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Smart Real Estate News & Commentary by Chris McLaughlin October 25, 2010

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Bernanke takes foreclosure problems seriously

That’s always good to know.  Federal Reserve Chairman Ben Bernanke said Monday that a federal agency review of foreclosure procedures at the nation’s largest mortgage servicers should be completed next month.  “We take violations of proper procedures seriously,” Bernanke said in remarks prepared for delivery at a joint conference in Arlington, Va., with the Federal Deposit Insurance Corp. on Wall Street’s foreclosure procedures.  “I would like to note that we have been concerned about reported irregularities in foreclosure practices at a number of large financial institutions,” Bernanke said. “The federal banking agencies are working together to complete an in-depth review of practices at the largest mortgaging servicing operations.” 

“We are looking intensively at the firms’ policies, procedures and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures,” he said.   “Now, more than 20% of borrowers owe more than their home is worth and an additional 33% have equity cushions of 10% or less, putting them at risk should house prices decline much further,” he said. “With housing markets still weak, high levels of mortgage distress may well persist for some time to come.” Bernanke said the conference will also focus on results from the ongoing program by the Federal Reserve Bank called the Mortgage Outreach and Research Effort, or MORE.

Hiring outlook slightly improved

In its October industry survey, the National Association of Business Economics (NABE) said Monday that employment conditions improved in the third quarter to the highest level since the start of the 2008-2009 recession.  Looking ahead, expectations for hiring over the next 6 months rose to the highest level since 2006, according to the survey.  A little over half of the economists in the October survey expect gross domestic product, the broadest measure of activity, to expand by more than 2% this year, down from 67% in July.  While the overall employment picture appears to be getting better, the job market is expected to remain under pressure into next year.  Earlier this month, NABE economists forecast the unemployment rate to rise to 9.7% this year, and then fall to 9.2% by the end of 2011. Unemployment in the United States currently stands at 9.6%.  Still, the October survey showed the percent of respondents reporting a decline in employment fell to 12%, a large improvement from the 31% reporting declines a year earlier.  The survey also found that profits at U.S. companies are increasingly being driven by sales in overseas markets, suggesting the weak dollar continues to be a boon for exports. 

According to the survey, more than half of respondents indicated that some portion of their firm’s sales came from operations outside the United States, while 16% said that over half of their sales came from foreign sources.  Meanwhile, a majority of respondents believe current regulatory policies and federal taxes will be a drag on business next year. However, they also expect the Federal Reserve’s move toward more easy monetary policy will support business in 2011.  The private sector is still struggling to adapt to changes in the regulatory landscape after President Obama signed a sweeping financial reform bill into law earlier this year. In addition, Congress has yet to decide the fate of tax cuts that are set to expire at the end of this year.   At the same time, the U.S. central bank is widely expected to announce additional stimulus measures next month. Fed officials, including chairman Ben Bernanke, have signaled recently that the bank is prepared to pump more money into the economy by purchasing Treasuries.

Dollar falls after G20

The dollar fell toward a one-week low against the euro after Group of 20 leaders vowed to avoid weakening currencies to lift exports.  The yen approached a 15-year high against the dollar on speculation Japan will refrain from intervening in foreign- exchange markets. The Australian dollar was within two U.S. cents of parity with the greenback on prospects the G-20 pledge will calm trade tensions and the Federal Reserve may signal a second round of bond purchases at its Nov. 2-3 meeting, boosting demand for higher-yielding assets.  The dollar fell to as low as $1.4012 per euro, near its weakest since Oct. 15, as of 9:57 a.m. in Tokyo from $1.3954 on Oct. 22.

It declined 0.3 percent to 81.11 yen, close to its 15- year low of 80.85 which it touched on Oct. 20. The euro gained to 1.3672 Swiss francs, the most since Aug. 11, before trading at 1.3665 from 1.3632 on Oct. 22.  G-20 officials pledged to refrain from “competitive devaluation” and to let markets set foreign-exchange values as they sought to calm fears that a trade war may break out if nations use cheaper currencies to spur growth.  Officials called for more sustainable current-account gaps without embracing a U.S. proposal for targets, as they ended talks in South Korea on Oct. 23. The G-20 Seoul Summit will be held on Nov. 11 and 12.

Freddie – foreclosure pipeline slowing

Freddie Mac, one of the two government-owned entities that finance about half all US mortgages, says that homes are taking as long as eight months to work their way through its foreclosure pipeline, two months longer than was typical before the housing crisis began.  The delay is the result of more borrowers staying in their homes for months after foreclosure proceedings have begun, requiring Freddie Mac to evict them before it can put those homes back on the market.  Fannie Mae, the other government-owned mortgage finance company, declined to say how long its process took.  A record number of foreclosures is contributing to the slowdown, but so are mounting legal questions surrounding bank procedures to repossess homes from delinquent borrowers. Some 6.7 million homes are either in some stage of delinquency or foreclosure, and nearly 30 percent of all home sales are of distressed properties, according to Core Logic, a real estate data tracker. In some hard hit markets, such as Phoenix, Arizona, the number is far higher. 

“People understand that it’s difficult for lenders to get them out of their homes, and so they are staying longer,” said Mark Zandi, of Moody’s economy.com. “In the past, if you got an eviction notice, you were likely to leave quickly. Now people are staying until there is a sheriff at their door.”  Some sheriffs are refusing to evict homeowners, following disclosures in court depositions that banks flouted state laws by filing thousands of foreclosure documents without verifying the accuracy of the information they contained. A Chicago-area sheriff has ordered deputies to stop carrying out foreclosure evictions over concerns that banks may be reclaiming properties from the wrong people.  In the case of Freddie Mac and Fannie Mae, which together sit on more than 190,000 foreclosed properties, the process of getting distressed homes ready for resale can take months and cost millions of dollars. If borrowers still occupy the homes, Freddie Mac will offer them financial assistance with relocation, a program known as “cash for keys”. Eviction proceedings are a last resort.

Home sales jump 10%, but that’s not saying much

Sales of previously occupied homes rose last month after a dismal summer but remain well short of healthy levels.  The National Association of Realtors says sales grew 10% in September to a seasonally adjusted annual rate of 4.53 million. They were still down 19% from the same month a year earlier. August’s results were revised downward slightly.  High unemployment, tight credit and the prospect of future declines in home prices have kept people from buying homes. Plus, the prospect of lawsuits from former homeowners claiming that banks made errors when seizing their homes is making some consumers fearful about buying foreclosed properties.  The median sale price was $171,700, down 2.4% from the same month year ago.

Now for our real estate education section…

Out-of-State Listing Lawsuits Likely to Have Major Implications

Just when you thought things couldn’t get much worse in the real estate industry, comes the news that out-of-state listings are now in the limelight. As most of the nation is glued to the news about robo-signers and banking bail-outs, the little noticed headlines about out-of-state listings has failed to gain much attention. That doesn’t mean it’s not important. In fact, this little tidbit might have a more immediate impact on the average short sale or real estate investor than other events making the evening news night after night.

The Crux of the Issue

The out-of-state listing lawsuit(s) primary deal with sites like ForSaleByOwner.com and other flat-fee listing sites who place their listings on MLS related sites like Realtor.com or other MLS/Multiple Listing Service sites. This practice has become fairly common in recent years as a method to generate maximum visibility however regulators in states ranging from Alaska to Nebraska have issued cease-and-desist orders against at least one major broker in California who has used this strategy without being licensed in the named states. According to the states, only those with a current valid state license may negotiate listings, sales or purchase of a property or “….assist in procuring prospects”.  Traditionally, sites like ForSaleByOwner.com would pay a broker to list MLS properties in distant markets but other sites like Move.com objected since these properties were not represented by an agent or broker.

Potential Implications

What does this mean for the future of flat-fee sites? It depends. Certainly they are not in direct competition with major MLS listings as the majority of by owner and other flat-fee sites currently comprise a small fragment of the major market. However, without the ability to market via MLS listings, total viewership may remain so small as to create an early demise. Advocates of the current system claim the recent updates to state laws are not constitutional and do not apply because they are not providing real estate related services such as price negotiations etc., only a form of advertising for owners that wish to sell without the use of a Realtor.

Part of the problem comes in due to the templates used by MLS related sites such as Realtor.com which use language that repeatedly refers to the broker or agent which requires  a state license to conduct business in each state. Because this has already reached the federal level, experts believe it will have far reaching implications for states around the nation. Given the tax hungry status of most states, it is likely they will support anything designed to increase revenue including more stringent requirements toward licensing in order to post properties to the MLS listings. It would take a far sighted politician to realize that moving real estate is good for everyone. Critics claim this will lead to a situation of stagnation in the industry as a stringent interpretation will require 50 different state licenses in order to access 50 different MLS systems.

Bottom Line

If a state has laws on the books that can fine or prosecute people for performing the work of a real estate broker without a license and you place flat-fee listings on the MLS for that area, it’s time to start searching for alternative methods to make contact with prospective clients or work with a licensed broker. Realtor.com, the official National Association of Realtors site, is one of the largest and most popular MLS listings in the nation. Traditionally sites like ForSaleByOwner.com would pay a broker to list MLS properties in distant markets but other sites like Move.com objected since these properties were not represented by an agent or broker. In recent years the Federal Trade Commission/FTC has tried to force the MLS providers to adopt a more open and inclusive policy toward limited service and flat-fee brokers but critics point to this latest move as evidence of a tightening policy instead.

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 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
–

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

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HUD changes definitions

The U.S. Department of Housing & Urban Development (HUD) has announced changes to its Neighborhood Stabilization Program (NSP).  HUD will change how it defines foreclosed and abandoned to include properties in mortgage default and uninhabitable homes with lingering code violations. These expanded definitions, effective immediately, will increase the reach of NSP by allowing more properties to qualify, remove existing barriers caused by market conditions, and help state and local grantees to meet a Congressional requirement that they obligate all of their NSP1 funding by September of this year.  HUD previously defined the term foreclosed to apply only to properties where the foreclosure process was completed. Local communities suggested this narrow definition was not a good fit for market conditions since many properties were lingering in the foreclosure process and beyond the reach of NSP.

The original definition limited a grantee’s ability to intervene strategically when a lender initiates but does not complete foreclosure, or where a default is allowed to linger. In addition, many lenders are transferring properties to aggregators or loan servicers, which then arrange for final disposition. In some of these cases, the previous policy did not consider the properties to retain their foreclosed status after title is transferred to the aggregator or servicer.  Properties will now be eligible for NSP assistance if any of the following conditions apply: The property is at least 60 days delinquent on its mortgage and the owner has been notified; or the property owner is 90 days or more delinquent on tax payments; or under state or local law, foreclosure proceedings have been initiated or completed; or foreclosure proceedings have been completed and title has been transferred to an intermediary aggregator or servicer that is not an NSP grantee, subrecipient, developer, or end user.\

Dollar down 

The dollar fell 0.1% against the yen to ¥94.475 and 0.4% versus the British pound to $1.527. But it rose 0.1% to $1.348 against the euro.  “The March employment report confirmed that the trend in the U.S. job market and indeed the economy remains upward and onward,” said analysts at Forex.com in a report.  Still analysts said that much of the dollar’s strength against the euro is attributed to persistent worries over Greece’s stability.  “Credit default swaps for Greece, Portugal and Spain surged to recent highs this past week, just after the EU accord on Greece, which should serve as a reminder that EU credit concerns are still an issue,” analysts for Forex.com said. The British pound continued to enjoy a boost because of better-than-expected economic reports announced by the U.K. government last week.

But Forex.com said any major appreciation in the currency will be stifled ahead of the May general election.  Investors will be keeping a watch on China’s currency policy, which many economists believe has been artificially held down to boost Chinese exports and bolster its economy.  Revaluation of the Chinese yuan would be seen as supporting the global recovery by improving the export competitiveness of developed economies such as Japan or Germany, Forex.com analysts said.  Several economic reports are due out this week, including consumer credit and chain-store sales.

Here come taxes

The new Medicare tax on investment income and a rise in capital gains and dividend taxes means investors will soon face higher costs.  By 2013, investment taxes for wealthy Americans will rise to roughly 24% from the current level of 15%. The tax applies to roughly 1 million individuals who earn over $200,000 and 4 million couples who rake in more than $250,000.  While this group makes up just 2% of the population, it’s a far bigger driver of market activity than the other 98%. In addition, the higher rates aren’t tied to inflation, meaning middle-class Americans will eventually price into the group.  The psychological impact may be profound in the market. With the U.S. economy still reeling in the aftermath of the worst recession since the 1930s, investors have more reason to show caution in the near term.  “You’ll probably see more of a sideways pattern in the stock market over the next few years, but it’s a little muddy as to how the higher taxes might factor in,” said Linda Duessel, equity market strategist at Federated Investors. 

With some of the 2003 tax cuts expiring at the end of this year, wealthy Americans will likely see a boost in long-term capital gains taxes to 20% from 15%. Starting in 2013, they’ll also pay additional Medicare taxes – an extra 0.9% of their wage income and an extra 3.8% on investment income.   For many investors, the rally over the last 12 months only served to cut or erase the losses they racked up in 2008′s bloodletting. Having only just recovered some or all of their holdings, investors may see the threat of higher taxes as a catalyst to bail, said Ken Grant, partner at Waterstone Private Wealth Management.  “If you’re thinking of selling and you know you’re going to see a tax of 20% in 2011 and 15% in 2010, you’re going to sell ahead of the higher rate that’s coming,” Grant said.

Now on to our real estate investing education section …

Got Your iPad Yet? All the Reasons You Need to Order Now

By the time you read this, Apple will have released the much awaited iPad. For those fortunate few who pre-ordered months ago when the news was first released, congratulations! You are among the minority of advanced users and early adopters ready to enjoy the latest and greatest gadget for 2010. As for the rest of our readers who are trying to justify the right reason to purchase the iPad…here is the quick list of why it makes sense to splurge a bit.

1. It’s a business expense! iPad isn’t just another nifty little tech gadget by Apple…this one actually has some stellar productivity applications designed expressly for real estate agents, short sale investors and others. Zillow.com has already announced the launch of their application for complete iPad integration including the ability to perform photo-drive search, browse city/neighborhood while viewing listings side by side, preview homes and drop into a favorites file…all on an extra large screen. 

ZipRealty wasted no time in launching their own version with listing and sold data for 4,000 cities across the nation. Add in a few subscriptions to business magazines and you have a solid incentive to save time, money and take a much needed tax deduction.

2. Cool. Seriously, it’s the hottest tech toy of the season expected to out sell the Kindle as well as Nook. Not really interested in an e-reader? Don’t worry, the iPad is expected to have plenty of other applications including the ability to watch/share movies, music, games, email, surf the web and take advantage of 140,000 iPhone apps. By combining elements of e-reader, phone and netbook…the iPad is expected to become “the” work tool for tech savvy professionals.

3.  Virtual Meetings via Webex. Yes, you read right. The iPad combined with Cisco is expected to provide anytime/anywhere virtual meetings via WebEx. View documents, join a two-way audio conversation and much more on the road or anywhere you need to be.

4. Unlocked. We love unlocked. No contract for the 3G plan and as of this reading, you should be able to use it on any network.

5. View Photos on the Go. Add a camera accessory to the iPod to upload and view photos on the go including impact potential for those short sales properties in need of instant upkeep and a lender reality check!

Now for the basics; starting price is $499 and up to $829 for all the bells and whistles. It sports a 9.7 inch display screen, superb battery life and a slew of accessories sure to keep even the most dedicated technophile satisfied.

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
      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/ 

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

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

********************************************************
The Return of the Short Sale Sensei: Ninja Negotiation at Its Best

She was one them.

She’s dined with them.  Had drinks with them.  And went over to birthday

parties at their home.  If there’s a secret that loss mitigators have, she knows it.  She was one of them, after all…for 15 years.

Until now.

Join us for the Return of the Short Sale Sensei and learn how to utilize

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Olick – Now we all pay

Diana Olick’s latest column puts “principal writedown” in perspective:  “The government is officially giving borrowers back home equity. Yep, somewhere between $35 and $50 billion worth. Of course we’ve all lost over $5 trillion, but who’s counting? Lenders still aren’t required to do it, but they’re going to get an awful lot of taxpayer-funded incentives to do it…Let’s face it, the underwater issue (that is borrowers owing more on their loans than their homes are worth) is now far bigger than the subprime issue and the unemployment issue.  Yes, it’s concentrated heavily in five states, but it still manages to plague home prices nationwide.  People are walking away in greater numbers than ever before, and people who want to stay are unable to get into modification programs because of their overwhelming negative equity.  Yesterday, before the House Oversight Committee, Treasury Secretary Herb Allison said his concern with principal write down was 1) expense, 2) fairness, and 3) moral hazard. I asked him this morning what had changed overnight?  ‘The moral hazard aspects are mitigated by the structure of the programs.’   I’m not entirely sure what that means, although I’m sure many smart people behind closed White House doors came up with that exact phrase. I guess it means that because borrowers and servicers have to earn the write down incentives over three years that it’s fair.  Or maybe because it helps keeps borrowers out of foreclosure, thereby stabilizing home prices around them, that it’s fair. Or maybe because the servicers and investors have to bear some cost, that it’s fair. Maybe it’s just that there is simply no other way to get ourselves out from under this mess than to forget all the bad choices some lenders and borrowers made and give them a fresh start. And for those of us who acted responsibly? No pain no gain.  As I tell my kids every day, life isn’t fair.”

DSNews.com – More foreclosures comin 

According to the latest Mortgage Metrics Report from the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), performance of home mortgages serviced by the largest national banks and federally regulated thrifts declined for the seventh consecutive quarter in the fourth quarter of 2009.  The overall percentage of current and performing mortgages fell to 86.4 percent at the end of last year, driven by an increase in mortgages that were 90 or more days past due. Prime mortgages, which make up two-thirds of the mortgages in the portfolio, continued to have the greatest increases in delinquency.  Overall, servicers implemented more than 594,000 new home retention actions during the fourth quarter, according to the report. That included 259,410 new trial plans initiated under the Home Affordable Modification Program (HAMP) and 21,316 existing trial plans converted to permanent HAMP modifications. The actions also included 102,102 loan modifications, 94,667 trial plans, and 116,600 payment plans for borrowers who did not qualify for HAMP.  The number of new home retention actions was more than twice the number of new modifications during the same quarter a year ago.  More than 82 percent of all modifications implemented during the fourth quarter of last year reduced borrowers’ principal and interest payments, and all HAMP modifications reduced monthly payments. Most HAMP modifications decreased borrowers’ monthly payments by 20 percent or more, according to the regulators’ report.  Loan servicers report that they “expect new foreclosure actions to increase in upcoming quarters as alternatives to prevent foreclosure are exhausted and a larger number of seriously delinquent mortgages slip into foreclosure,” the report said.

“No, I don’t want to pay the same mortgage anymore”

New plans to push lenders to offer principal forgiveness and originate Federal Housing Administration (FHA)-backed refinance mortgages are leading borrower advocates to argue that the program isn’t enough to entice lenders and servicers to participate. Additionally, industry players are concerned over the potential moral hazard the initiative potentially presents.  Under the terms of the voluntary program, lenders will be required to write down at least 10% of the mortgage principal for borrowers who are current on their payments.  The program is open to borrowers whose mortgage isn’t currently insured by the FHA. The principal reduction must bring the new FHA loan to value (LTV) to 97.75% and make the new payments account for 31% of the borrower’s monthly income. The program also offers incentives to lenders who offer borrowers with second lien mortgages similar principal reduction and refinance options. The maximum allowed LTV of the combined loans is 115%.  Lee Howlett, president of mortgage technology and service provider ISGN’s servicing practice, believes the industry would have been better served had the principal forgiveness incentives been implemented from the start.  “It’s frustrating in the sense that the people that have gone through some kind of modification, now come back and say I want my principal reduced,” he said. “Every time you announce a program six months after the old one, you run that risk of everybody that’s in the midst of a current trial modification to quit.”  Another lingering question what valuation method will be used to determine the LTV of the underwater borrower.  For my part, I’d like to know:  has the world gone insane 

Consumer Spending Rises 0.3%

The Commerce Department said spending increased 0.3% after rising by a slightly downwardly revised 0.4% in January. Consumer spending in January was previously reported to have increased 0.5%.  Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of U.S. economic activity, to increase 0.3% last month.  “I guess the big takeaway is that consumers are comfortably consuming again. We have positive numbers five months in a row since October, which I guess is a good sign,” said Chris Low, chief economist at FTN Financial in New York.  Consumer spending rose at a modest 1.6% annual rate in the fourth quarter, slowing from 2.8% in the prior period, according to a government report on Friday.  Spending adjusted for inflation rose 0.3% last month, adding to a 0.2% increase in January.  Personal income was flat following January’s 0.3% rise, where markets had expected incomes to edge up 0.1%.  Payrolls of goods-producing industries fell $3.5 billion in February after increasing $5.2 billion, while manufacturing slipped $1.4 billion following a $5.0 billion gain.  Real disposable income was flat last month after falling 0.4% in January. With no income growth, savings fell to an annual rate of $340 billion, the lowest level since October 2008. The saving rate slipped to 3.1%, also the smallest rate since October 2008, from 3.4% the prior month.  The data also showed the personal consumption expenditures price index, excluding food and energy, rising 1.3% in the 12 months to February. The index, which is a key inflation gauge monitored by the U.S. Federal Reserve, increased 1.5% in January.

VAT coming?

On page 146 of President Obama’s 2011 budget, under a table displaying a future of big deficits and mounting debt, is a notification that the Administration is creating a “Fiscal Commission” to “achieve sustainability over the long-run.”  With those bland words, the Administration is acknowledging that the immense weight of the national debt poses a dire threat to the economy, unless America takes radical action. Yet with the signing of the $931 billion healthcare overhaul, fixing future budget problems becomes far more difficult. The reform will immensely swell the amount of federal borrowing, even while the Administration touts the bill as a model of fiscal responsibility.   Only one tax can raise the revenues needed to escape a ruinous rise in debt: a European-style Value-Added Tax, or VAT. “The healthcare bill makes the logical case for the VAT stronger, because it’s not clear that Congress will make the difficult spending reductions the bill mandates,” says William Gale, an economist with the Brookings Institution. “The Fiscal Commission will give significant support for a VAT,” says Brian Riedl of the conservative Heritage Foundation.  Both Riedl and Gale agree that a VAT would most likely be enacted in the wake of a crisis, in which Asian and other foreign investors dump our debt, causing the dollar to collapse and interest rates to soar.  Gale thinks such a crisis is “a low probability event,” but still possible. He adds that a Ross Perot-style politician could champion the VAT, and possibly win broad populist support for it. Riedl believes a debt crisis is a big possibility if the U.S. continues to shun the spending reductions he favors. For now, the VAT doesn’t have much political support. But it’s virtually certain to become perhaps the most hotly debated budget issue of the next few years, precisely because of health care reform.

Now on to our real estate investing education section …

Three Safety Measures for Every Investment

If it feels like earning great returns on your investment dollar has been getting more difficult than ever – it’s not your imagination. Rising unemployment, escalating taxes and printing presses on overdrive paint a bleak picture for average American households. It seems everyone is out to take what little you are able to earn. To add insult to injury, if you do manage to set aside a little from your meager earnings it’s all but impossible to obtain anything more than the most miserly yield from a savings account, money market or certificate of deposit.

Of course, declining wages and shrinking interest rates aside…the cost of living for most people has continued to spiral out of control. Despite the hedonistic adjustments that create the current “official” rate of inflation, Americans sit stunned as they watch college costs rise by over six percent annually, healthcare expenses experience double digit increases and energy/food expenditures outpace earnings.

So, where can investors find new sources of income capable of creating the type of returns needed to keep up with the current rate of inflation and cost of living? Fortunately short sales still provide yields you can actually live with flexible terms and expert resources that benefit the “little guy”.

It might not be exciting…after all, you won’t read headlines about the guy next door doubling his income thanks to short sales…but it is effective and isn’t that what really counts in today’s tough economy? For those that are more interested in keeping pace with life’s rising cost rather than impressing other people, short sales provide the three critical safety measures every investment must have in today’s hostile financial arena:

1. Downside Protection. Remember the old Wall Street saying that investors should care more about the return OF their principal than a return ON their principle? Unlike ultra-risky stocks and bonds that can fall to the mercy of big banks and other bail-outs, short sale investors have a strong grasp on the state of their principle at every turn. Since everything is secured by physical assets, there is little need to worry whether or not your investment will be there a week or a year from now. Because you are buying at the bottom, there is little concern over an economic slowdown…in fact, that’s just another buying opportunity for those that master the skill of short sale survival.

2. Secure Immediate Returns. Short sales afford a solid and immediate income stream. Why wait for an income to trickle in even while the entire economy teeters on the brink of uncertainty. Savvy investors expect investments to generate a return right away…not some promise of future profits. Once you earn a return then use the money as you see fit – fund your needs right now or reinvest for even greater profits. Think you can find this in most bonds, cd’s or money market accounts? Better think again. Aside from a token amount that justifies the use of the term “investment”, the reality is they can’t compete with short sale returns when it comes to generating immediate profits.

3. Appreciation. There is certainly nothing long with a long term earning potential …in fact, everyone needs to set aside something toward the future and rising appreciation values are still one of the most valuable forms of profits thanks to favorable Capital gains taxation. Don’t fall for the myth that you must choose between short term profit versus long term profits…short sales can do both when properly structured.

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
      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
–

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********************************************************
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Mortgage reform: What is to be done?

Over the past 18 months, the government has taken extraordinary steps to keep the housing market viable.  Home sales reversed their four-year descent, and prices stabilized.  So far.  But it has cost $126 billion to date, and the bill is still growing.  What’s next?  With the Obama administration largely mute on the issue, Congress will hold its first hearing today about how to restructure the mortgage system in the wake of the financial crisis.  “Don’t make the American taxpayer responsible for handling speculative situations or bubbles,” he said.  Rep. Spencher Bachus, ranking Republican on the committee, said in a subsequent CNBC interview that he would prefer government exit the industry entirely.  “We need to phase it out over time,” he said. “America is about competition and innovation. The federal model simply is not the efficient model.”  Working out a new system is likely to take years. For the time being, the market is still resting on three government pillars: Fannie, Freddie and the Federal Housing Administration.  And even staunch free-market advocates who want to get rid of Fannie and Freddie in the long run agree that the housing recovery remains too fragile for the government to step away anytime soon.  “The first priority is we have to keep financing homes, and we don’t have a way to do that without Fannie and Freddie,” said Peter Wallison, a senior fellow at the conservative American Enterprise Institute. “We have to deal with the realities of where we are today.”  Since the government took over Fannie and Freddie, Obama officials have given few details on their long-term thinking, apart from saying that they want to delay a legislative proposal until next year.

DSNews.com – short sales now number 1

According to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions, last month distressed properties – those involving homes acquired as part of a foreclosure or pre-foreclosure sale – accounted for 48.1% of the home purchase transactions tracked by the survey.  The February numbers were up significantly from the 37.3% level recorded as recently as November. It was also the highest distressed property market share seen since last July.  Stepped up government efforts, including temporary foreclosure moratoriums and a push to qualify more financially troubled homeowners for mortgage modifications, temporarily reduced the number of distressed properties coming on the housing market in the fall and much of this past winter. But now a growing number of distressed properties appear to be hitting the housing market.  There are three major types of distressed properties: damaged REO, move-in ready REO, and short sales. During the period from November to February, sales in all three categories rose. Damaged REO grew from 12.3% to 14.4%; move-in ready REO grew from 12.6% to 16.6%, and short sales grew from 12.4% to 17.1%.  “Short sales now account for the No. 1 category of distressed property,” commented Thomas Popik, research director for Campbell Surveys. “Losses on short sales are typically lower than for REO, and both lenders and the government are pushing programs to facilitate short sales. But as more and more people default or simply want to walk away from their properties, mortgage servicers are having trouble expeditiously processing these complicated transactions.”

More regulation needed

Philadelphia Federal Reserve Bank President Charles Plosser said yesterday that better regulation is needed to dissuade financial market players from taking excessive risks after the “too big to fail problem” undermined discipline.  “The too big to fail problem has essentially removed much of that market discipline,” Plosser told an economic conference in Prague.  “We have to have ways of disciplining the actors in the marketplace so that they don’t take excessive risks, and in many cases the market can do that and do that quite effectively.  But when we protect creditors, when we protect people from failure, we encourage them to take risks.” Bernanke made clear at the weekend that large financial firms continued to play a crucial role in the global economy, and Plosser said different, but not necessarily more regulations were needed. “Government regulation and government oversight will never replace the marketplace officially … when there is regulation they will look for ways around that regulation in order to be successful,” he said.  “We will always as regulators be behind that curve. The only way we can be effective in protecting financial stability is to have regulations and rules that complement and encourage more market discipline, not replace it.”  If only things were as simple as adding more bureaucrats.

DSNews.com – seven more banks fail

The FDIC’s failed bank list jumped to 37 for the year after seven more community banks fell over the weekend – three in Georgia, and one each in Alabama, Minnesota, Ohio, and Utah.  Appalachian Community Bank in Ellijay, Georgia had 10 branch locations, with $1.01 billion in total assets and $917.6 million in deposits.  Bank of Hiawassee, based in Hiawassee, Georgia, ran five branches and had $377.8 million in assets and $339.6 million in deposits.  Century Security Bank in Duluth, Georgia operated two branches and had $96.5 million in assets and $94 million in deposits.  First Lowndes Bank in Fort Deposit, Alabama was a four-branch institution, with $137.2 million in assets and $131.1 million in deposits.  Minnesota’s State Bank of Aurora operated out of a single branch office. It had $28.2 million in assets and $27.8 million in deposits.  The single branch of American National Bank in Parma, Ohio had approximately $70.3 million in assets and $66.8 million in deposits.  Bank Corp. in Draper, Utah, had $1.6 billion in assets and $1.5 billion in total deposits.

Goodbye to Acorn

The Association of Community Organizers for Reform Now 

(ACORN) will no longer darken our doors nationally, after a meeting of the board over the weekend.  The fate of the local branches remains unclear. Although the majority will cease operation on April 1, as the non-profit continues to look for ways to settle its debts, some may rebrand themselves and operate around under a different name.  In an e-mail sent to reporters, ACORN said: “[We] have a great deal to be proud of — from promoting homeownership to helping rebuild New Orleans, from raising wages to winning safer streets, from training community leaders to promoting voter participation— ACORN members have worked hard to create stronger to communities, a more inclusive democracy, and a more just nation.”  ACORN began a turn for the worst when, in September, videos emerged online of ACORN workers allegedly giving some fraudulent advice to filmmaker James O’Keefe and his associate, Hannah Giles.  House Republicans last year began an investigation into how Acorn’s political arm was funded. Republican investigators on the House Oversight and Government Reform Committee determined that “there were no firewalls” between Acorn’s federally subsidized housing activities and its political wings, said Kurt Bardella, a spokesman Rep. Darrell Issa, the top Republican on the committee.  Officials of Acorn Housing, created by the main Acorn group in the mid-1980s, have said they had a separate board and budget, though the two organizations shared office space in some cities. Congress last year cut off federal funding for Acorn Housing. Federal money last year provided about three-quarters of the group’s budget of $24 million.  A large offshoot formerly known as Acorn Housing, which counsels low-income homeowners, has changed its name to Affordable Housing Centers of America and plans to continue operations.

Now on to our real estate investing educational section…

Fix that Foreclosure Next Door

Few things are more frustrating than trying to sell a home that sits beside a vacant foreclosure; would be buyers can be frightened away by overgrown lawns, vacant homes and a property that looks abandoned.  Here is what you can – and can’t – legally do to protect your own property values.

1. Buy the Property Yourself. Perhaps the first line of thought for a short sale investor is whether or not this represents another buying opportunity! In many cases the answer is a resounding yet. Even if you decide to purchase the property yourself, that doesn’t mean it can be ignored. Use the following tips to address urgent issues in order to maximize the successful sale of your current property in the interim.
2. Notify the Contact Person or Organization. Call the Clerk of the Court to find out who is currently responsible for the property; file a written request outlining the problem and specifying what needs to be performed in order to properly maintain the property. Not only is this helpful when trying to keep the yard and other environmental concerns looking their best but it may also place a bit of urgency under the file for those considering an eventual bid.
3. File Formal Complaints. If the property presents a potential health or safety issue…for example, an abandoned pool, contact the local public health unit to file a formal complaint. Be sure to follow up by sending a copy of the complaint to the property manager and/or bank responsible for the upkeep on the home.
4. Team-Up to Turn On the Heat. Put attention to the problem by collaborating with neighbors, the local Homeowners or Condo association and other interested stakeholders. If the HOA is part of the problem, be sure to file a formal written complaint with the association.
5. Do It Yourself. Although not advisable, in limited circumstances it is possible to take matters into your own hands in order to mow the yard or address other unusual situations. For example, unless otherwise posted, it is entirely legal to mow the yard or maintain the lawn in most areas of the nation; just be careful since an accident or injury is unlikely to be covered by homeowners insurance.  Remember,  never take it upon yourself to  enter a residence or dwelling even if the home is currently vacant.

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
      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
–