realtor

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

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

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

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

Done For You Lead Machine Unveiled Tomorrow!

You don’t want to miss this webinar … an all new done for you

lead machine with social media!  This is the first time that this new

concept has been unveiled — so don’t miss it!

RSVP here for the webinar Tuesday night at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/340133283

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

Permanent Modifications Showing Slight Improvement

According to a report from Barclays Capital, modification rates picked up over December and January as servicers converted more trials into permanent modifications under the Home Affordable Modification Program (HAMP).  According to the latest HAMP progress report from the Treasury, servicers provided more than 66,000 permanent modifications through December. Participating servicers receive more than $35 billion in total capped incentives, but the program could reach as high as $50 billion. Modification rates “turned a corner” in October 2009, according to BarCap analysts, congruent with the rise in HAMP permanent conversion rates. The Treasury recently changed document guidelines for the servicers that go into effect June 1, 2010. After that date, borrowers seeking help through the program must provide certain documentation to enter into a trial modification. At the start of the program, servicers collected the documents during the three-month trial plan, creating a lag time in the permanent conversion rate.  Out of the more than 1 million borrowers in HAMP trials, 34% have been on private-label securitized loans – meaning the loans are not held by Fannie Mae, Freddie Mac or Ginnie Mae. After assuming a similar conversion rate for non-agency loans, analysts found 22,600 non-agency permanent modifications under HAMP.  “This ties in closely with the 25,000 loans modified in past two months that we see using our custom logic on Loan Performance. A higher number based on our logic also makes sense to us as some servicers have non-HAMP modification programs,” according to the report. 

DSNews.com – FTC says no more upfront loan modification fees

The Federal Trade Commission has proposed a new rule that would prohibit third parties, including loan modification specialists and loss mitigation attorneys, from collecting payment for foreclosure prevention services until after they obtain a documented offer from a lender or servicer for a modification or other form of mortgage relief.  “Homeowners facing foreclosure or struggling to make mortgage payments shouldn’t have to contend with fraudulent ‘companies’ that don’t provide what they promise,” FTC Chairman Jon Leibowitz said. “The proposed rule would outlaw up-front fees so companies can’t take the money and run.”  The FTC has brought 28 cases against companies suspected of foreclosure rescue and mortgage modification scams, and state and federal law enforcement partners have brought hundreds more. According to the agency, generally these cases charged that companies do not provide the services they promise and that they misrepresent their affiliation with the government and government housing assistance programs, including the Making Home Affordable program.  “Far too many homeowners have paid up-front fees to bad actors who promised loan modifications but never delivered,” Treasury Secretary Timothy Geithner said. “I commend the FTC for proposing a strong set of safeguards to protect consumers from these predatory practices.”  The proposed rule also would bar providers from telling consumers to stop communicating with their lenders or mortgage servicers. It would also require them to disclose to consumers that they are for-profit businesses, the total amount consumers will have to pay, that neither the government nor the lender has approved their services, and that there is no guarantee that the lender will agree to change their loan.

Geithner says no double dip

U.S. Treasury Secretary Timothy Geithner said yesterday that the risk the U.S. economy will slip back into recession is lower now than at any time in the past year, but that recovery will be slow and uneven.  Even though credit ratings agency Moody’s last week warned that anemic U.S. growth, on top of already stretched government finances, could put pressure on the country triple-A status, Geithner dismissed concerns that rising U.S. indebtedness might put pressure on the United States’ prized triple-A credit rating.  “Absolutely not,” Geithner said when the interviewer suggested rising debt levels could put pressure on the top-notch rating. “That will never happen to this country.”  Former Treasury Secretary Hank Paulson, however, says that reducing the federal budget deficit poses “the most serious long-term challenge” to the United States. He also says he realized as Treasury secretary it was tough to convince lawmakers to tackle controversial issues without a crisis.  Geithner claimed there were even some encouraging signs in Friday’s report on U.S. unemployment for January, which showed another 20,000 jobs lost but a dip in the unemployment rate to 9.7 percent from 10 percent in December.  He said the Obama administration is doing everything it can to enhance recovery prospects and played down chances that growth might stall and push the United States back into recession.

The EU debt crisis and us

“Sovereign debt panic” finally struck last week, causing severe one-day drops in stock markets from New York to London to Toronto on Thursday.  The epicentre of the crisis is Greece, in danger of defaulting on its debt payments to worldwide holders of its government bonds, or sovereign debt.  The world is awash in potentially unsustainable debt, and the U.S. looms largest. President Barack Obama just tabled a budget that projects a doubling in America’s national debt, to $28 trillion (U.S.), by decade’s end. That’s twice the size of the U.S. economy.  Yet it’s the EU who is threatening the wealth of all of us. If Greece defaults on its debts, and it’s followed by Spain and Portugal and possibly Ireland and Italy as well, then the collapse of Lehman Brothers in 2008 will seem like a mere blip.  It isn’t so much the risk of default by these countries themselves that is spooking the markets at the moment, but the possibility that a still-skittish financial system will succumb to another fear-driven contagion. 

Normally Greece would simply devalue the drachma, or allow the markets to do it for them, and that adjustment would rebalance the economy and eventually make it more competitive, while also raising the value of foreign liabilities and making the people poorer.  But that can’t happen, because Greece is part of the monetary union, and the euro is held up by Germany’s strength. There’s talk of Greece leaving the euro, or being kicked out, but that would just make matters worse: outside the euro Greece would go into a downward spiral, dramatically increasing the value of its euro-denominated debts and creating hyper-inflation.  While it’s hard to imagine any of these countries’ governments defaulting on their debts, restoring their budget balances is going to hold back their economic growth for a long time and lead to higher long-term government interest rates around the world.

Now on to our real estate investing educational section…

It is estimated over 95% of millionaires made their money from real estate. On the other hand, the average Realtor earns less than $40,000 annually. Why the discrepancy? Obviously it’s quite possible to make stellar returns from real estate yet each and every year plenty of people barely make ends meet even while working at it full-time.  Yet research shows that success in real estate doesn’t require full-time work, a large private income or many of the other trappings of success typically associated with wealth creation from other venues. In fact, plenty of part-time investors far outperform fulltime real estate associates each and every year. Learn the secret of their success with these quick tips:

1. Accept Success – Seriously! Have you ever stopped to contemplate how easily most people accept failure or fate versus those that take responsibility for their own success? It’s quite remarkable when you stop to think about it. Understand that everyone is capable of making a success from short sale investments – but few people actually do so not because they are helpless but because they wait for help rather than forging their own path. When in doubt about what to do, first find a mentor and then…simple do it. IF it’s wrong you will learn from the experience but if not, you have made progress either way.

2.  Work at home when possible. Set a schedule then stick to it. Don’t allow distractions to clutter up your productive short sale investing time. Hire childcare if needed, find a reputable and reliable virtual assistant and then focus time and energy on building the foundation for your short sale empire by automating as much as possible.

3. Dump dumb rules. Simply your life and investing goals as much as possible. Sit down and think about how much time it takes you to argue with your spouse about some minor situation versus finalizing a deal or making offers on upcoming short sales. Re-evaluate what rules and roles dominate your day then eliminate those that don’t enhance your life.

4. Learn to say NO. Stop apologizing and don’t try to do it all yourself. It’s not in your best interest (or that of your family and friends) to tackle more than you are able to deal with on a regular basis. Leave space for down-time as well as impromptu activities. Short sale investments are especially prone to last minute maneuvers where those that win aren’t necessarily the most prepared but simply those in the right place at the right time.

5. List- Buy. The more you list the more they buy and vice versa…the more you buy the more you have to list as a short sale investor. It’s a numbers game so take action and automated it as soon as possible.  Increase your target marketing efforts on a regular basis; once you reach the desired number of homes, begin to switch your strategy to include more affluent clients.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2009.

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)

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

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

About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics

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

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

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

***********

“Strange New Automation Strategy Closes Short Sales

Fast and Easy in 2010! 

Think of it!  Our newly revised automatic system for finding and

closing short sales is letting people cut their  work-week in

half… and triple their income!

 

If you’re ready to say good-bye to endless hours of labor, and far too few dollars in return, find out more for fr-ee – no cost, no obligation.

Just click the link below to join our webinar this coming Tuesday

at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/623302963

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

More foreclosures coming 

The number of long-term adjustments completed under the president’s foreclosure prevention plan rose to 66,465 at the end of December, or 7.4% of all trial modifications started, up from 31,382 a month earlier.  Another 46,056 modifications are pending borrowers’ final signatures, according to Treasury statistics released Friday. Another 48,924 were denied permanent modifications, mainly because they did not make their trial payments on time, did not hand in the needed paperwork or did not meet the program’s criteria.  Meanwhile, the number of delinquent homeowners in trial modifications rose to 787,231, up from 697,026 a month earlier. 

Housing experts remain concerned that the rate of foreclosures still outpaces the help homeowners are receiving under the program. A record three million homeowners received at least one foreclosure filing in 2009, according to a RealtyTrac report released last Thursday.  A lot of borrowers are too far underwater or don’t have enough income to qualify for a permanent modification, said Celia Chen, senior director at Economy.com. Others will not be able to provide all the documentation needed.  Administration officials said they continue to review the program to make sure it is helping those in need, Chen said she doesn’t think there’s anything the government can do to keep these borrowers in their homes. “As more of these loans fail to make it to permanent modifications, a lot will go back on the market as foreclosures and that will depress home prices,” said Chen, who expects home prices to fall another 10% by the third quarter of this year.

President and Democrats trying to whip up populism in Massachusetts

The Democrats and the White House are scrambling to salvage the special U.S. Senate election in Massachusetts by trying to whip up a populist furor over banks.  Amid reports that financial institutions bailed out by the government are enjoying healthy profits and paying generous bonuses, and as a bipartisan commission began hearing testimony on banks’ role in the economic crisis, Senate candidate Martha Coakley (D), Vice President Joe Biden and others used the issue to portray Ms. Coakley, who is vying to succeed the late Edward Kennedy, as tough on bank executives and Republican Scott Brown (R) as coddling them.  This sort of anti-bank populism was popular in the 1930s by demagogues like Father Coughlin, but rarely has a president engaged in this sort of bareknuckle politics to save his agenda.  Polls show declining voter enthusiasm for Mr. Obama’s health-care plan, and Brown has campaigned on a promise to provide the 41st GOP vote to secure a Senate filibuster to scuttle a health-care bill. 

Democratic strategists concede Mr. Obama’s support in the past for a Wall Street bailout has fueled voter anger, particularly among conservatives and supporters of the antiestablishment Tea Party movement who are pouring money and volunteer hours into Mr. Brown’s race.  With the bank tax, “we can take populism back to our side,” a Democratic Party strategist said.  Mr. Brown he opposed the tax because it would most likely be passed on to consumers through ATM fees, among other things. He said banks would have to pay a hefty tax rather than use the money to extend much-needed loans to small businesses.  “If you’re having an uphill battle selling health care in a blue state like Massachusetts, that should send shivers down the spine of Democrats looking at races across the country,” said Brian Walsh, a spokesman for the National Republican Senatorial Committee.  A new Suffolk University poll finds Republican Scott Brown leading Democrat Martha Coakley, 50% to 46%. If Brown wins, ObamaCare dies. He would be the 41st vote to prevent any compromise legislation from coming to the floor of the Senate.

Questionable practices by banks on second liens?

Diana Olick of CNBC has exposed an alleged practice by banks to recoup second mortgages by demanding cash, off the HUD settlement statements, from either real estate agents or the buyers in short sales.  Olick says she has personally heard a recording of a phone conversation between a short sale real estate agent and a second lien lender, during which the second lien lender clearly asked for cash outside of the settlement and threatened to kill the deal without it. “AGENT: Well yes, I don’t want to lose my license, go to jail, I mean, I have to sign…  LENDER: You’re not going to lose your license – we have plenty of realtors who do this, who actually understand how this whole process goes – and they realize that OK, if I want to get this done, this will take place.” 

When asked about the practice, these are the replies from three of the biggest banks:  JP Morgan Chase simply answered, “No Comment,” Bank of America denied the practice, and Citi ’s reply was interesting: “We work very hard to help distressed homeowners find solutions for their financial challenges. In our attempt to amicably resolve the debt, we will generally negotiate a reduced settlement with the homeowner in order to release a second lien. Unlike some lenders who refuse to reduce the payoffs on second liens, we choose to reduce the payoff amounts in some situations to assist the borrower. We do not provide instructions to settlement agents on how to fill out the settlement statement or any other closing documents, and we certainly do not require settlement agents or any other parties to violate applicable laws.”

House List Prices Down 1% in December

Altos Research’s listing price index declined 1% in December and 1.4% during Q409, but the 10-city composite price index was up 5.2% for the year, the company said, adding it projects asking prices to continue to decline during the winter 2010 months.  The average listing price decreased to $494,426 from $499,267 from November to December. The index took a bigger monthly drop in December than it did in November, a result of the season decline in sales activity, Altos Research said.  Miami was the only market of the 26 that Altos Research measures that experienced a gain in listing prices. San Diego and Salt Lake City experienced the greatest listing price declines, down 4.3% and 3.5% respectively. 

Inventories also declined in 24 of 26 markets, the largest drops in Boston and the California markets of Los Angeles, San Francisco and San Jose. New York (2.1%), and Phoenix (0.7%) experienced the only increases for the markets covered. The 10-city composite experienced a 5.1% decrease in listing inventory.  All markets except San Francisco (99 days) had a median days on market of 100 or more days in December. Miami had the slowest turnover with a median of 247 days, more than eight months. The days on market for the 10-city composite was up 8% to 166 days.  The Altos Research study includes existing single-family homes and does not measure condos, town homes or new construction. Each market measured uses results from Census Bureau Metropolitan Statistical Areas (MSA).

Now on to our real estate investing educational section…

In the Know…Startling Starts & Other Frightening Facts

Information is power so it should come as no surprise that savvy short sale investors make a point of staying in the know. Today the ShortSale blog is reporting on startling starts and other frightening facts that should motivate even the strongest procrastinator to begin shopping for short sale deals in earnest.

Housing Starts

Housing starts have traditionally been a lagging indicator for the real estate market but it is a delicate balance at best. On one hand the population continues to grow even as older homes become obsolete. Data recently released by HUD indicates the number of housing starts at the end of 2008 were a mere 905,000…the lowest in recorded history. In fact, the last time housing starts approached this level was in 1975…since then we’ve added several hundred millions to the population. It should also be noted, the late 70’s and early 80’s were marked by rapidly rising interest rates and tremendous price jumps in the rental market. Short sale investors should take note and position themselves for potential gains. Remember, history may not always repeat itself but it often rhymes.

Not Privately Built

For those that point to private builders as possible rationale for the low number of housing starts, it should be noted the number of new privately owned housing units completed has also fallen to one of the lowest rates in recorded history – barely topping 1,119,700 by the close of 2008. In contrast, 1982 recorded the absolute lowest number of private completions with only 1,005,000 yet again reflecting a higher percentage of the total population.

Not Manufactured

Forget manufactured homes – sales are so dismal the entire industry is facing possible ruin. In fact, sales and shipments are so lackluster they are but a fraction of former years with a mere 82,000 units shipped in 2008. Compare to 378,000 ten years ago, it’s easy to see manufactured homes are not picking up the slack when it comes to affordable housing alternatives.

Bottom Line: Although the number of delinquent properties and shadow inventory continue to rise, early indications seem to point toward a day of reckoning in the future. Once existing inventory is purchased, expect a significant lag time to meet growing demand. Currently distressed homeowners have reduced expenses, moved in with family members and made other temporary arrangements in the hope of “riding out the storm” but short term solutions will eventually give rise to the need for permanent housing. The statistics speak for themselves, inventory is no longer growing sufficiently enough to meet long term need. Position yourself for profitable opportunities both today and tomorrow by using short sales to build a long term portfolio from the proceeds of short term profits.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2009.

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.realestaterichesnews.com/news (subscribe to this newsletter)

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

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

About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

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

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

***********

FixAFlip Encore This THURSDAY at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/844637394

 

Here are just a few reasons to get on this webinar ASAP…

 * No more worrying about “seasoning requirements,” like

  Bank of America’s 30-day holding period.

* No up-front capital – the deal qualifies, not you. It’s

  literally: no money, no credit, no problem!

* No more fears about getting tied up with loans from hard money

  lenders that require personal guarantees.

 

Truth is, you’re going to be unstoppable when you apply this

new concept to your investment strategy. 

So click on this link now and we’ll see you tonight:

https://www2.gotomeeting.com/register/844637394

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

Option ARMs feeding foreclosures

There are no specific numbers on how many option ARM loans there are. But analysts estimate that as many as 1.3 million borrowers took out $389 billion in option ARMs in 2004 and 2005 alone.  Many of those option ARM loans have already re-adjusted to higher payments, but more are on the way. Some 88 percent of Option ARMs originated between 2004 and 2007 are going to adjust higher between now and 2012. Those option ARM borrowers could see their housing bills go up as much as 63 percent, according to Fitch ratings.  “It’s going to kill off housing,” warns Patrick Pulatie, CEO of Loan Fraud Investigations, a predatory lending audit firm. “We have pretty close to 500,000 option ARM payments going higher in California over the next couple of years. The impact of the higher payments will be devastating for homeowners who are having trouble now making ends meet.” 

As the terms of those mortgages now readjust, homeowners are facing much higher mortgage payments at a time when the value of their house has plummeted and many are out of work. In some cases, homeowners who chose a very low starting interest rate have actually seen the overall amount of their mortgage increase—known as negative amoritization—putting them even deeper in debt.  “Option ARMs have been a disaster from day one and a lot of them have already defaulted,” says Greg McBride, senior financial analyst with Bankrate.com. “This is a very big issue because interest rates are rising.

And there’s more misery. If the Fed increases rates in the months ahead to fight inflation, rates tied to option ARM indexes will rise further—causing more payments to adjust up even sooner. And while Option ARM borrowers might want to re-finance, they often can’t because of falling home values and tighter credit restrictions.  “I don’t see how the option ARM problem is not a huge issue,” says Sylvia Alayon, vice president and director of operations for the Consumer Mortgage Audit Center, which provides auditing services to advocacy groups. “This is a major hit for housing. It will continue to feed the excess supply of housing with more foreclosures.”

What caused the housing bubble?

In a monthly survey of business economists by the  Wall Street Journal, 42 said low interest rates were partly to blame for the housing boom while 12 sided with Mr. Bernanke, who said they weren’t. Academic economists who specialize in monetary policy were split in a separate survey: 13 said low interest rates helped cause the housing bubble; 14 said they didn’t.  Mr. Bernanke laid out his defense of Fed policy in a speech to the American Economic Association last week, acknowledging that interest rates were very low but adding that policy “does not appear to have been inappropriate.” Other factors — notably an explosion of exotic mortgages and a flood of cash coming into the U.S. from abroad — were the crucial drivers of the housing bubble, he said. “Regulatory and supervisory policies, rather than monetary policies, would have been more effective means of addressing the run-up in house prices,” he said.  The “basic problem” was “the mistake” of raising short-term interest rates too slowly from 2004 through 2006, said Miles Kimball of the University of Michigan. “Going up quicker would have been better.”  “The appreciation of house prices was but one of many indicators which called for a somewhat more restrictive interest-rate policy” in 2004 and 2005, said Marvin Goodfriend of Carnegie Mellon’s Tepper School of Business.  Many economists met Mr. Bernanke halfway — arguing that low rates played a role in fueling the housing boom, though they may not have been the key force. Some noted that low rates encouraged banks to write the riskier loans that Mr. Bernanke puts at the center of the crisis.  “There is plenty of blame to go all around,” said Martin Eichenbaum of Northwestern University, expressing a commonly expressed view. “Loose monetary policy certainly contributed to easy financing, which was one element of the bubble.”

DSNews.com – Short sales are the answer

The Obama administration continues to search for a solution for homeowners facing foreclosure, but the reality of the situation is only about 4 percent of these at-risk homeowners receive long-term mortgage help.  Nearly 2 million housing units in the United States are in foreclosure or are bank-owned, and more are expected to follow, RealtyTrac said. Citigroup experts say the government’s current solutions have been ineffective at keeping people in their homes, and they anticipate lenders could foreclose on another 8 million loans as the economy worsens.  According to the National Association of Realtors, almost 500,000 transactions in 2009 were short sales, representing almost 10 percent of all home sales.  Banks are beginning to go along with short sales in increasing numbers, Bloomberg.com says.

According to the article, short sales almost tripled to 40,000 in the first six months of 2009, compared to the same months in 2008. However, according to data from the Office of Thrift Supervision and the Office of the Comptroller of the Currency, in the first half of 2009 there were 25 foreclosures started or completed for each short sale transaction. “It’s really finally dawning on banks that they’re better off with a short sale,” said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. “I think banks were in denial.”  The Obama administration is also advocating short sales as an alternative to foreclosure. As DSNews.com reported, the Treasury Department recently laid out finalized guidelines for carrying out short sales under the Making Homes Affordable program. Under the Home Affordable Foreclosure Alternative (HAFA) program, the administration is urging participating servicers to follow through with short sales as an alternative to foreclosure for homeowners who do not qualify for a modification under the Home Affordable Modification Program (HAMP).

Bank revenue  slumping?

Analysts at J.P. Morgan and Morgan Stanley issued reports on the banking industry yesterday in which they estimated that investment banking revenues had suffered in the final three months of last year.  J.P. Morgan’s report forecasts an average 27% decline in fourth quarter fixed-income revenues, with some banks such as BNP Paribas, Credit Suisse AG and Goldman Sachs Group Inc. expected to report a more than 30% fall in earnings from their fixed-income divisions for the period.  The fall is blamed on a continued drop in market volatility, which has reduced the profitability of credit and rates trading businesses that had been benefiting from record high bid/offer spreads earlier in the year.

Equity revenues are also forecast to decrease for similar reasons, with the report predicting an average 11% fall in earnings from the business.  Morgan Stanley’s analysts expect leading banks, such as Bank of America Merrill Lynch, Citigroup and J.P. Morgan to report a drop of between 22% and 41% in trading revenues from fixed income, currencies and commodities, with overall trading revenues forecast to fall by as much as a quarter.  The report comes on the heels of news that Obama may raise taxes on ALL banks, regardless of whether they received funds from TARP.  “Imposing new taxes on top of the increased regulatory costs will weaken the industry, just when the industry is helping lead the economic recovery,” said Scott Talbott, chief lobbyist for the Financial Services Roundtable, a bank lobbying group.  The federal bailout program has always been a controversial topic, but news of executive bonuses now being awarded is throwing new fuel on populist anger.

Home Refinancing Demand up

U.S. mortgage applications rose during the first week of 2010, reflecting a surge in demand for home refinancing loans as interest rates dropped, data from an industry group showed on Wednesday.  Demand for loans to purchase a home, however, only rose marginally. A continuation of this trend would not bode well for the U.S. housing market, which has been showing signs of stabilization, but remains highly vulnerable to setbacks.  The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended January 8 increased 14.3% to 528.1. The index, however, pales in comparison to its year-earlier level of 1,324.8.  The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 6.4 percent.  The lowest mortgage rates in decades and high affordability helped the hard-hit U.S. housing market find some footing in 2009 after a three-year slump.  The MBA’s seasonally adjusted purchase index, a tentative early indicator of home sales, rose 0.8% to 213.7.  The seasonally adjusted index of refinancing applications increased 21.8% to 2,407.2.  The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.13 percent, down 0.05 percentage point from the previous week. The prior week’s rate was the highest rate since late August.

Interest rates, however, were above the year-ago level of 4.89% and an all-time low of 4.61% set in the week ended March 27, 2009. The survey has been conducted weekly since 1990.  The refinance share of mortgage activity increased to 71.5% of total applications from 68.2% the previous week. The adjustable-rate mortgage, or ARM, share of activity was unchanged at 4.0% from the previous week.  Cameron Findlay, chief economist at LendingTree.com in Charlotte, North Carolina, said mortgage rates should rise sharply this year, reaching 6.20% in the fourth quarter. The mortgage finance industry will likely see a continued slow-down in 2010 as unemployment remains high and home sales slide, the MBA says.

More magic job numbers

In the continuing saga of jobs “saved or created,” the president’s chief economic adviser now claims the economic stimulus program has boosted employment by 1.5 to 2 million jobs.  The Obama administration estimate includes both jobs directly funded by stimulus money, as well as those created indirectly by companies buying supplies for stimulus projects, people spending their stimulus tax cuts and the like.  The administration last month changed the methodology used to track stimulus jobs to cover all positions funded by stimulus money, not just those “created” or “saved.” It will also only report figures on a quarterly basis and not attempt to keep a running total. 

How one arrives at concrete numbers like these when all indications are that most people paid down debt with handouts is left unsaid.  The Romer report, by the Council of Economic Advisers, (named after Christina Romer, chair of the council) is likely to spark sharp reactions from the Obama administration’s critics who argue that the $787 billion package has failed to deliver on its promises.  The economy has continued to lose jobs despite stimulus – shedding 85,000 in December. The administration, however, maintains that things would have been much worse without the American Recovery and Reinvestment Act.  The Romer report comes as the administration pushes a second stimulus bill in hopes of boosting employment. The Jobs for Main Street legislation calls for spending $154 billion on highway and transit construction and on education to prevent states from laying off teachers. The bill would also extend the deadline to file for unemployment insurance and the Cobra health insurance subsidy until the end of June.  No doubt we’ll all have a good laugh in the coming days watching experts pull apart and dismiss the latest “estimates.” Republicans have become increasingly vocal that the Recovery Act is a failure. Pointing to the stubbornly high 10% unemployment rate, the GOP says the stimulus package has done little to boost the economy.

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

Closing Costs & Other Fees

If you are new to the short sale process the sheer volume of closing costs can come as quite a surprise; in fact, it’s not unusual to see closing costs and other fees add thousands of dollars to the total cost of a property. Although theoretically everything is negotiable, some fees are customarily paid by the seller and others by the buyer; either way, every short sale investor should fully understand what they are paying for.

Some of the most common closing costs include:

• Revenue Stamps
• Title insurance
• Title examination
• Survey
• Appraisal Fee
• Real Estate Agent commission
• Home Inspection
• Termite/Pest Inspection
• Recording fees
• Mortgage satisfaction fees
• Mortgage discount points
• Photographs
• Repairs
• Attorney fees
• Lead paint inspection, Radon inspection,
• Survey
• Recording fees
• Mail/Courier fees

Expenses that are commonly pro-rated include:

• Rents
• Utilities
• Taxes
• Assessments
• Interest on deposits, assumed mortgages or other associated funds
• Heating oil or gas
• Prepaid service contracts or extended warrantees
• Prepaid mortgage insurance and other escrow items
• Homeowner association fees

Since short sale investors are often forced to assume the full responsibility for all closing costs when originally purchasing the property, it’s not unusual to reduce the purchase price offer in accordance with anticipated fees and expenses. Properties with excessively high homeowner association fees, back-taxes or other liabilities are at an even greater disadvantage due to the need for higher than average out of pocket expenses. Short sale investors should make this work to their advantage by creating a list clearly delineating all costs to be covered in addition to the lowered bid offer. Remember, this is above and beyond needed repairs, deferred maintenance and other expenses.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

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

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

About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

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

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

***********

Apartment prices fall 3%, vacancies up 8%

The national apartment vacancy rate rose to 8% in the last three months of 2009, according to Reis Inc., a commercial real estate information provider. That is the highest level Reis has ever reported.  The vacancy rate barely inched up from the third quarter — just 7.9% to 8% — but it rose significantly from a year ago, when it stood at 6.7%. Even more dramatic, vacancies spiked 45% from the third quarter of 2006, when they had bottomed out at 5.5%.  According to Reis economist Ryan Severino the main culprit is the recession.  Not only do people lose their jobs during downturns, many others are afraid of being laid off. And they all feel pressure to reduce their housing costs.  “Household formation rates slow down during recessions,” said Severino. “They may move in with their families or rent larger apartments and partner up with friends. They partner with others much more then they do during more prosperous times.”  Occupancy rates did climb during the quarter, with nearly 10,000 more apartments being rented than had been three months earlier, according to the report. But vacancy rates still managed to climb because 28,000 newly constructed units hit the market. A total of 120,000 new apartments came online during 2009, the most since 2003. 

Americans borrowing less

Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amounts on records going back nearly seven decades.  The Federal Reserve said Friday that total borrowing dropped by $17.5 billion in November, a much bigger decline than the $5 billion decrease economists had expected.  November’s $17.5 billion drop in total credit was the biggest amount in dollars terms since records began in 1943. That represents an 8.5 percent fall from the October borrowing level. That was the biggest percentage drop since total credit declined 9 percent in May 1980.  The borrowing category that includes credit cards fell by $13.7 billion, an all-time record decline in dollar terms. The drop was 18.5 percent from November, the biggest decline in percentage terms since a 29.6 percent plunge in December 1974.  The Fed’s credit report excludes home loans and home equity mortgages, only covering borrowing that is not secured by real estate.  The drop in overall credit for 10 straight months was a record in terms of consecutive declines, surpassing the old mark of seven straight declines set in 1943 and again in 1991.  Americans are borrowing less for a number of reasons. They remain fearful about their job prospects and they are also trying to replenish depleted investments.

DSNews.com – Future of Mortgage Purchase Program?

According to minutes released this week of the Federal Reserve Board’s closed-door December meeting, Fed policymakers have already begun debating whether the program should be extended, to ensure the already-fragile housing recovery maintains its course, but the decision has left a dividing line down the central bank boardroom.  The Federal Reserve has said it will end its purchases of mortgage-backed securities (MBS) from Fannie Mae, Freddie Mac, and Ginnie Mae on March 31, but the decision wasn’t unanimous. Over the past year, the U.S. central bank has purchased nearly 75 percent of the mortgages that Fannie, Freddie, and Ginnie have securitized. It currently holds just over $900 billion of these MBS bonds, and says by the time the program ends it will have bought a total of $1.25 trillion.

On Wednesday, federal banking regulators, including the Federal Reserve, issued an advisory to the nation’s financial institutions, warning them to ensure procedures and practices are in place to minimize their risks from loans and an increase in financing costs when interest rates do rise.  The government has already moved to reassure the market that the Fed’s withdrawal of its support won’t have as big a sting as some fear. In late December, the Treasury pledged “unlimited support” to Fannie Mae and Freddie Mac, and lifted the mandate that the two companies begin selling off large chunks of the securities they hold.  But some investors aren’t convinced. Ronald Temple, portfolio manager at Lazard Asset Management, told the Wall Street Journal that if the Fed stops buying mortgage bonds, we should expect mortgage rates to rise by at least a full percentage point. He says that combined with high unemployment and still large numbers of foreclosures could push home prices down as much as 20 percent.

Redefault Rates ‘Tragic’, Says Amherst 

According to Amherst Securities Group, default and prepayment rates on non-agency, private-label mortgage-backed securities (MBS) were constant in November. However, re-performance rates, where payments return to less than two months delinquent, were down and re-default rates “tragic” in November, according to market commentary provided by the firm.  The Amherst report, based on November payment data covering 98% of loans backing private-label MBS, said cash flow velocity continued to decline.  Based on performance data, Amherst projects that always-performing loans fell to $905bn in November from $930bn in October, as first-time defaults came in at $16bn, from $16.8bn in October.

Prepayments of $8.3bn were unchanged from the previous month.  Re-performing loans totaled $117.3bn in November, down from $118.1bn in October. Loans totaling $12.8bn became re-performing in November by getting back within two payments delinquent, down from $13.4bn in October. Total non-performing loans were $484.8bn in November, from $486.1bn in October.  Re-defaults after modification were $12.8bn, or 10.9%, up from 10.5% last month.  Laurie Goodman of Amherst has said the fundamentals of certain modification programs put them at a disposition for unsuccessful modification. The Treasury Department’s Home Affordable Modification Program (HAMP), for example, is “destined to fail” as it does not address negative equity.

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

Price Impact on ROI

One of the most commonly used valuation models for single family homes and short sales includes the Return on Investment or ROI. Despite the ease associated with using this calculation, the ROI is a robust measure of investment value that is both quick and convenient. However, it is also subject to a high level of volatility based upon the price of the property and type of funding in place. In fact, ROI is so dramatically influenced by funding mechanisms it is frequently considered a cornerstone by investment advisors. Let’s take a look at a few hypothetical short sale situations to demonstrate the impact of price on the ROI as well as how it can be used to your advantage.

Cash is still king and it speaks louder than ever especially with tightening lending standards and other banking irregularities; however, one area where cash doesn’t hold up quite as well as the use of leverage is in the calculation of ROI or return on investment. Let’s assume a short sale investor opts to purchase a property in cash for $100,000. If the property generated a one year rental return of $10,000 the total ROI is a fairly straightforward 10% or perhaps the property was flipped for a $20,000 profit and thereby the ROI was a handsome 20%. Both are completely realistic examples and certainly above and beyond what stocks, bonds or other inferior investments are currently able to deliver but the total return is a bit misleading. This can be due to the cost of borrowing the money in the first place (ie, what interest rate is being paid on the funds borrowed or the “spread” of the borrowed interest rate versus the total ROI received). For example, if the short sale buyer took out a home equity loan or borrowed against a 401-k plan, the interest rate may be a very reasonable 3 to 4 percent versus a total return of 10% – leading to a “spread” or ROI of 6-7 percent.

On the other hand, some properties are truly purchased completely for cash so the entire ROI is theirs to keep…but is this always the best situation? Maybe-maybe not. There are a multitude of reasons to purchase a property for cash – not the least of which is the inability to obtain full financing on a distressed property, the ease and convenience of closing and the cost savings of not having to obtain PMI or other add-ons. However, there are very strong reasons to finance a property or use the maximum amount of leverage possible to maximize ROI. Going back to the former example, let’s assume you financed a property for 80% of the value…$80,000 of the total price of $100,000. You used $20,000 out of pocket and received the same $10,000 annual rental or flipped for a quick $20,000. Instead of a respectable 10% to 20% return, you will now realize an eye-popping 50% to 100% return on your investment!

Now let’s take this one step farther…how important is price when it comes to ROI? The final answer is “it depends”. Certainly buying right is a critical consideration in any short sale deal however, when using leverage, price becomes much less important due to the extreme rates of return generated. In the above examples, every $1,000 addition in cost reflects a significant gain or loss in the final cash ROI but in the leveraged position, paying an additional $1,000 for a property results in a paltry difference in the final ROI. Short sale investors should fully understand how to maximize ROI depending upon the price and funding source to be utilized for the deal. By doing so it is often feasible to pay more for a property while still maximizing the full profit potential of your portfolio.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

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

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

About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–