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Mortgage deal closer

With a deadline looming today for state officials to sign onto a landmark multibillion-dollar settlement to address foreclosure abuses, the Obama administration is close to winning support from crucial states that would significantly expand the breadth of the deal.  The biggest remaining holdout, California, has returned to the negotiating table after a four-month absence, a change of heart that could increase the pot for mortgage relief nationwide to $25 billion from $19 billion.  Another important potential backer, Attorney General Eric T. Schneiderman of New York, has also signaled that he sees progress on provisions that prevented him from supporting it in the past.  The potential support from California and New York comes in exchange for tightening provisions of the settlement to preserve the right to investigate past misdeeds by the banks, and stepping up oversight to ensure that the financial institutions live up to the deal and distribute the money to the hardest-hit homeowners.

The settlement would require banks to provide billions of dollars in aid to homeowners who have lost their homes to foreclosure or who are still at risk, after years of failed attempts by the White House and other government officials to alter the behavior of the biggest banks.  The banks — led by the five biggest mortgage servicers, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — want to settle an investigation into abuses set off in 2010 by evidence that they foreclosed on borrowers with only a cursory examination of the relevant documents, a practice known as robo-signing. Four million families have lost their homes to foreclosure since the beginning of 2007.  If banks fall short of the multibillion-dollar benchmarks set out for principal reduction and other benefits for homeowners, they will have to pay the difference plus a penalty of up to 40% directly to the federal government, according to Mr. Madigan.  The settlement, if all states participate, will also include $3 billion to lower the rates of mortgage holders who are current. Banks will get more credit for reducing principal owed and helping families keep their homes, and less for short sales or taking losses on loans that were likely to go bad, like those that were severely delinquent.

102% tax?

James Ross, 58, is a founder and managing member of Rossrock, a Manhattan-based private investment firm that focuses on commercial real estate and distressed commercial mortgages.  “I realize I am very fortunate, and in fact I am a member of the 1%,” Mr. Ross wrote in an email. His résumé is studded with elite institutions: Yale, Columbia Law School and stints at the law firms Cravath, Swaine & Moore in New York, and Holland & Hart in Denver. Since his company fits the category of private equity, he has even carried interest.  Yet Mr. Ross told me that he paid 102% of his taxable income in federal, state, and local taxes for 2010.  “My entire taxable income, plus some, went to the payment of taxes,” Mr. Ross said. “This does not include real estate taxes, sales taxes, and other taxes I paid for 2010.” When he told friends and family, they were “astounded,” he said.

That doesn’t mean Mr. Ross pays more in taxes than he earns. His total tax as a percentage of his adjusted gross income was 20%, which is much lower than mine.  That’s because Mr. Ross has so many itemized deductions. Since taxable income is what’s left after itemized deductions like mortgage interest, charitable contributions, and state and local taxes are subtracted, it will nearly always be smaller than adjusted gross income and demonstrates how someone can pay more than 100% of taxable income in tax. Mr. Ross must hope that his interest expense will pay off down the road and generate some capital gains.  Still, all of Mr. Ross’s itemized deductions are money out of his pocket, which is why he’s had to draw on his savings to pay his taxes. Robert Willens, a tax expert and New York attorney, made the argument that taxable income, therefore, may be a better basis for measuring the tax burden.  Mr. Ross’s plight illustrates something that came through in nearly every response and cuts across nearly all income levels: The disparities of the tax code don’t just pit rich against poor or middle class. It taxes people within the same income brackets at grossly unequal rates.  “I cannot help but reflect on the unfairness of the current tax regime,” Mr. Ross wrote. “Why should I pay 102% of my taxable income in taxes when others, with far greater wealth than mine, pay a fraction of that?”

Bulk sales begin soon

The government is starting to shed foreclosed, single-family homes it owns — by selling them in bulk to investors, who would turn them into rental properties.  Officials, however, are saying only that test sales will occur “in the near-term” with a focus on the areas hardest hit by foreclosures. They declined to comment beyond a news release they issued.  The test comes after the government in summer 2011 asked for proposals on what to do with more than 90,000 foreclosed properties it then held. The government typically sells foreclosed properties one at a time, but officials specifically asked for ways to move homes in bulk because of the size of the backlog.  About 4,000 groups or individuals submitted ideas on how the government could unload the properties. After The Enquirer filed a Freedom of Information Act request, the government released a list of 423 companies, groups and individuals that submitted responsive proposals, but no details on their proposals.

The test sale of the foreclosures and conversion of them into rental housing is being supervised by the Federal Housing Finance Agency (FHFA). The agency has acted since 2008 as the federal conservator for Fannie and Freddie, which are public companies although they were created by Congress.  In a news release Wednesday, the finance agency said “Fannie Mae will offer for sale pools of various types of assets including rental properties, vacant properties and non-performing loans” under the test. It also asked investors to pre-qualify to participate in the test.  The investors will be required “to rent the purchased properties for a specified number of years.” FHFA officials hope the rental period will “provide relief for local housing markets that continue to be depressed by the volume of foreclosed properties, and provide additional rental options to certain markets.”

To qualify, investors will have to show the financial wherewithal to buy the assets, sufficient experience and knowledge to bear the risks and manage of the investment and agree to “keep certain information about the REO (real estate) and related matters confidential.”  Nationwide, the 83,000 homes currently up for sale and potential conversion into rental units are among more than 200,000 foreclosures of all kinds that the government holds, apparently making it the nation’s largest owner of foreclosed properties. The 200,000 is almost a third of foreclosed properties across the nation.  Moving the backlog would get them off the books of the Federal Housing Administration. It also would clear the books of Fannie Mae and Freddie Mac, which buy mortgages, bundle them and then sell mortgage-backed securities to investors.  The FHA, Fannie and Freddie became owners of the properties as hundreds of thousands of owners defaulted on their mortgages during the real estate meltdown.  Clearing the backlog would limit the loss to taxpayers, who already have bailed out Fannie and Freddie at a cost of $169 billion and counting. The losses are expected to total $220 billion to $311 billion by the end of 2014, according to latest projections in December by the Federal Housing Finance Agency.

Greece misses another deadline

Greece let yet another deadline slip on Monday for responding to painful terms for a new EU/IMF bailout, as German Chancellor Angela Merkel made clear Europe’s patience is wearing thin over drawn-out negotiations among its feuding political leaders.  Failure to strike a deal to secure the 130 billion euro ($170 billion) rescue risks pushing Athens into a chaotic debt default which could threaten its future in the euro zone.  Merkel turned up the heat, saying Athens had to come to terms with the “troika” of lenders – the European Commission, European Central Bank and IMF – to get the funds it needs to meet big debt repayments in March.  Greek political leaders, positioning themselves for a likely general election in April, have baulked at accepting another package of deeply unpopular wage and pension reductions, job cuts and tougher tax enforcement measures.

US Treasury prices pared gains notched in today’s European session that were a response to the lack of a political agreement in Greece to make reforms necessary to avoid default. Limiting gains, traders are preparing for the government’s quarterly refunding auctions, which will include sales of 10-year notes and 30-year bonds . Yields on 10-year notes, which move inversely to prices, fell 1 basis point to 1.92%. “Treasurys are modestly higher as discord among Greek coalition members over the terms of the second bailout raises the threat of default and has sent the euro and European stocks lower,” said bond strategists at RBS Securities. “We have a very quiet week of economic data up ahead and the market’s focus will be on the Treasury refunding auctions which begin tomorrow.”

New FHA standards increase Ginnie Mae risk

The Federal Housing Administration’s (FHA) recently announced plans to tighten its standards for approving lenders will increase prepayment risks for investors who own Ginnie Mae-back securities, say analysts at Barclays Capital.  The agency’s plans to eliminate the consideration of a lender’s compare ratio when deciding whether to streamline-refinance its loans will accelerate refinancing activity, they say, causing higher prepayment speeds, and, in turn, reduce investor profits.  The compare ratio is the serious delinquency rate of all loans originated by a lender during a two-year period relative to the average of all lenders operating in the same region. Higher coupon and seasoned loans have a weaker credit and greater default risks, therefore, streamline-refinancing them could lift ratio passed 150%. And if it does, the lender could lose the ability to originate FHA-backed loans.  The change is part of a larger attempt by the FHA to protect its Mutual Mortgage Insurance Fund, which many say is in danger of requiring a multibillion dollar government bailout.

Disregarding a lender’s compare ratio calculation creates an incentive for streamline-refinancing higher-risk borrowers, analysts say. This will speed up Ginnie Mae prepayments, particularly on higher coupons and pre-2009 originations since these have the worst credit quality.  “That said, we expect the effect on speeds to be modest,” they say. “We believe that this plan will be implemented and has the potential to raise GNMA speeds by a few CPR.”  The effect should be even less for pre-2010 vintages because their much better credit quality suggests they have not been constrained by the compare ratios.

Data from the Department of Housing and Urban Development (HUD) suggest that the compare ratios of most national lenders are now significantly below the 150% threshold.  In December, HUD Secretary Shaun Donovan, said as a result of an October analysis by an independent actuary of FHA’s insurance fund, HUD plans to announce how it will address premium prices in its fiscal year 2013 budget proposal.  Since then, Congress has enacted a 10 basis-point increase to the FHA annual mortgage-insurance-premium, and President Barack Obama has called on the FHA to shoulder a larger role in helping responsible home owners and the housing market.  “Given the circumstances, we think more changes to the FHA program could be in the works, and since the budgetary proposal should be released over the next few weeks, the timing is peculiar,” they said. “Therefore, Ginnie Mae faces heightened risks in the near term.”

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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*** Join Chris’ Facebook Fan Page–>

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Foreclosures to take longer

Reviews of hundreds of thousands of foreclosure cases ordered by regulators last year will take months longer to complete than first expected, according to documents filed with federal banking regulators.  The delays could postpone compensation for some homeowners harmed by improper foreclosure actions.  The reviews cover foreclosure actions in 2009 and 2010 by the nation’s 14 largest mortgage servicers, which handle payments for about 65% of US mortgages. They are required by enforcement orders announced by federal regulators in April.  Under the deadlines set in April, the reviews — which are being done by independent consultants hired by servicers — should have been completed this month.  But reviews of Bank of America’s (BOA) foreclosure cases could take until November, a letter that BOA’s consultant filed with the Office of the Comptroller of the Currency (OCC) indicates. BOA is the nation’s largest mortgage servicer, and the Promontory Financial Group is its consultant.  JPMorgan Chase’s consultant, Deloitte & Touche, indicated it may need about the same amount of time, according to its letter.

Review time frames have lengthened for other servicers, too, because the detail, scope and complexity of the reviews weren’t fully known in April, says OCC spokesman Bryan Hubbard.  Some companies may finish before others. Some may beat the timelines in their letters. Some deadlines may get longer, Hubbard says.  The OCC says servicers should not wait until all reviews are done to compensate homeowners.  While 4 million cases are eligible for reviews, consultants will sample only some for errors such as unlawful foreclosures and excessive fees.  Borrowers who faced a foreclosure action on their primary home by one of the 14 servicers in 2009 or 2010 are eligible for reviews. Anyone eligible who asks for a review by the April 30 deadline will get one, the OCC says.

Consumer sentiment up

The Thomson Reuters/University of Michigan preliminary January reading on its overall index of consumer sentiment rose to 74.0 from 69.9 in December for the fifth month of gains and the highest level since May 2011.  The report topped expectations of 71.5 and was in contrast to December’s weaker-than-expected retail sales reported on Thursday.  Thirty-four% of consumers polled in the consumer confidence survey said they had heard of recent job gains, a record high in the survey’s history and well above December’s 21%.  “The data suggest a stronger consumer spending outlook, rising to about a 2.1% gain in 2012,” survey director Richard Curtin said in a statement.  But consumers still lacked confidence in government economic policies with the majority rating policies unfavorably for the sixth month in a row.  Americans also remained dour on their personal finances with just 24% expecting their finances to improve in January, slightly below 25% last month.  The survey’s barometer of current economic conditions rose to the highest since February at 82.6 from 79.6, while its gauge of consumer expectations gained to 68.4 from 63.6.

2013 for housing recovery?

A poll of 23 economists and analysts found a consensus for no change in the S&P/Case-Shiller home price index in 2012, compared with a median 0.3% decline that was forecast in the last poll in November.  Many say that a recovery in the housing market is a key requirement for any vigorous rebound in the world’s largest economy. The spectacular collapse in US housing, which sent average prices plummeting by a third, was the trigger for the 2008-09 financial crisis and subsequent recession.  The meager 1.5% gain expected in 2013 will offer little comfort to the millions of Americans trapped in negative equity — owing more to their mortgage lender, and in some cases much more, than their houses are worth.  “I think we are seeing stabilization, but unfortunately it’s stability at the bottom,” said Lindsey Piegza, economist at FTN Financial, describing the grinding halt to several years of relentless price declines.  The average price of a US home is currently around where it was nine years ago, and the most recent data, from October, showed price declines still accelerating.

The market is still under pressure from an excess of homes up for sale. Fifteen of 20 respondents said monthly foreclosures should subside this year, while five didn’t see any let-up until 2013.  Among 20 respondents, 15 said they expect foreclosures to ease some time this year, while five said it would not happen until 2013.  Gains in home sales and new home construction in November, and recent improvement in homebuilder sentiment, added only a touch of optimism at the end of last year.  Still, while the gain expected over the next two years is tiny compared with the more than 30% plunge from the peak in 2006, it is still a more cheery outlook than in some other parts of the world.  A recent Reuters poll predicted British home prices, which have not dropped anywhere near as far as they have in the US, will slip 1.7% this year. In China, they are expected to fall 10 to 20%.

Excess regulations hamper economy

Regulatory policies are badly undermining the economic objectives of governments around the globe by hampering bank activity, JPMorgan Chase chief executive Jamie Dimon said in a conference call discussing fourth-quarter earnings Friday morning.  “Regulatory policy is completely contradictory to government objectives,” Dimon said, citing restrictions on trading and new capital regulations as regulatory sources of slower economic growth.  Dimon said that although regulators have provided additional clarity on new capital rules, the clarifications are have demonstrated that the capital rules are “bad.”  He noted that higher capital requirements have made risk weighting even more important for banks. Under international capital standards, different kinds of bank assets receive different capital treatment, a practice known as risk weighting.

Dimon also criticized the so-called Volcker rule banning proprietary trading. He warned that if the rule is not carefully crafted, it could limit not just prop trading but market making.  “The United States has the widest and deepest and most transparent capital markets in the world,” Dimon said. “And the most liquid.   If you lose liquidity because you lose market making, you cost investors money.”  He said that pension funds, retirees, and other large investors could lose out if restrictions on trading go too far.  “We have to be very careful that we don’t destroy that [market making] as we try to limit — put a fair limit — on proprietary trading,” Dimon said.

Fitch downgrades Merrill mortgage securities

Fitch Ratings downgraded four classes of Merrill Lynch Mortgage Trust securities certificates backed by commercial real estate because the underlying loans are expecting losses.  At the same time, 17 classes of loans in the same series of securities were affirmed by the ratings giant.  Fitch specifically classified 76 loans as mortgages of concern. About 25 of those 76 are specially serviced loans.  The entire loan pool subjected to the downgrade had an aggregate principal balance of $2.2 billion at the end of December, compared to $2.5 billion at issuance.  Of those loans in special servicing, 16 are real-estate owned, three are in foreclosure, another three are delinquent and 1% are current.  One of the largest contributors to the expected losses in the pool is a three-story office building in Scottsdale, Ariz. The loan was moved into special servicing in October of 2009 when a large tenant that fully occupied one of the buildings terminated its lease and vacated the premises. As of mid-last year, the building’s occupancy rate stood at 62%.  A hotel located in Tampa, Fla., also is contributing to uncertainty over the pool of loans with a special servicer saying it would like to pursue a foreclosure.

See you at the top!
Chris McLaughlin

**************
Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

NAR – short sales key to solving crisis

Stabilizing and restoring the health of the housing market is critical to a broader economic recovery, according to a white paper released yesterday by the Federal Reserve Board. Many of the issues and recommendations outlined in the paper support key principles established by the National Association of Realtors (NAR) to help revitalize the housing industry and economy.

The white paper, The US Housing Market: Current Conditions and Policy Considerations, calls for increased lending to creditworthy home buyers and more loan modifications, mortgage refinancings, and short sales to reduce the rising inventory of foreclosed homes and help stabilize and revitalize the housing industry; an approach long recommended by NAR to help spur the housing market recovery.  “As the nation’s leading advocate for homeownership and housing issues, NAR knows that a strong housing market recovery is key to the nation’s future economic strength,” said NAR President Moe Veissi. “Improving access to affordable mortgage financing for qualified home buyers and investors and aggressively pursuing more loan modifications and short sales is necessary to help reenergize the housing market and spur an economic recovery.”

For homeowners who are unable to meet their mortgage obligations, NAR has urged lenders and servicers to quickly approve reasonable short sale offers so these people can avoid foreclosure. The short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from the transaction.  “Loan modifications and short sales help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers, which is good for everyone,” said Veissi.

Jobs report strong

Non-farm payrolls jumped 200,000 in December, according to the Labor Department, pushing the jobless rate to a near three-year low of 8.5%. Economists polled by Reuters expected a gain of 150,000.  “Today’s figure should not come as a great surprise,” said Todd Schoenberger, managing director of LandColt Trading, adding that recent macro data had been pointing to good results. “The wildcard is January as retailers trim seasonal staff. An upside surprise for this month will validate the argument that an economic recovery is, indeed, talking place.”  The report comes after a handful of employment reports on Thursday that boosted sentiment as the number of planned layoffs at US firms fell to its lowest level since June last year, according to the report from consultants Challenger, Gray & Christmas. Private sector employment climbed 325,000 in December, much stronger than expected, according to payrolls processor ADP.

Bove – mortgage refinancing will hurt banks

Speculation that a new mortgage refinancing plan may be introduced drove bank stocks higher Thursday, but noted banking analyst Dick Bove believes investors actually got it wrong. He told Larry Kudlow that a program like that would actually “harm” banks.  “It’s bad for banks, it doesn’t help them in any way, shape or form,” Bove said.  The speculation was fueled by reports that suggested the White House may be preparing a new trillion-dollar plan to refinance home loans. However, administration officials told CNBC’s Dana Olick that they are not considering a $1 trillion refinancing program.  The fact that bank stocks went up on the possibility of such a program makes no sense whatsoever, Bove said. In fact, he thinks a mortgage refinancing plan would cause banks to lose money.  “If you add up all the sources of profit or loss,” he said, “they lose more than they gain.”  So why did the banks, like Bank of America, shoot up higher? Bove thinks it was a simple misreading of what a mortgage refinancing program would do for the banking industry.

He believes investors may have thought it might affect foreclosures, putbacks to the banking industry and the service income of the industry. However, Bove said it would do none of that.  “It harms the banking industry,” he said. “All it is, is taking a lot money from one class of people and giving it to another class of people under the theory that the second class of people would spend the money more than the first class.”  And banks aren’t the only ones which could be hurt, Bove said. Only 21% of the mortgages in the US are held by the banks. 55% held by Fannie Mae, Freddie Mac and mortgage pools, and the remainder is held by investors, he said.  “So the net affect is the people you are taking the money away from are the taxpayers and the investors.”

Unemployment down

The Labor Department said Friday that employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5%, the lowest since February 2009. The rate has dropped for four straight months.  The hiring gains cap a six-month stretch in which the economy generated 100,000 jobs or more in each month. That hasn’t happened since April 2006.  For all of 2011, the economy added 1.6 million jobs, better than the 940,000 added in 2010. The unemployment rate averaged 8.9% last year, down from 9.6% the previous year.  Economists forecast that the job gains will top 2.1 million this year.

The December report painted a picture of a broadly improving job market. Average hourly pay rose, providing consumers with more income to spend. The average work week lengthened, a sign that business is picking up and companies may soon need more workers. And hiring was strong across almost all major industries.  Manufacturing added 23,000 jobs. Transportation and warehousing added 50,000 jobs. Retailers added 28,000 jobs. Even the beleaguered construction industry added 17,000 workers.  A more robust hiring market coincides with other positive data that show the economy ended the year with some momentum.  Weekly applications for unemployment benefits have fallen to levels last seen more than three years ago. Holiday sales were solid. And November and December were the strongest months of 2011 for US auto sales.  Many businesses say they are ready to step up hiring in early 2012 after seeing stronger consumer confidence and greater demand for their products.

Olick – renter nation

“Despite record low mortgage rates reported today and rising affordability in most US housing markets, rent is the new reality for former home owners and new households alike.  For some it is post-traumatic stress from the housing crash, for others it is the inability to get financing to buy a home. Either way, the rental market continues on its tear.  In the last quarter of 2011, the apartment sector saw its largest quarterly increase in occupied stock of the year, according to Reis, Inc.  The vacancy rate dropped to 5.2%, the lowest since 2001 and lower than the last cyclical drop in 2006.  This bucks the historical seasonal weakness typical of the colder months of the year. The fourth quarter also tends to be a weaker leasing period, according to Reis, given that most households make moving decisions in the second and third quarters.

This surge in occupancy pushed asking and effective rents up 0.4 and 0.5% respectively, which Reis calls the only disappointing figures for the sector, missing expectations. Reis blames that on slow economic growth and still high unemployment.  ‘Higher quality properties in the most desirable locations posted rent gains in excess of 5-10%, while class B/C properties, catering to lower income tenants, found it relatively more difficult to raise rents,’ notes Victor Calanog, head of research at Reis.  Nowhere is that more evident than in the Washington, DC metro area where rents are way up across the city, and developers are rushing to erect new multi-family buildings and rehab old ones.  ‘Everybody wants to be in DC,’ beams Richard Key, district manager for Camden Property Trust, one of the largest publicly traded multifamily REITs in the nation. ‘Whereas in other markets there are deals, when you get to DC area, all the REITs want to be here, and so we’re all competing for the same piece of land, and that’s driving the price up. That is really is a challenge for us.’  Key is convinced that there has been a fundamental shift in attitudes toward home ownership that will last for several more years. He is not concerned that the pendulum will swing back to buying, just as all that new rental stock hits the market around 2014. Camden has seen rents on its DC properties rise over 5% in just the past year.  ‘The nice part is we haven’t seen a drop in occupancies with that rent growth, and so the hope is that we’re able to maintain our historical occupancies and continue to see that 5, 6, gosh, 7% is not out of the question in the next couple of years,’ says Key.

Washington, DC will likely see those higher rents because home prices didn’t fall very high during the housing crash and are already rebounding. It and Detroit were the only major markets posting annual gains on the latest S&P/Case-Shiller Home Price Index.  Other markets, like Las Vegas, where home prices are rock-bottom thanks to a huge supply of foreclosures, the rental market is tougher for developers and landlords.  As for renter society, it is also being fueled by tight mortgage underwriting. Rates may be at record lows, but only if you can get them. In a paper released Wednesday, Federal Reserve Chairman Ben Bernanke noted, ‘Continued efforts are needed to find an appropriate balance between prudent lending and appropriate consumer protection, on the one hand, and not unduly restricting mortgage credit, on the other hand.’  Until that balance is found, potential home buyers will stay on the sidelines, those sidelines being rental apartments. A new twist to watch, however, may be that rental nation will go single family.  With so many bank owned homes left to clear, and so many in government and the private sector looking at bulk rental investments, apartments may have big competition in the same neighborhoods where they used to compete against single family buyers.”

IRS audits millionaires

The Internal Revenue Service (IRS) audited one in eight millionaires who filed taxes last year while only auditing 1 in 100 individuals earning less than $200,000 in an effort to “assure that there’s equity in the system.”  Just 1 in 100 individuals earning less than $200,000 had their income tax returns examined, the IRS said.  The 12% of millionaire earners audited in 2011 was appreciably higher than the 8% who were audited in 2010. IRS officials said the high ratio was part of an effort to demonstrate that tax laws are applied fairly.  “That has been something we’ve concentrated on to assure that there’s equity in the system, to assure that those at the lower end of the spectrum know that those at the higher end of the spectrum are subject to the same rules and enforcement as everyone else,” Steven Miller, deputy IRS commissioner for services and enforcement, said in an interview.  In recent weeks, President Barack Obama and congressional Democrats have sought to boost taxes on the wealthy as a way to pay for jobs programs, a theme they are expected to continue in this presidential and congressional election year. IRS spokeswoman Michelle Eldridge said the growing portion of millionaire earners’ returns audited is not related to politics.  Yeah right.  Message to Americans:  Achieve the American dream and we’ll audit you.

WSJ – business using more space

The US office market showed modest signs of improvement in the last three months of 2011, as employers slowly expanded in an uncertain economic climate.  The national office-vacancy rate stood at 17.3% in the fourth quarter, slightly down from 17.4% three months earlier, according to real-estate research firm Reis Inc. But the rate remains stubbornly high, down just slightly from the post-downturn peak of 17.6%, reached in mid-2010.  The office market generally reflects employment trends and companies’ views on growth over the next few years. With job growth slow, companies have been reluctant to add new space.

The sector is still struggling with high levels of vacancy not seen since the early 1990s, a hangover from the sharp pullback by businesses during the downturn. The amount of space occupied by businesses fell by 137 million square feet from 2008 to 2010, according to Reis, which tracks 79 metropolitan areas.  By contrast, employers occupied just an additional 20.7 million square feet in all of 2011. “We’re not seeing huge moves down in vacancy,” said Chris Connelly, who heads the Chicago office for CBRE Group, a commercial-real-estate brokerage. “We’re just niggling away at it.”  Overall rents have been creeping up, with landlords seeking an average rent of $27.97 per square foot per year in the fourth quarter, up 0.4% from the third quarter.

Still, markets vary widely, depending on whether they are home to growing industries. Cities hard-hit by the housing crisis, such as Las Vegas and Phoenix, have among the highest vacancy rates in the country, above 25%.  Meanwhile, growth in the technology and energy sectors has accelerated a recovery in areas such as Northern California and cities in Texas. Last month, landlord Brookfield Office Properties Inc. signed a 141,000-square-foot lease in Houston with Italian energy company Eni SpA, which is taking a space that is 42% larger than its current lease, according to Brookfield.  “If those drivers aren’t there, you’re probably pretty much seeing a very slow, gradual recovery,” said John Sikaitis, director of office research for brokerage Jones Lang LaSalle.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Foreclosures up in New York

In the New York metro area, the foreclosure rate rose to 7.5% in June, up 2.1 percentage points from the previous peak in December 2009, according to Foreclosure-Response.org, a joint project by the Local Initiatives Support Corp., the Urban Institute and the Center for Housing Policy. The rate is up 3.7 percentage points from March 2009, when the group started tracking the data in 100 US metro areas.  “New York is a judicial state, so it takes a long time for properties that enter foreclosure to exit the process,” said Rob Pitingolo, a research assistant for Urban Institute. “The backlog of foreclosures in the system is driving the foreclosure rates up.”  Judicial states require a lengthy and formal court proceeding to carry out a foreclosure, and in New York that process can take up to two years for a loan to complete foreclosure, according to experts.  “At the current pace of foreclosure sales, we are looking at a process that could take decades to complete,” said Leah Hendey, a research associate at Urban Institute, in a statement. “It is critical that the status of these properties be resolved quickly if we want to stabilize communities and housing markets.”

The increasing foreclosure rate contributed to New York’s serious delinquency rate of 10.8% in June, much higher than the average 9.3%. In fact, while the serious delinquency rate has improved across the largest metro areas in the nation, falling 1.1 percentage points from its December 2009 peak of 10.4%, delinquency got worse in New York, where the rate rose 0.6 percentage points. The serious delinquency rate covers first-lien mortgages in foreclosure as well as loans that are delinquent for 90 or more days.  The good news is fewer homeowners in the New York metro area are falling behind on their mortgage payments, according to the data. The New York area’s 90-day-plus delinquency rate dropped 1.2 percentage points to 3.4% in June, compared with the same time a year ago. Delinquent loans in the New York metro area came in slightly below the average rate of 3.7%. The 90-day-plus delinquency rate represents the percentage of all mortgages that have not yet entered a foreclosure but are 90 or more days overdue.

Treasury to charge banks for risk monitoring

The US Treasury Department plans to start charging large banks a fee to cover the costs of the financial risk council it leads and a research office tasked with measuring threats to financial markets.  The Financial Stability Oversight Council and the Office of Financial Research were created by the 2010 Dodd-Frank financial oversight law, which instructs the government to bill banks for their operations.  On Thursday the Treasury Dept. released a proposed rule that would apply to banks with more than $50 billion in total assets, starting in the middle of next year.  The department is proposing charging these banks a flat rate that would be applied to an institution’s total consolidated assets, and would be collected twice a year.  The department has yet to announce the specific fee banks will be charged because the budget for the council and research office will not be known until President Barack Obama releases his fiscal 2013 budget proposal early next year.  The Treasury Dept. said it plans to have a final fee rule out no later than the end of May and will let banks know what their tab is in June. The fees will first be collected in July.  Treasury said the collected fees will be enough to cover six months of OFR and FSOC operating expenses and 12 months of capital expenses.  The proposed rule will be subject to 60 days of public comment.

Olick – housing’s new hope

“I’m not sure if it’s that usual New Year’s Eve optimism evoked by the generic philosophy that the grass is always greener on the other side of the calendar year, or perhaps the emotional need to dig ourselves out of what has surely been one of the more lugubrious periods in the US economy, but there is some hope in housing.  A few positive readings in home sales and housing starts recently, topped off by today’s 7.4% monthly jump in contracts to buy existing homes, are fueling what I dare say is a spark, albeit not a fire. They are also managing to trump what was a particularly opposing reading in home prices from the number crunchers at S&P/Case-Shiller this week.  Don’t worry, I’m not going to dump a bunch of coal on the numbers and claim they’re all spurious in some way; I’m all prepared to be munificent, while chary (did I mention my new year’s resolution is to improve my family’s vocabulary, as well as banish ‘like’ from my kids’ lexicon.) I will note that even the Realtors, while touting affordability and pent-up demand, note that many of these new signed contracts are the result of delayed transactions.

‘Contract failures have been running unusually high,’ notes National Association of Realtors chief economist Lawrence Yun. ‘Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,’ he said. Then there is a big story in the Wall Street Journal today of hedge funds putting their money back in housing, suggesting that while the numbers aren’t all there for a big win, these funds are usually ahead of big market shifts, so the housing surge must be on its way. I’ve spoken to some of these hedge fund types as well, and they seem to be playing on the surging rental market for now, getting the bargains but not expecting any big ‘flipping’ returns any time soon.  ‘Bottom line, whether due to even lower prices, historically low mortgage rates, falling inventory and a better tone to the labor market or a combination of all, the housing market is showing signs of stabilizing,’ says Peter Boockvar at Miller Tabak. ‘I say stabilize instead of bottom, as its too early to make that claim just yet with still a huge amount of foreclosures that hasn’t worked its way through the judicial system and prices that haven’t likely stopped going down as a result.’  Some are predicting that foreclosures will push home prices down another five to ten% before hitting a true bottom.

In addition, those rock-bottom mortgage rates that everyone is touting this week may be heading up, as the conservator of Fannie Mae and Freddie Mac today directed the two mortgage behemoths to inform servicers that guarantee fees would rise ten basis points next week. That, if you recall, is to pay for the temporary extension of the payroll tax cut. Yep, that money heads to the US Treasury, not to the troubled balance sheets of Fannie and Freddie. This accused nostrum will likely raise rates a tad, but rates are still close to historical lows. And we should remember that.

It’s all relative. Are things getting a bit better? Probably. I heard (or read…can’t remember) someone today say that housing has gone from a negative to a nothing for the US economy. So when we tout and rave about today’s pending home sales numbers, we mustn’t forget where we’ve been:  ‘It’s not going to keep 2011 from being the worst on record for new home sales, for single family permits and single family housing starts. Next year is going to be better, but that’s not saying much because this has been the worst year, probably since 1945,’ said IHS Global Insight’s Patrick Newport. In other words, housing ain’t exactly fecund, but it’s at least inching off life support.”

Oil up

Oil prices inched higher toward $100 a barrel Friday amid encouraging signs the US economy is slowly improving and continuing tensions between Western powers and Iran.  By early afternoon in Europe, benchmark crude for February delivery was up 13 cents to $99.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 29 cents to settle at $99.65 in New York on Thursday.  In London, Brent crude was down 48 cents at $107.53 a barrel on the ICE Futures exchange.  Crude has traded near $100 since mid-November after jumping from $75 in October as investors eye growing evidence the US economy could avoid a recession next year. The government reported Thursday that claims for jobless benefits fell to a four-week average of 375,000, the lowest level in three and a half years.

Energy trader Blue Ocean Brokerage said oil prices would likely eventually jump by about $50 if Iran, OPEC’s second-biggest crude exporter, tried to close the strait.  “Let’s start with an easy $20 spike, then add in a risk premium for insurance costs, delays, costs to push oil through alternative routes and the obvious loss of 3.5 million barrels a day from Iran,” energy trader Blue Ocean Brokerage said in a report.  “Crude oil prices have managed to outperform the commodity complex this year, with geopolitical risk premiums and seemingly resurgent US economy offsetting a worsening situation in the eurozone,” said analysts at Sucden Financial in London. “With regard to Iranian tensions specifically, an EU foreign ministers’ meeting on Jan. 30 to consider further sanctions on the country will likely prove an important focus in early 2012 trade.”  Trading volume was low this week as many investors take vacations around the Christmas and New Year’s Day holidays.  In other Nymex trading, heating oil rose 0.4 cent to $2.9241 per gallon and gasoline futures lost 0.7 cents at $2.6624 per gallon. Natural gas futures were down 2.2 cents to $3.005 per 1,000 cubic feet.

NAR – pending home sales up

Pending home sales continued to gain in November and reached the highest level in 19 months, according to the National Association of Realtors (NAR).  The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, increased 7.3% to 100.1 in November from an upwardly revised 93.3 in October and is 5.9% above November 2010 when it stood at 94.5. The October upward revision resulted in a 10.4% monthly gain.  The last time the index was higher was in April 2010 when it reached 111.5 as buyers rushed to beat the deadline for the home buyer tax credit. The data reflects contracts but not closings.  The PHSI in the Northeast rose 8.1% to 77.1 in November but is 0.3% below November 2010. In the Midwest the index increased 3.3% to 91.6 in November and is 9.5% above a year ago. Pending home sales in the South rose 4.3% in November to an index of 103.8 and remain 8.7% above November 2010. In the West the index surged 14.9% to 121.2 in November and is 2.9% higher than a year ago.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.  The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

Foreclosure backlog to take “decades” to clear

The number of seriously delinquent mortgages in the nation’s largest metropolitan areas slowed this year, according to a new study from the Urban Institute. But foreclosures remain a burden on the housing market, prompting the policy research group to call for a resolution to the housing crisis to ensure the foreclosure backlog is cleared out in a reasonable time period.  The institute said the serious delinquency rate in the 100 largest metro areas slowed to 9.3% in June from 10.4% in December 2009, according to data from Foreclosure-Response.org. The Urban Institute said the serious delinquency rate is classified as the share of loans in foreclosure, plus all of those that are more than 90 days in arrears.  “The foreclosure inventory that is building up is going to take an incredibly long time for lenders to clear,” said Leah Hendey, research associate at the Washington firm. “At the current pace of foreclosure sales, we are looking at a process that could take decades to complete. It is critical that the status of these properties be resolved quickly if we want to stabilize communities and housing markets.”  This decline was driven by a drop in delinquent loans, which fell to 3.7% in June from 5.5% in December 2009.

In hard-hit areas like Riverside and Stockton, Calif., the foreclosure rate declined significantly, dropping 1.9 percentage points and 1.7 percentage points from the peak two years ago.  Florida, New York and Illinois experienced a different shift in the market with foreclosure rates climbing in cities throughout those states.  In Tampa, the foreclosure rate jumped 2.8 percentage points, and in Chicago, it grew 2.3 percentage points. Those three states are judicial foreclosure states, which force a court to make a final decision before a property can leave the process. This leads to a growing backlog, the Urban Institute said.  Mortgage originations are down in all of the 100 metro areas surveyed, as well. Some of the largest drops occurred in Buffalo, N.Y., where originations fell 39% this year, and Miami, where new home loans fell 82%, the report said.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Home prices fall

The S&P/Case-Shiller index of property values in 20 cities dropped 3.6% in September from the same month in 2010 after decreasing 3.8% in the year ended August, the group said today in New York. The median forecast of 32 economists in a Bloomberg News survey projected a 3% decrease.  “We continue to expect home prices to fall through mid- 2012,” said Anika Khan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “We still have an oversupply of existing homes, and distressed transactions continue to drive down home prices.”  Estimates in the Bloomberg survey for the price change ranged from declines of 2.7% to 3.9%. The Case- Shiller index is based on a three-month average, which means the September data were influenced by transactions in July and August.  The year-over-year decline in September was the smallest in seven months.  Home prices adjusted for seasonal variations fell 0.6% in September from the prior month, the biggest decrease since March, after falling 0.3% in August. Unadjusted prices also decreased 0.6% from August as 17 of 20 cities showed declines.

Only Washington, New York and Portland, Oregon, showed gains.  Atlanta, Las Vegas and Phoenix posted new post peak lows in September, the report showed.  The year-over-year gauge provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.  Eighteen of the 20 cities in the index showed a year-over- year decline, led by a 9.8% drop in Atlanta.  Detroit showed the biggest year-over-year increase, with prices rising 3.7% in the 12 months to September. Property values in Washington were up 1%.  Nationally, prices decreased 3.9% in the third quarter from the same time in 2010. They increased 0.1% from the previous three months before seasonal adjustment and dropped 1.2% after taking those changes into account.

MF Global money pops up in Britain

About $200 million in customer money that vanished from MF Global is believed to have surfaced at JPMorgan Chase in Britain, according to people briefed on the matter. The discovery could be the most significant breakthrough in a month long hunt for the missing funds.  During MF Global’s last chaotic days, the brokerage firm overdrew an account at JPMorgan, according to another person who is close to the matter. Some investigators now believe the firm used customer funds to patch at least some of the hole, which would have been a significant breach of federal law.  MF Global transferred the roughly $200 million in the days before the firm filed for bankruptcy, said the people, who requested anonymity because the investigation was incomplete.  Some investigators suspect that the transfer to JPMorgan was the first major misuse of customer money at MF Global, the commodity brokerage powerhouse once run by Jon S. Corzine, the former Democratic governor of New Jersey. Authorities are also looking into whether JPMorgan initially questioned the source of the cash and sought proof from MF Global that it was complying with regulations, one of the people said.  The authorities believe MF Global failed to give JPMorgan full documentation for the cash, the people briefed on the matter said. But the bank’s concerns hardly mattered because the money had already been transferred to the account in Britain. It is unclear whether investigators can recover the $200 million.

New home sales up, prices down

New home sales rose in October, but are still trending to a low annual rate, according to data released Monday by the US Commerce Department.  Sales of new single-family homes last month were at a seasonally adjusted annual rate of 307,000. That’s up slightly more than 1% from the revised September rate and nearly 9% above the October 2010 rate.  The median sales price of new homes sold in October was $212,300, below the $213,300 price in September but up from $204,200 in October 2010. The average sales price of $242,300 in October was down from $248,400 in September and from $254,400 in October 2010.  But, as IHS economist Patrick Newport noted, the market conditions for single-family home sales are bad.

Tight credit for builders, falling home prices and high foreclosures and delinquencies continue to hold the new-home market back.  “This is shaping up to be the worst year on record for the single-family housing market,” Newport said in a note. He cited that data for new home sales, single-family housing starts and single-family permits will set record lows this year.  Builders say there has been marginal improvement in some markets with better economies.  “While this trend is encouraging, overall sales activity is still well below normal due to the effects of overly tight credit conditions for builders and buyers, the continued flow of distressed properties on the market and inaccurate appraisal values on new homes,” said Bob Nielsen, chairman of the National Association of Home Builders.  There was a 6.3-month supply of new homes at the current sales pace in October.

US deficit deadlock similar to Europe, Barney Frank blames you

Europe’s deepening debt crisis is echoed in the United States by the inability of President Barack Obama and Congress to strike a bipartisan deficit deal.  On both sides of the Atlantic, leaders are having a hard time making tough, unpopular decisions. And things come together only at the very last minute, if at all, while the global economy hangs in the balance.  What happens in Europe is important to Americans. It has already taken an economic toll on US exporters — from reduced consumer demand in Europe for their products and from a rising dollar against the euro.  The worse things get in Europe, the more likely the contagion could spread to the US  Right now, the situation looks much graver overseas, with Europe teetering on the brink of a new recession.  With their backs against the wall, and with some economists warning of an imminent collapse of the euro, European leaders are racing to find a grand bargain to keep their monetary union from fracturing. But time is running out.

The United States isn’t quite that close to the edge of the cliff. Last week’s failure of the so-called congressional supercommittee to strike a deficit-cutting deal to lower future government borrowing underscored that Congress is bogged down in inter-party strife, likely meaning that no deal on jobs, spending and taxes is likely until after next November’s presidential election.  The two parties were blaming each other for the deadlock. Republicans slammed Democrat Obama for not doing more to prod an agreement.  And one top Democratic lawmaker even suggested that “the public cannot be totally absolved of responsibility.”  “They elected us,” Rep. Barney Frank, D-Mass., senior Democrat on the House Financial Services Committee said at a news conference Monday called to announce his retirement after more than three decades.  “Congress is not some autonomous entity that parachuted through the dome,” Frank said. “We were elected.”

Olick – new homes face pressure

“Sales of newly built homes are bouncing around a bottom, but prices are now at the lowest level of the year.  The median price of a new home came in at $212,300 for October, which is up from a year ago, but October of 2010 represented the big fall after the end of the home buyer tax credit.  The fact that October of this year saw the lowest price of the year so far is not good news going forward. What this means for the nation’s big builders have the analysts split.  ‘While we continue to believe prices may fall slightly from current levels, we believe pricing is essentially near its trough, and therefore should result in minimal impairment charges for the builders in 2012,’ writes Michael Rehaut at JP Morgan.  ‘New home prices are still at a 31% premium to existing home prices (vs. 14% historically), and given the high level of existing home inventory, we expect pricing pressure to remain,’ notes Dan Oppenheim at Credit Suisse.  New home sales are still at half the normal historical levels, and they are in for more fierce competition in 2012, specifically, foreclosures.

Banks are ramping up the repossessions again after year-long delays in the process, and that will mean inventories of distressed properties will rise.  These rock-bottom priced properties may or may not compete with new construction, depending on geographical area, but they will bring overall existing home prices down, and that will do nothing good for consumer confidence.  Inventories of new construction are approaching healthy, at just a 6.3 month supply (far better than that of existing homes at an 8 month supply). In raw numbers, they are actually at a record low of 162,000 (or at least since the data tracking began in 1963). Unfortunately, that’s not helping prices in and of itself.  ‘The bigger picture is that house prices are still being weighed down by the huge number of discounted existing homes coming onto the market,’ writes Paul Diggle at Capital Economics. ‘New home sales will also be held back by the weaker pace of economic growth that we are expecting next year. Admittedly, at some point activity in the new homes market will have to rebound to reflect underlying population growth. But that is still a few years away yet.’

So will the big builders continue to slash prices in order to compete?  Can they?  ‘Commodity prices remain elevated, and that doesn’t give builders much room to cut prices too much without really sacrificing profit margins again,’ says Peter Boockvar at Miller Tabak.  That’s why analysts are being very selective in their approach to the home builders and are ‘muting’ their outlooks for 2012.  ‘This is shaping out to be the worst year on record for the single-family housing market,’ says Patrick Newport at IHS Global Insight. ‘New home sales (data start in 1963), single-family housing starts (data start in 1959) and single-family permits (data starts in 1960) will all set record lows in 2011. Existing home sales may avoid the cellar, but only because a third of them are selling at ‘distressed’ prices.’  So what will get housing back on a strong foundation for growth? All the analysts agree: Job growth.”

US credit outlook downgraded

In the wake of the Congressional debt committee’s failure to find agreement, Fitch Ratings affirmed the United States’ top-notch credit rating on Monday but revised its rating outlook to “negative,” down from “stable.”  That change indicates that the agency sees a slightly greater than 50% chance that it will downgrade the country’s AAA rating within two years.  In affirming the rating, Fitch said the US economy is still the most productive in the world and the government has “unparalleled financing flexibility.”

The US bond market is the largest and most liquid in the world and the dollar is the global reserve currency — held by banks worldwide and a staple in international transactions.  But the agency cited its “declining confidence” that Congress would enact “timely fiscal measures” to put the country’s public finances on a sustainable path.  It also noted that a worsening in the economic outlook would further mar the fiscal picture.  As it is, Fitch estimates that US debt held by the public will hit 90% of GDP by the end of the decade, up from about 70% today. And interest payments on the debt would likely consume more than 20% of tax revenues.  “Failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade of the US sovereign rating,” the agency said in a written statement.  Last week, the two other major ratings agencies — Moody’s and Standard & Poor’s — said the so-called super committee’s failure did not in itself affect their credit ratings for the country.  Moody’s affirmed its AAA rating. And S&P, which downgraded its US credit rating this summer because of the “political brinksmanship“ in the debt ceiling debate, said it would keep its rating for US bonds at AA-plus for now.  Both agencies had previously assigned a negative outlook on their US rating.

NAR – growth in commercial markets next year?

Commercial real estate markets have been relatively flat this year, but improving fundamentals mean a more positive trend is expected in 2012, according to the National Association of Realtors (NAR).  NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data for metro areas were provided by REIS, Inc., a source of commercial real estate performance information.

-  Office Markets
Vacancy rates in the office sector are expected to fall from 16.7% in the current quarter to 16.1% in the fourth quarter of 2012.  The markets with the lowest office vacancy rates presently are Washington, D.C., with a vacancy rate of 9.3%; New York City, at 10.3%; and New Orleans, 12.8%.  After rising 1.4% in 2011, office rents are forecast to increase another 1.7% next year. Net absorption of office space in the US, which includes the leasing of new space coming on the market as well as space in existing properties, is projected to be 20.2 million square feet this year and 31.7 million in 2012.

-  Industrial Markets
Industrial vacancy rates are projected to decline from 12.3% in the fourth quarter of this year to 11.7% in the fourth quarter of 2012.  The areas with the lowest industrial vacancy rates currently are Los Angeles, with a vacancy rate of 5.2%; Orange County, Calif., 5.7%; and Miami at 8.4%.  Annual industrial rent should decline 0.5% this year before rising 1.8% in 2012. Net absorption of industrial space nationally should be 62.0 million square feet this year and 41.2 million in 2012.

-  Retail Markets
Retail vacancy rates are likely to decline from 12.6% in the current quarter to 11.8% in the fourth quarter of 2012.  Presently, markets with the lowest retail vacancy rates include San Francisco, 3.7%; Long Island, N.Y., and Northern New Jersey, each at 5.7%; and San Jose, Calif., at 6.0%.  Average retail rent is seen to decline 0.2% this year, and then rise 0.7% in 2012. Net absorption of retail space is seen at 1.2 million square feet this year and 13.5 million in 2012.

-  Multifamily Markets
The apartment rental market – multifamily housing – is expected to see vacancy rates drop from 5.0% in the fourth quarter to 4.3% in the fourth quarter of 2012; multifamily vacancy rates below 5% generally are considered a landlord’s market with demand justifying higher rents.  Areas with the lowest multifamily vacancy rates currently are Minneapolis, 2.4%; New York City, 2.7%; and Portland, Ore., at 2.8%.

Average apartment rent is projected to rise 2.5% this year and another 3.5% in 2012. Multifamily net absorption is likely to be 238,400 units this year and 126,600 in 2012.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

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Short sales gaining popularity

US home prices may get a boost from an unlikely source: a pickup in sales of properties in default before they reach the stage where they are repossessed by the bank and sold.  There has been a “dramatic shift” in banks’ willingness to sell a property for less than the mortgage balance to avoid foreclosing, said Ron Peltier, chairman and chief executive officer of HomeServices of America Inc.  The short sales typically change hands at a discount of about 20% to homes not in financial distress, compared with a 40% price cut for bank-owned homes, according to RealtyTrac Inc. Short sales jumped 19% in the second quarter from the prior three months while foreclosure sales were flat, the data seller said.  “Banks have become much more supportive of short sales,” said Peltier, whose Minneapolis-based company is a unit of Warren Buffett’s Berkshire Hathaway Inc. “That’s better for the lenders, who have smaller losses on a short sale, and it’s going to be better for homeowners, who won’t have as much psychological distress as a foreclosure.”

Distressed sales brokered by HomeServices used to be 60% foreclosures and 40% short sales, Peltier said in an interview. Now, that ratio has flipped, according to the CEO.  “There’s a huge backlog of homes in default that the banks want to get rid of,” said Thomas Popik, research director for Campbell Surveys in Washington. “They don’t want to be homeowners.”  Banks are being more agreeable to short sales as foreclosures slow following a yearlong probe of so-called robo- signing, or pushing through unverified default documents. Foreclosure filings have fallen for 12 straight months through September as banks work through a backlog of paperwork, according to RealtyTrac.  Almost a third of all home transactions in August were foreclosures or short sales, according to the National Association of Realtors.

Goldman Sachs posts loss

Goldman Sachs posted a loss that was even worse than expected of 84 cents a share on a 33% drop in investment banking revenue from a year ago.  Wall Street had expected the company to post only the second quarterly loss since Goldman went public in 1999, but estimates were for just 16 cents a share in the red.  Shares, though, rebounded from earlier losses after company officials insisted the firm was well-positioned after the economy recovers and financial markets stabilized. Goldman stock rose 1% in premarket trading.  Goldman posted $3.59 billion in revenue, a decrease from $8.90 billion a year ago when it posted a profit of $2.98 a share.  Analysts had expected revenue of $4.29 billion.  Investment banking revenues came in at $781 billion, a one-third fall from the third quarter in 2010 and a 46% drop from the previous quarter. Financial advisory revenues were $523 million, up a bit from the same quarter last year.  Goldman’s loss-driver was its Investing & Lending division, which holds stocks, bonds, loans and private equity assets as long-term investments.  The division reported negative revenue of $2.48 billion as the value of those assets dropped sharply. Goldman’s stock investment in Industrial and Commercial Bank of China alone generated more than $1 billion of paper losses.  Goldman was also hurt by big declines in bond trading and investment banking revenue.  Its fixed income, currency and commodities client trading business reported $1.73 billion in revenue, a 36% decline from a year earlier.

Federal officials and banks try to hammer out a mortgage deal

Officials and big banks are working on a plan that would make refinancing available to some borrowers whose houses are worth less than their loans, so long as they are current on mortgage payments, the Wall Street Journal reported.  Such borrowers typically are not able to refinance because they lack equity in their homes. The plan would apply only to mortgages owned by the banks, the Journal said, citing people familiar with the matter.  Federal officials have been trying to broker a settlement with the five largest mortgage servicers — Ally Financial, Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo — the Journal said.  It is not clear how many borrowers would qualify for help, the paper added.  Officials are pushing for a plan in a bid to break a legal impasse with big banks over alleged foreclosure abuses and ease problems in the housing market, the paper said.  Discussions are still fluid and any final outcome is uncertain. Talks between government officials and the banks are expected to continue this week.

Oil down

Oil fell for a second day in New York after China said its economy grew at the slowest pace in two years and US crude stockpiles were forecast to increase.  Futures dropped as much as 0.5%, extending yesterday’s 0.5% decline, after China’s statistics bureau said the economy grew at 9.1% in the third quarter, less than predicted. An Energy Department report tomorrow may show US crude inventories climbed for a second week, according to a Bloomberg News survey. Technical indicators indicate prices may have advanced too fast to be sustainable.  “The number from China is getting a bit worse than before,” said Ken Hasegawa, an energy trading manager at broker Newedge Group in Tokyo, who forecasts prices will decline $5 a barrel. “If the recovery of the economies in Europe and the US is getting worse, then the economies of China and Asia will show some damage.”  Crude for November delivery fell as much as 40 cents to $85.98 a barrel in electronic trading on the New York Mercantile Exchange. It was at $86.10 at 2:45 p.m. Singapore time. Yesterday, the contract lost 42 cents to $86.38, the lowest settlement since Oct. 13. Prices are down 5.8% this year.  Brent oil for December settlement on the London-based ICE Futures Europe exchange dropped as much as 45 cents, or 0.4%, to $109.71 a barrel. The European benchmark contract was at a premium of $24 to US futures. The difference narrowed 16% yesterday, the most since June 16.

Rentals surge

Despite the most affordable buying market in decades, households across the country are slowly choosing rentals versus homeownership, signaling a positive economic trajectory for the multifamily sector, according to Freddie Mac’s October 2011 economic outlook report released Monday.  In the year ending June 2011, the Census Bureau reported a net increase of 1.4 million households that moved into rental housing, a 4% rise in the number of tenant households.  The US homeownership rate fell about 1.5% over the past year, according to Freddie Mac’s report.  Hessam Nadij, managing director of research and advisory services for Marcus & Millichap, said in the August issue of HousingWire magazine that “apartments, which are considered part of the commercial real estate sector, are well ahead of retail, office properties and industrial properties in the recovery because of the release of pent up demand.”  Much of the rental demand is from household heads under 30 years old who have decided to postpone homeownership in favor of renting during uncertain economic times, according to the report. Owner rates for those under 25 years old fell 4.4% to 21.9% while rates for those 25 to 29 years old fell 7% to 34.7%.

Bank of America Merrill Lynch estimated a net decline of 1.2 million homeowners since 2007, alongside a net increase of 3.4 million renters. Americans expect home prices to continue to fall, according to a recent Fannie Mae National Housing Survey. Another Fannie survey released in August also predicted a rise in renters.  Financing for rental housing is becoming more readily available. Frank E. Nothaft, Freddie Mac vice president and chief economist, attributed the rise in lending to low mortgage rates, improving apartment-sector economics and the return of traditional lenders that had curtailed activity during the recession. Nothaft said this year’s multifamily loan origination volume is “stronger” than last year’s.  Texas is the hottest market for apartments this year. A majority of the growth is coming from the Dallas-Fort Worth metro area, according to, a unit of RealPage, Inc. The North Texas region started more than 7,300 new units, according to the firm’s mid-year data.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

* As the top Florida foreclosure and pre-

foreclosure expert, he oversees more than

100 short sale & REO closings each month

* Long-time authority on real estate investing

and rapid reselling of distressed homes.  Owns

portfolio of nearly 150 high-value, high-profit

properties

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

running 4 different offices, supporting over

420 agents, uniquely positioning him to help

thousands of investors make money in the

biggest market opportunity ever!

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

closed 2,786 sides for a closed sales volume of

$392,912,927!

* Highly sought-after speaker, consultant, and

seminar leader for current trends and hot topics

in Real Estate Investing, Entrepreneurship, and

Wealth Building

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

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

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

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

NAR urges more short sales

In a letter sent to the US Department of Housing and Urban Development, the Federal Housing Finance Agency, and the US Department of the Treasury, the National Association of Realtors (NAR) responded to the agencies’ recent request for input and offered its recommendations for selling REO properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration. According to NAR, improving access to affordable mortgage financing for qualified home buyers and investors and committing additional resources to loan modifications and short sales will help reduce current and future inventories of real estate owned (REO) properties held by government agencies. NAR urged the agencies to create an advisory board as they explore new options for selling foreclosed properties to ensure that efficiently disposing of agency REO properties will minimize taxpayer losses and reduce the negative effects that distressed properties have on local real estate markets.

To prevent further REO inventory increases, NAR also recommended that the agencies take more aggressive steps to modify loans and, when a family is absolutely unable keep their home, to quickly approve reasonable short sale offers that allow families to avoid foreclosure. Phipps said that while federal programs have been put into place to help keep families in their homes, many of these have fallen short of expectations, and advocated that those resources be applied toward modifying loans and expediting short sales, which are typically less costly than foreclosure. “Loan modifications keep families in their home and reduce defaults, while short sales keep homes occupied, helping stabilize neighborhoods and home values,” Phipps said. “Expanding resources and ensuring the use of already allocated funds for pre-foreclosure efforts is the best opportunity to reduce taxpayer costs and creates more positive outcomes for homeowners and their communities.”

NAR is also concerned about proposals that include lease-to-own elements. Phipps said that agency policies should first be focused on keeping families in their homes through loan modifications or short sales if that’s a better option, and that the agencies should not expedite foreclosures so that those properties could be included in a lease-to-own program. He added that any lease-to-own programs should not be administered by the government, but instead should include the participation of local investors or nonprofits that can manage the specialized needs and challenges of the local market.

Boehner calls for tax reform

House Speaker John Boehner, in a high-profile speech, called on a special congressional “super committee” to consider tax reforms that would close loopholes but not raise rates—or tax revenues—as part of its bid to cut the US deficit. Boehner’s address to the Economic Club of Washington was a comprehensive statement of Republican economic principles as Congress works to bring down the stubbornly high 9.1% unemployment rate and tame the national debt. Boehner attacked “short-term gimmicks” and said a proposed tax credit for businesses that hire new workers would have little impact if employers were worried about other government policies. Washington’s energies would be better channeled toward reducing regulations on business, he said. “Let’s be honest with ourselves. The president’s proposals are a poor substitute for the pro-growth policies that are needed to remove barriers to job creation in America,” Boehner said. Boehner said the newly created “super committee” of congressional Democrats and Republicans should try to simplify the tax code in order to trim at least $1.2 trillion from annual budget deficits over 10 years. But that overhaul should not bring more revenue to the government and the committee should focus only on spending cuts and benefit reforms to trim deficits, Boehner said. The overhaul should yield a top rate of 25% for both income and personal taxes, Boehner said later on CNBC, down from their current level of 35%.

Olick – flood of foreclosures headed this way

“New foreclosure starts rose sharply in August, signaling a slew of foreclosed properties will be dumped on the already bloated housing market in early 2012. ‘Notices of Default,’ the first stage of the foreclosure process, rose 33% month-to-month, according to a new report from RealtyTrac. Much of this was driven by a huge jump in the numbers from Bank of America, as reported here on the blog Tuesday. ‘The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by robo-signing and other documentation problems,’ said James Saccacio, chief executive officer of RealtyTrac. ‘It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process.’

As always, the numbers vary locally, with default notices up more than 40% month-over-month in New Jersey (42%), Indiana (46%) and California (55%). The numbers are still down from August of 2010, but that was a near-record high month before any of the ‘robo-signing’ documentation problems were uncovered. While the jump is significant, it may just be the tip of the iceberg. After posting my blog on Bank of America Tuesday, a spokesman there responded, ‘We are on an ongoing path to return foreclosures to normal levels. Strong gains like that from July to August demonstrate our progress – primarily in judicial states — clearing more volume to advance to foreclosure once we pass the numerous quality controls we have in place and exhaust all options with homeowners. Our progress each month builds upon foreclosure levels lower than the market realities would dictate.’

The market realities are a far higher number of delinquent loans that have not yet even made it to foreclosure starts. There were 4.38 million delinquent loans recorded in July by Lender Processing Services, which does not include the 2.15 million in the foreclosure process. This latest jump, fed by Bank of America, may push other major loan servicers to do the same. ‘I wonder if this will signal a move by the lenders and servicers to stop waiting for the final settlement with the government to take place and re-start foreclosure proceedings on all those seriously delinquent loans?,’ asks RealtyTrac’s Rick Sharga. While settlement talks, lawsuits and investigations slog on, the big bank servicers are working to get the troubled loans through the process and off their books, and frankly that is the best course of action. The mortgage and housing market crash was a man-made disaster, but just like any hurricane or tornado, you cannot rebuild until you’ve cleared away the mess.”

US Postal Service proposes cuts

The US Postal Service, struggling to cut costs and conserve cash, says it wants to end overnight delivery of letters and postcards and will study about 250 processing sites for possible closure. The agency, which lost more than $3 billion last quarter, has said it must downsize drastically or will be forced to stop delivering mail by the end of next summer. Overseen by Congress and a regulator, it funds its services with postal-related revenue and does not get any taxpayer dollars. Delivering First Class mail in two to three days instead of one to three days could save about $3 billion by 2015, the agency said. The change would allow it to close facilities, cut back on overnight work and eliminate about 35,000 jobs. The Postal Service has struggled to offset falling mail volumes as consumers correspond by email and pay bills online. Personnel costs for its half a million employees are among the factors driving the agency out of business. In June, the agency stopped making biweekly payments into a retirement fund and, in July, it said it was considering more than 3,600 post offices for potential closure. It also wants to stop Saturday delivery to save cash. While the agency has some ability to consolidate and cut costs, officials are relying on Congress for serious structural reforms. The Postal Service said Thursday’s proposal would not require congressional approval but it would still need broader changes to get on a path toward financial health.

Mortgage rates at record lows

Fears over the European debt market pushed fixed mortgage rates to record lows this past week, according to Freddie Mac’s Primary Market Mortgage Survey. The 30-year, fixed-rate mortgage fell to a new bottom of 4.09%, down from 4.12% last week and 4.37% from a year ago. Meanwhile, the 15-year, FRM hit a record low of 3.3%, down from 3.33% last week and 3.82% last year. The 5-year, Treasury-indexed hybrid adjustable-rate mortgage averaged 2.99% this week, up from last week’s average of 2.96%. A year ago, the 5-year ARM hit 3.55%. In addition, the one-year ARM fell to 2.81% from 2.84% last week and 3.40% a year ago. “Continued investor concerns over the state of the European debt markets kept US Treasury bond yields low and allowed mortgage rates to ease once more this week,” said Frank Nothaft, vice president and chief economist for Freddie Mac. “In comparison, the average interest rate of mortgage outstanding in the second quarter was 5.28%. By refinancing into today’s 30-year fixed mortgage, homeowners could shave almost $1,715 a year in interest payments on a $200,000 loan.” Bankrate also reported falling mortgage rates this past week. Based on the firm’s analysis, the 30-year, FRM fell to 4.32% from 4.35% a week ago, while the 15-year, FRM hit 3.44%, down from 3.48%. The 5/1 ARM fell to 3.07% from 3.10%.

Zandi says 40% chance of recession

Back down into recession or finally up toward recovery, Moody’s Analytics Chief Economist Mark Zandi says the inflection point for the economy will likely occur in the coming months and before the 2012 election. Zandi said Thursday there is a 40% chance the economy will slide back into recession within the next year. Real GDP during the first half of 2011 increased at nearly 1% annualized rate and job growth slowed from close to 200,000 new positions per month to barely positive at the end of the summer. “This is not sustainable. Unless spirits improve soon, businesses will ramp up layoffs, consumers will pull back and the economy will fall into another recession,” Zandi said in a research note. Zandi said the problems threatening the economy is a laundry list of outside and artificial forces created by the struggling economies in Europe and the “psychologically debilitating events in Washington,” such as the recent debt crisis debacle and subsequent Standard & Poor’s downgrade.

But at its core is housing. Before a Senate subcommittee Wednesday, Zandi said the US economy faces an overhang of 1.25 million vacant homes and roughly 3.5 million loans in the foreclosure process or more than 120-days delinquent. Signs of restarting foreclosures in the recent report from RealtyTrac was a good sign of progress, Zandi said. “Housing generally is a major source of growth early in recovery. Two years into a recovery housing should be a tailwind to growth and of course it’s not. It’s a drag. Housing is not adding to growth,” Zandi said. “It’s subtracting.” Some monumental litigation sagas could be resolved in the coming months to help both the banks and the government-sponsored enterprises to address housing going forward. These include the servicing settlement between banks and the 50 state attorneys general and the mortgage securities lawsuits between, again, the banks and the Federal Housing Finance Agency. With the banks able to put their mortgage woes behind them, the economy might be able to move forward.

“The inflection point will come sooner than later,” Zandi said. “The AG, servicer has been slow and arduous, but I think it will be solved well before the next election, hopefully in the next few months. I’m hopeful the FHFA lawsuit will be resolved over the next few months. A few cases may be extended after the election and be ongoing for many, many years. But I’m hopeful that the fallout of the suit is well before then.” The US banking system as a whole is in reasonably good shape, he said. Many small banks will fail, and Bank of America continues to shift businesses and executives around, but credit has been made available. Commercial and industrial loans are up as much as 6% from last year. Auto loans and small business loans are also on the rise. “I don’t think the banking system is a real problem with the economy. There is an issue of writing first mortgages but I don’t think it’s capital. I think it’s more litigation risk and putback risk,” Zandi said.

DSNews.com – slowdown in cash investors

It’s Home price depreciation over the past few years has made housing more undervalued relative to incomes than ever before, yet home sales have continued to decline. Even more striking is that the dampened activity can be largely attributed to a weakening in demand from cash buyers and investors, triggered by the more uncertain investment climate, according to the researchers at Capital Economics. The firm has found that since January, the number of homes purchased by cash buyers and investors has fallen by 26%. Over the same period, purchases by first-time and repeat buyers have risen by just 2%. Widespread negative equity and high unemployment are preventing first-time and repeat buyers from filling the hole left by cash buyers and investors, Capital Economics notes. That imbalance translates to weak home sales numbers. Based on the Case-Shiller house price index and compared to the 1975-2010 average, the research firm says housing is now around 23% undervalued against disposable income per employee and disposable income per capita. These are both record lows. As Capital Economics said, the weak labor market and outstanding loan balances that exceed property values are keeping first-time and repeat homebuyers on the sidelines, even with mortgage rates at all-time lows.

Moreover, the firm’s analysts note that mortgage rates have yet to respond in full to the decline in 10-year Treasury yields to 2%. It is possible that 30-year mortgage rates will soon fall below 4%, according to Capital Economics. If so, the firm says the monthly mortgage principal and interest payment on a median priced home bought with an 80% loan would fall to a record low of 13% of median income. That would compare with the 20-year average of 20%. For cash buyers and investors, the weaker economic and investing climate is clearly taking its toll on housing demand, according to Capital Economics. The resulting fall in home sales has offset recent declines in the number of homes for sale, leaving housing inventory still high relative to demand, the research firm explained. And there’s nothing in the cards to suggest a resurgence to bring activity closer to normal levels. All this at the same time that home prices appear to be close to stabilizing, Capital Economics notes. Although, the firm says home prices have yet to respond fully to the recent weakening in consumer and investor demand.

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

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

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

Default notices spike

A report by RealtyTrac says first-time default notices were filed on 78,880 homes last month, marking a nine-month high and up 33 percent from July. It was the biggest increase since August 2007.  Even so, notices were down 18 percent from the same month last year and were down 44 percent from the monthly peak reached in April 2009 during the tail end of the recession.  The rise in default filings did not suggest that a new foreclosure problem was on the horizon, but that some of the backlog related to documentation problems was being worked out of the system, said Rick Sharga, senior vice president at RealtyTrac.  Foreclosure activity was halted temporarily late last year due to claims that lenders relied on “robo-signing,” where documents were signed without reviewing the case files.

Total foreclosure filings—which include default notices, scheduled auctions and repossessions—were sent to 228,098 homes, a 7 percent increase from July but down 33 percent from August 2010.  Bank repossessions fell 4 percent to a six-month low of 64,813 homes. Repossessions have come down 37 percent from the peak of 102,134 hit in September 2010.  Nevada once again had the highest state foreclosure rate with one in every 118 homes receiving a foreclosure filing in August. Nevada has held the top spot for over four years.  Even so, Nevada saw a 3 percent decrease in filings as scheduled auctions and bank seizures eased.

Unemployment, inflation surge

The weekly jobless claims number, which is closely watched as an indicator for employment trends, unexpectedly rose 11,000 to 428,000, well ahead of estimates of 411,000.  The number of people applying for unemployment benefits jumped last week to the highest level in three months.  The four-week average, a less volatile measure, rose for the fourth straight week to 419,500.  The economy added zero net jobs in August, the worst showing since September 2010. The unemployment rate stayed at 9.1 percent for the second straight month.  Businesses added only 17,000 jobs in August, which was a sharp drop from 156,000 in July. Government cut 17,000 jobs. Combined, total net payrolls did not change.

The consumer price index, meanwhile, gained 0.4 percent when including volatile food and energy prices, after an increase of 0.5 percent in July. The so-called core CPI, though, gained 0.2 percent, which was in line with expectations.  Consumers paid more for a range of goods and services last month, pushing up inflation and squeezing Americans’ purchasing power.  For the 12 months ending in August, the core index surged 2 percent, the biggest year-over-year increase in nearly three years. That’s at the top end of the Federal Reserve’s informal inflation target. It could limit the central bank’s ability to take further steps to try to revive the economy.  Food prices rose 0.5 percent, the biggest increase since March. That was due to higher prices for cereals and dairy products. Energy costs increased 1.2 percent.

Senate hears risks of Obama’s plan

As the Obama administration works to construct a plan to refinance millions of underwater borrowers into lower-rate mortgages, a Senate subcommittee heard the hidden risks and difficulties of building such a program yesterday.   Nearly 11 million borrowers currently owe more on their mortgage than the home is worth, according to CoreLogic. Nearly every panelist testifying Wednesday said these borrowers along with the overhang of more than 1.25 million vacant homes and 3.5 million loans in the foreclosure process to be the obstacle holding back the housing recovery and the overall economy.   Senators Barbara Boxer (D-Calif.) and Johnny Isakson (R-Ga.) reiterated before the subcommittee the need to adopt their version of the plan, which would eliminate the loan-to-value restrictions and fees for refinancing Fannie Mae and Freddie Mac loans into lower rates.

The first problem is that the program would also cost the Federal Reserve $4.5 billion in the reduction of interest payments on mortgage-backed securities it bought during the credit crisis of 2008, leaving a $600 million net loss to taxpayers.  Second, David Stevens, the CEO of the Mortgage Bankers Association, told the subcommittee that no proposal addresses the representation and warranty risk of refinancing a mortgage. If the Obama administration’s program does not force Fannie and Freddie to waive its right to force lenders to buy back the refinanced mortgage should it slip into default, lenders may not participate.  Many panelists suggested the Obama administration should simply revamp and expand the Home Affordable Refinance Program, but Stevens pointed out that the private sector has refinanced roughly 4 million mortgages, nearly four times the amount of public programs.  A slew of other obstacles remain for refinancing borrowers so deep underwater. Stevens said existing requirements under the “To-Be-Announced” market and current tax law make pricing securities with loans in excess of 125% LTV nearly “insurmountable.”

Industrial output up slightly more than forecast

U.S. industrial production rose 0.2 percent in August, slightly better than forecast, as a solid gain in manufacturing offset a drop in utility output, a Federal Reserve report showed.  August’s industrial output gain followed an unrevised 0.9 percent jump in July. Economists polled by Reuters had expected a 0.1 percent gain in August output.  Utility output fell 3.0 percent in August after rising 2.8 percent amid a July heat wave.  But manufacturing production rose 0.5 percent, with consumer durables rising a healthy 1.3 percent as automotive production rose. This followed an unrevised 0.6 percent rise in July factory output. Mining output rose 1.2 percent after a 1.1 percent rise in July.  Capacity utilization, which gauges firms’ performance relative to their full potential, edged up to 77.4 percent in August, from a downwardly revised July reading of 77.3 percent.

Southern California sales up

August home sales in Southern California rose 8.6% from July, but the outlook going forward is murky with August sales far below historic averages, DataQuick said Wednesday.  The month of August was an improvement from July with 19,654 homes and condos selling in the counties of Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That compares to 18,090 sales in July and 18,541 sales from a year ago.  August was the first month since mid-2010 to report a year-over-year gain in Southern California home sales.  “Scratch beneath the surface and there’s not a lot to cheer about this month. Home sales were up from a year earlier but remained far below average. Many would-be buyers can’t find financing, and others who want to make a move now are stuck because they owe more than their homes are worth,” said John Walsh, president of DataQuick. “Financial markets are increasingly choppy, the political outlook is incredibly murky and consumer confidence remains poor. Needless to say, it’s not an environment ripe for stabilizing the housing market.”  The San Diego Housing Market Monitor report, which is produced by The Berkland Group, also found pending home sales in San Diego rose 7% in August, while actual sales increased 4%. When comparing last month to a year earlier, San Diego sales still fell 3%.  Distressed home sales made up 46% of all sales in the area in August.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

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

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

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

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

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

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

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

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

Olick – new wave of foreclosures coming

“Bank of America is ramping up its foreclosure processing, sending out far more notices of default to borrowers in August than in previous months, well over 200% more month-to-month. A notice of default is the first stage of the foreclosure process in non-judicial foreclosures states, that is, where foreclosures do not go before a judge. The notice of default is usually sent when a borrower is 90 days or more overdue in payments, but that timeline has been extended significantly during this housing crisis, due to the so-called ‘robo-signing’ processing scandal and the sheer volume of troubled loans.

Mortgage and housing analyst and strategist Mark Hanson alerted me to unusually high legal default filing activity, and his research points to Bank of America as the primary driver. I contacted a Bank of America spokesman, who responded: ‘It appears the numbers you noted to me this afternoon generally track with our own numbers for key categories. It should be noted it’s driven more in key states like California and Nevada than overall, and certainly the progress we’re seeing is limited to non-judicial states. Judicial states continue to move very slowly, with key states like New Jersey only beginning to start processing foreclosures again this month.’

The foreclosure numbers are down very slightly year-over-year, but only because August 2010 was one of the highest foreclosure months on record, and of course was just before the ‘robo-signing’ scandal was uncovered. Delays in processing have artificially lowered the foreclosure numbers over the past year, so this new surge is likely addressing loans that have been long delinquent, but unaddressed. In other words, the foreclosure pipeline is filling again. RealtyTrac, a widely followed foreclosure sale and data site, is also confirming a surge in overall notices of default in its August numbers, to be released later this week. They do not cite Bank of America specifically, which bought Countrywide Financial, taking on millions of troubled loans. ‘We’ve been seeing REO [bank-owned property] sales, and processing of loans through foreclosure. This increase may simply be the lenders and servicers starting the next cycle. August traditionally is a high month for foreclosure actions, so part of the increase might be seasonal,’ says RealtyTrac’s Rick Sharga. ‘Could be any number of reasons – but with 3.5 million delinquent loans, this had to happen sooner or later.’

The question of course is, is this a one month catch-up purge or will it continue at high levels for a while? And if the latter, will other banks follow suit quickly? Because if other banks see Bank of America pushing more loans to foreclosure, which will inevitably means more properties heading out for sale, they may want to get in before that glut of properties pushes prices down even further. ‘This proves once again that ‘credit’ as measured by legal defaults and foreclosures is not necessarily about borrowers missing payments, rather about what the servicers chose to do about it,’ notes Hanson.”

CBO cuts economic outlook

The Congressional Budget Office (CBO) —the non-partisan budget and economic analyst for Congress—said economic growth would slow from previous estimates and a nagging, 9.1% jobless rate would basically remain stuck there through next year’s presidential and congressional elections. CBO Director Douglas Elmendorf said his agency now sees economic growth of around 1.5% this year and 2.5% in 2012. That’s down from CBO’s August estimate of 2.3% and 2.7%, respectively. New data since CBO pieced together its August outlook contributed to the downward estimates, Elmendorf said. The unemployment rate, now at 9.1%, will remain “close to 9% through the end of 2012,” Elmendorf said. Last month, CBO estimated joblessness at 8.9% this year, falling to 8.5% in 2012.

MBA – mortgage applications up

Mortgage applications increased 6.3% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending September 9, 2011. This week’s results include an adjustment to account for the Labor Day holiday. The Market Composite Index, a measure of mortgage loan application volume, increased 6.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 15.4% compared with the previous week. The seasonally adjusted Purchase Index increased 7.0% from one week earlier. The unadjusted Purchase Index decreased 16.2% compared with the previous week and was 7.2% lower than the same week one year ago.

The Refinance Index increased 6.0% from the previous week, stopping a run of three consecutive weekly decreases. The Refinance Index is not seasonally adjusted but is adjusted for the holiday. On an unadjusted basis, the Refinance Index decreased 15.2% and is 23.5% lower than the same week a year ago. The four week moving average for the seasonally adjusted Market Index is down 2.9%. The four week moving average is up 0.5% for the seasonally adjusted Purchase Index, while this average is down 3.9% for the Refinance Index. The refinance share of mortgage activity increased to 77.3% of total applications from 77.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.9% from 7.1% of total applications from the previous week.

Wholesale prices flat, inflation eases

Excluding the volatile food and energy categories, core wholesale prices edged up 0.1%, the smallest increase in three months. The figures indicate that inflation pressures are easing. The Producer Price Index, which measures price changes before they reach the consumer, was unchanged in August, the Labor Department said Wednesday, after a 0.2% rise in July. In the past 12 months, the index has increased 6.5%, mostly due to higher gas and food costs. That’s the smallest 12-month rise since March, though much bigger than the annual changes late last year. Core prices rose 2.5% in the past 12 months, the same pace as July.

Food prices rose 1.1% in August, the largest increase since February. Egg prices jumped nearly 11%, the most since April, while processed chicken prices increased 3.7%, the most in five years. That likely reflects the higher cost of corn and other grains that are used for animal feed. Processed fruits and vegetables rose 2%, the most since February 1990. The core index was pushed up by a jump in tire prices, which rose 1.4%, the most in four months. Wholesale gasoline prices, meanwhile, fell 1% in August, and home heating oil dropped 1.2%. Sharp increases in the prices of oil, food and other commodities pushed up most measures of inflation earlier this year. But now that many commodities are becoming less expensive, inflation pressures are fading.

What might work in Obama’s jobs plan

House Majority Leader Eric Cantor critiqued the Obama jobs plan on Tuesday, pointing out areas lawmakers can agree on as well as areas that House Republicans will oppose — including stimulus spending and tax hikes on the rich. “We need to work very hard to try to peel off things that we can actually agree on,” Cantor said at a summit hosted by the American Action Forum, a right-leaning think tank created by deficit hawk Doug Holtz-Eakin, a former Congressional Budget Office director. Cantor provided new insight on Republican reaction to the $447 billion Obama jobs package that the White House officially sent Congress on Monday. “Let’s get some wins on the board together. And then we’ll have to disagree to disagree on some of the things that will have to be decided in public debates in the next election.”

One of those areas Republicans want to leave to voters: Tax hikes for the rich. President Obama’s largest proposed pay-for — which the White House estimates would raise roughly $400 billion over 10 years — limits itemized deductions and certain other exemptions for individuals with adjusted gross incomes of $200,000 or more ($250,000 and up for married couples). Cantor said that’s not going to happen. “Republicans are not going to accept tax increases if the goal is to grow the economy,” he said. The No. 2 House Republican also elaborated a nuanced opposition to some details of the Obama jobs package that Republicans agree on in principle, like infrastructure spending.

The White House and some Republicans have talked about creating an infrastructure bank that would pair public and private dollars to finance projects that revamp roads and bridges. But Cantor blasted that proposal on Tuesday. “I, for one, think that infrastructure bank is akin to creating a Fannie and Freddie for roads and bridges,” Cantor said comparing the idea to the struggling government-owned mortgage finance companies. “It’s something we don’t need to do.” He said he’d rather see expedited permitting for such projects, which is included in the Obama package.

With 14 million workers jobless, Cantor acknowledged the enormity of the problem. But he doesn’t believe in a no-strings-attached extension of unemployment benefits. Without going into details, Cantor said he’d favor an extension only if it were tied to “job opportunities.” “Unemployment benefits should not turn into a permanent solution,” Cantor said. “We should somehow connect unemployment benefits with work or a job opportunity.”

In his Tuesday speech, Cantor also pointed out areas of bipartisan agreement, like giving more generous tax breaks to small businesses and pulling back burdensome regulations. President Obama has said he will push hard for his new jobs proposal to be passed in its entirety — not piecemeal. However, the president won’t veto pieces of the jobs package, if Congress passes them that way, a top Administration official on Tuesday.

Orlando prices jump 15%

As foreclosures and short sales made up a shrinking share of local home sales, home prices in Orlando jumped 15% in August from a year earlier. The Orlando metro area’s median price for August was $115,000, up 21.2% from January and 15.1% from August 2010, according to a report from the Orlando Regional Realtor Association. “A steady rise in the percentage of ‘normal’ sales — those that are neither bank-owned nor short sales — continues to boost the overall price,” said the report. Those “normal” transactions made up 41% of sales in August, down a percentage point from July. That was the first decline in such sales after they rose for six consecutive months.

Even with prices on the upswing, though, sellers continue to overprice their homes, the report shows. The average home sold for 95% of its listing price in August, after spending an average of 101 days on the market before coming under contract. Affordability numbers suggest the Orlando market still has a large amount of unmet demand. The area’s affordability index rose to 248 in August, showing median income earners make more than twice as much as they need to in order to qualify for a median-priced home. “Affordability conditions this year have been enormously favorable, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers and ignoring a large share of otherwise creditworthy buyers,” said association Chairman Mike McGraw of McGraw Realty Services, Inc. “Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that in Orlando and even on a national scale could stimulate additional economic activity and create jobs.”

The number of Orlando home sales completed in August fell 8.7% to 2,342 from a year earlier, as bank-owned sales fell 51%. Short sales and “normal” sales each rose 32%. Meanwhile, led by a decline in the number of condominiums for sale, Orlando’s for-sale housing inventory fell 39% to 10,055. That put inventory at a 4.29 month supply. Average interest rates paid by buyers fell to 4.26%, the lowest level since the realtor association began tracking it in 1995.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

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http://www.reomillionaireclub.com

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http://www.smartrealestatenews.com

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

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

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

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

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

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

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

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

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

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Summer home sales up

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

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

Unemployment up, trade down

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

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

Olick – why no refi?

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

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

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

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

Obama’s likely jobs plan

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

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

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

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

-  Extending the payroll tax cut to employers.

-  Extending unemployment aid.

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

-  A mortgage relief program.

Obama’s likely mortgage plan

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

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

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

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