short sale

Smart Real Estate News & Commentary by Chris McLaughlin August 11, 2011

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Nuwire – Banks now prefer short sales to foreclosures

Banks dealing with lengthy, complicated and frequently messy foreclosures are starting to see “short sales” as a quicker and cheaper way of getting bad loans off their books.  The nation’s biggest mortgage servicers- Bank of America, JPMorgan Chase and Wells Fargo - are beginning to step up their efforts to ease the short sale process for borrowers who are unsuccessful in getting loan modifications and face the threat of foreclosure.  Servicers are attempting to reach out to borrowers and are paying out more incentives to those suffering financial hardship to help proceed with a short sale. They are also cutting down the time taken to approve short sales, although realtors still complain that the process takes too long.  JPMorgan has processed 120,000 short sales through its proprietary program since June 2009 and now averages 5,000 short sales a month. The bank says its average response time to approve a short sales transaction is 30 days.  “We think the short sale is a good solution for many struggling homeowners and we let them know that it’s an option,” said Christine Holevas, spokesperson for JPMorgan in an email. “Our outreach efforts have increased in the past year or so. Foreclosure can be an expensive and lengthy process for all parties. It’s a good deal for the homeowner and a good deal for us (a cheaper way to get a bad loan off the books.)”

The average time for the foreclosure process- from the time of notice to the completed foreclosure- is now 318 days in the U.S., according to RealtyTrac.  The foreclosure process in the state of New York, which follows a judicial process, took 966 days on average for properties foreclosed in the second quarter. New Jersey and Florida followed with an average processing time of 944 days and 676 days respectively.  The longer it takes for a foreclosure to be approved, the longer bad loans stay on banks’ books.  Foreclosures are also more expensive than short sales, because of the legal expenses involved as well as the expenses for maintenance and upkeep while the property is in foreclosure.  Wells Fargo, for instance, incurred expenses on repossessed homes to the tune of $305 million in the second quarter and $408 million in the first quarter, according to data from SNL. Data for the other big banks wasn’t available.  According to real estate analytics firm CoreLogic, the number of short sales in the market have tripled in the last two years and transactions are anticipated to grow by 25% in 2011. The markets with the largest short sale volume are California, Arizona, Colorado and Florida.

Mortgage rates and the downgrade

At least one fear was not realized amid Monday’s meltdown: the concern that mortgage rates would immediately shoot higher in response to Standard & Poor’s downgrade of Fannie Mae and Freddie Mac, the government-sponsored entities that are the 800-pound gorillas of the mortgage market. In fact, the initial response to Fannie and Freddie getting cut to AA+ from AAA was precisely the opposite. Mortgage rates were poised to continue declining.  HSH Associates, which surveys lenders, quoted the average 30-year fixed rate mortgage at 4.44% Monday. “We expect to see rates go into the 4.30′s by noon tomorrow,” said Keith Gumbinger, of HSH Associates.  Mortgage rates are set off of the interest rates on U.S. Treasury notes and bonds. Even though Standard & Poor’s pulled its AAA rating of the United States Friday night, investors still rushed into U.S. Treasury securities Monday as a safe haven, believing more in the “full faith and credit of the United States” than in the opinion of Standard & Poor’s credit analysts. As investors snapped up Treasury notes and bonds they pushed down interest rates on those securities, which move inversely to prices.

Interest rates low till 2013

The Federal Reserve painted a much gloomier picture of the economy yesterday, and indicated it would keep cash cheap and easy for at least two more years.  The Fed indicated it plans to keep “exceptionally low” interest rates in place until at least mid-2013 as a way to continue to prop up the recovery.  The new two-year time horizon was an unusual move because the Fed doesn’t typically signal its policies that far in advance, and because it was interpreted as an admission that the economy will remain weak until then.   three of the Fed’s 10 voting members formally dissented against using the new language. Multiple dissenting votes are rare among the Fed’s policy-making committee.  Regional Fed presidents Richard Fisher of Dallas, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia said they would have preferred to keep the “extended period” phrase instead of laying out the 2013 timeframe.  “What it’s telling us is, this was a very divisive meeting and there was a lot of back and forth,” said Sherry Cooper, chief economist with BMO Financial Group and a former Fed economist.

Mortgage refis soar

Mortgage applications increased 21.7% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending August 5, 2011.  The Market Composite Index, a measure of mortgage loan application volume, increased 21.7% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 20.9% compared with the previous week. The Refinance Index increased 30.4% from the previous week. The seasonally adjusted Purchase Index decreased 0.9% from one week earlier. The unadjusted Purchase Index decreased 1.2% compared with the previous week and was 4.9% higher than the same week one year ago.  “Amid substantial market turmoil last week, mortgage rates dropped to their lowest levels of the year, and refinance applications jumped more than 30% to their highest levels of the year,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Over the past month, refinance application volume has increased by 63%.  Refinance applications for jumbo loans increased by almost 75% relative to last week. Despite these low mortgage rates, applications for home purchase have remained little changed through the summer.”
The four week moving average for the seasonally adjusted Market Index is up 9.7%. The four week moving average remained unchanged for the seasonally adjusted Purchase Index, while this average is up 13.7% for the Refinance Index.  The refinance share of mortgage activity increased to 75.6% of total applications from 70.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.1% from 6.6% of total applications from the previous week.

QE3 coming?

Goldman Sachs reviewed its position on further monetary stimulus, saying that further quantitative easing had a greater than ever chance of being implemented in the United States.  “We now see a greater chance that the FOMC (Federal Open Market Committee) will resume quantitative easing later this year or in early 2012.  We’ve changed our call because the committee’s reaction to incoming economic data is more dovish than previously thought,” Jan Hatzius, chief U.S. economist Goldman Sachs said in a note.  “The policy commitment to keep the funds rate at ‘exceptionally low levels…at least through mid-2013′ was more aggressive than we had anticipated. We are surprised that there is a date, even more that it is almost two years in the future,” he said.  He added that the Fed had been explicit, more so than anticipated, about preparing to use “these tools” – the same language used in September 2010 which paved the way for the last round of quantitative easing (QE).

“We see a recession risk of about one in three and if that were to happen the committee would of course ease further. The most likely route to be deployed initially by the Fed would be ‘conventional’ QE but it could be even more aggressive such as rate caps or interventions in non-government securities market,” Hatzius said.  Although more QE was now Goldman’s base case there was a possibility that it might not occur if the economy turned out stronger than forecast and if inflation posed a higher hurdle to further stimulus.  “Also the anti-Fed backlash late last year might argue against further QE but the policy could be tweaked so instead of a large-and-scary upfront number they might choose to specify a smaller monthly flow of purchases,” he added.

WSJ – Freddie’s losses narrow

Freddie Mac posted a $2.1 billion loss during the second quarter, down from a year-ago loss of $4.7 billion.  The mortgage-finance giant paid $1.6 billion to the government and asked for $1.5 billion in new aid during the quarter. That marked the fourth consecutive period in which, after making its regular dividend payment to the government, the company didn’t generate a loss for taxpayers.  The report came on the same day that Standard & Poor’s downgraded the long-term credit rating of Freddie Mac and its larger cousin, Fannie Mae, to AA-plus from AAA. That stemmed from S&P’s decision late Friday to cut the credit rating of the U.S. government, which effectively nationalized Fannie and Freddie three years ago.  The U.S. government has pledged to keep Fannie and Freddie afloat by injecting unlimited amounts of money into both in order to keep mortgage markets functioning. Fannie and Freddie are required to pay a 10% dividend to the government on those infusions. Over the past year, Freddie Mac has absorbed $2.1 billion in government aid to cover, in part, the cost of $6.4 billion in payments to the Treasury. The cost of the government’s bailout of Freddie stands at $51.9 billion. Fannie Mae last week reported a net loss of $2.9 billion for the second quarter and asked the government for another $2.8 billion on Friday, bringing its tab to $89 billion.

Freddie’s quarterly loss stemmed in part from losses on derivatives that are used to hedge the firm’s exposure to swings in interest rates. The firm also added $2.5 billion to its loss reserves, up from a $2 billion addition in the first quarter. While mortgage rates have fallen to new lows over the past two weeks, Chief Executive Charles “Ed” Haldeman Jr. warned that “labor market weakness and households’ worries about their financial security” had damped home sales, prompting a “cautious” outlook.  While both companies ran up huge losses in the two years following the government takeover, Freddie has shown glimmers of stability in recent quarters. That stems in part from the size of its loan book, which is about 40% smaller than Fannie’s, and because Freddie guaranteed fewer risky loans than Fannie.

See you at the top!
Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.
All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

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 May 13,

2011

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More political interference

Calling housing “the biggest headwind on the economy right now,”

Obama broached two relatively new ideas for the White House:

Longer-term mortgage modifications and principal reductions.  “In

addition to these short-term loan modifications, we want to see

if we can get longer-term loan modifications. And in some cases,

principal reduction, which will be good for the … person who

owns the home, but it’ll also be good for the banks over the long

term,” Obama said.  Both ideas would require Congress to pass

laws to force the banks to cooperate, and principal reduction is

sure to stir Wall Street banks, because it is direct interference

by the government in private finance.  When Obama campaigned, he

had talked about pushing for policy to give bankruptcy judges the

ability to write down principal owed on homes whose owners are

bankrupt, but when he took office, he stood on the sidelines of

legislation that would have allowed principal reductions, and his

administration said that current housing policy was good enough.

House Republicans passed a bill to kill the administration

programs that most experts have gauged a failure.

Inflation up

The Consumer Price Index, the government’s key inflation measure,

rose 3.2% over the last 12 months ended April 30, according to

today’s report from the Labor Department. It was the biggest

12-month jump since October 2008. Half of the increase was due to

rising energy prices, the government said.  Meanwhile, so-called

core-CPI, which strips out volatile food and energy prices and is

considered a better long-term predictor of inflation, rose 1.3%

from a year ago.  Gas prices alone surged 3.3% in April, and are

up 33.1% over the past year.

Overall, prices jumped 0.4% in April, in line with forecasts from

economists surveyed by Briefing.com.  Core CPI rose 0.2% during

the month, surpassing economists’ forecasts, which called for a

0.1% tick higher.

MBA – CEO testifies

David H. Stevens, President and CEO of the Mortgage Bankers

Association (MBA), testified before the Senate Committee on

Banking, Housing and Urban Affairs’ Subcommittee on Housing,

Transportation and Community Development on “The Need for

National Mortgage Servicing Standards.”  Following are portions

of his remarks:  “Presently,  servicers face a growing number of

checks and balances, ranging from federal laws and regulations,

such as RESPA and TILA, to fifty state laws, regulations, and

local ordinances, as well as court rulings and FHA, VA, and Rural

Housing servicing requirements. These requirements are in

addition to Fannie Mae standards, Freddie Mac standards, and

other contractual obligations. In short, servicers are faced with

complex and often contradictory rules and regulations, many of

which are still emerging.  What is the answer?  A consolidated

servicing standard that could drive these reforms.  Creating an

industry standard would streamline and eliminate many of these

overlapping requirements, providing clarity and certainty for

borrowers, lenders and investors alike.  It is critical that all

of the federal regulators involved act in a coordinated manner to

establish one national consolidated servicing standard that

applies to the entire industry, rather than piling on requirement

after requirement.”

“A national standard should start with a complete analysis of

existing servicer requirements and state laws governing

foreclosures.  Development should include an open dialog with

stakeholders in the servicing arena, all of whom must ultimately

implement and comply with the national standard.  MBA has

initiated this process by convening a blue-ribbon Council on

Residential Mortgage Servicing.  That Council examined the entire

servicing model and is forming recommendations to improve the

system for all stakeholders.  I am pleased to announce that we

are releasing the preliminary White Paper from the Council today

and ask that it be included as part of my written testimony.  

In the White Paper, the Council aims to examine the current

servicing model, address public misconceptions relating to

servicing practices and incentives, and educate the public on the

role and compensation of servicers.   I believe this White Paper

will provide useful information to you and other policymakers

that are currently debating national servicing standards.  I

encourage this subcommittee to use MBA and it’s Council on

Residential Mortgage Servicing as a resource going forward.  In

conclusion, as we develop servicing standards, I will urge you to

pay careful attention to the interdependence of servicing and the

impact that changes to the servicing system will have on the

economics of mortgage servicing, tax and accounting rules and

regulations, and the effect of the new requirements on Basel

capital requirements and on the TBA market.  Servicing does not

exist in a vacuum; instead it is part of a broader ecosystem

which involves all the varied elements of the mortgage industry.

The housing market remains fragile.  Therefore, when considering

changes to the current model, policy makers must be mindful of

unforeseen and unintended consequences that could ultimately

result in higher housing costs for consumers and reduced access

to credit.”

Retail sales up .05%

Total retail sales increased 0.5% last month, the Commerce

Department said. Sales rose 0.9% in March and have risen every

month since July 2010.  Economists had expected a 0.6% gain,

according to consensus estimates from Briefing. com.  Sales

excluding autos and auto parts were up 0.6%, roughly in line with

estimates.  Despite the overall increase in retail sales,

economists said the data suggest that consumer spending may be

slowing down.  Sales at gas stations were up 2.7% in April. Food

and beverage retailers had a 1.2% increase in sales, while

grocery store sales were up 1.5% last month.  Gas prices have

surged this year, with the national average near $4 a gallon. In

addition, food prices have risen sharply due to poor crop yields

and higher production costs due to the spike in energy prices.

Many economists had anticipated a bump in sales during April due

to the Easter holiday, which occurred later in the month than it

normally does.  But department store sales actually fell 0.2% in

the month, according to the report.

NAR – questions Dodd-Frank Act

The National Association of Realtors (NAR) says that a proposed

rule to define qualified residential mortgages (QRM) under the

Dodd-Frank Wall Street Reform and Consumer Protection Act (the

Dodd-Frank Act) would unnecessarily restrict access to home

ownership.  On July 21, 2010, President Barack Obama signed the

Dodd-Frank Act into law. A provision in the Act requires that

financial institutions retain 5% of the risk on loans they

securitize. The purpose is to discourage excessive risk taking

and create strong incentives for responsible lending and

borrowing. Exempt from the requirement are certain QRMs; FHA and

VA mortgages are also exempted.  Six agencies are developing the

risk retention regulation – the Department of Housing and Urban

Development, Federal Deposit Insurance Corp., Federal Housing

Finance Agency, Federal Reserve, Office of the Comptroller of the

Currency, and the U.S. Securities and Exchange Commission.  The

proposed rule narrowly defines QRMs, requiring an 80%

loan-to-value, which necessitates a 20% down payment. The rule

would also limit mortgage payments to 28% of gross income, a very

tight standard.

Following are some of NAR’s remarks:  “As the leading advocate

for housing and home ownership, NAR firmly believes Congress

intended to create a broad QRM exemption – strong evidence

shows that responsible lending standards and ensuring a

borrower’s ability to repay have the greatest impact on

reducing lender risk, and not high down payments.,” said NAR

President Ron Phipps, broker-president of Phipps Realty in

Warwick, R.I. “Saving the necessary down payment has always

been the principal obstacle to buyers seeking to purchase their

first home. Proposals that require high down payments will only

drive more borrowers to FHA, increase costs for borrowers by

raising interest rates and fees, and effectively price many

eligible borrowers out of the housing market.”

According to NAR Research, 60% of recent home buyers made less

than a 20% down payment, and it would take 14 years for a typical

person to save up a 20% down payment to buy a median-priced home.

 NAR wants federal regulators to honor Congressional intent by

crafting a QRM exemption that includes a wide variety of

traditionally safe, well underwritten products such as 30-, 15-,

and 10-year fixed-rate loans; 7-1 and 5-1 ARMs; and loans with

down payments in the 5% – to 20% range with mortgage insurance,

where required, and with other features found in low-risk loans

such as no prepayment penalties or balloon payments.

Business inventories up

The Commerce Department said inventories increased 1.0% to $1.48

trillion, the highest level since November 2008, after increasing

by an upwardly revised 0.7% in February.  Economists polled by

Reuters had forecast inventories rising 0.8% after a previously

reported 0.5% increase in February.  Inventories are a key

component of gross domestic product changes and March’s

bigger-than-expected gain could see the government raise its

first-quarter GDP estimate.  The economy grew at a 1.8% annual

rate in the first quarter, with inventories accounting for 0.93

percentage point, after a 3.1% pace in the fourth quarter.

Business sales rose 2.2% to $1.20 trillion in March, the highest

level since July 2008, after rising 0.5% the prior month. March’s

percentage increase in sales was the largest since March 2010.

March’s sturdy sales pace pushed down the

inventory-to-sales-ratio (which measures how long it would take

to clear shelves at the current sales pace) to a record low 1.23

months from 1.24 months in February.

NY foreclosure courts face 7 year backlog

According to RealtyTrac, at the rate the New York court systems

are currently working through the backlog of foreclosure cases,

it will take more than seven years to clear.  New York is a

judicial state, whereby foreclosures are completed through the

court system. But as cases mounted, the state developed the

largest foreclosure timeline in the country.  It currently takes

an average of 900 days for a foreclosure to wind through the New

York system, according to RealtyTrac, which maintains a count of

filings at the county level.  At the end of April, New York held

an inventory of 39,000 properties that received the initial

foreclosure notice or had been scheduled for auction but remain

unsold. Daren Blomquist, the editor of the RealtyTrac’s monthly

reports, said there is some estimation involved because the firm

doesn’t automatically remove a property from the active inventory

if there has been no update or sale within a certain number of

days.  New York averaged 314 scheduled auctions and 224

repossessions to REO per month so far in 2011. That’s down from

roughly 700 auctions and 520 REO each month last year. Assuming

only half of the 39,000 ends up being foreclosed and the rate of

repossession holds, it would take 87 months to clear this

inventory, Blomquist said.  New York implemented new rules giving

homeowners more protection in February, which may further delay

not only the process but a recovery.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com

http://www.shortsalescoach.com

http://www.sixfigurebpo.com

http://www.reomillionaireclub.com

http://www.youtube.com/shortsalesriches 

http://www.smartrealestatenews.com

(subscribe to this newsletter)

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

About the author:

Chris McLaughlin is widely known as America’s top

Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-

      foreclosure expert, he oversees more than

      100 short sale & REO closings each month

   * Long-time authority on real estate investing

      and rapid reselling of distressed homes.  Owns

      portfolio of nearly 150 high-value, high-profit

      properties

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

     running 4 different offices, supporting over

     420 agents, uniquely positioning him to help

     thousands of investors make money in the

     biggest market opportunity ever!

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

      closed 2,786 sides for a closed sales volume of

      $392,912,927!  

    * Highly sought-after speaker, consultant, and

      seminar leader for current trends and hot topics

      in Real Estate Investing, Entrepreneurship, and

      Wealth Building

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

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

Smart Real Estate News & Commentary by Chris McLaughlin December 14, 2010

 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

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

HAMP found lacking, again

Last April, the Congressional Oversight Panel found the program to be struggling to get off the ground despite having been in action for a year and a half. The latest evaluation of the Home Affordable Modification Program (HAMP) came out Tuesday and the result was — same deal.  HAMP has undergone tweaks since April. But the Congressional Oversight Panel, created to issue periodic reports on the TARP bailout program, found little improvement in performance.  Instead of helping 3 million to 4 million struggling mortgage borrowers keep their homes, as originally projected, HAMP will prevent only about 700,000 to 800,000 foreclosures. That number is dwarfed by the 8 million to 13 million foreclosures expected to occur by 2012.  Through the end of October, there have been 519,648 permanent modifications made.  And, since the Treasury Department lost the authority to further restructure the program at the end of October, bolstering its prospects is no longer likely, the report said. In fact, banks are offering more modifications through their own process than through the government’s.  The new report cited several reasons for the program’s failure. For one, servicers, the companies hired by banks to manage the loans, earn extra profits through fees imposed during foreclosure. Because of that, servicers were preventing or delaying modifications.  Another big obstacle was that many loans in trouble often came burdened with second mortgages — home equity loans or lines of credit — that had to sign off on potential deals.  Because so many homes are worth less than the borrowers owe, there is little money to cover the first loan, let alone a second mortgage. So many banks in the second position refused to sign off unless they were paid something.  The oversight panel also faulted Treasury for not having effective means of collecting and analyzing HAMP data. The department, said the panel, did not even set meaningful goals against which to weigh the program’s effectiveness.  Because participation has been so limited, HAMP will probably only spend about $4 billion of the $30 billion allocated for it.  even the loans that have been permanently modified through HAMP have not performed well. Many have already re-defaulted, and that means taxpayer money down the drain.

 Retail sales up

The Commerce Department said total retail sales rose 0.8% last month, fueled in part by deep discounting on holiday merchandise.  Economists surveyed by Briefing.com on average had forecast an increase of 0.5% for November, compared to a revised 1.7% jump in sales the prior month. October sales were originally reported to have increased 1.2%.  Sales excluding autos and auto parts rose 1.2%, compared to a revised 0.8% gain in ex-auto sales in October. Ex-auto sales were originally reported to have increased 0.4%.  Economists had forecast a rise of 0.6% in the measure for November, according to Briefing.com.  The government report showed sales at clothing stores rose 2.7%, were up 2.3% at sporting goods and hobby stores, increased 2.8% at department stores and climbed 1.3% at general merchandise sellers. Online sales rose 2.1%.  Higher gasoline prices fueled gas station sales to a 4% increase in November.  But there were a few weak pockets as well in last month’s report. Electronics sales dipped 0.6%, a figure also reflected when Best Buy, the No. 1 electronics seller, reported a miss on its sales and profit last quarter earlier Tuesday.  Furniture purchases slipped 0.5%.

 BOA finds new way to profit

 Bank of America (BOA) and hedge fund firm Fortress Investment Group have found a new way to profit from foreclosures – by collecting the tax debts of people who can’t afford to pay their property taxes.  Then they package the debts as securities and sell them to investors.  The investigative journal for the Center for Public Integrity noted that BOA’s securities division bundled $301 million worth of owed taxes which Fortress then converted into bonds to pitch to private investors.  Tax debt buyers can assess interest charges and a host of other fees and expect an estimated return of seven to ten percent from the deals.  If the debt still isn’t paid after a certain period of time, buyers can seize the properties through foreclosure.  Public records won’t show who purchased these securities, at what prices they were traded, or the anticipated returns they bring it, because the bonds were sold in private.  A BOA spokesman, William Halldin, denied that the bank and Fortress had acted together in bidding in the auctions.  Halldin said, “Our bids were made independently of any other organization.  Any suggestion that they weren’t independent is simply incorrect.” 

 The journal further claims that financial institutions, including several beneficiaries of federal bailout funds, are energetically finding new money-making avenues from the hot foreclosure market.  They stand-in as tax collectors and as an extension of that role, help local governments to significantly improve their budgets by also finding new owners for abandoned properties.  For example, in Florida, Miami-Dade County, raked in more than $274 million in June last year from the sale of approximately 60,000 property tax liens.  The property tax lien market, estimated at $5 billion and growing, has not come under much scrutiny or legislation.  There is no industry watchdog and regulations have simply not been able to keep up with the fast pace of foreclosures.  Buyers of property tax debts typically hop from state to state to take part in quick online auctions without having to reveal their association with Wall Street, and without registering their operation.  It seems like government officials are not only used to selling property tax debts to these virtually unknown limited liability companies but that their only interest is the large cachet of money the business reaps in.  The only thing required by the government is a tax identification number.

 Frugality?  Not so much

 Private sector debt fell by $165 billion in the third quarter. That is just a quarter of the rate of decline a year ago, Capital Economics notes. But what’s more, government debt issuance more than canceled out that drop, expanding by $380 billion during the period ended in September.  That gap, if you can bear it, stands to get even bigger in coming quarters should Congress approve the deficit-expanding tax deal reached this month by the White House and congressional Republicans.  That shift is not exactly reassuring the many fiscal hawks who warn that U.S. profligacy will not end well. They say the wider the budget gap, the bigger the mountain of debt sitting atop U.S. assets. Both of those trends, they claim, will push the dollar toward collapse in an inflationary crisis reminiscent of a banana republic.  If the ever-growing U.S. budget deficit is exhibit one in this lecture, exhibit two is the staggering level of debt piled up on all levels of society, as measured by the ratio of nonfinancial debt to economic output. Though there has been some talk of Americans getting their financial houses in order, there is not a lot of evidence of it to look at this number (see chart, right).  While financial firms have indeed cut their debt by 16% or so since the financial crisis broke out two years ago, nonfinancial debt – that carried by consumers, government and nonfinancial businesses — remains just 2 percentage points below its bubble-era peak, at 243% of GDP.  The unexpected rise in consumer spending is part of the reason economists at the likes of Goldman Sachs and UBS have been raising their U.S. growth forecasts lately.  “This is a pretty important shift,” Goldman economist Jan Hatzius said this month. “This is why are we turning more upbeat on U.S. growth after being downbeat for the past five years.”

 WSJ – it’s taking longer to foreclose

 Two years ago, the state began requiring that banks and borrowers attend settlement conferences before a foreclosure takes place.  While the conferences are popular with borrowers and have succeeded in helping some families keep their homes, banks have been reluctant to participate. That, and recent revelations that some lenders have improperly submitted foreclosure documents, has prompted judges to take a harsher stance with lenders.  The foreclosure process typically begins after a borrower misses three consecutive monthly payments and ends once the lender repossesses the home or the borrower brings the loan current. Nationwide, there were 2.1 million mortgages in some stage of foreclosure as of October, according to research firm LPS Applied Analytics. 

 The average loan in foreclosure had been in default for 492 days as of October, up from 289 days at the end of 2005, according to LPS.  In New York and New Jersey—another state with consumer friendly laws—the waits are longer. The average loan in foreclosure had been in default for 604 days in New York and 544 days in New Jersey as of October.  “We try and help as many people as we can,” says New York Supreme Court Judge Michael Ajello. “We set up a conference and I try and persuade and cajole the banks to reduce the payments,” he says. But the banks, he adds, “are not very cooperative.”  The Mortgage Bankers Association, which represents some of the nation’s biggest banks, said that banks aren’t trying to be uncooperative but in many cases loan modifications won’t help borrowers because they are unable to meet payments regardless.  At Staten Island’s Richmond County Supreme Court, which has one of the biggest foreclosure caseloads in the city, tensions between borrowers, lenders and judges are rising every week.  The court now hosts settlement conferences four days a week—double that of last year—with about 40 borrowers scheduled to appear each day.

 Two more banks prepare to pay back TARP

 Two regional U.S. banks plan to repay their government bailout loans, a sign of health that could put pressure on other lenders to shed government aid.  Huntington Bancshares said it was issuing stock and bonds to help repay $1.4 billion it received under the U.S. Government’s Troubled Asset Relief Program in November 2008.   First Horizon National Corp said it is selling debt and equity to pay off $867 million of TARP aid.  Huntington’s shares fell after the news because the bank will sell so much equity to repay the government, analysts said. First Horizon’s shares rose as investors cheered its move to shed government support.  Analysts said these repayment plans could be the first of another wave of TARP repayments, and suggest that the U.S. banking system is continuing to heal after the 2008 crisis.  Banks that have yet to repay the government should think about doing it soon, said Jeff Davis, bank analyst at boutique bank Guggenheim Partners.  “If you’re a bank that does wait now, the market might be left to assume there are deeper problems,” Davis said.  The offerings from Huntington and First Horizon come one year after the largest U.S. banks — including Citigroup Inc., Bank of America Corp., and Wells Fargo & Co., raised tens of billions of dollars to repay their government bailout aid.  The first wave of banks to repay TARP came in the summer of 2009, and included Goldman Sachs Group Inc and JPMorgan Chase & Co.

 CNBC’s Olick – negative equity

 ”Just because you owe more on your mortgage than your home is worth doesn’t necessarily mean that you are no longer able to afford your mortgage. For many Americans who bought their homes during the housing boom, little has changed for them financially other than what the appraiser has determined on paper.  What has changed are attitudes, and attitudes can be dangerous.  22.5 percent of U.S. borrowers were in a negative equity position on their homes at the end of Q3, according to a new report from CoreLogic.  The authors of the study warn that deteriorating home prices now will likely push the percentage back up in Q4.  The definition of home ownership, at least according to the Census, includes homeowners in a negative equity position. ‘However, homeowners in negative equity are not likely to behave similarly to homeowners with equity, because their financial interest (the equity) has disappeared and has only a small prospect of returning soon, given price trends,’ note CoreLogic authors.

 Underwater borrowers are more likely to behave like renters, which means they’re not going to invest much in home improvement. They are also more likely to walk away from their commitment, although not in the waves some had predicted.  The Obama Administration has been pushing lenders, Fannie Mae and Freddie Mac to write down principal on underwater mortgages in order to put borrowers back into a positive equity position.” Interestingly, the latest push is for borrowers who are current on their mortgages. They lenders argue, why should they give money voluntarily if the loans are still performing? They don’t even do that very often when the loans are in trouble!  The answer is: attitudes.  The Administration is clearly concerned that more borrowers will either walk away from their commitments or stop spending money on their homes, which are usually their single largest investment.  But is the Administration’s answer—to give borrowers back a few percentage points of equity on paper—really going to fix that and change owner attitudes? No, especially since so many Americans got used to taking money OUT of their homes to pay for all those lovely upgrades.  The change has to come in real home price appreciation.  That is the only thing that is going to give homeowners that much-needed faith in the market, that confidence to stay where they are and spend, not some measly equity handout that won’t amount to much and may just prompt the borrowers to put their house on the already glutted market. 

 And how do you get home price appreciation?  Get rid of that glut of inventory—especially the foreclosures. I’m back on my investor high horse again. Stop offering handouts to underwater borrowers who don’t need them to pay their mortgages and start focusing that same money on eating up empty houses and restoring real home price appreciation through a competitive marketplace. If you help well-vetted, responsible investors buy up the properties and rent them to all the families that lost their homes, you will do a lot more good.

 Now for our real estate education section…

 Blind-Sided by Insufficient Short Sales Advertising?

Have you been blindsided by insufficient short sales marketing strategies? According to several different research studies the answer is probably in the affirmative. Take for instance a new survey conducted by Adweek Media in conjunction with the Harris poll; despite substantial increases in innovation and creativity among internet advertisers, consumers are still “blind” to many advertisements. In another recent study, researchers found that consumers are increasingly blind to advertisements that are too familiar….and (much to their shock) advertisements that represent too much “change”.

Confused yet? No need. Here at the Short Sales blog we take pride in providing clear cut solutions to all your short sales needs including effective marketing strategies. There are three main points that should form the basis of all marketing strategies for the short sale investor and real estate professional:

1. Learn what to do – and what not to do – to attract attention online. Innovation and creativity is important but be sure to spend wisely. For example, banner ads – once considered the mainstream of internet advertising – are woefully out of date…in fact, they ranked near the bottom in terms of impact upon consumers/viewers. On the other hand, social media marketing was found to be highly effective despite relatively mundane formats.

2. Don’t go with the status quo. There are certain times and situations when prospective clients actually desire the status quo; for example, when selecting a reputable baby-sitter or perhaps searching for a funeral director….but most of the time the status quo simply comes across as boring. For real estate, it could be considered one of the deadly sins. Lack of ingenuity, innovation and ambition are NOT going to impress prospective clients. Not sure where you stand? Ask a few friends to take a quick look at your business cards, website, blog, Facebook page and other marketing materials then check back 24-48 hours later to see what they remember most. If they can’t recall anything, you are in dire need of an update. If they can recall 3-5 items then you are probably running with the majority of the pack but certainly not in a leadership position. If they recall more than a half dozen items give yourself a big pat on the back…at the very least you are memorable.

3. Don’t go overboard. After reading item number two above it might seem like a good idea to do anything to get noticed…and depending on where you landed in the dull category, even negative publicity might be an improvement. However, it’s never a good idea to make a habit out of negative publicity. Research indicates that people or concepts too far outside of someone’s norm also tend to be overlooked by clients. By definition, real estate is considered a complex transaction by the majority of people: It routinely involves legal concepts, financial constructs, psychology and much more. On one hand, you want to provide valuable information but in a user-friendly and engaging way. If you work with first-time homebuyers be sure to cover the basics while simultaneously meeting the advanced information needs of investors or others. At the same time, it is important to become memorable without making people uncomfortable. Finding the right balance isn’t simple but sooner or later, those that manage to carve out a niche will have a better chance of retaining clients in the long run. A great logo, appealing incentive program, slightly off-beat appearance or nearly any form of recognition is good…just keep it within a comfort zone that is accessible to the majority of people.

4. Add interaction. A final report by Unicast indicates that consumers are more likely than ever to share and respond to social marketing sites such as Facebook and Twitter. Video abandonment remains problematic but is beginning to show signs of improvement as users (and content providers) grow more technologically savvy.

See you at the top!

 Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * 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 October 26, 2010

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Mortgage mods slow

There were 28,000 permanent mortgage modifications reported in September under the Home Affordable Modification Program, known as HAMP. That’s down from more than 33,000 in August.  A total of 495,898 borrowers have received permanent loan modifications since HAMP was launched in 2009. Of that half-million homeowners, 11% redefaulted on their new lower-cost loans after nine months. After six months, less than 10% of modified loans were delinquent.  Banks start by offering trial modifications to see if homeowners qualify for the program and can afford the new payments. Nearly 1.4 million trials have been started thus far, with 35,297 of them happening in September.  Raphael Bostic, assistant secretary of the U.S. Department of Housing and Urban Development, said the Obama administration’s efforts have helped “millions of families” stay in their homes, though no one else seems to agree with him. 

“With many unavoidable foreclosures still in the pipeline, it’s clear that we have a hard road ahead,” Bostic said in a statement.  Indeed. Meanwhile, according to the Special Inspector General for TARP, a congressionally mandated watchdog for the program The Troubled Asset Relief Program has so far “fallen woefully short” of preserving homeownership through the Obama administration’s modification efforts.  “For example, as SIGTARP has noted in past quarterly reports, increased moral hazard and concentration in the financial industry continue to be a TARP legacy,” according to the report. “The biggest banks are bigger than ever, fueled by government support and taxpayer-assisted mergers and acquisitions.”

Ford makes record profit

Dearborn, Mich.-based Ford posted net income of $1.7 billion, or 43 cents per share, up from $997 million, or 29 cents a share, a year earlier. Analysts surveyed by Thomson Reuters expected Ford to report a 38-cent-a-share profit.  Ford’s previous best third-quarter net income was $1.1 billion reported in 1997.  The automaker cited a strong product line, momentum in North America and continued success at Ford Credit as areas of growth.  “It’s been the same story all year long,” said David Whiston, an automotive analyst at Morningstar. “Better pricing in North America, and that offsets the small losses in Europe. The North American market is a real earnings driver.”   Ford also announced plans to further strengthen its balance sheet by paying down its revolving credit line by $2 billion and prepay the remaining $3.6 billion in debt owed to a retiree health care trust.  “Ford sales continue to surge due to a stronger product lineup and improved consumer image,” said Jesse Toprak, vice president of auto trends at TrueCar.com, in a statement. “Their retail sales are strong and transaction prices have been increasing this year, contributing to an improved bottom-line for the automaker.”

Home prices drop

Home prices fell 0.2% from July after five consecutive months of gains, according to the S&P/Case-Shiller composite index of 20 metro areas. However, prices rose a modest 1.7% compared with a year earlier, the housing group reported today.  It was, said David Blitzer, spokesman, “a disappointing report … indicating that the housing market continues to bounce along the recent lows.”  The year-over-year rise fell short of expert expectations as put together by Briefing.com, who predicted a 2% year-over-year rise.  One city that bucked the trend was Las Vegas, where prices inched up 0.1% month-over-month. However, it continued to be the worst performer compared to last year, with prices down 4.5%. Prices in Sin City are down 57% from their peak, which was reached in August, 2006.  Detroit scored the best monthly gain, up 0.5%; San Francisco was up 7.8% year-over-year, the most of any city.  Prices fell 1.1% in Dallas – the worst month of any of the 20 metro areas.

Volcker – no short term inflation

Paul Volcker, former chairman of the Federal Reserve, says the United States will face neither a problem of rising inflation for several years nor a damaging spell of falling prices.  “Inflation is not a problem right now. It won’t be a problem next year, it won’t be a problem for several years,” said Volcker, who is now chairman of the Obama administration’s Economic Recovery Board.  “I see no possibility, frankly, that a deflation will take place,” Volcker said during a panel discussion on financial reform at Boston College.  “Over a period of time, price stability will be conducive to a strong economy,” he added.  The Fed, under Chairman Ben Bernanke, is widely expected to go ahead with efforts to spur inflation, which the central bank sees as its best chance to lift an economy that some see as being on the verge of falling back into recession and a downward spiral in business activity.  The United States, facing massive budget deficits, is caught in a tough situation where a big new spending program is probably unfeasible, but draconian budget cuts like those now being enacted in the UK are also unlikely, he said.  However, according to Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co, Federal Reserve Treasury purchases will likely spur global inflation while failing to lower U.S. unemployment.

Olick – sales worse than we think

Noise.  There’s an awful lot of it in the report on September existing home sales from the National Association of Realtors.  Yes, it was the biggest monthly gain in 28 years, but it was also the third worst sales month on record. This was thanks to the historic plunge in home sales in July, after what we first thought was the closing deadline for the home buyer tax credit.  September’s data still has government stimulus in it, as it’s showing the final closings from the tax credit. Thirty-two percent of home buyers in September were first timers and a whopping 29% paid in cash, which really gives you an idea of where the mortgage market is today. Sales were still 19 percent below September of 2009 levels, so that tempers the big gain as well. The median sales price also fell 2.4 percent year over year and is the lowest reading since March. 

If you take out the seasonal adjustments in September, there were actually 35,000 fewer home sales in September than August, or a 8.5 percent drop. We always use the seasonally adjusted numbers, because home selling is a very seasonal business, but you can’t ignore the raw stats on this one. The most important number in this report, however, is that 35 percent of all sales in September were of “distressed” properties, or foreclosures and short sales. We all know a huge chunk of that goes away in October, thanks to the foreclosure servicing issues and resulting moratoria.  In a speech today before a conference on the future of housing finance, Fed Chairman Ben Bernanke said the Fed “is evaluating potential effects of these [foreclosure servicing] problems on the real estate market and financial institutions.”  I think the answer to that is in today’s home sales report. The housing market is looking at a rough road.  “Bottom line, the data is an improvement off a very depressed level,” notes Peter Boockvar of Miller Tabak. “But with the robosigner, foreclosure moratorium taking center stage at the very end of September, which today’s figure didn’t capture and neither will Oct (this number measures closings), the figures towards year-end will look much different.”

Now for our real estate education section…

THE #1 Secret to Success

Chances are you have heard it all before; How to make a million before the age of 30. How to outsource everything and work only 4 hours each week. How to live the life you love without time or financial constraints. When confronted with these promises, there are two types of people; those that believe it wholeheartedly and those that reject it.

If you were to ask the average real estate investor why they either accept or reject each premise, chances are you wouldn’t be persuaded to change your own position from the resulting response. In most instances, the rationale boils down to little more than personal philosophy, hope or blind faith. However, ask an experienced and successful short sale investor whether or not they concur and chances are you would be surprised by the response.

The Top 20

The top 20 percent of professionals in nearly any industry represent the “cream of the crop”. They are not necessarily the “best of the best” (a title reserved for those in the top 2 to 5 percent) but rather substantially “better than average”. There is reason for optimism in this situation because there is plenty of room for newcomers, it doesn’t require all the advantages and it is attainable…IF you understand some basics of how and what matters most when generating business.

Common Ground

Does success boil down to the power of positive thinking or is it something else entirely? Well, studies have shown (repeatedly) that it’s a little bit of both. Positive people tend to be fun, engaging and successful because other people like to be around them. It’s not necessary to be the smartest (although intelligence and preparation certainly helps) nor the richest (there are plenty of ways to finance a property or find others to do it for you). No, the one shared trait that makes or breaks success is simply the ability to build a customer base. Think about this for one moment. Would you rather follow the trail of a relative newbie with a fanatically following of tens of thousands or the leadership of an expert who is all but unknown? Both have something to offer but the message is unlikely to meet critical density without the support of the masses. The same applies in a business or investment; without other people, all the hard work and acquisitions have no outlet. The flow of information…and finances…stops.

Key Points

By now you are probably thinking “terrific but what about some real tips”. Well, here they are. When researchers examined the practices of the “top 20″ real estate professionals they found some interesting facts that every short sale investor can use to their advantage. For example, nearly 90% of their business comes from referrals…90 percent! In order to capitalize on this trend, savvy real estate professionals create an aggressive program designed to make contact with past and present clients at least weekly. The result? Greater growth and a rising percentage of market share.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

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 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–