short sale

Smart Real Estate News & Commentary by Chris McLaughlin March 12, 2012

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Fannie and Freddie CFOs make more than CEOs

The Federal Housing Finance Agency’s (FHFA) announcement of salary cuts for Fannie Mae and Freddie Mac executives doesn’t go as far as some would like.  The FHFA detailed a $500,000 cap on salaries Friday, in particular for the incoming CEOs of the government-sponsored enterprises. That remains above the federal pay scale and falls short of compensation caps in standing legislation, and includes deferred payments that boost potential pay to $30.73 million for the top 10 executives.  Fannie and Freddie’s chief financial officers are exempt from the base salary cap, meaning they’d make more than the new chief executives. CFOs Ross Kari and Susan McFarland will make $675,000 and $600,000, respectively, in 2012.  Patrick Lawler, FHFA chief economist, said candidates the agency contacted for CEO positions requested subordinates make a competitive salary.  “We’re going to try and fill these two positions at a very low wage rate, but we just don’t think there’s any chance on the others,” Lawler said.

Three Freddie executives are also set to receive a raise, albeit at or below the $500,000 barrier.  These levels do represent a sharp reduction since the government took Fannie and Freddie into conservatorship. Compensation for the top 15 executives at each GSE is down 63%, according to the FHFA.  Members of Congress, however, weren’t keen on the changes.  “That may (be) an appropriate level for the private sector, but as long as the GSEs live off the taxpayers, these companies are owned by taxpayers and their staff should be paid accordingly,” Rep. Spencer Bachus, R-Ala., said in a statement Friday.  A House bill sponsored by Bachus would limit GSE executive pay at $218,978 for 2011. It passed the committee level in November.  Jeff Emerson, a spokesman for Bachus, said that bill could come up before a full House vote soon. Bachus called the FHFA’s change “long overdue,” but said it doesn’t go far enough.

Another measure, attached to a House and Senate-approved congressional insider trading bill, would put Fannie and Freddie employees on a federal pay scale with a maximum $275,000 salary and no bonuses.  Both chambers approved separate versions, each with the GSE provision, in February, but have yet to reconcile the two measures.  Sen. Jay Rockefeller, D-W.Va., cosponsored the GSE amendment in the Senate and called the FHFA’s move a “good first step.”  “Even a $500,000 salary is too much,” Rockefeller said in a statement. “Excessive executive pay at taxpayer-funded entities has already been going on for too long and must end — period.”  The FHFA said any further salary reduction from its $500,000 benchmark or uncertainty around it would “heighten safety and soundness concerns.”  “A sudden and sharp change in pay from these levels would certainly risk a substantial exodus of talent, the best leaving first in many instances,” FHFA acting director Ed DeMarco said in a release. “A significant increase in safety and soundness risks and in costly operational failures would, in my opinion, be highly likely.”

Legislators in Washington railed against executive pay at Fannie and Freddie during committee hearings in the fall, including before the House Oversight Committee. That committee, chaired by Rep. Darrell Issa, R-Calif., issued a critical report on GSE pay, calling executives “government-sponsored moguls.”  “I’m encouraged to see that (the) FHFA took the Oversight Committee’s recommendation to reevaluate the bonus structure for these executives,” Issa said Friday in a release.  The $500,000 salary cap, however, only refers to bimonthly or weekly payments, according to FHFA documents. The pay structure includes “deferred payments,” which the FHFA does not consider bonuses, delayed by a year for each quarter.  The top 10 executives can still earn that $30.73 million with deferred payments included, a 13% reduction from roughly $35.3 million in 2011. Executives ultimately brought in $30.1 million last year with these payments.

Deferred payments are subject to reductions based on conservatorship and personal performance, as well as continued employment up to Jan. 31 2014. Early-exit provisions make up 70% of deferred salary.  The FHFA included that provision to encourage executives to stay, Lawler said.  “This is an unusual pay structure that’s designed for a very unusual situation,” Lawler said. “It doesn’t look 100% like the private sector, but it certainly isn’t the government either.”  Charles “Ed” Haldeman and Michael Williams, Freddie and Fannie’s outgoing CEOs, could earn up to $5.4 million in 2012, including $900,000 in base salary. Haldeman, however, recently asked not to receive $2 million in incentives tied to 2009 and 2010, according to a regulatory filing and first reported by The Wall Street Journal.  But both have said they’d leave before year-end, with $2.88 million in deferred salary tied to retention reductions.

Stress tests expected to show progress

The Federal Reserve will release the results of its latest stress tests this week, and they are expected to show broadly improved balance sheets at most institutions.  While unpleasant surprises are possible, analysts are counting on the Fed to find banks largely healthy. That would stand in marked contrast with the holes, in the tens of billions of dollars, found on balance sheets in the first round of stress tests in 2009.  The examination is not merely an intellectual exercise. If institutions fall short, they could be required to raise billions in new capital, depressing their shares. If they pass, dividend increases and stock buybacks by the strongest institutions will follow as they did after the second round of tests a year ago, pleasing investors whose banks’ stocks still trade at levels far below where they where before the collapse of Lehman Brothers in September 2008.

Under the tests, Federal Reserve specialists are trying to predict how capital levels at the 19 largest banks would withstand an economic downturn even more severe than the one that followed the Lehman collapse.  In addition to a 50% stock market decline and an 8% contraction in real gross domestic product, the tests envision an unemployment rate of 13%, well above the 10.2% peak recorded in October 2009. A surge in unemployment would increase losses for banks on mortgage and credit card debt.  If all that were not enough, the Federal Reserve is considering what would happen to bank assets if a market shock hit Europe and reverberated in the United States, gauging the extent of losses that have not loomed large for American institutions, despite the continuing problems in Greece and weaker European borrowers.

Regulators are walking a fine line: if they permit the banks to return too much capital now, that might leave the industry vulnerable in the event of a downturn and lead others to think the industry was returning to its risky ways. On the other hand, a raft of negative results would alarm investors just as calm seems to be returning to the markets.  For banks to pass the tests, they must show that their Tier 1 capital ratio – the strictest measure of a bank’s ability to absorb financial blows – will be at 5% or better, even in the Fed’s nightmare case. To raise dividends or buy back stock, the ratio would have to remain above 5%, after capital was returned to shareholders.  Tier 1 capital ratios for the 19 largest banks have improved since the depths of the financial crisis, rising to 10.1% in the third quarter of 2011 from 5.4% in the first quarter of 2009. Actual capital in dollar terms has jumped to $741 billion from $420 billion.

Olick – homebuilding stocks too hot?

“Improvement in the jobs market, improvement in potential buyer traffic, improvement in existing home sales, no change in record low mortgage rates…no surprise the analysts are starting to upgrade the nation’s public home builders. Not to mention that we’re getting an unusually warm start to the spring market.  ‘We are raising our targets for the builders, and are upgrading DHI, LEN, and TOL to Outperform (from Neutral), and also upgrading MTH and RYL to Neutral (from Underperform),’ wrote Credit Suisse’s Dan Oppenheim in a note this morning, that then sent the stocks of all the builders on a tear.  Not that they haven’t been on a tear since last fall, with the S&P home builder’s index nearly doubling. If that happened even before all this new spring energy in the market, then the obvious question is, how much farther do these stocks have to go?

That will depend entirely on the spring results, which we won’t get until summer. We want to focus on new orders and new home sales, but we also need to pay close attention to the distress in the market, since many foreclosed homes are relatively new construction, left over from the building boom barely six years ago.  ‘There will likely be added supply/competition as more foreclosures come to market following the robo-signing agreement, and a significant backlog of 6.6 million delinquent loans/foreclosures still needs to be worked off (though foreclosure pricing seems to have bottomed and there are plenty of investor buyers of foreclosures),’ writes Oppenheim.

He also cites increases in FHA mortgage insurance premiums. FHA is a favorite loan product for first time home buyers, and first time buyers are major clients of the new home builders. And while bargain-basement foreclosures may be hurting the home builders in the short term, the rental boom due to all these foreclosures may actually provide builders with another opportunity.  ‘Bowing to the realities of today’s for-sale housing market, a growing cadre of market-rate builders are warming to the concept of houses as an alternative rental product,’ writes Lew Sichelman in National Mortgage News.  That’s right, building houses to rent, not sell. Not so crazy, given rising rents and rising demand. If the multi-family developers can do it, why can’t single family builders?  As for the stocks of the big guys, are they too hot? Most builders are pricing in order increases of 20% at least, according to CNBC’s Bob Pisani.  ‘That seems to be happening, which would leave little room for price run-ups, but remember, this market is very under-owned by a lot of investors, so these stocks could go beyond reasonable valuations very easily,’ says Pisani.”

Obama defends energy policy

President Obama is stepping up defense of his record amid concern higher oil prices may lift gasoline to $5 a gallon in some parts of the country this summer, posing a potential threat to the president’s bid for reelection on November 6.  Republicans point out that Obama policies have hobbled the energy industry with red tape and point to the administration’s blockage of TransCanada Corp’s Keystone XL oil pipeline project to back their charge that he is hostage to environmentalists in his political base.  Obama visited election battleground states North Carolina and Virginia last week to promote his message and will speak at the White House on Monday with local television stations serving key swing states, including Colorado, Nevada and Pennsylvania.

BOA and MBIA battle over evidence

Bank of America (BOA) is defending itself after insurer MBIA filed a letter with a court asking for sanctions against BOA over alleged delays or failure to produce records compelled in discovery.  MBIA, which is suing Countrywide over alleged misrepresentations made about the quality of Countrywide loans that MBIA insured as securities, is requesting documents that could shed light on allegations of fraud within the former subprime lending giant. BOA purchased Countrywide in 2008.  In a letter to Judge Eileen Bransten with the New York State Supreme Court, MBIA claims BOA failed to produce documents requested on fraud allegations, delayed the production of requested materials and dumped thousands of documents on MBIA at the last minute, making it difficult for the insurer to conduct an appropriate investigation before depositions in the case.

Bank of America responded with its own letter to the court. The bank said the allegations are baseless and blamed the mass release of documents on a coding error that was disclosed to MBIA.  Furthermore, in its letter, BOA claims MBIA refused to wait for the coding error situation to be remedied, which led to the production of documents on a rolling basis. The bank claims MBIA knew the process would take weeks and says BOA devoted significant resources to the document production.  MBIA views the recent discovery spat in a different light.  “Over the course of the last three weeks, Bank of America has produced nearly 170,000 pages of new, relevant, successor liability documents,” MBIA attorneys wrote. “These productions, which are continuing, have forced postponement of a number of successor liability depositions and compelled MBIA to agree to a brief extension of the successor liability discovery schedule. This is just the latest conduct by BAC to sabotage the discovery schedule and cause MBIA significant prejudices, and is part of an indefensible pattern of delay and discovery abuses by both the BAC and Countrywide defendants.”

MBIA’s request for discovery sanctions also claim Countrywide failed to produce documents related to allegations of fraud on Countrywide home loans.  “This includes withholding important categories of documents on specious grounds and then selectively producing certain of such documents that it believes are favorable on the eve of (or during) depositions,” MBIA said in its filing.  Bank of America denies the discovery process has prejudiced MBIA and says MBIA’s sanction requests are baseless in a letter to the court.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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About the author:

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

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

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

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

* In 2011, Chris’ 4 Central Florida real estate offices
closed 3,336 sides for a closed sales volume of
$430,902,643!

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin March 5, 2012

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Underwater borrowers eligible for settlement write-downs

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

Greek Bond Swap Deal Rests on Knife Edge

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

New Jersey witnesses lending resurgence

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

US stock futures fall on global economy worries

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

DSnews.com: Treasury Reinstates HAMP Incentives

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

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

* In 2011, Chris’ 4 Central Florida real estate offices

closed 3,336 sides for a closed sales volume of

$430,902,643!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin February 22, 2012

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

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Foreclosure abuse rampant

A report this week showing rampant foreclosure abuse in San Francisco reflects similar levels of lender fraud and faulty documentation across the United States, say experts and officials who have done studies in other parts of the country. The audit of almost 400 foreclosures in San Francisco found that 84% of them appeared to be illegal, according to the study released by the California city on Wednesday. “The audit in San Francisco is the most detailed and comprehensive that has been done – but it’s likely those numbers are comparable nationally,” Diane Thompson, an attorney at the National Consumer Law Center, told Reuters. Across the country from California, Jeff Thingpen, register of deeds in Guildford County, North Carolina, examined 6,100 mortgage documents last year, from loan notes to foreclosure paperwork. Of those documents, created between January 2008 and December 2010, 4,500 showed signature irregularities, a telltale sign of the illegal practice of “robosigning” documents.

One of the major problems that has emerged in the foreclosure crisis is that it is far from clear that many lenders foreclosing on properties actually own the loans and have the right to take action against them. In many cases during the housing bubble that burst in 2008, original mortgages were repackaged and sold to so many investors that it is now unclear who actually holds the loans. In the San Francisco study, which studied properties subject to foreclosure sales between January 2009 to November 2011, 45 per cent were sold to entities improperly claiming to be the owner of the loan. “It is not impossible that there are homeowners who are alleged to have defaulted on loans to which they never fully agreed to and, further, are being foreclosed upon by lenders that might not even own such loans,” the report stated.

One factor that probably caused the particularly high 84 per cent rate of illegal foreclosures in San Francisco is that California is a “non-judicial” foreclosure state. In other words, the foreclosure process does not need to be overseen by a judge. That left the conduct of lenders in California – one of the hardest-hit states in terms of foreclosures – largely unscrutinized until the robosigning scandal gained prominence in late 2010. In judicial foreclosure states such as New York, some judges have been taking banks to task for submitting faulty foreclosure paperwork. But Ray Brescia, a visiting professor at Yale Law School and an expert in housing law, said foreclosure fraud had been as rampant in judicial states as non-judicial ones. “This number around 80% is not a number we have not seen before,” Brescia said, referring to both the issuing of faulty loans during the housing bubble and the foreclosure crisis that followed. “There have been a very high level of irregularities across the country.”

Businesses brace for new “fair” tax plan

The Treasury Department will roll out a corporate tax reform plan today from President Barack Obama, administration officials said yesterday, with expectations low for any major tax code overhaul in an election year. The Obama plan will follow such principles as “fairness” that the president laid out in his State of the Union address to Congress last month, the officials said. A cut in the corporate tax rate, which presently tops out at 35%, may be included, as well as a proposal for a minimum tax on overseas profits, analysts said. After the presidential and congressional contests are decided in November, however, a number of major tax and budget issues will converge on Washington and new momentum for comprehensive tax reform may follow. Potomac Research analyst Greg Valliere said: “Even if Geithner floats something and members of both parties say they’re interested, I simply cannot see a reform bill passing before the election, close to a zero% chance.” He added: “I suppose anything would be possible in a lame-duck session in December, but something this huge and complex will require a thorough vetting, and that could take a year – or much longer.” The last major rewrite of the tax code came in 1986 under Republican President Ronald Reagan.

Republican Representative Dave Camp, chairman of the US House of Representatives tax-law writing Ways and Means Committee, wants to slash the top corporate rate to 25%. Obama last week unveiled a $3.8 billion budget-and-tax proposal that called for aggressive government spending to boost the economy and for higher taxes on the rich. On Friday, Congress approved extending a payroll tax cut through the end of 2012. Its expiration will coincide with several other fiscal earthquakes: the expirations of individual tax cuts enacted under President George W. Bush, and $1.2 trillion in automatic budget cuts across all government programs imposed as part of last year’s deal to raise the debt ceiling. After these events and others, analysts said, thorough tax reform may be a realistic prospect. For now, they said, tax proposals will largely amount to political messaging. Republican presidential candidate Mitt Romney on Tuesday called for a flatter, fairer and simpler tax code. He is scheduled to make a major economic speech on Friday in Detroit. Details of his tax plan may emerge before then.

Mortgage applications down

The Mortgage Bankers Association (MBA) said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.5% in the week ended Feb 17. The MBA’s seasonally adjusted index of refinancing applications gave up 4.8%, while the gauge of loan requests for home purchases slipped 2.9%. The refinance share of total mortgage activity dipped to 80.1% of applications from 81.1%. Fixed 30-year mortgage rates averaged 4.09%, up 1 basis point from 4.08% the week before. The survey covers over 75% of US retail residential mortgage applications, according to MBA.

Eurozone at the brink of recession

The euro zone economy is in danger of tipping into recession, with the services sector shrinking this month along with manufacturing, tempering a wave of optimism after a new bailout deal for Greece struck this week. Surveys of purchasing managers published on Wednesday showed unexpectedly weak activity in the region’s most powerful economy, Germany, and in France. This is as well as in the bloc’s floundering debtor states, such as Spain, where unemployment is running at 23%, and Greece where the euro debt crisis began more than two years ago and continuous cuts have provoked riots. The Markit Eurozone Composite Flash PMI, a good leading indicator of overall economic growth, fell to 49.7 in February from 50.4 last month, below expectations for a rise to 50.6 and under the 50 line that divides growth from contraction. That weakness was echoed in China, whose PMI showed export orders falling in their worst performance in eight months. Europe is China’s biggest export market. Older data published on Wednesday, official figures on euro zone industrial orders for December, showed there had been some stabilization at low levels. Manufacturing orders in the 17 countries that share the euro rose 1.9% on the month, beating the 0.7% predicted in a Reuters poll and reversing a 1.1% fall in November. But with euro crisis curtailing on British business with the bloc, two Bank of England policymakers voted earlier this month for an even bigger stimulus to the economy in February than the extra 50 billion pounds ($79 billion)that their colleagues agreed to pump into the economy, minutes to the BoE’s February 8-9 meeting showed.

Olick – will gas prices be the spoiler?

“I spent Sunday afternoon at a Toll Brothers neighborhood in Northern Virginia called ‘Dominion Valley.’ It’s a planned community about 45 miles from the heart of DC that sprung up in 2000 and has sold 2500 homes, with another 1,000 still planned. My mission was to get a sense of buyer traffic as the President’s Day weekend unofficially kicks off the spring home selling season. As I was driving back toward DC, I noticed the price of gas (for the cheap stuff) was $3.75 a gallon. Ouch. (They’re higher in other parts of the country). That can’t be good for sales. Some of the potential buyers I spoke with worried about the drive time, but hadn’t seemed to give gas prices as much thought. Many people who live in Dominion Valley commute into the city, or just outside to the Pentagon and surrounding contractor base in Crystal City. Commutes in this area are often long, but when gas prices spike they become more costly, too.

The sales center and model homes bustling with potential buyers. With a weather forecast for snow and the ‘National Sales Event’ advertised by Toll Brothers was mostly discounts on upgrades, I was surprised to see a steady crowd. John Elcano, Toll’s VP for Virginia Sales, told me they’ve raised prices four times since October. Several of the potential and actual buyers I spoke with were eager to move, one from a condo in the same community, another a first time home buyer, and another who was downsizing from a bigger house with a bigger yard. Scott Genburg and his wife, who live near Dominion Valley, already sold their existing house, without even putting it on the market. A realtor canvassed their neighborhood and they accepted the offer. So they ended up needing to buy something fast and bought a new home. But none of the folks I spoke with were looking for a bigger house with a longer commute, a stable of the boom times. With the federal government a steady source of jobs, the Washington, DC, and Northern Virginia markets have shown resilience in the face of the great recession. Builders seem to be responding. Metrostudy reports that finished, vacant housing inventory rose more sharply than any other market it studies in the last quarter, up 17.7%. At the same time, the inventory of existing homes for sale is low. Ken Croisetiere, who just got married, expressed frustration with the house hunting process ‘it feels like a great time to buy, but what we’re finding out is that the houses that appeal to us are not as abundant as we would like to find. Toll’s Elcano says, ‘people are relocating to the area, they can’t find a resale to move into so they‘re moving more toward the new construction.’ But will people still move to new construction in the suburbs if it cost $100 to keep the tank full on a weekly basis? ISI home building analyst Steve East says higher gas prices will impact builders, with a ‘modest effect’ on the entry level market.”

Oil hits $106

Oil prices hovered above $106 a barrel Wednesday in Asia amid concern that conflict over Iran’s nuclear program could lead to global crude supply disruptions. Benchmark crude for April delivery was up 11 cents to $106.36 per barrel late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $2.65 to settle at $106.25, the highest since May, in New York on Tuesday. Brent crude was down 16 cents at $121.50 per barrel in London. Oil has jumped from $96 earlier this month amid escalating tension between Western powers and Iran. On Tuesday, Iran Gen. Mohammed Hejazi warned his country is prepared to carry out a pre-emptive strike against any nation that threatens Iran. His comments followed Iran’s announcement of war games to practice protecting nuclear and other sensitive sites — viewed as a message to the US and Israel that the Islamic Republic is ready both to defend itself and to retaliate against an armed strike. Iran said over the weekend that it will stop selling oil to Britain and France in retaliation for a planned European oil embargo this summer. The move was mainly symbolic — Britain and France import almost no oil from Iran — but it raised concerns that Iran, which produces almost 4 million barrel a day of crude, could take the same hard line with other European nations that use more Iranian crude. “A real stoppage of 4 million barrels a day will send crude markets to at least $130,” Carl Larry of Oil Outlooks and Opinions said in a report. “A stoppage longer than a month will push that number to $150. Damage to oil fields or transport areas will add even more premium that will not go away for years.”

WSJ- should mortgage rates be even lower?

Mortgage rates are the lowest on record. But by a key historical measure, they should be even lower. Over the past year, a wide gap ripped open between the mortgage rates house hunters see and a benchmark interest rate investors demand to buy bonds backed by home loans. In normal times, this obscure metric would only be of interest to bankers, brokers and traders of mortgage-backed securities. But with housing still dragging on the economy, the spread is potentially slowing the recovery—and important to everyone from top Washington policy makers to strapped homeowners who could use a few extra dollars each month.

For months, a key interest rate on mortgage-backed securities—known as the current coupon yield—has tumbled faster than average US 30-year mortgage rates. In recent weeks, the difference between the two has flirted with levels seen in the aftermath of the financial crisis. Some say the wide spread shows the large banks that dominate the mortgage market are flexing their muscle by keeping prices relatively high. Others argue the gap reflects increased regulatory costs, risks and new realities of mortgage making. Either way, the spread is wide. Tuesday afternoon, it was 0.96 percentage points—almost double its average over almost 30 years. It has been as high as 1.20 percentage points this year.

If history is any guide, it should be a lot lower. With yields on mortgage-backed securities at these levels, the 30-year fixed rate mortgages would be roughly 3.40% if the spread was around its historical average of 0.50 percentage points. That rate would save a US homeowner with the average outstanding loan balance of $155,000 about $41 in mortgage payments each month, versus the current rate. Over the seven-year period someone usually holds a 30-year mortgage, that translates into a roughly $3,446 difference, according to numbers provided by trade publication Inside Mortgage Finance. Wider spreads generally translate into better margins for banks and brokers. And some lenders have seen profitability on mortgage origination improve as the spread has widened. Some mortgage-finance observers suggest that increased concentration among the large banks that dominate the mortgage market better helps explain the wide spreads. They argue that because there are fewer banks doing the bulk of the mortgage lending than in years past, it is easier for them to capture market share without offering rock-bottom prices. “It’s a lack of competition. We really haven’t seen a competitive marketplace since 2008,” said Guy Cecala, publisher of Inside Mortgage Finance.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin December 6, 2011

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Foreclosures down in Colorado

According to a report re-leased Tuesday by the Colorado Division of Housing, foreclosure auction sales in Colorado’s metropolitan counties were up 7.9 percent in November compared to November of last year.  Foreclosure sales in Larimer County rose 47 percent in November compared to a year ago but filings dropped 37 percent.  Overall, sales and filings dropped in Larimer County in the first 11 months of the year compared to the same time frame in 2010.  However, comparing the first 11 months of this year to the same period last year, foreclosure filings were down 28.6 percent through November while foreclosure auction sales were down 20.7 percent.  New foreclosure filings fell year over year during November with total filings dropping 21.7 percent from 2,932 filings in November 2010 to 2,296 filings in November of this year. Foreclosure auction sales increased during the same period from 1,195 to 1,290.  From October 2011 to November 2011, foreclosure filings fell 2.3 percent, and foreclosure sales at auction rose 37.5 percent.

Foreclosure auction sales through November fell year over year from 2010’s 11n-month total of 18,728 to 14,854 during the same period this year. Foreclosure filings were also down through November, falling to 23,556 filings year-to-date this year from last year’s 11-month total of 32,982.  Year-to-date through November, the counties with the largest decreases in foreclosure filings, year-over-year, were Mesa County and Denver County, where filings decreased by 35.2 percent and 32.2 percent, respectively. Pueblo County reported the smallest decline in filings with a decrease of 12.5 percent from the first 11 months of 2010 to the same period this year. All counties surveyed reported year-over-year decreases in foreclosure filings.  For the first 11 months of this year, all counties also showed decreases in foreclosure auction sales when compared to the same period last year.

The counties with the largest decreases in foreclosure auction sales, year-over-year, were Broomfield County and Adams County, where auction sales decreased by 40.3 percent and 27.0 percent, respectively. Pueblo County reported the smallest decline in auction sales with a decrease of 9.1 percent from the first eleven months of 2010 to the same period this year.  The county with the highest rate of foreclosure sales during November was Adams County with a rate of 681 households per foreclosure sale. Mesa County came in second with 792 households per foreclosure sale. The lowest rate was found in Boulder County where there were 3,402 households per foreclosure sale.

Mr. Geithner goes to Germany

U.S. Treasury Secretary Timothy Geithner arrived in Germany on Tuesday for a three-day blitz of euro zone officials to urge them to take decisive action to backstop their currency union and resolve a crushing debt crisis.  Geithner will press French President Nicolas Sarkozy, the new leaders of Spain and Italy and Germany’s finance minister to agree at a crucial European Union summit on Friday to take steps that will give markets confidence that no euro zone countries will default, and that the region’s banks will stay solvent.  Geithner has made several trips to Europe in recent months as U.S. concerns over the crisis grow and, judging by comments from both him and President Barack Obama, the Treasury Secretary may add to a growing chorus calling for the European Central Bank to take more decisive action to resolve the crisis.

The need for action was underscored by Standard & Poor’s warning on Monday that 15 of the 17 euro zone countries now face an unprecedented mass downgrade if they fail to reach a satisfactory agreement at the Brussels summit—all the way up to AAA-rated Germany and France.  The Federal Reserve joined with the European Central Bank and others in action to ease dollar funding strains a week ago and Obama and Geithner have both pointed to the option of the ECB backstopping European governments and the banking system. That idea is viewed by many economists as the key to any comprehensive solution to the crisis, but resisted by Germany.

Olick – why are cancellations even higher?

“For the past several months, Realtors across the nation have been reporting an ever-increasing number of cancelled existing home sale contracts. The latest Realtors Confidence Index now puts the cancellation rate at 20 percent, way up from the historical norm of around four to six percent.  ‘On-time settlements were reported as declining from 65 percent to 47 percent,’ according to the Realtors. It’s not why you think, or at least not why I thought. Inability to get a mortgage was reported by just 9 percent of respondents to the Realtor survey. Bigger issues were failed inspections, buyers with cold feet and adverse economic conditions. I’m sure appraisals figured in there as well.  It begs the question then, if these are just delays or true cancellations?

Anecdotally, I was doing a report on a residential street in Northwest DC last week, an area that is still holding its own and didn’t lose much in the housing crash. I was standing in front of a ‘For Sale’ sign, when the Realtor from the sign came out of the house. She wanted to know what we were saying about the neighborhood, concerned of course that there were any signs of cracking. I assured her there were not, but asked about the house she was selling.  The Realtor told me it was actually under contract, after about 35 days on the market. I asked why there was no ‘under contract’ sign, which used to be so commonplace before the ‘sold’ sign goes up. She said they hadn’t had the inspection yet, although the house looked, at least from the outside, to be in very good condition. When I asked if she worried about that, her answer was, ‘You never know these days.’ Apparently the jitters are widespread, even in one of the nation’s most secure housing markets.

With so much of the current housing market comprised of distressed property sales, and with the Realtors unable to capture so much of that share in their data, uncertainty is certainly understandable if not mandated. I read a report today citing Barclay’s analyst Stephen Kim of Barclays Capital, who is upgrading builders and raising price targets on the premise that we will see a housing ‘rebound’ in 2012.  ‘In the absence of a government homebuyer incentive, prices for non-distressed home sales have stabilized for almost a year. In our opinion, this is the most important trend in the housing industry right now,’ notes Kim. ‘We are amazed at how little attention it has been getting from the media and the Street. This stability on the part of non-distressed prices has occurred despite a very high share of distressed activity and continued declines in overall prices.’

I’m not sure where he’s getting that stabilization. CoreLogic reported home prices in September, excluding distressed sales, fell 1.1 percent in September. Their chief economist Mark Fleming cites a supply and demand imbalance and adds, ‘Distressed sales remain a significant share of homes that do sell and are driving home prices overall.’  We obviously have to be very careful reading today’s housing market tea leaves. There are so many different indicators and so many different entities reporting these indicators, that it’s often hard to find out what’s really going on. That’s why I always go back to the Realtors on the front lines. They are telling us that this market, distressed or not, is skittish and undependable. A 20 percent cancellation rate for existing sales is shocking and does not suggest a rebound on the horizon. At best, I’m looking for simple stabilization.”

Euro down against dollar

The euro edged lower on Tuesday, as traders reacted to news that Standard & Poor’s (S&P) put 15 euro-zone countries on a negative “credit watch” late in the prior session.  The euro traded at $1.3369 compared with $1.3386 in North American trade late Monday.  The dollar index, which measures the U.S. unit against a basket of major rivals, traded at 78.702 compared with 78.654 late Monday.  The move by S&P killed a risk rally that had been fueled in part by a pledge by German Chancellor Angela Merkel and French President Nicolas Sarkozy to quickly seek a new treaty that would automatically impose sanctions on violators of the euro zone’s fiscal rules.  The warning applied to triple-A Germany and France and all other euro members other than Cyprus, which was already on negative watch, and Greece, whose CC rating already implies a high probability of default.

Toll Brothers Q4 profits down 70%

Luxury homebuilder Toll Brothers said Tuesday its fourth-quarter profit fell about 70% to $15 million, or 9 cents per share, compared to $50.5 million, or 30 cents per share, a year earlier.  The homebuilder said its profit drop is attributed to inventory and joint venture write-downs, as well as debt retirement charges. In addition, the firm enjoyed a significant tax benefit in the fourth-quarter of 2010, which buoyed last year’s 4Q income.  The company said without the charges, fourth-quarter pretax income would have hit $33.9 million, up from $18.1 million last year. On the other hand, the firm’s overall fourth-quarter revenue grew to $427.8 million from $402.6 million last year.  For its entire 2011 fiscal year, which ended Oct. 31, the company earned $39.8 million, or 24 cents per share, compared with a loss of $3.4 million, or 2 cents a share, for fiscal year 2010.  The Horsham, Pa.-based homebuilder experienced another positive in the fourth quarter with home building deliveries hitting $427.8 million and growing to 757 units, compared to $402.6 million and 700 units, a year earlier.  The average fourth-quarter contract price for a Toll Brothers home hit $606,000, up from $565,000 last year, suggesting values are going up in the high-priced home segment.  In the fourth quarter, the firm signed contracts worth $390 million, up 24% from last year.

It’s Obama’s tone, not taxes, says tycoon

Leon Cooperman, a 68-year-old Wall Street veteran, says he is for higher taxes on the wealthy. He would happily give up his Social Security checks. He voted for Al Gore in 2000. He says the special treatment of investment gains, or so-called carried interest, for private equity and hedge fund managers is “ridiculous.” He says he even sympathizes, at least to some extent, with the Occupy Wall Street protesters.  And yet, Mr. Cooperman, a man with a rags-to-riches background who worked at Goldman Sachs for more than 25 years in the 1970s and 1980s before starting his own hedge fund, Omega Advisors, which has minted him an estimated $1.8 billion fortune, is waging a campaign against President Obama.

Last week, in a widely circulated “open letter” to President Obama that whizzed around e-mail inboxes of Wall Street and corporate America, Mr. Cooperman argued that “the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them.”  He went on to say, “To frame the debate as one of rich-and-entitled versus poor-and-dispossessed is to both miss the point and further inflame an already incendiary environment.”  The letter comes as President Obama is planning to give a speech on Tuesday in Osawatomie, Kan., about the economy and the middle class, following in the path of President Theodore Roosevelt, who campaigned a century ago in that very city against the wealthy and big business.  Mr. Cooperman’s complaint has less to do with the substance of taxing the wealthy than it does the president’s choice of words in promoting it, an emphasis that he says is “villainizing the American Dream.”  While many executives have complained about what they perceive as the president’s antibusiness bent, Mr. Cooperman’s letter has gained credibility and attention in political and business circles because of his own seemingly liberal stances on taxes and the like.  He said, in an interview, that he had been deluged with hundreds of e-mails and phone calls about the letter, “99.9 percent of it positive.”

Mr. Cooperman, who recently signed the Giving Pledge, Bill Gates’s and Warren Buffett’s effort to press the world’s billionaires to give away at least half of their wealth, said he felt he came into his money honestly and said proudly, “I spend more than 25 times on charity what I spend on myself.” Asked whether he had received any response from the president for his letter, he replied with a chuckle, “I’m not optimistic I’ll hear from him.”

New Jersey foreclosures wait for deliberations

Hundreds of New Jersey foreclosure cases are waiting in the wings for the state’s Supreme Court to issue what will be a landmark decision in the Garden State.  Legal scholars suggest lenders are waiting to see what the court will do with the U.S. Bank National Association. Guillaume case before moving forward with thousands of pending foreclosures.  The issue in the case causing lenders to pause is the question of whether a foreclosure notice is made invalid because the lender filed a notice of intent to foreclose with the servicer listed on the notice instead of the lender.  In the original complaint, the Guillaume’s argue the lender, U.S. Bank NA, violated the Fair Foreclosure Act by not including the lender’s information in a spot that ended up containing contact information for the servicer.  Linda Fisher, a professor at Seton Hall Law School who has been following the case, said the foreclosure process is “kicked off by filing the notice of intent to foreclose.” Fisher filed an friend-of-the-court brief with the New Jersey Supreme Court in support of the Gillaumes’ claim.  Fisher says the intent to foreclose form has 24 data points, including the name of the lender and contact information for the lender.

The Guillaumes, who challenged the foreclosure on several fronts, initially claimed the lender “violated the FFA because although the notice of intent to foreclose listed plaintiff as the holder of the note, it did not list plaintiff’s address, but rather, listed the address and telephone number” of the servicer.  An appellate court ruled for the lender and against the plaintiffs saying “directing the Guillaumes to contact ASC (or the servicer) fulfilled the purpose of the notice provision under the FFA — making the debtor aware of the situation, and how and who to contact to either cure the default or raise potential disputes.”  But the case now awaits the New Jersey Supreme Court decision, causing some lenders to pause before launching foreclosures.

Fisher said the initial notice of intent to foreclose claimed the servicer was the lender and the holder of the obligation. Later in the case, the issue became the fact that the lender’s name was listed but with the servicer’s address.  “The banks are contending it is OK to enter only the name of the servicer,” Fisher said. “The Guillaumes are saying the servicer is not a substitute for the lender because the statute is quite clear, and it specifically mentions inclusion of the name of the lender.”  Banks are likely delaying some of their foreclosure actions in the state because they want to know how the Supreme Court will rule on this limited issue, Fisher contends. A rule against the lender’s argument could mean banks will have to review their intent to foreclose notices.  Fisher said if it turns out that Guillaume forces the 24 data points to be filled out perfectly, banks will have to retrace their filing steps to ensure they don’t end up facing sanctions.

LPS – house price declines across the board

Lender Processing Services, Inc. (LPS) today announced that its LPS Applied Analytics division updated its home price index (LPS HPI) with residential sales concluded during September 2011. The LPS HPI summarizes home price trends nationwide by tracking sales each month in more than 13,500 ZIP codes. Within each ZIP code, the LPS HPI tracks five price levels from low to high.  “Home prices in September were consistent with the seasonal pattern that has been occurring since 2009,” explained Kyle Lundstedt, managing director for LPS Applied Analytics. “Each year, prices have risen in the spring, but revert in autumn to a downward trend that has not only erased the gains, but has led to an average 3.7 percent annual drop in prices to date. The partial data available for October suggests a further approximate decline of 1.1 percent. Partial data from last month proved to be a good indicator for September’s performance: it showed a preliminary 1.1 percent estimated decline, compared to the 1.2 percent as shown by the full-month’s data.”

The LPS HPI national average home price for transactions during September was $202,000 – a decline of 1.2 percent for the month. As in previous years, this decline follows a 0.9 percent decline during August.  The September national average price is down 1.8 percent from the average price at the beginning of the year.  LPS HPI average national home prices continue the downward trend begun after the market peak in June 2006, when the total value of U.S. housing inventory covered by the LPS HPI stood at $10.6 trillion. The value has declined 30.2 percent since that peak to $7.56 trillion.  During the period of most rapid price declines, from June 2007 through December 2008, the LPS HPI national average home price dropped $56,000 from $282,000, which corresponds to an average annual decline of 13.8 percent.

Since December 2008, prices have fallen more slowly, interrupted by brief seasonal intervals of rising prices. During this period of more slowly declining prices, the national average price has fallen approximately $24,000 from $226,000. This corresponds to an average annual decline of 3.7 percent. The national average home price has declined 4.4 percent over the most recent year to September 2011.  Price changes were consistent across the country during September, declining in all ZIP codes in the LPS HPI. Higher-priced homes had somewhat smaller declines: -1.2% percent for the top 20 percent of homes (prices above $317,000), compared to -1.4 percent for the bottom 20 percent (below $102,000).

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

* Owner of one of Florida’s largest Real Estate firms,

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

* In 2010, Chris’ 4 Central Florida real estate offices

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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