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The Norris Group Real Estate News Roundup 12/16/09

Wednesday, December 16th, 2009

Today’s News Synopsis:

The Wall Street Journal reports that people are increasingly willing to abandon mortgage payments for becoming renters, housing starts climb almost 9%, the FDIC offers some reprieve from securities accounting rules for the next year, and the Bureau of statistics released their real earnings report stating that average hourly earnings fell by .5%.

In The News:

DSNews - “Trulia and RealtyTrac Release Survey Results of Homebuyers’ Attitudes Toward Foreclosures” (12-15-09)

“n Tuesday, Irvine, California- based RealtyTrac and Trulia Inc., headquartered in San Francisco released the results of a new survey revealing insights to how consumers feel about purchasing a foreclosed property, conducted on their behalf by Harris Interactive, a market research firm based in New York City. Beginning in May 2008, the survey has been conducted every six months, making this the fourth survey of its type.”

Wall Street Jounral – “American Dream 2: Default, Then Rent” (12-16-09)

“People’s increasing willingness to abandon their own piece of America illustrates a paradoxical change wrought by the housing bust: Even as it tarnishes the near-sacred image of home ownership, it might be clearing the way for an economic recovery.”

Mortgage Brokers Association – “Mortgage Applications Increase Slightly in Latest MBA Weekly Survey” (12-16-09)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending December 11, 2009. The Market Composite Index, a measure of mortgage loan application volume increased 0.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.3 percent compared with the previous week.”

Bloomberg – “Housing Starts in U.S. Climb 8.9% to 574,000 Pace “ (12-16-09)

“Builders in November broke ground on more U.S. homes, a sign the recovery in homebuilding may carry through into 2010. Housing starts rose 8.9 percent to an annual rate of 574,000, the Commerce Department said today in Washington. Building permits, a sign of future construction, climbed to the highest level in a year.”

DSNews – “FDIC Offers Reprieve for Securities Accounting Rules” (12-16-09)

“The FDIC has finalized a new regulatory capital rule that will give lenders who package and resell mortgages a little breathing room when it comes to accounting for these assets on their books. The federal agency’s rule directly addresses FAS 166 and 167, which beginning January 1, 2010 moves most securitizations – including residential and commercial mortgage-backed securities – back onto the issuer’s balance sheet. Banks had pushed for a three-year transition period to phase in the new accounting directives. The FDIC gave them 12 months.”

DSNews – “HUD Establishes Standards for State Compliance with SAFE Act” (12-16-09)

“On Tuesday, HUD announced the publication of a proposed rule setting the minimum standards that states must meet in licensing loan originators to comply with the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (Safe Act). The proposed rule was posted in Tuesday’s federal register and on HUD’s website.”

National Mortgage Magazine – “NAMB forms Legislative & Regulatory Action Fund to protect broker industry” (12-16-09)

“The National Association of Mortgage Brokers (NAMB) has announced the launch of its Legislative & Regulatory Action Fund to collect donations that will be used for protecting the interests of the mortgage broker industry. The mortgage broker profession has underwent extensive scrutiny and is being portrayed unfavorably in the mainstream media, as the housing industry undergoes sweeping legislative and regulatory initiatives to stimulate the economy and implement safeguards aimed at preventing another housing bubble. NAMB has worked hard to defend mortgage brokers against deceptive and misleading information, and has been successful in many instances. NAMB continues the fight to protect and preserve your industry.”

Housing Wire – “Fed Orders Credit Suisse to Cease and Desist” (12-16-09)

“The US Department of Treasury’s Office of Foreign Assets Control (OFAC), along with the US Department of Justice and the New York County District Attorney’s Office, separately announced a $536m settlement with Credit Suisse. The firm will pay $268m each to the US and to New York.”

Housing Wire – “FDIC OKs Delay of FAS 166, 167 Effect on Capital” (12-16-09)

“The board of directors at the Federal Deposit Insurance Corp. on Wednesday finalized a new capital rule that addresses industry concerns raised by Financial Accounting Standards (FAS) 166 and 167. FAS 166 and 167, which take effect in January, will require financial institutions to bring certain securitized assets onto balance sheets.”

Bureau of Labor and Statistics – “Real Earnings” (12-16-09)

“Real average hourly earnings fell 0.5 percent from October to November, seasonally adjusted, the Bureau of Labor Statistics reported today. A 0.5 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) more than offset a 0.1 percent increase in average hourly earnings for production and nonsupervisory workers.”

HUD – “Shopping for Your Home Loan” (12-16-09)

“The Real Estate Settlement Procedures Act (RESPA) requires lenders and mortgage brokers to give this booklet to buyers within three days of applying for a mortgage loan. RESPA is a federal law that helps protect consumers from unfair practices by settlement service providers during the home-buying and loan process.”

Looking Back:

One year ago, the California Association of Realtors projected a 12.5% increase in California real estate prices for 2009 with the prediction that REOs would be absorbed in 2009. The National Association of Realtors came out with concerns on the commercial real estate forecast and Bloomberg reported that the cost of credit writedowns topped one trillion.

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The Norris Group Real Estate News Roundup 12/15/09

Tuesday, December 15th, 2009

Today’s News Synopsis:

According to MDA DataQuick, home sales decreased by 13.3 percent in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange County. The Federal Reserve plans to leave interest rates at the current record low. Research from Trulia and RealtyTrac shows that 43% of U.S. adults will consider buying foreclosed property. A survey from JBREC shows that 57 percent of home builders expect to receive more revenue in 2010 than 2009.

In The News:

DQNews - “Southland home sales and prices up” (12-15-09)

“A total of 19,181 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 13.3 percent from October’s 22,132, and up 14.7 percent from 16,720 for November 2008, according to MDA DataQuick of San Diego.”

San Francisco Chronicle – “Fed is expected to leave rates at record low” (12-15-09)

“The Federal Reserve is expected to leave interest rates at a record low this week. The big question is whether Chairman Ben Bernanke and his colleagues will hint about when they will reverse course and start boosting rates.”

Wall Street Journal – “Remaking Fannie and Freddie: Six Mistakes to Avoid” (12-15-09)

“While economic theory suggests that duopolies can be highly competitive, there are strong disagreements on whether this applies to Freddie Mac and Fannie Mae.…While additional GSEs would undoubtedly enhance competition, it is important to recognize the trade-off between concerns over excess profits and market liquidity.”

Inman - “Zillow rolls out rental search” (12-15-09)

“One in four people who plan to move in the next three years say they intend to look at both for-sale and rental properties, Rascoff said, citing a poll by Harris Interactive.”

Housing Wire – “Fewer Buyers Consider Foreclosures: RealtyTrac, Trulia” (12-15-09)

“Fewer homebuyers are likely to consider purchasing a foreclosed property in the future, according to a survey conducted by the online real estate companies Trulia.com and RealtyTrac. Conducted in early November, 43% of US adults indicate they are at least somewhat likely to consider purchasing a foreclosed home, a drop from 55% in the same survey conducted in May.”

Housing Wire – “After ‘09 Housing Bottom, Builders Optimistic for ‘10″ (12-15-09)

“While Fitch maintains a negative outlook for US homebuilding in 2010, the John Burns Real Estate Consulting (JBREC) monthly builder survey showed optimism among 264 home building industry executives from public and private companies. The belief that builders will have increased community count, better orders and slightly higher prices has 57% of respondents planning for more revenue in 2010 than in 2009.”

Bloomberg - “Mortgage Originations to Fall 16% in 2010 as Stimulus Ends” (12-15-09)

“Mortgage originations probably will decline 16 percent next year as the homebuyer tax credit expires and the Federal Reserve winds down purchases of mortgage-backed bonds, according to a report by Keefe, Bruyette & Woods Inc.”

Looking Back:

One year ago, the NAHB reported that builder confidence was at an all time low. Zillow estimated that home price reductions would add up to a total of $2 trillion in losses. Research from HomeDex showed that the median price per square foot decreased to $196.

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The Norris Group Real Estate News Roundup 12/14/09

Monday, December 14th, 2009

Today’s News Synopsis:

Research from Barclay’s Capital shows that Fannie Mae’s losses may exceed $200 billion. Under new FHA rules, at least 50 percent of the units in a project must be owner-occupied.

In The News:

Housing Wire – “Multifamily Developer Fairfield Files for Bankruptcy” (12-14-09)

“Privately held multifamily real estate developer Fairfield Residential filed for Chapter 11 bankruptcy, the San Diego-based company said in an announcement on its Web site.”

Housing Wire – “Citi to Repay TARP as Treasury Sheds JPM Investment” (12-14-09)

“Citigroup (C: 3.75 -5.06%) on Monday revealed plans to repay $20bn of government funds through the Troubled Asset Relief Program (TARP)”

Housing Wire – “Amherst Sees ‘Inconsistent’ Triple-A Re-REMIC Ratings” (12-14-09)

“Residential mortgage-backed securities (RMBS) originally rated triple-A have been downgraded to below investment-grade levels, leaving investors with insufficient cash flows. Re-REMICs allow for maximized cash flows on downgraded bonds by re-tranching the original security into a new, properly enhanced triple-A security and a junior bond, according to Amherst.”

Housing Wire – “Fannie Mae Losses May Exceed $200Bn: BarCap” (12-14-09)

“Eventual losses at mortgage giant Fannie Mae (FNM: 1.10 +5.77%) could exceed $200bn, posing a risk of receivership after year-end when limitations on the Treasury Department’s authority to support the agencies return, according to research Friday by Barclays Capital (BarCap).”

Bloomberg – “‘Substantial’ Bank Losses Needed to Fix Housing, Goodman Says” (12-14-09)

“Banks will need to take ‘substantial’ writedowns on home-equity loans to enable loan modifications that will allow the U.S. housing market to recover, according to Amherst Securities Group LP. The government’s existing mortgage-modification program will fail to avert many of the 9 million to 10 million looming foreclosures because it doesn’t reduce principal for borrowers, about a quarter of whom owe more than the current value of their houses, Laurie Goodman, a mortgage-bond analyst at Amherst”

Inman - “4 hot real estate tech tools” (12-14-09)

“With Boopsie, you don’t have to type in a URL, wait for your browser to load the URL, and then enter the address or click on a map and wait for those to load as well. Instead, Boopsie uses your phone’s GPS to pull the 10 nearest properties. For agents, it also provides MLS details, key box locations, as well as the listing broker’s contact information. Boopsie also provides one-click access to nearby closed and pending sales, backup offers and leases. At the NAR trade show, Boopsie loaded all this information in about two seconds.”

Orange County Register – “South coast sees gain in distressed homes” (12-14-09)

“Two weeks ago, Dana Point’s percentage of foreclosures and short sales was 22.4%, which has risen slightly to 22.6%. Laguna Beach also saw an increase in distressed inventory. The city’s percentage of distressed inventory rose to 8.6% from 7.7% two weeks ago.”

Realty Times – “Washington Report: FHA Condo Rules” (12-14-09)

“FHA won’t insure mortgages in buildings or complexes where less than 30 percent of the units haven’t already been sold. At least 50 percent of the units in a project must be owner-occupied or sold to purchasers who intend to occupy them. ”

Realty Times – “Stop Before You Reduce the Price” (12-14-09)

“Take a really close look at what IS selling in the neighborhood or market area. Can you identify any common denominators among the selling listings versus the non-selling ones? Maybe all the sales are of four-bedroom homes and your listing has three. Maybe it’s the two-story models that are selling and yours is a ranch. You can’t fix that, of course, but it might help you understand (and explain to your seller). ”

Looking Back:

The Federal Reserve cut interest rates to 1 percent. The median single-family hoe price in San Francisco fell 16.6 percent in October. Nancy Pelosi announced Senate plans for a $500 billion economic stimulus plan.

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The Norris Group Real Estate News Roundup 12/11/09

Friday, December 11th, 2009

Today’s News Synopsis:

Mark Greene of FICO forecasts that credit-card and mortgage defaults will increase during the next six months. Former director of the FHFA James B. Lockhart III, claims that the housing downturn may not be finished. Statistics from both Moody’s Investors Service and Fitch Ratings show that the default rate for CMBS increased during November.

In The News:

Mortgage Bankers Association – “MBA Comment on Passage of Regulatory Reform” (12-11-09)

“Regrettably, the House moved forward and passed a bill that could adversely impact borrowers and lenders alike. By not creating a uniform, national regulatory standard, the bill continues the conflicting and confusing patchwork of state and local laws that result in increased costs for borrowers.”

Bloomberg - “Mortgage ‘Cram-Down’ Amendment Fails in U.S. House” (12-11-09)

“The U.S. House rejected a mortgage ‘cram-down’ amendment that would have given federal judges the power to lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court. Lawmakers voted 241-188 today against the amendment, which was to be part of broader legislation reining in excessive risk taking on Wall Street. All but four of the Republicans who voted opposed the amendment, pulling with them 71 Democrats to defeat the measure.”

Bloomberg - “Defaults to Rise as Credit Issues Remain, Greene Says” (12-11-09)

“The next six months will bring more credit-card and mortgage defaults, said Mark Greene, chief executive officer of FICO, maker of the credit-scoring formula most widely used by U.S. lenders.”

Bloomberg - “Lockhart Says Housing May Take ‘Another Leg Down’” (12-11-09)

“James B. Lockhart III, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency, said the U.S. housing decline may not be over. Lockhart said at a conference in New York that he’s concerned there may be ‘another leg down’ because of the pace of foreclosures. Foreclosures will ‘spike’ unless the Obama administration’s programs to spur home loan modifications do more to reduce homeowners’ debts, he said.”

Housing Wire – “CMBS Delinquency Jumps Most in November: Moody’s” (12-11-09)

“The delinquency rate among US commercial mortgage-backed securities (CMBS) jumped in November, according to separate surveys by Moody’s Investors Service and Fitch Ratings. Moody’s saw a 46bps increase over last month’s delinquency rate — the largest monthly increase of the current downturn — bringing CMBS conduit and fusion loans to 4.47% delinquent.”

Inman - “Feds: BofA lagging in loan mods” (12-11-09)

“Bank of America — which has more mortgages eligible for the Home Affordable Modification Program (HAMP) than any other participating loan servicer — continues to lag behind the industry average in modifying troubled borrowers’ loans, according to the latest report from the Treasury Department. Through the end of November, Bank of America had made trial or permanent modifications on only 14 percent of the estimated 1 million HAMP-eligible loans it’s servicing that were delinquent by 60 days or more, the Treasury Department said”

Realty Times – “Short Sales May Rise Due to New Government Incentives” (12-11-09)

“‘The push right now is for servicers to avoid foreclosure and the push is coming not only from The Obama administration and the Treasury but also from the owners of the loans such as Fannie Mae and Freddie Mac. And the focus right now is on short sales. So, I think in 2010, you’re going to see a lot more short sales and hopefully reduced foreclosures,’ says Travis Hamel Olsen, chief operating officer of Loan Resolution Corporation.”

In The News:

One year ago, Bank of America announced plans to cut 30,000 to 35,000 jobs.  U.S. Regulator James Lockhart claimed that mortgage rates would fall below 4 percent. An estimated forecast from UCLA showed that home-price declines since 2006 had amounted to $4.5 trillion.

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152-TNG Radio – Hugh Bromma 12-12-09

Friday, December 11th, 2009

Hugh Bromma, CEO of Entrust

Hugh Bromma

CEO, Entrust

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This week Bruce is joined once again by Hugh Bromma. Hugh is the CEO for Entrust Group. The Entrust Group was founded in 1981. Hugh is recognized as an industry spokesperson in the self-directed market. Entrust provides tax enhanced services such as self directed IRAs, and qualified plans to tax payers. Entrust manages over $4 billion worth in assets.

Bruce begins by asking if any big changes are coming up in 2010 that will affect what people may do with their IRA. Anyone who wants to convert a traditional IRA to a Roth IRA may do so without any income caps. These converters may pay taxes over 3 years for the amount that they convert from their traditional IRA. Before, the income cap was $100,000, even if the traditional IRA was for a couple. Now a person with a very large IRA may convert to a Roth.

When you use a Roth, you do not pay any taxes. With a traditional IRA, you pay taxes as soon as you get distributions.

The government chose to formulate the Roth program because it allows them to be paid in advance. This program has made the traditional IRA fundamentally obsolete for people who want to pay taxes upfront on an asset that they know will depreciate dramatically.

To make the conversion from the traditional IRA to a Roth, you must pay taxes on both a federal and state level. Some states may have higher taxes than others. There are times when making a conversion is a bad decision. Anybody who contemplates a conversion should speak to a tax professional, because everyone’s tax situation is going to be different. One must determine whether it is advantageous to pay taxes up front or over time. If you have an asset in your IRA with a very low market value, but will appreciate tremendously, then it is probably a good idea to convert that asset.

If you are unsure of the value of your assets, then you should have it appraised, or you should hire a broker who will provide you values on comps.

Leverages are permitted when transferring from an IRA to a Roth. The debt is going to be a true non-recourse to the individual. The title and the debt of the properties in the IRA will be paid for, and signed by, the retirement account. There is an unrelated debt financed income tax, which may be paid on that debt portion. You must pay tax on the money that you borrow from your IRA, but the amount will be relatively insignificant.

The Roth IRA was established in 1998. Hugh Bromma has an expertise that Bruce does not think most people understand. Bruce has never been asked, “What are you doing with your Roth?” This surprised Hugh.

If you have an established Roth IRA, you cannot make a direct contribution to your Roth if your income exceeds $100,000. In 2010, if you drag a maximum contribution to your traditional IRA, then you will be able to pay the tax and make that direct contribution. This change in 2010 will be permanent.

Bruce did research on the highest tax rates in the U.S. since 1913. He was shocked to discover that 80 percent of the time, the top tax rate was over 60 percent. This scares Bruce and Hugh, and they fear that some high tax changes will take place in 2011.

At 59 and a half, if you have an established 5-year Roth IRA, then you can start taking distributions without penalties. If you start taking distributions prior to 59 and a half, or from an unestablished Roth, there is a 10 percent penalty for premature withdrawal. If you die, then your Roth IRA will still be subject to an estate tax.

With a Roth IRA, you cannot get a second home for personal use. Secondary homes may only be used for investment purposes. You cannot live in it, use it, personally repair it, or do property management on it. Cousins and in-laws are allowed to use a secondary home, but not your son, daughter or wife. You are also prohibited from hiring a son-in-law from rehabbing the home. The rules state that you are not allowed to receive a current benefit from your Roth assets. This rule includes yourself and someone that is related to you. Also, if you have ownership in an IRA or Roth then you may not use funds outside of that account for rehabbing or loan payments. If you do make a mortgage payment using money outside of your IRA, it is considered an excess contribution and it is reportable to the IRS. You will be forced to withdraw that mortgage payment by the next year, or you will be penalized for 6 percent of the amount of the infraction.

It is also against the rules to put money from your Roth account into a company that you are a manager of. If you own 10 percent or more of such a company then you are subject to penalization.

If people try to find a way around the rules, they are almost guaranteed to get caught. Some people who try to commit illegal transactions lose the entire value of their IRA. However, it is not considered a criminal act to commit an illegal transaction. Illegal transactions are punished through extreme taxes. Illegal transactions are a great benefit to the IRS, so there is no need for the IRS to prosecute.

Bruce thought of a creative transaction that might occur between two people: There are two investors who know each other, but are not partners in any business. They both buy properties at trustee sales. Buyer A buys a house using his own money, and then gives Buyer B the option to buy it for a dollar more than he paid. Buyer B fixes it, sells it, and the proceeds over the cost go to the Roth IRA of the other guy, and then the buyer receiving the benefit returns the favor. Bruce asks Hugh if this is an okay transaction. Hugh says that they must consider whether or not their transaction could be seen as a sham from the IRS. This transaction could be considered a sham, because its intent is to avoid paying taxes. It gets down to intent and Bruce decides to scrath that plan.

Bruce brings up leveraging with Options. Bruce talks about optioning land in the coming years and how that would be structured. Bruce knows someone who made $30 million on that plan, but it wasn’t in a Roth. If he had made that transaction in his Roth then the transaction would be legal. Options are one of the best uses for Roths. Options is one of the best plays that savvy Roth IRA investors use to increase their accounts.

Bruce’s Roth could have enough money to do a real estate transaction every month. He could fix properties and resell them 12 times every year. This may or may not be a problem with the IRA. If you are doing this kind of work professionally, and you are perceived as a dealer, then it is not illegal to do it within a retirement account. However, there may be dealer issues outside of the IRA. This is typically not a problem. One of the obligations you have for your individual retirement account is to make a lot of money. If you are using that money to make 10 option plays every year, then you will probably not have any issues. If someone uses their IRA to hire sales people for their property sales, then they will be labeled as a dealer. Richard Lipton has written a few articles on this subject.

If someone has a buy-sell operation with employees, but also has a Roth that does the same activity on a smaller scale, then that would probably be okay. Hugh is not completely certain about this, depends on their mood, but he considers the IRS to be reasonable in the tax courts.

Spec building is allowed with Roths, as well as land ownership and trust deed investment. Entrust needs a complete package before it cuts loose with an investor’s funds. The package is up to the IRA owner, but Entrust needs to make sure that you have an asset that can be titled in the name of the trust for an individual retirement account. Unfortunately, sometimes people will try to buy or sell a note, but they then discover that their note is actually a private placement or some other sort of asset. Buying an existing note and investing in a trust deed that is currently initiating involves the same fundamental process.

Bruce asks Hugh to describe the term “checkbook access”. A checkbook IRA is an LLC that is usually sold to someone from a lawyer. It is a single member LLC that is allowed to be owned by an individual retirement account. That LLC is run by the IRA owner. Hugh has discovered that many people use this system to make prohibited transactions. Entrust has developed a Real Checkbook IRA in which a person receives a debit card and a checkbook, which becomes an asset of their IRA. They may then buy their investments using that methodology.

Hugh Bromma’s website is www.theentrustgroup.com. Bruce and Hugh will be teaching together at an investment seminar on January 2nd.

The Entrust website can be found at www.theentrustgroup.com. January 22nd, Hugh and Bruce will be teaching together.

We’d like to thank Hugh Bromma and Entrust for sponsoring I Survived Real Estate 2009. Thank you!

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The Norris Group Real Estate News Roundup 12/10/09

Thursday, December 10th, 2009

Today’s News Synopsis:

According to RealtyTrac, foreclosure activity decreased  by 8 percent in November. Hanley Wood Market Intelligence reports that Orange County builders had their first positive month in October, after 13 months of contract declines. A survey from HomeGain shows that 48 percent of agents and brokers believe that home prices will stay the same, and 24 percent believe that prices will increase.  Data from the U.S. Treasury Department shows that 31,382 of the 1 million three-month modifications have become permanent.

In The News:

DSNews - “Foreclosure Activity Recedes for Fourth Straight Month: RealtyTrac” (12-10-09)

“The foreclosure tide appears to be subsiding, according to the latest numbers from RealtyTrac. The company said Thursday that foreclosure activity fell 8 percent in November, compared to October – it’s the fourth consecutive month that RealtyTrac’s data has shown a decrease in foreclosure filings.”

CBIA - “California New-Home Market Breaks into Positive Territory, CBIA Announces” (12-10-09)

“The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New-Home Sales and Pricing Report showed that sales in new-home communities of 10 units or more were 25 percent above October 2008, a strong improvement from the lingering year-over-year decline last month and represents the first notable increase since the start of the housing downturn. During October, 2,294 new homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 1,838 in October 2008. Sales of single-family homes were up by 4 percent, while sales of townhomes and ‘plexes’ – duplexes, triplexes, etc. – were up 36 percent and sales of condominiums were 94 percent higher than a year ago thanks to strong sales at projects in the Los Angeles and San Francisco areas.”

Orange County Register – “Losing streak ends for O.C. builders” (12-10-09)

“Hanley Wood Market Intelligence says after 13 straight months of annual declines in new home sales contracts, Orange County builders recorded their first up month in October. According to the Costa Mesa research firm, homebuyers signed 90 contracts to buy a new Orange County home that month, up 13.9% from October 2008.”

Inman - “Survey: Hopeful on home prices” (12-10-09)

“Forty-eight percent of agents and brokers surveyed think home prices will stay the same and 24 percent think prices will go up, the company reported. That’s a slight increase from the third-quarter survey, when those numbers were 46 percent and 23 percent, respectively. This marks a major change from HomeGain’s first-quarter survey when 36 percent thought prices would remain flat and 11 percent thought prices would increase. The survey had 928 respondents.”

Housing Wire – “30,000 Trial HAMP Mods Go Permanent” (12-10-09)

“Of the 1m homeowners who have been offered three-month trial modification under the Home Affordable Modification Program (HAMP), 31,382 have received a permanent modification, according to from the US Treasury Department.”

Housing Wire – “Mortgage Volume to Decline in 2010, Says Dorado” (12-10-09)

“Mortgage origination volume will decline next year compared to 2009 levels, but the use of software-as-a-service (SAAS) applications will rise, San Mateo, Calif.-based SAAS developer Dorado Corporation said in its projections for next year. Dorado projects more than 30% of mortgages created next year will be originated with SAAS applications, which generally work as Web-based tools a developer hosts on its own servers and distributes access through subscription licenses.”

Housing Wire – “Treasury Used $364bn of TARP funds in 2009″ (12-10-09)

“The Treasury Office of Financial Stability (OFS) used $364bn of the $700bn available funds, mostly in investments according to the report, and $73bn of the TARP funds have already been repaid. Bank of America last week committed to repaying the $45bn it received through the program.”

Housing Wire - “Mortgage Rates Rise off Record Lows” (12-10-09)

“Freddie Mac’s (FRE: 1.12 +0.90%) survey put the 30-year fixed-rate mortgage (FRM) at 4.81% with an average 0.7 point for the week ending Dec. 10, up from the previous week when it was a record low average of 4.71%. A year ago, Freddie Mac put the 30-year FRM at 5.47%.”

Bloomberg – “Wells Fargo Cuts as Much as 30 Percent in Principal” (12-10-09)

“Wells Fargo & Co., the bank that gained a portfolio of option adjustable-rate mortgages when it bought Wachovia Corp. last year, cut the principal for delinquent borrowers in some loans by as much as 30 percent. Wells Fargo has forgiven an average of $46,000 in principal, or 15 percent, for the 43,500 option-ARM loans it has modified this year through September, said Franklin Codel, chief financial officer at the bank’s home-lending unit.”

Looking Back:

One year ago, Orange County tax collectors reported that property tax collections decreased by $145 million. One hundred twenty-seven financial companies received preliminary approval for $60.4 billion from TARP.

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The Norris Group Real Estate News Roundup 12/09/09

Wednesday, December 9th, 2009

Today’s News Synopsis:

Gov. Schwarzenegger signed a bill which ensures that consumers may choose their own real estate service provider when purchasing a foreclosure. According to Zillow, Bay Area properties have lost 3 percent of their value during the first 11 months of 2009. 18 percent of FHA loans are either delinquent or in foreclosure. Statistics from Freddie Mac show that national home prices increased by .9 percent during the second quarter of this year.

In The News:

Managing REO – “Buyer’s Choice Act Signed Into Law” (12-10-09)

“Gov. Arnold Schwarzenegger has signed an assembly bill into law that protects consumers by ensuring that they have the right to choose their own real estate service providers when purchasing foreclosed properties. Also known as the Buyer’s Choice Act, the law prohibits sellers of REO properties from requiring the buyer to use a particular title company, escrow settlement or other real estate service provider. The Escrow Institute of California says this ‘unethical, anti-competitive practice’ drives up costs for homebuyers and takes business away from locally owned companies.”

San Francisco Chronicle – “Decline in home values levels off” (12-9-09)

“Homes in the nine-county Bay Area lost $38.1 billion in value in the first 11 months of this year, a 3 percent drop, according to real estate site Zillow.com. Gargantuan though that sounds, it’s a pittance compared with the $233.1 billion in home values wiped out in 2008, which was a 15.7 percent plunge from the previous year.”

Los Angeles Times – “Geithner: bailout program extended to October” (12-9-09)

“Money from the $700 billion taxpayer-funded bailout program has helped rescue big Wall Street firms, auto companies and others. That’s angered many Americans, who feel the government hasn’t provided them with relief from high unemployment and rising home foreclosures. Geithner said the Troubled Asset Relief Program that Congress passed in October 2008, will be extended until Oct. 3, 2010. He has the authority to extend the TARP simply by notifying lawmakers.”

Inman - “Home prices rise 0.9% in Q3″ (12-9-09)

“Home prices rose for the second quarter this year, according to Freddie Mac’s quarterly national Conventional Home Price Index (CMHPI) Purchase-Only Series released Tuesday, adding evidence the nation’s housing market is warming up. The government mortgage entity’s home-price-growth index rose 0.9 percent in the third quarter, following an upwardly revised 2 percent pickup in the second quarter. The increases of the past two quarters made up for about two-fifths of the declines registered during the final quarter of 2008 and the first quarter of 2009. U.S. home-sale prices were down 3.9 percent year-over-year.”

San Francisco Chronicle – “Condo rules could shut out buyers, hit builders” (12-9-09)

“The tighter lending standards are designed to protect the financial health of the FHA. Roughly 18 percent of loans insured by the FHA are either delinquent or in foreclosure and the agency’s financial cushion has dipped below the federal minimum. But the move is a blow to condo buyers because the FHA has become a key source of mortgage financing. The agency insures roughly one in four new loans today because buyers need only have a 3.5 percent down payment.”

Housing Wire – “‘Toxic Titles’ Worth Less than Cost of Foreclosure: Fed’s Duke” (12-9-09)

“‘In the most devastated neighborhoods, some lenders do not even complete the foreclosure process or record the outcome of foreclosure sales because the cost of foreclosing exceeds the value of the property,’ Duke said. These ‘toxic titles,’ she added, have placed a large number of properties in legal limbo. High rates of abandonment pushed many cities such as Flint, Mich. and Cleveland to pursue plans to ‘right size’ by demolishing vacant properties and create land banks, Duke said.”

Housing Wire – “Deutsche Sees New Year’s Surge of Fannie, Freddie Buyouts” (12-9-09)

“The pace of buyouts in delinquent loans in Fannie Mae (FNM: 0.92 0.00%) and Freddie Mac (FRE: 1.11 0.00%) mortgage-backed securities portfolios (MBS) is set to boom in 2010 as new accountancy rules come into effect, changing the nature of securitization.”

Mortgage Bankers Association – “Mortgage Applications Increase in Latest MBA Weekly Survey” (12-9-09)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending December 4, 2009. The Market Composite Index, a measure of mortgage loan application volume, increased 8.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 54.0 percent compared with the previous week, which was a shortened week due to the Thanksgiving holiday.”

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The Norris Group Real Estate News Roundup 12/08/09

Tuesday, December 8th, 2009

Today’s News Synopsis:

Chase Home Finance reports that 29 percent of its HAMP trial plans failed to become permanent. Research from Altos Research shows that home prices decreased in 24 of the 25 markets that the company observes. A credit analysis of 27 million consumers lead TransUnion to estimate that delinquencies of 60 days or more will drop 3 percent by the end of 2010.

In The News:

Housing Wire – “HAMP Must Address Second Liens, Congress Hears” (12-8-09)

“Mortgage servicing firms make money off servicing fees, which are based on the principal amount — a disincentive for reducing principal, Goodman said. Servicers are often owned by large financial institutions that hold second liens. If principal reduction is left up to the banks’ discretion, she said, the conflicting financial interests will likely restrict principal reduction, she said.”

Housing Wire – “Chase Converts 2% of Offered HAMP Trials into Permanency” (12-8-09)

“For every 100 HAMP trial plans initiated by Chase Home Finance from April to through September, 29 borrowers did not make the required payments and failed to reach a permanent status, according to testimony from Molly Sheehan, senior vice president at Chase Home Finance.”

Housing Wire - “List Prices Declined in 25 of 26 Markets: Altos Research Index” (12-8-09)

“The Altos Research 10-city index of home listing prices decreased 0.4% from October to November, and prices fell in 25 of the 26 major markets the Mountain View, Calif.-based real estate market research firm tracks.”

Housing Wire – “Prices Up For Second Straight Quarter in Freddie Index” (12-8-09)

“Home prices increased for the second straight quarter in Freddie Mac’s (FRE: 1.11 +2.78%) Conventional Mortgage Home Price Index (CMHPI). The purchase-only index increased 0.9% from Q209 to Q309, following a 2% increase from Q109 to Q209. The two quarters of increases are equal to about 40% of the declines experienced in Q408 and Q109. For the 12-month period ending in Q309, home sales prices were down 3.9%.”

Housing Wire – “Mortgage Delinquencies to Decrease in 2010: TransUnion” (12-8-09)

“Based on credit performance of 27m consumers, national credit bureau TransUnion projects mortgage delinquencies of 60 or more days to drop nearly 3% by year-end 2010 to 6.39%, from an expected 6.56% at year-end 2009.”

Housing Wire – “House Prices Lose 0.5% in October, IAS Says” (12-8-09)

“House prices continued to decline in October, falling 0.5% across the US, according to the latest data compiled by default management and residential collateral valuation service provider Integrated Asset Services (IAS). The Northeast and Midwest census regions both slipped (1.6% and 0.3% respectively) and the South and West regions gained a respective 1.1% and 0.5%.”

Bloomberg – “Calpers Real-Estate Holdings Decline 30% During First Quarter“ (12-8-09)

“The California Public Employees’ Retirement System, the largest state-run U.S. public pension, saw the value of first-quarter real estate holdings decline 30 percent and is terminating contracts with some investment firms behind the loss, a consultant for the fund said.”

Bloomberg – “Citigroup Said to Push for Bailout-Payback Agreement This Week” (12-8-09)

“Citigroup Inc. Chief Executive Officer Vikram Pandit is pressing the U.S. Treasury Department and regulators to agree as soon as this week on a plan to pay back $20 billion remaining from a government bailout, people familiar with the matter said.”

Inman - “SEC charges former New Century execs” (12-8-09)

“Three former executives of New Century Financial Corp. — one of the most prominent subprime lenders during the housing boom — have been charged with securities fraud for allegedly misleading investors.”

Orange County Register – “Will new appraisal rules hurt FHA borrowers?” (12-8-09)

“On January 1, 2010 FHA will require the Home Valuation Code of Conduct (HVCC) process for all appraisals, falling in line with Fannie Mae and Freddie Mac. For a multitude of reasons this will be tremendously negative for the market, for buyers and for sellers.  It will further depress property values, it will hinder sellers ability to get open offers and most importantly it will prohibit many FHA buyers from even having their offers looked at by sellers in multiple offer situations-even if they have higher offers.”

Looking Back:

One year ago, data from the 14 largest banks revealed that 53 percent of borrowers with modified mortgages were more than 30 days late on their payments after six months.  Statistics from DataQuick showed that Orange County home prices declined by 18 percent from 2007 to 2008. Delinquency rates for mortgage loans rose to 3.96 percent.

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The Norris Group Real Estate News Roundup 12/07/09

Monday, December 7th, 2009

Today’s News Synopsis

The MBA reports that delinquency rates increased during the third quarter for most mortgage investor groups. Bernanke claims that the recovery should continue for at least a year, but the U.S. still has some trouble to overcome. Six more banks were shut down Friday, which will cost the FDIC a total of $2.384billion.

In The News:

Mortgage Bankers Association – “MBA Report Shows Third Quarter 2009 Commercial and Multifamily Mortgage Performance Falls in Weakened Economy” (12-7-09)

“Delinquency rates continued to increase in the third quarter for most commercial/multifamily mortgage investor groups, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report.”

MSNBC - “Bernanke: Too soon to tell if recovery will last” (12-7-09)

“The Fed chief repeated his belief that the recovery will continue at least into next year. But he cautioned that the economy is confronting some ‘formidable headwinds’ — including a weak job market, cautious consumers and still-tight credit.”

Housing Wire – “TARP Costs Narrow as Treasury Sheds Capital One Investment” (12-7-09)

“Initial projections put the cost of the financial stabilization efforts at more than $500bn, which factored into the President’s budget in February. Of that projection, $300bn was expected directly from TARP, and another $250bn was included in the budget to cover needed resources beyond TARP’s $700bn.”

Housing Wire – “Fannie Prepays Plunge ‘Unexpected’ 6%: BarCap” (12-7-09)

“The prepayment rate among Fannie Mae (FNM: 0.91 -1.09%) 30-year notes slipped 6% ‘unexpectedly’ after the government-sponsored entity (GSE) suspended buyouts related to the Home Affordable Modification Program (HAMP), according to monthly commentary by Barclays Capital. The buyout delay in this month’s reporting period for Fannie indicates a spike in buyouts — and the prepayment speed — next month as mortgages are modified and withdrawn from mortgage-backed security (MBS) pools, according to researchers.”

Housing Wire – “Monday Morning Cup of Coffee” (12-7-09)

“Regulators shut down six banks Friday, bringing to total number of failed institutions to 130 this year. The total estimated cost to the Federal Deposit Insurance Corp.’s (FDIC) deposit insurance fund is $2.384bn.”

Housing Wire – “Mortgage Insurers Deny 20-25% of Claims: Moody’s” (12-7-09)

“Mortgage insurance rescission rates jumped to 20-25% in recent quarters, relative to historical 7% averages. Moody’s said mortgage insurers rescinded about $6bn of claims since January 2008 and could rescind another $2bn to $4bn of claims during the next few years.”

Orange County Register – “O.C. mechanics liens drop 23%” (12-7-09)

“The Real Estate Research Council of Southern California reports that in the third quarter the number of Orange County mechanics liens filed were 730 – that’s -23.4% vs. a year ago. Mechanics liens are typically filed when contractors working on a real estate property — home or commercial, new or old — go unpaid for their services.”

Orange County Register - “Hear why O.C. property tax collections jumped” (12-6-09)

“Considering the wave of the ugly economic news out there, we were surprised to learn that early Orange County property tax collections were up $54 million as the Dec. 10 deadline for first installment payments neared.”

Looking Back:

One year ago, the delinquency rate for one-to-four-unit residential properties stood at 6.99 percent. 500,000 jobs were cut within one month’s time. The U.S. Treasury offered a multi-billion dollar proposal to lower the interest rate on 30-year mortgages to 4.5 percent.

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151-TNG Radio – Hugh Bromma 12-5-09

Friday, December 4th, 2009

Hugh Bromma, CEO of Entrust

Hugh Bromma

CEO, Entrust

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This week Bruce is joined by Hugh Bromma. He is the CEO for Entrust Group. The Entrust Group was founded in 1981. Hugh is recognized as an industry spokesperson in the self-directed market. Entrust provides tax enhanced services such as self directed IRAs, and qualified plans to tax payers.

Bruce has known Hugh for a long time, so this interview is long overdue. The Entrust website is one of the most informative web sites that Bruce has ever seen.

When Entrust started in 1981, Hugh was the only person working for company other than his consultant. The consultant did financial industry consulting, but he was not in the IRA business. Hugh dealt with the IRAs and qualified plans. There are currently about 200 employees in Entrust. The company has over $4 billion in assets, and approximately 50,000 clients.

The first book Hugh wrote was “How to Invest in Real Estate Using Your IRA or 401K”. That book was written in 2003. Hugh himself invests in real estate in California.

The growth of Hugh’s company has grown far greater than he had expected. Part of his company’s plan was to create individual retirement accounts that are available to everyone. Entrust is the only company with a franchise who does this.

Entrust is a record keeping and administrating company for individual retirement accounts and qualified plans. Its emphasis is for self-directed investment in real estate, notes, and private placements. In 1975, ERISA made it possible to make a self directed decision for retirement funds. Before 1975, companies had defined benefit plans. ERISA made it possible to have defined contribution plans and 401Ks, which allowed individuals to defer money into the plan that their employer has provided.

In a defined benefit plan, there is supposed to be a check for everyone in a predetermined amount. If someone makes a mistake, and money is lost from a year or two, then problems can occur. When there are losses, or insufficient funds, then the employer has to find a way to make up for that lost money. Sometimes a defined benefit plan can be closed, and then rolled into a defined contribution plan, so that the pension is no longer defined. This means that people will lose their defined benefit plan, and a large sum of their retirement fund. The people losing their retirement plans cannot stop their pension managers from doing this. A city in Northern California declared bankruptcy, because 90 percent of its income was lost in a fixed cost of retirement.

In the end, the ERISA did not make most people wealthier. Self-directed does not always mean that good decisions are always made.

Entrust does not give investment advice, but it does give people a lot of education. However, Entrust will often refer their clients to experts for advice. Bruce thinks that is a great service. Entrust does not often have to worry about people opening up accounts who do not know what to do with their money. Entrust emphasizes education before their clients open an account.

Entrust is an administrator and record keeper for custodian banks. This means that banks hire Entrust to keep records for individual retirement accounts. Many custodians suggest investments to their clients, and the investment advice they give you will most likely be directed toward their area of expertise.

People can easily discover the status of a bank fairly easily. If a bank is having problems, and if they’re ratings are low, then you may have to worry about that bank going out of business. Many of those banks will be absorbed by an FDIC selected bank.

Most custodians do not know the rules and regulations for their business, which is why they use Entrust. Entrust acts as a decision making filter for custodians.

Webinars have become incredibly popular, and many of Entrust’s offices do weekly webinars. You do not have to worry about audience interaction during a webinar. Most of the people attending Entrust seminars are sophisticated individuals, who know how they want to use their money, and know what a self-directed IRA is, and want to be more informed about what they can do with their account. Most of the people attending these seminars are not beginners, and some have had accounts for 20 years. Beginners are encouraged to attend introduction seminars.

There are some limitations on self-directed IRAs. Collectibles such as gems, works of art, beverages, collectible coins, stamps, and antiques are not permitted. Self dealing transactions are also not permitted. Any investment from which the investor may receive an immediate benefit is not allowed. Precious metals such as gold, silver, and platinum are allowed. However, you cannot hold these precious metals within your home. If someone does choose to illegally hold a precious metal, then it becomes a distribution at the market value as of December 31st of the year in which the transaction took place. It is distributed to the individual, and it is taxed, and it may include an excise tax, as well as other penalties. These taxes may be as costly as 150 percent of the value of each bar of gold.

Small rules change relatively frequently. There are private letter rulings and prohibited transaction exemptions that change the interpretation of the established rules. Primary Code changes do not happen very often. There have been about 10 code changes in the last 20 years.

In Hugh’s newsletter, there was an article that said, “Never let a good crisis go to waste”. Bruce asks if self-directed investors are more likely to buy at a bottom, or if they are more likely to invest according to a trend and be damaged by it. Hugh says there are investors that have an understanding of trends, and they are able to predict a good time to buy into the market. There are some investors that are not educated, and will injure themselves by investing during a trend. Hugh says that investors are now beginning to invest in real estate again. Hugh knows this because lots of people are obtaining more cash for real estate deals. Many people believe that we are near the bottom.

Approximately 1.5 to 2 percent of all U.S. dollars in retirement accounts are in self-directed IRAs. The other 98 percent of the retirement money is invested into stocks, bonds, mutual funds, certificates, and insurance products. Those decisions are not made by the people holding the retirement fund, the decisions are made by someone in the qualified plan market. 80 percent of the people who makes those decisions will never change their investments for the entire life of their 401K, so they will never be able to take advantage of a low or high market. They have to hope that they will retire during a market peak.

The most common retirement vehicles for self-employed individuals are SEP IRAs, or individual 401K plans. They can set aside anywhere from $46,000 to $51,000 per year for earned income. There is no percentage limitation on how much of your income you can put into those 2 plans, so long as you do not invest more than that maximum limit.

The Entrust website can be found at www.theentrustgroup.com. January 22nd, Hugh and Bruce will be teaching together.

We’d like to thank Hugh Bromma and Entrust for sponsoring I Survived Real Estate 2009. Thank you!

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