tax credit

Smart Real Estate News & Commentary by Chris McLaughlin August 5, 2010 

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20 million underwater mortgages by 2012?

More than 14 million borrowers were underwater as of Q110, and with a further 10.8% decline in house prices expected relative to Q409 levels, another 6 million borrowers are likely fall into negative equity by the end of 2011, according to commentary today by Deutsche Bank.  The presence of negative equity goes hand-in-hand with an increased likelihood of strategic default, as borrowers may sometimes not be willing to pay the mortgage when the house has lost substantial amounts of value.  The firm noted that, even when strategic default makes economic sense, many borrowers resist on moral and social grounds, as well as from fear of legal consequences.  The existence of recourse — when a lender is able to pursue a borrower’s other assets — also acts as a disincentive against strategic default. 

Deutsche Bank noted 11 states are considered non-recourse — though not all explicitly forbid deficiency judgments on homes or on purchase loans. Underwater borrowers are more likely to default in non-recourse states. The greater the negative equity, the higher the cumulative default rate.  “Walk away or strategic default from a house with negative equity makes economic sense, especially in locations that have less expensive rentals,” Deutsche Bank researchers said.  “Many existing academic studies model homeowners’ default decision based on the theoretical hypothesis that a borrower would exercise a default when it is in-the-money, i.e., when the borrower’s house has negative equity. Therefore, a homeowner with negative equity would default even though they can still afford to make their mortgage payments.

Final tax credit lift in prices

According to Clear Capital’s Home Data Index Market Report, July house prices gained 8.1% from the same point last year, slowing somewhat from the 8.8% growth measured in June as the effect of the homebuyer tax credit begins to fade.  July house prices increased 7.9% from the previous three months, an improvement from the 5.2% growth seen in June. Alex Villacorta, senior statistician at Clear Capital said home prices are continuing their growth from the beginning of the year.  “This trend indicates that the initial upward momentum created by the tax credit expiration is being sustained,” Villacorta said. “While quarterly gains are showing strong momentum across the country, these recent price advancements are just the latest turn in a volatile housing market that has seen ‘W’ shaped price trends over the last two years.” 

Morgan Stanley analysts warned that data from these large indices should be taken with a grain of salt as local markets can deviate from one another despite larger macro trends. Scott Sambucci, vice president of data analytics at Altos Research, brought up similar concerns when he predicted further declines through 2010.  Prices in the West have been stable compared to rest of the market, increasing 2.7% in July. It has bounced between a 1.6% drop to the latest gain in July since the start of 2010.  On the metropolitan statistical area (MSA) level, Charlotte, North Carolina demonstrated more stability than the nation, much like the West. Prices there declined only 13% since its peak in the middle of 2007, while, national prices have dropped more than 30% since its height in the middle of 2006.

Jobless claims up

The Labor Department says there were 479,000 initial jobless claims filed in the week ended July 31, up 19,000 from a upwardly revised 460,000 the previous week.  The weekly figure is the highest since April 10, when 480,000 initial claims were filed.  The number of claims was higher than the 455,000 claims expected in a consensus estimate of economists surveyed by Briefing.com.  The 4-week moving average of initial claims, which is calculated to smooth out volatility, was 458,500, up 5,250 from the previous week’s upwardly revised average of 453,250.  The government said 4,537,000 people filed continuing claims in the week ended July 24, the most recent data available. That’s down 34,000 from the preceding week’s upwardly revised 4,571,000 claims.   Economists surveyed by Briefing.com were looking for 4,530,000 ongoing claims.  The 4-week moving average for ongoing claims climbed by 25,750 to 4,575,500 from the preceding week’s upwardly revised 4,549,750.  The latest claims data has little bearing on the government’s closely watched employment report for July, due on Friday, as it falls outside the survey period.

Beazer homes posts larger loss than expected

Beazer Homes USA posted a bigger-than-expected quarterly loss as the expiration of the federal homebuyer tax credit caused orders to plunge in May and June.  For the third quarter, Beazer reported a loss of $27.8 million, or 41 cents per share, compared with the loss of 25 cents per share expected by industry analysts, according to Thomson Reuters.  Last year, the company reported a loss of $28 million.  Homebuilding revenue jumped 52 percent to $339.9 million.  Analysts on average expected the company to post revenue of $325.1 million, according to Thomson Reuters.  Home closings rose 73 percent to 1,643 homes as buyers and builders alike rushed to close on home sales before the tax credit’s June 30 deadline.  But orders fell 32.5 percent to 1,037 homes.  “Homebuyers continue to be concerned about employment, the impact of additional foreclosures and general conditions in the economy,” said Chief Executive Officer Ian McCarthy. “We believe employment growth and improved consumer confidence remain the keys to a sustainable recovery in the homebuilding industry.”  Atlanta-based Beazer, the eighth-largest homebuilder in the United States, operates in 16 states.

Tax the rich?

If Congress fails to act in extending the Bush tax cuts, taxes on most Americans would go up next year — adding $1,541 to the average household payment, by one estimate.  Taking that money, a total of $135 billion, out of the pockets of consumers and small businesses could be a devastating blow to the fragile economy.  Every American who pays federal income taxes would see them increase if the tax cuts expire, according to the nonpartisan Tax Foundation. A typical middle-class family with a median income of $63,366 would pay $4,964 in taxes next year if the cuts expire, well above the $3,423 tax it would pay if cuts were extended.  President Obama and Treasury Secretary Timothy F. Geithner want to continue the tax cuts for lower income people, but have made it clear they want big tax hikes on job creators – successful investors and entrepreneurs – by letting the Bush tax cuts expire in 2011. This is despite the troubling persistence of unemployment greater than 9 percent.   

According to Caroline Baum of Bloomberg, squeezing the rich is no way to spur the economy.  “What we do know, empirically, is this: Over time, federal revenue as a share of gross domestic product has stayed fairly constant at 17.9 percent. That’s true if the top marginal tax rate is 91 percent (1950s), 50 percent (early 1980s) or 35 percent (2000s). Now the government wants to take money from the rich and give it to the poor. “They are wrong,” Laffer says. “It doesn’t work that way. The rich can change the volume, timing, composition and location of their income. Poor people can’t.” The rich have the luxury to respond to incentives, to opt for more work and less leisure when the return on work is greater. They are motivated to take risks, maybe start a business, invent something, and get even richer while giving others the opportunity, through hiring, to do the same. 

The opposite is true for low-income workers. When the government raises taxes, someone struggling to put food on the table for his family may have to go out and get a second job to maintain his level of take-home pay. For this socio-economic group, higher taxes translate to more work.  The goal should be to incentivize individuals to work hard, save and invest in the future. It’s about growing the pie.  I, for one, would like to see the debate shift from class warfare over tax rates and targeted tax relief to tax reform. Either scrap the tax code and introduce a simple flat tax with no deductions, or scrap the IRS and move to a consumption tax.  If you want to get money out of politics, there’s only one way to do it. Take the tax code out of Congress’s hands.”

Now for our real estate education section…

Crisis Control

Real estate is like any other business…sooner or later you will encounter a crisis. It may come in the form of a nationwide financial meltdown that disrupts funding for millions or something as simple as an overtly negative individual. Whatever the form, learning how to mitigate damages and restore a positive attitude is a key component to success.

1. Don’t be Defensive. Many old-timers will tell you dog can smell fear…the same applies to an audience whether it be your banker or a real estate seminar. People understand power and often turn against those that are perceived as weak or on the defensive. Remember, actions speak louder than words so guard your voice, words and body language.

2. Never Repeat a Negative Question. Rather than reinforce a negative question, try to rephrase it or move ahead. It’s better to take a small hit than give more time to an issue unless it is absolutely essential.

3. Never Blame Others. It puts you in a bad light and tends to make people distrust you…plus, it leaves people wondering what you might say about them behind their backs.

4. Don’t Argue. You might be right but the chances of convincing someone else decrease the more they defend their position to you. Instead, validate their position and explain your own thinking or simply move ahead. Not only does it conserve energy but it frees your mind from the feeling of dependence and allows you to see things from a different perspective.

5. Irrelevant Questions. This is perhaps one of the most frustrating situations for an investor or real estate pro to encounter…endless, tiresome and totally irrelevant questions. Unlike overly aggressive, negative or argumentative clients it’s not possible to simply “agree to disagree” and move on; instead, you must assume the person simply doesn’t understand or has a different agenda. If it’s possible to anticipate where they went wrong, try to bail them out to help them “save face”…it shows concern and sensitivity.  For those with their own agenda, try to determine if it is “helps” or “hurts” your position then act accordingly.

6. Plan for Murphy’s Law. Remember Murphy? Whatever can go wrong will go wrong so plan ahead for it. Put contingencies in place especially when it matters the most. For example, when planning an open house be sure to plan for inclement weather. Putting together a big media blitz, find another venue to publish in case the first falls through. Taking out a private loan, have a second on standby.

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
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http://www.reomillionaireclub.com
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About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 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 July 5, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

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$8000 tax credit gets a last gasp

On Friday President Obama signed a law giving consumers three extra months to close the deal and still get a popular tax credit from the government – assuming they’re already in the process of buying a home.  Homebuyers with contracts signed by April 30 who failed to go to closing by the original June 30 deadline will now have until September 30 to complete their purchases.  The Senate approved the measure on Wednesday just hours ahead of the earlier deadline and one day after the House of Representatives approved the measure. 

The $8,000 tax credit for first time homebuyers and $6,500 credit for others purchasing a new primary residence was a highly popular temporary measure by the Obama administration to jump start home sales during the economic recession.  Real estate agents said as many as 180,000 homebuyers would miss the June 30 deadline because banks and settlement offices were struggling to deal with the volume of people rushing to close on their deals signed before April 30.  Critics say the three-month extension is an invitation for fraud, providing prospective home buyers time to back date contracts to a date before April 30 and subsequently closing on those contracts by the new September 30 deadline.  “The IRS reminds taxpayers that special filing and documentation requirements apply to anyone claiming the homebuyer credit,” the Internal Revenue Service said.

Bankruptcy filings up

Bankruptcy filings surged 14% during the first half of 2010, according to the American Bankruptcy Institute. Filings totaled 770,117 through June, compared to 675,351 during the same period last year.  The institute also said that bankruptcies totaled 126,270 in June, a jump of 8.5% from the same month in 2009, when they totaled 116,365.  The institute relied on data from the National Bankruptcy Research Center for its information. 

Samuel Gerdano, executive director of the institute, says “Years of rising consumer debt and low savings rates, combined with the housing and unemployment crisis, are causing bankruptcy levels not seen since the 2005.”  In 2005 Congress amended the Bankruptcy Code, making it harder for Americans to file and sparking a rush to file by October of 2005, when the amendments kicked in. In 2005, bankruptcy filings totaled more than 2 million.  By comparison, Gerdano expects there will be more than 1.6 million new bankruptcy filings by the end of 2010.

HAUP now active

As of July 1, homeowners have been able to apply for assistance from the Home Affordable Unemployment Program (HAUP).  HAUP provides homeowners a forbearance of monthly mortgage payments, either reducing them or suspending them for at least three months. Servicers can extend the timeline depending on regulatory guidelines.  In June, the unemployment rate edged down to 9.5% from 9.7% in May, according the Department of Labor.  Homeowners who qualify for the program have a first-lien mortgage originated on or before Jan. 1, 2009. The unpaid principal balance on a single-unit primary residence must be equal to or less than $729,750, and the mortgage has to be in default or in imminent default. 

HAMP requires borrowers to be employed with some income for the modification to be reduced down to 31% of the monthly income.  But once the borrower finds another job or the borrower is 30 days from the end of the HAUP forbearance period, the borrower can be revaluated for a HAMP modification.  Those who have already gone through the Home Affordable Modification Program (HAMP) process are not eligible for the HAUP.  HUAP joins the Home Affordable Foreclosure Alternatives (HAFA) program, which provides incentives to servicers for providing short sales and deeds-in-lieu of foreclosure, as another net to catch borrowers who fall out or fail the HAMP program.

Factory orders drop more than expected

The Commerce Department said Friday that orders for manufactured goods decreased 1.4 percent in May. It was the biggest drop since March 2009.  Excluding the volatile transportation sector, orders fell 0.6 percent. That number fell 0.7 percent in April, the worst showing in 13 months. Overall orders in April grew a revised 1.0 percent.  Orders for big-ticket durable goods were down 0.3 percent, after a 2.0 percent increase in April. Electronics and commercial aircraft were among the weakest performers. 

Demand for those goods expected to last less than three months fell 2.1 percent. Lower gas prices were partly to blame. But there were significant losses for makers of clothing, drinks and tobacco, and chemical products.  The overall decline in orders was bleaker than the 0.5 percent drop expected by economists surveyed by Thomson Reuters.  Manufacturing has been a rare bright spot, helping lead the country out of recession with increased hiring and productivity.  However, economists fear joblessness and less demand for exports could sap the sector’s strength in the coming months.

DSNews.com – Delinquencies inch up in May

The seasonal improvement period for delinquencies and foreclosure inventories has come to a halt, according to an industry report released last Thursday by Lender Processing Services (LPS).  The Florida-based analytics firm’s monthly Mortgage Monitor report found that the total U.S. delinquency rate jumped to 9.2 percent in May, inching up 2.3 percent from April and 7.9 percent higher than the same month last year.  Herb Blecher, VP of LPS Applied Analytics, said the slight increase on the delinquency side was expected as this is the period when rates start to pick up. He said delinquencies will likely continue to increase all the way through the end of the year.  The foreclosure inventory rate remained stable from the month prior at 3.18 percent, but it was 13.5 percent higher than May of 2010. Blecher explained that while some stability has been achieved in the foreclosure inventory rate, a further decline over the coming months is unlikely. 

The national noncurrent loan rate, which reflects both foreclosures and delinquencies, came in at 12.38 percent. Not including REO properties, nearly 6.3 million loans were noncurrent in May. When REO properties were included, the total jumped to nearly 7.4 million.  On a state-by-state basis, Florida and Nevada continued to hold the most noncurrent loans in May, with rates of 22.4 percent and 21.8 percent respectively. On the other end of the spectrum, the lowest noncurrent loan rates were seen in North Dakota, at 4.1 percent and South Dakota, at 5 percent.

Now for our real estate education section…

Life, Liberty, the Pursuit of Happiness & Real Estate

By the time you read this, the entire nation will have once again celebrated another Fourth of July with all of its star spangled glory, hoards of hot dogs and rainy day fireworks. This year it is also a good idea to stop and reflect on what the founding fathers really had in mind when declaring independence and the self-evident concept that all men are created equal. While life, liberty and the pursuit of happiness might seem an odd topic for a real estate investing newsletter…real estate played a critical role in the creation of what was to become the “American way of life”. In fact, real estate is so critical to the plans of the founding fathers that to tamper with ownership is to change the very fabric upon which our society was based.

Throughout history, societies have risen and fallen based upon land rights and ownership. “Free men” were nearly always landowners while serfs, servants and peasants were those forced to eek out a living without the benefit of owning raw assets or the land upon which the based a livelihood. During the formation of this nation, land rights were closely associated with the ability of a man (or woman) to determine their own fate, pursue a life of individual meaning and the very essence of freedom itself. The rights of property ownership include:

The right of possession, the ability to control the property, the right to enjoy the property, the right of exclusion and disposition. Unfortunately, many of these same rights upon which the nation was built are now under attack from a variety of sources. Not only does the erosion of land ownership and property rights impact the individual but also society at large. From runaway zoning regulations to the actions of eminent domain, land rights in the United States have eroded over decades but never to the extent seen in recent years. For example, the same bill that allows a judge to modify a mortgage contract is seen as a potential threat to the very foundation of contractual law…creating a more risky (and therefore more costly) lending environment for future loans. Squatters rights which are plaguing many cities across the nation have severely undercut the foundational right of enjoyment, exclusion and disposition. Even the newly proposed (and passed) regulations concerning required training, licensure and/or certification for everything from lead laws to owner financed properties is expected to have dramatic impact upon the rights of the individual to control and dispose of their own properties.

What does this mean for real estate investors and other property owners?

Change. Perhaps not the exact type of change the nation had in mind during the last election but change just the same. However, change isn’t always bad. In many instances it present unprecedented opportunity for those that are prepared to act. If history is any measure, excessive regulations tend to add ever increasing cost and growing scarcity over the long run. The new lead laws are a prime example; be requiring additional certification for anyone (including the property owner) to perform even rudimentary work on a home built prior to 1978, the cost of renovation is likely to increase even without putting more money into the pockets of the property owner.

Houses built post 1978 just became slightly more valuable if for no other reason than the lack of headache associated with them. Likewise, foreclosed properties plagued by squatters are at a distinct disadvantage…but may represent a golden opportunity for new investors long on time and short on funds. Savvy real estate estate investors would do well to keep an eye out for buying opportunities and price their bids accordingly. In the meantime, congratulations in exercising one of the most fundamental rights enjoyed by every red blooded American throughout the history of our great nation…the right to buy and sell property. It’s the cornerstone of what made this nation strong and what has been the foundation to wealth over the eons.

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
–

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

http://www.smartrealestatenews.com/ 

*** Follow Chris on Twitter–> http://www.twitter.com/mclaughlinchris

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75% of modified home loans will redefault

Most borrowers who have had their mortgages modified through a government-sponsored program will redefault within 12 months, according to a report released Wednesday.   Between 65% and 75% of loans that are modified through the Home Affordable Modification Program(HAMP) but not backed by the federal government are likely to go bad, according to the report released by Fitch Ratings, a N.Y.-based credit-rating agency. The main reason these borrowers continue to struggle is that HAMP does nothing to solve the rest of their debt problems, the report added.  “Many of these borrowers still have very heavy levels of other debt,” said Diane Pendley, a Fitch managing director, “auto loans, credit cards and other expenses.

The HAMP modifications reduce housing expenses down to 31% of income but do not touch these other obligations.”  Currently, according to the Fitch report, about half of prime borrowers who lose their homes now do so through foreclosure. The other 50% go through short sales, in which they sell their homes for less than what they owe the bank, or deed-in-lieu, a transaction where the bank takes back the property directly and forgives the outstanding balance.  The servicers have been encouraged to rev up their short sale engines by the Treasury Department, which runs HAMP and its sister program, Home Affordable Foreclosure Alternatives (HAFA), which provides cash incentives to the parties who agree to short sales.. Now, when borrowers re-default on HAMP mods or other bank workouts, banks are much more likely to offer help to execute a short sale or deed-in-lieu.

US Housing Market Slows as Buyers Get Picky

Against a backdrop of misery, buyers are empowered — and are taking full advantage. Exacting buyers are upending the battered real estate market, agents and other experts say, leading to last-minute demands for multiple concessions, bruised feelings on all sides and many more collapsed deals than usual. It is a reversal of roles from the boom, when competing buyers were sometimes reduced to writing heartfelt letters saying how much they loved the house and how they promised to eternally worship the memory of the previous owners. These days, it is the buyers who are coldly seeking the absolute best deal while the sellers are left in emotional turmoil. 

Everyone expected the housing market to suffer at least a temporary hangover after the government’s $8,000 tax credit expired, but not necessarily this much. Preliminary data from around the country indicates that the housing market began swooning last month immediately after the credit was no longer available. In some places, sales dropped more than 20 percent from May 2009, when the worst of the financial crisis had subsided. Builders have been affected too. Construction of new homes in May dropped 17.2 percent from April, the Commerce Department said Wednesday, significantly lower than forecast. Permits for future construction dropped 10 percent, suggesting a cruel summer. 

The Mortgage Bankers Association said Wednesday that applications for loans to buy houses were down by a third compared with last year. Applications are back to the level of the mid-1990s, when the country’s housing market was smaller.  But the optimists, and real estate remains full of them, say the trough is temporary. The stimulus might have stolen sales from May but by July, they argue, people will need to buy again.

Unemployment benefits, ‘doc fix’ scaled back in Senate bill

Seeking to appease deficit hawks, the Senate scaled back unemployment benefits and Medicare physician reimbursement measures on Wednesday. The revised jobs bill eliminates a $25 weekly supplement for the jobless that had been part of the last year’s stimulus act. Those currently receiving the supplement in their unemployment benefits check will continue to do so until they exhaust their extended benefits, or until the week of Dec. 7, whichever comes first.

That cut will reduce the bill’s cost by $5.8 billion over the next decade. The new version of the bill would also freeze a 21% cut to Medicare physician reimbursement rates only through November, instead of through 2011. This will reduce the bill’s size by $16.4 billion over 10 years.  Senate lawmakers also voted Wednesday to include a measure in the bill that would push back the deadline to close on home purchases and still qualify for a federal tax credit of up to $8,000. Homebuyers would have until September 30, instead of June 30, to complete the transaction. The provision will cost $140 million over 10 years

Diana Olick – Oil May Be the Nail in Florida Housing’s Coffin

“I’ve been in beastly hot Pensacola, Florida, preparing stories on mortgage mediation, and, of course, oil. President Obama dropped by the beach of Pensacola, Florida yesterday to talk to some local folks, while I spent the day in empty beach front mansions and empty ocean-view condos. The oil isn’t really here yet, just a few tar balls, but the apprehension is everywhere.  This is a housing market that saw prices drop 50 percent in the housing crash.  I’m talking beautiful, grand, beachfront properties, where the sand is positively Caribbean white, and values just plummeted.  Last year, as investors started to dip their toes back into the warm water here, it all started to pick up, and condos and homes alike were selling again, albeit at bargain prices.

Now just the perception, the fear that oil is coming, changed all that in an instant. It’s not just buyers putting the breaks on, but renters as well, and that will not bode well for condo owners who rely on renters to offset their mortgages. Rothfeder, a self-proclaimed optimist, says he’s hoping BP will start writing checks to all sorts of people in Pensacola Beach, including condo owners. But how much and for how long?   What strikes me, though, in driving around here for the last few days is not the growing fear among the locals, but the sheer number of “For Sale” signs down the beach. They’re literally almost every third house. That kind of inventory isn’t healthy for any market, forget a beach-front community staring down the face of an oil slick.” 

Economic Weakness Continues to Weigh on Commercial Mortgage Performance: MBA Report

Delinquency rates continued to increase in the first quarter for all commercial / multifamily mortgage investor groups, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report. The delinquency rate for loans held in CMBS is the highest since the series began in 1997.  Delinquency rates for other groups remain below levels seen in the early 1990’s, some by large margins.  Between the fourth quarter 2009 and first quarter 2010, the 30+ day delinquency rate on loans held in commercial mortgage-backed securities (CMBS) rose 1.54 percentage points to 7.24 percent.  “Weakness in the economy has continued to weigh on commercial properties, which in turn weighs on the mortgages they back,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. 

“Economic growth, specifically in areas of jobs and consumer spending, will be key to stabilizing the commercial property and mortgage markets going forward.”  The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae and Freddie Mac.  Together these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding  

Senate Backs Extending Deadline for Housing Tax Credit

The Senate voted Wednesday to give homebuyers another three months to settle on their contracts and take advantage of a popular tax credit that sparked a rush of activity in the housing market.  The current deadline requires buyers to close by June 30 to get the $8,000 tax credit for first-time homebuyers.  Existing homeowners buying a new primary residence are eligible for a $6,500 credit.  Buyers are offered the measure as an amendment to a bill that would extend some popular business tax breaks and extend unemployment insurance benefits for jobless workers. The proposal would not have a significant impact on future home sales as the extension would be only for home buyers who already had a contract in hand by April 30. The popularity of the tax credit has caused some anxiety because settlement offices are inundated with buyers trying to close on transactions by the end of this month to get the tax break.

Now on to our real estate education section…

Mid-Year Review: Progress or Problems?

Half the year is now over – how is your short sale career going? Have you made progress or are you plagued by problems? It’s time to take inventory, make any necessary changes and chart a course for action with these telling signals. Answer each question honestly then make it a priority to revise any situation in need of additional attention:

1. Have you met your profit goals? If not, are you able to identify a specific reason such as a deal gone bad, failure to correctly calculate costs or some unavoidable setback? What about your profits per sale…are they stagnating or growing? Work less and earn more by integrating the 80/20 rule.

2. Is your customer service impeccable? If not, it should be. People demand multiple ways to make contact and the sooner the better. Social media is moving into the mainstream as professionals compete for the best clients.

3. Are you actively networking and investing in marketing? It’s essential to maintain a market presence and actively network with others. Yes, the economy might be bad but history has taught that those who thrive during tough times rise to the top…the others merely fade away. Use tough times to your advantage by looking for opportunity and adding value to the relationship. Not sure how to measure your network activities? Hers’ a simple tip…review the number of new contacts added to your database since January 1st of this year. Remember, each year the bottom 10% should be eliminated while focusing efforts on the top 10%. At this point in the year, your database should have grown by at least 5% (minimally).

4. Have you expanded your professional referral sources?  Similar to the contacts and networks, review the number of referrals you make and receive. Both should indicates at least a 5% increase at this point in the year.

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)

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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
–

http://www.shortsalesriches.com

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

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

Fix A Flip … A Revolutionary Way to Close More Deals!

We’ve been flooded with phone calls and e-mails begging
us to reopen Fix A Flip … so today you get another
chance!  If you’ve been frustrated by not being able to close
your flip transactions due to 30 to 90 day seasoning
requirements, this program is for you!

Join us for a webinar Tuesday at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/570893394

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

The next collapse

If there’s another real estate collapse on the way, it’s in commercial real estate, and the FDIC closing Chicago’s Corus Bank last month may have signaled the beginning of it.  Corus, whose balance sheet full of bad construction loans, was just one of many banks that have this type of debt on their books, and refinancing the $2 trillion in commercial mortgages is going to be tough as property values decline.  In this new age of cautious lending, few banks are willing to refinance loans.  Michael Haas, a real estate attorney at Jones Day, says, “There is a hesitancy to extend credit when there is a real possibility that the real estate may be worth less than it was a few years ago.” In a situation similar to the subprime crisis, we may be looking for a wave of foreclosures and loan defaults that could, in turn, trigger a collapse in the market of the structured bonds backed by commercial real estate and construction debt.

MBA objects to new legislation 

The Mortgage Bankers Association (MBA), like most of us who believe government has no place in the nation’s business, objected to legislation passed by the House Financial Services Committee that would create a consumer financial protection agency.  The bill continues the patchwork approach of state and local laws that present challenges for lenders in multiple states, and ultimately lead to increased costs for consumers.  MBA’s Chairman, Robert E. Story, Jr. says:  “MBA has also expressed concern about the creation of a new government bureaucracy that could result in financial institutions facing conflicting regulatory guidance from two regulators – the CFPA and their existing prudential regulators.   A better approach would be to create a national regulator for mortgage banks that would regulate for both consumer protection and safety and soundness.  Existing federal regulators could then be empowered to enforce consumer protections on the financial institutions they oversee.  Moving forward, MBA will continue to work to make these and other improvements to the bill in the hope of finding common ground on a consumer protection bill that we can support.”

2010 is shaping up for a weak recovery 

The Federal Reserve is in no rush to pull back its extensive economic life support measures.  Chicago Federal Reserve President Charles Evans said: “We have to think about our exit policy and are looking at it very carefully, but at the moment, that’s not our first order concern, at the moment, its policy accommodation.  I think that the recovery is going to be very unsatisfactory in 2010.”  Evans, who will vote on the Fed’s policy-setting panel in 2010, said he expects unemployment to rise above ten percent.  The Fed has cut rates to near zero and pledged to hold rates there for an extended period.  Its next policy-setting meeting is Nov. 3-4 and it is not expected to signal any movement toward an exit then.  High unemployment and low inflation rates both indicate that policy accommodation is in order, and with economic growth, household spending will be restrained and businesses will face weaker demand for their goods and services, Evans said. “It is not going to feel like a recovery for some time.”

Freddie Mac – increased delinquencies

Freddie Mac announced today that its mortgage investment portfolio grew by an annualized 7.3 percent rate in September, while delinquencies on loans it guarantees accelerated.  The portfolio increased to $784.2 billion, for an annualized 3.4 percent decrease year to date, and delinquencies, which increase stress on the company’s capital, jumped to 3.33 percent of its book of business in September from 3.13 percent in August and 1.22 percent in September 2008. The multifamily delinquency rate accelerated slightly in September to 0.11 percent from 0.10 percent in August. A year earlier it was 0.01 percent.

IRS gives Homebuyer Tax Credit to aliens and minors 

Ok, we knew it would happen, right?  We all love the tax credit – if only the government didn’t have to be the one administering it.  The Treasury Inspector General for Tax Administration (TIGTA) believes the Internal Revenue Service (IRS) may have paid out millions of dollars in first-time homebuyer tax credits to individuals not eligible to receive the $8,000 credit.  Nearly $4 million of incorrectly paid credits were due to both alleged fraud and filing errors on claims by 580 taxpayers less than 18 years old. The youngest of these was 4 years old, TIGTA head J. Russell George said in prepared testimony to the House Ways and Means Oversight subcommittee.  TIGTA also found 3,200 taxpayers with Individual Taxpayer Identification Numbers (ITIN) claiming the credits. ITINs are used to track income tax for resident aliens, in lieu of a social security number, and it’s possible that as much as $20.8 million in tax credits was paid to resident aliens ineligible for the credit.  As of August 22, 2009, more than 1.4 million taxpayers claimed the tax credit for homes purchased in 2008 and 2009, representing total foregone tax revenue of about $10 billion, according to estimates presented by Government Accountability Office (GAO) director of strategic issues James White.

Now on to our real estate investing educational arena …

Who’s Your Seller?

By far, one of the surest signs of a novice short sale investor is the tendency to think of the homeowner as the actual seller. While s/he certainly has a legal right to the property and therefore a “say-so” in whether or not to accept an initial offer for a short sale, when it comes down to the hard and fast fundamentals of the deal, more often than not the actual lender is closer to what most people would consider the actual “seller”.

If this seems counter-intuitive, chances are you are not alone. Many homeowners actually believe they are the “sellers” as well; in fact, it’s not uncommon to hear things like “Send me an offer and I’ll consider it” or “How much will you pay me for the property?”. Of course, that is understandable since most homeowners never really realized they didn’t truly own the property to begin with…the bank did (and still does). However, what is forgivable among distressed homeowners seeking financial relief is unforgivable among short sale investors; you simply must know and understand your seller in order to work a successful transaction.

Take time to consider a few facts; first, the lender is the only party able to make the final determination on whether or not to accept the short sale offer, subject of course to the homeowners’ approval. They can determine what constitutes an acceptable net and even change their mind when it suites them to do so – make it your business to understand what the seller needs and wants to make the deal work …the real decision maker, not the homeowner.  For example:

1. Have you used the correct state commission form containing all required disclosures for both buying and selling?
2. If you are using your own purchase and sale contracts/option etc, have you verified each includes all necessary verbiage and disclosures?
3. Do you have appropriate contracts in place with agents specifying the working relationship?
4. Do you have appropriate disclosures, verbiage and properly positioned details of each transaction when buying/selling a property?
5. Does the BPO accurately reflect the property?
6. Have you verified all the “math” so the Net is properly attributed? Don’t make it harder than it needs to be for the seller to approve your deal!
7. Do you understand all legal requirements related to “double closings”? If not…learn them. This is a major cause of confusion and loss of confidence when purchasing short sale investments!

Serious about short sales? Get to know your seller then adopt a tried and true system that works rather than spending all your time talking about investing.  Interested in learning more? Attend a free webinar to learn more about short sales in less time than you ever thought possible.

See you at the top!

Chris McLaughlin

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

Copyright Loss Mitigation Institute LLC 2009.

All Rights Reserved.

http://www.shortsalesriches.com
http://www.shortsalescoach.com
http://www.sixfigurebpo.com
http://www.reomillionaireclub.com
http://www.youtube.com/shortsalesriches 

*************************************************
Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…
http://www.shortsalesriches.com/blog

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

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
    * Add me on Facebook: http://www.facebook.com/mclaughlinchris
    * Join my Fan Page: http://www.mclaughlinchris.com
–