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

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HAMP found lacking, again

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

 Retail sales up

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

 BOA finds new way to profit

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

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

 Frugality?  Not so much

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

 WSJ – it’s taking longer to foreclose

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

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

 Two more banks prepare to pay back TARP

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

 CNBC’s Olick – negative equity

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

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

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

 Now for our real estate education section…

 Blind-Sided by Insufficient Short Sales Advertising?

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

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

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

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

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

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

See you at the top!

 Chris McLaughlin
**************

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

http://www.smartrealestatenews.com (subscribe to this newsletter)

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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 September 20, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

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*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

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Shadow inventory, short sales rising

As the approximate 2.5 million homes in foreclosure complete the process, national delinquencies will fall, and REO inventory and short sales are expected to trend upward, according to a report released today by John Burns Real Estate Consulting.  There are currently 562,000 bank-owned homes and 2.5 million mortgages more than 90 days delinquent in the market.  Single-family starts as well as single-family and multi-family permits were down in August, leaving total completions last month 33% lower  than July, at 587,000 units.

Foreclosures grew by 4% month-over-month.  Shadow inventory is inevitably growing and affecting the market already hit hard by high levels of distressed mortgages, such as Stockton, Calif. and Orlando, Fla., which have an excess supply of inventory already. According to John Burns’ data, the two cities have a 27 shadow months supply of homes, 22,344 and 81,309 homes, respectively.  CoreLogic reported that national home prices in July remained steady, but existing home sales decreased 2.6% in August compared to July, according to the National Association of Realtors. New home sales dropped 12% over the same period.

Will raising taxes kill business?

Republicans say raising taxes on the wealthy would cause small businesses to pull back on hiring. Many leading Democrats say that’s nonsense. Who’s right?  Obama wants to raise income tax rates on individuals making more than $200,000 and joint filers making $250,000 and up. That would affect 3% of all taxpayers who report business profits (known as “net positive business income”) on their individual tax returns, according to estimates by the Joint Committee on Taxation, the tax gurus on Capitol Hill.  All told, we’re talking about approximately 750,000 individuals.  How much small business income does that small minority generate?  Next year, an estimated 50% of all business income reported on individual returns will be generated by that small minority of taxpayers who file at the top two rates, the JCT estimates. 

Republicans contend that hiking taxes on even a small group of business owners — because they create a large amount of small business income — will discourage them from hiring. And it might discourage them from investing in other ways in their businesses. The ripple effect: The companies they might have bought equipment or services from will also take a hit.  The end result: fewer jobs are created.  Mari Adam is a certified financial planner who counts small business owners among her clients, and she herself runs a small business. She’s also a Democrat who believes taxes will have to go up. But she’s opposed to that happening in the near-term.  “It’s the context that they’re raising taxes in,” Adam said. “You sense you’re being assaulted from every direction.” 

Business income, home values and investments are all down, Adam noted. Meanwhile, a number of federal and local tax measures have been passed or proposed that could be a hit to small business owners for years to come.  There’s a new requirement, for instance, that they issue far more 1099s than they used to. By 2013, a high-income business owner will have to pay more Medicare tax on her wages and those of her employees. Plus, her investment income will be subject to the Medicare tax for the first time.  Until small business owners’ personal income recovers a bit, Adam believes, they’ll be reluctant to hire or expand.  “None of these [tax] measures is enough, in itself, to put you out of business,” she said. “All these things are cumulative. … The psychological impact of a tax increase now should not be underestimated.”  “It’s like the frog in boiling water. If you keep turning up the temperature, the frog won’t jump out, but eventually you do kill it.”

Olick – More stimulus or not?

“I’m not sure if it’s politics alone or the politics of economic prediction, but I’m seeing an awful lot of ‘revised’ housing expectations as we head into fall.  Chief economist of Fannie Mae Doug Duncan writes, ‘The large pullback in home sales after the tax credits’ expiration suggests weakening home prices in the third quarter.’  He calls a housing bottom, ‘elusive,’ and revises his 2010 projection of basically flat home sales to -7.4 percent.  And then came Moody’s ‘ResiLandscape’ report for September. The headline: ‘A Longer and Deeper Housing Correction’ Thanks to the end of the home buyer tax credit, ‘The housing market’s nascent recovery is back-sliding into a double-dip,’ says author Celia Chen. And so Moody’s has revised its forecast for a home price bottom from Q1 of 2011 to Q3 of 2011. ‘Prices will descend until distress sales represent a smaller share of total home sales,’ writes Chen.  I don’t pretend to be an economist, but didn’t everyone predict a fall-off from the end of the home buyer tax credit? (We saw it after the end of the first credit last Fall).”

“Haven’t we been watching the poor performance of the Administration’s mortgage bailout? Did I miss something about a surge in new employment?  On Monday CNBC will hold a town meeting with President Obama, and I’m sure someone will ask him whether or not he believes we need more government stimulus in housing.  So far the President has left most of the housing talk to his troops at Treasury and HUD.  The arguments for and against government stimulus in housing are both strong, and the price to pay for both is high. Either we let housing go through a long and painful correction or we continue a cycle of artificially stimulated boost and bust, as was the case with the tax credit.  I guess that’s why it’s so hard for all these economists to stick to their forecasts.”

Banks hurting

Inside the great investment houses on Wall Street, business has taken a surprising turn — downward.  After an unusually sharp slowdown in trading this summer, analysts are rethinking their profit forecasts for 2010.  The activities at the heart of what Wall Street does — selling and trading stocks and bonds, and advising on mergers — are running at levels well below where they were at this point last year, said Meredith Whitney, a bank analyst who was among the first to warn of the subprime mortgage disaster and its impact on big banks.  Worldwide, the number of stock offerings is down 15 percent from this time last year, while bond issuance is off 25 percent, according to Capital IQ, a research firm. Based on these trends, Ms. Whitney predicts that annual revenue from Wall Street’s main businesses will drop 25 percent, to around $42 billion in 2010, from $56 billion last year.  Trading in shares listed on the New York Stock Exchange was down by 11 percent in July from 2009 levels, and August volume was off nearly 30 percent. 

“What’s happened in the third quarter is that after a very slow summer, people expected things to come back,” said Ms. Whitney. “But they haven’t, and the inactivity is really squeezing everyone.”  The downward slide on Wall Street parallels a similar shift in the broader economy, which has slowed considerably since showing signs of a nascent recovery this spring. And if banks come under pressure, all but the safest borrowers may struggle to get loans.  With less than two weeks to go in the third quarter, companies will be hard-pressed to fulfill earlier, more optimistic expectations.  “It’s like the marathon: if you’re five miles behind, you can’t make that up in the last 10 minutes of the race,” said David H. Ellison, president of FBR Fund Advisers, a money management firm that specializes in financial companies. Many banks are barely scraping by in traditional Wall Street business.

Wall Street Journal – 10 reasons to own a house

1. You can get a good deal. Especially if you play hardball. This is a buyer’s market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired.

2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What’s not to like? These are the lowest rates on record.

3. You’ll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you’ll get a tax break on capital gains—if any—when you sell.

4. It’ll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension—zoning permitted—or paint everything bright orange.

5. You’ll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos.

6. It offers some inflation protection. No, it’s not perfect. But studies by Professor Karl “Chip” Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year.

7. It’s risk capital.  No, your home isn’t the stock market and you shouldn’t view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too.

8. It’s forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won’t. Most, I dare say.

9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes.

10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes.

Now for our real estate education section…

Monday Myth-Buster: OPM

“The great enemy of the truth is very often not the lie – deliberate, contrived and dishonest – but the myth – persistent, persuasive and unrealistic.”

John F. Kennedy

Myth:  OPM (Other Peoples’ Money) is Best Avoided for Foreclosure Investing

Fact: Using OPM is the preferred method of investing in real estate and locating a solid source of investment funds is easy once you understand how to properly negotiate the terms.

Why Use OPM?

The use of OPM not only provides the greatest return on investment but provides the foundation that allows the purchase of meaningful deals. Let’s take a quick look at how this would work in real life.

Investor A decides to go it alone and sets aside enough money to purchase a $100,000 property for cash. Investor A feels great about this decisions since there is less headache and hassle associated with a cash transaction, s/he saves on closing costs and is able to keep 100% of the profits without the need to make expensive interest payments each month. Investor A sells the property for $135,000 for a tidy profit of $35,000 on the original $100k invested (for the sake of simplicity we are keeping this basic) or roughly 35%. Compared to the return most investors are getting on their money in today’s tough economy, Investor A looks like a genius!

Investor B also decides to purchase a $100,000 property while using a bank loan. S/he puts $20,000 down and takes out a mortgage for the remaining $80,000. This property is also sold for $135,000 but due to slightly higher transaction costs and loan servicing, there were an additional $5,000 in costs. The total profit is $30,000…less than that realized by Investor A in nominal terms but higher in relation to the total amount out of pocket.

Because Investor B only put $20,000 down, the total rate of return was 150% on the initial investment. In fact, using the same $100,000 out of pocket, Investor B could afford to purchase five properties for the same amount out of pocket and a total return of $150,000 versus only 35%. Compared to Investor A, Investor B now looks like a genius!

Investor C also decides to purchase a $100,000 property by maximizing the use of OPM. S/he only puts down $2,000 out of pocket and uses OPM to cover the other $98,000. The property also sells for $135,000 with $5,000 in expenses. Total profit is $33,000 on an original investment of only $2,000….obviously Investor C is the real genius! By using OPM, Investor C would be able to purchase up to 50 properties for the same $100,000 with a total return of over $1.5 million dollars. Pure Genius!

See you at the top!

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

Copyright Loss Mitigation Institute LLC 2010.

All Rights Reserved.

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

http://www.smartrealestatenews.com (subscribe to this newsletter)

*************************************************
About the author:

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

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month
   * Long-time authority on real estate investing
      and rapid reselling of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties
    * Owner of one of Florida’s largest Real Estate firms,
     running 4 different offices, supporting over
     400 agents, uniquely positioning him to help
     thousands of investors make money in the
     biggest market opportunity ever!
    * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building
    * Follow me on Twitter: http://twitter.com/mclaughlinchris
    * Join my Facebook Fan Page: http://www.mclaughlinchris.com
–

Smart Real Estate News & Commentary by Chris McLaughlin August 17, 2010

Forward this e-mail to your friends! 

Then they can subscribe directly at the following link: 

http://www.smartrealestatenews.com/

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

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

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

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

More mortgages behind on payments, but increase rate has slowed

Credit reporting agency TransUnion said today that in the three months ended June 30, the number of mortgage holders 60 days or more behind on their payments was 6.67%, Tuesday. That’s a big jump from 5.81% in the second quarter of last year, and well above the historical norm of 1.5% to 2%.  One positive sign is that the statistic reveals a slower rate of increase from the pace seen a year ago.  What’s more, it marks a marginal improvement from the rate of 6.77% recorded during the first three months of the year. It’s also below the 6.89% record reached in the fourth quarter of 2009. “We’re seeing signs of recovering in terms of delinquency,” said FJ Guarrera, vice president in TransUnion’s financial services unit. 

The data comes days after foreclosure listing firm RealtyTrac Inc. said the number of U.S. homes lost to foreclosure in July surged 6% from last year. That jump indicates that more banks stepped up repossessions to clear out their backlog of bad loans.  “A lot of foreclosures continue to work their way through the system,” Guarrera said. Although the delinquency data does look back a few months, it shows a slight improvement that could indicate foreclosures will start to slow, he said.  Witness to that there were 12 states that showed increased delinquency rates in the second quarter, whereas a year ago the figure worsened in nearly every state, Guarrera said.  Driving up the national rate are the four states hardest hit by the foreclosure crisis: Nevada, Florida, Arizona and California. In each of these, the rate is above 10%, with Nevada leading at 15.86%, compared to 13.8% a year ago. In Florida, the delinquency rate rose to 15%, from 12.3% last year.  The rates in Georgia, New Jersey, Maryland and Illinois are also above the national average.  North and South Dakota remain at the low end for the nation, at 1.61% and 2.23%, respectively.  Some states, however, have more trouble ahead, including Arizona, California, Florida, Georgia, and Nevada: The rate is expected to start falling by the end of this year, but remain above 10% through 2012.

New home construction rises as demand weakens

The Commerce Department says housing starts rose 1.7% from June to a seasonally adjusted annual rate of 546,000 last month.  Economists were expecting housing starts to rise to 555,000, according to a consensus estimate from Briefing.com.  On a year-over-year basis, starts fell 7% from July 2009.  Applications for building permits, a gauge of future construction activity, fell over the month. Single-family starts in July fell 4.2 percent in July, the lowest level in more than one year. 

Permits for new construction, a leading indicator of future building activity, fell 3.1% to 565,000 from 583,000 one month earlier — reaching the lowest level since May 2009. Economists had expected permits to post a figure of 580,000 for July.  “Starts are still well below the 630,000 plus level we were seeing right before the homebuyer tax credit expired at the end of April,” said Paul Ashworth, senior economist at Capital Economics.  “The bad news is that activity in the housing market is likely to remain depressed for several years,” he said in an email. “The ‘good’ news, however, is that housing is so depressed it is hard to see activity falling much further from such a severely depressed level.”  Meshing with the new home sales data, the National Association of Home Builders on Monday said that its index of home builder sentiment fell to a 17-month low amid growing concerns about the nation’s economy.

Big banks loaning to small business again

According to the Federal Reserve’s quarterly survey of senior bank loan officers, demand for business and consumer loans was unchanged, but large banks — those with assets greater than $20 billion — are easing their lending conditions.  But the July survey showed the first sign that credit was loosening for small businesses, a sector especially hard-hit during the recession.  Over the last quarter, small companies — those with sales of less than $50 million a year — found loan standards relaxing for the first time since 2006. 

Lending generally eased for consumers, but credit card loans were the exception, the Fed report said.  Changes in standards for credit card loans varied widely. Big banks — and a few other card issuers — generally eased up, while others said they tightened conditions.  In addition, a small fraction of banks said they had reduced the size of credit lines for existing customers. Still, the report said, “that fraction has decreased noticeably over the past few surveys.”

Olick – Reform Fannie and Freddie now?

“Financial industry leaders, academics, economists and dozens of TV cameras will meet in a room at the Treasury Department for the first public forum on reforming the two mortgage giants which have been bleeding cash while still controlling 70 percent of today’s mortgage market.  No question these two entities, Fannie Mae and Freddie Mac, which have cost the taxpayers at the very least $148 billion on paper, not to mention irreparable, continuing and costly damage to consumer confidence in housing, must not exist in their current state for the long term.  I just wonder if now, or even January, 2011, when the Treasury Secretary has promised to deliver a reform proposal to Congress, is the right time to take this on? The housing market is still in deep hangover from the home buyer tax credit, job losses and lack of improvement in the job market are pushing foreclosures back up, and consumer confidence is so low right now that even in economically healthy local markets, potential home buyers are sitting tight on the fence.  Granted, much of Tuesday’s motivation is political.

The administration, heading into the fall elections, has to look like it’s on top of the one big remaining issue in the financial collapse.  But politics have a funny way of wreaking havoc on the markets, and I don’t just mean the stock market, I mean the housing market as well. What we need now, above any more money thrown at housing, is a return of consumer confidence.  Americans need to believe in housing and in the ability of our economy to support housing. Taking down the only secure bastions of liquidity in today’s mortgage market, immensely flawed as they are, or at least having big public forums that generate headlines that make Wall Street traders think these two behemoths are coming down imminently, is, I believe, dangerous. Yes, government needs a plan for Fannie and Freddie, and no they should not exist as they are in the future. But is now really the time?

Producer prices rise

The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate rose 0.2 percent, in line with Wall Street analyst expectations, after dipping 0.5 percent in June.  In the 12 months to July, producer prices increased 4.2 percent after rising 2.8 percent in May. The year-on-year increase was also in line with forecasts.  Separately, the Federal Reserve reports that output at the nation’s factories, mines and utilities increased 1.0 percent last month.

But it says June’s results were revised to a loss of 0.1 percent, reflecting the economy’s sluggishness.  Factory output grew by a robust 1.1 percent in July, helped by auto plants that kept operating when they normally shutter for summer renovations. Factories are the largest single component of industrial production.  The strong manufacturing growth should ease fears that the economy could begin to shrink again. The nation emerged a year ago from its deepest recession since the Great Depression.

Now for our real estate education section…

How to Access & Use the LIHTC

Never heard of the LITHTC? Don’t worry…even many seasoned real estate professional rank as mere novice users when it comes to the Low Income Housing Tax Credit data. However, not only is this a robust resource but also a potentially valuable one for those investors or professionals interested in applying for low income tax credits.

How to Access the LIHTC Database

To access the Low Income Housing Tax Credit database or learn more about the various programs, visit http://litch.huduser.org

Users can select from a variety of variables including a specific city, range, dates or other pertinent search queries.

Research

The LITHTC database contains over 31,250 different projects with over 1,840,000 units. Available research information includes project location, census tract, longitude/latitude, geo codes, county, state, zip, contact information for each project sponsor, total number of units and form of credit eligibility, unit distribution by rooms, type of construction, for profit or non-profit status, tax exemption plus much more.

Who may be interested in this? Obviously researchers interested in social service needs as well as small business owners, developers and even investors searching for historic norms that compare to their own area.

Other Cool Features

Take a few minutes to look around while on the site because there is a lot of terrific information available. For those interested in building or rehabilitating real estate in accordance to low income tax credits, find out if your building is eligible or to apply visit http://www.hud.gov/offices/cpd/affordablehousing/training/web/lihtc/basics/

To learn more about income and rent limits in your area, visit:

http://www.danter.com/TAXCREDIT/getrents.HTML

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

*** Join Chris’ Facebook Fan Page–> http://www.mclaughlinchris.com

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The Millionaire Real Estate Investor Jet Experience

If you’ve ever wanted to fly on a Legacy 600 private jet… be whisked away from the tarmac in a limo, to your luxury hotel, where they pull

back the velvet cord for you….and spend quality time with Chris

McLaughlin and Nathan Jurewicz while on the jet…

 

Then this will be the most exciting webinar you’ve ever been on!

 

Join us at 11 AM ET Tuesday to learn all about this amazing contest:

https://www2.gotomeeting.com/register/464038107

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

House Prices Up 5.1 Percent in April Amid Slower REO Growth

Home prices in April gained 5.1% from last year, while REO levels across the country slowed their climb, according to the real estate data provider Clear Capital. The firm measures home prices on a rolling three-month period. REO took up 29.6% of the market in April, less than a percentage point of growth from 28.9% in March when levels increased from 26.1% in February.  The best performing markets manage to post positive gains as the tax credit expired in April. Alex Villacorta, senior statistician at Clear Capital, said an interesting dynamic their seeing is the distinction between markets that resist increased levels of REO and those that remain sensitive to them. “For example, the highest performing metro areas have seen prices remain relatively flat over the last quarter despite REO saturation rates averaging just above 33 percent. Contrast this with the lowest performing areas which have seen prices drop dramatically with average declines of more than 10 percent and average REO saturation rate less than those in the highest performing areas,” Villacorta said. “This paradox suggests that price trends are not wholly dependent on distressed sale volume, and re-enforces the need to understand local market trends.”

Costly Glitch as Investors Lose Billions 

The glitch that sent markets tumbling Thursday was years in the making. The old system of floor traders matching buyers and sellers has been replaced by machines that process trades automatically, speeding the flow of buy and sell orders but also sometimes facilitating the kind of unexplained volatility that roiled markets Thursday. In recent years, what is known as high-frequency trading — rapid automated buying and selling — has taken off and now accounts for 50 to 75 percent of daily trading volume. At the same time, new electronic exchanges have taken over much of the volume that used to be handled by the New York Stock Exchange. In fact, more than 60 percent of trading in stocks listed on the New York Stock Exchange takes place on separate computerized exchanges.

The Securities and Exchange Commission and the Commodity Futures Trading Commission said they were examining the cause of the unusual trading activity.  Mary L. Schapiro, chairwoman of the S.E.C., and Gary Gensler, the head of the C.F.T.C., held conference calls with overseers of the exchanges who were reviewing trading tapes from the day.  The source remained unknown, but that jolt apparently set off trading based on computer algorithms, which in turn rippled across indexes and spiraled out of control.  Many firms have computers that are programmed to automatically place buy or sell orders based on a variety of things that happen in the markets. Some of the simplest triggers are set off when a stock drops or rises a certain percent in the trading day, or when an index moves a specific amount. But these orders can have a cascading effect.  Some circuit breakers do exist, a legacy of the reforms made following the 1987 stock market crash, but they only kick in after a huge drop — and only at certain hours. Though glitches in individual stocks have happened before, the scale of the problem on Thursday was different, as it moved hundreds of stocks sharply at the same time, many of them blue chips that form the foundation of individual investors portfolios as well as major indexes like the Dow and the Standard & Poor’s 500-stock index.

Diana Olick –  Freddie Mac Proves: Govt. Can’t Bail on Housing Now

“Freddie Mac’s request for an additional $10 billion in aid from the Federal Government, coming at the same time that the current and former Treasury Secretaries testify before the Financial Crisis Inquiry Commission, has debate swirling once again around GSE reform.  Let me preface by reiterating what everyone from Secretary Tim Geithner on down has said: It isn’t going to happen any time soon because of the fragility of the housing market. But it’s just that fragility that we have to dig into a bit deeper, and you find it in the Executive Summary section of Freddie’s 10Q: We estimate that home prices decreased nationwide by approximately 0.9% during the first quarter of 2010 based on our own index of our single-family credit guarantee portfolio. Our assumption for home prices, based on our own index, continues to be for a further decline in national average home prices over the near term before any sustained turnaround in housing begins. I was alerted to this by the office of Congressman Darrell Issa (R-CA), the ranking member of the House Committee on Oversight and Government Reform, who has been highly critical of the Administration’s housing bailout. ”

Olik continued: “There is definitely more demand and more confidence in the housing market today than there has been in a long time, and that is causing more organic home sellers to finally bite the bullet and put their homes up for sale, not because they have to, but because they want to. While inventories historically always rise in the Spring, this Spring the increase is nearly twice the norm. Add that to the shadow supply that Freddie’s report suggests is working its way through the government’s flawed loan modification program, and you can see where home prices will still be under considerable pressure. So while Republicans try to jam GSE restructuring onto the financial services reform bill, the fact is that tinkering with those two at this point in housing’s shaky recovery would be something close to negligent. Face it, there is not much propping up the housing market today, outside of the government; pulling the government out of the mortgage market at this point is a great debate, but that’s all it can be, a debate.”

Plan for Congressional Audits of Fed Dies in Senate

Last-minute maneuvering in the Senate allowed the Federal Reserve to sidestep legislation that would have exposed its interest-rate decision-making to congressional auditors. Sen. Bernie Sanders (I., Vt.) pushed a provision that would’ve largely repealed a 32-year-old law that shields Fed monetary policy from congressional auditors.  It was gaining momentum despite opposition from the Treasury and the Fed.  In the past, a House bill sponsored by Rep. Ron Paul (R., Texas) that passed in December contains a proposal similar to the original Sanders measure. If the Senate bill passes, it will need to be reconciled in a conference committee. That keeps the pressure on the Fed alive for the coming months. 

But for now, the compromise, endorsed by Senate Banking Committee Chairman Christopher Dodd (D., Conn.) and the Treasury, would require the Fed to disclose more details about its lending during the financial crisis. It would also require a one-time audit of those loans and a one-time review of Fed governance. A formal vote was pushed back until next week. Thursday’s Senate showdown came after senators on the left and right joined forces to support Mr. Sanders’ provision.  Fed Chairman Ben Bernanke, while insisting on a commitment to “openness” at the Fed, said in a letter to Congress the Sanders measure would “seriously threaten monetary policy independence, increase inflation fears and market interest rates, and damage economic stability and job creation.” Anil Kashyap, an economist at the University of Chicago’s Booth School of Business said, “There are times when you have to start raising interest rates before the economy’s recovering. If you’re going to get audited while you do that, you know you’re going to be slower—meaning we’re going to tolerate higher inflation.”

Wall Street Journal – Housing Inventory Rises in Many Cities

The number of homes listed for sale grew in many metropolitan areas in April. The supply of homes available for sale in 27 major metropolitan areas at the end of April was up 2.6% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The ZipRealty data cover all single-family homes, condominiums and town houses listed on local multiple-listing services in metro areas where the firm operates. On a national basis, inventories typically rise in April from the March level as people put houses on the market for the busy spring home-shopping season. Over the past 27 years, the average increase in April has been about 5%, according to Ivy Zelman, chief executive of Zelman & Associates, a research firm. Compared with the year-earlier month, the April inventory in the 27 metro areas covered by Zip was down about 9.6%. These inventory data don’t capture the entire potential housing supply. Around eight million households are behind on their mortgage payments or in the often lengthy process of foreclosure. Many of those homes eventually are likely to be put on the market as banks foreclose or owners are forced to sell.

As Markets Get Hammered, Mortgage Finance Stocks Dip

The Dow Jones fell today nearly 1,000 points before clawing back some of its losses, and the London-based FTSE also dipped for the fourth day in a row, as American and European financial markets faced the spectre of negative overhang from the debt crisis in Greece. The Nasdaq and S&P 500 also were on the decline, according to MarketWatch, in a reverse of the recent bull-run. And as HousingWire’s real-time mortgage finance Dow tracker indicates, money in the market moved away not only from the big banks and lenders but the GSEs as well: The Dow rebound continued as above to close down 347.8 points, at 10,520.32.  Traders in the Markit iTraxx SovX Indices, a family of sovereign CDS indices covering countries across the globe, also experienced negative activity. “The bailout we wished for so hard came and seems to have passed without having the desired impact. This is a much bigger crisis than the Lehman one, but the market has yet to recognize it,” said Suki Mann, a credit strategist at Société Générale.Mann

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Now on to our real estate investing education section …

Friday File – 15 Minute Real Estate Investor Resolution

Earlier this week we spent some time discussing the potential ramifications related to the passage of HR 2499…the Puerto Rico Democracy Act of 2010 as well as resources for securing foreclosure and REO data of the recent FDIC bank take-over’s.

Whether you agree or disagree with the proposal, the entire issue provides valuable food for thought when it comes to evaluating your marketing message.

For example, did you know that…

- One of every seven people in the United States is of Hispanic origin.

- Hispanics are now the largest minority in the United States even though they are not comprised of a single ethnic or racial group.

- Roughly 70 percent of the Hispanic population reside in one of the following five states: California, Texas, New York, Florida and (surprisingly) Illinois.

- An estimated two-thirds of population growth projected to take place in the United States over the next decade will be born by Hispanics alone. By 2050, the Census projects that 1 out of every 4 people in the United States will be Hispanic compared to less than 1 of every 6 for African American/black persons.

- Hispanic purchasing power is growing at two-times the rate of the general public.

For this week’s fifteen minute short sale resolution, take time to evaluate your marketing message.

1. Do your visuals include a multi-cultural appeal or are they relatively homogenous?

2. If you buy or sell property in one of the top five states mentioned above, do you directly appeal to this growing market via alternative language materials or a sales professional versed in working with a Spanish speaking market?

3. Have you teamed-up with pertinent contacts in the Latin American market…for example, realtors or brokers in Puerto Rico, Mexico and other locations?

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 

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
–