real estate short sales

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

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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)

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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

Smart Real Estate News & Commentary by Chris McLaughlin October 31, 2011

Forward this e-mail to your friends!

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Home prices headed for triple-dip?

According to Fiserv, a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.  Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv’s chief economist.  Should home values meet Fiserv’s expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.  The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.  In the second dip, which was reached last winter, prices were down 33%before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.  Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.

Many of the regions that will be hardest hit were already beaten up during the previous two dips.  Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.  Other cities expected to be hit hard include the not-so-lucky Las Vegas, which is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).  There will be some winners, however, led by Madera, Calif. and Carson City, Nev., which will each gain 15.5%. That’s some consolation for hard-hit residents: The average home in each of these metro areas has lost more than half its value.  Other metro areas Fiserv expects to recover nicely are Yuma, Ariz. (up 9.5%), Yuba City, Calif. (9.2%) and Farmington, N.M. (8.3%).  Many of the markets that will record the biggest increases are vacation or retirement communities that had taken some of the biggest hits during the bust.  The biggest “winner” will be Ocala, Fla., with a 22.4% spike for the 12 months ending June 30, 2013. Ocala was one of the hardest hit communities in the US over the past several years, with home prices falling some 50%.  Others anticipated gainers will be Napa, Calif., which Fiserv projects will improve by 20.9% over that same period; Panama City, Fla. (an estimated 18.2% jump) and Bremerton, Wash. and Carson City, Nev. (both expected to see home prices climb 17.9%).  Some cities will continue to fade, however. Fort Lauderdale, Fla.’s forecast is for a 9.2% drop through next June and another 6.7% the 12 months after that. Its neighbor, Miami, will endure 13.5% and 5.2% declines, respectively.

Fed panel divided

When the Federal Reserve’s policymaking committee meets on Tuesday and Wednesday, five of the 10 voting members will arrive in open disagreement with the chairman, Ben S. Bernanke, about the direction of monetary policy. Three conservative members say the Fed has already done too much. Two liberals say the Fed needs to do much more.  But it is still the chairman who determines whether the central bank should expand its campaign to stimulate growth for the third time since August, and lately Mr. Bernanke has been focused on an old theme: communicating the benefits of existing policies in order to increase their impact.  The Fed “continues to explore ways to further increase transparency about its forecasts and policy plans,” Mr. Bernanke said in a mid-October speech in Boston. Later he described improved communication as perhaps the main lesson that makers of monetary policy should take from the financial crisis.

Miami pending sales uneven

Pending home sales in two Miami counties are heading in opposite directions.  Cumulative pending home sales, which include single-family homes and condominiums, in Miami-Dade County rose 11% in September to 11,296 from 10,219 a year earlier, according to the Miami Association of Realtors and the Multiple Listing Service systems.  The September figure is 5% below the previous month’s total of 11,915.  Increased pending sales are indications of increased future sales. A sale is listed as pending when a contract is signed but the transaction has yet to closed, which normally takes one to two months.  MAR chairman Jack H. Levine said rising pending sales mirror the robust closed sales activity the organization continues to experience in South Florida.  “Strong demand from domestic, international and second home buyers is not diminishing, as buyers and investors take advantage of the amazing opportunities currently available in the Miami real estate market,” he added.  However, in Broward County, cumulative pending home sales fell .3% to 7,693 from 7,719 a year earlier, and dropped 3% from the previous month when there were 7,894 pending sales, according to the Broward Council of MAR and the MLS systems.  Nationally, the Pending Home Sales Index rose 6.4% to 84.5 in September from 79.4 a year earlier, according to the National Association of Realtors. The September index is 4.6% lower than the 88.6 index reported the month before.

Oil down

Oil prices fell below $93 a barrel Monday in Asia as investors mulled whether slowing global economic growth justified a surge in crude this month.  Benchmark crude for December delivery was down 79 cents at $92.53 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 64 cents to settle at $93.32 in New York on Friday.  Brent crude was down 75 cents at $109.6 a barrel on the ICE Futures Exchange in London.  Crude has soared this month — up 24% from $75 on Oct. 4 — amid investor expectations European leaders would soon announce a plan to contain Greece’s debt crisis. Last week, EU policymakers said they agreed to lower Greece’s debt level over the next decade and require bondholders to accept 50% losses.  Traders are now turning their attention to the global economy, especially to weak growth in the U.S and Europe.  Investors will be closely watching the latest employment figures scheduled to be announced Friday for signs about the strength of the US economy. Gross domestic product grew 2.5% in the third quarter, allaying fears of a recession, but consumer confidence is at its lowest in almost three years.  Some analysts expect the jump in crude in October will push gasoline prices higher and undermine demand.  “The market has come a very long way in a very short amount of time,” energy trader and consultant The Schork Group said in a report. “That is not to say it cannot go even farther, but it is to say that it has certainly gone far enough to start pinching consumers.”  In other Nymex trading, heating oil fell 2.5 cents to $3.04 per gallon and gasoline futures slid 1.9 cents at $2.63 per gallon. Natural gas advanced 1.8 cents at $3.94 per 1,000 cubic feet.

Olick – be careful with rentals

“I thought I would share a response to yesterday’s blog post on the Obama Administration considering selling Fannie and Freddie’s foreclosed properties in bulk to private investors.  Rick Sharga used to work, and speak, for RealtyTrac, a well-known foreclosure sale site and tracker. He recently jumped ship to join Carrington Mortgage Holdings, which does everything from asset management to residential mortgage origination, servicing and property management.  Here’s Sharga’s take:

‘Your post today made its way through our offices pretty quickly, as we’ve been doing REO rentals for several thousand properties in our own portfolio for several years, and as part of Fannie Mae’s Tenant-in-Place program. We’d probably be one of the companies you mentioned who would be interested in buying some of the GSE REO assets and turning them into rental units for some period of time. But it’s not an investment to enter into lightly.

(Note: REO’s: Real estate-owned properties are those acquired by a lender, whether a bank or the government, after an unsuccessful auction attempt.)

This isn’t the slam dunk success story for investors that some of your sources suggested today. Rental margins can be extremely thin, the probability of success varies wildly from market to market, and an investor who doesn’t understand how the financials work could be in for a rather rude awakening. Managing a large portfolio of properties across the country isn’t exactly a walk in the park either, and there aren’t a lot of companies with the infrastructure to support that sort of initiative right now.

We do think that the idea makes a lot of sense from an overall housing market perspective. Done properly, it will remove a large number of distressed properties from sales inventory (and from the dreaded shadow inventory) which should help to stabilize home prices – and, in some markets, help stabilize rapidly-rising rental rates by adding rental inventory. It would take large sums of capital that are currently on the sidelines, and put them to use, which would be a boon for the economy. It would allow the GSEs to cap their losses on these REOs, and protect the values of their portfolios of performing loans. To your point, it would clear up much of the uncertainty in the housing market today by removing the overhang of distressed properties. And the timing is right, as there appears to be a growing demand for rental housing, while many potential buyers repair their credit, try to save money for a down payment, or just decide to wait out the market before they buy.  It’s not a panacea, but could be one of the best ideas to come along since the foreclosure tsunami hit. We’re just not sure how big a wave of investors we’re likely to see once people actually do the math.’”

CMBS servicers worried

With some 13% of commercial mortgage-backed securities in special servicing, the largest players in the market say they are bracing for bigger loans and more volume in their pipelines.  In addition, at least one panelist predicted more delinquent CMBS would move to REO status.  The comments were made during a panel discussion on CMBS special servicing at the Urban Land Institute’s annual conference in Los Angeles. The four panelists, from LNR Asset Services, Midland Loan Services Inc., CWCapital Asset Management LLC and C-III Asset Management LLC, hold 90% of all CMBS assets held in special servicing.  Significant numbers of large balance loans will be maturing over the next five years, with a good portion of those in 2012, panelists said. Large balance loans also bring with them more complexity as they come highly structured with mezzanine and subordinated positions.

Unlike major residential servicers, who have agreed to stop dual-tracking by having loans in foreclosure while also seeking a workout, CMBS special servicers said they follow a dual-track to exert pressure on the borrower to resolve the loan’s issues.  Their arsenal to resolve delinquent CMBS includes interest-only loans for a set period of time, loan extensions, principal write-downs and new structures that include an equity infusion by the borrower or a partner the borrower brings to the table.  Smaller loans — typically those under $5 million — tend to involve a less sophisticated and less financially secure borrower and are more likely to be sold as notes or end up as REO. Larger loans may have a Wall Street-backed borrower who has the ability to put equity into the deal and make it work. Larger loans also tend to be backed by property that piques the interest of investors on the prowl for opportunities, panelists said.

Affiliates of special servicers have the ability to bid on properties they are servicing, but all four panelists said that is rare. But the option for related entities to buy assets under the care of special servicers raised several questions from audience members over inside dealing or unfair advantages.  As of September, $618 CMBS were outstanding with 9.63% delinquent by 60 days or more. Of that 13% or 4,400 CMBS real estate loans are in special servicing, equaling a loan balance of $82 billion, according to statistics provided by attorney firm Ballard Spahr.  Fitch Ratings said cumulative CMBS defaults hit 12.4% in the third quarter. To date, CMBS defaults are half of what they were for the entire year of 2010, suggesting the rate is slowing down, according to Fitch.  Office properties represent 29% of specially serviced CMBS, up nearly 17% since 2009. A significant amount of the underlying collateral is in the New York area (24%) with the Deep South also holding a significant amount (23%).  CMBS is benefiting from tighter spreads, according to a note put out Friday by Trepp. On Thursday, spreads on super seniors fell 20 to 35 basis points.  Loans are not landing with special servicers by surprise. Some come in before default if problems are identified. An example would be a large office complex or retail center that loses a major tenant. Disposition of problem loans typically takes about 18 months, panelists said.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin October 28, 2011

Forward this e-mail to your friends!
Then they can subscribe directly at the following link:

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*** Join Chris’ Facebook Fan Page–>

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

Short sales take off in Mobile, Alabama

Foreclosures and short sales accounted for 40% of all sales in Mobile County for the 12 months that ended Oct. 1, according to the Multiple Listing Service for the Mobile Area Association of Realtors. Twenty-five% of new listings during that same period were distressed properties. In Baldwin County, 43% of all home sales during that period were foreclosures and short sales, according to the MLS, while distressed properties made up 28% of the new listings. The situation is not unique to coastal Alabama. After falling for three quarters, foreclosure activity is slowly ramping up again, according to James Saccacio, chief executive officer of RealtyTrac, an online monitor of the nation’s foreclosure market. “Third quarter foreclosure activity increased marginally from the previous quarter, breaking a trend of three consecutive quarterly decreases that started in the fourth quarter of 2010,” Saccacio said. The increase was fueled by a 14% jump in new default notices, “indicating that lenders are cautiously throwing more wood into the foreclosure fireplace.”

More than 100 coastal properties were scheduled to be sold at foreclosure sale last week. About one-third of them sold at prices from the low $20s to $300,000 or more, with the average about $150,000 or less. Alabama had 1,508 filings in September, according to RealtyTrac.com. Mobile County had 243 foreclosure listings last month with the highest number in the city of Mobile at 167. The average foreclosure sales price was $77,614. Baldwin County had 135 foreclosure listings in September. Fairhope and Daphne had the largest number at 25 each. The average foreclosure sales price was $147,419. Mississippi had 412 foreclosures listings in September. Harrison County saw 61 listings in September with the highest number in Gulfport at 28. Jackson County had 27 listings with the highest in Ocean Springs at 17.

US downgraded again?

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts. The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the US deficit, the bank said in a research note published on Friday. A second downgrade — either from Moody’s or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden. A second loss of the country’s top credit rating would be an additional blow to the sluggish US economy, Merrill said. “The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in the report. “Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes,” he added. The bipartisan congressional committee formed to address the deficit — known as the “super committee” — needs to break an impasse between Republicans and Democrats in order to reach a deal to reduce the US deficit by at least $1.2 trillion by November 23. If a majority of the 12-member committee fails to agree on a plan, $1.2 trillion in automatic spending cuts will be triggered, beginning in 2013. Those automatic cuts, mostly in discretionary spending, would weigh further on a fragile US economy, Merrill said.

Obama to reveal more housing measures

President Barack Obama will unveil new measures to help US homeowners Monday, in the first leg of a campaign-style swing through western states that may be crucial to his re-election in 2012. Obama will propose actions that do not require congressional approval to help the economy, a White House official said. They include an initiative to help homeowners refinance their mortgages, which Obama will discuss in Nevada, a state hit hard by the housing crisis. The states on Obama’s tour were chosen deliberately. Each has large populations of Hispanics, a voting bloc Obama’s campaign is eager to win over. Nevada and Colorado are “swing states” that alternate allegiance between Republicans and Democrats, making them valuable political prizes in presidential elections. Both could prove critical to Obama’s chances in the November 2012 election. He will use them as a backdrop to make his latest push to boost the weak economy, which remains the biggest obstacle to his hopes of retaining the presidency. According to the White House official, he will also try out a new slogan to put pressure on Congress: “We can’t wait.”

Obama will highlight the result of that work during his Nevada stop. The FHFA intends to loosen the terms of the two-year-old Home Affordable Refinance Program (HARP), which helps borrowers who have been making mortgage payments on time but have not been able to refinance as their home values have dropped. To help underwater borrowers, or those whose loans are worth more than their homes, FHFA plans to scrap a cap that prohibits any homeowners whose mortgage exceeds 125% of the property’s value from participating in HARP, which is targeted at loans backed by Fannie and Freddie. The government is also preparing to reduce the loan fees that the two government-controlled mortgage firms charge and waive fees on borrowers that refinance into loans with shorter terms, according to an administration official. Lenders could begin refinancing loans under the retooled program as soon as December 1, while loans that exceed the current loan-to-value limit will not be able to participate until early next year, according to an official. The program, which was due to expire in June, will be extended through 2013, an official said.

Republicans charge, however, that the White House’s economic policies as a whole have not been effective. “Their policies are in place, and they are demonstrably not working,” Mitch McConnell, the Republican leader in the Senate, said on CNN on Sunday. While away from Washington to advocate for his policies, the president is filling his campaign coffers. During his three-day trip out West he will attend a fundraiser in Las Vegas, two in Los Angeles, one in San Francisco and two in Denver. Republicans, choosing among a field of presidential candidates currently led by former Massachusetts governor Mitt Romney and businessman Herman Cain, accused Obama of focusing more on fundraising than helping the unemployed. “The president is back to doing what he does best — raising money to save his own job,” said Reince Priebus, chairman of the Republican National Committee, in a new advertisement. “Instead of focusing on getting the 14 million unemployed Americans back to work, he’s focusing on protecting his own.”

US firms not hiring, not laying off

The National Association of Business Economics’ (NABE) industry survey found that 59% of the 68 respondents saw no change in their employment levels, up from 49% in July. That was the highest percentage since January last year. The survey was conducted between Sept. 20 and Oct. 5. About 29% of businesses expected to increase payrolls, down from 43% in July. Three% planned to lay off workers, up from zero three months ago. The findings suggest that job growth will probably remain too slow to lower a stubbornly high unemployment rate that has been stuck above 9%. After adding to payrolls at a brisk pace early in the year, businesses have turned cautious as the debt crisis in Europe and acrimony in Washington over budget policy cloud the economic outlook. While the euro zone accounts for about two% of US exports, economists warn the fiscal troubles in the region could trigger a financial crisis that would hit American banks and drag the economy into a new recession.

The NABE survey found that a fifth of businesses had seen a drop in sales because of the European debt crisis, with just under a third expecting the drag to continue through the first quarter of 2012. Amid the economic uncertainty, businesses are cutting back on capital spending. A third of businesses said they were increasing investment in capital, down from 41% in July. About 60% planned no changes to their capital spending budgets, up from 53% three months ago. Business spending in equipment and software has supported the weak economy. While businesses are cutting back on capital spending, they still do not believe the economy will slide into recession. Most respondents expected the economy to grow slowly but not slip back into recession. About 84% expected gross domestic product to grow at an annual pace of about 2% or less.

More foreclosures on the way

Two key indices of home prices likely fell in August, suggesting large numbers of foreclosures and continued high joblessness are acting as a drag on the market, according to a new forecast. The Case-Shiller 20-city composite home price index, scheduled to be released on Tuesday, likely fell 3.8% in August from a year earlier and 0.3% from July on a seasonally adjusted basis, said a forecast from Zillow Inc. chief economist Stan Humphries. The downward trend will continue through the end of the year, he predicts. “We expect to see continued home value depreciation as unemployment and negative equity remain high,” said Humphries. “The large foreclosure pipeline will produce relatively low priced REOs in the market, putting downward pressure on prices going forward, and we do expect the pace at which homes exit this pipeline to pick up in the near-term.” The Case-Shiller 10-City composite index is expected to register a seasonally adjusted decline of 3.5% in August from the previous year, and 0.2% compared to July.

“After showing monthly appreciation earlier this year and building some momentum, recent weak economic data is starting to be reflected in home values,” Humphries said. “Existing home sales have been disappointing, with September sales down 3% from August.” Humphries is bearish on the overall housing market for at least the next year. A survey of more than 100 economists by Pulsenomics shows the median expectation for that group is a decline in the Case-Shiller 20-city index of 2.8% in the fourth quarter from the final three months of 2010. Zillow, on the other hand, is projected a 4.5% decline, and then another 2.5% drop from the fourth quarter of 2011 to 2012. Zillow has a strong track record of accurately forecasting changes in these Case-Shiller indices. Zillow’s July forecast for the non-seasonally adjusted 20-city index was off by just 0.1 percentage point, coming in at 4.0% compared to the actual number of 4.1%.

Base metals rally

Industrial metals rose for a second day in London, extending the biggest rally in two years, as figures showed manufacturing may swell in top global consumer China. Chinese manufacturing may expand in October for the first time in four months after a preliminary index of purchasing managers released by HSBC Holdings Plc and Markit Economics today climbed to 51.1 from September’s final reading of 49.9. Metals also gained as Japanese exports increased more than estimated by economists surveyed by Bloomberg News. “Good data out of China overnight is adding to the positive Monday morning sentiment,” said Ole Hansen, vice president of trading advisory at Saxo Bank A/S in Copenhagen. Copper for three-month delivery advanced $209, or 2.9%, to $7,354 a metric ton by 10:11 a.m. on the London Metal Exchange. The LME Index of the six main metals traded on the exchange increased 4.7%, the most since August 2009, on Oct. 21. Copper for December delivery rose 3.1% to $3.3235 a pound on the Comex in New York.

Imports of refined copper into China rose 17% to 275,499 tons in September from August, customs figures showed today. Shipments were up 14% from a year earlier. Managed-money funds held net-short positions in copper, or wagers on falling prices, totaling 8,294 futures and options contracts as of Oct. 18, compared with 9,489 a week earlier, data from the US Commodity Futures Trading Commission showed. Aluminum for three-month delivery on the LME rose 2.3% to $2,174 a ton. Prices for the lightweight metal are close to the cost of production, Aluminum Corp. of China Ltd. President Luo Jianchuan said, according to a statement posted on the company’s website today. Lead climbed 2.7% to $1,967 a ton and nickel rose 0.9% to $18,960 a ton. Tin advanced 1.3% to $21,950 a ton and zinc gained 3.3% to $1,865.25 a ton.

Obama keeps bashing big banks

President Obama nominated Thomas Hoenig, former chief of Federal Reserve Bank of Kansas City and long-time critic of the largest banks, as vice chairman of the Federal Deposit Insurance Corp. If the Senate approves Hoenig, he would serve on the FDIC board until December 2015. In March, Hoenig said he would retire from the Kansas City Fed, where he served as president for 20 years. He left Oct. 1. Leaving freed him up to sharpen his opinions of the largest financial institutions that he said are directly responsible for the financial crisis in 2008. Those institutions have enjoyed unfair preferential treatment since, he said. “So long as the concept of a (systemically important financial institution) exists, and there are institutions so powerful and considered so important that they require special support and different rules, the future of capitalism is at risk and our market economy is in peril,” Hoenig said in a June speech at New York University.

Since 2008, there have been 398 bank failures, of which 326 were smaller community banks. Jaret Seiberg, an analyst at Washington think tank MF Global, said the nomination is a positive for these smaller institutions. Hoenig has been an advocate for smaller banks and frequently spoke about the cost of regulatory burdens on them, Seiberg added. “It is hard to find a government official who spoke out more forcefully for breaking up the biggest banks than Hoenig during his tenure as Kansas City Federal Reserve president,” Seiberg said. “He believes too-big-to-fail is a serious problem that only can be fixed by making the biggest banks smaller. As FDIC vice chairman, he will have an even bigger platform for this message.”

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 September 29, 2011

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MBA – mortgage applications up

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 9.3% in the week ended Sept 23.  The MBA’s seasonally adjusted index of refinancing applications rose 11.2%, while the gauge of loan requests for home purchases rose 2.6%.  Fixed 30-year mortgage rates averaged 4.25% in the week, down 4 basis points from 4.29% the week before.  “Mortgage rates declined last week, at least partially in response to the Fed’s announcement that they would shift their portfolio towards longer-term Treasury securities, and that they would resume buying mortgage-backed securities,” Mike Fratantoni, MBA’s Vice President of Research and Economics, said in a statement.  The US Federal Reserve last week unveiled a new stimulus plan to support the economy’s recovery and help the mortgage market.  US mortgage rates are linked to yields on US Treasuries and mortgage-backed securities.

Durable goods orders down

The Commerce Department said durable goods orders dipped 0.1% after an unrevised 4.1% jump in July.  Economists polled by Reuters had forecast durable goods orders unchanged last month. Orders were held back by an 8.5% drop in bookings for motor vehicles—the largest decline since February last year.  Excluding transportation, orders also slipped 0.1% after rising 0.7% in July. Economists had expected this category would also be unchanged.  But non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, increased 1.1% last month after a revised 0.2% fall in July.  This suggested that businesses, sitting on about $2 trillion in cash, had not responded to the recent financial market volatility by curtailing spending on capital goods. Economists had expected a 0.3% rise after a previously reported 0.9% decline in July.

Manufacturing, which has done the heavy lifting for the fragile economy recovery, has slowed in recent months, but Augusts durable goods report pointed to underlying resilience and offered hope that a another downturn might be avoided.  Outside of transportation and primary metals, which fell 0.8%, details of the durable goods report were relatively strong. Orders for machinery edged up 0.1%, while computers and electronic products rose 1.3%. Demand for capital goods increased 4.2% and electrical equipment and appliances rose 1.3%.  Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, increased 2.8% after rising 0.4% in July.

Olick – turnkey is key

“It was just hitting 105 degrees in Dallas when Phillip Carter herded a group of Australian investors onto a bus and headed out to see some previously foreclosed properties. Cowboy to cowboy, Carter tells them the Dallas market is ripe for profit, as rental demand surges and rents head higher. The difference in his business model is that the cash is ready to flow, immediately.  ‘We buy foreclosures in bulk from the banks, REO’s, and rehab them and sell them with property management,’ says Carter, who sells his properties complete with renters. ‘It’s a turn-key package that provides cash flow.’  Carter is promising 20% cash return on most of his investments, and his ‘Texas Cash Cow Investments’ is just the business model his largely foreign clients want.

Travis Henley is hitting Kansas, Indianapolis, Memphis and Atlanta, ready to put the relative power of his Australian dollar to work against the still-crumbling US housing market. Carter’s properties are just what he’s looking for.  ‘We’re looking for cash flow and maybe a bit of appreciation as well, but at this stage we’re mainly looking at cash flow,’ says Henley.  Fellow Aussie, Damian Nagus, says the exchange rate alone will offer enough capital appreciation, but he’s still looking to hold for a long time.  ‘The money is patient. I’ve been investing in Australia for 25 years and own a reasonable amount of property, and so we’re here with a ten year horizon,’ estimates Nagus.  ‘We view that it’s going to be a good five years without much happening, as America tries to get it’s way out of where it is now, and in ten years time we will look at where we are and see if we need to sell or just continue to hold.’

Nagus and Henley think there may be better cash flow in the Atlanta market, but Carter claims Dallas is the best bet now.  Dallas was not a boom-to-bust market, like Phoenix or Las Vegas, and home prices are down just 3% annually, according to the S&P Case Shiller home price index released today. That’s better than the top 10 and top 20-city composites.  ‘Dallas is the first market to take off because we’re having the largest population increase in history here,’ notes Carter. ‘It’s increasing the market in that the inventory is going down very quickly and prices are going up. Rents are going up and appreciation is going up.’  Carter would like to see the federal government help investors like himself by loosening up some of the financing guidelines at mortgage giants Fannie Mae and Freddie Mac. His track record and relationships with the big banks have allowed him to make bulk purchases of 30-40 properties at a time, but he’d clearly like to do more.  ‘The biggest challenge for us right now, honestly, when investors see this opportunity, they think it’s too good to be true,’ admits Carter, a self-proclaimed ‘opportunist.’ But he’s doing a brisk business, with clients from China, India, Canada and a surprising demand from US baby boomers, wary of the stock market. Carter claims he’s the largest company doing this kind of turn-key business.  ‘I guess it’s a cowboy business, kind of like commodities,’ Carter says as he leads Outback entrepreneurs around his properties. ‘Instead of doing cattle, we’re doing houses.’”

Unemployment across the nation

For decades, the nation’s economic landscape consisted of a prospering Sun Belt and a struggling Rust Belt. Since the recession hit, though, that is no longer the case. Unemployment remains high across much of the country — the national rate is 9.1% — but the regions have recovered at different speeds.  The once-booming South, which entered the recession with the lowest unemployment rate in the nation, is now struggling with some of the highest rates, recent data from the Bureau of Labor Statistics show.  Several Southern states — including South Carolina, whose 11.1% unemployment rate is the fourth highest in the nation — have higher unemployment rates than they did a year ago. Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession.  The West has the highest unemployment in the nation. The collapse of the housing bubble left Nevada with the highest jobless rate, 13.4%, followed by California with 12.1%. Michigan has the third-highest rate, 11.2%, as a result of the longstanding woes of the American auto industry.  Now, though, of the states with the 10 highest unemployment rates, six are in the South. The region, which relied heavily on manufacturing and construction, was hit hard by the downturn.  Economists offer a variety of explanations for the South’s performance. “For a long time we tended to outpace the national average with regard to economic performance, and a lot of that was driven by, for lack of a better word, development and in-migration,” said Michael Chriszt, an assistant vice president of the Federal Reserve Bank of Atlanta’s research department. “That came to an abrupt halt, and it has not picked up.”

The reordering of the nation’s economic fortunes can be seen in the Brookings analysis, which found that many auto-producing metropolitan areas in the Great Lakes states are seeing modest gains in manufacturing that are helping them recover from their deep slump, while Sun Belt and Western states with sharp drops in home values are still suffering. The areas that have been hurt the least since the recession, the study said, rely on government, education or energy production. Places that were less buoyed by the housing bubble were less harmed when it burst.  In Pennsylvania, the analysis found, the Pittsburgh area — which is heavily reliant on education and health care — is weathering the downturn better than the Philadelphia area. In New York, areas around long-struggling upstate cities like Buffalo and Rochester are recovering faster by some measures than the New York City metropolitan area. And the rate of recovery in Rust Belt areas around Youngstown and Akron, two Ohio cities that were hit hard, has outpaced that of former boomtowns like Colorado Springs and Tucson.  In a sign of how severe the downturn has been, the Brookings analysis found that only 16 of the nation’s 100 largest metropolitan areas have regained more than half of the jobs they lost during the recession.

So what happened in South Carolina? Richard Kaglic, a regional economist at the Federal Reserve Bank of Richmond, Va., said the state’s lingering troubles reflect what happened when its construction and manufacturing industries were hit hard by the recession. Mr. Kaglic, who is also a pilot, used an aviation metaphor to explain what he meant.  “If your nose is high, if you’re climbing faster and your engine cuts out, you fall farther and it takes you a longer time to recover,” he said. “The conditions we experienced in late 2008, 2009, are as close as you come to an engine-out situation in the economy.”  But Mr. Kaglic said that the recent return of manufacturing jobs was giving him hope, and that one reason for the high unemployment rate was that more people were now seeking work.  “I would look at it as our dreams are delayed,” he said, “rather than our dreams being denied.”

Mortgage fraud up

Reports of possible mortgage fraud grew in the second quarter, with financial institutions filing 29,558 mortgage loan fraud suspicious activity reports, the Financial Crimes Enforcement Network said Wednesday.  That is up from 15,727 in the same quarter of 2010.  In the first quarter of 2011, suspicious mortgage activity reports grew to 25,485 complaints.  The surge in SARs are coming as mortgage lenders sift through the paperwork in past mortgages. Mortgage servicers remain under heavy scrutiny following robo-signing allegations and continue to sift through documents in order to make sure all ducks are in a row. Many of the reported instances come from defaults, including borrowers who wrongly presented information about their finances.  The FinCEN network, which works in tandem with the Treasury, said the surge in activity is also tied to increasing mortgage repurchase demands and other special filings. SARs are especially surging on transactions that involve several financial institutions.  FinCen found that 81% of the suspicious activity was related to circumstances that occurred before 2008. Sixty-three% involved activities that occurred four or more years ago.  “We’re continuing to see a large number of SARs filed on activity that occurred more than two years ago, an indication that financial institutions are uncovering fraud as they sift through defaulted mortgages,” said FinCEN Director James Freis, Jr.  “But we also continue to see indications of ongoing mortgage fraud activities,” he added. “FinCEN’s report released today raises awareness of the common scams that homeowners and lenders may encounter when arranging or modifying home financing.”

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