short sale investing

Smart Real Estate News & Commentary by Chris McLaughlin February 16, 2012

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FHA defaults rise

Defaults on Federal Housing Administration (FHA) mortgages increased in December for the ninth-straight month.  More than 711,000 FHA-backed home loans were in default at Dec. 31, nearly 19% higher a year earlier.  As defaults increased, a constricted and delayed foreclosure process is hurting the government’s ability to unload the properties once they are repossessed.  The US Housing and Urban Development Department (HUD) held 32,170 REO in December, according to a recent report, the lowest level measured since the same month in 2007. The high was reached in March 2011 at 68,997 properties.  The FHA insures roughly one-third of the mortgage market, as private insurers have been struggling with capital shortfalls since the crisis in 2007.  But the FHA is in trouble as well because of the surging defaults. The capital ratio of the agency’s mutual mortgage insurance fund slipped to 0.24% last year, well below the 2% mandated by Congress.

Analysis from the White House’s Office of Management and Budget released this week showed the fund would actually fall into the red this year and need an unprecedented bailout from the Treasury Department.  Bank of America will send roughly $500 million to the FHA as part of a settlement reached last week over past countrywide origination problems. HUD Secretary Shaun Donovan said more settlements would be announced soon, sending between $900 million and $1 billion to the FHA.  The agency will also be raising insurance premiums above the hikes set to take place in 2012 as a result of the payroll tax cut extension reached last year.  Donovan said this week that new loans written this year and last are proving to be more profitable than expected. But the market remains fragile and another downturn in housing could put the fund in further trouble.  “A very significant piece of what determines the actuarial value of the fund is what we project to happen to home prices,” Donovan said. “The better than expected performance of the new loans can be offset if home prices perform worse than we expect.”

Tax cut deal announced

A payroll tax cut for 160 million Americans, set to expire at the end of this month, would be extended through December under a bipartisan deal announced early today by US congressional leaders.  The accord would also renew expiring jobless benefits for millions of others and prevent a pay cut for doctors of elderly Medicare patients.  Economists say the tax cut extension and renewal of jobless benefits should provide a lift to the US economy, certain to be a key issue in the battle for control of Congress and the White House in the run-up to Election Day.  “We have reached an agreement and we’re moving forward,” Republican Representative Dave Camp, who headed the negotiating committee, told reporters shortly after midnight EST.  It was not immediately clear when the House of Representatives and Senate would vote on the deal, but lawmakers hoped to do so before they leave Friday for a week-long recess.  Many Republicans had initially balked at the extension while others insisted that its cost had to be offset by spending cuts to prevent an increase in the US deficit.  House Speaker John Boehner and fellow Republican leaders cleared the way for a deal on Monday when they dropped their demand that there be spending reductions to pay for the tax-cut extension.

Olick – foreclosures up again

“After a year-long reprieve from rising foreclosures, the numbers are going up again.  One in every 624 US households received a foreclosure filing in January, up 3% from the previous month, according to a new report from RealtyTrac.  Foreclosure activity froze in many states in 2011, due to processing delays after fraud, or so-called ‘Robo-signing,’ were uncovered in the fall of 2010.  The thaw is now on.  ‘We expect the pattern of increasing foreclosures to continue in the coming months, especially given the finalized mortgage and foreclosure settlement reached in early February between 49 state attorneys general and five of the nation’s largest lenders,’ said RealtyTrac’s CEO Brandon Moore in a written release.  ‘Foreclosure activity increased on a year-over-year basis for the first time in more than 12 months in Florida, Illinois, Indiana and Pennsylvania, following a pattern we saw in late 2011 in states such as California, Arizona and Massachusetts.’

While states that do not require a judge to preside over foreclosure proceedings, like California, saw a jump in filings toward the end of last year, judicial states have all but stalled. That will now change, thanks to the $26 billion dollar government-lender/servicer settlement. There will still be some delays on individual state levels, but the wheels are turning again, and that means more bank repossessions and more foreclosed properties heading to the re-sale market.  Bank repossessions, the final stage of the foreclosure process, increased at least 30%  year-over-year in several states, including Massachusetts, which saw a 75% spike.  Bank-owned or REO (real estate owned) activity hit a 16-month high in Illinois and a 15-month high in Indiana.  Default notices, the first stage of foreclosure, were flat nationally in January, but spiked in judicial states, like Connecticut and Pennsylvania (up 112%) and even in non-judicial states like Maryland (up 100%).

Nevada still posted the highest foreclosure rate, with one in every 198 households receiving a filing, despite an 8% drop in foreclosure activity. Nevada is a non-judicial foreclosure state, so the foreclosure backlog has been clearing for the last several months.  The situation is the same in California, where foreclosure activity dropped to a 50-month low, but the state still posted the second highest foreclosure rate in the nation. More than 51,000 borrowers received a foreclosure filing in January. California cities still account for nine of the top ten metro foreclosure rates, according to RealtyTrac.  As optimism seems to abound for the spring, at least among the nation’s home builders whose sentiment index jumped to the highest level in four years this month, foreclosures still stand in the way of a robust recovery.  Distressed property sales lower the value of homes around them, and that pushes more borrowers into a negative equity position, owing more on their mortgages than their homes are currently valued. Until banks work through the enormous backlog of foreclosures, which number in the millions, home prices will not hit a firm bottom, especially in the most troubled local real estate markets.”

Jobless claims down

Jobless claims slipped 13,000 from an upwardly revised 361,000 the previous week and beneath economist estimates that actually saw the number rising.  The drop in jobless claims marked a near four-year low, suggesting the labor market was finally strengthening.  Initial claims for state unemployment benefits dropped 13,000 to a seasonally adjusted 348,000, the Labor Department said, the lowest since March 2008. The prior week’s figure was revised up to 361,000 from the previously reported 358,000.  Economists polled by Reuters had forecast claims rising to 365,000. The four-week moving average for new claims, seen as a better measure of labor market trends, fell 1,750 to 365,250 — the lowest since April 2008.  Considerable slack still remains, with 23.8 million Americans either out of work or underemployed. There are no job openings for nearly three out of every four unemployed.  A Labor Department official said there was nothing unusual in the state-level data and no state had been estimated.  The number of people still receiving benefits under regular state programs after an initial week of aid tumbled 100,000 to 3.43 million in the week ended Feb. 4. That was the lowest level since August 2008.  Economists had forecast so-called continuing claims falling to 3.50 million from a previously reported 3.52 million.  The number of Americans on emergency unemployment benefits rose 16,568 to 3.00 million in the week ended Jan. 28, the latest week for which data is available.  A total of 7.68 million people were claiming unemployment benefits during that period under all programs, up 18,304 from the prior week.

Housing starts up

The Commerce Department said today that housing starts climbed 1.5% to an annual rate of 699,000 units.  Initial estimates for housing starts can be subject to large revisions and the government revised the December reading significantly higher to a 689,000-unit rate.  The Commerce Department initially estimated groundbreaking in December advanced at a 657,000-unit rate.  Economists polled by Reuters had forecast housing starts rising in January from the initial reading to a 675,000-unit pace.  Starts of multi-unit buildings, which are often rented, jumped 8.5% last month. New construction on buildings with five units or more increased 14.4%.  Groundbreaking on single-family units, which make up a much larger portion of the sector, fell 1.0%.  Permits climbed 0.7% to an annual rate of 676,000 units.

Inflation up

US producer prices outside food and energy recorded their largest increase in six months in January, but are unlikely to ignite inflation pressures given the slack in the labor market.  The Labor Department said on Thursday its seasonally adjusted core producer price index rose 0.4% last month, the largest gain since July, after increasing 0.3% in December.  Economists polled by Reuters had expected core PPI to rise only 0.2%. In the 12 months to January, core producer prices rose 3.0 after increasing 2.7% in December.  But overall prices received by farms, factories and refineries edged up 0.1% after dipping 0.1% in December.  The rise, which was smaller economists’ expectations for a 0.4% gain, reflected declines in food and energy prices.  In the 12 months to January, producer prices increased 4.1%, moderating from 4.8% December. That was the smallest increase in a year.  The Federal Reserve last month viewed inflation as largely contained and said it expected to hold interest rates near zero at least through late 2014.  Wholesale prices outside of food and energy were pushed up by a drugs costs, which accounted for about 40% of the increase. Higher prices for light motor trucks and household appliances also contributed.  Passenger car prices fell 0.8% after rising 0.5% in December.

Student loans drain retirement savings

Student loan debt amassed by parents is growing faster than loans taken out by the student.  Parents’ loan debt has more than doubled over the last decade — exceeding $100 billion dollars or 10% of all outstanding student loan debt, according to the independent research firm FinAid.org.  “Parents of every income level are increasingly borrowing for their children’s college education. It doesn’t matter whether the parents are low income, middle income or upper income. There’s been dramatic growth in the percentages of parents who’ve been borrowing,” says FinAid.org founder and publisher Mark Kantrowitz.  Many parents who co-signed loans or borrowed money on their own for their children’s education now face the loss of their retirement nest eggs, homes and other assets. As student loan debt has topped US credit card debt, “America faces the very real possibility of another major threat on par with the devastating home mortgage crisis,” according to a new study by the National Association of Consumer Bankruptcy Attorneys (NACBA).

Piling up student loans in middle age is “troublesome”, says NACBA vice president John Rao, an attorney with the National Consumer Law Center. “Parents who take out loans for children or co-sign loans will find those loans more difficult to pay as they stop working and their incomes decline.”  But, parents’ need to borrow has grown as their savings has declined and plummeting home values have made it difficult for many households to tap what was once a common financial resource — the equity in their homes.  Parents have an average of about $34,000 in student loans and that figure rises to $50,000, including interest, over a standard 10-year loan repayment period. Interest rates on the most common parental loan – the federal Parent “PLUS” loan – is fixed at almost 8%. So the return on parents’ investments needs to average at least 8% just to break even.  The fixed-rate PLUS loan is often a better choice for families than private student loans, whose rates may vary. But the need to borrow private or PLUS is often a sign of over borrowing, Kantrowitz says.  “Parents should borrow no more than they can afford to pay in 10 years because they have to worry about their own retirement. By the time they retire, they should have no debt remaining since they will have no income to repay that debt.”

Southern California – January sales up, prices down

Southern California home sales rose slightly last month as investors snapped up the region’s lowest-priced properties, sinking prices to the lowest levels in more than 2 1/2 years, DataQuick, a research firm, reported yesterday.  More than half of existing homes sold were foreclosed on in the previous year or short sales — transactions in which the price is less than what is owed on the property.  There were 14,523 new and existing homes and condominiums sold in the six-county region in January, up 0.4% from the same period last year, DataQuick said. Sales plunged nearly 25% from December, reflecting a typical seasonal decline.

Last month, 669 new homes sold, the lowest monthly tally since DataQuick began tracking sales in 1988.  The median price was $260,000, down 3.7% from $270,000 the same period a year earlier and from December. It was the lowest price since $249,000 in May 2009. During the current cycle, prices peaked at $505,000 in the middle of 2007 and bottomed out at $247,000 in April 2009.  John Walsh, president of the San Diego-based research firm, said January is typically a poor gauge of future sales but that the mortgage market “remains dysfunctional.” Nearly one-third of homes sold last month were paid for fully in cash for a median price of $199,000.  Absentee buyers — mostly investors and second-home purchasers — bought 26.8% of homes sold, paying a median price of $193,500. Absentee buyers were especially active in the Inland Empire, which has Southern California’s lowest-priced homes.  Homes that sold for at least $500,000 accounted for 16% of sales, down from 18.3% a year earlier, DataQuick said. During the last decade, a monthly average of 27.2% of homes sold for at least $500,000.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2011.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

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

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

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

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

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

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

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

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

Smart Real Estate News & Commentary by Chris McLaughlin February 6, 2012

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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

Smart Real Estate News & Commentary by Chris McLaughlin January 16, 2012

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–>

http://www.mclaughlinchris.com

*** Follow Chris on Twitter–>

http://www.twitter.com/mclaughlinchris

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

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

Smart Real Estate News & Commentary by Chris McLaughlin January 6, 2012

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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