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Underwater borrowers eligible for settlement write-downs

A calculation by a Brookings Institution economist narrowed down a pool of underwater homeowners to 500,000 who could qualify for principal reduction from the $25 billion mortgage settlement.  Using the parameters of the settlement, Ted Gayer found just 5% of the nation’s 11.1 million underwater borrowers could get the principal reduced on their mortgage, first reported by The Washington Post. About $10 billion of the settlement, in the form of credits, will go toward principal write-downs made by the five banks. Only homeowners delinquent on their mortgages are eligible. Gayer eliminated others according to underlying requirements, including Fannie Mae or Freddie Mac loans and homes not owner-occupied. It’s a rough calculation, Gayer warned, and he made some assumptions in the process. He eliminated any loans not held on the banks’ balance sheets, as well as any with a second loan. Mortgage bondholders may not take kindly to principal write-downs, he said.

Greek Bond Swap Deal Rests on Knife Edge

Greece faces a decisive week in its struggle to avert a sovereign default, with a planned debt swap poised on a knife-edge amid doubts over the level of participation by private bondholders. Charles Dallara, the head of the international consortium of financial institutions that negotiated the debt restructuring, declined to predict the rate but acknowledged that the complexity of the deal had required some investors to spend time understanding it. Many investors need to decide by Tuesday because of the complications of the deal. Because of the size of their holdings, a large number of bondholders will have to consult their boards, especially as the loss is about 75 percent in net present value terms. Private holders of 206 billion euros in Greek bonds have until Thursday evening to decide whether to take part in a swap where they would trade bonds for a package of bonds and cash that would knock about 100 billion euros off Athens’ debts. Private holders of 206 billion euros in Greek bonds have until Thursday evening to decide whether to take part in a swap where they would trade bonds for a package of bonds and cash that would knock about 100 billion euros off Athens’ debts.

New Jersey witnesses lending resurgence

The volume of loans written by New Jersey-based banks rose 16.5% in 2009-2011, while lending fell 5.6% nationwide over that span, according to The Star-Ledger in Newark. Most of the gains in the Garden State were attributable to MetLife expanding into mortgage lending, which the insurance giant has since abandoned. But smaller lenders stepped into the void left by the exit of some of the larger banks, as well. HousingWire explored how community banks are boosting market share as big banks write fewer home loans in our latest HW Focus on Lending, a supplement to the March issue. “We made a conscious effort to take advantage of other banks stepping back,” Kevin Cummings, president and CEO of Investors Bank of Short Hills told the Star-Ledger. Cummings’ firm increased its commercial balance sheet to $3.6 billion from $380 million at the end of 2007.

US stock futures fall on global economy worries

US stock index futures fell on Monday after data showed Europe’s private sector activity declined last month and China cut its growth target, reigniting concerns about the strength of the global economy. European stocks dropped, with shares in euro zone peripheral countries such as Italy and Spain among the worst hit, after data showed the region was likely to slide back into recession. Chinese Premier Wen Jiabao cut his nation’s 2012 growth target to an 8-year low of 7.5 percent and put a priority on boosting consumer demand in hopes of weaning the economy off a reliance on external demand and foreign capital. European markets were also pressured ahead of a March 8 deadline for Greece and private bondholders to complete a debt swap. Failure to reach agreement would put the country back on the brink of a messy default. Economists look for a drop of 1.5 percent after a 1.1 percent rise in the previous month. American International Group Inc is selling part of its stake in AIA Group Ltd to raise about $6 billion to help repay a huge federal government bailout.

DSnews.com: Treasury Reinstates HAMP Incentives

The Treasury Department says servicers participating in the Home Affordable Modification Program (HAMP) are getting better at evaluating homeowners for the program, including noticeable improvement in assessing borrower income to determine program eligibility and calculate the amount of their modified payments. HAMP performance reviews evaluate servicers based on three categories: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management, and governance. Treasury said it agreed to release withheld incentives for past deficiencies as part of the $25 billion federal-state mortgage servicing settlement announced last month, but officials stress that they retain the right to withhold incentives in the future should the results of HAMP compliance reviews warrant such remedial action. As of the end of January, participating servicers had granted 951,319 permanent HAMP modifications to distressed borrowers. There are an additional 76,343 HAMP trials currently in active status.

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 2011, Chris’ 4 Central Florida real estate offices

closed 3,336 sides for a closed sales volume of

$430,902,643!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

2012 to be the best year for short sales?

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

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

Gridlock an Obama strategy?

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

What the $25 billion bank deal means

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

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

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

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

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

US Treasurys edge higher after Greek setback

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

Mortgage writedowns to cost taxpayers $100 billion

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

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

WSJ – EU tries to revive Greek talks

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

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

Olick – foreclosure investors a double edged sword

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

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

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

* Follow me on Twitter: http://twitter.com/mclaughlinchris
* Join my Facebook Fan Page: http://www.mclaughlinchris.com

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

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

New foreclosure plan

Big investors are showing interest in an evolving Obama administration plan to sell off foreclosed homes, although the government will have to make the offer sweet enough to coax private funds. The White House is assessing how best to encourage private companies and investors to snap up foreclosed properties held by the government and convert them into rentals. Officials want private partners to take over as much as $30 billion in single-family properties that are currently on the books of government-run Fannie Mae, Freddie Mac and the Federal Housing Administration. Several money managers with large fixed income funds are interested, according to sources, and a request for ideas on how to construct a program received nearly 4,000 responses. The foreclosure conversion program would come as the next step to complement other government supports for housing, including an expanded refinance program announced on Monday.

The main question for prospective investors, which include broker-dealers and firms already overseeing similar rental programs, is the type of financing the government will make available—an issue officials are still struggling with. “In order to get a better bid, there has to be some incentive involved to get qualified investors involved,” said Ron D’Vari, co-founder and chief executive of NewOak Capital. “The reality is not a lack of interest, but so far it looks like a lack of financing.” Incentives could include low interest rates, tax benefits or some type of rental assistance, said D’Vari, a portfolio adviser who has been involved in mini-bulk auctions of real estate-owned properties, or REOs, in California. REO properties are those acquired by a lender, whether a bank or the government, after an unsuccessful auction attempt. Fannie Mae, Freddie Mac and the FHA own about 250,000 properties, close to a third of the country’s REO pool.

One key challenge would be finding big enough blocks of properties in specific geographic areas that could be sold at one time. Analysts say this is what it would take to make the program attractive to large institutional investors. The transaction and liability costs property managers will face as they try to bring deserted units back up to code also pose a hurdle. The government also needs to determine how it will protect taxpayers, and it might explore ways to pair up with investors and allow Fannie Mae, Freddie Mac and FHA to keep some type of an ownership stake in the rental properties. A public-private partnership, somewhat along the lines of a program the Treasury tried to use to soak up toxic bank assets during the financial crisis, would allow the government to gain from the sales. Fannie Mae, Freddie Mac and the FHA have already undertaken some small efforts to reduce the backlog of foreclosed homes. They have donated a few vacant properties for demolition and have held some small auctions. Having already received $141 billion in taxpayer support since being seized by the government in 2008, Fannie Mae and Freddie are under enormous pressure to make sure they maximize the returns from the properties they hold. “This has got to be thought out. Fannie and Freddie would need to assess if they are getting the return they need from a rental,” said Ken H. Johnson, a real estate professor at Florida International University. Johnson said one way to get over the hurdle would be for the two agencies to be given an explicit mission of market stabilization.

2.5% growth, jobless claims hold steady

US economic growth increased at its fastest in a year in the third quarter as consumers and businesses set aside fears about the recovery and stepped up spending, creating momentum that could carry into the final three months of the year. At the same time, slightly fewer people sought unemployment benefits last week, though level remains elevated above 400,000. Though part of the increase came from the reversal of temporary factors that had restrained growth, the expansion was a welcome relief for an economy that looked on the brink of recession just weeks ago. U.S. gross domestic product expanded at a 2.5% annual rate in the third quarter, the Commerce Department said in its first estimate on Thursday. That was a big acceleration from the 1.3% pace in the April-June quarter and matched economists’ expectations. Consumer spending in the last quarter was the strongest since the fourth quarter of 2010, while business investment spending was the fastest in more than a year. Even though consumer spending was stronger, businesses were slow in stocking up their warehouses. The peppier spending and a slower pace of inventory accumulation by businesses will lay a base for a solid fourth quarter, but a slowdown in Europe and the exhaustion of pent-up U.S. demand could leave a weak spot early in 2012. And the recovery’s pace is still too weak to lower a jobless rate that has been stuck above 9% for five straight months.

Olick – new sales increase, prices tank

“Sales of newly built homes in September came in well over expectations, and stocks of the big builders took a little tick up on the news. They then dropped off pretty precipitously, as analysts weighed in on what is behind that nice headline number. First of all, these particular monthly numbers are based on signed contracts to buy a home, not closings, which provide the numbers for existing home sales. This data set is extremely volatile due to how small the survey pool is. And then of course you have these huge seasonal adjustments, which are important given housing’s distinct seasonality, but they can really skew the reality. So, the headline number is that sales (signed contracts) rose 5.7% from a seasonally adjusted annualized rate of 296,000 in August to 313,000 in September. Take out the seasonal adjustment, and don’t annualize (the expectation of how many homes will sell this year based on the monthly rate) and according to the report, builders sold 25,000 homes in August and 25,000 homes in September. No change. The good news is that builders usually sell fewer homes in September than August, and they sold the same, hence the seasonal bump up, the bad news is that 25,000 is a pitifully low number of sales, actually tying a record low.

We can haggle over sales numbers ’til the cows come home (if their home isn’t in foreclosure), but we really need to focus on the pricing numbers. The price of a newly built home fell 10.4% in September year over year to $204,400.00, which is about $200 higher than the low of 2003. Builders are being forced to compete with existing home sale prices, one third of which are distressed properties (foreclosures and short sales). The median existing home sale price in September was $165,400, so that’s still a pretty big premium. Unfortunately, given the high cost of materials these days and difficulty in obtaining construction loans, builders take every dollar drop pretty hard. ‘The pricing issue would generally hit everyone and would result in lower margins (and some additional impairments),’ notes Dan Oppenheim at Credit Suisse. Of course the pricing numbers also have noise in them. ‘Those particular price figures are not adjusted for the mix of new homes being built, so the rate of decline probably also reflects the switch to building smaller homes rather than the so-called ‘McMansions’ that were popular during the boom years,’ writes Paul Ashworth at Capital Economics, who says a turnaround in the new home market may still be a couple of years away.”

Will the super-committee slow spending this Christmas?
The Super Committee has been negotiating behind closed doors since September, and they have until Nov. 23 — that’s the day before Thanksgiving — to reach an agreement on at least $1.2 trillion in deficit reduction measures. Some retail experts fear that further political gridlock in Washington will make American consumers even more hesitant to spend during the busiest shopping period of the year. When the Super Committee was forged out of the debate on whether to raise the debt ceiling, consumers reigned in spending. One of the problems plaguing retailers is a lack of exciting new products to inspire consumers to shop, says Marshal Cohen, chief industry analyst at NPD Group. “There is almost nothing new…to get the consumer excited beyond just the traditional holiday categories,” Cohen says. Against this backdrop, the political discussions could create a big distraction for consumers. And that’s something retailers don’t want when most analysts, including Cohen, expect marginal growth at best this holiday season. It also may be yet another reason for consumers to be downbeat. Numerous consumer surveys have shown that consumers are worried about the economy and about their rising household expenses. One of the latest, a survey conducted by Deloitte, showed that two-thirds of consumers expect the economy to stay the same or weaken next year. As a result many consumers reported that they would be trimming their gift list and 42% said they planned to spend less this year.

Underwater mortgages in Las Vegas fall further

The September median home price in Las Vegas fell 11.5% from one year ago and remains 63% below the peak, according to analytics firm DataQuick. A home that sold for $312,000 during the peak of the housing bubble in November 2006 is now worth $115,000. September was the 12th straight month the median home price fell from the year before. The decline has fallen to levels not seen since the mid-1990s, DataQuick said. “This can be attributed to several factors: home price depreciation; robust sales of low-cost foreclosures; robust sales to investors, who mainly target low-cost properties; extraordinarily low new-home sales (new homes tend to sell for more than resale homes); and higher-than-usual condo resales (condos tend to be the least expensive homes),” DataQuick said.

President Obama gave a speech Monday in Vegas, promoting changes to help more underwater borrowers refinance announced the same day. The Federal Housing Finance Agency will waive some representation and warranty risk, appraisal requirements, and negative equity caps for the Home Affordable Refinance Program. How effective the program is remains in question for the nearly 4 million Fannie Mae and Freddie Mac borrowers underwater. In Vegas, 80% of the local homeowners owe more on their mortgage than the home is worth, according to RealtyTrac. Principal reduction remains the largest tool yet to be taken up by the largest banks or by any government agency on a large scale to combat the negative equity problem in the U.S.

Department of Housing and Urban Development Secretary Shaun Donovan said principal reduction will be a major function of the still pending attorneys general settlement with the largest mortgage servicers. Many Republican AGs and lawmakers say such lengths would only promote strategic default, not entice more people to stay current on their mortgage. Meanwhile, the number of default notices in Vegas increased 190% from July to August, according to DataQuick. More than 4,700 default notices were filed, led by Bank of America, the same findings states along the West Coast found. “It is unclear whether the higher levels of NODs seen in August and September are the beginning of a longer-term upward trend in default filings, which could mean far more distressed properties on the market and more downward pressure on home prices,” DataQuick 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

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

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

MBA – Commercial/multifamily mortgage delinquency rates down

Commercial/multifamily mortgage delinquency rates among four out of five major investor groups decreased in the second quarter of 2011, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report.  Between the first quarter and second quarter of 2011, the 90+ day delinquency rate for loans held by FDIC-insured banks and thrifts decreased 0.25% to 3.93%. The 60+ day delinquency rate for loans held in life company portfolios decreased 0.02 percentage points to 0.12%. The 60+ day delinquency rate for multifamily loans held or insured by Fannie Mae decreased 0.18 percentage points to 0.46%. The 60+ day delinquency rate for multifamily loans held or insured by Freddie Mac decreased 0.05 percentage points to 0.31%. The 30+ day delinquency rate for loans held in commercial mortgage-backed securities (CMBS) increased 0.25 percentage points to 9.43%.

The second quarter 2011 delinquency rate for commercial and multifamily mortgages held by banks and thrifts was 2.65 percentage points lower than the series high (6.58% reached in the second quarter of 1991). The delinquency rate for commercial and multifamily mortgages held in life insurance company portfolios was 7.25 percentage points lower than the series high (7.37% reached during the fourth quarter of 1993); the rate for multifamily loans held by Fannie Mae was 3.16 percentage points below the series high (3.62%, reached during the fourth quarter of 1991); and the rate for multifamily loans held by Freddie Mac was 6.50 percentage points lower than the series high (6.81% reached in 1992). The rate for loans held in CMBS was a record high for the series.

Small business pessimistic

The National Federation of Independent Business (NFIB) said its Small Business Optimism Index fell 1.8 points to 88.1.  The decline was largely due to weaker expectations for real sales gains and reduced hope for an improvement in business conditions in the next six months.  “With such a dim outlook, owners are not going to do a lot of hiring or expanding,” said William Dunkelberg, chief economist at the NFIB.  The US Congress let a debate over spending go down to the wire in early August, nearly leaving the government unable to pay its bills. The country’s debt was then downgraded by a major rating agency.  The index reading was based on a survey of NFIB members.

Olick – friction in Obama’s refi proposal

“The response to President Obama’s recent proposal to refinance more borrowers into lower interest rate mortgages was at best underwhelming and at worst scathing. The plan would expand the government’s so-far disappointing, Home Affordable Refinance Program (HARP), which helps current but underwater borrowers with Fannie Mae and Freddie Mac loans to refinance.  ‘Mr. President, the housing market is the foundation of the US economy. It is cracked and chipping away,’ writes Florida real estate consultant Jack McCabe in an editorial in the Herald-Tribune.  ‘The walls are beginning to cave. Your answer, anecdotally, seems to be put a new roof on it.’  McCabe is calling for principal write-down for troubled mortgages, not refinances for borrowers who are current on their monthly payments. The argument so far against principal write-down is that it would cost banks and investors (including Fannie Mae and Freddie Mac) too much.

Unfortunately the plan, which could allow borrowers with more than 25% in negative equity to refinance, is being deemed too costly as well. While the Congressional Budget Office estimated it would cost investors in the original mortgages between $13 and $15 billion (while potentially saving 111,000 borrowers from defaulting), analysts at JP Morgan Chase say it would cost more:  If such a policy were successful on a large scale, it would clearly devalue higher coupons, and would threaten lower coupons with incremental gross supply. A more modest HARP overhaul, while less disruptive, still forces investors to require more conservative valuations until details emerge.

All these arguments, however, may be moot, as the overseer of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA), which would have to approve the refinance effort, is sounding wildly cautious. In a statement following the President’s speech, Director Ed DeMarco states, ‘If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program’s intent of assisting borrowers and reducing credit risk for the Enterprises, we will seek to do so.’  He goes on to say, however, that there are ‘several challenging issues to work through,’ and then he uses the word ‘uncertain’ twice in characterizing any outcome.  While DeMarco doesn’t detail said ‘frictions,’ they are vast and not limited to investor cost. First of all, too many borrowers probably still wouldn’t qualify if they just did away with the loan to value ratio of 125%. Of the 838,400 HARP refinancings done so far, only 62,432 had LTVs above 105%, according to Jaret Seiberg at MF Global.  ‘We believe lenders are reluctant to HARP a loan if they fear the borrower is so underwater that they might default anyway,’ writes Seiberg.  Then there are issues of loan origination dates, put-backs on loans that default and borrower qualifications. Frictions. Beyond the friction, however, is the simple fact that a refinance program, while potentially an economic stimulus, is not a housing stimulus and shouldn’t be characterized as such. The HARP program is and always was for current borrowers and does nothing to address the millions of non-current borrowers, bank-owned foreclosed homes and falling home prices.”

Import prices down

US import prices fell in August due to lower fuel, food and industrial material costs, a government report showed today.  A drop in prices for petroleum helped push import prices 0.4% lower following a 0.3% increase in the previous month, the Labor Department said in a report. Prices for food and industrial materials also fell.  Analysts polled by Reuters had expected import prices to fall 0.8% in August.  With unemployment stuck near 9% and wages stagnant, more costly imports have been a principle form of inflationary pressure in the US economy. Highlighting how much oil prices have risen, petroleum import prices were up 43.5% in August from a year earlier.  US Federal Reserve Chairman Ben Bernanke said last week that such pressures would ease due to tamer prices for oil and other commodities. Less inflation pressure gives the Fed more room to try to boost growth, and policymakers are expected to unveil more stimulus measures soon.  “The decline in market energy and commodity prices in recent weeks is likely to lead to a further easing in headline import prices,” said Peter Newland, an analyst at Barclays Capital in New York.  Newland said, however, the report suggested pipeline pressures at the core level continue to build, reflecting the effects of a weaker dollar and inflationary pressures abroad.

Excluding petroleum, import prices rose 0.3%, accelerating from a 0.1% increase in July.  Bernanke had suggested a rebound in auto production following Japan’s March earthquake disaster — which created bottlenecks in the industry that pushed prices higher — would ease inflation pressures as well.  Prices for imported cars and car parts were unchanged last month, while consumer goods rose 0.3% when autos and parts were stripped out.  Export prices rose 0.5% in August after falling 0.4% in July. Economists had expected export prices to be unchanged last month.

Phoenix foreclosures up

The Phoenix area’s single-family home foreclosure rate jumped last month, with 31% of existing-home sales classified as foreclosures, according to a new report from the W.P. Carey School of Business at Arizona State.  A month earlier in July, the single-family foreclosure rate in greater Phoenix held steady at 29%. Prior to hitting 29% in July, the foreclosure rate hovered at 43% in January and February, falling all the way down to 29% in July and then ticking back up again last month.  “The uptick in foreclosure activity was not entirely unexpected since we’ve seen a pattern of upward movement in this rate in the latter months of a year over the last few years,” said the report’s author Jay Butler, a professor emeritus at the W.P. Carey School of Business at Arizona State University. “The weak economy and income growth are probably leading to more people giving up on their homes.”

About 2,900 single-family home foreclosures occurred in Phoenix last month, up from 2,500 in July, but down from 4,000 in August of 2010.  Many of the vacant homes are selling to investors outside the market.  “Since the start of the housing decline in late 2007, investors, especially foreign investors, have been the dominant buyers of homes to either fix-and-flip or rent out,” said Butler. “While the housing market is beginning to produce some positive movement, the surrounding economic environment continues with anemic job and economic growth that’s forestalling consumer confidence and preventing more people from buying homes.”

Deficit hawks downplay need for stimulus

Two regional Federal Reserve presidents cast doubt on the notion, widely prevalent in financial markets, that the central bank will ease monetary policy further at its Sept. 20-21 meeting.  Richard Fisher, president of the Dallas Fed, told a conference of the National Association of Business Economics that there was little more policymakers could do to help the economy. His counterpart in St. Louis, James Bullard, said no decision had been made on further easing, adding that the central bank had already been very aggressive in bringing down borrowing costs.  “While disappointing economic performance certainly makes the case for an aggressive monetary policy, the FOMC has in fact provided that aggressive policy,” St. Louis Fed President James Bullard said in prepared opening remarks at an event at the regional central bank’s headquarters.  Bullard is not a voter on the Federal Open Market Committee this year, but Fisher is. In August, Fisher dissented against the Fed’s promise to keep rates low until at least 2013, and said he expects others to follow suit.  “I expect more dissents,” Fisher said after his speech at the NABE conference.

DSNews.com – mortgage fraud decreases

Mortgage fraud grew in the second quarter of the year but was still down from where it was a year earlier, according to the Second Quarter 2011 Mortgage Fraud Index, released Monday by MortgageDaily.com.  The index, based on criminal and civil cases in which defendants allegedly attempted to deceive real estate lenders into making credit decisions based on fraudulent documentation or false appraisal values, increased to 1261 based on 194 cases during the quarter, up 27% from the previous period (150 cases), but down from 1699 for the same period a year earlier (266 cases).  Minnesota emerged as a problem area during the second three months of 2011, with $161 million more in cases than the previous quarter, increasing the total dollar amount of mortgage fraud cases in the state to more than $184.7 million.  Minnesota came in just ahead of Florida with $184 million in fraud cases.  The national total was just under $1.6 trillion, according to MortgageDaily.com.  However, the dollar figure was down $661 million from the second quarter of 2010, as California (down $300 million), Michigan (down $218 million) and Pennsylvania (down $198 million) all saw declines.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

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

Summer home sales up

Clear Capital said home prices rose 4% in the second quarter, but the real estate data firm warns rocky times lie ahead.  Still, gains made in the summer are likely to be short-lived with consumer confidence weakening toward the end of the summer.  “Although the summer gains appear to signal strong growth in home prices, it’s important to keep in mind that these gains are off of the record lows of winter,” said Alex Villacorta, director of research and analytics at Clear Capital. “With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter.”

Clear Capital said the Midwest experienced the highest home price gain of 7.3% in the most recent quarter. The Northeast and South followed with price growth of 4.9% and 3.5%, respectively. Price gains in the West were more limited, landing in the 0.7% range on a quarter-over-quarter basis.  Jacksonville, Fla., replaced Detroit as the worst performing market, with second-quarter home prices dropping 2.7% in the Florida city from the prior quarter.  Clear Capital remains concerned about lagging consumer confidence.  “The latest readings on consumer confidence paint an ominous picture that at present, consumers are still not ready to risk jumping into the market despite very low mortgage rates and very affordable home prices,” said Villacorta.

Unemployment up, trade down

The Labor Department says weekly applications for unemployment benefits rose 2,000 to a seasonally adjusted 414,000.  The report suggests companies aren’t significantly increasing layoffs, despite weak economic growth. But it also signals that little hiring is taking place. Applications need to fall below 375,000 to indicate sustainable job growth. They haven’t been below that level since February.  The four-week average, a less volatile measure, increased for the third straight week to 414,750.

At the same time, the trade gap totaled $44.8 billion, 13.1% less than in June and well below a consensus forecast of $51.0 billion from Wall Street analysts surveyed before the report. It was the biggest month-to-month percentage drop in the deficit since February 2009.  US exports rose 3.6% to a record $178.0 billion, driven by record shipments to countries in South and Central America and higher demand from China and major oil producers. Records were also set for two large categories, goods and services, as well as for capital goods and autos.

Olick – why no refi?

“The latest weekly mortgage application survey released today by the Mortgage Bankers Association makes no sense. Mortgage applications fell 4.9% overall, with applications to purchase a home essentially flat and applications to refinance down 6.3%. The part that doesn’t make sense is that refi’s have fallen for the second straight week, at the same time that mortgage rates have fallen for the second straight week.  Lower rates usually spur more refi’s, not fewer.  The reason we’re not seeing a surge is that most people who qualified for refi’s, already did when rates went below 5%. Now rates flirt around the 4.25% area, dipping momentarily, but not long enough for borrowers to pull the trigger and get the biggest benefit. Despite sudden drops in the 10 year Treasury yield, lenders are not rushing to offer super low rates because they don’t want a flood of refi’s and because they get enough business at 4.25%. Right now, without much competition from their peers, lenders don’t see it as cost effective to lower rates.

Then there is of course the underwriting issue. A lot of folks simply don’t qualify for these low low rates, so the pool of potential applicants is limited.  ‘Millions of households are missing out on the mortgage bargain of a lifetime because they do not have the credit score or down payment required to qualify for a new loan,’ writes Paul Dales at Capital Economics.  This is not to say that we haven’t seen a huge volume of refinancing over the past year. Refi’s rose nearly 43% month to month in August and have risen 90% since April, according to Capital Economics.  ‘At first glance that looks impressive,’ writes Dales. ‘But given just how far mortgage rates have fallen, it is not a great return.’ Mortgage rates are down nearly a full percentage point from February.

So how do we get more Americans into lower mortgage rates? Most expect President Obama to announce some kind of refinance plan during his big speech about the economy tomorrow. The running bet is that it will be some permutation of the Home Affordable Refinance Program (HARP) that allows borrowers with Fannie Mae or Freddie Mac loans, who are underwater by as much as 25%, to refinance to lower rates. So far this program has processed 838,000 loans, according to MF Global’s Jaret Seiberg.  Seiberg estimates that with a few tweaks, they could add twice as many borrowers, but those tweaks will be complicated. First you have to lower the fees, which would hit Fannie and Freddie’s bank accounts. ‘FHFA [overseer of Fannie and Freddie] would need to conclude that the value from the reduced probability of default from the refinancing exceeds the lost revenue from the lower fees,’ notes Seiberg.  The thought is that they would also expand the Loan to Value Ratio’s (LTV’s), but Seiberg notes that of the HARP refi’s already done, relatively few had LTV’s over 105% anyway. ‘We believe lenders are reluctant to HARP a loan if they fear the borrower is so underwater that they might default anyway,’ says Seiberg.

So could the plan eliminate underwriting on these refi’s, since the borrowers would have to be current regardless, and a current borrower doesn’t need to be underwritten and re-qualified if they are already paying a higher rate?  ‘If somebody is current on their mortgage and hasn’t missed any payments in the last three years, does it make any difference if you re-equalify them?’ asks Guy Cecala of Inside Mortgage Finance. ‘If they’re not in trouble now, and they happen to default in six months, regardless of whether you refi them you’re still facing a loss if you’re Fannie and Freddie. Theoretically they’re less of a risk to you if they have lower mortgage payments.’  But a wide-open plan like that could be far too tricky to implement because there’s just not enough infrastructure in place to handle the volume.  Regardless, all this refinancing, if it were to happen, in some form or another, would not help the housing market to recover; it might juice the economy a little, putting more spending dollars into our pockets, but it would do nothing to help people in trouble on their mortgages and nothing to spur home buying.”

Obama’s likely jobs plan

President Barack Obama will unveil a jobs package today, and it’s expected to total more than $300 billion, according to US media reports.  Here are elements likely to be part of the speech:

-  Extending a payroll tax cut for workers first enacted last December. Continuing the tax cut by another year would cost about $112 billion, according to the non-partisan Congressional Budget Office.  Congressional Republicans are lukewarm on the idea, some saying the White House should focus on measures such as broad tax reform that would have a more lasting impact.

-  Public-works projects, such as the repair of highways and school buildings.  Republicans contend large-scale spending initiatives have not helped the economy and point as evidence to the economy’s weakness despite the $800 billion stimulus package Obama and his fellow Democrats enacted in 2009.

-  Propose federal help to states to prevent layoffs of teachers and first responders.

-  Extending the payroll tax cut to employers.

-  Extending unemployment aid.

-  A training program targeted toward those who have been unemployed six months or more.

-  A mortgage relief program.

Obama’s likely mortgage plan

Obama’s speech could include a nod to efforts to strengthen the housing market by allowing more homeowners to refinance at the current low interest rates, according to sources familiar with the matter.  The refinancing initiative under consideration would broaden eligibility for refinancing for homeowners whose mortgages are backed by Fannie Mae, Freddie Mac and the Federal Housing Administration.  Republicans would likely oppose plans for broader refinancings that involve taxpayer subsidies; either directly from the government or through Fannie Mae and Freddie Mac but the administration might be able to take executive action on some aspects of the plan.

Changes involving the mortgage giants would require approval by their regulator. The direct jobs impact from homeowner help is expected to be less significant than the potential improvement in consumer sentiment.  Any extra spending from reduced mortgage costs could lead to increased hiring, though that could take months and may not happen at all if households choose to save instead.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Banks offered deal

Big US banks in talks with state prosecutors to settle claims of improper mortgage practices have been offered a deal to limit part of their legal liability in return for a multibillion dollar payment.  According to five people with direct knowledge of the discussions, state prosecutors have proposed settlement language in the “robosigning” case that also might release the companies from legal liability for wrongful securitization practices.  Some state officials have expressed concern that they have offered the banks far too broad a release from liability. Others say the broad language was perhaps inadvertently crafted and will be tightened as negotiations continue. Participants on both sides stressed the talks remain fluid.  However, the banks – some of whose share prices have been battered by concern about their exposure to mortgage-related litigation – are pressing for immunity from a raft of alleged civil violations and have called the latest proposal a “non-starter”.

They say the proposals from state prosecutors will need to be expanded before striking a deal, which is expected to involve a total penalty of $10 billion to $25 billion.  The two sides will meet again this week to iron out their differences. They are close to an agreement on future standards governing the servicing of home loans, yet remain far apart on other issues, such as legal liability claims, compliance and enforcement, and the amount of cash it will take to settle the allegations.

World Banks sees no recession

World Bank President Robert Zoellick said yesterday that the US economy will likely limp along with slow growth and high unemployment but avoid a recession.  “I don’t believe the US and the world will go into a double-dip, but there is a high degree of uncertainty,” he told reporters in Singapore. “Events in the eurozone can have ripple effects all around the world, not only in terms of financial markets but also confidence, whether it be consumers or businesses.”  Zoellick said European countries may need to deepen fiscal integration — implying governments should sacrifice some control over their budgets so spending policies can be coordinated among countries using the euro.  He said recent government bond purchases by the European Central Bank have provided temporary monetary liquidity to markets.  “The policies that have been pursued by the EU up to now can buy time, but parliaments and the public have to come to terms with fundamental questions,” Zoellick said. “One direction is to deepen the fiscal union.”

Singapore Finance Minister Tharman Shanmugaratnam, who is also chairman of the International Monetary Fund’s policy advisory committee, warned that the EU must solve the structural differences of its members rather than simply react to each new crisis.  “We’ve now reached a critical juncture where further postponement of solutions could lead to the possibility of an outcome that Europe wouldn’t like to contemplate, with very large costs to its citizens,” Tharman said.

WSJ – advertised rate vs what you get

The gap between the lowest advertised mortgage rate and the average rate that borrowers actually get is as high as it has been in two years, save a single week last September. As of last week, the lowest available rate—according to a survey of more than 200 lenders by LendingTree.com—was 3.75% for a 30-year fixed mortgage, but the average rate was 4.39%. At the current 0.64 percentage-point spread, the difference in rates could mean an extra $53,000 in interest payments over the life of a 30-year, $400,000 mortgage.  While there is always a spread—not all borrowers qualify for the lowest rate, after all—it is usually much smaller: An average spread is usually around 0.40 percentage point.  The bigger discrepancy of late has little to do with borrowers’ credit scores, which historically have largely decided what rates lenders choose to offer. Instead, it is more reflective of changes in the way lenders approach their business. Lenders have raised their profit margins by 1.5 to 2 percentage points in the past month, according to Informal Research Services, by offering borrowers slightly higher rates.

Lenders say they haven’t lowered rates further because, simply, they don’t have to. The mortgage market is not the cut-throat business of years past. Most lenders are happy to make mortgages but not at any cost. And there is still plenty of demand given that rates are still historically very low. As it is, lenders are able to make loans that, while still cheap, are more profitable, says Michael Fratantoni, vice president of research and economics at the Mortgage Bankers Association, a trade organization that represents mortgage lenders.  The lowest advertised rates are available for only those borrowers with pristine credit. Anyone else could consider waiting, as the rates they get may be lower as soon as the current surge in demand ebbs, possibly as soon as the end of September. For those looking to refinance or buy a home now, mortgage analysts suggest taking the lowest rate offered and shopping it around to other lenders. In particular, regional, rather than national, outfits, may be more willing to negotiate.

Obama down in the polls ahead of speech

According to a number of polls released yesterday, Barack Obama’s job approval ratings plunged to a new low ahead of his major economic speech Thursday, with widespread discontent among Americans over his handling of the economy and jobs.  An NBC News/Wall Street Journal poll of 1,000 US adults showed Obama’s overall job approval rating at a low of 44%, down 3 percentage points since July, while his handling of the economy stands at 37%.  An ABC News/Washington Post poll of US adults showed that six in 10 Americans rate the president’s job on the economy and jobs negatively, while one in three say they are now worse off financially since Obama entered the White House. It has a 3.5 percentage point margin of error.  A third poll of 1,000 likely voters by Washington-based Politico and George Washington University found that 72% of voters believe the country is either strongly or somewhat headed in the wrong direction, a jump of 12% since last May. That survey’s results have a 3.1 percentage point error margin.  “Obama is no longer the favorite to win re-election,” said Democratic pollster Peter Hart, who conducted the NBC/Wall Street Journal survey with Republican pollster Bill McInturff.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

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

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

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

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

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

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

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

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

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Pending home sales up

The Pending Home Sales Index (PHSI) increased in June following a wide swing down in April and then up in May, according to the National Association of Realtors (NAR). Activity increased in the West and South but declined in the Midwest and Northeast; all regions show strong double-digit gains from a year ago.  The PHSI in the Northeast slipped 0.4% to 68.9 in June but is 19.4% higher than June 2010. In the Midwest the index fell 3.7% to 79.7 in June but is 26.4% above a year ago. Pending home sales in the South increased 4.4% to an index of 99.2 and are 19.1% higher than June 2010. In the West the index rose 6.4% to 107.0 in June and is 16.4% above a year ago.  Existing-home sales this year are expected to total 5.0 million, slightly higher than 2010. Similarly, little change is forecast for aggregate home prices with several indicators, including NAR’s median prices, showing recent signs of stabilization.

GDP much worse than thought

Gross domestic product (GDP), the broadest measure of the nation’s economic health, rose at an annual rate of 1.3% in the second quarter, the Commerce Department said.  While that’s an increase from the revised 0.4% growth rate in the first three months of the year, it is hardly good news. The government originally reported that the economy grew at a 1.9% annualized rate in the first quarter.  Dubbed a “soft patch” by economists and even Federal Reserve Chairman Ben Bernanke, the economy’s sluggishness was due to a variety of factors that weighed on consumers and businesses.  Higher gas prices for one, hit Americans hard when they peaked at a national average of $3.98 a gallon in May. The aftermath of Japan’s earthquake and tsunami also rattled the global supply chain, weighing on the auto industry in particular.  Meanwhile, Europe’s debt crisis and the debt ceiling debates at home started to once again unnerve investors and employers, and job growth slowed to a trickle.  Overall, consumer spending, which accounts for roughly 70% of gross domestic product, picked up only 0.1% in the second quarter – marking a significant slowdown in consumer spending after it grew 2.1% in the first three months of the year.

Olick – pending sales up, cancellations up

“Last month, the National Association of Realtors reported a huge jump in cancellations of pending home sale contracts. 16% of contracts didn’t make it to closing, up from a norm of about 4%.  The chief economist at the NAR said he was baffled by it, but ask any agent working the nation’s neighborhoods, and they’ll tell you it is all about confidence and financing—specifically, a lack of both.  ‘It seems like everybody’s got home purchase ‘cancel-itis,” says David Fogg, a real estate agent in Burbank, Calif.  ‘Currently, we are seeing about 75%, when we close escrow, had been in escrow 2 or 3 times prior.’

Fogg says the higher cancellations recently are most definitely tied to the turmoil in Washington, D.C. over the debt ceiling. Already nervous buyers are suddenly changing course, unsure how the debt crisis will affect the overall economy, and more importantly, their own employment.  ‘Though a higher than normal cancellation rate can hold back final closing figures, it could well be that some past cancellations are nothing more than delayed buying decisions, rather than outright cancellations,’ says the Realtors’ chief economist Lawrence Yun.  Financing and appraisals are taking far longer, with tighter underwriting restrictions amid the still-simmering foreclosure crisis. Another factor is short sales, which are increasingly popular at the big banks as an alternative to foreclosure. This is when the bank allows a troubled borrower to sell the home for less than the value of the mortgage. These can take far longer and run into more roadblocks that scuttle many deals.

More buyers did sign sales contracts in June than in May, though, according to a new report from the National Association of Realtors. Pending home sales rose 2.4% month-to-month and are nearly 20%* higher than June of 2010, the low point following the end of the home buyer tax credit.  ‘Three, four, five years ago we could close a home in 10 or 15 days, just approved before [it was] hardly even applied, but it’s very different now,’ says Fogg. ‘It was very easy before, and as a result, a lot of the transactions closed very quickly before people could change their minds.’  Buyers also have one more thing to worry about: more talk in Washington about a cut in the mortgage interest deduction. That directly affects purchasing power, as buyers factor that potential into their finances.”

Republicans try to reach compromise

House of Representatives Speaker John Boehner is trying to round up enough Republican support for his plan to reach a compromise to raise the U.S. debt ceiling before a Tuesday deadline.  One House member who had resisted Boehner’s entreaties said early Friday that there has been progress on the measure and predicted it would pass later in the day.  “I think we made progress last night,” Representative Trey Gowdy, a Tea Party movement-backed first term congressman, told CNN. “What we’ll do today, and I predict it will be done today, is for the third time send a plan that raises the debt ceiling in a responsible way.”  With only four full days left, the Treasury could unveil as early as today an emergency plan explaining how the government would function and pay its obligations if Congress does not agree to raise its borrowing limit from $14.3 trillion. 

Boehner’s plan, which would cut spending by about $900 billion and raise the debt ceiling for a few months, is sure to be rejected by the Democratic-controlled Senate but could factor into an eventual compromise.  Top Senate Democrat Harry Reid wants to raise the debt ceiling by enough to kick the crisis beyond the November 2012 presidential election so Obama doesn’t have to face the music again during the election.  Reid indicated late on Thursday that he may advance his own bill, which claims to cut spending by $2.2 trillion over 10 years, in the Senate rather than use Boehner’s proposal as the basis for a compromise.  Critics have called the Reid bill an accounting trick that inflates costs and then “cuts” them.  Tea Party lawmakers say they are justified in taking a strong stand after being elected last year on a promise to slash spending.

NAR against home ownership tax hikes

Any changes to the mortgage interest deduction now or in the future could threaten recent progress toward stabilizing the housing market, critically erode home prices and values, destroy middle-class wealth accumulation and hurt economic growth.  That was the message delivered by National Association of Realtors (NAR) Chief Economist Lawrence Yun during today’s ”Rethinking the Mortgage Interest Deduction“ forum, where he joined a panel of experts to debate the future of the MID. The event was hosted by the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institute, and the Reason Foundation.  “As the leading advocate for housing and homeownership, NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy,” said Yun. “The MID facilitates home ownership by reducing the carrying costs of owning a home, and it makes a real difference to hard-working middle-class families.”

Yun argued that now is the worst possible time to discuss changing the tax laws, which could further impair the housing market’s fragile recovery and a broader job market recovery.  “One thing that is indisputable is that eliminating the MID will lower the homeownership rate in the U.S.,” he said. “While we must ensure that the conditions that led to the artificially inflated home ownership rate of the bubble years do not resurface, we also need to create the conditions for sustainable home ownership, which has been shown to provide myriad social benefits for families and communities.”  During the debate, Yun challenged recent proposals calling for changes to the tax code, stating that it’s a misplaced argument to say the MID was a cause of the housing market bubble and is suddenly part of the deficit problem, when it’s been part of the federal tax code for more than 100 years.  Reducing or eliminating the MID is a de facto tax increase on homeowners, who already pay 80 to 90 percent of U.S. federal income tax. Yun said the share could rise to 95% if the MID is eliminated.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

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

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

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

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

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

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

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

Forward this e-mail to your friends!

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WSJ – rents up, vacancies down

Apartment landlords are enjoying rising rents and falling vacancies.  The average effective rent, the amount paid after discounting, was $997 in the second quarter of the year, up from $974 a year earlier, according to a report scheduled for release Thursday by Reis Inc., which tracks leasing data for 82 markets. Second-quarter rents rose in all but two markets.  Rent levels rose fastest in San Jose, Calif., to $1,501 in the second quarter. The average effective rent in San Francisco was $1,806; Wichita, Kan., $495, and New York, $2,826.  Vacancies, meanwhile, fell in 72 of the 82 markets during the second-quarter vacancy rate to 6%, the lowest since 2008 and compared with 7.8% a year earlier, according to Reis. Vacancies declined fastest in Charleston, W.Va., Greensboro/Winston-Salem, N.C., and Richmond, Va.

“Rising rents and falling vacancies are the perfect situation for landlords,” said Rich Anderson, an analyst for BMO Capital Markets. “It’s like drinking without the hangover.”  But there were some cautious signs in the data. Landlords filled a net 33,000 units in the second quarter, a slowdown from the 45,000 units they filled in the first quarter. That was somewhat surprising because typically, the net “absorption” rate falls faster during the summer as college graduates leave campus and descend on cities in search of jobs. Some analysts said the slower absorption rate could be linked to slower job growth, although it is too soon to know for sure. The peak apartment renting season runs from May to September.  “When you’re going from big numbers and getting gradually smaller it’s tough to determine if things are in fact cooling,” says Haendel St. Juste, an analyst at Keefe, Bruyette & Woods.

Meanwhile, supply remains constrained. Roughly 8,700 new apartment units opened during the second quarter, the second-lowest quarterly tally for new completions since Reis began collecting data in 1999.  But there is new construction in the pipeline. The CoStar Group, a Washington, D.C.-based real-estate research firm, expects about 22,500 units to be added this year, followed by 94,600 in 2012 and more than 109,000 in 2013.  But as long as employers keep adding jobs to the economy, analysts say, they expect vacancy rates to keep falling and rents to keep rising. “Barring some unexpected shock from the global economy, we expect the recovery to continue through 2011,” Reis wrote in the report. “Vacancies should continue to decline while rents rise at an even faster pace than we observed in the first half of the year.”

Hiring down

The economy gained just 18,000 jobs in the month, the government reported Friday, sharply missing most expectations and coming in even weaker than the paltry 25,000 jobs added in May.  It marked the weakest month since September, when the economy was still losing jobs.  Economists were eagerly awaiting this month’s report, following a dismal report from May.  Since then, predictions for June’s report have varied widely. A consensus of economists surveyed by CNN had predicted a gain of 125,000 jobs for June, but the breadth of forecasts ranged from a meager gain of 21,000 jobs to a solid 237,000.  Bringing further disappointing news, the government also revised the numbers for April and May both downward.  The unemployment rate rose to 9.2% from 9.1% in May. Economists had predicted the rate would improve to 9%.  Overall, the job market is still far from a full recovery.  The economy needs to add about 150,000 jobs a month just to keep pace with population growth.  So far, the nation has only gained back about a fifth of the 8.8 million jobs lost during the recession.

Olick – Fannie Mae offers new financing option

“Remember how we all blamed investor/flippers using faulty financing for the housing crash?  You know, these are all the bad guys who ran up home prices to their own profit, with no concern for the inevitable fallout; they colluded with overzealous, borderline blind, lenders who gave anybody and everybody a loan with no attention paid to their ability to repay said loan.  That’s all over now. You can’t get a loan without pledging your first born in collateral, and if you’re an investor, you rank somewhere just below Angelo Mozilo.  Or do you? Last month Fannie Mae made a little change in the rules for all-cash buyers to apply for mortgages. I don’t recall a press release, and I’m quite sure I’m on their mailing list. But there it is, ‘Announcement SEL-2011-5,’ a ‘Selling Guide Update:’

Currently, Fannie Mae requires a minimum of six months to elapse between the time a borrower purchases a home and subsequently applies for a cash-out refinance.  The Selling Guide has been updated to allow a cash-out refinance within six months of a purchase transaction when no financing was obtained for the purchase transaction.  There are of course all kinds of parameters, including maximum LTV (loan-to-value ratio), documentation, arms-length transaction and ‘all other cash-out refinance eligibility requirements and cash out pricing applied.’ The mortgage cannot be larger than the value of the home of course.  Hands down, this is a boon to investors, who can now get equity out of their investments faster. It’s also a boon to home buyers who couldn’t compete in the long term with all-cash investors, but who might be able to put down the cash for a few weeks before obtaining a mortgage.

So is this a ‘loosening’ of standards that could fuel all those nefarious investors of the housing boom? Wait, maybe today’s investors aren’t so dangerous after all (as I’ve been saying over and over).  ‘We continually examine our policies and standards to determine what changes to make to better serve the market, and this is one of those changes,’ said Fannie Mae spokesman Andrew Wilson.  ‘There is a role for everyone in stabilizing the market, including those who invest in properties to repair and improve them, owner occupant buyers, and those that build and maintain quality, affordable rental units,’ Wilson said. ‘We believe our requirements are carefully crafted to ensure that we are financing legitimate buyers who opt to purchase with cash.’  All-cash buyers are now one-third of the market and far higher in the more distressed markets. Most all-cash buyers are investors, but owner-occupants are also trying to take advantage of reduced pricing on distressed properties; trouble is they can’t always compete in the all-cash arena.

A lot of deals, especially short sales (where the bank lets you sell for less than the value of the mortgage), have fallen apart because of buyer financing issues. All-cash buyers also usually get a price break in competitions with financed buyers, as sellers would rather just see the money. This could give some owner occupants at least an even playing field with investors. Obviously they still need the cash up front, but only temporarily.  Will this now create a new breed of quick flippers? Today’s investors tend to hold long-term and rent out in order to make their gains, but now, with a quick financing option, they may take the money out to do upgrades and then put the property right back on the market.  Tough to say, but it certainly changes the lending landscape and signals something of an olive branch to all those real estate investors, who are helping to clear the vast quantity of distressed properties that continue to plague the nation’s housing market.”

US Treasury wilts

Now that the Federal Reserve’s $600 billion Treasury buying spree is over, the bond market is growing nervous.  Barring possible hiccups in August as Congress wrestles with the task of raising the legal borrowing limit, the U.S. government will go on issuing around $166 billion in Treasury bonds and notes a month, and primary dealers aren’t quite sure where demand will come from, and at what price.  One possibility lies in investors such as foreign central banks, insurance companies and fund managers, but pulling them in may be tricky; some Treasury yields are near all-time lows. And for the first time since 2005, JPMorgan is reporting there are no long positions in Treasuries.  And Congress is still struggling to raise the debt ceiling, with the latest talks leaving a wide gulf in place between President Barack Obama and Republican lawmakers, as the Treasury’s Aug 2 deadline for a potential default draws near.

For now, primary dealers, the banks and securities firms authorized to bid on behalf of clients in Treasury auctions, will have to wager on a price without the certainty they had of being able to sell the securities quickly in the secondary market, or to the Federal Reserve.  “People are going to be less willing to take on duration without the certainty of three or four buybacks per week to support the market,” said Rick Klingman, managing director of Treasury trading at BNP Paribas in New York.  Duration is a measure of interest-rate risk.  That has already led to sloppier auctions, with higher borrowing costs for the U.S. government as auction high yields fix at a higher mark than available in the open market, a phenomenon known as a “tail.”  This happened two weeks ago when three separate auctions “tailed” in the worst week for U.S. government debt sales since March 2010.  Auctions tail when bidders insist on cheaper prices for a given security, or when confusion about the demand for that security causes bidders to behave cautiously.  The next test will be next Tuesday when the government sells $32 billion in three-year notes.

Foreclosure settlement deadline extended

A settlement over foreclosure practices between the nation’s five largest mortgage servicers, federal agencies and the states’ attorneys general will not be reached by next Tuesday.  July 13 is the deadline for the banks to submit plans for improving their servicing standards on loan modifications and foreclosures to the Office of the Comptroller of the Currency (OCC). The deadline was extended by 30 days last month at the request of the Department of Justice, which is coordinating the actions of the states attorneys general and the OCC.  There was a possibility the attorneys general and the OCC would coordinate the settlement and the submission of the action plans as both require banks to adopt more stringent standards for carrying out loan modifications and foreclosures. Whether this happens now depends on whether the DOJ asks for another extension.

Fewer bankruptcies

The number of bankruptcy filings in June was 120,623, or an average of 5,483 a day, a drop of 6.2% from May, when filings totaled 122,775, or 5,846 a day, according to a report from Epiq Systems, which tracks bankruptcy filings. There was one additional day to file in June compared with May. Average daily filings are down nearly 10% from June of last year.  Though economic factors like foreclosures and unemployment play a role in bankruptcy, over the long run, the filing rate tends to be more closely tethered to the amount of outstanding consumer debt.  Access to credit, however, can influence the bankruptcy rate over the shorter term: as lenders tighten their standards, filings tend to rise because struggling consumers can no longer rely on credit cards or other loans to get them through a rough period. But when more new loans are being made, filings tend to fall — at least for a while.

So far this year, the vast majority of the bankruptcy cases — nearly 70% — were Chapter 7 filings, which provide individuals with the proverbial “fresh start” because their debts are forgiven. (To qualify, filers need to pass a means test to determine whether they are unable to repay their debts.)   In contrast, a Chapter 13 filing requires individuals to use their disposable income to pay back a portion of their debts through a three- or five-year repayment plan. Some people choose Chapter 13 because it allows them to save their primary homes from foreclosure, though they are required to catch up on their mortgage payments. Slightly more than 27% were Chapter 13 filings. (The remainder were mostly commercial filings.) The overall split between Chapter 7 and Chapter 13 filings is consistent with last year’s ratio.  While the overall number of bankruptcy filings was down last month, there were variations from state to state. For instance, filings in Georgia rose 13% and were up 33% in Delaware, compared with May. But filings in Wyoming fell 30%, in South Dakota 21%, in West Virginia 18% and in Wisconsin 17%.  In both New York and New Jersey, the number of bankruptcy cases dropped by 5%.

WSJ – mortgage rates up

Mortgage rates in the U.S. rose broadly over the past week after showing little movement over the past month, according to Freddie Mac’s weekly survey.  The 30-year fixed-rate mortgage was 4.60% for the week ended Thursday, compared with 4.51% the previous week and last year’s rate of 4.57%. Rates on 15-year fixed-rate mortgages were 3.75%, up from 3.69% last week and down from 4.07% a year earlier.  Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.30%, up from 3.22% last week and down from 3.75% a year ago. One-year Treasury-indexed ARM rates were 3.01%, up from 2.97% in the prior week and down from 3.75% in the prior year.  “Mortgage rates followed Treasury yields higher over the holiday week but remain quite affordable by historical standards,” said Freddie Mac Chief Economist Frank Nothaft.  To obtain the rates, fixed-rate mortgages required an average payment of 0.7 point, while adjustable rate mortgages required an average 0.6-point payment. A point is 1% of the mortgage amount, charged as prepaid interest.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

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

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

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

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

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

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

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

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

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

Home prices up

According to the S&P/Case Shiller 20-city index, prices rose 0.7% in April compared with March, although they fell 0.1% when adjusted for the strong spring selling season. Prices were down 4% year-over-year. “In a welcome shift from recent months, this month is better than last — April’s numbers beat March,” said David Blitzer, S&P’s spokesman, in a statement. “However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season. It is much too early to tell if this is a turning point or simply due to some warmer weather,” Blitzer added. Any hint of good news in the troubled housing market will likely bring cheer to the industry, and there are some signs that market conditions are not quite as dire as some of the statistics may indicate.

Much of the price drop over the past year can be blamed on severe price slashing for homes in foreclosure, as Federal Reserve chairman Ben Bernanke pointed out in a press conference last Wednesday. Prices for homes sold by regular sellers have held up much better. Metropolitan Washington continued to be the strongest of the 20 cities covered by the report. Prices rose 3% in April there and have been on the plus side year-over-year, up 4%. The worst performing market for the month was Detroit, where prices fell 2.9%. The biggest year-over-year drop was recorded by Minneapolis, where prices have plunged 11.1% since last April.

Debt deadline looms

U.S. Treasury Secretary Timothy Geithner is not expected to significantly shift the Aug. 2 date when the government will have exhausted all of its emergency measures to stave off default, a source familiar with the administration’s efforts said today. That means the Obama administration and Congress still have about a month to reach a deal to raise the $14.3 trillion debt limit on how much the government can borrow. The Treasury Department is due to provide congressional leaders with an updated forecast as early as Friday.

A significant shift in the Aug. 2 drop-dead date would fuel suspicions among a growing group of Republicans that the deadline can be ignored and that the administration is fear-mongering. “Delaying it will reinforce the argument that this crisis is a creation of Treasury, the White House and the political establishment,” said Stuart Rothenberg, a non-partisan political analyst. He said it also will fuel arguments that the administration is picking “dates out of a hat to try to put pressure on Republicans to raise taxes.” The White House is locked in a battle with lawmakers over how to raise the debt limit and curtail government spending. The Treasury borrows on average about $125 billion per month to meet obligations such as paying elderly and disabled Americans social security benefits.

Olick – low end, higher losses

“As I sit here, less than 24 hours from the next release of the much-followed monthly S&P/Case Shiller Home Price Index, I’m confronted with all kinds of varying data and hypotheses on the future track of home prices. Particularly interesting to me is a new breakdown, by Capital Economics (which watches our market from Toronto, Canada), on how prices are falling faster at the low end than the high end. At face value I thought this was a no-brainer. Of course the low end is falling faster because that’s where the bulk of the foreclosures are, thanks to the subprime mortgage debacle, which of course targeted first-time and low-income buyers on the low end. I had no idea how large the discrepancy is: ‘Since their 2007 peak, prices in the low tier have so far fallen by 45% compared with declines of 35% and 25% in the middle and high tiers respectively,’ notes the report.

Even though most of the subprime distress has worked itself through the market, the pressure on the low-end continues because it is the low-end borrowers now who have the toughest entry to the oh-so-tight mortgage market. As the report reminds, proposed risk retention rules will likely mean a 20% down payment, which will price many borrowers out of the low end of the market. And this is not just in the markets we always talk about. The New York Fed put out some alarming numbers today showing that 10% of mortgages in New York City are in the ‘seriously delinquent’ pool, as in more than 90 days past due (for Manhattan it’s one in 50 loans, but for the Bronx and Brooklyn it’s one in eight). Since New York is a judicial foreclosure state (requires foreclosure cases go before a judge), the backlog of foreclosure cases hit 80,000 after the so-called ‘robo-signing’ paperwork scandal. Properties repossessed by banks in March spent an average 900 days in the foreclosure process! The shadow inventory in New York is therefore huge, and that gets me back to where I started. Most of those borrowers in New York who lost their homes were on the low end of the market (note the discrepancy in pricey Manhattan versus the other boroughs). You can extrapolate that scenario to any market and see that the low end will continue to fall victim to distressed pricing. That can, of course, trickle up, as the move-up buyer is hamstrung by the inability to sell at a decent price.”

Citigroup VP charged with fraud

Gary Foster, a former Citigroup executive, was arrested Monday on charges he embezzled more than $19 million from the bank. According to a criminal complaint unsealed in New York, Foster allegedly transferred millions of dollars from various Citigroup accounts into his personal account at JPMorgan Chase on eight separate occasions between May 2009 and December 2010. Foster, 35, is also accused of using fraudulent contracts and deal numbers to mask the transfers. The former vice president of Citigroup’s Treasury finance department was arrested at John F. Kennedy International Airport on Sunday morning when he arrived on a flight from Bangkok. The charges were announced by the U.S. Attorney’s office and the Federal Bureau of Investigation. “The defendant allegedly used his knowledge of bank operations to commit the ultimate inside job,” said Loretta Lynch, the U.S. Attorney for the Eastern District of New York.

Citigroup informed law enforcement officials immediately after discovering suspicious transactions, she said, adding that the bank is fully cooperating with the prosecution “to ensure Mr. Foster is prosecuted to the full extent of the law.” According to the complaint, Foster transferred money from internal Citigroup accounts including its interest expense account and debt adjustment accounts, to the bank’s cash account. From there, he allegedly wired the money to his personal account at Chase, according to prosecutors. Foster is expected to appear in court later Monday in Brooklyn, N.Y. He plans to plead not guilty, according to his lawyer, Isabelle Kirshner of Clayman & Rosenberg. Kirshner said she had just received the complaint and was reviewing the charges. “These are serious charges and we will investigate them fully,” she said. If convicted, Foster could face up to 30 years in prison.

Cash for short selling

Most banks figure they’re doing homeowners a favor simply by signing off on short sales and forgiving the amount owed. But in some cases, Chase and Wells Fargo borrowers receive that and cash at the closing. Lenders routinely hand homeowners a few thousand dollars if they leave the properties in good shape after foreclosure. That’s known as “cash for keys.” Also, homeowners are entitled to $3,000 of government money if they complete short sales through the Home Affordable Foreclosure Alternative program. Wells Fargo and Chase don’t specifically address why they offer the money for short sales. Rather, they explain they’re cutting their losses in choosing to forgo the potentially lengthy process of foreclosure. “Our goal is to help as many people avoid foreclosure as possible,” Chase spokeswoman Nancy Norris said, pointing out that the bank has completed more than 110,000 short sales nationwide since early 2009. Wells Fargo offers the cash to homeowners in Florida and other states “where the foreclosure process is lengthening,” spokesman Tom Goyda said.

The average foreclosure in Florida took 619 days for cases completed in the first three months of 2011, according to RealtyTrac Inc., a foreclosure listing firm. That’s more than 30 percent longer than cases completed a year ago. The lenders decide whether to make payments after considering individual circumstances, and they don’t disclose what those are. The banks won’t say how many people have been offered the cash. Chase and Wells Fargo don’t say how many home loans they own in Florida. The money for short sales is an effort by the lenders to be viewed as good corporate citizens as they expand aggressively in Florida after the banking takeovers, Miami-based banking analyst Ken Thomas said. Ward Kellogg, chairman of Paradise Bank in Boca Raton, said his community bank occasionally has offered money to homeowners who cooperate in short sales. He figures Chase and Wells Fargo are agreeing to the incentives so that they can write off the bad loans as soon as possible. “Without cooperation, it’s going to take a year and half,” Kellogg said. “With cooperation, it could be 30 to 60 days.”

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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

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

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

More political interference

Calling housing “the biggest headwind on the economy right now,”

Obama broached two relatively new ideas for the White House:

Longer-term mortgage modifications and principal reductions.  “In

addition to these short-term loan modifications, we want to see

if we can get longer-term loan modifications. And in some cases,

principal reduction, which will be good for the … person who

owns the home, but it’ll also be good for the banks over the long

term,” Obama said.  Both ideas would require Congress to pass

laws to force the banks to cooperate, and principal reduction is

sure to stir Wall Street banks, because it is direct interference

by the government in private finance.  When Obama campaigned, he

had talked about pushing for policy to give bankruptcy judges the

ability to write down principal owed on homes whose owners are

bankrupt, but when he took office, he stood on the sidelines of

legislation that would have allowed principal reductions, and his

administration said that current housing policy was good enough.

House Republicans passed a bill to kill the administration

programs that most experts have gauged a failure.

Inflation up

The Consumer Price Index, the government’s key inflation measure,

rose 3.2% over the last 12 months ended April 30, according to

today’s report from the Labor Department. It was the biggest

12-month jump since October 2008. Half of the increase was due to

rising energy prices, the government said.  Meanwhile, so-called

core-CPI, which strips out volatile food and energy prices and is

considered a better long-term predictor of inflation, rose 1.3%

from a year ago.  Gas prices alone surged 3.3% in April, and are

up 33.1% over the past year.

Overall, prices jumped 0.4% in April, in line with forecasts from

economists surveyed by Briefing.com.  Core CPI rose 0.2% during

the month, surpassing economists’ forecasts, which called for a

0.1% tick higher.

MBA – CEO testifies

David H. Stevens, President and CEO of the Mortgage Bankers

Association (MBA), testified before the Senate Committee on

Banking, Housing and Urban Affairs’ Subcommittee on Housing,

Transportation and Community Development on “The Need for

National Mortgage Servicing Standards.”  Following are portions

of his remarks:  “Presently,  servicers face a growing number of

checks and balances, ranging from federal laws and regulations,

such as RESPA and TILA, to fifty state laws, regulations, and

local ordinances, as well as court rulings and FHA, VA, and Rural

Housing servicing requirements. These requirements are in

addition to Fannie Mae standards, Freddie Mac standards, and

other contractual obligations. In short, servicers are faced with

complex and often contradictory rules and regulations, many of

which are still emerging.  What is the answer?  A consolidated

servicing standard that could drive these reforms.  Creating an

industry standard would streamline and eliminate many of these

overlapping requirements, providing clarity and certainty for

borrowers, lenders and investors alike.  It is critical that all

of the federal regulators involved act in a coordinated manner to

establish one national consolidated servicing standard that

applies to the entire industry, rather than piling on requirement

after requirement.”

“A national standard should start with a complete analysis of

existing servicer requirements and state laws governing

foreclosures.  Development should include an open dialog with

stakeholders in the servicing arena, all of whom must ultimately

implement and comply with the national standard.  MBA has

initiated this process by convening a blue-ribbon Council on

Residential Mortgage Servicing.  That Council examined the entire

servicing model and is forming recommendations to improve the

system for all stakeholders.  I am pleased to announce that we

are releasing the preliminary White Paper from the Council today

and ask that it be included as part of my written testimony.  

In the White Paper, the Council aims to examine the current

servicing model, address public misconceptions relating to

servicing practices and incentives, and educate the public on the

role and compensation of servicers.   I believe this White Paper

will provide useful information to you and other policymakers

that are currently debating national servicing standards.  I

encourage this subcommittee to use MBA and it’s Council on

Residential Mortgage Servicing as a resource going forward.  In

conclusion, as we develop servicing standards, I will urge you to

pay careful attention to the interdependence of servicing and the

impact that changes to the servicing system will have on the

economics of mortgage servicing, tax and accounting rules and

regulations, and the effect of the new requirements on Basel

capital requirements and on the TBA market.  Servicing does not

exist in a vacuum; instead it is part of a broader ecosystem

which involves all the varied elements of the mortgage industry.

The housing market remains fragile.  Therefore, when considering

changes to the current model, policy makers must be mindful of

unforeseen and unintended consequences that could ultimately

result in higher housing costs for consumers and reduced access

to credit.”

Retail sales up .05%

Total retail sales increased 0.5% last month, the Commerce

Department said. Sales rose 0.9% in March and have risen every

month since July 2010.  Economists had expected a 0.6% gain,

according to consensus estimates from Briefing. com.  Sales

excluding autos and auto parts were up 0.6%, roughly in line with

estimates.  Despite the overall increase in retail sales,

economists said the data suggest that consumer spending may be

slowing down.  Sales at gas stations were up 2.7% in April. Food

and beverage retailers had a 1.2% increase in sales, while

grocery store sales were up 1.5% last month.  Gas prices have

surged this year, with the national average near $4 a gallon. In

addition, food prices have risen sharply due to poor crop yields

and higher production costs due to the spike in energy prices.

Many economists had anticipated a bump in sales during April due

to the Easter holiday, which occurred later in the month than it

normally does.  But department store sales actually fell 0.2% in

the month, according to the report.

NAR – questions Dodd-Frank Act

The National Association of Realtors (NAR) says that a proposed

rule to define qualified residential mortgages (QRM) under the

Dodd-Frank Wall Street Reform and Consumer Protection Act (the

Dodd-Frank Act) would unnecessarily restrict access to home

ownership.  On July 21, 2010, President Barack Obama signed the

Dodd-Frank Act into law. A provision in the Act requires that

financial institutions retain 5% of the risk on loans they

securitize. The purpose is to discourage excessive risk taking

and create strong incentives for responsible lending and

borrowing. Exempt from the requirement are certain QRMs; FHA and

VA mortgages are also exempted.  Six agencies are developing the

risk retention regulation – the Department of Housing and Urban

Development, Federal Deposit Insurance Corp., Federal Housing

Finance Agency, Federal Reserve, Office of the Comptroller of the

Currency, and the U.S. Securities and Exchange Commission.  The

proposed rule narrowly defines QRMs, requiring an 80%

loan-to-value, which necessitates a 20% down payment. The rule

would also limit mortgage payments to 28% of gross income, a very

tight standard.

Following are some of NAR’s remarks:  “As the leading advocate

for housing and home ownership, NAR firmly believes Congress

intended to create a broad QRM exemption – strong evidence

shows that responsible lending standards and ensuring a

borrower’s ability to repay have the greatest impact on

reducing lender risk, and not high down payments.,” said NAR

President Ron Phipps, broker-president of Phipps Realty in

Warwick, R.I. “Saving the necessary down payment has always

been the principal obstacle to buyers seeking to purchase their

first home. Proposals that require high down payments will only

drive more borrowers to FHA, increase costs for borrowers by

raising interest rates and fees, and effectively price many

eligible borrowers out of the housing market.”

According to NAR Research, 60% of recent home buyers made less

than a 20% down payment, and it would take 14 years for a typical

person to save up a 20% down payment to buy a median-priced home.

 NAR wants federal regulators to honor Congressional intent by

crafting a QRM exemption that includes a wide variety of

traditionally safe, well underwritten products such as 30-, 15-,

and 10-year fixed-rate loans; 7-1 and 5-1 ARMs; and loans with

down payments in the 5% – to 20% range with mortgage insurance,

where required, and with other features found in low-risk loans

such as no prepayment penalties or balloon payments.

Business inventories up

The Commerce Department said inventories increased 1.0% to $1.48

trillion, the highest level since November 2008, after increasing

by an upwardly revised 0.7% in February.  Economists polled by

Reuters had forecast inventories rising 0.8% after a previously

reported 0.5% increase in February.  Inventories are a key

component of gross domestic product changes and March’s

bigger-than-expected gain could see the government raise its

first-quarter GDP estimate.  The economy grew at a 1.8% annual

rate in the first quarter, with inventories accounting for 0.93

percentage point, after a 3.1% pace in the fourth quarter.

Business sales rose 2.2% to $1.20 trillion in March, the highest

level since July 2008, after rising 0.5% the prior month. March’s

percentage increase in sales was the largest since March 2010.

March’s sturdy sales pace pushed down the

inventory-to-sales-ratio (which measures how long it would take

to clear shelves at the current sales pace) to a record low 1.23

months from 1.24 months in February.

NY foreclosure courts face 7 year backlog

According to RealtyTrac, at the rate the New York court systems

are currently working through the backlog of foreclosure cases,

it will take more than seven years to clear.  New York is a

judicial state, whereby foreclosures are completed through the

court system. But as cases mounted, the state developed the

largest foreclosure timeline in the country.  It currently takes

an average of 900 days for a foreclosure to wind through the New

York system, according to RealtyTrac, which maintains a count of

filings at the county level.  At the end of April, New York held

an inventory of 39,000 properties that received the initial

foreclosure notice or had been scheduled for auction but remain

unsold. Daren Blomquist, the editor of the RealtyTrac’s monthly

reports, said there is some estimation involved because the firm

doesn’t automatically remove a property from the active inventory

if there has been no update or sale within a certain number of

days.  New York averaged 314 scheduled auctions and 224

repossessions to REO per month so far in 2011. That’s down from

roughly 700 auctions and 520 REO each month last year. Assuming

only half of the 39,000 ends up being foreclosed and the rate of

repossession holds, it would take 87 months to clear this

inventory, Blomquist said.  New York implemented new rules giving

homeowners more protection in February, which may further delay

not only the process but a recovery.

See you at the top!

Chris McLaughlin

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

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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

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