short sales

Smart Real Estate News & Commentary by Chris McLaughlin October 4, 2011

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California pulls out of foreclosure talks

The state of California pulled out of multi-state mortgage negotiations with large US banks, dealing a sharp blow to long-running efforts to secure a broad settlement over allegations of lending abuses.  California Attorney General Kamala Harris wrote in a letter on Friday that she will pursue her own investigation.  “California was being asked for a broader release of claims than we can accept and … the relief contemplated would allow too few California homeowners to stay in their homes,” Harris said in the letter to government officials leading the talks.  New York had exited the talks in August over a disagreement about how much legal immunity the banks should receive in any settlement.  Representatives of the banks met with Harris last week in an attempt to keep California on board.  The state has faced some of the worst default rates in the country, with an unemployment rate of 12.1% and two million residents who owe more on their mortgage than their home is worth.  Eight of the 10 hardest hit US cities in terms of foreclosure rates are in California, Harris said.  State and federal officials have discussed penalties totaling roughly $20 billion from institutions that include Bank of America, JPMorgan Chase, Wells Fargo and Citigroup.

Public sector pensions go on a diet

To fix their persistent pension problems, some US states are looking to reshape their retirement plans to resemble those in the private sector.  Over the last few decades, the private sector has ditched traditional pension plans with their defined benefits. They have been replaced with defined contribution accounts, such as 401(k)s, in which employees allocate a set amount each month to invest — often partly matched by employers — and then cash out at retirement.  This has left the public sector as the main provider of defined benefit plans, which pay employees a fixed amount each month after retiring.  But pension funds have been stung by the recent financial crisis and recession, leaving taxpayers and political leaders agonizing over the possibility they will be unable to afford those defined payments. Estimates of a total shortfall range from around $700 billion to $3 trillion, due to differing forecasts of investment returns.  “If the idea is that tax revenues are down and state budgets are crunched, and they surely are … I think it’s worthwhile to take a step back and look at the actual costs,” said Ilana Boivie, director of programs for the National Institute on Retirement Security, or NIRS.

No rise in home prices till 2020?

A survey of bank risk managers says that home prices are unlikely to recover before 2020 and mortgage defaults will persist for years.  The survey, conducted by the Professional Risk Managers’ International Association for FICO, found that 49% of respondents do not expect housing prices to rise back to 2007 levels for another nine years. Only 21% of respondents said they would.  The findings, which authors called “a decidedly pessimistic outlook”, are a sharp reversal from cautious optimism the survey respondents expressed late last year and in early 2011.  In addition, 73% of surveyed bankers say they expect mortgage defaults to remain elevated for at least another five years. And 46% believe mortgage delinquencies will increase over the next six months.  Only 15% of respondents expect mortgage delinquencies to decline during that period.  A large number of respondents says they also expect to see an uptick in delinquencies on auto loans, credit cards and student loans.  Small businesses are expected to continue face a challenging credit environment. More than one-third of respondents forecast an increase in delinquencies on small business loans.  Bankers also appear to be pessimistic about recovery in consumer spending, with 64% of respondents expecting credit card usage to remain below pre-recession levels for at least five more years.  Half of the respondents expect credit card balances to increase over the next six months, due to higher spending by some households and smaller monthly payments by others.

Fed will act if it needs to

The US Federal Reserve will act if the economy weakens further and has the tools to do so, a top Fed official said on Friday.  St. Louis Fed President James Bullard said he expects the economy to grow modestly over the next year—though the sluggish pace leaves it vulnerable to shocks.  “Should economic performance deteriorate, monetary policy will respond,” Bullard said, according to slides of a presentation he was scheduled to make. “The Fed is not now, or ever, ‘out of ammunition’.”  With interest rates near zero, Bullard said, the Fed can support the economy through inflation and inflation expectations and asset purchases are a “potent tool”.  Dealers polled by Reuters earlier this month gave a median chance of 32% that the Fed will embark on a third round of quantitative easing.  The Fed said last week it plans to buy $400 billion of longer-term Treasurys and sell the same amount of shorter-term Treasurys by the end of June 2012, in an effort to lower longer-term borrowing costs.  It also said it would support the mortgage market by reinvesting principal payments from its mortgage-related debt into mortgage-backed securities.

Housing market has hit bottom?

The US housing market hit bottom this year and will remain flat until 2014, when it will start to slowly recover, said Rick Sharga, an executive vice president with Carrington Mortgage Holdings.  “We’re looking at a catfish recovery,” he told attendees at the Asian Real Estate Association of America conference in San Francisco Friday, saying the market will bump along the bottom for some time before starting to revive.  More than a million foreclosure actions that should have taken place this year have not yet moved forward, and that delay pushes a resolution of the housing market’s problems into next year and beyond, he said, citing data from RealtyTrac, where Sharga served as a senior vice president until this week.  “We can’t expect to see home price appreciation until we work through these distressed assets,” he said.  Since 2005, there’s only been one quarter in which US banks have sold more properties than they’ve taken back through foreclosure, leaving a huge overhang of real estate-owned assets that need to be cleared out.

Banks hold about 800,000 REOs, and three-quarters of those are not listed for sale, said Sharga. Another 800,000 homes are in foreclosure and 1.5 million loans are delinquent.  This “shadow inventory” will slow down a housing market recovery, he said, as monthly foreclosure numbers will remain elevated through 2012 and REO inventories will stay high through 2013.  Even with the continuing distress in the housing market, the country is not likely to enter a double-dip recession, said Eugenio Aleman, a director and senior economist at Wells Fargo & Co.  Although US workers have suffered as the nation has lost 9 million jobs over a two-year period, the manufacturing and service sectors are expanding, he noted.  “The rest of the economy is not booming, but it’s doing fine,” said Aleman. Wells Fargo is projecting that the US economy will expand over the next few years, but at anemic rates: 1.6% this year, 1.4% in 2012 and 1.9% in 2013.  “We are standing firm,” said Aleman of Wells Fargo’s economic forecast. “We are not going to go into a recession.”

ECRI says recession inevitable

Weakness in leading economic indicators has become so pervasive the Economic Cycle Research Institute now predicts a new recession is unavoidable.  “The vicious cycle is starting where lower sales, lower production, lower employment and lower income [leads] back to lower sales,” co-founder Lakshman Achuthan declares in the accompanying video.  Whereas Achuthan said the jury is still out in late August, the weakness in leading economic indicators — and ECRI uses a dozen for the US alone, he notes — has become a “contagion” that is spreading like “wildfire.”  Although the recovery has been “subpar” by nearly every measure, Achuthan refutes the idea the economy never got out of recession in the first place. “Just because it looks and feels a certain way doesn’t mean it’s a recession,” he says. “You haven’t seen anything yet. It’s going to get a lot worse.”  It’s too soon to predict just how bad it’s going to get, but he expects another spike in unemployment and further expansion of the federal government’s $1 trillion deficit. This forecast has huge ramifications for the 2012 election and the already struggling US consumer and Achuthan says a “mild” recession is the best-case scenario.  By now you may be wondering what separates ECRI’s recession call from the myriad other recession calls out there. First, ECRI’s primary raison d’etre is predicting recession and recovery calls. Second, and more importantly, The Economist reports ECRI has never issued a “false alarm” on a recession call, meaning many of the Chicken Littles currently declaring “the sky is falling” might actually be right this time around.

Mortgage help for unemployed disappears

The federal government can’t even give money away to help the unemployed pay their mortgage.  A $1 billion program to assist the jobless will likely end up spending only half the funds, at most, because so few people met the strict criteria.  The Housing Department, which had to approve the applications for the Emergency Homeowners’ Loan Program by Friday, expects that only 10,000 to 15,000 people will qualify. That’s only a small sliver of the roughly 100,000 who applied.  “No one could have anticipated how difficult the statutory requirements make it to reach homeowners,” said Lemar Wooley, a HUD spokesman.  Those who make the cut are expected to receive between $35,000 and $45,000 in aid, he said.  Many had high hopes for the loan program because it was targeting a segment of delinquent homeowners not being helped by other federal initiatives, such as mortgage modifications.

The initiative quickly became a quagmire of delays and requirements, however. The rollout was postponed for months, finally launching in late June. HUD originally gave people less than six weeks to apply, but then pushed back the deadline to mid-September.  But it was the income and delinquency guidelines that prevented many seemingly eligible people from getting assistance, housing counselors say. HUD used a complicated formula that took into account monthly payments, income and arrears.  Only 34 of the 174 homeowners who came to Tierra del Sol Housing Corp. in Las Cruces, N.M., met the criteria, said Rose Garcia, the agency’s executive director. Some people were turned away because they were already too far behind in their payments or because their income fell because of a family member’s illness.  “This program could have made a difference to save people from being homeless,” she said. “But it doesn’t meet people’s needs.”  In Philadelphia, Michelle Lewis is waiting to see how many of the 400 applications her Northwest Counseling Service received will be approved. She fears it will be few.  One problem she ran into was that many applicants lost their jobs more than a year ago. Under HUD’s rules, the circumstance that caused the delinquency had to have occurred within the past 12 months.  The Pennsylvania loan program, which ended in June because of state budget cuts, allowed for many more hardship conditions so it was able to reach more people than the federal effort, she said.  “The [HUD] guidelines were so restrictive that it knocked out a lot of otherwise eligible and worthy consumers,” said Lewis, the agency’s chief executive.

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 August 29, 2011

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Short sales on the increase

According to RealtyTrac, short sales are increasing as a percentage of home sales in many states, helping some neighborhoods and homeowners avoid the more devastating impacts of foreclosures.  The increases were sharper in some states, including California, Nevada, Michigan, Georgia and Colorado, the data show.  In Colorado, short sales were 17% of all sales in the second quarter, up from 10% a year earlier. In California, they made up 25% of sales, vs. 18%.  Bank of America, the largest home mortgage servicer, expects to complete more than 100,000 short sales this year — more than double what it did in 2009, the bank says.  Wells Fargo Senior Vice President J.K. Huey says short sales have been “steady to slightly” up in recent months, partly because there are fewer bank-owned houses for sale in some markets, and that has forced buyers to pursue more short-sale properties.

In the second quarter, short-sale homes sold at a 21% discount to non-foreclosure homes, while bank-owned homes went at a 40% discount, RealtyTrac says. Short sales may also reduce losses for loan owners because they avoid full foreclosure costs. Borrowers may qualify for new mortgages sooner after a short sale than after a foreclosure.  Short sales peaked at 16% of the market in early 2009, RealtyTrac says. Realtors say there should be more short sales and that they should get done faster.

Consumer spending, inflation, up

The Commerce Department said consumer spending increased 0.8%, the largest gain since a matching increase in February, after slipping 0.1% in June.  Economists polled by Reuters had expected spending, which accounts for about 70% of US economic activity, to rise 0.5%.  When adjusted for inflation, spending rose 0.5% last month, the largest gain since a matching increase in December 2009, after being flat in June.  Spending on durable goods increased 2.0% last month, likely reflecting a pick-up in motor vehicle sales as the shortage of autos caused by the supply disruptions from Japan ease.

Overall spending in July was lifted by a 0.3% rise in income as employers stepped-up hiring. Income rose 0.2% in June and economists had expected a 0.3% increase last month.  Disposable income increased 0.3%, but when adjusted for inflation fell 0.1% – the first decline since September. With spending outstripping real disposable income, savings fell to an annual rate of $582.8 billion from $638.6 billion in June.  The report showed inflation pressures remain elevated. The personal consumption expenditures price (PCE) index rose 0.4% after slipping 0.1% in June. Compared to July last year, the index was up 2.8%, the largest increase since October 2008, after advancing 2.6% in June.  The core PCE index—excluding food and energy—rose 0.2% for the second straight month.  The core index, which is closely watched by Federal Reserve officials, increased 1.6% in the 12 months through July, the largest increase since May 2010, after rising 1.4% in June. The Fed would like to see it close to 2%.

Lending shrinks

Analysts at Bank of America Merrill Lynch doubt government attempts to improve the mortgage refinancing process will help lenders build capacity.  “The economics of the mortgage lending industry have changed,” the analysts said. “Originators used to have 2-3 points of upside with very little downside. With putback risk taking center stage, they now face 2-3 points of upside and 40-50 points of downside. This change in economics has caused the lending industry to shrink by half.”  BofAML said participation in the government’s HARP has been limited to higher-quality borrowers. Whereas, focusing on refinancing high-loan-to-value and low-FICO borrowers “can have a bigger impact on the economy.” And any new federal effort to boost the number of mortgage refinancings must help build out lending capacity, according to BofAML.  “Lift the specter of putback risk and the pieces fall into place: banks are freed to compete over riskier borrowers; GSEs get updated information about loans on their books and reduced default risk; mortgage financing finds its way to homeowners who have been on the outside; and Washington’s involvement is minimal,” according to Bank of America Merrill Lynch.

Hiring slows

Intuit, a payrolls processing company, said small businesses added 35,000 jobs after increasing employment by 40,000 in July.  The survey is based on responses from about 66,000 employers at businesses with fewer than 20 employees that use the Intuit Online Payroll system and covered the period from July 24 to August 23.  According to a Reuters survey, nonfarm payrolls probably increased 80,000 this month after July’s 117,000 gain.  Three of the 62 economists polled predicted a contraction in nonfarm employment this month, citing the erosion of business confidence and a strike by 45,000 Verizon Communications workers during the payrolls survey period.  They cautioned, however, that a drop in August employment should not be interpreted as a sign the economy was back in recession. The economy grew at a 1% annual rate in the second quarter after expanding only 0.4% in the January to March period.  The average work week for small business employees fell 0.3% to 24.9 hours, according to the Intuit survey, while the average monthly salary eased 0.08% to $2,649.

Irene’s footprint

According to the most recent government model, projected economic loss from wind damage alone is forecast to top $1 billion. That’s less than earlier estimates that topped $2 billion but it does not account for flood and other storm damage.  More than 4 million people up and down the Eastern seaboard are still without power. “For a lot of folks, the danger still exists,” FEMA administrator Craig Fugate told CNN Sunday. “We still will have trees coming down, heavy rain, strong winds.”  So far, the estimates are nowhere near the $45 billion in private insurance damage that Hurricane Katrina left in its wake in 2005 not including flood losses, according to the Insurance Information Institute.  In hurricanes, damages are often caused by coastal flooding, which is typically covered only if you have federal flood insurance.  But damage can also result from gusts of wind that pick up and throw items like lawn chairs and tree limbs through windows. Fallen trees and utility poles can also damage houses and cars.  Damage from wind gusts, downed trees and the like is often covered by car or home insurance; consumers with damages should call their insurer about claims.  “The Mid-Atlantic and New England have experienced damaging hurricanes in the past, and the growth in coastal population and property values makes today’s storms even more costly,” said Consumer Federation of America Institute president Robert Hartwig in a statement on Thursday.

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 August 9, 2011

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–>

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

10,000 HAFA short sales

Servicers completed 10,438 short sales through the government’s Home Affordable Foreclosure Alternatives program since it launched in April 2010, according to the Treasury Department. HAFA was designed to provide an incentive to servicers for completing short sales and deeds-in-lieu of foreclosure for loans that fail out of the larger Home Affordable Modification Program. Through June, servicers started 21,412 short sales and DILs, up 20% from the month before. A total of 10,754 were completed, up 25%. JPMorgan Chase is the programs leading performer, completing nearly 3,600 through the program, including nearly 1,000 in June alone. Wells Fargo was second, completing more than 3,100 since the program launched and roughly 700 in June. Bank of America completed 1,873 HAFA transactions, an increase of roughly 200 in the month.

Pam Marron, a senior loan officer with Gold Start Mortgage Financial Group in Tampa Bay, Fla., said more and more homeowners in negative equity view a short sale as their only way out. Many, she said, are defaulting because banks require them to do so in order to qualify for a short sale. “The growing problem in Florida is the alarming increase in the number of short sale listings that are coming onto the market. These people are still employed but severely underwater and are having to short sale because they are not able to pay the vast difference owed between the mortgage amount and the value of these homes,” Marron said. “Banks are requiring homeowners to default in order to qualify for the short sale.” In 22% of the HAFA agreements started — equal to roughly 4,700 mortgages — the homeowner began a HAMP trial but later requested a HAFA agreement or was disqualified from HAMP.

Moody’s keeps AAA rating

In his first comments since S&P’s decision, Moody’s analyst Steven Hess sounded a note of caution about Moody’s rating of the U.S., repeating that the Aug. 2 plan to cut deficits by $2.1 trillion was positive for America’s credit standing, but not enough to keep its rating on a stable outlook. Moody’s had earlier put the U.S. on “review for downgrade” on July 13, before removing the ratings watch and affirming the triple-A rating on Aug. 2, after the U.S. Congress passed a measure cutting the fiscal deficit and raising the statutory borrowing limit. “If the process for further deficit reduction that is included in the Budget Control Act produces results that are not really credible, that combined with the economic performance could potentially cause an early move on the rating,” Hess told Reuters in an interview.

Even the $917 billion in savings that have already been agreed by Republicans and Democrats are not guaranteed in the long term, Hess said. Those savings come mostly from slowing the growth of the discretionary programs that Congress approves annually, covering everything from the military to food inspection. If the U.S. manages to keep its triple-A rating until the end of 2012, Moody’s will likely take into account how the government will handle the expiration of Bush-era tax cuts to make a decision on the triple-A rating, currently under a negative outlook. Plans from the next administration for additional deficit-reduction measures will also be taken into consideration, Hess said.

WSJ – higher mortgage rates coming?

Mortgage markets in the U.S., which remain on government life support, could be rattled by the downgrade of the U.S. credit rating, potentially raising borrowing costs for consumers. Given the “sufficiently perilous” state of the U.S. mortgage market, a downgrade “can do nothing but harm the market,” says Karen Shaw Petrou, managing partner of Federal Financial Analytics, a research firm in Washington. “The question is how much?” To be sure, no one knows for certain the impact of the unprecedented downgrade on the mortgage market, even if that market is fundamentally intertwined with the federal government.

One concern is that downgrades may trigger forced selling by mutual funds or foreign investors to comply with investor-specific capital requirements restricting them to assets rated triple-A. But analysts said that most institutional investors’ rules for investing in government-backed mortgage debt aren’t contingent on ratings. And with investors seeking traditional safe-haven assets such as Treasury and government-backed mortgage securities, “there just doesn’t seem to be much else to invest in,” says Andrew Davidson, a mortgage-industry consultant in New York. “What would people put their money in if they sold their agency mortgages? It’s hard to see what the trade is.”

Mortgage rates are closely tied to yields on the 10-year Treasury note. Rising demand for Treasurys pushed down yields over the past two weeks, even as the threat of a U.S. default from the debt-ceiling debate in Washington dragged on, because investors looked for less risky assets amid concerns over the European debt crisis and the sluggish U.S. economy. Mortgage rates dropped to an eight-month low last week, with 30-year fixed-rate mortgages averaging 4.39% for the week ended Thursday, according to a survey by Freddie Mac. Still, the uncertainty created by the downgrade has investors on edge. The interplay of a downgrade, on top of the euro-zone crisis and renewed fears over a double-dip recession in the U.S., could lead to increased volatility in mortgage markets. “There are so many moving parts to this that no one really knows how it will go,” says Mr. Simon.

S&P cuts Fannie, Freddie

Standard & Poor’s on Monday downgraded the credit ratings of Fannie Mae, Freddie Mac and several other U.S. government entities, reflecting their dependence on federal support. Included in S&P’s latest downgrade were the senior issue ratings on debt issued by Fannie and Freddie, the giant mortgage-finance firms. Ten of the 12 Federal Home Loan Banks, which also provide funding for home loans, also received downgrades. Two of the Federal Home Loan Banks–of Chicago and Seattle–already had the lower AA-plus credit rating. The downgrades of Fannie and Freddie reflect the mortgage firms’ “direct reliance” on the U.S. government, S&P said. Fannie and Freddie depend on the U.S. government’s support to stay afloat, and therefore would be on a shaky footing if the U.S. ever defaulted on its debt. S&P on Friday removed for the first time the triple-A rating the U.S. had held for 70 years, saying the budget deal reached in Washington last week didn’t do enough to address the gloomy outlook for America’s finances. Fannie and Freddie, which were placed under federal control in September 2008, receive infusions of cash from the Treasury Department on a quarterly basis if their net worth drops below zero. Stabilizing the two firms has cost taxpayers $141 billion so far.

Next recession could be worse than the last one

If the economy falls back into recession, as many economists are now warning, it could be more painful than the last time around. Given the tumult of the Great Recession, this may be hard to believe, but the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then. And growth has been so weak that almost no ground has been recouped, even though a recovery technically started in June 2009. Anxiety and uncertainty have increased in the last few days after the decision by Standard & Poor’s to downgrade the country’s credit rating and as Europe continues its desperate attempt to stem its debt crisis.

Housing recovery on hold

According to the latest analysis of home price trends in 384 markets based on the Fiserv/Case-Shiller Indexes, it will be well into the first quarter of 2013 before median home prices across the nation will even be on par with prices from the first quarter of this year. And that’s not saying much. During the first quarter of 2011, prices fell in 302 of the 384 housing markets tracked by the Fiserv/Case-Shiller index, dropping by an average of 5.1% year-over-year. As a result of continued weakness on the jobs front and the debt ceiling fiasco, Fiserv pushed back its projections of a housing market turnaround by three months. Now, it doesn’t expect home prices to start gaining any ground until the second quarter of 2012. Instead, Fiserv expects median home prices to continue to fall by an average of 3.1% between March 31 of this year and March 31, 2012. After that, it expects to see prices increase by 2.7% until the first quarter of 2013.

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 July 27, 2011

Forward this e-mail to your friends!

Then they can subscribe directly at the following link:

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*** Join Chris’ Facebook Fan Page–>

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

Mortgage applications decrease

Mortgage applications decreased 5.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA)Weekly Mortgage Applications Survey for the week ending July 22, 2011.  The Market Composite Index, a measure of mortgage loan application volume, decreased 5.0% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4.9% compared with the previous week. The Refinance Index decreased 5.5% from the previous week. The seasonally adjusted Purchase Index decreased 3.8% from one week earlier. The unadjusted Purchase Index decreased 3.4% compared with the previous week and was 2.2% higher than the same week one year ago.  The four week moving average for the seasonally adjusted Market Index is down 0.3%. The four week moving average is down 0.5% for the seasonally adjusted Purchase Index, while this average is down 0.3% for the Refinance Index.  The refinance share of mortgage activity decreased to 69.6% of total applications from 70.1% the previous week.  The adjustable-rate mortgage (ARM) share of activity increased to 6.1% from 5.8% of total applications from the previous week.

GOP debt bill revisions coming up

House Speaker John Boehner will rewrite his debt ceiling legislation to ensure that it meets his oft-stated pledge to cut spending more than Congress increases the federal borrowing limit after the Congressional Budget Office (CBO) on Tuesday evening estimated that the Budget Control Act of 2011 would reduce deficits by only $851 billion over 10 years.  Boehner’s plan — and a competing Democratic bill in the Senate — are the only live bills this week that would increase the debt ceiling by Aug. 2. The ceiling must be raised by then, when the Treasury Department estimates it will no longer be able to pay all its bills without borrowing.  A House vote planned for Wednesday was pushed back a day following the CBO report.  The CBO said the bulk of deficit savings under Boehner’s original bill — $710 billion — would result from caps on discretionary spending.  The other big chunk of savings — $136 billion — would come from reduced interest costs on the debt.  The spending caps in Boehner’s bill would result in small savings in the early years, but the savings would grow over time.  In addition, the Boehner bill would require that both chambers of Congress vote on a Balanced Budget Amendment but doesn’t require that one be enacted.

Olick – debt and mortgage rates

“As we edge ever closer to D-Day (default day, debt ceiling day, however you choose to see next Tuesday, August 2nd), those of us who live and breathe the housing market are trying to figure out what this will mean to mortgage interest rates.  They are currently bouncing around historic lows and have been for some time. Refinances are surging, as the seven people left who haven’t yet refied are scrambling to do so.  But are we all worried over nothing?  ‘The debt crisis is probably the biggest factor hanging over mortgage rates at the moment,’ says Guy Cecala of Inside Mortgage Finance. ‘Once investors feel there is any uncertainty about the US government’s ability to guaranty its debt, Treasury rates and mortgage rates will start to rise – probably by at least 25-50 basis points.’  That’s the clearest answer I’ve gotten from the many experts we’ve had discussing this on CNBC today. Most just say, ‘We can’t know.’ I’ve been arguing that the debt crisis is not as big a deal as the scheduled drop in the conforming loan limits at Fannie Mae, Freddie Mac and the FHA. Experts say the change from the $729,750 limit in the highest priced markets to $625,000 and the drop back to $417,000 in lower-priced markets will really only affect 5% of homes nationally, but the percentage is far higher in certain local markets.  ‘But some FHA borrowers will be pushed towards the Fannie/Freddie market and higher down payments since the FHA loan limits don’t bottom out at $417k (like the GSE limits do),’ reminds Cecala.

While we all worry about what that lowest rate can be and where, the fact is that while the ‘average rate’ on the 30-year fixed is very low, today’s buyers are not all eligible, especially as those rates require big down payments and super-clean credit.  ‘Those people are not qualifying for the super low rates now, and 30% of our sales now are to cash buyers, investors and foreigners, anyway,’ notes Shari Olefson of Fowler, White, Boggs, who argues we’re missing the point.  ‘The bigger issue with those rates, other than housing and the crisis, is going to be the adjustable rate mortgages. If the rates go up, we are absolutely going to be seeing more defaults and more foreclosures as a result of those adjustable rate mortgages.’  And that’s just what we need, as we are finally now seeing a drop in initial mortgage delinquencies. Given today’s rates, most borrowers with expiring ARMs are actually adjusting to lower rates. And let’s remember that: Rates are historically low, and even a bump up of 50 or even 75 basis points still puts us at very low rates. That’s why, again, we have to look beyond the rate to what the rate effects.

‘A downgrade of US government debt would plausibly raise interest rates, and that would communicate to mortgage rates, but more important would be the effect on confidence and our national spirit, which is so conflicted right now,’ says Robert Shiller of the S&P Case-Shiller home price index. ‘It is harming our sense of confidence that matters more than the direct effects on interest rates.’  Last month 16% of home buyers who signed a contract on an existing home bailed out of that contract before closing. The norm is about a 4% cancellation rate, according to the National Association of Realtors. A real estate agent in Burbank, California says he’s seeing cancellations in the 70% range right now. Is it mortgage rates? Mortgage availability? Appraisals? No, he says. It’s a complete lack of consumer confidence.”

Oops – maybe it’s not so bad

For weeks, President Barack Obama and Treasury Secretary Timothy Geithner have stressed that the US Treasury will run out of room to borrow funds next Tuesday and have warned of dire consequences if Congress does not raise the nation’s $14.3 trillion debt ceiling in time.  But Treasury officials have never said when the government will run out of cash to pay the nation’s bills, and the consensus among Wall Street analysts is that the cash won’t run out until about two weeks after the August debt-ceiling drop-dead date.  “The first risk of a legitimate default is Aug. 15,” said Ward McCarthy, chief financial economist and managing director at Jefferies & Co. “Cash is not going to be an immediate problem. The debt ceiling space is not going to be an immediate problem.”  McCarthy and other Wall Street analysts predict that the Treasury will have enough cash to meet its early-to-mid August obligations, including $23 billion in Social Security payments to the elderly and disabled on Aug. 3.  That view lends credence to claims that some Republicans have been making for days now that the US government will be able to keep functioning and paying its bills even if there is no deal by Aug. 2.

Analysts also expect that the US Treasury will be able to roll over the $90 billion in US debt that matures Aug. 4.  “In all forecasts, it appears as if they have ample cash to cover their obligations,” said Lou Crandall, chief economist with research firm Wrightson.  Wrightson and Jefferies expect the United States would start defaulting on its obligations on Aug. 15, the date the government must pay out $41 billion, including around $30 billion in interest on US debt.  Barclays Capital has said Treasury may run out of cash to pay its bills around Aug. 10, when $8.5 billion in Social Security payments are due.  A Treasury spokesperson on Tuesday had no comment.  Analysts do not expect the credit rating agencies to downgrade US debt if Congress does not raise the limit by Aug. 2 and the government is still able to pay its bills.

WSJ – banks fight over splitting foreclosure tab

US banks trying to negotiate a settlement over the home-foreclosure mess have hit a new hurdle: They are squabbling over how to split the tab.  The lack of a deal so far among the nation’s largest home-loan servicers has already depressed bank stocks, and an extended impasse could further spook investors.  “As time goes on, banks will lose the PR battle,” said Paul Miller, banking analyst with FBR Capital Markets. The terms of a settlement, he said, are less important than getting it done. “They need to get everything behind them.”  As federal and state officials prod banks toward a multibillion-dollar deal to atone for a host of irregularities in foreclosing homes around the US, Wells Fargo & Co. has told government officials it should pay less than Bank of America Corp. or J.P. Morgan Chase & Co., according to people familiar with the situation.

The behind-the-scenes infighting has delayed a resolution and could prolong the months-long uncertainty over the ultimate cost of ending one of the biggest controversies stemming from the financial crisis.  Negotiations already have dragged on past the mid-June target set by US officials, despite shareholder pressure on banks to reach a deal.  Settlement talks with Bank of America, Wells Fargo, J.P. Morgan, Citigroup and Ally Financial Inc. began in March and include a mix of all 50 state attorneys general, the Treasury Department, Justice Department and Department of Housing and Urban Development.  The latest disagreement among banks is a contrast to the largely unified public stance taken by financial firms as they work to put the foreclosure woes behind them.  Wells Fargo contends it should be rewarded for having fewer risky or delinquent mortgages than the other two, people familiar with the matter said.  Citigroup Inc. also has told regulators the structure of a settlement should reflect differences between financial institutions, claiming it should pay less because of its stronger controls on foreclosure practices, these people said.

Durable goods orders fall in June

Orders for durable goods fell 2.1% last month, with the weakness led by a big drop in orders for commercial aircraft, the Commerce Department reported Wednesday. A number of other categories also showed weakness including autos and auto parts. A key category that tracks business investment plans fell 0.4% in June.  The 2.1% decline in June orders came after an even bigger 2.5% drop in April. Orders had risen 1.9% in May. The latest drop was a disappointment to economists who had forecast a slight rise, believing that the disruptions caused by the Japanese natural disasters and the surge in energy prices earlier this year were beginning to wane.  The June decline pushed durable goods orders down to $191.98 billion on a seasonally adjusted basis. That is still 29.1% higher than the recession low hit in April 2009, but it is 21.6% below the high set in December 2007 as the recession was beginning.

Demand for commercial aircraft plunged 28.9% while orders for new cars and auto parts fell 1.4%. Total demand for transportation products fell 8.5% as orders for military aircraft were also done. Outside of transportation, orders would have shown a small 0.1% increase.  Demand for primary metals such as steel rose 1% but orders for heavy machinery fell 2.3% and demand for computers and related products dropped 0.8%.  The category of capital goods excluding aircraft, considered a good proxy for business investment plans, fell for the second time in three months, dropping 0.4% in both June and April.  The Federal Reserve reported recently that auto production fell 2% in June, the third straight month of declines for autos. US automakers have had trouble getting component parts out of Japan. Overall industrial production showed a slight 0.2% rise in June. Gains in mining and utilities offset a flat reading for factory output.  A closely watched gauge of manufacturing activity grew more strongly in June after a sluggish May. The Institute for Supply Management’s manufacturing index rose to 55.3 last month after a May reading that was the weakest in 20 months. A reading above 50 indicates manufacturing is continuing to expand.

DSNews.com – prices stabilizing?

Median prices for REO and short sale transactions continue to decline and have fallen 10% since 2009, according to a new report from CoreLogic.  Distressed sales are taking their toll on market readings of home prices. CoreLogic says when the distress factor is excluded from the equation, home prices are actually beginning to stabilize.  In May 2011, the company’s “excluding distressed sales” price index dropped 0.4% from a year ago, compared to a decline of 7.4% for the all-transactions index. Non-distressed median prices for both existing and new homes are back to 2009 levels, according to CoreLogic.

While the distressed property market has been a prominent factor of the current housing cycle, the analysts at CoreLogic believe that prominence may begin to wane somewhat in the months ahead.  New foreclosure auction filings have dropped significantly since last October, according to the research firm.  At the same time, the industry’s shadow inventory – which is the estimated pending supply of distressed properties – declined to 1.7 million homes in April 2011. That’s down from 1.9 million homes a year ago and down nearly 20% from the shadow inventory peak hit in January 2010.  With these two distressed sale drivers narrowing, CoreLogic says such transactions will likely begin to decline late in 2011 and into 2012.  Although presently the market share for distressed sales remains high, the company has found that geographical sources of distress are shifting and becoming more dispersed.  According to CoreLogic’s report, as of December 2008, four of the top five largest distressed sales markets were all located in California, and the top five markets averaged a distressed sale share of 68%.  As of April 2011, only two of the top five markets were in California and CoreLogic says more importantly, the average distressed share in the top five markets dropped to 56%.

CoreLogic’s data show that Detroit (59%) and Las Vegas (58%) led the nation with the highest share of distressed transactions in April. They were followed by Sacramento (57%) and Riverside (54%) in California and Warren, Michigan (51%).  While much of the focus on distress surrounds the share of sales, CoreLogic says the price discount for REO properties is an equally important factor.  REO price discounts are largest generally outside the markets with the highest share of distressed sales. Miami leads the way with a 62% REO price discount, followed by Chicago (60%), Detroit (60%), St. Louis (60%), and West Palm Beach (58%).  CoreLogic also notes in its report that equity – or lack thereof – remains a primary concern for the industry.  “Depreciation in home prices during the last four years has reduced home equity by more than half to $6.1 trillion and caused a rapid increase in the number of foreclosures,” CoreLogic said in its report.   Nearly 11 million, or 23%, of all residential properties with mortgages were in negative equity at the end of the first quarter of 2011, according to CoreLogic’s assessment.  The company says distribution of negative equity is heavily skewed to a small number of states. Nevada had the highest negative equity percentage in Q1 with 63% of all mortgaged properties underwater, followed by Arizona (50%), Florida (46%), Michigan (36%), and California (31%).

Recession here again?

Burt Flickinger, managing director of retail consultancy Strategic Resource Group, said the US has just entered a 500-day retail recession, and before it’s over, the US will see weaker retail sales, more store closures and even additional retailers joining Borders in bankruptcy.  Helping to drive the trend is a weak labor market, Flickinger said.  Job growth has remained elusive, pushing the unemployment rate to 9.2%. Flickinger also expects more people will be joining the ranks of the unemployed as state and local governments make further cuts to their budgets.  The latest consumer confidence report from the Conference Board showed consumer attitudes perked up from the prior month, but it also captured growing fears about jobs. Those fears are likely to curtail spending, especially when you consider the large numbers of households that are living paycheck to paycheck.

Flickinger also cited the long-term unemployed who will stop receiving extended unemployment benefits this year as another contributing factor. Once the checks stop arriving, these people will have even less money than they do now.  A recent study by Moody’s Analytics estimated that close to $2 of every $10 that went into American’s wallets last year were payments like jobless benefits, food stamps, Social Security and disability. As the jobless benefits expire, about $37 billion will be drained from the nation’s pocketbooks, according to Moody’s.  Couple these trends with sky-rocketing inflation for food and clothing as well as for gasoline prices, which are on the rise again, and you quickly see just how pinched the consumer is.

See you at the top!
Chris McLaughlin

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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,
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biggest market opportunity ever!

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$392,912,927!

* Highly sought-after speaker, consultant, and
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