real estate investing

Smart Real Estate News & Commentary by Chris McLaughlin January 31, 2012

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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

Smart Real Estate News & Commentary by Chris McLaughlin January 24, 2012

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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*** Follow Chris on Twitter–>

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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

Smart Real Estate News & Commentary by Chris McLaughlin December 9, 2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Florida, South Dakota foreclosures up

California-based CoreLogic said the rate of foreclosures in the Tampa-St. Petersburg-Clearwater area among outstanding mortgage loans was 12.26% for September, an increase of 1.55 percentage points compared with September 2010, when the rate was 10.71%.  At the same time, the mortgage delinquency rate has increased.  During September, 16.73% of mortgage loans in the Tampa metro area were 90 days or more delinquent compared with 16.44% for the same period last year. That’s a 0.29 percentage point increase from the same month last year.  The foreclosure activity in Tampa-St. Petersburg-Clearwater was higher than the national foreclosure rate of 3.48% in September. That’s an 8.78 percentage point difference.  Florida as a whole fared a little worse. In September, 17.38% of mortgages in the state were delinquent.  This data comes on the heels of another report from CoreLogic this week that showed Tampa Bay area home prices dropped 8.5% in October, compared with a year earlier.  The higher foreclosure rate could drag down sale prices further. The home-price decrease dropped less than 1% when distressed properties were excluded from the index, CoreLogic said. When troubled properties, such as short sales and bank-owned sales, were taken out of the data, prices declined just 0.9%, the report said.

CoreLogic says the rate of South Dakota foreclosures among outstanding mortgage loans for September is 1.4%, an increase from 1.11% in September 2010.  But the South Dakota rate sits more than 2 percentage points below the national foreclosure rate for September, which is 3.48%.  In Sioux Falls, the state’s largest city, the September foreclosure rate climbed to 1.48%, from 1.25% in September 2010. Two years earlier, the rate was below 1%.  The rate of mortgage delinquency in South Dakota decreased. In September, 2.63% of mortgage loans were 90 days or more delinquent, compared to 2.72% for the same period last year.

US trade deficit narrows

The US trade deficit narrowed in October to its lowest in 10 months, but imports from China hit a record high.  The trade gap totaled $43.5 billion, in line with a consensus estimate from analysts before the report. However, the Commerce Department revised its estimate of the September trade deficit to $44.2 billion from $43.1 billion.  As a result, the October trade gap narrowed 1.6% from September, instead of widening, as most analysts expected.  Both US imports and exports declined in October, in a possible sign of weakening demand in the US and abroad. Imports fell 1% to $222.6 billion, led by a $3.6 billion drop in industrial supplies and materials. The average price for imported oil fell for a fifth consecutive month to $98.84 per barrel, from its May peak of $108.70.  Despite the overall import decline, imports of capital goods and food, feeds and beverages increased to records in October.

Imports from China rose to a record $37.8 billion and imports from Japan increased to $12.3 billion, the highest since April 2008. US exports fell 0.8% to $179.2 billion, led by a $1.3 billion drop in industrial supplies and materials. The biggest monthly decline in that category was for non-monetary gold, which tumbled 25% to $3.5 billion. However, for the first 10 months of 2011, non-monetary gold exports totaled $27.8 billion, compared to $14.8 billion in the same period last year.  US exports to China increased to $9.7 billion, the highest since December.  The US trade gap with China was unchanged in October at $28.1 billion, but remained on track to surpass the annual record of about $272 billion set in 2010.

Olick – what are buyers putting down?

“Ask the Realtors, the Builders, even the Housing Reporters, and they’ll all tell you that the biggest impediments to housing’s recovery are higher credit underwriting standards.  Down payments are a big part of that, as most mortgage market experts will say you can’t get those great low rates today without putting down at least 20%, and more if you need a jumbo loan.  That’s why a new report from LendingTree listing the states with the highest and lowest average mortgage down payments was so surprising to me. It wasn’t the states, but the cash down.  New Jersey came in with the highest average, but that average was just 13.76%, according to LendingTree. North Dakota boasts the lowest average at 12.29%. Still both are well below the 20% we all complain about.  Granted FHA (Federal Housing Administration) loans, which due to the government insurance, require very low down payments, and while they rose to a very large share of the market during the worst years of the housing crash, they have since fallen back to an approximately 20% share of originations today.

Fannie Mae and Freddie Mac require at least 10% down, but then you have to pay private mortgage insurance to get the best rates.  ‘The reality is when you put less than 20% down, you have to pay for some kind of insurance to protect the lender from the higher risk that you’ll default…but private mortgage insurers these days aren’t always willing to do business with low down payments,’ notes a LendingTree spokesman.  If average down payments are this low, it raises concern over proposed mortgage industry regulation that would require a 20% down payment for a lender to be able to securitize and sell a loan fully into the marketplace. Lenders, like LendingTree, don’t like it.  ‘If Federal regulators were to adopt the proposed 20% down payment requirement, a majority of borrowers wouldn’t be able to meet the standard given the findings in this report,’ said Doug Lebda, founder and CEO of LendingTree.  But what if the average that LendingTree is reporting, isn’t what it appears to be?  ‘What we know is that 20-25% of mortgages nationwide carry down payments of 3.5% or less (FHA or VA) while most of the rest carry down payments of 20% or more (Fannie, Freddie and jumbo),’ notes Guy Cecala of Inside Mortgage Finance. ‘So an average of 12 or 14% is not impossible, but it doesn’t really mean that a lot of people are actually getting mortgages with those ‘average’ down payments.’  Don’t you just hate it when real math gets in the way of a good lobby?”

One holdout to new EU treaty

The European Union said Friday that 26 of its 27 member countries are open to joining a new treaty tying their finances together to solve the euro crisis. Only Britain remains opposed, creating a deep rift in the union.  In marathon overnight talks, the 17 countries that use the euro gradually persuaded nearly all the others to consider joining the new treaty they would create. Some of those countries may face parliamentary opposition to the treaty, which would allow for unprecedented oversight of national budgets.  “Except for one, all are considering participation,” EU President Herman Van Rompuy told reporters after the summit ended. “I’m optimistic because I know it is going to be very close to 27.”  A document released near the end of a high-stakes EU summit Friday said the leaders of nine of the 10 EU countries that don’t use the euro “indicated the possibility to take part in this process after consulting their parliaments where appropriate.”  ”This is the breakthrough to the stability union,” German Chancellor Angela Merkel told a press conference after the summit.

EU leaders expressed disappointment that Britain stayed out.  French President Nicolas Sarkozy blamed the split on British Prime Minister David Cameron.  “David Cameron made a proposal that seemed to us unacceptable, a protocol to the treaty that would have exonerated the United Kingdom from a great number of financial service regulations,” Sarkozy said shortly before dawn, after what he called a “difficult” dinner meeting had dragged through the night.  Cameron defended his stance.  “What was on offer is not in Britain’s interest so I didn’t agree to it,” he said. “We’re not in the euro and I’m glad we’re not in the euro. We’re never going to join the euro and we’re never going to give up this kind of sovereignty that these countries are having to give up.”

MBA – no compensation changes please!

The Mortgage Bankers Association (MBA) doesn’t want to see any changes to the mortgage servicing compensation.  In a letter to the Federal Housing Finance Agency (FHFA) , the trade group said no one has made a compelling case for why the current model needs to be tweaked. MBA President and CEO David Stevens said the group agrees with the government that there is a need for improvements for all participants of the mortgage underwriting and securitization processes.  “However, we believe that any change to the current servicing compensation model is unnecessary to accomplish these goals,” he said.  In late September, the FHFA proposed two mortgage servicing compensation models.  The MBA believes dramatically changing residential servicing, origination, and secondary market operations serves no one, claiming “radical changes in any of the major structures underlying the existing TBA market could reduce liquidity in the TBA.”  “The world of residential mortgage servicing has undergone unprecedented stress over the course of the economic downturn,” Stevens said. “The current servicer compensation model is still the best approach and making radical changes, like the proposed ‘fee for service,’ will have dramatic impacts not just on originators, servicers and investors, but also on borrowers in both the costs they pay to get a mortgage and the support they receive from their servicers.”  The MBA prefers a cash reserve structure, which calls for deferring some existing fees to cover servicing costs for “catastrophic economic and default situations.”

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin December 7, 2011

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Home prices fall

According to the CoreLogic Home Price Index (HPI), national home prices, including distressed sales, also declined by 3.9% on a year-over-year basis in October 2011 compared to October 2010.  This follows a decline of 3.8% in September 2011 compared to September 2010.  Excluding distressed sales, year-over-year prices declined by 0.5% in October 2011 compared to October 2010 and by 2.1% in September 2011 compared to September 2010.  Distressed sales include short sales and real estate owned (REO) transactions.

Highlights as of October 2011

-  Including distressed sales, the five states with the highest appreciation were:  West Virginia (+4.8%), South Dakota (+3.1%), New York (+3.0%), District of Columbia (+2.4%) and Alaska (+2.1%).

-  Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.1%), Illinois (-9.4%), Arizona (-8.1%), Minnesota (-7.9%) and Georgia (-7.3%).

-  Excluding distressed sales, the five states with the highest appreciation were: South Carolina (+4.6%), Maine (+3.1%), New York (+3.1%), Alaska (+2.9%) and Kansas (+2.8%).

-  Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.8%), Arizona (-7.0%), Minnesota (-5.7%), Delaware (-3.9%) and Georgia (-3.6%).

-  Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to October 2011) was -32.0%.  Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -22.4%.

-  Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 78 are showing year-over-year declines in October, two fewer than in September.

Citigroup plans layoffs

Citigroup is cutting 4,500 jobs worldwide, Chief Executive Vikram Pandit said on Tuesday, becoming the latest large bank to trim staff.  Pandit, speaking at the Goldman Sachs Financial Services Conference, said the bank would record a $400 million charge in the quarter for severance and other expenses related to the layoffs.  The cuts are equal to about 2% of Citi’s workforce of 267,000 employees at the end of third quarter 2011.  Pandit said the cuts would be completed over “the next few quarters” and would come from a range of businesses.  Citi joins other banks worldwide that have cut more than 120,000 jobs as regulations have imposed tighter industry rules and the economy remains weak.  Pandit said Citi’s reductions would involve its proprietary trading units, which are being wound down.  The 2010 Dodd-Frank financial reform law features a provision known as the Volcker Rule that limits banks from betting their own capital in the market.  Pandit also said Citi’s expense previously disclosed expense reduction program generated $1.4 billion in savings so far this year, nearly 4% of the bank’s $37.72 billion of operating expenses in the first three quarters.

MBA – mortgage applications increase

Mortgage applications increased 12.8% from one week earlier (which included the Thanksgiving holiday), according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 2, 2011.   The Market Composite Index increased 12.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 60.2% compared with the previous week. The Refinance Index increased 15.3% from the previous week. The seasonally adjusted Purchase Index increased 8.3% from one week earlier to its highest level since August 5, 2011. The unadjusted Purchase Index increased 47.2% compared with the previous week and was 0.8% lower than the same week one year ago.  “Coming out of the Thanksgiving holiday, applications increased significantly as mortgage rates dropped to their lowest levels in about two months,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “In particular, refinance applications increased sharply, with some lenders seeing refinance volume double. Despite this surge, aggregate refinance activity is still below levels reported two weeks ago. Some lenders indicated they are beginning to see an increase in HARP loans, but that increase is still a small portion of the move this week.”

The four week moving average for the seasonally adjusted Market Index is down 3.20%. The four week moving average is up 3.33% for the seasonally adjusted Purchase Index, while this average is down 5.13% for the Refinance Index.  The refinance share of mortgage activity increased to 76.0% of total applications from 73.9% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.7% from 5.8% of total applications from the previous week.  In November 2011, among refinance borrowers, 52.9% of applications were for fixed-rate 30-year loans, 26.2% for 15-year fixed loans, and 5.8% for ARMs. The share of refinance applications for “other” fixed-rate mortgages with amortization schedules other than 15 and 30-year terms was 15.1% of all refinance applications. The shares for 30-year fixed and the “other” fixed category increased from the previous month, while the 15-year fixed and ARM shares decreased from last month.  For applications for home purchase, 85.5% were for fixed-rate 30-year loans, 6.8% for 15-year fixed loans, and 5.9% for ARMs. This is the second lowest ARM share for purchases since January 2011.

Stock market in for a beating?

Robert Prechter, founder and president of Elliott Wave International, says there’s a big storm coming our way.  Prechter compares the current phase of the market to the late stages of the 1929 – 1933 period in US history; a time marked by extreme volatility eventually ending in tears.  “One of the things that happened in 1929 was that a consortium of the biggest banks in the country tried to stop the market from going down,” notes Prechter. Those banks failed of course, just as Prechter says they did when the Central Banks tried to prevent the coming financial meltdown in 2008 by offering essentially free credit.  The timing is only different, he says, because “banks these days are much bigger than they were in 1929.” In the 20′s institutions were reliant on client money to lead their bailout attempts. Today Central Banks have the ability to call on future, often overstated, tax revenues and are unencumbered by anything such as a gold standard when attempting to ward off the human desire to hide under the covers, financially speaking.

Prechter also draws parallels to April of 1930, 1937, and other periods in which relatively brief recoveries dissolved. Pick a tool, any tool, and Prechter says it suggests a stock market going lower. “Patterns, sentiment indicators, or momentum are all saying the same thing: This is a bear market rally.”  According to Prechter, not all the Central Banks in the world trump international trends towards a cautious, negative mood already impacting all things financial. This trend, the inverse of those giddy days of the 1990′s when all things seemed possible (even Internet stocks and the Euro!), causes predictable behaviors in the masses. They tend to sell stocks, stop spending, and start revolting against current leadership; all of which should sound familiar to those who read the newspaper.  It’s an environment confounding to bulls and bears alike. At the beginning of 2011, Prechter notes, the bulls were betting on a sharp recovery in stocks and “got hurt quite a bit.” Commodities were a bad bet, hurting “hyper-inflationist” bears.  Let’s remember that real estate isn’t in the stock market.

Olick – two housing markets?

“As we head toward the end of the year, for some reason the drumbeat to claim that housing has bottomed is growing louder.  There were a few positive indicators in September, rising housing starts and rising home sales, that gave some analysts fodder for optimism, but the readings on prices are far less rosy, and alas far more complicated.  Two reports out today show home prices are falling again after seeing some gains in the Spring and Summer. Lender Processing Services says they’re down 3.7% annually in September, erasing the gains of the Spring, and they say all of the 13,500 zip codes it tracks are in the negative.  Meanwhile CoreLogic says prices fell 3.9% in October, but when you take out foreclosures and short sales (the latter when the home is sold for less than the value of the mortgage), home prices are down just 0.5% annually. The vaunted S&P/Case-Shiller home price index was down 3.9% in September, and that’s a three month running average including distressed and non-distressed property sales.

So why are analysts now predicting a house price recovery?  Goldman Sachs put out a report late last week predicting that S&P/Case-Shiller would drop 2.5% further and then bottom, probably in the summer of 2012. This when the S&P/Case-Shiller folks themselves predict a 3.5% drop and a bottom later in 2012. The Goldman theory is based on some kind of ‘equilibrium’ price model for each market. They also claim that homes no longer appear ‘expensive.’ when you look at price/rent ratios, and that historical models suggest that income and population, as always, will drive improved demand.  Then this week analysts at Barclays Capital honed in on the difference in price drops between distressed and non-distressed properties. They claim the non-distressed market is stabilizing, so that must mean that a foreclosure or short sale is, ‘increasingly being seen as a poor substitute for a non-distressed home,’ according to analyst Stephen Kim. He claims the disparity will in fact widen over time.

So are we just supposed to ignore the distressed market? What about the fact that in some cities more than half of the properties selling are distressed? And what about the fact that there are more distressed properties coming to market, as the banks ramp up the long-stalled foreclosure process? And how about appraisers using distressed properties as comps to non-distressed properties?  I realize many of you think I’m too bearish on housing’s recovery, but trust me, nobody’s more sick of reporting the same lousy numbers than I am. The problem is that while sales are improving slightly, and consumer sentiment may be settling a bit, the mess left to clean up from the past is still weighing heavily on the future. The economy may be improving slightly, buyers may be considering getting back in, but we are barely half way through the overhang of distress, and any change in the economy could set us back even further.  I am in no way claiming that housing is in for a quadruple dip nor that we are going to see more big losses. Frankly I think we’re going to be flat in housing for a long time, which is not a very interesting story to tell from a reporter’s perspective. While there may be two types of properties (distressed and non-distressed), there is just one housing market, and you cannot negate one to inflate or deflate the other.”

Small business more optimistic, maybe

Optimism of small business owners remained flat in November at 53%, according to a new scorecard by SurePayroll, the leading online payroll service for small businesses with less than 100 employees. That’s fairly good news after optimism rebounded by 20% in October from an all-time low of 33% in September.  The report, which measures the current health of small business in America, also showed hiring was down from October, but wages on the other hand did tick up slightly. Still both remain down 3% and 0.5% year-to-date, respectively.  Small businesses make up 99.7% of all employer firms and employ more than half of private sector workers in this country, according to the US Small Business Administration, which describes a small business as having fewer than 500 employees.

While 53% of small business owners are optimistic about the state of the economy and the health of their business, one must not forget roughly the same amount of are just as pessimistic. Alter says most of SurePayroll customers describe themselves as “cautiously optimistic” and that sentiment rests heavily upon what happens in Washington.  Next year one of the biggest factors to impact the decisions made by small businesses is the Supreme Court’s ruling over the constitutionality of Obama’s health care law, according to SurePayroll’s November scorecard. By a ratio of 2 to 1, the small business owners surveyed are hopeful the Supreme Court finds the health care legislation unconstitutional. If that were to happen, hiring and wages would likely see a boost, says Alter.  Another big factor to impact small businesses is whether Congress will act to extend the employee payroll tax credit and if so, who will have to foot the bill. Passing an extension would provide many Americans with an extra $1000 dollars in discretionary spending, which would be good for business, says Alter. But, if it is businesses who have to cover the expense of that credit, that would certainly hurt hiring and wages.

WSJ – delinquent CMB loans declines

The share of delinquent commercial mortgages that were bundled together and sold as securities declined modestly during the third quarter for the first time since the property downturn began four years ago, according to a survey released yesterday by the Mortgage Bankers Association.  The share of loans at least 30 days past due fell to 8.92% from 9.02% in the second quarter for commercial and multifamily loans in mortgage-backed securities. Those loans have had the worst performance among all commercial mortgages originated during the boom, and the delinquency rate was still above the 8.52% mark of one year ago.

Commercial mortgages held by US banks had a 90-day delinquency rate of 3.75% at the end of the third quarter, down from 3.94% in the second quarter. Delinquencies on bank-held commercial loans have fallen or remained flat in each of the past four quarters.  Delinquencies posted small increases on multifamily mortgages held by Fannie Mae and Freddie Mac, but the increases came from very low absolute levels. Freddie Mac has a delinquency rate of just 0.33%, or around one-tenth of the level of delinquencies of commercial banks. That was up from 0.31% in the second quarter but down from 0.36% in the first quarter.  Nearly 0.57% of Fannie Mae multifamily mortgages were delinquent at the end of September. That was up from 0.46% at the end of the June, but down from 0.71% at the end of 2010.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

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About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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