 0.2% when distressed sales were removed from the equation.

The December decline followed a much larger drop of 4.3% in November, compared to November 2010. “While overall prices declined by almost 5% in 2011, nondistressed prices showed only a small decrease. Until distressed sales in the market recede, we will see continued downward pressure on prices,” said Mark Fleming, chief economist for CoreLogic. While national statistics may be bleak, a few states posted increases in the price of homes last year. Montana came in first with 4.4% appreciation with distressed sales included, followed by Vermont (+4%), South Dakota (+3.1%), Nebraska (+2.5%) and New York (+1.7%). Illinois had the biggest 2011 decline in prices, 11.3%, followed by Nevada at 10.6%. Nevada’s peak-to-current decrease stands at 60% (including distressed homes), compared with a national decrease of 33.7%.

Employment up

The pace of job creation surged in January, with the US economy generating 243,000 new positions while the unemployment rate dropped to 8.3%, according to government data released today. Both numbers were far better than consensus, which expected a growth of 150,000 jobs and a steady unemployment rate of 8.5%. The overall work week remained unchanged at 34.5 hours while wages rose an average of four cents an hour to $23.29. The closely watched labor-force participation number, which can skew the unemployment rate, fell to 63.7%, the lowest since May 1983. The number of those working part-time for economic reasons rose 1.2%. Job gains have been concentrated primarily in the service sector, particularly in retail and the food and beverage industries. Warehousing, manufacturing, mining and health care also have participated. True to form, services were responsible for 162,000 of the January swell, with manufacturing payrolls growing 50,000. Government cuts subtracted 14,000 from the total. The total number of unemployed fell below 13 million for the first time since February 2009, while the total amount of employed Americans rose to 141.6 million, an increase of 847,000 from December. The unemployment rate was last this low in February 2009. The so-called real unemployment rate, which measures discouraged workers as well and is referred to as the U-6, nudged lower to 15.1%.

Long-term unemployment, though, remains a problem, with the duration dropping from a near-record 40.8 weeks to 40.1 weeks. Also, the level of discouraged workers surged, rising 7% to its highest level since December 2010. Job growth remains one of the two missing pieces of the recovery puzzle, even though the rate has been on a steady trek lower. In December, the economy created 203,000 jobs and the unemployment rate slipped to 8.5%, well off its 10.1% cycle peak. The monthly jobs report generally draws considerable trader reaction, which as of late has been all negative.

Olick – rent vs own riles government policy

“Fannie Mae and Freddie Mac, the mortgage giants under government conservatorship, together owned 182,212 foreclosed properties as of the end of September. While they aggressively market and sell these homes to investors and owner-occupants alike, the numbers are still too high; these number could go far higher, as foreclosures previously stalled by paperwork issues come back into process. That’s why the federal regulator overseeing the two is launching a bulk sale program, offering investors the chance to buy foreclosed properties at a discount, as long as those investors turn the properties into viable rentals for a specified number of years. ‘This rental period could provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets,’ according to a release from the regulator, the Federal Housing Finance Agency (FHFA).

The FHFA launched the initial phase of pre-qualification. Investors must prove they have ‘(a) the financial wherewithal to acquire the assets; (b) sufficient experience and knowledge in financial and business matters to analyze and bear the risks of the investment opportunity; and (c) agreement to keep certain information about the REO [Real Estate Owned, i.e. bank owned] and related matters confidential.’ That last part is to keep the prices competitive as the market starts to improve. Giving investors the opportunity to help clear the massive amount of distress in the housing market is crucial. The inventory of foreclosed properties is large, getting larger, and making it impossible for the overall market to achieve price stability. Witness a report today from CoreLogic which shows that home prices in December fell 4.7% year-over-year including sales of distressed properties. Excluding those properties, home prices fell less than one%.

Some, however, think the program is a negative: ‘People are brainwashed to think foreclosures are a bad thing for the housing market. Perhaps four years ago when a million loans all went into default and Foreclosure at the same time but not today. Today, 1st timers and investors — with an insatiable appetite for foreclosures, REO resales, and short sales — are the bedrock of this housing market.’ – Mark Hanson, Mortgage Analyst

‘Foreclosed homes are already meeting strong demand from investors when they come to market. We think these buyers are willing to pay a relatively full price, as they know the specific locations, and a large number of buyers have the ability to bid on the individual homes (doesn’t require significant capital)… Additionally, it will be difficult/expensive for investors to scale up operations given the broad geographic dispersion of properties vs. more traditional rental units, potentially limiting participation.’ – Dan Oppenheim, Credit-Suisse

Oppenheim also asks a valid question as to why the government would offer discounts to large investors buying in bulk, but not to individual investors buying perhaps a single property. There are plenty of Americans out there salivating over incredibly low-priced homes; rental income could be as much of a boon to them as perhaps a tax cut or a refinance. It was interesting yesterday, during his speech touting a proposed new government mortgage refinance program, President Obama, caught up in the moment, exclaimed, ‘No more renting!’ Putting aside the public relations blunder that was, given the fact that the FHFA had announced its REO to rent program not two hours before, it just drove home the conflict our government has between what it thinks Americans want to hear and what our economic reality dictates.

A few simple facts: There is not enough buyer demand to meet the number of homes for sale. A huge number of the homes for sale are empty, foreclosed properties. Too many Americans either cannot afford to buy a home or do not have the credit necessary to finance a home. Too many Americans cannot afford to sell their current homes in order to move or step up to a larger home. Rental demand is therefore strong and getting stronger. While homeownership may be a tenet of the ‘American Dream,’ renting is today’s actuality for a growing number of Americans. Whether it is large investor bulk programs or single investor incentives, adding to rental supply, thereby lowering rents, while at the same time clearing the market of foreclosed properties is a win. It may not be as politically palatable as offering ‘responsible’ borrowers a veiled tax credit in the form of a mortgage refinance, but it is good medicine for what ails housing.”

Pension threat for market investors

It’s no secret that the financial crisis and resulting malaise has taken its toll on bank stocks, commodities and Treasury yields. But it may be have triggered another ripple – one that has gone somewhat unnoticed. Pension funds have become seriously underfunded. According to a recent report from Credit Suisse some of the nation’s largest companies owe their pensions more than 25% of their market cap (after taxes). Although the problem is complex, at its core is simple math. Many firms forecast returns of 8% annually, and that just hasn’t happened. This developing situation is potentially market moving because it could require companies to make larger contributions – much larger. And if contributions ‘do’ go up, the money will have to come from someplace on the balance sheet.

“A pension accounting change at UPS will result in $527 million after tax charge in 2011,” says Joe Terranova. “And Sunoco said they have to contribute $80 million into their pension funds.” In other words, the need to fund pensions could drag down profits and, in turn, share price. In fact, the pension liability at AK Steel was cited by BofA as a reason behind their recent decision to downgrade the stock to ‘Underperform’ from ‘Neutral.” “I think in 2012 it will be a recurring issue,” Terranova says. John Ehrhardt of Milliman confirms the thesis. He tells us that investors should expect record numbers of earnings charges in 2012. “Record low interest rates result in historically high liabilities and the only remaining lever may be employer contributions.” And according to Ehrhardt this may be just the tip of the iceberg. “These companies are going to need 20-30% returns to fill the kinds of gaps we’re talking about.”

WSJ – Ally financial swings to loss

Ally Financial Inc., the US government-owned auto lender, swung to a $250 million net loss in the fourth quarter after taking a charge for regulatory penalties stemming from foreclosure matters. The Detroit-based lender, which provides financing for General Motors Co. and Chrysler Group LLC dealers and customers, continued to make money from its auto-lending operations, but the results were weighed down again by its mortgage unit, which is saddled with lawsuits over foreclosures and soured mortgage investments. The loss compares to a year-ago profit of $79 million. It had a core pretax loss, which reflects results from continuing operations before taxes and other expenses, of $24 million, down from $526 million. Excluding a $270 million foreclosure-related charge, core pretax income would have been $246 million.

“One of our key priorities remains aggressively addressing the risks related to the mortgage business and taking steps to protect the key franchises at Ally,” Michael Carpenter, the company’s chief executive, said in a statement. “This will be critical to advance plans to repay the US taxpayer.” Ally, which was formerly owned by GM, is one of at least five major mortgage servicers in discussions with state and federal regulators over a potential settlement of “robo-signing” and other alleged foreclosure offenses. Regulators are close to finalizing a deal worth as much as $25 billion that could also include Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. On Tuesday, Ally said it would record the $270 million charge in the fourth quarter for penalties from regulators and other government agencies related to foreclosure issues.

The charge was mainly related to its mortgage subsidiary, Residential Capital, which has been the subject of bankruptcy speculation for several months. The charge caused a temporary decline in ResCap’s tangible net worth below $250 million, breaching debt covenants of some of its lenders, Ally said. Ally has been trying to scale back its mortgage operations as it focuses on building up its auto business and online retail bank. In November, the company said it would significantly curtail its correspondent lending operations, which comprise the bulk of its mortgage originations.

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

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

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

Washington state considers short sale protection

Banks could soon be barred from pursuing deficiency judgments against Washington state borrowers after a short sale. A Senate committee in the Washington State Legislature will hold a hearing over H.B. 2718, which states that if a bank “writes off debt from the short sale, they can’t then subsequently collect this debt from the seller. The bill was modeled after similar action passed in Oregon last summer. The bill if passed does not require the lender to accept a short sale offer. It would go into effect with 90 days of being passed. According to a Washington Realtors alert put out late last week, a borrower would report the write off to the Internal Revenue Service and take a tax deduction for the loss. This same amount is also counted as taxable income for the seller. “Providing certainty and consumer protections for short sale sellers is critical in the current real estate market,” the trade group said. “Successful short sales often prevent foreclosures that would harm consumers, tax revenue and economic recovery.” After the Oregon bill took effect in June, REO numbers became choppy and then began to fall at the end of the year. In September, repossessed homes totaled 1,420, according to RealtyTrac. That number increased to 2,057 the following month then slid to 936 in November and 874 in December. Some of that could be due to seasonal trends. Most lenders put repossessions on hold during the holiday season, but the December total was down 29% from the same month one year earlier.

S&P warns of rate cuts over health costs
Ratings agency Standard & Poor’s warned it may downgrade “a number of highly rated” Group of 20 countries from 2015 if their governments fail to enact reforms to curb rising healthcare spending and other costs related to aging populations. Developed nations in Europe, as well as Japan and the United States, are likely to suffer the largest deterioration in their public finances in the next four decades as more elderly strain social safety nets, S&P said in a report. “Steadily rising healthcare spending will pull heavily on public purse strings in the coming decades,” S&P analyst Marko Mrsnik wrote in the report. “If governments do not change their social protection systems, they will likely become unsustainable.” If no reforms are adopted, healthcare-related credit downgrades would likely start within three years, eventually leading to an increase in the number of junk-rated countries as of 2020, the study showed.

Olick – US Treasury forcing principal forgiveness

“Late Friday the US Treasury Department announced a major expansion of its Home Affordable Modification Program (HAMP). The three-year-old program has been largely deemed unsuccessful, as it has provided just about 750,000 borrowers with permanent loan modifications. The initial expectation from government officials was that it would help three to four million borrowers. ‘Clearly the initial program erred on the side of making sure taxpayers were protected, but it didn’t do enough to help the overall economy,’ said Michael Barr, former Asst. Treasury Secretary for Financial Institutions and one of HAMP’s original architects. Now taxpayers will pony up the cash, as Treasury is tripling the financial incentives to lenders and opening the program up to Fannie Mae, Freddie Mac and investors in rental properties. The money would come out of TARP funds, i.e. from the taxpayers. We still don’t know if Fannie and Freddie will participate, since their conservator, the FHFA’s Ed DeMarco, has been actively fighting principal write down for years. A week ago he sent a letter to members of congress explaining the math behind his argument.

But the Treasury may be forcing DeMarco’s hand. He claimed that writing down mortgage principal would cost $4 billion more than the modifications that Fannie and Freddie are doing now. Those involve interest rate reduction and principal forbearance. The newly expanded HAMP, however, with its triple- sized cash incentives, would shore up that $4 billion hole. Funny how he mentioned that hole on Monday, and the Treasury announced the new plan Friday. ‘If he [DeMarco] doesn’t get to yes, then he has no political leg to stand on,’ says FBR’s Ed Mills, who estimates the enhanced program could add one million borrowers to its ranks. Mills says a ‘no’ from DeMarco would enable the Obama Administration to replace him, which it tried to do once before, only to be blocked by members of Congress. ‘It would be an appropriate response for him to do it,’ says Barr of DeMarco. ‘I do think they should participate.’ I asked Barr why the Treasury waited three years to use the TARP funds for principal reduction. The obvious answer is that this is presidential election year, and the housing market is still floundering, but Barr claims the Treasury was just being careful. ‘It’s a use of taxpayer funds, and you want to make sure you’re not providing more of an incentive than is required,’ he said. ‘One person’s successful program is another person’s bailout.’”

Treasury department stirs the pot

The Treasury Department is investigating a report that Freddie Mac, the mortgage giant, bet against homeowners’ ability to refinance their loans even as it was making it more difficult for them to do so, Jay Carney, the White House spokesman, said yesterday. ProPublica and National Public Radio reported that Freddie Mac, which maintained slightly tighter restrictions than Fannie on homeowners’ eligibility to refinance, had a multibillion-dollar investment whose value hinged on borrowers continuing to pay higher interest rates. Beginning in 2010, Freddie bought several billion dollars’ worth of “inverse floater” securities — essentially the interest-paying portion of a bundle of mortgages — for its investment portfolio while selling the far less risky principal portion. Fannie and Freddie are supposed to be decreasing the size of their investment portfolios. There is no evidence that Freddie tailored its refinancing standards to its investing strategy, but “inverse floaters” make less money if the loans they cover refinance to a lower interest rate. Freddie issued a statement yesterday defending its commitment to helping homeowners. “Freddie Mac is actively supporting efforts for borrowers to realize the benefits of refinancing their mortgages to lower rates,” it said. The company said refinancing accounted for 78% of its loan purchases in 2011.

HAMP 2.0
The expansion of the Home Affordable Modification Program (HAMP) by the Treasury Department is expected to benefit special mortgage servicers, mortgage insurers and nonagency mortgage-backed securities holders, while having no material effect on agency MBS, Keefe, Bruyette & Woods said yesterday. Previously, if a borrower’s first-lien monthly mortgage payment was lower than 31% of income, the borrower was ineligible for HAMP. Factoring other debts to the evaluation will expand the pool of borrowers who can now qualify for HAMP. Investors also were given new incentives for accepting principal write-downs, with the financial benefits for such an action increasing from a range of 6 to 21 cents on the dollar to 18 to 63 cents. The Obama administration also extended the HAMP program deadline through December 2013. “We believe that the more flexible debt-to-income ratio and the inclusion of some investor properties will have a positive impact on modification activity,” KBW analysts said in its research note. “The impact of the increased principal reduction incentives remains unclear.

While it should help the nonagency sector, the impact would be far greater if there was GSE participation. The response from FHFA on Friday afternoon suggests that the GSEs might not participate,” according to KBW analysts. The research firm expects the changes to have “no material impact on agency MBS prepayment speeds.” However, special servicers in the mortgage industry are expected to benefit from the modifications. Ocwen Financial Corp. earned $28.3 million in HAMP incentive fees in the first nine months of 2011, and KBW believes other firms also will benefit from an expanded HAMP program. Barclays Capital analysts also see the changes as having no significant impact on agency MBS. “The reason is that the vast majority of debt forgiveness will be on delinquent loans, which are typically already bought out of the agency MBS trust,” Barclays wrote. “The only effect might be from the moral hazard side: if underwater borrowers in agency MBS pools start going delinquent on purpose to qualify for debt forgiveness, speeds will obviously rise. But we think this is unlikely to have a significant effect on agency speeds.”

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

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

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

OC Register – investors are the answer

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

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

Income up, spending down

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

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

LPS – 2010-2011 originations good quality

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

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

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

Total US loan delinquency rate:  8.15%

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

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

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

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

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

Big banks hedge against EU

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

Olick – foreclosure pipeline swells

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

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

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

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

Replacements to help drive economy

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

FHA – originations down, delinquencies up

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

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

Bakersfield.com – no kudos for the POTUS

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

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

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

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

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

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

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

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

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

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

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

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

Foreclosures fell 12% in California, but…

The number of California homes entering foreclosure in the fourth quarter fell 11.9% from the same period in 2010 to the second-lowest level over the last four years, said DataQuick, a real estate information firm in San Diego. A total of 61,517 notices of default, which are filed to initiate foreclosures, were recorded on California properties during the fourth quarter. That was a 13.7% drop from the third quarter of 2011.  Some economists say California and other states will probably see an increase in foreclosure actions as banks deal more aggressively with seriously delinquent mortgages. That increase probably will push home prices lower.  Default notice filings fell sharply in December, particularly those involving loans from Bank of America and Bank of New York Mellon, and helped drag down the overall quarterly numbers. Average daily filings on behalf of Bank of New York Mellon dropped 75% from November to December; filings on behalf of Bank of America dropped 50%, Wells Fargo 20% and JPMorgan Chase 13%, DataQuick said Tuesday.  The number of homes taken back through the foreclosure process also fell, by 11.8% from a year earlier to 31,260.

The majority of the loans entering the foreclosure process in the fourth quarter were made in 2005 to 2007, when poor lending practices by major institutions were rampant.  Californian homeowners were a median nine months behind on their payments when they received a notice of default from their lender. Among the state’s largest counties, mortgages in San Francisco, Marin and San Mateo counties were the least likely to go into foreclosure. Homes were most likely to enter the foreclosure process in Sacramento, San Joaquin and Stanislaus counties, according to DataQuick.  In Southern California, the number of default notices filed on properties fell 10.2% from a year earlier, and the number of homes taken back by banks fell 11%.  Many foreclosures were delayed in 2011 as banks worked through issues surrounding mortgage servicing and foreclosure. Settlement negotiations among attorneys general, federal agencies and the mortgage industry over foreclosure and mortgage servicing abuses dragged on through most of last year.

Analysts attributed the delays to the uncertainty over the outcome of those talks. If a deal is struck among the parties and new foreclosure processes by banks are put in place, some analysts say the foreclosure machinery could ramp up again.  Those negotiations continue to inch forward but could still fall apart. State attorneys general have received drafts of the deal with the banks, a $25-billion settlement that would overhaul foreclosure and mortgage servicing practices, according to two people familiar with the negotiations who aren’t authorized to speak publicly.  A key component to any strong deal would be California’s participation. State Atty. Gen. Kamala D. Harris, who must make that decision for the Golden State, has not said whether she will sign on. Harris walked away from talks with the banks last year, saying they were asking for too much release from liability, but since then certain provisions have been added to the deal with the aim of getting her back to the table.  Yesterday the Center for Responsible Lending gave the proposed $25-billion deal a tentative thumbs up, calling it “an important step forward in addressing foreclosure abuses.” The nonpartisan advocacy group noted that the deal would “provide an important template for ways banks can use principal reduction to reduce unnecessary foreclosures and put the country back on a path to economic recovery.”

GOP says Obama economic plan is a failure

President Barack Obama has resorted to “extremism” with stifling, anti-growth policies and has tried dividing Americans, not uniting them, Indiana Gov. Mitch Daniels said Tuesday in the formal Republican response to the president’s State of the Union address.  He took particular aim at Obama’s efforts in recent months to raise taxes on the rich and castigate them. “No feature of the Obama presidency has been sadder than its constant effort to divide us, to curry favor with some Americans by castigating others,” Daniels said, according to excerpts of his remarks released before he and Obama spoke. “As in previous moments of national danger, we Americans are all in the same boat.”  “The extremism that stifles the development of homegrown energy, or cancels a perfectly sane pipeline that would employ tens of thousands, or jacks up consumer utility bills for no improvement in either human health or world temperature, is a pro-poverty policy,” Daniels said.

Obama has halted work on the proposed Keystone XL oil pipeline from western Canada to Texas’ Gulf Coast. Republicans say the project would create thousands of jobs, a claim opponents say is overstated. The administration has also pursued policies aimed at reducing pollution and global warming.  Daniels said Republicans prefer “a passionate pro-growth approach that breaks all ties and calls all close ones in favor of private sector jobs that restore opportunity for all and generate the public revenues to pay our bills.”  Even before Obama spoke, Republicans in the Capitol and on the campaign trail accused him of three years of higher spending, bigger government and tax increases that have left the economy stuck in a ditch.  “This election is going to be a referendum on the president’s economic policies,” which have worsened the economy, said House Speaker John Boehner, R-Ohio. “The politics of envy, the politics of dividing our country is not what America is all about.”

Olick – more plans from the president

“After several largely ineffective programs to help troubled borrowers and after fruitless attempts at budging the hard-line conservator of Fannie Mae and Freddie Mac, President Obama is proposing a brand new refinance program for borrowers who are current on their mortgages, regardless of who owns their loan; the catch is that this one has to go through Congress.  ‘I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks,’ the President announced in his State of the Union address.  Unlike previous efforts in the refinance space, including a recently revamped and expanded government program for borrowers who owe more on their mortgages than their homes are currently worth, this plan would not be limited to those with loans backed by Fannie Mae and Freddie Mac, according to senior administration officials. The two mortgage giants own or guarantee about half of the nation’s mortgages. It would be open to all borrowers current on their loans.

The Obama administration is offering precious few details, promising more in the coming weeks, but several sources say the plan is to ask Congress to allow the government mortgage insurer, the Federal Housing Administration (FHA), to back refinances of underwater mortgages. No estimates were given as to how many borrowers such a plan could potentially help, only that this would be a voluntary, borrower-initiated plan, and not a blanket refinance of all borrowers.  The costs, according to administration officials, would be modest, and the President would request that a portion of his financial crisis responsibility fee offset any of those costs, so there would be no addition to the federal debt.  ‘A small fee on the largest financial institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust,’ Mr. Obama added.  Loan servicers could be faced with a flood of applications and could have to add resources to handle it all, but officials say the opportunity to generate revenues from the refinances would be incentive enough. Still many servicers have balked at the idea of mass refinancing, as the new loans could present more risk and less reward.

The idea is to remove the barriers and ‘frictions’ that have kept many borrowers out of refinancing to historically low rates. Some of those include high levels of negative equity, loan level price adjustments, loan origination dates, put-backs on loans that default, and borrower qualifications.  Then there is the very basic problem of politics. Whatever the details of the plan are, Republicans, despite the fact that they have been calling for more refinances, are unlikely to hand President Obama a popular victory on the eve of a presidential election. They may also oppose anything that makes Fannie Mae and Freddie Mac bigger, when the two are allegedly winding down.”

Americans lead in debt reduction

Americans are cutting their debt faster than other countries and could already be halfway through the deleveraging process, setting the stage for the nation’s economic recovery, says a new report from McKinsey Global Institute.  However, even when U.S. consumers finish deleveraging, they probably won’t be as powerful an engine of global growth as they were before the crisis, warns the report.  According to McKinsey analysts, deleveraging happens in two stages: First, the private sector reduces debt, while economic growth is negative or minimal and government debt rises; then, growth rebounds and supports gradual government deleveraging.  “Somewhat surprisingly, given the amount of concern over the U.S. economy, we find that the United States is furthest along in private-sector debt reduction and closest to beginning the second phase of deleveraging,” says the report.  “The remaining obstacles for its return to growth are its unsettled housing market and its failure to lay out a credible medium-term plan for public debt reduction,” concludes the report.

Since the financial crisis, U.S. household debt has fallen by $584 billion, or 15 percentage points relative to disposable income, which is more than in any other country.  At this pace, Americans could reach sustainable debt levels by the middle of 2013.  The report also found that since the 2008-2009 financial crisis the world’s ten largest developed economies have seen their total debt increase, primarily due to growing government debt.  The U.S., South Korea and Australia are the only countries that have seen a decline in the ratio of total debt to GDP during that time period.  Moreover, the United Kingdom and Spain are deleveraging at a much slower pace, and it could take another decade until their private-sector debt returns to the pre-bubble levels.  In the United States, most of the private-sector deleveraging has happened in the financial sector, where debt relative to GDP had declined to $6.1 trillion from $8 trillion, levels not seen since 2000.

MBA – mortgages down 5%

Mortgage applications decreased 5.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 20, 2012.  The results include an adjustment to account for the Martin Luther King holiday.  The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 13.8 percent compared with the previous week.  The Refinance Index decreased 5.2 percent from the previous week.  The seasonally adjusted Purchase Index decreased 5.4 percent from one week earlier. The unadjusted Purchase Index decreased 9.7 percent compared with the previous week and was 6.5 percent lower than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is up 4.12 percent.  The four week moving average is up 0.47 percent for the seasonally adjusted Purchase Index, while this average is up 4.85 percent for the Refinance Index.  The refinance share of mortgage activity decreased to 81.3 percent of total applications from 82.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.3 percent from 5.6 percent of total applications from the previous week.  In December 2011, among refinance borrowers, 56.6 percent of applications were for fixed-rate 30-year loans, 24.3 percent for 15-year fixed loans, and 5.3 percent for ARMs.  The share of refinance applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 13.8 percent of all refinance applications. The share for 30-year fixed increased from the previous month while the 15-year fixed, ARM and the “other” fixed category shares decreased from last month.

Markets down on possible Obama re-election

So far, the presidential election has not impacted stocks, but that could change if Mitt Romney appears unlikely to make it as the GOP nominee.  For the past two days, Romney’s vulnerability to former House Speaker Newt Gingrich has been the talk of trading rooms.  Gingrich beat Romney handily in the South Carolina primary Saturday, the second of three early contests that Romney lost. But the volatile Gingrich is not viewed as a strong candidate to beat President Obama.  “Obama’s gone from 50 percent probability to 55 percent on Intrade,” said Dan Clifton, Strategas head of policy research. “This week he just kind of exploded once Gingrich won in South Carolina. The Intrade market is saying there’s a much greater chance of President Obama being re-elected.”  Romney, the former governor of Massachusetts, is by far the preferred candidate on Wall Street, where many disagree with Obama’s policies and have been stung by what they call “class warfare.”  “I don’t think it’s fully reflected in the market yet. The market is drifting. There’s a mild degree of anxiety, and that’s really because it’s overbought. Is there a gentle longing for a smoke-filled room? Yeah. There’s some yearning for that,” said Art Cashin, UBS director of floor operations.  The S&P 500 broke its five-day winning streak Tuesday, finishing 1 point lower at 1314, but it is up 4.5 percent since the start of the year.  Analysts believe if Romney loses the Florida primary next Tuesday, he will have a hard time stopping Gingrich’s momentum.

Huffington post – Romney on mortgages

Finally, a presidential candidate came out and honestly addressed the biggest problem in our economy, the enormous debt overhang in our mortgage market. A few days ago, Mitt Romney was at a forum in Florida talking about foreclosures, and his comments were actually refreshingly honest about our housing and banking situation and the need for a debt write-down.  We’re just so overleveraged, so much debt in our society, and some of the institutions that hold it aren’t willing to write it off and say they made a mistake, they loaned too much, we’re overextended, write those down and start over. They keep on trying to harangue and pretend what they have on their books is still what it’s worth.  Mitt Romney was pointing out that the banks are carrying debt on their books at inflated values. When was the last serious politician to make that point, openly? There’s more.  In some cases, if the debt is not in something you can service, it’s like you have to move on and start over away from those debts. It’s helpful if you get an institution that’s willing to work with you, but if you don’t you have no other option.

Romney is now saying that if you can’t pay your debts and your lending institution won’t work with you, walk away. Perhaps this isn’t so surprising, though, as Romney is an expert in debt restructuring. This is actually just common business sense.  And finally, he offered a real solution to the mortgage debt crisis.  “The banks are scared to death, of course, because they think they’re going to go out of business… They’re afraid that if they write all these loans off, they’re going to go broke. And so they’re feeling the same thing you’re feeling. They just want to pretend all of this is going to get paid someday so they don’t have to write it off and potentially go out of business themselves.  This is cascading throughout our system and in some respects government is trying to just hold things in place, hoping things get better… My own view is you recognize the distress, you take the loss and let people reset. Let people start over again, let the banks start over again. Those that are prudent will be able to restart, those that aren’t will go out of business. This effort to try and exact the burden of their mistakes on homeowners and commercial property owners, I think, is a mistake.”

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

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

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

2012 to be the best year for short sales?

The Mortgage Debt Forgiveness Act of 2007 allows an income tax exemption for a homeowner whose mortgage debt is partly or entirely forgiven by a bank.  It’s set to expire Dec. 31, 2012.  Matt Alegi, a partner with the Potomac law firm Shulman Rogers and chair of the firm’s residential real estate practice group, says the tax break has meant a savings in the tens of thousands of dollars for individuals.  Typically, if someone were to have $150,000 forgiven by the bank, Alegi says, “you just made another $150,000 of income for tax purposes in that year.”  So, say someone makes $50,000 but had $150,000 forgiven by the bank. That person is now paying taxes on a $200,000 income, and included in a much higher tax bracket.  The loss of the relief will plunge homeowners further into debt, Alegi says.

He also thinks the expiration of the Debt Forgiveness Act will have an impact on short sales themselves. Homeowners could try to push the short sale through this year to take advantage of the tax break.  Alegi believes there will be strong lobbying to extend the tax break. If it isn’t extended, the appeal of a short sale could greatly diminish for the homeowner.  To take advantage of the Debt Relief Act, you need to fall under very specific guidelines outlined by the IRS.  For example, the debt forgiven is only for primary residences and the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.  Alegi says homeowners who spent the forgiven money on education or other bills do not qualify.

Gridlock an Obama strategy?

When President Obama outlines his goals for 2012 during Tuesday’s State of the Union address, he shouldn’t expect a lot of cooperation from Republicans, senate Minority Leader Mitch McConnell (R-Ky.) said yesterday.  “With the Obama economy established now…unemployment is still at 8 ½%,” McConnell said. “It didn’t work, and we’re not interested in doing more of the things that don’t work.”  He said Obama was “AWOL” last year on his bus tour when Republicans wanted to tackle tax reform and entitlements, and he expects more of the same this year.   “He was not involved whatsoever,” McConnell said. “So I’m not optimistic, frankly, that in an election year that he’s likely to be any more engaged than he was last year.”  What’s more, he thinks the logjam in the nation’s capital is part of Obama’s agenda.  “That’s his strategy…to demonize Congress, to complain because he can’t continue to get everything he wants, like he did the first two years,” he said. “It’s all about his re-election and not about the country.”  One thing that McConnell thinks will get done is the payroll tax cut extension, which was extended for only two months in December when Congress couldn’t come to an agreement.  “We’ll be back at trying to figure out how to do that for the balance of the year and how to pay for it,” he said. “We don’t want to add to the deficit.”

What the $25 billion bank deal means

According to an Associated Press report, five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial — and US state attorneys general could adopt the agreement within weeks. It’s expected President Barack Obama will mention new developments in the negotiations in his State of the Union address today.  A settlement between the banks and the states doesn’t mean homeowners who lost their homes to foreclosure will get them back. In fact, they’re unlikely to benefit much at all financially, though the total financial settlement could be as high as $25 billion.  What’s worse is the settlement does not apply to loans held by Fannie Mae or Freddie Mac. Since Fannie and Freddie own about half of all US mortgages – or 31 million US home loans – that means a lot of homeowners who have been hurt by the banks’ deceptive foreclosure practices won’t be getting much-needed assistance.  Nearly 11 million people – one in four homeowners – owe more than their home is worth. According to current guidelines, these underwater homeowners have few options and little chance at refinancing.  Here’s how the settlement could shape up:

-  $17 billion would go toward reducing the principal balance struggling homeowners owe on their mortgages.

-  $5 billion would be put into a reserve account for various state and federal programs. A portion of this money would cover the $1,800 checks that would be sent to homeowners affected by deceptive practices. Only about 750,000 Americans, or half of the households who might be eligible for assistance under the deal, will likely receive checks.

-  About $3 billion would be used to help homeowners refinance at 5.25%, far below current mortgage interest rates.

If the proposed settlement terms are accepted, roughly 1 million of these homeowners could see the principal amount of their mortgages reduced by an average of $20,000. That’s good news for some, but bad news for the other 10 million homeowners who would like to claim a principal reduction but won’t qualify.  The better news is this settlement has the potential to reshape long-standing lending guidelines and make things easier for at-risk and underwater homeowners across the board. But critics say it doesn’t do enough. Sen. Sherrod Brown (D-Ohio) tells the Associated Press: “Wall Street is again trying to pass the buck. Instead of criminal prosecutions, we’re talking about something that’s not more than a slap on the wrist.”  Some states have disagreed over what to offer banks, with states like New York, Delaware, Nevada and Massachusetts arguing banks should not be “protected from future civil liability.” The deal will not fully release banks from future criminal lawsuits by individual states, and a few of those states’ attorneys general have already promised to pursue their own investigations.  Bank officials have argued few, if any, foreclosures wrongfully took place as a result of documentation issues. Ally Financial CEO Michael Carpenter has been among the most vocal, claiming the company found no instances of wrongful foreclosure after its own internal audit. Carpenter has said he will fight the government in court if need be.

US Treasurys edge higher after Greek setback

US Treasurys edged higher today, after euro zone finance ministers rejected an offer by private creditors to restructure Greek debt, keeping alive fears of a default.  Benchmark 10-year note’s yield was at 2.06%, compared with 2.058% in late US trade on Monday. The yield rose as high as 2.094% on Friday, its highest since early December. The 30-year bond yield was at 3.14%.  Demand for safe-haven US debt was further boosted after a report rekindled fears that Portugal, seen as the second most risky country in the euro zone, could be the next potential default candidate after Greece.  Further dousing optimism, Germany denied a report that it was ready to boost the combined firepower of the euro zone’s rescue funds to 750 billion euros ($979 billion).  During its two-day policy meeting starting on Tuesday the Federal Reserve is expected to push out expectations on when it will next raise interest rates until at least 2014, and the meeting will also be closely watched for any hints of new QE, which analysts expect would focus on mortgage-backed bonds.  The Treasury Department will sell four-week bills and two-year notes later in the day. The Treasury will sell a total of $99 billion in new two-year, five-year, and seven-year notes this week.

Mortgage writedowns to cost taxpayers $100 billion

Forgiving mortgage debt on Fannie Mae and Freddie Mac loans would cost the taxpayer-funded companies almost $100 billion, their regulator said.   The Federal Housing Finance Agency (FHFA) said that as of June 30, the companies guaranteed nearly 3 million mortgages on single- family homes that are underwater, or worth less than the loans they secure.  “FHFA estimates that principal forgiveness for all of these mortgages would require funding of almost $100 billion,” FHFA Acting Director Edward J. DeMarco said in a Jan. 20 letter to Representative Elijah Cummings, a Maryland Democrat who had threatened to subpoena the information. The FHFA posted the letter on its website today.  Nearly 80% of the Fannie Mae and Freddie Mac borrowers with negative equity were current on their payments, DeMarco said.

DeMarco, whose agency was created by Congress to minimize losses at Fannie Mae and Freddie Mac and is independent of President Barack Obama’s administration, has maintained that principal forgiveness would increase the size of the government’s bailout of the companies, which have cost taxpayers more than $153 billion since they were taken under government control in 2008.  The agency compared the cost of principal forgiveness to the companies’ current practice of forbearance, which allows delinquent borrowers to defer payments.  “Given that any money spent on this endeavor would ultimately come from taxpayers and given that our analysis does not indicate a preservation of assets for Fannie Mae and Freddie Mac (FMCC) substantial enough to offset costs, an expenditure of this nature at this time would, in my judgment, require congressional action,” he said.

WSJ – EU tries to revive Greek talks

European Union finance ministers today piled pressure on Greece and its private-sector creditors to do more to ensure that a proposed deal to restructure Greece’s private-sector debt will be enough to put the country back on a firm fiscal footing.  The International Monetary Fund (IMF) and the euro zone’s four triple-A-rated countries-—Germany, the Netherlands, Finland and Luxembourg—are pushing for a low average interest rate on new bonds to be issued as part of the restructuring, in order to ensure the government can pay its debts in the future.  But as they were heading to a meeting Tuesday, EU finance ministers also urged Greece to implement tough austerity and structural reforms and provide more written assurances to its partners that it would commit to its pledges before further aid can be released.  Austrian Finance Minister Maria Fekter said she’s “not pleased” with progress so far. “We’re sending a very direct message to Greece that the community expects more, also in terms of structural reform,” she told reporters. “We’re not pleased and only when there’s a written message on the table in front of us, can further assistance be discussed.”

Greece’s debt restructuring is planned to take the form of a bond exchange in which creditors holding some €200 billion ($260.32 billion) in debt would swap their securities for new instruments with half the face value. The key sticking point is how much interest the new bonds should pay.  The restructuring is part and parcel of the second bailout program for Greece amounting to €130 billion. Without this loan, Greece will default on a €14.4 billion bond maturing March 20.  But talks in Athens with the Institute of International Finance, which represents the majority of Greece’s private-sector creditors, have dragged on for three weeks and stalled over the weekend. Private-sector creditors said in a final offer that they won’t accept an average interest rate of less than 4%.  The IMF voiced concerns yesterday that the deal being discussed by Greece and the creditors would leave the country with a higher-than-expected debt burden in the years ahead, people familiar with the matter said.  That sets up a difficult choice: press bondholders to accept more losses, or accept that Greece’s peers and the IMF will have to kick in more support.

Olick – foreclosure investors a double edged sword

“The best and most expeditious way to clear the vast inventory of foreclosed properties weighing down today’s housing market is to get more investors in and sell them these properties at bulk discounts.  That’s what the Obama administration and Federal regulators are currently considering for the thousands of homes currently owned by Fannie Mae, Freddie Mac and the FHA.  While big private equity funds are still largely in a very tedious deal-making stage with banks or waiting on the sidelines for a government program, smaller individual investors are getting in. Nearly 23% of home purchases in December were by investors, according to a new survey from Campbell/Inside Mortgage Finance. That is a slight increase from November, but the share has remained largely unchanged for the past year.  What has changed dramatically is how many of these investors are using all-cash…74% according to the survey, which also found that, ‘cash buyers are able to bid significantly lower—and successfully—on many properties because they offer a shorter and more reliable closing timeline.’ That is precisely what mortgage servicers want.

‘While investor bids may not be the first offers accepted, they often end up winning properties after other homebuyers are eliminated because of mortgage approval or timeline problems,’ according to the survey authors. ‘Appraisals below the contracted price are a common reason for mortgage denials. Most mortgage financing timelines are now in excess of 30 days.’  There has been a lot of concern among industry analysts that bulk foreclosure sales would push home prices down further, but it appears that is already happening, as investors usually offer 10-20% below list price, while first time home buyers and current homeowners are generally offering list. If the offers are competitive, cash will prevail.”

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

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

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

Foreclosures at 49 month low in December

An annual report of foreclosure activity in the US found the number of properties subject to default notices, scheduled auctions or bank repossessions in 2011 dropped 34% from the previous year, according to a RealtyTrac report released today. In addition to the overall decline in foreclosures, the report found that December activity was at the lowest level since August 2007. However, the report cautions 2012 could likely see an upswing in activity.  For the fifth straight year, Nevada recorded the most foreclosure activity of any state in the nation. While 1.45% of housing units nationwide had at least one foreclosure filing in 2011, the Nevada rate was 6%. That translates into foreclosure filings for 1 in 16 housing units in the state.  Despite having the distinction of the country’s highest foreclosure rate, the situation in Nevada has improved significantly from years past. Foreclosure activity in 2011 was down 31% from that of 2010. Default notice filings dropped 70% in the fourth quarter compared to the third quarter. However, that decrease may be largely attributed to a change in Nevada state law that requires an additional affidavit before beginning the foreclosure process.

Other states with an above-average percentage of homes with at least one foreclosure filing in 2011 represent almost every region except New England:

-  Arizona – 4.14%

-  California – 3.19%

-  Georgia – 2.71%

-  Michigan – 2.21%

-  Florida – 2.06%

-  Illinois – 1.95%

-  Colorado – 1.78%

-  Idaho – 1.77%

BOA rebounds

Bank of America (BOA) matched profit expectations and exceeded revenue estimates for quarterly earnings, sending shares that had been trading below $5 just a month ago spiking higher in premarket trading.  BOA posted fourth-quarter earnings excluding items of 15 cents per share, up from 4 cents in the year-earlier period.  Net income was $2 billion, compared to a loss of $1.2 billion in the same period a year ago.  Analysts had expected the company to report earnings excluding items of 15 cents.  After the earnings announcement, the company’s shares jumped 6.4% in pre-market trading.  After struggling along the way to deal with regulatory requirements and blowback from the European debt crisis, BOA posted a full-year profit of $1.4 billion against a loss of $2.2 billion in 2010.  The company has been busy shedding non-care assets, moves that resulted in a 43% cut in credit losses and $34 billion in proceeds.  In particular, BOA said it made $2 billion in the fourth quarter by selling its stake in a Chinese bank and selling debt. That offset losses and higher legal expenses in its mortgage business.

A million homeowners may get writedowns

About one million American homeowners would get writedowns in the size of their mortgages under a proposed deal with banks over shady foreclosure practices, US Housing and Urban Development Secretary Shaun Donovan said yesterday.  The deal, which could be struck within weeks, would mark the largest cut in the mortgage load since the start of the credit crisis.  “We’re very close to a settlement that would both fix the servicing problems, but also help over a million families around the country stay in their homes and get help,” Donovan said at a US Conference of Mayors meeting in Washington.  Talks involving federal officials, state attorneys general and major banks to resolve allegations of “robo-signing” and other misconduct in foreclosures have dragged into their second year.  Donovan’s announcement came the same day that two big regional US banks disclosed they had set aside funds related to mortgage servicing matters, a sign that lenders beyond the five largest mortgage servicers may join the expected settlement.  In exchange for between $20 billion to $25 billion in relief to distressed homeowners, the banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial — will put behind them potential government lawsuits about improper foreclosures and abuses in originating and servicing the loans.  Using Donovan’s estimate, the settlement could provide roughly a $20,000 reduction each for the one million borrowers.

Unemployment down

The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008. The decline added to evidence that the job market is strengthening.  Weekly applications fell 50,000, the biggest drop in the seasonally adjusted figure in more than six years, the Labor Department said Thursday. The four-week average, which smooths out fluctuations, dropped to 379,000. That’s the second-lowest such figure in more than three years.  A department spokesman cautioned that volatility at this time of year is common. Applications had jumped two weeks ago, largely because companies laid off thousands of temporary workers hired for the holidays.  When weekly applications fall consistently below 375,000, it usually signals that hiring is strong enough to push down the unemployment rate.

Hiring improved in the second half of 2011. In December, employers added 200,000 jobs. That marked the sixth straight month in which the economy added at least 100,000 jobs. And the unemployment rate fell to 8.5%, a three-year low.  For all of 2011, the economy added 1.6 million jobs. That was up sharply from 940,000 in 2010. Economists say they expect roughly 1.9 million more jobs to be added this year, according to a survey by The Associated Press.   Still, the job market has a long way to go before it fully recovers from the damage of the Great Recession, which wiped out 8.7 million jobs. More than 13 million people remain unemployed. Millions more have given up looking for work and so are no longer counted as unemployed.  The manufacturing sector remains a bright spot. Factory output jumped 0.9% in December, the Federal Reserve said this week. That was the sharpest monthly gain in a year. Manufacturing gained 225,000 jobs last year, the most since 1997.  The economy likely grew at an annual rate of about 3% in the final three months of last year, economists estimate.  That would be a sharp improvement over the 1.8% annual growth rate in the July-September quarter. Rising consumer spending is thought to be fueling much of the gain in the current quarter.  Even so, economists worry that growth could slow in the first half of 2012. Europe is almost certain to fall into recession because of its financial troubles. And wages failed to keep pace with inflation last year. Without more jobs and higher pay, consumers might have to cut back on spending. That would weigh down growth next year. Consumer spending accounts for about 70% of the economy.

Olick – do apartments face a bubble?

“A huge surge in rental demand and comparatively little apartment supply created a boom in multi-family construction in the last year, but with the single family housing market slowly beginning to show signs of life, the concern among banks and investors is that all that supply will hit the market just as rental demand drops off.  Based on preliminary estimates of Q4 ’11 activity, multi-family loan origination volume increased to $82 billion in 2011, up from $50 billion in 2010, according to Chandan Economics. Understandably, some lenders and investors are starting to ask questions.  ‘While 2012 should be another good year for apartment REITs, there is concern amongst some investors and managements that market expectations may be hard to beat,’ say analysts at Sandler O’Neill. ‘Based on discussions with managements, revenue growth should match sentiment but expense growth may be the wildcard.’

Rents have been rising steadily as apartment vacancies drop and ’rental nation’ pervades consumer sentiment, but 2012 will likely not see as robust rent growth as 2011; housing affordability continues to improve and renting is becoming ever more expensive than owning.  ‘A stretched consumer is beginning to push back harder against rental increases, and new supply and a slowly healing single-family market will begin to equalize what has been a lopsided, renter-dominated housing market for over 5 years,’ say analysts at Green Street Advisors.  Mortgage applications surged 23% last week, according to the Mortgage Bankers association, although most of that was refinances. Another positive came from the NAHB’s home builder sentiment index, which saw big gains in builder confidence, citing improved sales and buyer traffic. So is there real cause for concern about apartment demand?  ‘Only in some markets,’ says Sam Chandan of Chandan Economics. ‘Austin is a case in point. The supply response has been unusually strong there. Apart from specific cases like that, we do not anticipate a strong reversal in the rental bias until jobs accelerate markedly.’

Since 2004, when homeownership rates peaked, the population of 20-34-year-olds grew by 2.8 million, according to researchers at CoStar Group, a commercial real estate information company. But the number of households shrunk by 300,000. In other words, younger Americans were doubling up with roommates or moving back in with their parents.  ‘This suggests big pent up demand – as much as 1.4 million new households within this prime renting cohort,’ says CoStar’s Suzanne Mulvee.  We also have to remember that many Americans now have either damaged credit or not enough of a downpayment to qualify for today’s low interest rate mortgages. That could keep them as renters for many more years, as credit standards aren’t likely to loosen any time soon.  Pent-up demand will, like everything else in real estate, vary from market to market. In Washington, DC, for example, investors in multi-family are still very bullish, as home prices are strengthening and apartment supply is still limited. In other areas, like Las Vegas, where distressed homes are selling at big discounts, rental demand may wane more quickly for apartments, as those unwilling to buy choose to rent single family homes.  Another headwind to the multi-family sector could be more investors buying foreclosed single-family homes in bulk to rent. With federal regulators and the Obama administration seriously considering a program to sell bulk foreclosures owned by Fannie Mae and Freddie Mac, there could suddenly be a large supply of single family rentals competing against multi-family buildings. Again, that would largely be in the sand states, as there are far fewer foreclosed homes in major cities where apartments are and will likely continue to see big gains.”

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

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

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

Foreclosures to take longer

Reviews of hundreds of thousands of foreclosure cases ordered by regulators last year will take months longer to complete than first expected, according to documents filed with federal banking regulators.  The delays could postpone compensation for some homeowners harmed by improper foreclosure actions.  The reviews cover foreclosure actions in 2009 and 2010 by the nation’s 14 largest mortgage servicers, which handle payments for about 65% of US mortgages. They are required by enforcement orders announced by federal regulators in April.  Under the deadlines set in April, the reviews — which are being done by independent consultants hired by servicers — should have been completed this month.  But reviews of Bank of America’s (BOA) foreclosure cases could take until November, a letter that BOA’s consultant filed with the Office of the Comptroller of the Currency (OCC) indicates. BOA is the nation’s largest mortgage servicer, and the Promontory Financial Group is its consultant.  JPMorgan Chase’s consultant, Deloitte & Touche, indicated it may need about the same amount of time, according to its letter.

Review time frames have lengthened for other servicers, too, because the detail, scope and complexity of the reviews weren’t fully known in April, says OCC spokesman Bryan Hubbard.  Some companies may finish before others. Some may beat the timelines in their letters. Some deadlines may get longer, Hubbard says.  The OCC says servicers should not wait until all reviews are done to compensate homeowners.  While 4 million cases are eligible for reviews, consultants will sample only some for errors such as unlawful foreclosures and excessive fees.  Borrowers who faced a foreclosure action on their primary home by one of the 14 servicers in 2009 or 2010 are eligible for reviews. Anyone eligible who asks for a review by the April 30 deadline will get one, the OCC says.

Consumer sentiment up

The Thomson Reuters/University of Michigan preliminary January reading on its overall index of consumer sentiment rose to 74.0 from 69.9 in December for the fifth month of gains and the highest level since May 2011.  The report topped expectations of 71.5 and was in contrast to December’s weaker-than-expected retail sales reported on Thursday.  Thirty-four% of consumers polled in the consumer confidence survey said they had heard of recent job gains, a record high in the survey’s history and well above December’s 21%.  “The data suggest a stronger consumer spending outlook, rising to about a 2.1% gain in 2012,” survey director Richard Curtin said in a statement.  But consumers still lacked confidence in government economic policies with the majority rating policies unfavorably for the sixth month in a row.  Americans also remained dour on their personal finances with just 24% expecting their finances to improve in January, slightly below 25% last month.  The survey’s barometer of current economic conditions rose to the highest since February at 82.6 from 79.6, while its gauge of consumer expectations gained to 68.4 from 63.6.

2013 for housing recovery?

A poll of 23 economists and analysts found a consensus for no change in the S&P/Case-Shiller home price index in 2012, compared with a median 0.3% decline that was forecast in the last poll in November.  Many say that a recovery in the housing market is a key requirement for any vigorous rebound in the world’s largest economy. The spectacular collapse in US housing, which sent average prices plummeting by a third, was the trigger for the 2008-09 financial crisis and subsequent recession.  The meager 1.5% gain expected in 2013 will offer little comfort to the millions of Americans trapped in negative equity — owing more to their mortgage lender, and in some cases much more, than their houses are worth.  “I think we are seeing stabilization, but unfortunately it’s stability at the bottom,” said Lindsey Piegza, economist at FTN Financial, describing the grinding halt to several years of relentless price declines.  The average price of a US home is currently around where it was nine years ago, and the most recent data, from October, showed price declines still accelerating.

The market is still under pressure from an excess of homes up for sale. Fifteen of 20 respondents said monthly foreclosures should subside this year, while five didn’t see any let-up until 2013.  Among 20 respondents, 15 said they expect foreclosures to ease some time this year, while five said it would not happen until 2013.  Gains in home sales and new home construction in November, and recent improvement in homebuilder sentiment, added only a touch of optimism at the end of last year.  Still, while the gain expected over the next two years is tiny compared with the more than 30% plunge from the peak in 2006, it is still a more cheery outlook than in some other parts of the world.  A recent Reuters poll predicted British home prices, which have not dropped anywhere near as far as they have in the US, will slip 1.7% this year. In China, they are expected to fall 10 to 20%.

Excess regulations hamper economy

Regulatory policies are badly undermining the economic objectives of governments around the globe by hampering bank activity, JPMorgan Chase chief executive Jamie Dimon said in a conference call discussing fourth-quarter earnings Friday morning.  “Regulatory policy is completely contradictory to government objectives,” Dimon said, citing restrictions on trading and new capital regulations as regulatory sources of slower economic growth.  Dimon said that although regulators have provided additional clarity on new capital rules, the clarifications are have demonstrated that the capital rules are “bad.”  He noted that higher capital requirements have made risk weighting even more important for banks. Under international capital standards, different kinds of bank assets receive different capital treatment, a practice known as risk weighting.

Dimon also criticized the so-called Volcker rule banning proprietary trading. He warned that if the rule is not carefully crafted, it could limit not just prop trading but market making.  “The United States has the widest and deepest and most transparent capital markets in the world,” Dimon said. “And the most liquid.   If you lose liquidity because you lose market making, you cost investors money.”  He said that pension funds, retirees, and other large investors could lose out if restrictions on trading go too far.  “We have to be very careful that we don’t destroy that [market making] as we try to limit — put a fair limit — on proprietary trading,” Dimon said.

Fitch downgrades Merrill mortgage securities

Fitch Ratings downgraded four classes of Merrill Lynch Mortgage Trust securities certificates backed by commercial real estate because the underlying loans are expecting losses.  At the same time, 17 classes of loans in the same series of securities were affirmed by the ratings giant.  Fitch specifically classified 76 loans as mortgages of concern. About 25 of those 76 are specially serviced loans.  The entire loan pool subjected to the downgrade had an aggregate principal balance of $2.2 billion at the end of December, compared to $2.5 billion at issuance.  Of those loans in special servicing, 16 are real-estate owned, three are in foreclosure, another three are delinquent and 1% are current.  One of the largest contributors to the expected losses in the pool is a three-story office building in Scottsdale, Ariz. The loan was moved into special servicing in October of 2009 when a large tenant that fully occupied one of the buildings terminated its lease and vacated the premises. As of mid-last year, the building’s occupancy rate stood at 62%.  A hotel located in Tampa, Fla., also is contributing to uncertainty over the pool of loans with a special servicer saying it would like to pursue a foreclosure.

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

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

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

Senate committee approves statewide guidelines for foreclosures

The Banking and Finance Committee voted 5-2 in favor of sending the substitute to House Bill 110 to a full vote, which could happen as soon as this week.  According to the proposal, the bill would authorize cities and counties to create foreclosure registries that would have statewide requirements. The fee to register a property would not exceed $175, and the penalties for failing to register properties would be limited to $500 a month and $2,000 total.  The proposal does not preempt city or county ordinances requiring registration of foreclosed properties for repeated violations that remain uncorrected for at least 60 days, but would it would stop any other local foreclosure registries currently in existence.  Banking Committee Chairman Sen. Jack Murphy said such a law is needed to prevent cities and counties from treating fees associated with foreclosures and vacant properties as a cash cow.  “It can’t become a revenue source,” Murphy said. “That’s a tax. We need something standardized that everybody has to go by. That will keep abuse from occurring.”  Murphy cited reports that DeKalb County raked in more than $550,000 in fees in less than a year.

The original legislation was sponsored by state Rep. Mike Jacobs, a Republican lawmaker whose district includes DeKalb County.  The bill is a carryover from last year, when it stalled as lobbyists for cities and counties raised concerns that the bill could have unintended consequences. Several people representing groups who opposed the original version remarked that they had not seen the updated proposal until Monday’s committee hearing and were still evaluating whether it is an improvement.  “County and city elected officials are hearing a lot from the public about this,” said Clint Mueller, a spokesman for the Association of County Commissioners of Georgia. “There are a lot of foreclosed and properties that are not being taken care of. We have no idea where to even begin to find out who is responsible.”  Still, Mueller said it is important to ensure that municipalities are not punished in an effort to address the issue through state legislation.  “It could have far-reaching effects if it’s not done right,” he said.  If approved, the law would take effect July 1.

Small business optimism edges up

The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose 1.8 points to 93.8.  Eight of the index’s 10 components were either improved or flat. About half the gain was due to reduced concern about business conditions six months into the future, the NFIB said.  The index is still in recession territory, however, 6 points below the pre-recession average and more than 10 points below the same point in the recovery from the 2001 recession.  The gains in the index are supportive of the view that economic growth will pick up in 2012, but the gains are not likely to be substantial unless the index rises more sharply, the business group said.  The NFIB reported earlier this month that small businesses cut staff in December. The% of businesses reporting reductions in employment remained relatively low, but the percentage increasing employment, though larger, did not offset the losses and remains historically low for an expansion.

Zillow – 3 – 5 years away from normal

Real estate website Zillow.com on Tuesday released a report that shows South Florida home values were flat in November.  Zillow’s Home Value Index for Palm Beach, Broward and Miami-Dade counties was $137,000 – up 0.1% from October.  Values here have been flat or positive for seven of the past nine months. Prior to that, though, values had declined in 66 of the previous 67 months.  Zillow said home values in South Florida have fallen about 4% from a year ago and 55% from the 2006 peak.  Zillow’s report comes a day after a mostly encouraging forecast from the Clear Capital research firm.  Stan Humphries, chief economist for Zillow, said in a statement that supply and demand are still out of whack in many markets, and more foreclosures in 2012 are expected to hurt home values.  “Even with the anticipated increase in foreclosures, look for 2012 to be a transitional year in which home values fall modestly followed by a prolonged period of flat home values,” he said. “We’re still three to five years away from ‘normal’ housing market conditions.”

New details for MF Global

The investigation into MF Global is intensifying as federal authorities unearth new details and confront potential obstacles in their hunt for roughly $1.2 billion in customer money that disappeared from the brokerage firm.  While prosecutors and regulators have jointly conducted dozens of depositions with former and current employees, a senior official in the Chicago office of MF Global recently declined to meet with the federal authorities, people briefed on the investigation said.  That official, Edith O’Brien, a treasurer at MF Global, is considered a “person of interest” in the investigation, the people said. Federal authorities suspect that she transferred about $200 million to JPMorgan Chase in London on the eve of the bankruptcy of MF Global, money that turned out to be customer cash.  Authorities had expected to interview Ms. O’Brien last month. She instead balked at meeting voluntarily, asking first to strike a deal with criminal authorities that would excuse her from prosecution, the people said. The criminal investigation is led by the Federal Bureau of Investigation and federal prosecutors in Chicago and Manhattan.  The request by Ms. O’Brien is the first in this case, one person briefed on the investigation said. Still, such requests are common in federal investigations and it does not suggest that she violated Wall Street regulations. Ms. O’Brien has not been accused of any wrongdoing, and there is no indication that she intentionally transferred customer money to JPMorgan.  Ms. O’Brien’s lawyer, Reid H. Weingarten, did not respond to requests for comment.

WSJ – mall occupancy up slightly

US malls and shopping centers experienced a slight improvement in occupancy during the fourth quarter, a relief for landlords that have been battling lackluster demand from retailers for most of the downturn.  But data service Reis Inc. cautioned that any recovery remains precarious and the outlook for this year is mixed, given the clouds hovering over the economy. While some retailers are expanding—such as Forever 21 Inc., Dick’s Sporting Goods Inc. and Dollar General Corp.—landlords can expect more headaches from high-profile store closures by companies such as Sears Holdings Corp. and Gap Inc.  The fourth quarter typically is the strongest for retail landlords as well as their tenants. Still, the fourth quarter of last year was one of the strongest since the recession hit, in terms of rising rents and occupancies.

Malls in the top 80 US markets posted an average vacancy rate of 9.2% in the quarter, down from the 11-year high of 9.4% in the third quarter, according to Reis, which began tracking mall data in 2000. Mall vacancies had been climbing steadily for most of the downturn since 2007, when the vacancy rate fell as low as 5.5%.  Demand for space at neighborhood and community shopping centers also strengthened in the quarter, with stores occupying an additional 3.1 million square feet in the top 80 markets. Because of new construction, vacancy in this category remained at 11%, where it has been for three quarters, a level last seen in 1991.  Owners of retail property have been hit hard during the downturn by overbuilding, consumer caution and competition from online shopping. In the three years covering 2008 through 2010, retailers at neighborhood and community shopping centers vacated a total of 31.6 million square feet, according to Reis.  But the most recent quarter’s results indicate that the worst might be over, especially with the economy adding jobs. A decent holiday shopping season also gave the retail property sector a boost, with 23 national chains reporting an average sales gain of 3.4% in November and December at stores open at least a year, according to Retail Metrics Inc.

The average annual rent at US malls rose to $38.92 a square foot in the fourth quarter, a 0.3% increase from the third quarter and the second consecutive quarterly gain, according to Reis. Mall rents had been mostly flat or declining since 2008.  Average annual rents at US strip centers increased 0.1% in the fourth quarter to $19.04 a square foot after 13 consecutive quarters of remaining flat or declining.  Retail landlords also have been helped by a virtual shutdown in new store construction, meaning they face less competition for tenants. Only 4.5 million square feet of shopping-center space opened in 2010, the lowest figure in 31 years, according to Reis. Last year was slightly higher, with only 4.9 million square feet being delivered.

HARP 2.0 effects to be seen soon

Effects of the retooled Home Affordable Refinance Program (HARP) may start to appear next month, analysts said yesterday.  Since the Federal Housing Finance Agency (FHFA) announced changes to HARP in October, servicers have been adjusting operations. Upfront fees, loan-to-value ratio caps and representation and warranty claims on the old loan file were eliminated for eligible borrowers.  The program launched in March 2009. Roughly 838,000 Fannie Mae and Freddie Mac borrowers were able to refinance into lower rates, but only about 7% of them had LTVs above 105%.

Prepayments slowed in December, according to Bank of America Merrill Lynch (BOAML) analysts, dropping 6% on Fannie Mae securities backed by 30-year fixed-rate mortgages.  “We anticipate another uneventful month in January before February provides the first glimpse into the new program’s prospects. Even before then, it is interesting to note that HARP-eligible pools — which responded slowly at the start of the current refinancing wave — continued to show slow, steady prepayment increases this month,” BOAML analysts said.

Rumors stirred of another plan from the White House to boost more refinancing. A white paper from the Federal Reserve made the case for one, along with other suggestions to address still lingering housing problems.  Analysts at JPMorgan Chase said Monday that modifying all coupon stacks of mortgage-backed securities would violate the prospectus. The loans, analysts said, need to be at risk of imminent default for such an action. If Washington started a refi wave on GSE loans and everything was moved into a 4% mortgage, Chase analysts believe it would only result in a total of $25 billion to $30 billion in annual savings for borrowers.  “The dollar savings of such a move are modest in light of the overall economy,” the analysts said and would merely be a transfer of wealth from investors to borrowers. “HARP 2.0 theoretically addresses many refi hurdles, and we will learn over the next six months how successful it will be.”

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

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

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

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