short sale investing

Smart Real Estate News & Commentary by Chris McLaughlin September 19, 2011

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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

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http://www.reomillionaireclub.com

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http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin September 15, 2011
Forward this e-mail to your friends!

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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

Smart Real Estate News & Commentary by Chris McLaughlin September 14, 2011

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–>

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.

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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

Smart Real Estate News & Commentary by Chris McLaughlin September 8, 2011

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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