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DSNews.com – short sales up

Servicers completed 1,666 short sales and deeds-in-lieu (DIL) of foreclosure under the Home Affordable Foreclosure Alternatives (HAFA) program in April. That’s up 73.7% from the 959 HAFA transactions completed the month before.  HAFA has been in place since April of 2010. According to Treasury’s latest report, which covers program activity through April of this year, a total of 7,113 short sales and DILs have concluded through HAFA.  Treasury says another 7,780 HAFA transactions have been started, meaning an agreement has been put in place between the servicer and the homeowner for terms of a potential short sale of DIL.  Treasury notes that a short sale typically takes 120 days to complete under the program. The number breakdown in the report doesn’t specify how many of the HAFA“starts” are still in process or may have been withdrawn. Any short sale also requires the cooperation of a third-party purchaser, junior lien holders, and mortgage insurers to complete the transaction.

The latest data show that the 10 largest servicers participating in the federal government’s foreclosure prevention programs have completed a short sale or DIL for 82,995 borrowers who did not qualify for a Home Affordable Modification Program (HAMP) trial and 31,048 borrowers whose trial plans were canceled, indicating that servicers are employing their own short sale programs to avert foreclosure for borrowers that don’t fit the mod equation.  Critics of HAFA have urged Treasury to raise the monetary incentive for servicers, investors, and subordinate lien holders, citing low payouts as a common reason HAFA short sales are rejected.

WSJ – mortgage rates hit new 2011 low

Home mortgage rates fell again to a fresh 2011 low as a week of downbeat jobs data fueled concerns over a possible economic slowdown this year, according to the latest survey from Freddie Mac.  The decline in fixed rates represented the eighth-straight weekly fall and comes after the Bureau of Labor Statistics this week said employers added far fewer private-sector jobs than expected.  The housing market continues to be fragile across the nation as well,” Freddie chief economist Frank Nothaft said, with Federal Reserve data released Wednesday showing weak sales and prices in most districts.  The 30-year fixed-rate mortgage averaged 4.49% in the week ended Thursday, down from 4.55% the prior week and last year’s 4.72% average. Rates on 15-year fixed-rate mortgages fell to 3.68% from 3.74% the previous week and 4.17% a year earlier.  Five-year Treasury-indexed hybrid adjustable-rate mortgages fell to 3.28%, from 3.41% last week and 3.91% a year earlier. One-year Treasury-indexed ARM rates decreased to 2.95%, from 3.13% the prior week and 3.91% a year earlier.  To obtain the rates, fixed-rate borrowers required an average payment of 0.7 point, while the adjustable-rate mortgages required a 0.5 point payment. A point is 1% of the mortgage amount, charged as prepaid interest.

Banks fight back

The Foreign Account Tax Compliance Act was passed by Congress last year and comes into force in 2013. Last week, senior bank executives implored Tim Geithner, US Treasury secretary, to modify the law, according to people familiar with the meetings.  Banks say they are already racking up significant costs. Eventually, they say, the task of scouring records for US citizens and then reporting them could run into billions of dollars and conflict with domestic privacy laws. Disclosure records show groups including Switzerland’s Credit Suisse, Barclays of the UK and TD Bank of Canada have together spent millions of dollars lobbying on the issue.  Terry Campbell, Canadian Bankers Association head, said the act was “conscripting financial institutions around the world to be arms of US tax authorities”. Algirdas Semeta, the European tax commissioner, told the Financial Times that he shared the concerns of the financial sector and expected more meetings with US counterparts. “We can find alternatives that would ensure all necessary information on their taxpayers without imposing additional burdens on financial institutions in the EU,” he said.  People involved in meetings on the subject say the Obama administration has indicated it will look to reduce the burden on banks, which have to identify US citizens with accounts of more than $50,000.

Olick – predicting home prices is impossible

“When Robert Shiller, co-creator of the S&P/Case-Shiller Home Price Indices , speaks, he tends to make headlines, and yesterday was no different.  Claiming that he wasn’t making any predictions, he predicted that home prices could fall another 25%.  ‘That wouldn’t surprise me at all,’ he hedged. And there was the headline, tragic as it is.  I happened to be at the conference yesterday where he said that. In fact, I was a speaker/panelist at the Standard and Poor’s ‘Housing Summit 2011: Boom, Bust and Beyond.’ And, no offense, but that wasn’t the headline. What really struck me was what he said right before that.  ‘Statisticians deal with things that repeat themselves. This housing boom and bust is so historic and unprecedented, you can’t forecast the future because you have no comparison.’  That was not only the headline, but the theme of the conference, as I sat on a panel with economists from S&P, Experian and Columbia Business School. Chip Case was there as well, disagreeing with Shiller on several points.

Audience members, largely from the finance industry, kept asking the same question in different ways, ‘When is this all going to get better??’  One by one, we panelists opined on headwinds and tailwinds, but never really answered. This is something of a shift from just the past few months, when the economists who cover housing seemed to be suddenly more bullish.  But now we have a new dip in home prices, which is putting more borrowers in a negative equity position. There is more concern of more borrowers hitting that ‘stress threshold,’ as one panelist put it, where they just quit paying on their loans.  We already have millions of borrowers who are not current on their mortgages. They haven’t hit the foreclosure pipe yet, but many will, and the panelists seemed most concerned about this huge glut of properties that will not just hit, but continue to plague the market for years to come.

This as the Treasury released a lackluster report on its own mortgage modification program and then punished several big banks for poor performance by cutting off the program’s financial incentives.  By far the biggest concern among questioners and panelists alike was lack of buyer demand. The demand that should be there is pressured by fear, tight credit and under-employment.  ‘Even with recent job growth, we still have 7 million fewer people employed today than at the peak in 2008, and the unemployment rate remains high at 9.1% officially, but a whopping total of 15.9% are underemployed or have given up their search,’ notes housing analyst John Burns.  This ‘wage-less recovery,’ he argues is largely behind the lack of buyer demand, despite much-improved affordability. 

But all real estate is local, right? And all these national numbers that folks like me spew don’t have any footing in local reality, right? Yes, that may be true when it comes to the numbers. All real estate is local, but consumer confidence is national, and that trumps the local numbers.  I have to say, leaving yesterday’s conference, I felt a strange unease, not because we talked about the same barriers to recovery that I talk about every day of the week, but because all these experts who are supposed to tell us when it’s all going to be alright…don’t have a clue.”

Oil prices fall on productivity boost

Oil prices fell to near $98 a barrel today, extending a big loss from Friday after a report said Saudi Arabia plans to boost its crude production.  Saudi newspaper al-Hayat reported Friday that the country will increase production by 13%, or about 1.14 million barrels per day, to boost global supplies and help lower prices. Earlier last week, the Organization of Petroleum Exporting Countries failed to reach consensus to raise output and left the cartel’s production quotas unchanged.  Fighting in Libya since February has shrunk global crude output by shutting down the OPEC nation’s 1.6 million barrels a day of production. Political violence and upheaval in the Middle East and North Africa this year has probably added about $15 to the price of oil, said Paul Sheard, global chief economist at Nomura.  Analysts are concerned an escalation of violence and instability in the Middle East would send oil prices higher and undermine global economic growth.  In other Nymex trading in July contracts, heating oil rose moved up 0.01 cent to $3.1061 a gallon while gasoline added 0.14 cent to $3.0191 a gallon. Natural gas futures gained 5 cents to $4.807 per 1,000 cubic feet.

Fitch downgrades 9 mortgage servicers

Fitch Ratings downgraded ratings on nine mortgage servicers because of tougher regulations and the lack of urgency these companies displayed in response to the foreclosure crisis.  The credit rating agency took action on two Bank of America servicing divisions of, two Wells Fargo servicing divisions, JPMorgan Chase , Citigroup , MetLife Bank , PNC Bank and SunTrust Mortgage .  In late 2010, procedural defects surfaced across the servicing industry. Servicers halted the foreclosure process to fix affidavits required in judicial states. Federal regulators followed with investigations and consent orders, requiring new standards for servicing loans. Negotiations between the 50 state attorneys general remain ongoing.

“The full extent of the concerns resulting from this and other related functions within servicer operations is far from resolved. Fitch expects that the additional scrutiny from a wide range of interested parties, as well as the potential new regulation and heightened risk from litigation, will result in continued reluctance to proceed with foreclosure,” Fitch said.  In November, Fitch placed these ratings on watch and complete a full review of the rated sevicers later in 2011.  Fitch already incorporated the heightened resolution times and loss severities into its analysis of outstanding residential mortgage-backed securities bonds. Therefore, it does not expect to change outstanding RMBS bond ratings.

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.smartrealestatenews.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.  Own 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

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Fannie Freddie mortgage mods drop 28% in Q1

Fannie Mae and Freddie Mac servicers provided 86,201 modifications in the first quarter, down 28% from the previous quarter, according to the Federal Housing Finance Agency.  The drop comes after modifications fell 18% in the fourth quarter. Combined with repayment and forbearance plans, servicers retained nearly 144,000 homes in the period. Servicers also started 260,000 foreclosures, and although that is down from 310,000 from the previous quarter, it’s nearly double the amount of homes retained.  Servicers provided 26,000 permanent workouts under the Home Affordable Modification Program, up from 17,000 in the previous three months. Another 64,000 loans were put into active HAMP trials, meaning the majority of the modification activity for Fannie and Freddie mortgages went through HAMP.

Since the Treasury Department launched HAMP in March 2009, Fannie and Freddie servicers permanently modified more than 320,000 mortgages, according to FHFA data.  Short sales and deeds-in-lieu of foreclosure remained nearly unchanged from the previous period at roughly 27,500.  Roughly 44% of the borrowers said their reason for delinquency was a curtailment of income, compared to 14% who said they had too many obligations and 4% who pointed their continued unemployment.  Refinancing through the Home Affordable Refinancing Program totaled 130,204 in the first quarter, down 8% from the previous quarter. However, more than 16,000 of the refinancings were done on loans with a loan-to-value ratio of 105% or higher in the first quarter.

The amount of delinquent loans on Fannie and Freddie balance sheets declined.  Mortgages between 30- and 60-days delinquent totaled 553,000 in the first quarter, down 16%. There were 1.3 million loans more than 60-days delinquent, which dropped 7% from the previous period. And loans in serious delinquent or in the foreclosure process dropped to 1.19 million, down 5% from the previous period.  Seriously delinquent loans dropped to 4.02% in the first quarter, down more than 20 basis points from the previous period.

GOP says shrink federal workforce 10%

A new bill would shrink the number of government workers by 10% by 2015. For every three retiring federal workers, the government would only be allowed to hire one replacement.  The measure would save an estimated $127.5 billion over 10 years if adopted, according to Reps. Darrell Issa of California, Dennis Ross of Florida and Jason Chaffetz of Utah, the bill’s sponsors.  “Private sector job creators and families in my district have learned to do more with less,” Chaffetz said in statement. “So should the federal government.”  The idea is not exactly a new one. President Obama’s own fiscal commission included the basic plan in its final report, but would reduce the roughly 2 million member workforce at a less aggressive rate.  “Washington needs to learn to do more with less, using fewer resources to accomplish existing goals without risking a decline in essential government services,” the report said.

Olick – spring housing season

I don’t know what the official end of the spring housing market is, but it seems as if the experts have called the close, and it ain’t great.  Last week, after the folks at the vaunted S&P/Case Shiller Indices put a period on the home price double dip, which others had been reporting for months — and The New York Times did a piece on falling home prices — it seemed like suddenly the housing watchers got nervous again.  Over the weekend, JP Morgan Chase’s housing analysts revised their outlook lower for home price recovery, “largely based on existing home sales coming in lower than expected.” While they expect that regional divergences will increase, “Our new base case is down percent from here (Q1 2011) and bottoming in mid-2012. We expect home prices to modestly improve over the summer months.”  Soon after, Credit Suisse’s Monthly Survey of Real Estate Agents announced: “Weak ending to the spring season.” CS’s Daniel Oppenheim notes, “A lack of urgency continues as does a fear and hesitation of buying if prices still have further to fall.” This, we knew.

“Most worrisome was the lengthening time needed to sell a home, as there are few qualified buyers and those qualified buyers are waiting for the right price.” Buyer traffic is weak, and distressed markets are showing the best activity. This is a key point because of an argument that was going around the blogosphere last week.  Core Logic put out a price report showing that if you remove distressed properties from the equation, home prices are basically flat, not falling, as the rest of the reports scream. Housing bulls, including the former FHA commissioner, Dave Stevens, now head of the Mortgage Bankers Association, pointed to the report as evidence of recovery, but when I Tweeted about the Core Logic report, well-known mortgage analyst Mark Hanson protested:  “Why in the world would they discount distressed sales when they are the market, they support the market, and without them as support, house sales volume and sentiment would tumble. Further, MBS [mortgage-backed securities] loss severities and bank loan loss reserves are based on distressed sales not organic sales. In short, distressed sales carry more weight across the things that matter to the housing and financial markets.”

I’m watching a segment on MSNBC right now about how renewed trouble in housing might affect the 2012 presidential election. Suddenly housing is back in the headlines, not that it ever should have left.  Politicians may point to a slowdown in new mortgage delinquencies, and claim that the housing recovery is fine, but just slow. That should not be the focus. The focus must be on the more than 11 million underwater borrowers, and not just because some might walk away from their homes.  The plain truth is that not all homeowners who owe more on the mortgages than their homes are worth are going to walk away from said homes, and abandon their lifestyles and credit ratings in the process. Not near everyone.  But negative equity has a huge effect on lifestyle, spending and mobility. There is an enormous inventory of unsold homes on the market and about to come on the market, and if current homeowners can’t sell their homes, then they can’t buy new ones.  That may sound kind of “duh,” but I don’t think enough bankers or policymakers get it. You cannot rely on investors and first-time home buyers to eat up an unprecedented backlog of inventory.

Obama’s economic adviser leaving

President Obama’s top economic adviser, Austan Goolsbee, is leaving the administration to return to the University of Chicago, the White House announced yesterday.  The announcement came after a series of reports that showed the U.S. economy struggling to maintain headway after the housing bust, banking crisis and recession. On Sunday, Goolsbee told CNN’s “State of the Union” that despite disappointing employment, manufacturing and housing price figures, the long-term trends remain positive.  Goolsbee took over for Christina Romer, who stepped down last September from the job running the White House Council of Economic Advisers. Goolsbee was on the original White House economic team, serving on the council with Romer and Cecilia Rouse, that swept into office in January 2009 at the height of the financial crisis.  Only Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke remain of Obama’s original economic brain trust. Rouse left the White House earlier this year to teach at Princeton.

Goolsbee has been an outspoken defender of Obama’s policies as the U.S. economy struggles to find its footing following the steep recession of 2007-09. In a statement announcing Goolsbee’s departure, Obama called him “a close friend” and “one of America’s great economic thinkers.”  Last Friday, when dour-than-expected unemployment figures were released, Goolsbee was the first to give them an upbeat spin calling them a “bumps on the road to recovery,” a phrase repeated in Obama’s speech later that day and throughout the weekend.

But the financial markets weren’t so sure. Stocks closed lower again yesterday, as investors remained nervous about the nation’s economic future.

WSJ – mortgage misery

Almost 40% of homeowners who took out second mortgages—extracting cash from their residences to cover everything from vacations to medical bills—are underwater on their loans, more than twice the rate of owners who didn’t take out such loans.  The finding, in a report to be released today by real-estate data firm CoreLogic Inc., illustrates the consequences of easy borrowing amid the housing boom’s inflated prices. The report says 38% of borrowers who took cash out of their residences using home-equity loans are underwater, or owe more than their home is worth. By contrast, 18% of borrowers who don’t have these loans were underwater.  It’s not clear how much cash withdrawn from homes during the boom was used to acquire luxuries such as expensive automobiles, and how much went to basic necessities, including tuition expenses, or renovations intended to raise a property’s value.  What is clear is that home-equity loans, which account for about 10% of the U.S. mortgage market, have been a headache for homeowners and lenders alike. Second mortgages refer to any loan taken out on a property that is subordinate to the first mortgage, and include home-equity loans or lines of credit.

Second mortgages are weighing on a fitful recovery, in which housing has figured as particularly weak spot. The S&P/Case-Shiller National Index last week showed that home prices tumbled 4.2% nationwide in the first quarter, its third straight quarter of price declines after a modest recovery in early 2010. Nationwide, prices have fallen 34% since their peak in 2006. The inventory of unsold homes will take 9.2 months to sell, the National Association of Realtors said recently, about 50% higher than what is considered a healthy level.  CoreLogic found that borrowers with second mortgages had deeper levels of negative equity—an average of $83,000 compared with $52,000—than borrowers without second mortgages. In many cases, borrowers withdrew cash from their properties using home-equity loans or lines of credit, a type of second mortgage. The CoreLogic report doesn’t include cash-out refinancing, a common practice during the boom, where borrowers opted to extract cash while refinancing their first mortgage.  According to Federal Reserve Board data, homeowners took out a total of $2.69 trillion from their homes at the height of the housing boom between 2004 and 2006. That tally includes cash-out refinancing.  Overall, the CoreLogic report found that the percentage of underwater homeowners declined slightly in the first quarter. About 10.9 million Americans who borrowed to buy their homes, or 22.7% of all homeowners with a mortgage nationwide, were underwater in the first quarter, down from 11.1 million, or 23.1%, in the fourth quarter of 2010.  The modest decline wasn’t a sign of an improving market. Rather, the change reflected completed foreclosures, which reduced the total number of homeowners in the market, CoreLogic said.

Second mortgages have made it more difficult for troubled borrowers to negotiate loan modifications with lenders. Economists say borrowers with second mortgages on homes that are underwater are far more likely to walk away from their homes.  Homeowners seeking a “short sale,” in which they sell their property for less than the value of the outstanding mortgage, have a much harder time doing so when they have a second loan, because all the lenders involved must agree to take losses on the sale, and second-lien holders take the first losses in such a situation.

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

Real Estate News & Commentary by Chris McLaughlin, April 21, 2009
http://www.shortsalesriches.com/welcome.html

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PPIP comes under fire

Inspector General Neil Barofsky, a fierce skeptic of the bailout schemes, has come out with an official report expressing concern over Tim Geithner’s Public-Private Investment Partnership (PPIP).  In a report issued today, the report said “The sheer size of the program ($2 Trillion) … is so large and the leverage being provided to the private equity participants so beneficial, that the taxpayer risk is many times that of the private parties, thereby potentially skewing the economic incentives.”  Under plans unveiled by Treasury, for every $1 of private investment, Treasury would invest $1 and could provide another dollar in a nonrecourse loan. That money could then leverage a loan from another government fund backed mostly by the Federal Reserve, a step that Barofsky said would dilute the incentive for private fund managers to exercise due diligence.  Barofsky recommended that Treasury not allow the use of Fed loans “unless significant mitigating measures are included to address these dangers.”

Credit Card rules are a changin’

President Obama will meet on Thursday with administration officials and credit card company executives to press CEOs to adopt practices designed to protect consumers.  In the meantime, existing legislation, designed to ban card companies from abruptly jacking up interest rates and fees and prevent young adults from getting credit cards, will be going ahead in Congress.  But even if Congress doesn’t pass the legislation, Federal Reserve rule changes set to kick in next year would stop higher interest rates from being imposed when consumers are late paying unrelated bills.  The changes also stop companies from averaging finance charges from two previous cycles, a practice that dings consumers who carry a balance and pay it off.  This year, credit card legislation made it out of a Senate committee, but just barely, by 12-11.  The Senate bill is even tougher than the House bill, preventing credit card issuers from raising interest rates and fees even if the consumer’s general credit risk goes up.  A top industry advocate, Scott Talbott of the Financial Services Roundtable, said that if credit card companies can’t charge fees and interest based on general risk, all card holders will have to pay more because customers with good credit scores will have to subsidize those with weaker credit scores.  “It’s going to reduce credit and make it more expensive for everyone,” he said.  “That’s not what we need for the financial markets.” 

Leading economic index down .3%

The Conference Board’s Leading Economic Index declined 0.3% last month, showing the recession may persist through the summer.  The drop was steeper than the 0.2% analysts polled by Reuters were expecting.  It also fell 0.2% in February, which was originally reported as a 0.4% drop.  Over the last six months, the index has fallen 2.5%, compared to the smaller 1.4% drop for the previous six months.  The Coincident Index, a measure of current conditions, fell for the third month in a row, by 0.4%, primarily due to declines in employment and industrial production.  The Lagging Index, which provides a glimpse backward, has been on a downward trend since July 2007, the Conference Board said.  Its 0.4% decline in March was caused by weakness across all of its components, which include duration of unemployment, inventory levels, and outstanding loans.  “The recession may continue through the summer, but the intensity will ease,” said Ken Goldstein, an economist at the Conference Board.  Hey, where have we heard that before? 

More cash for car companies

An independent oversight report on the Treasury Department’s corporate rescue fund said the Obama administration will extend $500 million to Chrysler through the end of April as it tries to reach an alliance with Fiat, and up to $5 billion through May to help General Motors restructure outside of bankruptcy.  The UAW, which represents about 26,000 workers at Chrysler and 62,000 at GM, and is under pressure along with bondholders and banks to help Chrysler and GM slash debt so they can restructure.  The central issue for the UAW and the car companies is reaching an accord on restructuring the finances of a multi-billion-dollar retiree health care trust.  GM said on Monday it would cut another 1,600 salaried jobs by May 1, as part of a plan to slash its global salaried work force this year by about 10,000, or 14 percent.  GM also aims to cut 37,000 hourly jobs worldwide by the end of the year.

Bailout fund running low?

Only $109.6 billion in resources remain in the government’s $700 billion financial rescue fund, but Treasury Department officials said they expect the fund will be boosted over the next year by about $25 billion as some institutions pay back money they have received.  Geithner said the Bush administration had committed $355.4 billion in resources before it left office, and the Obama administration has since committed an additional $30 billion to AIG and $5 billion to auto suppliers, bringing the total for what the administration termed “exceptional assistance” to $152.4 billion.  Another $218 billion has been committed to banks to bolster their capital reserves.  So far, that program has disbursed nearly $200 billion to more than 500 banks nationwide with more applications pending.  Former Treasury Secretary Henry Paulson had once set a goal of having $250 billion disbursed to banks.  Oh well, if we run out of money we can always just print more, right?  It’s all the rage.

Now on to our real estate investing education section…

Fortunes, Freedom and Fear – The Time are a Changing

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin.
And the first one now
Will later be last
For the times they are a-changin.

Bob Dylan

While the media continues to report the decline of real estate, the rising vacancy rates among commercial holdings and the trend toward lower returns on rentals or other investments, short sale investors are still managing to bring in big bucks. Given the ultra-low returns on dollars, stocks, bonds and other traditional investments one would wonder why the American public hasn’t taken a second look at historically low interest rates and realized a correction will take place sooner or later.

Amazingly, it’s simply because they don’t truly believe in change. Most American’s today believe the buy and hold strategy of faithfully putting away a few dollars for a rainy day will fund a decent lifestyle. Work at a job and start a 401-k to assure an easy and comfortable retirement. Let stock brokers and fund managers handle your hard earned money for you…like Madoff and others who “know best” what how to best put your money to work.

Rather than profit from the time-tested value of land and real estate, they would rather take a chance on “buy and hold” stocks and bonds. Indeed, rather than think for themselves or open their eyes to the massive challenges facing the nation as a whole, they would rather leave their future retirement and the lives of their children to the provision of Uncle Sam. Unfortunately, history tells us this is not the road to wealth – few governments in the world have ever provided more than a subsistence existence to the population and all Ponzi schemes eventually fade away.

No dear reader, the current financial order may not survive…and neither may millions of more retirement accounts or pension funds. Consider the roaring 20’s…it was a time of unprecedented economic prosperity, massive gains in real estate, easy credit, luxury and growth. The nation was intoxicated by parties, the industrial improvements of the day and most of all…the expansion of riches due to financial instruments like stocks and bonds. Then, like now, it went south. Newspapers and media reports indicate some opted for suicide, others lived a life of poverty never to recovery while a few – very few indeed – went on to make family fortunes that survived until the present day.

Who were those that thrived while others were lining up outside of soup kitchens? Those that bought land and other hard assets for pennies on the dollar. The examples don’t end there; remember the scene in “Gone with the Wind” where the father tells a stubborn daughter the only thing worth fighting for is the land. It’s more than a quaint idea…it’s the stuff fortunes and freedom are made from. Britain was built on the acquisition of land. The Greek and Roman empires only recognized the rights of their “free” citizens…all of which were landowners. In fact, going back for thousands of years the single item of value which differentiated the wealthy and free citizens from the rest is land…or in today’s vernacular – real estate.

Like the old Bob Dylan tune, the order is rapidly fading and those that are first are likely to come up last as financial guru’s give way to the time tested road to riches gleaned from real estate. Real estate might be slow right now but it will later be fast.  The nation elected a new President on the podium of change. The financial figures have fallen one by one and indeed, the line is drawn. Learn how to profit from the change rather than rely on past promises by learning how to control your own financial future with short sale investments.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html  

P.S.

Don’t miss our webinar tonight at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/530620442

P.P.S.:

Check out one of the ShortSalesRiches students holding himself as well as us accountable to whether the system truly works!  Go here now to watch the videos from John Michailids:

http://www.youtube.com/shortsalesriches

and

http://www.willjohnmakeit.com

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com 
http://www.sixfigurebpo.com *************************************************
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 flipping of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties

    * Owner and Supervising Broker of one of Florida’s
     largest Real Estate firms, running 4 different
     offices, supporting nearly 450 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

     * On twitter: http://twitter.com/mclaughlinchris
     * On facebook:

http://www.facebook.com/addfriend.php?id=709199143

—

Real Estate News & Commentary by Chris McLaughlin, March 30, 2009
http://www.shortsalesriches.com/welcome.html

——–

Brand New Investor Makes It Happen!  If you

missed the amazing testimonial from a newbie

real estate investor who made $51,000+ on her

first deal, go here now to watch this video:

http://www.youtube.com/shortsalesriches

Then grab a spot for yourself before they all

disappear in our no-cost, no-obligation
webinar right here Tuesday at 8:30 PM

ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/745206430

———

Foreclosures spike again in February

It was starting to look like the problem was easing before January, when foreclosure starts declined to 69,000 in November from 77,000 in October and then dropped again to 56,000 in December.  But in January the number of started foreclosures jumped to 217,000, and now February’s numbers have leaped up again to 243,000.  87,000 homes were repossessed (foreclosures completed) by banks during February, a 28% jump from the 68,000 foreclosures completed in January.  Since the mortgage meltdown hit in July 2007, 1,395,044 homes have been lost.  In February, nearly 250,000 homeowners received either mortgage modifications or repayment plans from their lenders, according to Hope Now, the coalition of lenders, investors, and community advocacy groups put together by the Obama administration’s foreclosure prevention initiative. 

AIG back in the news

American International Group (AIG) has cut or delayed payments to some of its real-estate ventures, potentially leaving the developers and their bankers in the lurch.  AIG had previously been sued by Mitchell L Morgan Management Inc for missed and delayed payments, and the latest victim is Alabama shopping-center developer Alex Baker.  The action puts 15 banks at risk of exposure to soured loans.  AIG Global Real Estate, an arm of the insurance company, has interests totaling more than $23 billion across 53 million square feet of real estate.  The Federal Reserve is monitoring AIG’s spending closely after committing $180 billion in bailout funds, but whether that’s helping or harming is still anyone’s guess.

Detroit failed

The Obama administration gave General Motors and Chrysler LLC failing grades Monday for their turnaround efforts.  It promised a sweeping overhaul of the troubled companies, but also threatened a “structured bankruptcy.”  Prior to the announcement, CEO Rick Wagoner announced his resignation, saying it came at the request of the Obama administration.  GM will get 60 more days and Chrysler 30 more days in which to make a final push toward proving they can run viable businesses.  If Chrysler succeeds — probably by merging with Fiat — it will receive a $6 billion loan.  In GM’s case, the officials would not specify how much the carmaker might receive, but we can all guess it’ll be a lot. 

Stocks slide on banking troubles

Bad news from the auto sector was bad enough, but Treasury Secretary Tim Geithner’s announcement that more banks would need help caused stocks to tumble, with the Dow opening 202 points lower, the S&P 500 index lost 21 points,  and the Nasdaq composite lost 39 points.  As Art Hogan, chief market strategist at Jefferies & Co put it, “We were starting to see some light at the end of the tunnel, but it’s beginning to look oddly like a train.”  That pretty much captures investor sentiment this am.  Would it be an understatement to say the week isn’t off to a good start?  Especially if you own auto or banking stocks.

Now on to our real estate investing education section…

Understanding the Time Value of Money – Why Short Sales Still Make Sense

Deflation or Inflation? Chances are whichever side of the debate you happen to be standing on at the moment you are in good company. The government experts are readily printing money out of thin air…and actually admitted as much in recent weeks…while financial analysts, other governments around the globe and those with fixed incomes fear the rise of inflationary pressures. How could so many smart people have such a strong disagreement? It comes down to the time value of money. A topic of such importance it will have profound implications on the way you structure investments throughout your lifetime.

There are two primary methods used to determine the time value of money – Present Value and Future Value. Present value is what a dollar today is worth rather than the value compared to receiving it as some point in the future. For example, let’s assume you have an option to sell or hold a modest property purchased via short sale. To keep the calculations and comparisons simple, we will further assume the property is paid in full.  You are reasonable positive you could pocket $100,000 by selling the property outright but wanted to know if this was your best option.

Typically, future dollars are worth less than present dollars due to inflationary pressures. The entire purpose of the Federal Reserve is to assure a steady supply of funds including controlled inflation (defined in the 1-3 percent range). So for example, if the rate of inflation was rising at 3 percent annually the value of $100,000 would be only $74,400 in only ten years.  Wait 20 years and that same $100,000 is only valued at $55,000. Bump up the rate of inflation to 5 percent and $100,000 drops to only $61,000 in ten years and only $37,000 in 20…now you know why lottery ticket discount so much if you take the lump sum payment up front! Ditto for insurance companies.

Short sale investors should immediately realize money printing combined with the ability to use leverage in the form of loans can dramatically increase the ability to generate cash today – not ten or twenty years into the future. In fact, the more excess cash (above what is needed to pay your bills and service debts) you generate today, the better especially during times of inflation. If inflationary pressures hit the levels seen in the 70’s take a look at what happens …$100,000 turns into $42,000 within ten years and only$14,000 by year 20. What originally would pay for a modest home will eventually only be enough to buy a used car without taking steps to preserve your wealth.

Rarely, a reversal takes place where future dollars may become more valuable than current dollars as is sometimes seen during a deflationary cycle. That is what the government fears most since it would make it more costly to pay back all the loans and debt obligations – a cost so high it could jeopardize the foundation of the nation. However, the current deflationary concern is a temporary one at best. The Federal Reserve has repeatedly stated they expect the deflationary aspect of this current crisis to cool by the end of 2009 to 2010…listen carefully – unlike what many “think” they hear…the government and Fed Reserve is not claiming the pain will be over…only that the current deflationary spiral will come to an end. The lack of investment grade returns is unlikely to resume its former hay-day for quite some time while employment continues to lag. Both add up to very real pain as Americans are unable to make a profitable investment or keep pace with their standard of living from lagging wages.

Bottom Line: This is a once in a lifetime buying opportunity unlikely to last forever. Act before it is too late.

See you at the top!

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html  

P.S.

Don’t miss out webinar Tuesday at 8:30 PM ET, 5:30 PM PST:

https://www2.gotomeeting.com/register/745206430

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

http://www.shortsalescoach.com
http://www.shortsalesriches.com
http://www.reomillionaireclub.com 
http://www.sixfigurebpo.com *************************************************
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 flipping of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties

    * Owner and Supervising Broker of one of Florida’s
     largest Real Estate firms, running 4 different
     offices, supporting nearly 450 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

     * On twitter: http://twitter.com/mclaughlinchris
     * On facebook: http://www.facebook.com/addfriend.php?id=709199143

—