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Refi wave cooling

admin — Mon, 10 Jan 2011 20:28:43 +0000

Smart Real Estate News & Commentary by Chris McLaughlin January 10, 2011

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Refi wave cooling

Mortgage refinancings through the Home Affordable Refinance Program known as HARP increased 26% in the third quarter of 2010. Strategists for Fannie Mae and Freddie Mac investors, however, say the spike is likely to be short lived. Fannie Mae and Freddie Mac loan modifications through HAMP increased 16% in the third quarter of 2010, according to Federal Housing Finance Agency, which oversees the government-sponsored enterprises. Overall, the spike remains muted as the Mortgage Bankers Association refinance index remains near a multiyear low and Braver Stern Securities reports that it would look for the December prepayment report to hit the high-water mark for prepayment speeds for this cycle. The MBA reported on Wednesday that refinancings accounted for 70.3% of all mortgage applications for the week ended Dec. 24 and 71% for the last week of the year. Expected rises in mortgage interest rates, however, do not bode well for future refinancings.

The 5.0% coupon remains on the 40 bps refinancing cusp given the 5.04% effective mortgage rate, which moves almost 45% of the 30-year mortgage universe out of the refinancing window. “Many investors are total return in nature and the 5.0 coupon is going to prove very sensitive to small changes in interest rates with 4.5% now completely out of the money,” said Scott Buchta head of investment strategy at the firm. “Prepayment speeds will slow higher up in the coupon stack, but to a lesser degree.” Aggregate Fannie 30-year prepayments slowed 5% month on month, according to analysts at Barclays Capital. “The slowdown in overall speeds suggests that there is not much backlog left in the origination pipeline, and, therefore, there should be a sharp slowdown in speeds next month,” they wrote in a note to clients. Buchta adds that unless originators expand the credit window, the refinancing window will shut for many more borrowers than simple economics would indicate. Currently 45% of the 30-year mortgage borrowers are currently out of the money from a rate point of view, with added fees prohibiting many marginal borrowers from refinancing their existing loans. “It doesn’t seem likely that banks will be looking to refinance marginal credit borrowers whose loans they did not underwrite in the first place because of uncertainties associated with reps and warrants,” he added.

The Barclays analysts also pointed to harsh realities that will lower the rate of mortgage refinancings. “While a significant easing of underwriting standards would lead to a rebound in speeds, the likelihood of that happening in 2011 is slim, in our view, because recent developments have been pointing to continued tightening,” they said. The latest examples include Fannie and Freddie’s new increase to the loan-level delivery fees, the Federal Housing Administration’s plan to aggressively pursue put-backs in 2011, and originators’ raising the DTI and FICO requirements. “Given this, it should take a while for underwriting standards to stabilize,” they add. “Credit easing does not seem to be on the horizon yet.”

Less worry about layoffs

A steady decline in layoffs is giving the vast majority of adults who have jobs the confidence to spend more freely and help energize the economy. Their renewed confidence has boosted retail sales — just what’s needed to spark what economists call a “virtuous cycle”: Higher consumer spending raises company profits, which spurs hiring, which fuels more spending and growth. Consumer spending is critical because it powers about 70% of the economy. It rose for five straight months through November, kicking off the strongest holiday shopping season since 2006. Many shoppers are showing enough confidence to splurge on new cars: Auto sales rebounded 11% in 2010, the first increase since 2005.

“The strongest showing for consumers since the peak years of the last expansion signals that the broader economy is near a threshold of self-sustaining growth,” analysts at Citi Investment Research & Analysis wrote last week. Federal Reserve Chairman Ben Bernanke echoed that point Friday. He told a Senate panel he sees evidence that a “self-sustaining” recovery is taking hold because consumers and businesses are spending more. Morgan Stanley economists say 4% growth is “likely, perhaps even conservative” in 2011, up from an estimated 3.1% last year. Late this month, the government will estimate economic growth for the final quarter of 2010.

DSNews – MA court voids foreclosures

The Massachusetts Supreme Court ruled Friday that U.S. Bank and Wells Fargo did not have the legal right to foreclose on two homes in the state, invalidating the lenders’ seizure of the properties and raising further questions about foreclosure documentation – this time related to the proper transfer of ownership on mortgages packaged as securities. Analysts warn that the decision could have far-reaching implications on loans that have already been liquidated, those in the process of foreclosure, and sales of foreclosed bank-owned homes. In a unanimous 6-0 ruling, the Massachusetts Supreme Court upheld a lower court’s decision that U.S. Bank and Wells Fargo did not have the proper documentation to prove that they owned the mortgages at the time of foreclosure. U.S. Bank and Wells Fargo were not the originators of the mortgages, but served as trustees of the two separate securitization trusts holding the loans. Interestingly enough, both foreclosures – U.S Bank’s on the mortgage of Antonio Ibanez, and Wells Fargo’s on the mortgage of Mark and Tammy LaRace – occurred on the same day, July 5, 2007.

The lenders then turned around and bought each of the respective homes themselves at the foreclosure auction. At the core of the issue is that the lenders both failed to ensure the assignment of the mortgage notes were executed and recorded in the registry of deeds before the dates of the foreclosure sales. Justice Robert J. Cordy wrote in a court opinion, “…what is surprising about these cases is not the statement of principles…regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.” He went on to say, “There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure. Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order.” The Supreme Court rejected the two banks’ requests to apply the ruling only to future cases, which could have implications for thousands of foreclosures in the state that have already been completed. Wells Fargo said in a statement, “Wells Fargo believes the court’s ruling does not prevent foreclosures on loans in securitizations. The court simply set forth a standard legal process that mortgage servicers must follow in Massachusetts.” The analysts at Barclays Capital described the case as “problematic for banks and non-agency investors, since it overturns completed foreclosure sales.” They say the ruling could raise title issues in the minds of the potential buyers of REO properties, could further reduce prices on distressed sales, and slow foreclosure to REO rolls and liquidations.

Olick – what the MA court ruling means

“Now that the Massachusetts Supreme Court has upheld a lower court’s ruling that Wells Fargo and U.S. Bancorp did not have the proper paperwork to foreclose on two homes, the question is what that means for the broader mortgage market and the future of millions of foreclosures in or about to be in process? Not only does this decision affect individual foreclosures, but it throws into question the entire mortgage securitization process. We’ve spent a lot of time on this blog discussing the process of how loans were divided, mixed, bundled and sold over and over during the heat and height of the housing boom. The issue in contest over foreclosures now lies with the ‘note,’ or the IOU on the mortgage. The mortgage is the security that says the house is the collateral. Ownership of the note is critical because that note must be transferred when the mortgage is traded around.

During securitization a process called ‘endorsements in blank’ are used, so that mortgages can be transferred quickly. But you still need that note when you foreclose. ‘This is really about endorsed/assigned in blank,’ says JT Smith of Aristar Funding. ‘Judges didn’t understand and transfer taxes were not paid. This is going to get very ugly. The mortgages became like bearer bonds in that whoever had possession of original wet copy was the owner, and if you didn’t have that you could not foreclose. Then if you did why didn’t you pay transfer taxes?’ It’s exactly what Prof. Adam Levitin told me way back in October: ‘The mortgage is still owed, but there’s going to be a problem figuring out who actually holds the mortgage, and they would be the ones bringing the foreclosure. You have a trust that has been getting payments from borrowers for years that it has no right to receive. So you might see borrowers suing the trusts saying give me my money back, you’re stealing my money. You’re going to then have trusts that don’t have any assets that have been issuing securities that say they’re backed by a whole bunch of assets, and you’re going to have investors suing the trustees for failing to inspect the collateral files, which the trustees say they’re going to do, and you’re going to have trustees suing the securitization sponsors for violating their representations and warrantees about what they were transferring.’”

So now what? 95% of troubled borrowers currently do not contest their foreclosures, Paul Miller of FBR tells me. He sees this less about the specific case as the perception of this case: ‘If you see more and more of these headlines, many people might look at this and say ‘I can get my house free and clear if I just contest the foreclosure and get a favorable judge that sides on my side. All of the sudden I have a free mortgage.’ That’s not what’s going to happen in this case,’ Miller said in an interview. He believes these two homes will eventually go to foreclosure. In fact, this Massachusetts case may not be exactly as the headlines are screaming. The American Securitization Forum, immediately after the ruling, put out a statement saying, ‘The ASF is pleased the Court validated the use of the conveyance language in securitization documents as being sufficient to prove transfers of mortgages under unique aspects of Massachusetts law. Importantly, unlike the lower court, tithe Court also said assignments of mortgage can be executed in blank, as long as a complete chain of transfers can be shown through the applicable deal documents.’

ASF says those documents were not introduced in the lower court and that the lower court would have ruled otherwise if they had. ‘The ASF is confident securitization transfers are valid and fully enforceable,’ concludes the ASF’s Executive Director, Tom Deutsch. That remains to be seen, as lawsuits abound over this very issue all over the country. Clearly investors didn’t like the ruling, as they sent shares of bank stocks into a despair spiral. This may be the final Massachusetts court ruling, but it will not be the final word in this chapter of the foreclosure mess.”

WSJ – Late 2011 Fed exit?

A top Federal Reserve official said he would set the bar “very high” for the central bank to stop short in its planned $600 billion in bond purchases, but that the Fed may need to begin considering a reversal of policy by year end. Kocherlakota, who rotates into a voting slot on the Fed’s policy panel this year, said in an interview with the Wall Street Journal published today, “There would have to be a disorderly reaction of some kind in inflation expectations or in the behavior of the dollar. We’re talking about relatively extreme events.” Kocherlakota said he threw his support behind the bond purchase plan after colleagues argued persuasively the policy would move monetary policy in the right direction even if it would not have a large impact. He told the Wall Street Journal he did not know whether the Fed might stop short of buying the full $600 billion or end up buying more. He said, however, he would have supported the program even if he had known the economy would prove somewhat stronger than he had been forecasting. Kocherlakota said he expects the U.S. economy to grow 3% to 3.5% this year, with inflation rising about 1.5% to 2%. He said he expects the U.S. jobless rate to drop to close to 9% by the end of the year, but stay above 8% through 2012.

The Minneapolis Fed chief reiterated his argument that structural shifts in the economy had likely raised the level of measured unemployment that would be sustainable without generating unwanted inflation. He said the level of unemployment that might trigger inflation was likely in a range of 6.5% to 8%, well above the 5% to 6% Fed forecasts released in November suggest is a more widely held view among policymakers. He said that was not an immediate concern for policy, but that it might become a consideration by the end of the year. The government said on Friday that the jobless rate dropped to 9.4% last month from 9.8% in November. “Right now this debate over what the level is of structural unemployment is somewhat — I don’t want to say uninteresting — but is not immediately relevant for policy considerations,” Kocherlakota said.

“If things go as I expect, then I think it’s going to be really important toward the end of the year, toward the end of 2011, to have some notion of what this level of structural unemployment is,” he said. “If the number is 8% … and according to my forecast unemployment will be around 9 toward the end of 2011 and inflation is at 1.5% … that’s the point where you might think about exit,” Kocherlakota added. The Fed has held benchmark overnight rates near zero since December 2008. After pressing rates close to zero it bought $1.7 trillion in mortgage-related and government bonds. Then, in November, it launched the latest $600 billion bond-buying program, which has drawn heavy criticism. Kocherlakota said the backlash against the program did not change his calculation of the plan’s costs, which he called relatively small.

Now for our real estate education section…

Cloud Computing 101

Cloud computing is gaining a great deal of attention…for good reason. It’s a cost effective option for many small business owners and even real estate investors that need reliable service, easy access, open expansion and affordability. Sound too good to be true? Well until recently it was; cloud computing was considered the sole domain of large corporations and multi-nationals. Today, that has changed thanks to giants like Amazon AWS and Google; the cost of cloud computing is now well within reach of even the smallest business owner.

What is Cloud Computing?

In the past, digital files and content were stored on servers or hard drives either on-site or “off-site” but always under the direct ownership and control of the business owner. Cloud computing allows small business owners, agents and investors to harness the technology and technical support (uptime, redundancy etc) of major providers like Amazon or Google without having to invest huge up-front sums in the technology. Think of it as renting space on their server via a sophisticated virtual interface.

In addition to the reliability and redundancy advantages, cloud computing allows users to store and access digital files anytime and anywhere as long as you have access to the Internet and/or cell phone. Back-up important data, share files and even make modifications on the go.

Advantages

A few other advantages to cloud computing is the ability to scale or grow as needed. Data intensive sites or those that receive large volumes of traffic are often forced to purchase expensive hosting platforms or servers even before they have the traffic to support it. Cloud computing allows you to buy what you need when you need it without any worry of running out of space at a later date. It’s an especially attractive feature for those searching for scalable platforms able to meet the needs of a growing business.

Take a Test Drive

Not sure if cloud computing is right for you? Take a test drive by visiting a few sites to see for yourself. Two of the most popular options are Google and Amazon.

Google: http://www.google.com/apps/intl/en/business/index.html#utm_campaign=en&utm_source=en-ha-na-us-sk&utm_medium=ha&utm_term=cloud%20computing

Amazon: http://aws.amazon.com/

See you at the top!

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

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

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About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes. Owns
      portfolio of nearly 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
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MBA – Refinance activity slows

admin — Thu, 02 Dec 2010 01:40:33 +0000

Smart Real Estate News & Commentary by Chris McLaughlin December 1 , 2010

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MBA – Refinance activity slows

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 26, 2010 decreased 16.5% on a seasonally adjusted basis from one week earlier. This week’s results include an adjustment to account for the Thanksgiving holiday. On an unadjusted basis, the Index decreased 34.2% compared with the previous week. The Refinance Index decreased 21.6% from the previous week. This is the third weekly decrease for the Refinance Index which reached its lowest level since June 2010. The seasonally adjusted Purchase Index increased 1.1% from one week earlier and is at its highest level since the beginning of May 2010.

The unadjusted Purchase Index decreased 22.9% compared with the previous week and was 2.7% higher than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 5.8%. The four week moving average is up 3.8% for the seasonally adjusted Purchase Index, while this average is down 8.2% for the Refinance Index. The refinance share of mortgage activity decreased to 74.9% of total applications from 78.6% the previous week. This is the third consecutive weekly decrease for refinance share which is at its lowest level since June 2010. The adjustable-rate mortgage (ARM) share of activity increased to 5.7% from 5.3% of total applications from the previous week.

Bipartisan debt commission releases its final report

The bipartisan debt commission released its final report today, recommending a wide range of controversial spending cuts and tax changes that would slash $4 trillion in deficits over the next 10 years. The group, which will discuss the recommendations at a meeting in Washington on Wednesday morning, plans to vote on Friday. The report, called “The Moment of Truth,” is an amended version of a plan put out three weeks ago by the panel’s co-chairmen, Erskine Bowles and Alan Simpson. While the scope of the final report and the magnitude of measures recommended are very similar to that of the original Bowles-Simpson plan, there are some differences. Among them: The amended plan recommends that lawmakers consider a one-year payroll tax holiday either for workers or employers as an economic stimulus measure. That echoes a stronger payroll tax holiday proposal offered last month by another debt reduction task force co-chaired by Alice Rivlin, who also sits on the president’s commission. Overall, spending cuts would account for roughly 74% of the deficit reductions. Tax measures — including a reduction in tax breaks — would account for roughly 26%. In order for the commission to make official recommendations to Congress, 14 of its 18 members would need to support them. The report would theoretically reduce the country’s accumulated debt to 40% of the overall economy by 2035, down from the 185% currently projected.

MBA – Commercial and multifamily delinquencies mixed

Delinquency rates for different commercial/multifamily mortgage investor groups were mixed in the third quarter, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report. The delinquency rate for loans held in CMBS is the highest since the series began in 1997. Delinquency rates for other groups remain below levels seen in the early 1990′s, some by large margins. Between the second quarter and third quarter of 2010, the 90+ day delinquency rate on loans held by FDIC-insured banks and thrifts increased 0.15 percentage points to 4.41%. The 30+ day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 0.36 percentage points to 8.58%. The 60+ day delinquency rate on loans held in life company portfolios decreased 0.07 percentage points to 0.22%. The 60+ day delinquency rate on multifamily loans held or insured by Fannie Mae decreased 0.15%age points to 0.65%.

The 60+ day delinquency rate on multifamily loans held or insured by Freddie Mac increased 0.07 percentage points to 0.35%. The third quarter 2010 delinquency rate for commercial and multifamily mortgages held by banks and thrifts was 2.17 percentage points lower than the series high (of 6.58% reached in the second quarter of 1991). The rate for loans held in CMBS was a record high for the series. Delinquency rates for commercial and multifamily mortgages held in life insurance company portfolios was 7.15 percentage points lower than the series high (of 7.37% reached during the third quarter of 1993); the rate for multifamily loans held by Fannie Mae rate was 2.97 percentage points below the series high of 3.62% (reached during the fourth quarter of 1991); and the rate for multifamily loans held by Freddie Mac was 6.46 percentage points lower than the series high (of 6.81% reached in 1992). Based on the unpaid principal balance of loans (UPB), delinquency rates for each group at the end of the third quarter were as follows:

- Banks and thrifts: 4.41% (90 or more days delinquent or in non-accrual).
- CMBS: 8.58% (30+ days delinquent or in REO);

- Life company portfolios: 0.22% (60+days delinquent);
- Fannie Mae: 0.65% (60 or more days delinquent);
- Freddie Mac: 0.35% (60 or more days delinquent).

Private sector growth up, job cuts planned

Payrolls among private employers rose by 93,000 in November, the 10th consecutive month of increases, payroll processor ADP said in its report.. That was a much bigger jump than economists had expected. The ADP employment report was expected to show a gain of 58,000 jobs in November, according to the Briefing.com consensus of economist forecasts. In addition, the October gain was revised by nearly double to 82,000 from the originally reported 43,000. Employment in service jobs surged, adding 79,000 jobs. The goods producing sector added 14,000 jobs, the first monthly increase since March 2007.

The nation’s smallest businesses showed the most growth: Large businesses, defined as those with 500 or more workers, increased by 2,000. Medium-size businesses, defined as those with between 50 and 499 workers, increased by 37,000. And employment among small-size businesses, defined as those with fewer than 50 workers, increased by 54,000. Employers announced plans to reduce payrolls by 48,711 jobs last month, according to Challenger, Gray & Christmas, a Chicago-based outplacement firm. The figure was up 28% from October, but down 3.3% compared with November 2009. The November tally was the highest since March, when employers announced 67,611 job cuts. But the spike was “not indicative of a broader trend,” according to John Challenger, the firm’s chief executive. The reports are seen as a barometer for the government’s closely-watched monthly jobs report, which comes out Friday. Economists expect that employers added a total of 130,000 jobs in November, after a gain of 151,000 in October. The unemployment rate is forecast to remain unchanged at 9.6%.

Olick – Home price disconnect

“Fact: Home prices lag home sales. It happens on the way up and on the way down. Today’s S&P Case Shiller home price report just confirmed what we’ve seen from umpteen other reports in the past few months, that home prices are taking a double dip. We knew it would happen. ‘I would guess that by the end of today I would hear lots of double-dip forecasts and a few I told you so’s. Things are rotten,’ opines S&P’s David Blitzer. But the question is, of course, how rotten? Home sales fell off dramatically in July after the expiration of the home buyer tax credit. Then they came back a few months later, and then turned for the worse again in October. Prices are much harder to gauge because there is so much emotion involved in pricing a home, not to mention so much uncertainty surrounding foreclosure sales, which can affect the price reports dramatically. No question it is a buyer’s market out there, but really only for the buyers who don’t have to sell. Those who do have to sell, the move-up buyers, are stuck in this bizarre financial disconnect.

It’s all about math, that they apparently refuse to do. They expect a great discount on whatever house they’re buying, but they are unwilling to take a loss on the home they’re selling, even if it’s a net gain in the end. ‘The move-up buyer is putting all his ideas about wealth based on the house he owns,’ notes DC area real estate agent Donna Evers. They simply refuse to do the math. ‘In other words, in 2005, say the peak of the market, a real estate agent told me I should be able to get $700k for my house, and now it looks like it might be worth 10 percent less – $630K so I can’t sell because I’ve lost $70K.

Well if you were going to buy a house for 950K it is now worth 855K which is a $95K differential,. plus you’ve got a tremendous saving on your monthly payments because interest rates are much lower compared to what they were in 2005.’ It all makes sense, but it somehow doesn’t compute in the mind of the move-up buyer. Of course there’s also the issue that banks are requiring larger down payments to get a mortgage, and some buyers don’t have the equity cushion in their current home that would allow them to take a loss and still make a new down payment. Hence the stall in the move-up market.”

Now for our real estate education section…

Escrow & eBay

Ever think about selling a short sale on eBay? You aren’t alone…eBay has become a virtual gold mine for those seeking to buy or sell out of the ordinary properties, create a bit of buzz or simply get the word out about their real estate investment business. One of the most confusing aspects of the entire transaction for buyers or sellers is how to handle the escrow account.

Escrow Defined

Escrow is a tool commonly used to protect both the buyer and selling during regular real estate transactions by placing funds into a third-party account or one specifically structured to separate the monies from other transactions. This assures everyone that no funds or property will change hands until the proper conditions and timing have taken place.

Common examples of escrow include an earnest money deposit or down payment. Earnest money demonstrates the buyers willing intent to purchase a property if certain conditions are met and/or accepted by the seller and secures the property while financing, inspections and other stipulations are addressed. Another common situation includes the payment of property taxes and insurance which may be pro-rated during the sale of the property. Funds are often put into escrow until the due date.

Easy Escrow

The advent of eBay and other online transactions has led to an increase in Internet escrow accounts both domestically throughout the United States and even internationally. It is important to understand the terms and conditions before buying or selling real estate online including how the escrow and other funds will be handled. There are several common steps including:

1. Request the Earnest Money Deposit. Be sure to stipulate the time period and amount. For example, an earnest money deposit of $1,000 must be received within 24 hours after the close of the auction.

2. Specify all conditions of return or non-return status. Be sure to abide by state laws.

3. Indicate where the money will be held and who is responsible for administration of the escrow account. Typically your attorney or other representative will be listed.

4. Subsequent installments. Several sellers advocate using a tiered system for the earnest money with a smaller ($1,000) up-front fee payable immediately upon the close of the auction and another due within a week to ten days payable by check, money order or other certified funds. This has the added benefit of engaging the prospective buyer while creating a sense of ownership and entitlement early in the process. It also makes it harder for the buyer to walk should “buyer’s remorse” set in later.

See you at the top!

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

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.

admin — Thu, 04 Nov 2010 14:04:36 +0000

Smart Real Estate News & Commentary by Chris McLaughlin November 3, 2010

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TOMORROW: Our Orlando Foreclosure Investing Summit is nearly

SOLD OUT. Click here to claim one of the last seats:

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Why did HAMP fail?

Casey B. Mulligan, an economics professor at the University of Chicago, thinks the Home Affordable Modification Program (HAMP) failed because bad economics doomed it from the very start. He explains that ome buyers take usually out mortgages that cover only part of the value of the houses they are buying, so the house is worth more than the mortgage owed. Fannie Mae and Freddie Mac both announced debt forgiveness or “loan modification” formulas. The modification program encourages lenders to reduce mortgage payments, so that each borrower’s housing payments (including principal, interest, taxes and insurance) are no more than 31% of the borrower’s gross income. If the mortgage modification rules were actually followed, one implication would be that a family that earns $50,000 more in the year before the modification stands to pay an additional $15,500 a year for five years on housing payments — a total of $77,500. Adding $50,000 to your income adds $77,500 to your expenses: the mortgage lender gets more than 100% of your extra income! Economists call this a marginal “tax rate” that exceeds 100%, because the person earning that income is obligated to give all of it to a third party (the lender, in this case), and then some.

Economists may argue about how high tax rates should be, but we all agree that marginal income tax rates of 100% (or more) are terribly destructive. And the terrible incentives in the federal mortgage modification guidelines were known even before the Obama administration put together its program. Because of its destructive economics, the modification program was proposing changes that were only marginally beneficial to borrowers and massively costly for banks. Rather than overtly contradicting the Treasury by denying eligible borrowers, banks are encouraging borrowers to deny themselves by requiring those borrowers to endure deluge of paperwork. Both the Bush and Obama administrations have run roughshod over incentives, and the housing market and the wider economy continue to suffer because of it.

GOP wins House, seats in Senate

Republicans won control of the House of Representatives as voters dealt a stiff rebuke to President Barack Obama and the Democratic Party in a wave that swept the GOP to power in states and districts across the country. Republicans also made gains in the upper chamber, picking up five seats as of early this morning. The GOP won a series of state houses and governorships as well. At midnight, Mr. Obama phoned Rep. John Boehner, who is in line to become the next Speaker of the House, to offer congratulations, and the pair briefly discussed ways to work together. The White House said the president told Mr. Boehner that he wanted to “find common ground, move the country forward and get things done for the American people.” In House races, Republicans defeated both veteran lawmakers and freshmen swept into office with Mr. Obama just two years ago. The size of the GOP majority would not be known until votes are tallied for dozens of undecided races, but it was clear that voters had delivered the GOP a victory of historic proportions.

At a Washington victory party, Mr. Boehner said Republicans will focus on cutting spending and shrinking government. “We hope President Obama will now respect the will of the people, change course and to commit to making changes that they are demanding,” he said. “To the extent he is willing to do that, we’re ready to work with him.” He also spoke of his own rise to power, choking up as he recalled his early days putting himself through school and “working every rotten job there was.” Even before the votes were counted, Democrats were pointing fingers over whom to blame for the drubbing. Some are calling for major changes in the tight circle of political advisers Mr. Obama keeps in the White House. The election will end Nancy Pelosi’s four-year tenure as the first female Speaker of the House. She was lauded by Democrats for her political skill in moving energy and health-care bills through the House. But that success turned into a liability when the campaign got under way. Republicans have promised to cut federal spending, return unspent money from last year’s stimulus act to the Treasury and repeal Mr. Obama’s health-care law. Before those legislative battles begin, a lame-duck Congress must return to Washington this month to pass bills to fund the government and deal with expiring tax cuts, including all of the income, estate, capital gains and dividend tax cuts approved under President George W. Bush.

MBA – purchase apps up, refinance apps down

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 29, 2010 decreased 5.0% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5.3% compared with the previous week. The Refinance Index decreased 6.4% from the previous week. This is the third straight week the Refinance Index has decreased. The seasonally adjusted Purchase Index increased 1.4% from one week earlier. The unadjusted Purchase Index increased 0.2% compared with the previous week and was 28.0% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 0.1%. The four week moving average is down 2.7% for the seasonally adjusted Purchase Index, while this average is up 0.8% for the Refinance Index. The refinance share of mortgage activity decreased to 81.3% of total applications from 82.3% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.4% from 5.3% of total applications from the previous week.

Private sector creates 43,000 jobs

According to ADP, private employers added 43,000 jobs in October compared to a revised loss of 2,000 jobs in September. The figure was originally reported as a loss of 39,000. The ADP figures come ahead of the government’s much more comprehensive labor market report on Friday, which includes both public and private sector employment. That report is expected to show a rise in overall nonfarm payrolls of 60,000 in August, based on a Reuters poll of analysts, but a rise in private payrolls of 75,000. “Today’s ADP National Employment Report shows that U.S. private sector employment remains frustratingly stagnant,” said Gary Butler, CEO of ADP, in a prepared statement. “The new Congress has a great opportunity to make job creation priority one by taking actions that both reduce uncertainty across the economy and incentivize businesses to invest and expand.” Meanwhile, planned layoffs edged up slightly in October from the month before, while the pace of job cuts remained near a record low, outplacement company Challenger, Gray & Christmas announced earlier Wednesday. US companies planned to cut 37,986 jobs last month, up 2.2% from the 37,151 layoffs planned in September. The number of planned cuts is down 32% from the same month of 2009.

Olick – housing mess affects everyone

“I know I tread housing stats all day every day, but two particular numbers struck a nerve today. A condo expert I was interviewing in Miami Beach told me that at the current sales pace there is an 18 year (yes, year) supply of condos on the market here. As I was trying to digest that, the Census released its quarterly home owner/vacancy report, and noted that there are close to 19 million vacant homes in America today. And that’s a quarterly improvement. There will be plenty of election night discussions on CNBC and other outlets, I’m sure, on how the outcome of elections will affect economic policy and trickle down to housing. Some will argue that a Republican surge will quash any hope of more government stimulus in housing, while others will argue it will give the banks more breathing room and help investors back into mortgage investment. I don’t know what to believe today when I look at the sheer numbers. Nine out of 10 buyers here are foreign, many of them Venezuelan, looking to secure their money somewhere outside their country due to financial turmoil at home. There are very few U.S. buyers because there is just no financing out there. Some cagey investors are actually buying with cash and then refinancing the cash out, because apparently the banks are more willing to refi than originate new purchase loans. But this is Miami Beach, which is not really America. In the rest of the country millions and millions of homes are sitting empty and household formation is near historic lows.

The troubled U.S. economy isn’t all that enticing to immigrants anymore, so you’re losing even more demand there. The critical confidence needed to bring buyers back is nowhere to be found, even in some of the nation’s more healthy markets. The foreclosure freezes may stem the tide of bank repossessions temporarily, but eventually more distressed properties will flood the housing market, pushing home prices lower yet again. Yes, it will be largely in the former boom states, but the headlines will spread their doom and poison as they did before. So here we sit at the precipice of possibly a new force in government. This as we have nothing less than the restructuring of our entire mortgage finance system (Fannie Mae and Freddie Mac) all warmed up on our plates. No question, the coming year will be historic for housing’s future. I would just caution those who shape it to keep an eye on the numbers, always keeping in mind that there are homes, people, communities and jobs behind them. While the fixes may not be fair to some, they may just be the bitter pill we all need to swallow to build our wealth once again.”

Fed’s call now

The Federal Reserve is about to take a huge risk in hopes of getting the economy steaming along again. Nobody is sure it will work, and it may actually do damage. The Fed is expected to announced today that it will buy $500 billion to $1 trillion in government debt, and drive already low long-term interest rates even lower. The central bank would buy the debt in chunks of $100 billion a month, probably starting immediately. Economists call it “quantitative easing.” It gets the name “QE2″ (like the ship) because this would be the second round. The Fed spent about $1.7 trillion from 2008 to earlier this year to take bonds off the hands of banks and stabilize them. Many analysts and even supporters of the plan see dangers. It could make the weak dollar even weaker and lead to trade disputes with other countries. It could lead bond traders to believe that higher inflation is on the way, and they could derail the Fed’s efforts by pushing rates higher. Here is a look at the ways the Fed’s strategy could backfire:

- As word trickled out over recent months that the Fed was planning a new round of bond purchases, the dollar sank. It hit a 15-year low to the Japanese yen Nov. 1. A drop in the dollar can help companies like Ford that sell their products abroad. When the dollar weakens against the euro, for example, one euro buys more dollars than before. Foreign customers notice the price of the Explorer they’ve been eyeing is lower in their currency, yet Ford still pockets the same number of dollars for every sale. The downside is that a weakened dollar pinches people in the U.S. because anything produced in other countries becomes more expensive, like oranges from Spain or toys from China. “Look around you,” says Thomas Atteberry, a fund manager at First Pacific Advisors. “How many things can you find that were made in the U.S.A?”

- Buying bundles of Treasurys knocks down interest rates, making borrowing cheap. But it also motivates investors to move out of safe investments into riskier ones in search of better returns. The stock market, for instance, rises in value and everyone with some of their savings in stocks feels wealthier. Ideally, it produces what economists call a “wealth effect”: People who feel better off spend more. The problem, according to some critics, is that cheap borrowing costs and buoyant markets make a fertile environment for bubbles, which eventually pop.

- For others in the bond market, the greatest worry isn’t that the Fed will flood the economy with dollars and lets inflation run wild. It’s that the Fed will prove too timid. News reports that the Fed may spend less than the $500 billion bond traders have been betting on has helped push long-term rates higher in the last three weeks. David Ader, head of government bond strategy at CRT Capital, sketches one scenario if the Fed shoots too small. Say the Fed announces a $250 billion plan. The yield on the 10-year Treasury note, which is used to set lending rates for mortgages and corporate loans, could jump from 2.6 percent to maybe 3.2 percent. “If the Fed’s efforts fail we suddenly look like Japan,” Ader says. “Japan started off wimpishly, then did it again, and again and then they wound up losing a decade.”

Lord Abbet & co – recovery slow, but here

According to Lord Abbet & co, despite poor housing sales this past spring, the residential real-estate market fundamentally seems to have found stability. Its conclusions deserve elaboration: “The latest volatility in housing sales is almost surely a transitory reaction to the April termination of the government’s $8,000 first-time home buyer’s tax credit, itself never sufficient enough to affect housing fundamentals. Whatever claims Washington may have made for its policy, families hardly seemed likely to incur mortgage debts for $200,000, $300,000, or more just to save $8,000 on their tax liability. But if the credit has had little effect on the fundamentals, it has influenced the timing of people’s purchases. Once it became apparent that the tax break would end in April, those who were thinking of buying anyway had every reason to accelerate their closing from May or June, for instance, back into April, when they could still secure the credit. Accordingly, housing sales surged in March and April, rising almost 16%; but since many of those closings took from sales that would otherwise have occurred later, succeeding months into July saw a sales decline of almost 34%. Mirroring sales, new residential building activity also gyrated, surging by almost 9.0% into spring and then, after the termination of the tax credit, falling almost 8.5% into July. But for all these ups and downs in sales and construction, price behavior has consistently spoken loudly to more stable fundamentals.

Throughout the months of weakness last spring, the prices of existing homes and condominiums continued to rise, actually accelerating from a 4.4% rate of gain between January and April to a 5.6% rate of gain between April and July (the most recent month for which data are available). Now, as if to confirm the message of pricing, August sales of existing homes picked up, rising 7.6% from July’s low level, and new housing starts nationally rose almost 2% in August, or almost 24% at an annualized rate. It is, of course, always dangerous to rely on one month’s data, but in this context, with other supporting evidence, the focus on a single month may well be appropriate. If the spring scare was misplaced, however, the future can promise only very slow recovery. Default and delinquency problems remain intense, allowing only the most halting pace of financial healing. To be sure, default gauges have improved. The Mortgage Bankers Association reports a drop in the rate by 45% from a year ago. Lender Processing Services reports about a 5% drop in delinquencies, as well. But even with this undoubted improvement, both defaults and delinquencies, at 4.67% and 9.85%, respectively, remain high by historical standards. High vacancy rates also point to a slow housing recovery. Homeowner vacancies, at 2.5% in the second quarter (the most recent period for which complete data are available), are modestly better than they were in the first quarter, at 2.6% 2.7% at the end of 2009, and 2.9% in 2008. But they remain much worse than long-term historical averages of 1.5%. Rental vacancy rates, at 10.6% nationally, also have improved from 11.1% a year ago, but similarly remain well above the longer-term historical average of 6.0%. Even in the best circumstances, it would take a long time to work off these excesses, but it is also clear that the data disguise other constraints. Anecdotal evidence suggests strongly that banks and other mortgage lenders are holding back on foreclosures.

No doubt they reason in part that a family in the house, even if they are not paying, is better than hiring security to protect a vacant structure. More, these lenders must fear the market effects of thoroughgoing action on foreclosures, specifically that the rise in houses for sale would glut the market and send prices spiraling downward again. While managing the foreclosure process has helped produce the recent stability, it will prolong it as well, as banks and other lenders gradually feed this “shadow inventory” of homes out for sale and in the process limit the upward move in pricing and new construction. The upside in this situation lies in the hope that the economic recovery will eventually enable homeowners to resume their obligations, obviating any need for even delayed foreclosures and sales, and allowing the market to improve sooner than it otherwise might. The downside is that lenders will mismanage the “shadow inventory,” foreclose too rapidly, putting too many of these properties out for sale, and precipitating another round of downward pressure on housing markets. On the positive side, the slow speed of general economic recovery limits likelihoods. On the risk side, the success of lenders to date raises the probability of effective management. On balance, then, probabilities point to a very slow housing recovery indeed, one in which moderate sales only gradually reduce vacancy rates and moderate income growth fosters only slow financial healing.”

Now for our real estate education section…

What’s the Deal with Owner Finance & The SAFE Act?

The SAFE ACT went into effect October 1, 2010 and since that time, there has been an avalanche of rumors, false information, fear mongering and outright confusion surrounding the facts and status of owner financing. Today we are going to spend a few minutes dealing with the details every real estate agent and investor needs to know about owner financed real estate.

The SAFE ACT in a Nutshell

The SAFE Act essentially says that you must have a license to sell an owner financed property. The original intent is to crack down on fraud and confusion surrounding the sale of a home but there are some inadvertent consequences of potential interest to investors as well as agents; especially those that use a “mortgage assignment” when dealing with investment property. Keep reading to see if you are in the clear or need to make adjustments.

It’s All in the Details

Don’t believe everything you read or hear; seller financing is not dead (contrary to popular opinion) but is in fact, quite alive and well. If you have a license, no problem…chances are you are completely in the clear. However, if you are an investor and do not hold a current license, then it may be a good idea to understand the difference between a land contract and/or contract for deed versus a pure seller finance situation where the title changes hands at closing.

A land contract involves a type of sale where the owner holds the title until the property is paid in full whereas in the other situation, the owner holds a note and acts like the bank by issuing a mortgage. The title changes hands during the closing just like it would if bank financing was obtained. Land contracts do not fall under the provision of the SAFE ACT because the title is not transferred until the completion of all payments. On the other hand, if you hope to sell a property and act like the bank by issuing a mortgage and transferring the title at closing, a license may be required. It does not stipulate that the homeowner must obtain a license but simply that you must work with either a licensed broker or real estate attorney.

Other Exemptions

There are other exemptions to the SAFE ACT including:

Homeowner is selling their own personal/private home via owner financing. The SAFE ACT stipulates a homeowner may sell their own primary residence via owner financing (including the type where the title changes hands at closing) without obtaining the help of a licensed professional. However, this does NOT apply to rental or investment real estate.

Lease with option exemption(s). Investors may still sell a property via lease to own as well as land contract or a land contract with lease option.

Bottom Line: When in doubt, speak with your attorney or tune in to learn more via our free webinars.

See you at the top!

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

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About the author:

Chris McLaughlin is widely known as America’s top
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    * As the top Florida foreclosure and pre-
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      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes. Owns
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    properties
    * Owner of one of Florida’s largest Real Estate firms,
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     400 agents, uniquely positioning him to help
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     biggest market opportunity ever!
   * Highly sought-after speaker, consultant, and
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Short refinancing program started yesterday

admin — Wed, 08 Sep 2010 15:36:47 +0000

Smart Real Estate News & Commentary by Chris McLaughlin September 8, 2010

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Short refinancing program started yesterday

The Federal Housing Administration (FHA) began offering new government-insured mortgages to rescue underwater borrowers yesterday, but the new Short Refinancing program may face as many limitations as earlier programs designed to aid the still sputtering housing market. The Treasury Department set aside $14 billion in Troubled Asset Relief Program (TARP) funds to encourage mortgage servicers to support write-downs of second mortgages and to provide coverage for a share of potential losses on these new loans, according to HUD.

The combination of TARP dollars and the FHA insurance means the new lenders will have a loan backed by the U.S. for up to 97.75% of the home value. Under the program, eligible borrowers can receive an FHA-insured loan if the lender or investor writes off the unpaid principal balance of the original first-lien by at least 10%. To be eligible for the new loan, the homeowner must be underwater but still current on the mortgage, which cannot be already insured by the FHA. A credit score of 500 or better is required. The new refinanced loan must have a loan-to-value ratio of no more than 97.75%. After receiving the new refinancing through the program, the borrower’s combined loan-to-value ratio on the re-subordinated mortgages cannot exceed 115%. The new FHA mortgage can only be used to refinance the unpaid principal balance on the first lien.

MBA – mortgage applications up, refinance applications down

The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 3, 2010 decreased 1.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.9% compared with the previous week. The Refinance Index decreased 3.1% from the previous week. The seasonally adjusted Purchase Index increased 6.3% from one week earlier. The unadjusted Purchase Index increased 4.0% compared with the previous week and was 38.8% lower than the same week one year ago. “Purchase applications increased last week, reaching the highest level since the end of May.

However, purchase activity remains well below levels seen prior to the expiration of the homebuyer tax credit, and is almost 40% below the level recorded one year ago,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “On the other hand, refinance volume dropped last week for the first time in six weeks, but the level of applications to refinance remains close to recent highs, as historically low mortgage rates continue to draw borrowers into the market.” The four week moving average for the seasonally adjusted Market Index is up 4.4%. The four week moving average is up 1.3% for the seasonally adjusted Purchase Index, while this average is up 5.0% for the Refinance Index. The refinance share of mortgage activity decreased to 81.9% of total applications from 82.9% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.1% of total applications from the previous week.

More spending by the administration

According to many economists, Obama’s new proposals are not going to reverse the downward trend of economic activity. The proposals, which are not expected to pass through Congress quickly, include an estimated $200 billion in tax breaks for investing in new plants and equipment, a $100 billion extension of the business tax credit for research and development and $50 billion over the next decade to improve roads, rails and other infrastructure. These plans come on top of existing administration proposals to extend tax cuts to households earning less than $250,000 a year, and provide $30 billion to spark an increase in lending to small businesses. “I don’t think the [new] proposals taken together are a game changer,” said Mark Zandi, chief economist of Moody’s Analytics. “They’re not going to jump start the economy, at least not in the next 6 to 12 months.” Allowing businesses that make equipment purchases to write off the cost of the investment right away, rather than over a period of years, might spark some capital spending, but will have limited impact on employment, according to Zandi.

It could even cost some jobs if a business buys technology from overseas that improves productivity rather than hiring more U.S. workers. “Investment spending has picked up very nicely, that’s not the problem,” he said. “The problem is a lack of hiring. This is driven more by what [Obama] can get through Congress than by what will create jobs.” With record cash on corporate balance sheets, the tax credit will do little to spur additional short-term spending, echoed David Rosenberg, chief economist and strategist for investment bank Gluskin Sheff.

“We already have business spending running at its fastest rate in three decades without the need for more deficit-financed tax incentives,” he said. “In other words, how ridiculous is it for the government to be targeting tax relief to the one part of the economy that needs it the least?” Allen Sinai of Decision Economics also sees limited impact from any of the proposals. He said the infrastructure spending is only going to add to government debt without providing long-term help for the economy, and that similar spending in Japan did little to prevent a so-called “Lost Decade” there in the 1990′s. “We need outside-the-box, big picture thinking to have a big effect on the muddle-through economy we’re facing,” he said.

Prime mortgage delinquencies next?

Mortgage analytics firm CoreLogic is reporting that subprime delinquencies are steadily trending downward. Additionally, the firm’s main economist warns the performance of prime mortgages may be a growing concern, especially considering economic hardship can suddenly hit any American family, regardless of the types of housing debt they hold. CoreLogic reports 2,376,120 American subprime mortgages are still active in the market in June, down 12.5% from a year ago. Overall, the numbers show that despite the decrease in volume, subprime mortgages still account for the great percentage of current delinquent loans and foreclosures across the board.

As of June, 39.6% of the subprime loan market is 60 days delinquent — 35% of that is 90 days delinquent, 13% of that are now in foreclosure and 3.8% of mortgages are real estate owned. But that’s comparable to the nearly 6.5 million prime mortgages that fit into the same delinquency categories, where 60+ day delinquencies are not showing a significant decline and foreclosures continue to steadily inch upward, now passing the 2% mark. “If you’re looking at delinquencies and foreclosures by data type you’re comparing 16% versus 40%,” said Fleming in an interview. “But that’s 16% of 40 million loans (prime) versus 40% of only 2 million loans (subprime),” which equals 6,355,506 delinquent prime mortgages versus 950,448 delinquent subprime mortgages.

Fleming also mentioned that delinquency and foreclosure are “product agnostic” occurrences, meaning economic factors such as job loss don’t choose a person based on their mortgage. A borrower who losses his job and has a subprime mortgage is more likely to have trouble paying it than does a borrower with a prime mortgage who losses his job. “Maybe we need policy to look at what kind of loans people have,” Fleming said with regard to decreasing delinquency. “If I were a policy maker I would be focusing law toward the prime space.”

Republican plan

House Minority Leader John Boehner outlined a plan to bolster the economy on Wednesday, hours ahead of President Obama’s scheduled speech unveiling a $350 billion job-boosting proposal. Boehner, R-Ohio, identified the “two main problems hampering job creation” as “excessive government spending and the uncertainty Washington Democrats’ policies – especially their massive tax hike – are causing small businesses.” He called on House Republicans to take on the problems in two ways. First, he suggested passing a bill that “cuts non-security related government spending for the next year back to FY 2008 levels — before all of the bailouts, government takeovers and ‘stimulus’ spending sprees began.”

Second, he suggested the Congress “enact a two-year freeze on all current tax rates to stop job-killing tax hikes on families and small businesses…While President Obama intends to move forward with his plan to raise taxes on half of small business income in America, House Republicans will continue to fight to permanently stop job-killing tax hikes,” said Boehner. Boehner’s call for a freeze on tax rates amounts to a compromise with Obama. Republicans have called for a permanent extension of the tax cuts, saying they are needed to spur economic growth. “If we’re able to do this together, I think we’ll show the American people that we understand what’s going on in the country and we’ll be able to get our economy moving again and get jobs growing in America,” Boehner said.

Now for our real estate education section…

White Hat Replies to Black Hat Accusations

Back in the day when Westerns were popular, the bad guy always wore a black hat while the good guy sported a shining white hat. With a single glance it was simple to see who to trust and who to keep an eye on. Today things aren’t quite so simple especially when it concerns financial matters. Who is to blame for the current economic woes…bankers, brokers or buyers? Everyone seems to have a different opinion. The same applies to real estate investors – especially if they specialize in foreclosures or short sales. If only things were that simple. The reality is that investors are increasingly able to create a win-win situation that benefits the bank, the investor, the homeowner and even the new buyer. Today we will tackle a few of the more common accusations levied against real estate investors along with the facts behind the facade.

Accusation: You are taking advantage of someone else’s misfortune.

Response: Not everyone is a victim; some made a calculated risk while seeking a greater reward…and lost. Also, the economy has changed and many people are now stuck in homes they cannot afford and do not want. Once out from under the burden of this house they are now free to pursue other opportunities and get their financial life back on track.

Accusation: You are profiting from the poor since foreclosures and short sales only happen in distressed or poor areas.

Response: Foreclosures and short sales are not limited to poor areas. The neighborhood may or may not be distressed depending upon the unique composure of the community itself. Some areas were over-built and heavily promoted for investment properties by new builders and have an inordinate number of foreclosures while other neighborhoods may only have a very few. It can literally change from street to street.

Accusation: You are taking advantage of people by bidding low and then re-selling at a higher price.

Response: A tremendous amount of time, energy and risk goes into securing a property, making any needed renovations, marketing it and locating a new buyer. Unforeseen repairs, unanticipated delays, taxes and insurance plus a long list of other potential costs are just a small part of the equation. Sellers and banks need to move properties; the reward reflects the inherent risk plus value of time and other costs.

Accusation: You are throwing needy families out into the street.

Response: Evictions are not the norm. Even in the worst case situation, most homeowners have lived in the home rent/mortgage free anywhere from six months up to two full years…in fact, media reports clearly demonstrate some homeowners admittedly “making out like bandits” simply by refusing to pay their mortgage. Banks are so backed up that it can take an inordinate amount of time to process the paperwork; meanwhile, many homeowners are able to save a substantial sum simply by putting aside the mortgage payments. Social service programs and other government assistance is available to families in need especially those with children, the elderly or the disabled. In fact, many modification programs actually help with moving expenses by putting cash in the hands of former homeowners.

See you at the top!

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

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

http://www.smartrealestatenews.com (subscribe to this newsletter)

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About the author:

Chris McLaughlin is widely known as America’s top
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Best Real Estate Resources You Never Knew Existed

admin — Thu, 19 Aug 2010 18:13:32 +0000

Smart Real Estate News & Commentary by Chris McLaughlin August 19, 2010

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Homeowners pessimistic

According to the Zillow Second Quarter Homeowner Confidence Survey, U.S. homeowners were less confident about the value of their homes in the second quarter, with one-third believing home prices had not yet reached a bottom. Homeowners were more pessimistic about the short-term future of home values in their local market than they had been in the previous three quarters, with 33% believing home values in their local housing market had not yet reached a bottom, while 38% believed they had already reached a bottom. Nationally, 28% of homeowners said home values in their local real estate market would decrease in the next six months, up from 20% in the first quarter. Additionally, less than one-third, or 30%, believed home values in their local market would increase, down from 42% in the first quarter.

Zillow said less than a quarter, or 24%, of homeowners said their home had increased in value in the past year, compared with 27% in the first quarter. In reality, 34% of homes increased in value in the second quarter, according to the Zillow Q2 Real Estate Market Reports. 27% of homeowners believed their own homes’ values would increase in the next 12 months, 35% believed they will stay the same, 12% expected a decrease and 26% did not know. Of those who expected their homes’ values to increase, the median expectation was a rise of 6%, although that varied by geography. Despite the increasing pessimism, a large number of homeowners were anxiously awaiting the opportunity to sell. Indeed, 5% of U.S. homeowners said they were very likely to put their home on the market in the next six months if they saw signs of a real estate market turnaround. Zillow said this translated into 3.8 million homes with the potential to come into the market. By comparison, 5.2 million existing homes were sold in all of 2009. “As these homeowners hear news of stabilization in home values, they put their homes on the market, driving up inventory and keeping a cap on home value appreciation,” Humphries said.

Jobless claims jump

The Labor Department says that initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 500,000 in the week ended Aug. 14, the highest since mid-November. Analysts polled by Reuters had forecast claims slipping to 476,000 from the previously reported 484,000 the prior week, which was revised up to 488,000 in Thursday’s report. The four-week average of new jobless claims, considered a better measure of underlying labor market trends as it irons out week-to-week volatility, rose 8,000 to 482,500, the highest since early December. The number of people still receiving benefits after an initial week of aid fell 13,000 to 4.48 million in the week ended August 7 from an upwardly revised 4.49 million the prior week. Analysts polled by Reuters had forecast so-called continuing claims rising to 4.50 million from a previously reported 4.45 million. The insured unemployment rate, which measures the%age of the insured labor force that is jobless, was unchanged at 3.5% during that period. The number of people on emergency benefits increased 260,105 to 4.75 million in the week ended July 31.

Olick – Refi boom could break smaller banks

” To summarize, refinance applications are way up, up 17%, while purchase applications are on life support, down 3.4% from the previous week and down nearly 39% from a year ago. Refis now make up a full 81.4% of all mortgage applications, up from 78.1% the previous week, and at their highest level since January of 2009. With home prices way down and mortgage interest rates hovering near record lows, you would think more buyers would get off the fence and sign a contract, but continued weak consumer sentiment is hold them back. You would also think that the bright side to all this is that all this refinancing is putting more money in the average, struggling American’s pocket.

But then I read this note from FBR’s Bob Ramsey, who believes the rate on the 30-year fixed could go as low as 4%, with the following implications: ‘If rates continue to fall, a refi boom could swamp banks and thrifts with cash flows with no obvious place to invest. With newly issued agency MBS yielding approximately 3.5%, banks and thrifts face considerable reinvestment risk.’ Thrifts, he says, are better positioned to handle the risk than regional banks, because, ‘better efficiency provides a significant buffer to weaker revenues.’ The less efficient regionals, he says, are most at risk and adds: ‘Further, if rates remain low for an extended period, we would expect an increase in bank M&A activity as challenging prospects convince some to sell, and others choose to consolidate and grow earnings by cutting duplicative costs.’ I had thought that most borrowers who could had already refinanced by now, but he says that, for some unknown reason, is not the case. “We believe approximately half of conforming borrowers have both the economic incentive and equity to refinance.” It seems that in today’s housing finance market, for every upside, there is a downside.

GM tries to break away from the government

General Motors Co. filed registration papers Wednesday for an initial public stock offering, laying the groundwork for the car maker to begin cutting its ties to the U.S. government, its majority owner. GM outlines a business plan that intends to leverage its massive global scale, strength in fast-growing emerging markets such as China and a balance sheet cleaned up by Chapter 11. At the same time, the company warns it faces many risks, such as continuing losses in Europe and a significant underfunding of its pension obligations. GM’s plan to return to the public markets includes preferred stock, which the company will sell to raise funds, along with common shares, which will be sold exclusively by some of GM’s current shareholders, including the U.S. government. The company said no dividend is currently planned to be paid on the common shares.

The IPO will allow the U.S. Treasury to begin selling the 61% stake it holds in GM after last year’s $50 billion U.S. government bailout of the company. Another holder of GM shares, the United Auto Workers, also is expected to sell some of its stock during the IPO, according to people familiar with the situation. The IPO, expected later this year, is anticipated to raise $10 billion to $15 billion but possibly more. An expected price range for the shares will be determined closer to the sale. For the government to recoup its full investment GM must achieve a stock-market value of $70 billion—10 times GM’s market capitalization before the company headed into bankruptcy-court protection in June 2009, and at least $30 billion more than the market value of Ford Motor Co.

Now for our real estate education section…

Best Real Estate Resources You Never Knew Existed

By now everyone has heard of Zillow but when it comes to serious real estate related research, here’s how to find the best of the best…the type of data the experts use to create those ground-breaking reports and hard hitting case studies. Whether you are working on your next commercial enterprise or simply want to stay abreast of the latest and greatest real estate related information, tap into sure-fire resources to access the best data available.

1. Put a Ph.D to work. Search thousands of doctoral dissertations to see who is working on relevant housing and commercial development related projects. Sponsored by the Office of University Partnership and the US Dept of Housing and Urban Development, this is a goldmine of research:

http://www.oup.org/ddrg/ddrg_profilesearch.asp

2. Free Information resources. Need a few good resources but don’t have the time or money to hire a writer? Use these free foreclosure related resources to educate consumers and help them make informed decisions about the best course of action when it comes to keeping, selling or buying a home. Produced by the Making Home Affordable Program in conjunction with HUD, they are designed for maximum readability in both spanish and english.

http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure

3. Social Media & Uncle Sam – Your good old Uncle Sam has finally taken the plunge and is now available via Facebook and Twitter. Find out about the most recent research, grant and tax credit opportunities, new programs and much more with instant updates via your favorite social media site.

http://www.facebook.com/pages/Washington-DC/HUD-USER/183685747712?v=wall

http://twitter.com/HUDUSERNEWS

4. Taxing Tips – It’s a topic we would all rather avoid but make it as painless as possible by tuning in for great tips right from the source. IRS.gov has it’s very own real estate tax center…a topic of profound importance to every real estate investor.

http://www.irs.gov/businesses/small/industries/article/0,,id=185194,00.html

See you at the top!

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

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

http://www.smartrealestatenews.com (subscribe to this newsletter)

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Smart Real Estate News & Commentary by Chris McLaughlin, February 3, 2010

admin — Wed, 03 Feb 2010 16:12:09 +0000

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Refinance loans up 21%

Demand for home loans rose to a six-week high on a mini refinance wave, with borrowers pushing to lock in rates before they climb later this year, the Mortgage Bankers Association (MBA) said today. Applications to buy homes and refinance loans jumped last week to mid-December levels as average 30-year mortgage rates held near 5%. The industry group’s mortgage index jumped 21% last week, fueled by a 26.3% leap in demand for refinancing as purchase loan requests increased 10.3%. The 30-year mortgage rate dipped 0.01%age point to 5.01%. But this borrowing cost was 0.40%age point above the record low set last March and seen headed higher throughout the year. “Rates continue to hover around 5%, quite low by historical standards, but are well above the record lows seen in 2009 and hence are not generating substantial refi volume,” said Michael Fratantoni, MBA’s vice president of research and economics. Affordability remains high with mortgage rates still historically low and average home prices plunging about 30% from 2006 peaks before stabilizing since last summer. The government’s bonus to first-time and move-up buyers via a tax credit remains in place for several more months, luring buyers who have been sitting on the sidelines waiting for some signs of stability. “I do think the housing recovery in the U.S. still has legs and is firmly in tact,” said Ian Pollick, economics strategist at TD Securities in Toronto. “There’s a lot of pent up demand in the system right now, there are a lot of really really good deals.”

Jobs reports mixed

According to payroll-processing firm Automatic Data Processing (ADP), private-sector employers cut 22,000 jobs in January, marking the smallest decline since February of 2008. The number of cuts in December was revised down to 61,000 from the previously reported 84,000. Economists surveyed by Briefing.com had forecast a loss of 30,000 jobs in January. The service sector reported an increase of 38,000 jobs in January, marking the second consecutive month of job growth for that sector following a 21-month decline. The figure was offset by a loss of 60,000 in the goods-producing sector and a drop of 25,000 manufacturing jobs, which marked its lowest level since January, 2008. In a separate report Wednesday, outplacement firm Challenger, Gray & Christmas Inc, said planned job cuts had accelerated in January. Challenger said employers announced 71,482 layoffs in January, reversing what had been a steady decline in layoff announcements. January’s figure is up 59% from December 2009, when layoffs fell to a 24-month low of 45,094. But it was a sharp decline from the 241,749 cuts announced a year ago. The retail and telecom sectors were the hardest hit in January, with 16,737 and 14,010 job cuts, respectively. The unemployment rate is expected to remain unchanged at 10%.

MBA – Commercial and Multifamily Mortgages Increased in 4th Quarter

According to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, fourth quarter 2009 commercial and multifamily mortgage loan originations were 12% higher than during the same period last year and 15% higher than during the third quarter of 2009. The 12% overall increase in commercial/multifamily lending activity during the fourth quarter was driven by increases in originations for all property types except multifamily. When compared to the fourth quarter of 2008, the increase included a 105% increase in loans for hotel properties, a 101% increase in loans for retail properties, a 59% increase in loans for industrial properties, a four% increase in loans for office properties, a one% increase in health care property loans, and an eight percent decrease in multifamily property loans. Fourth quarter 2009 mortgage originations were 15% higher than originations in the third quarter 2009. Among investor types, loans for commercial bank portfolios saw an increase in loan volume of 39% compared to the third quarter 2009, loans for life insurance companies saw an increase in loan volume of 35% compared to the third quarter 2009, conduits for CMBS decreased by 50% during the same time span, and originations for GSEs decreased 15% from the third quarter to the fourth quarter 2009. “Commercial and multifamily mortgage originations picked up in the fourth quarter, but remain at a low level in absolute terms,” said Jamie Woodwell, Vice President of Commercial Real Estate Research at the MBA. ”The trend shows stability coming back to the market, but the pick-up in volumes really indicates just how low origination levels had fallen.”

Obama’s budget in a nutshell

President Obama’s proposed 2011 budget calls on Congress to make a number of tax changes for individuals. These include: Letting tax cuts expire – the 2001 and 2003 Bush tax cuts are scheduled to expire by 2011 – the 33% bracket would become 36% and the 35% bracket would rise to 39.6%. The long-term capital gains tax rate would increase to 20%, up from 15%; limit itemized deductions – to cap at 28% the rate at which high-income households can itemize their deductions. Currently the value of a deduction is equal to the deductible amount multiplied by one’s top income tax rate, which can range well above 28%; keep the estate tax – assumes the estate tax will be made permanent at a $3.5 million exemption level per person and a top rate of 45% on taxable estates.

That’s more generous than current law, which calls for a $1 million exemption level and a 55% top rate starting in 2011; raise taxes on investment fund manager profits – tax the portion of profits paid to managers of hedge funds and private equity funds as ordinary income rather than as a capital gain, subjecting it to much higher tax rates than the 15% capital gains rate currently imposed; eliminate capital gains tax on small business stock – eliminate the capital gains tax altogether on stock in small businesses held for at least five years; make tax cuts permanent on lower and middle income – tax cuts will be made permanent for everyone making less than $200,000 ($250,000 for couples); permanently protect the middle class from the “wealth” tax; extend the Make Work Pay credit – one-year extension of the stimulus-created tax credit; permanently expand a low-income tax credit – families making less than $85,000 would be able to claim nearly double the child and dependent care tax credit for which they currently qualify; permanently extend the American Opportunity Tax Credit – expanding the existing Hope Scholarship tax credit and making it partially refundable. So much for deficit restraint.

DSNews.com – Banks not tightening credit any more

According to a new report from the Federal Reserve, most large banks have stopped tightening standards on a number of loan types. However, just because it’s not getting tighter doesn’t mean it’s getting easier. Still, it might be seen as a hopeful sign for a financing world that’s been strained since 2007 – hopeful for pretty much every sector except commercial real estate, that is. That’s one of the only loan types where the majority of banks said they’d continued to tighten credit criteria. “Banks’ policies on commercial real estate lending were an exception, as large net fractions of respondents further tightened their credit standards during the final quarter of last year,” the report said. “In addition, banks reported that they had tightened terms on [commercial real estate] loans substantially over the past year.” The Fed said only a small net fraction of banks tightened standards on prime residential real estate loans in the fourth quarter. A somewhat larger percentage of banks – but still fewer than in previous quarters – tightened standards on nontraditional residential real estate loans. Likewise, just a small net fraction of banks reported more stringent lending standards for revolving home equity lines of credit. Banks reported weaker demand across the board – for commercial property loans, prime residential real estate loans, nontraditional mortgages, and home equity loans, alike. The Federal Reserve’s survey results are based on responses from 55 domestic banks and 23 U.S. branches and agencies of foreign banks.

Vacancy rate unchanged

According to the US Department of Commerce, the national vacancy rate for “homeowner” housing units remained at 2.7% in Q409, unchanged from Q109. The rate only slightly wavered from 2.9% at the end of 2008 and 2.6% in Q309. The highest the rate has ever climbed since 1996 was to 2.9% in Q108 and again in Q408. For rental housing, the vacancy rate dropped to 10.7% in Q409 from 11.1% in the previous quarter but increased from 10.1% in the last quarter of 2008. For Q409, more vacancies appeared in principal cities, 3.1%, compared to 2.5% in the surrounding suburbs, according to the report. The rate within the city dropped from 3.5% in the fourth quarter of 2008. More vacancies appeared in the South, 2.9%, edging 2.8% in the Midwest and 2.7% in the West. The Northeast region had a 1.9% vacancy rate. The South also had the highest rental vacancy rate of 13.7% in Q409. The Midwest had a 11.2% rental vacancy rate, followed by the West, 8.9%, and the Northeast, at 7.2%. To combat vacancies, the US Department of Housing and Urban Development (HUD) recently announced that it would provide financing for owner-occupants looking to purchase real-estate owned (REO) property.

Now on to our real estate investing educational section…

How to Save the Sale

Sooner or later every short sale investor encounters a sale in danger of dying. Fortunately, with a few simple steps it’s possible to dramatically reduce the risk of spoiling a sale.

1. Get Smart. Prequalify and prepare from first contact. Everyone has an “A” list and a “B” list when it comes to prospective buyers but it’s still necessary to put things into proper perspective before spending a lot of time and effort on dead-ends. Remember, the internet helps to eliminate and reject prospects through the use of well placed questions and comments. For example, asking a simple question such as “Is there another home you wished you had bought?” can explain a lot; price range, comfort zone and readiness just for starters.

2. Value-Driven. Tough economic times have led most buyers to become more price conscious than ever; it’s no longer enough to simply show a few over-priced homes to prep for an attractive in-house alternative…instead, be prepared to demonstrate real value with low risk. Buyers want to know they won’t lose money in the long run by buying a given house or property.

3. Don’t Shut Doors on any Deal. Some buyers are just the opposite – they have money and when presented with the right opportunity – are willing to go substantially above and beyond their traditional budget. Don’t automatically exclude higher priced properties for those that have the means to make ends meet at a larger than life level. In this situation, recognize the price is not the prime motivator but rather the “right” property. Determine what constitutes a desirable deal then make it happen.

4. Time Right. Timing is everything but it takes time to learn how to distinguish valid help from harassment when working with prospective clients. Too soon and you can quickly cool even the hottest prospect…too long of a delay and you risk having others step in to fill your shoes.

5. Preferred Status. Everyone likes to feel special and as a short sale professional it is your duty to given individualized attention to every prospect….of course, some clients are just a bit more special than others especially when it comes to sealing the deal. Find a few ways to express that little extra something when working with your “A” list clients; meet at a local coffee shop then foot the bill (don’t worry – it’s a legitimate write-off) or schedule exclusive “preview” showings to the most promising prospective buyers before the big announcement. Remember, it’s the thought that counts not necessarily the size of the status symbol.

6. Teach sellers to think like buyers and vice versa. Yes, it’s easier said than done but it’s all in the wording. By teaching sellers to act like buyers and buyers to act like sellers you assure they will present and demand more reasonable offers. Think of it as a small investment that pays big dividends at closing time.

7. Have a contingency plan in place. Every good investor identifies the “out” long before buying into the given investment – it’s no different with short sales. Know when and how you plan to exit the property then have a contingency in place should something go amiss. It’s one additional layer of protection that allows short sale investors to sleep easy by knowing they have plenty of outlets for every property.

See you at the top!

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

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.

The Truth About Yesterday’s Housing Plan & Its Impact on Short Sales & REOs

Chris McLaughlin — Thu, 19 Feb 2009 17:40:09 +0000

Real Estate News & Commentary by Chris McLaughlin, February 19, 2009
http://www.shortsalesriches.com/welcome.html

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Ok, before we get started will you do me a favor? Please forward this e-mail to every Realtor and real estate investor you know. I’m getting inundated for my opinion on the latest housing bill and its impact on short sales and REOs. So here’s the truth of what is really going on.

It is much ado about nothing … unfortunately our friends in the media know little about the housing crisis that we’re living through, but let’s start talking about this new “Homeowner Affordability and Stability Plan” that was announced by the President.

They are saying that the plan will enable “up to 4 to 5 million responsible homeowners to refinance.” That’s true … and a great boom for loan officers and title companies, but let’s look a little more at these claims that they will stop foreclosures. It helps folks who right now aren’t the ones really struggling … and ignores the folks under water on their mortgage beyond 5%.

Let’s read directly from the White Houses’ summary:

“Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.”

Yep, they sure can do that … but guess what? Most of the folks who will take advantage of this are not the folks that are in foreclosure or currently facing foreclosure! If they have a conventional mortgage with Fannie and Freddie, they aren’t the issue right now … for the most part, the subprime garbage is.

But there’s a magic number out there … 105%. Yes, that’s what we’re talking about. If the loan is less than than 105% of its current market value, they might be eligible for refinance. But come on! Most of the people in foreclosure purchased with 100% financing … you know, the 80/20 loan. Most homes lost at least 15% of value last year, and in California, Nevada, Arizona and Florida, just double that to at least 30%. This plan does nothing for these homeowners.

Now let’s think about this further. In order to refinance with Fannie and Freddie, you have to not only have equity in your home (or in this case you can’t be under water more than 5%), but you also have the meet the guidelines for a loan refinance. That means you have be employed. You must have a job. NINJA (no income, no job, no assets) loans aren’t around anymore. So everyone who just lost their job doesn’t qualify for this help.

But is this a good idea, regardless of whether it won’t help people facing foreclosure? Yes. If we can reduce mortgage rates that will allow more Americans to have more money in their pockets, which translates to more consumer spending. Frankly I like this idea a lot more than the $400 a year tax credit that will do little to actually help our economy.

Unfortunately, with 80% of distressed properties having a first and second mortgage, modifications for those who were over leveraged is going to be next to impossible unless they’ve been paying extra payments to bring down their loan balance. So what did Obama signal that he supports?

Cram downs.

What is that?

That’s when a bankruptcy court judge steps in and basically modifies loans and cuts its principal. But here’s the rub: if you violate the sanctity of contracts, you will add uncertainty to the end investor, which means he’s not willing to pay as much for the loan portfolio, which drives up interest rates.

Will cram downs slow short sales?

NO! Come on folks, the reason people do short sales is to save their credit and stop a foreclosure. Do you think those doing short sales want a bankruptcy on their record? No, those are the individuals that don’t want to a short sale anyhow … those are the ones that really want to stay in the home and believe with a modification they can afford it.

What cram downs may do is create an incentive for lenders to approve more short sales and modify more loans. Why? Because they don’t necessarily want to roll the dice with a bankruptcy court judge.

But I read that these banks are putting moratoriums on foreclosures? Won’t that mean fewer REOs and short sales?

Who owns the majority of loans in trouble? It isn’t the banks! It is the investors that purchased these loans. They then hired a servicing company to service that loan on behalf of Collateralized Debt Obligation A23GE63 in Singapore. This is critically important: the majority of homes in foreclosure are not owned by banks, they are owned by investors who bought mortgaged backed securities.

An article in the Wall Street Journal today noted that these investors are now threatening to sue the servicer if they screw up a modification or mishandle a foreclosure. “The securitization has split the interest in the home loan among so many different parties that it is difficult for servicers to make a modification without fear that some significant party may sue or do something else that hurts the servicers,” Kurt Eggert, a professor at Chapman University, told the Journal.

So, we’ve talked about loan refinance and cram downs. What about the modification for those who are in foreclosure? What is that all about?

First, the lender reduces the interest rate on the mortgage to no more than 38% of the borrower’s income. (Note: what if they don’t have a job…kinda hard to do, huh?)

Second, the government will match dollar for dollar the reduction from 38% to 31% debt to income ratio (government is buying down interest rates, not a bad idea, but the investor has to take the hit getting to 38% which many of them won’t do).

Third, lenders must keep the modification in place for 5 years.

In order to incentivize lenders, the government will pay the $1,000 for the initial modification and then will give a $1,000 payment for the next three years if the loan is current.

Then the government will give a carrot to the homeowner of a $1,000 principal reduction for up to $1,000 each year for the next 5 years.

So does this do anything to really stem the foreclosure tide? Unfortunately not really … because lenders know the nasty statistics that most folks don’t want to talk about.

But the New York Times told it to everyone on its front page today. Guess what? Read it for yourself: “The nation’s 14 largest banks reported that more than half of the loans they modified last year were delinquent again after just six months, according to the federal bank regulator, the comptroller of the currency.”

Yes, after just six months over half of the modifications that were done went back into foreclosure. Why? First of all, a lot of people that never should have been homeowners became homeowners with 100% financing. They aren’t ready for the responsibility of owning a home and aren’t able to manage their finances accordingly. Second, the economy has a lot of folks wiped out and they’ve lost their job. And third, after paying for a property that they know is $75,000+ underwater, at some point they just walk from it because it frankly doesn’t make economic sense to keep it, especially since their credit is shot already because they’ve missed so many payments. They can bail out now, rebuild their credit, and buy something again in a few more years (with a short sale they only have to wait 2 years).

So what really happened yesterday? A big mess just got messier. False hope was given to millions of people facing foreclosure that own homes that are never going to get refinance or modified in a meaningful manner.

Now on to our investor education section …

Short Sales & Foreign Investments

Short sale investors with access to key markets with international appeal would do well to understand the basics about selling to foreigners; despite relative gains on the part of the dollar, the exchange rate remains highly favorable to foreigners interested in purchasing domestic real estate. Plus, unlike other nations, the United States remains “foreign” friendly by allowing non-residents to own property.

Fortunately, with the emerging economies around the world beginning to show an interest in other cultures and travel, even relatively modest homes can benefit from working with international buyers. Foreign vacation homes and affordable destinations are no longer reserved only for the rich; many middle class Europeans, rising young Asians and others are taking advantage of once in a lifetime buying opportunities to purchase a home of their own in the land of the free. Learn how to maximize potential profits by tapping into the lucrative foreign market with these quick tips:

1. Evaluate the property carefully. Excellent examples of property of interest to foreign investors or buyers includes vacation homes, property located in major metropolitan areas such as New York City or Washington D.C., property located in close proximity of international airports and/or those with established access to colleges, hospitals or other desirable amenities.

2. Make it meaningful. Speak the language. You will obtain better results by placing ads in both English and whatever other language you wish to target but don’t stop there! Understand how the cultural perception will influence how your home is viewed. For example, while white walls may seem clean and fresh to Americans’, potential buyers from Asiatic cultures often associate white with death. Make sure your ads are appealing both in word and picture for the target market.

3. Watch the exchange rate. Exchange rates fluctuate dramatically so plan to spend a bit extra setting up an escrow account and other banking that is experienced with foreign transactions. Don’t skimp on overnight delivery – delays can literally cost hundreds or even thousands of dollars due to variations in the exchange rate. Specify how all funds will be paid, in what time period and in what form. It is highly recommended to require funds in USD to avoid major variations.

4. Keep track of time. Don’t’ assume your buyer will be in the states during the period of the sale and transaction. Long distance transactions are increasingly the norm especially among the “jet set” crowd so use time marks and remain flexible when dealing with oversea transactions.

5. Take it to the bank. One of the best reasons for selling to international buyers is the ability to create a win-win for all involved. International buyers are often used to high sales prices where American properties still seem like a bargain; combined with favorable exchange rates don’t’ be surprised to find them downright giddy. On the other hand, you get top price for a property. Yes, it is a little extra work but often well worth the time to learn the nuances of working with international buyers.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html

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*************************************************
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 flipping of distressed homes. Owns
      portfolio of nearly 100 high-value, high-profit
     properties

    * Owner and Supervising Broker of one of Florida’s
     largest Real Estate firms, running 4 different
     offices, supporting nearly 450 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

—

Short Sales Riches Blog » refinance

Refi wave cooling

Smart Real Estate News & Commentary by Chris McLaughlin January 10, 2011

Refi wave cooling

Less worry about layoffs

DSNews – MA court voids foreclosures

Olick – what the MA court ruling means

WSJ – Late 2011 Fed exit?

Now for our real estate education section…

Cloud Computing 101

What is Cloud Computing?

Advantages

MBA – Refinance activity slows

Smart Real Estate News & Commentary by Chris McLaughlin December 1 , 2010

MBA – Refinance activity slows

Bipartisan debt commission releases its final report

MBA – Commercial and multifamily delinquencies mixed

Private sector growth up, job cuts planned

Olick – Home price disconnect

Now for our real estate education section…

Escrow & eBay

Escrow Defined

Easy Escrow

Smart Real Estate News & Commentary by Chris McLaughlin November 3, 2010

Why did HAMP fail?

GOP wins House, seats in Senate

MBA – purchase apps up, refinance apps down

Private sector creates 43,000 jobs

Olick – housing mess affects everyone

Fed’s call now

Lord Abbet & co – recovery slow, but here

Now for our real estate education section…

What’s the Deal with Owner Finance & The SAFE Act?

The SAFE ACT in a Nutshell

It’s All in the Details

Other Exemptions

Short refinancing program started yesterday

Smart Real Estate News & Commentary by Chris McLaughlin September 8, 2010

How to wholesale and quickly flip commercial real estate properties without using a dime of your own money or credit:

Short refinancing program started yesterday

MBA – mortgage applications up, refinance applications down

More spending by the administration

Prime mortgage delinquencies next?

Republican plan

Now for our real estate education section…

White Hat Replies to Black Hat Accusations

Best Real Estate Resources You Never Knew Existed

Smart Real Estate News & Commentary by Chris McLaughlin August 19, 2010

Homeowners pessimistic

Jobless claims jump

Olick – Refi boom could break smaller banks

GM tries to break away from the government

Now for our real estate education section…

Smart Real Estate News & Commentary by Chris McLaughlin, February 3, 2010

****************************************************** “You Thought Short Sales Were Hard to Close?

Sorry - You Thought Wrong…”

Refinance loans up 21%

Jobs reports mixed

MBA – Commercial and Multifamily Mortgages Increased in 4th Quarter

Obama’s budget in a nutshell

DSNews.com – Banks not tightening credit any more

Vacancy rate unchanged

Now on to our real estate investing educational section…

How to Save the Sale

The Truth About Yesterday’s Housing Plan & Its Impact on Short Sales & REOs

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“You Thought Short Sales Were Hard to Close?