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The Norris Group Real Estate News Roundup 9/17/10

Friday, September 17th, 2010

Today’s News Synopsis:

Fitch Ratings reports delinquencies on commercial real estate CDOs increased to 12.1% last month. Statistics from BarCap show GDP slowed to an annual rate of 1.6% in the 2nd quarter. I Survived Real Estate 2010 is taking place tonight. Multiple experts from different regions of the real estate industry will be speaking at the event. You can watch it live at www.isurvived2010.com

In The News:

Housing Wire – “White House appoints Warren to set up consumer protection bureau” (9-17-10)

“President Obama appointed Elizabeth Warren advisor to Secretary of the Treasury, and she will be in charge of setting up the Consumer Financial Protection Bureau. Warren was the chair of the Congressional Oversight Panel, which oversees the Treasury’s implementation of the Troubled Asset Relief Program”

Housing Wire – “CRE CDO delinquencies up slightly in August, near record-high” (9-17-10)

“Delinquencies on commercial real estate loan collateralized debt obligations rose slightly in August, up to 12.1%, according to Fitch Ratings. The agency’s CREL CDO index in July was 12% and 7.5% a year earlier. The record reached a record high of 13% in January.”

Housing Wire – “BarCap anticipates stronger GDP growth in 3Q, double dip risk receding” (9-17-10)

“In the second quarter of 2010, GDP slowed to an annual rate of 1.6%, slightly better than what analysts projected. According to BarCap, a narrowed trade deficit in July, stronger-than-expected business inventories, and moderating growth in manufacturing activity suggest more GDP growth in the third quarter.”

Bloomberg - “Consumers Resist Smart Meters After $3.4 Billion Stimulus Push” (9-17-10)

“G&E Corp., Cisco Systems Inc. and General Electric Co. are all betting that energy-monitoring devices will catch on in homes. Convincing consumers that they’re a good thing is turning out to be a tough sell. Power companies have traditionally relied on workers walking house to house to monitor electricity use. Smart meters are designed to give utilities a real-time picture of electricity consumption, eventually allowing them to create pricing plans that will encourage conservation during peak hours. About 43 percent of U.S. homes will have the new meters by 2014, up from 14 percent at the end of last year, according to Dallas-based market researcher Parks Associates.”

Bloomberg - “Small Business Can’t Get Loans From Bailed-Out Banks in U.S.” (9-17-10)

“Chip Besse figured he could hire a dozen people once he got a $1.1 million small-business loan. Wells Fargo & Co. turned him down. U.S. taxpayers helped the San Francisco-based bank weather the 2008 financial crisis with a $25 billion loan and $9.5 billion of debt guarantees. By July 2009, when Besse wanted to buy and expand a Colorado snowmobile-rental business, Wells Fargo wasn’t sharing the wealth, he said.”

Orange County Register – “Real estate job placements improving” (9-17-10)

“The UC Irvine Center for Real Estate reports that it’s having an easier time finding jobs for its students, a possible sign of improvement in the real estate jobs market. Both large banks, like Wells Fargo and Bank of America, and emerging businesses are hiring, center officials said. There’s also increased interest on the part of full-time employers, summer employers, people interested in interns and people interested in mentorships.”

Orange County Register – “Irvine woman sues over loan mod ‘hoax’” (9-17-10)

“An Irvine homeowner is suing a large national mortgage servicing company, saying they perpetrated a ‘loan modification hoax’ and committed fraud by promising but never granting her a permanent home loan modification.”

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor event calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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192-TNG Radio – Ivan Choi 9-18-10

Friday, September 17th, 2010

Ivan Choi

President of REOMac


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September 17th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate Investors Association and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, Claudia Buys Houses, The Business Press, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by Ivan Choi. He is a fifteen year veteran in mortgage banking with a background in finance, technology, retail loan origination, and servicing. He just started his own company called Savia Home Loans. Also, he is president of REOMac; a national non-profit trade organization.

Ivan currently lives in Corona, and previously lived in Irvine. For the last 15 years he has been working in retail mortgage banking. For 14 of those years, he worked with Countrywide Home Loan, which was acquired by Bank of America. He worked with Bank of America for another year, and then decided to start his own mortgage banking company. He has a second job with a national REO outsourcing company.

Mortgage banking is different than mortgage brokering. A mortgage broker originates loans, and puts them through to a major bank for funding. The broker attempts to find the best possible fit, and best possible pricing, for the homebuyer. The mortgage banker is fulfilling loans directly out of their own funding capacity. The money that a mortgage banker uses is essentially his or her own.

Presently, it is very difficult to start a mortgage banking company, because of the meltdown. Another prominent mortgage executive, who worked with one of the big banks until 2008, decided to start his own mortgage banking company. The biggest warehouse line he was able to get was worth about $700,000. That is not worth a week’s worth of loans.

Once your loan money is entirely lent out, you can try to keep that loan in your books, or you can try to sell it to an investor. That investor will provide you with liquidity to buy and sell another loan. You can either sell the underlying note and service the loan yourself, or you can sell both the note and the servicing rights. This is not understood by all people, but servicing rights to the loan has a certain monetary value as well.

In 2006, mortgage bankers were amazed by how generous loan guidelines were. On the flip side, when the mortgage market melted down, Ivan could not believe how difficult it was to obtain credit. We swung the pendulum from allowing too many people to obtain credit, to now allowing too few to obtain it. What is traditionally observed as a “makes sense” loan is now very difficult to obtain.

The present model of mortgage banking is that an originator makes a lot of loans for home buyers, they then package those loans into securities and sell them on the secondary market. Unfortunately, the demand for those securities in the secondary market has dried up, so we no longer have the liquidity that mortgage originators relied on to make loans in the first place. That is why many of those “makes sense” loans can no longer be made today. Currently, Fannie, Freddie, and FHA make up over 70% of the business for mortgage originators and lenders.

New Vista Asset Management Company is a San Diego-based company established 4 years ago by two veterans of the mortgage banking business. The two partners, Jim Park and Jerry Acosta, have a lot of connections both in the mortgage industry and the political world. New Vista serves as an REO asset management company. Any bank that cannot handle REO inventory can hire a company like New Vista to offload those REOs. New Vista is special because it is a multicultural company. Normally, Ivan does not pay attention to the cultural differences between companies, however, this is currently a significant difference because the government is more willing to work with culturally diverse businesses.

Inventory levels have changed pretty dramatically over the last couple years. Foreclosure inventory has been building up for the past couple years. This is because the foreclosure process has slowed down. Ivan believes it will take another 6 to 12 months before we can feel that we are in a foreclosure market. This will be a big relief for real estate agents, because many of them were hurt in 2007 and 2008.

Ivan defines “shadow inventory” as the backlog of foreclosures that have not yet finished the foreclosure process. When people use the term shadow inventory, they often use it to imply there was some evil conspiracy by big banks and the government to artificially hold in properties from the market to do 1 of 2 things: 1) to hold properties back and parcel them out, on a limited basis, to preserve valuations and earn a better return than what they would have received. 2) Mortgage bankers are holding inventory from the market to play magic accounting on the backside, which enables them to put out good quarterly earnings reports, so that their stocks won’t drop. As a former worker for Countrywide and Bank of America, Ivan believes these theories to be untrue.

Fannie and Freddie have double the REOs from last year, but the REO agents do not. Fannie expects approximately 1 million properties to finish the foreclosure process between the 4th quarter of 2010 and the 1st quarter of 2011. Asset management companies and banks can only process so many of those properties. Ivan believes that California cities are probably not capable of getting rid of that many properties with their current level of staff.

In 2008, Mike Novak-Smith had 900 REO listings. Today, he has 105, yet Fannie has double their amount of REOs. There does seem to be a disconnect between their ability to get properties onto the market. Perhaps the players have shifted, and the GSEs are understaffed.

On another topic, delinquencies are very high. In California, delinquency numbers have gone from 5% to 12% in the last 18 months, yet foreclosure numbers have gone down. Bruce believes that lenders do not actually own all these properties. Bruce believes that banks are refusing to foreclose on properties.

The government is involved in the foreclosure process now. There is a huge motivation for the federal government to modify loans or do short sales. The major servicers are now paranoid about going through the normal foreclosure process now, because if they do not fully document everything without offering ever possible solution to the borrower, the government will attack them. If the government believes the lender could have offered a loan modification but chose not to, then the lender gets dragged through the mud. There is a lot of pressure on the lenders to find other solutions.

REOMAC is having an educational event in October in Hollywood, Florida. The title of the event is “New Challenges, New Approaches”. The industry is preparing for a very different new year. Banks and servicers must satisfy their homeowners and their loan investors. At the same time, the government is beating up the banks. The end result is that we have a lot of government initiative and legal changes. The servicer must still find a way to make everyone happy, including the loan investor who has ultimate responsibility for the underlying note. Ivan believes many of the changes in 2011 will be legal related. Ivan does not believe there will be much of a change in public perception, because now everyone has had their shot at beating up people involved in the real estate industry.

The REO business is a very low margin business, and you must have a big team to run a lot of volume. REO inventory has decreased so dramatically that many professional REO broker shops have had to lay off people in the midst of the impending surge in inventory. All the good REO brokers are trying to figure out ways to scale up rapidly, because they don’t want to get caught with their pants down. It’s a Catch 22, because you can’t staff up too far in advance, but you still want to be ready when the opportunity hits.

HAFA guidelines were released on April 1st. Those guidelines were a game changer, because it caused the government to be heavily involved in mortgage servicing and foreclosure processing. Ivan does not believe that short sales will pick up to the high degree that we need them to pick up. Short sale numbers are increasing right now, but when you compare the overall number of short sales to the number of foreclosures, you can see that short sale numbers are still very small. REO is where all the business is going to go.

The event for REOMAC is taking place on October 20th thru the 23rd in Hollywood, Florida. It is the 25th anniversary of a very worthwhile organization.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Adrenaline Athletics, Benton Investment Group, Community RE-Invest Group, Delmae Properties, Elite Auctions, Entrust California, Everlast Photography, Inland Empire Investors Forum, Keystone CPA, Landwood Title, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Rick and LeeAnne Rossiter, San Jose Real Estate Investor Association, Starz Photography, Summit Solutions, Tony Alvarez, Wealth Point, and Westin South Coast Plaza.

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The Norris Group Real Estate News Roundup 9/16/10

Thursday, September 16th, 2010

Today’s News Synopsis:

According to MDA DataQuick, 6,698 houses and condos closed escrow in the Bay Area last month. Also, 34,239 houses and condos were sold statewide. BarCap expects that of all the subprime mortgages still current and originated in 2005, 70% will default.

In The News:

CBIA - “An Updated, Upgraded Deck Made Easy With Composites” (9-16-10)

“According to a recent study by the Joint Center for Housing Studies at Harvard University, remodeling spending is expected to increase on an annual basis by the end of the year with growth accelerating to the double-digits in the first quarter of 2011. Fueled by increased confidence in the economy, more homeowners are investing in their homes again.”

MDA DataQuick – “California August Home Sales” (9-16-10)

“An estimated 34,239 new and resale houses and condos were sold statewide last month. That was down 2.7 percent from 35,202 in July, and down 14.0 percent from 39,811 for August 2009. California sales for the month of July have varied from a low of 29,764 in 1992 to a peak of 73,285 in 2005, while the average is 48,805. MDA DataQuick’s statistics go back to 1988.”

MDA DataQuick – “Bay Area Home Sales Drop to 1992 Level; Median Price Slips Again” (9-16-10)

“A total of 6,698 new and resale houses and condos closed escrow in the nine-county Bay Area last month, down 1.1 percent from 6,773 in July and down 10.9 percent from 7,518 in August 2009, according to MDA DataQuick of San Diego.”

MBA - “MBA Report: Give FHA More Resources and Authority to Strengthen Program” (9-16-10)

“The Federal Housing Authority (FHA) commissioner should be granted the resources to better manage the agency through the current housing market crisis and to allow the agency to continue to thrive when the market recovers, according to new report from the Mortgage Bankers Association. Increasing resources for staffing and technology are among the 12 recommendations to improve the FHA and the Government National Mortgage Association (Ginnie Mae) by the MBA’s Council on the Future of FHA and Ginnie Mae. Convened in November 2009, the council consists of senior executives from 27 companies, representing both large national lenders and small independent mortgage bankers.”

CNN - “Foreclosure rates hold steady” (9-16-10)

“The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes.”

San Diego Union Tribune – “Most oppose walking away from mortgage” (9-16-10)

“A majority of Americans believe it is ‘unacceptable’ for homeowners to stop paying mortgage payments and walk away from their homes, says a Pew Research Center survey. Of the 2,967 adults surveyed during the second half of May, 59 percent said they believed it was wrong for a homeowner to stop making mortgage payments and surrender their home to a lender. Still, 19 percent said it was OK to walk away while another 17 percent said it depended on the homeowner’s circumstances.”

Housing Wire – “CoreLogic sees distressed housing sales rising in coming months” (9-16-10)

“CoreLogic (CLGX: 18.29 -0.76%) said tax credit-induced sales helped push distressed sales to a seven-month low in June, but the share of distressed sales is expected to bounce back in coming months, according to the firm’s inaugural U.S. Housing and Mortgage Trends report. The bi-monthly report will track housing sales, valuation, negative equity and foreclosure activity. In June, the distressed sale share fell to 24% of overall sales, down from a peak of 35% in early 2009, according to CoreLogic.”

Housing Wire – “Mission Capital principal: Banks stoke the economy with distressed sales” (9-16-10)

“Activity has dramatically picked up since the fourth quarter of 2008. This is in large part due to speculation on the part of funds and high net worth individuals in loan assets, as well as in the stock and debt of the underlying financial institutions. As banks have become more healthy and their financial projections more visible, they have stoked the economy by simultaneously lending and selling distressed loans at a discount. This creates a virtuous cycle of investment activity in that investors are investing in credit-impaired assets, rehabilitating them and then refinancing right-sized debt.”

Housing Wire – “BarCap estimates more subprime defaults from troubled vintages” (9-16-10)

“BarCap analysts are predicting high default rates on still-current subprime mortgages originated between 2005 and 2007. Of those subprime mortgages still current and originated in 2005, 70% are expected to default. In 2006, the expected default rate for current subprime is 89%, and 84% of current subprime from the 2007 vintage.”

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor event calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 9/15/10

Wednesday, September 15th, 2010

Today’s News Synopsis:

Mortgage applications decreased 8.9% this week, according to the MBA. Fannie Mae predicts 2010 sales will total 7.4% less than sales in 2009. UCLA economists predict the unemployment rate will remain above 10% until the end of 2012. GSEs have lost $226 billion since the end of 2007.

In The News:

Mortgage Bankers Association - “Mortgage Applications Decrease in Latest MBA Weekly Survey” (9-15-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 10, 2010.  The Market Composite Index, a measure of mortgage loan application volume, decreased 8.9 percent on a seasonally adjusted basis from one week earlier.  This week’s results include an adjustment to account for the Labor Day holiday. On an unadjusted basis, the Index decreased 27.4 percent compared with the previous week.”

Reuters - “Fannie Mae now sees US home sales drop, not rise” (9-15-10)

“The company is predicting total U.S. sales of new and existing homes in 2010 will drop 7.4 percent from 2009, compared with expectations for a 0.8 percent rise in its forecast last month. It means sales would fall to about 5.12 million homes from 5.53 million units in 2009.”

The Press Enterprise – “UCLA economists say growth will be hard to notice” (9-15-10)

“Now UCLA’s economists say it’s unlikely there will be enough job growth to drive the state’s unemployment level below 10 percent until the end of 2012.”

Housing Wire – “Barr: GSEs won’t exist once reform takes root” (9-15-10)

“Fannie Mae and Freddie Mac won’t exist in their current state once financial reform takes root, according to a top Treasury Department official. Prior to conservatorship two year ago, the government-sponsored entities operated under a ‘heads I win, tails you lose’ system that is unacceptable, Michael Barr said Wednesday before a subcommittee of the House Committee on Financial Services.”

Housing Wire – “FHFA estimates GSEs final cost to taxpayers could reach $400 billion” (9-15-10)

“Speaking before the House Financial Services Committee today, Edward DeMarco, acting director of the Federal Housing Finance Agency maintains that the government-sponsored enterprises could still cost the taxpayers $400 billion. Fannie Mae and Freddie Mac were taken into conservatorship by the FHFA in September 2008. Since the end of 2007, the GSEs have lost $226 billion with 73% of that stemming from the single-family credit guarantee business. The Treasury has recorded losses of $148 billion attributable to its bailout of Fannie and Freddie.”

Housing Wire – “New project inquiries at residential architecture firms down 24% in 2Q: AIA” (9-15-10)

“Kermit Baker, the chief economist at AIA, said business conditions at architecture firms hit an all-time low in 2008 but had been making a steady recovery to the first quarter of 2010, when these companies reported the first increase in billings in nearly three years.”

Housing Wire - “Zillow 30-year mortgage rates go up, CEO steps down” (9-15-10)

“The 30-year, fixed-mortgage rate increased last week to 4.32% from a near-record low of 4.27% the week prior, according to the Zillow Mortgage Marketplace weekly update.”

Bloomberg - “U.S. Home Prices Face 3-Year Drop as Inventory Surge Looms” (9-15-10)

“Shadow inventory — the supply of homes in default or foreclosure that may be offered for sale — is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.”

Looking Back:

One year ago, a survey from the National Association of Home Builders showed that buyers were unwilling to pay more for a new “green” home. DQNews reported that the total sales in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange Counties fell 10.8 percent from the previous month. Both Ben Bernanke and Bank of America believed the U.S. financial downturn was coming to an end. The Coopers Korpacz Real Estate Investor Survey estimated that U.S. commercial property would not recover until 2012.

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The Norris Group Real Estate News Roundup 9/13/10

Monday, September 13th, 2010

Today’s News Synopsis:

Many predictions are being made regarding the economy and the housing market. Most of the articles have an overall positive outlook on the economy, while most had a negative outlook for the housing market. New delinquencies decreased 8.5% in August. The FDIC said 119 banks failed so far this year.

In The News:

CNBC - “No Double Dip, Stimulus Did Help: IMF Chief” (9-13-10)

“There is unlikely to be a double-dip recession, while the fact that stimulus spending was helpful in containing the crisis is undisputable, Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), told CNBC Monday.”

Housing Wire – “Economist calls latest Basel 3 timeline ‘nonsense’” (9-13-10)

“The Basel Committee on Banking Supervision adopted new standards for the capital requirements of the world’s largest financial firms, mandating the banks hold capital equal to 7% of assets. As HousingWire reported in the Monday Morning Cup of Coffee, the committee increased the minimum common-equity requirement to 4.5% from 2% and stipulated banks hold a capital conservation buffer of 2.5% to withstand potential stress, raising the total common-equity requirement to 7%.”

Housing Wire – “Radian’s new delinquencies drop 8.5% in August” (9-13-10)

“Mortgage servicers reported 9,084 in new delinquent loans insured by Radian Group (RDN: 7.865 +3.49%), a mortgage insurer based in Philadelphia. It’s an 8.5% drop from the 9,930 of newly delinquent loans for Radian in July. Radian’s primary inventory of delinquent mortgages did fall to 137,374 in August, too, down from 138,015 delinquent mortgages in July.”

Housing Wire – “REITs outperform Barclays expectations, long term outlook positive” (9-13-10)

“Real estate investment trusts (REITs) outperformed analyst expectations in the first quarter of 2010, according to a weekly report released today by Barclays Capital. Week-over-week, the National Association of Realtors’ (NAR) composite REIT return index dropped 0.9% to 3,153.3. Despite the decrease, the index is 0.9% higher than one month ago and 33.7% higher than one year ago. The composite return index year-to-date is up 17.2% from 2,690.1 for the same period last year.”

Housing Wire – “JPMorgan analysts bearish on housing recovery” (9-13-10)

“JPMorgan Chase (JPM: 41.20 +3.62%) analysts lowered estimates for a recovery in the housing market between next year and 2014 because the expiration of the homebuyer tax credit slowed demand and overall economic malaise pushed some indicators lower in July.”

Housing Wire – “BofA’s Moynihan see 25% chance of double dip recession” (9-13-10)

“The discussion now is whether we might have a so-called double dip recession – although our experts think the chance of that is low… we’re now putting the chances of a double-dip at around 25%.”

Housing Wire – “Monday Morning Cup of Coffee” (9-13-10)

“At June 30, Horizon Bank had total assets of $187.8 million total deposits of $164.6 million. The FDIC said 119 bank have failed this year, including 23 in Florida. The FDIC recently said the number of banks on its “problem list” is at the highest level since 1993.”

Bloomberg - “U.S. Accelerates in 2011 as Demise of Consumer Is Exaggerated” (9-13-10)

“Debt payments as a share of disposable income fell to 12.46 percent in the first quarter from a peak of 13.96 percent in 2008 and are about in line with the 12.09 percent average of the last 30 years, based on Federal Reserve data. Berner sees the ratio falling to what he considers a sustainable range of 11 percent to 12 percent by year-end. This improvement will help the U.S. economy avoid a relapse into recession and put it on course for 3 percent growth next year, he said. The economy grew 1.6 percent in the second quarter.”

Bloomberg - “Fannie, Freddie Regulator Blames Mortgage-Loan Pools for Poor Performance” (9-13-10)

“Mortgage pools purchased as investments by Fannie Mae and Freddie Mac during the housing boom included more risky and poor-performing loans than those guaranteed by the government-backed firms, their regulator said. So-called private-label securities bought by the two firms from 2001 through 2008 had a bigger share of mortgages with adjustable interest rates and more borrowers with credit scores below 660, two indicators of loans at higher risk of default, the Federal Housing Finance Agency said in a report today.”

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor event calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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191-TNG Radio – Mike Novak-Smith 9-11-10

Monday, September 13th, 2010

Mike-Novak-Smith

Mike Novak-Smith

REO Agent


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September 17th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate Investors Association and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, Claudia Buys Houses, The Business Press, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by Mike Novak-Smith. Mike has been a household name in the REO business since the 90s. He has gained national recognition for his work in the REO industry.

The first REO Mike ever closed was in January of 1991. RT Resolution Trust Corporation was the first REO client he ever had. That company took care of the failed savings and loans assets from the 80s. He thought using that company was a good idea because he sensed a changed in the market at that time. Resolution Trust called and offered him listings that no one else was interested in, and Mike believed he could handle them.

Mike reads a lot and he pays attention to the market. He viewed REOs as a way to survive every month. He knew that if he got 2.5 percent of the deals on the market, then he could make the house and car payment. Once he started doing it, he liked it, because it was more like a business than chasing deals. The audition for the business was hard, but once you have experience, its much less stressful.

There are a few surprises for agents wanting to get into the REO business. First, you have to do a lot of work. Second, you have to put out a lot of money to get properties sold. Third, you get treated rather harshly, because the people you work with are busy and they don’t have time to sugar coat their messages to you. A lot of people can’t wait to be an REO agent, until they become one. You have to be a superior skill level to do REO work in comparison to retail work. It is a very competitive business. If you make a mistake, there are 100 people who want your place.

In the 90s, the peak years for Mike were from 96 to 98. Mike had been in the business for a few years prior to 91 doing retail jobs. All the way through January, 2004, he had a lot of REO deals. From 04 to 05, he did not have any REO deals.

In 2003, Mike closed 110 REO deals. When the REO deals started drying up, Mike was one of the last people his clients were using. When the REO deals came back in 2005, he had 3 REOs within the first month.

Most of the people that Mike knew from the 90s have moved onto bigger things. If they did well during that time period, then they probably moved up to corporate positions.

In the 90s, much of Mike’s inventory consisted of new 4 bedroom, 3 bath houses. Mike gets a lot of new homes as well. He even gets homes that haven’t finished construction.

Currently, Mike’s business is somewhat unpredictable. He might have a several week period where he gets a large number of REO deals, but then the following week he will get zero. This could be a function of the trustee sales changing their bid prices.

The people REO brokers work with do not entirely know the policies of their employees. You hear a lot of rumors, but the only people who really know, are the ones working at the top of the business. Mike occasionally receives calls from corporate leaders in which they ask for his opinion on certain policy changes. Mike does not believe that anyone has complete control over policy changes, because the government makes frequent policy changes as well.

At the peak of this cycle, Mike had over 900 files, and maybe 600 active files in the MLS. Currently, properties spend months in preparation before being listed. Once they are listed, they usually sell fairly quickly.

Properties now require a bit of time before they become vacant. Occupants understand now that they can get money to move out. The magic number for convincing an occupant to move out tends to be between $2,000 to $4,000. Some of these occupants have severe financial problems, but for many of them, its just a game.

The length of time it takes for a property to become an REO after delinquency is 15-18 months. When the property actually goes into foreclosure, the renting tenants are often surprised. Mike advises renters to get their rental property from a broker who manages rentals. Don’t try to just rent a house off of CraigsList. Quite frequently, people will begin renting a house and end up in foreclosure two months later. Bruce was once personally asked by his own potential tenants if he had a loan on the rental house and if it was current. These renters had obviously had this experience in the past.

Most asset managers now communicate through proprietary websites. Offers come in electronically through email. There is not a lot of verbal communication, and fax machines aren’t being used either.

Asset managers have the power to take offers when the asking price is normal, but when an offer is unusual, then the offer must be taken to the next level.

When Mike gets a listing, he often gets the property directly from the lender, but there are also many properties that are outsourced to other companies. Some lenders have received too many REOs for their own labor force, so they have to outsource their work. Outsourcers typically use the same system as the lender.

Mike gets paid back 99 percent of the time if he follows the lenders standards. You cannot do all the work yourself. You must have staff to take on the work load of an REO agent. As an REO broker, you wear many hats, and accountant is one of them.

In 2007, lenders were openly admitting that they would list their properties with the highest broker opinion. Bruce believed that was the perfect system to fail. Lenders have now become more willing to listen to reasonable BPOs, and they often ask for multiple price opinions. Many BPOs today are being performed by inexperienced brokers who will do the work for cheap. Mike thinks this is unwise. When BPOs are done by experienced brokers, the price opinions usually come out fairly similar.

Short sales are becoming more popular right now. Mike closed a couple short sales last year, and he is doing more right now.  He does not prefer short sale deals, because those deals can often take more time than they are worth. Bruce is confounded by the length of time required to do a short sale. Short sales should not take six months to finish. The last short sale Mike finished took six weeks to close. Many short sales involve PMI companies, loan investors, servicers, and possibly an HOA law suit. You have to get all the people involved in the deal to take a loss, and that negotiation takes some time.

There is no compensation for an REO broker until he finishes the short sale. Someone getting into the short sale business could be six months away from a check for every deal they work with. If the broker cannot get someone to help with the paper work, then that short sale is not worth the time.

Mike sees REO levels increasing in 2011. These REOs will come from failed loan modifications and state programs. Short sales will probably increase as well. In the 90s, short sales were very popular, but loan servicers and investors eventually realized that it was easier just to foreclose, because then they could control the process.

Right now, if an inexperience broker attempts to perform a short sale, they often take up to six months to get the deal done. When this happens, the loan servicer will choose to have an REO.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Adrenaline Athletics, Benton Investment Group, Community RE-Invest Group, Delmae Properties, Elite Auctions, Entrust California, Everlast Photography, Inland Empire Investors Forum, Keystone CPA, Landwood Title, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Rick and LeeAnne Rossiter, San Jose Real Estate Investor Association, Starz Photography, Summit Solutions, Tony Alvarez, Wealth Point, and Westin South Coast Plaza.

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The Norris Group Real Estate News Roundup 9/10/10

Friday, September 10th, 2010

Sources:
http://www.mortgageorb.com/e107_plugins/content/content.php?content.6632
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-189
http://blogs.wsj.com/economics/2010/09/09/irs-needs-strategy-to-recoup-home-buyer-tax-credit/
http://realtytimes.com/rtpages/20100907_political.htm
http://www.dsnews.com/articles/shadow-inventory-shrinks-for-fifth-consecutive-month-barclays-2010-09-03
http://www.dsnews.com/articles/real-estate-investment-firm-acquires-stake-in-760m-fdic-loan-portfolio-2010-09-07
http://online.wsj.com/public/resources/documents/retro-HOUSINGM08.html
http://realtytimes.com/rtpages/20100907_political.htm
http://jan.ocregister.com/2010/09/05/more-people-leave-california-than-arrive/44597/
http://www.siteselection.com/issues/2010/jul/North-American/
http://www.housingwire.com/2010/09/07/bank-deposit-balances-shrink-for-first-time-since-92

Today’s News Synopsis:

Real Capital Analytics reports distressed commercial properties rose $5.1 billion in July. President Barack Obama appointed Austan Goolsbee as leader of the Council of Economic Advisors. Mortgage servicers completed 65% more permanent modifications on Fannie Mae and Freddie Mac loans through HAMP in the 2nd quarter. According to Harris Trifon, average losses on loans packaged into U.S. CMBS totaled $501 million last month.

In The News:

Housing Wire – “Troubled commercial loans may be near the peak: Real Capital” (9-10-10)

“Distressed commercial properties increased $5.1 billion in July, the lowest addition since October 2008, according to the research firm Real Capital Analytics. The July additions were also less than half the monthly average for all of 2009 and through 2010 so far. The total amount of distressed commercial loans stands at $189.1 billion.”

Housing Wire – “Obama names Goolsbee leader of Council of Economic Advisors” (9-10-10)

“President Barack Obama announced today the appointment of Austan Goolsbee as leader of the Council of Economic Advisors. He will be one of four principal members of the team who’s duties include finding ways to add more jobs to the economy and lower the unemployment rate.”

Housing Wire - “Securities industry takes a beating in 2Q” (9-10-10)

“Issuance of mortgage-related securities in the second quarter totaled $356.5 billion; down 8.4% from the first quarter and 45.7% from the year earlier. Issuance from the government sponsored entities Fannie Mae and Freddie Mac still dominate the space with Ginnie Mae.”

Housing Wire - “CMBS delinquencies pass 8% despite record loan mods” (9-10-10)

“Special servicers modified a record $2.1 billion in loans backing commercial mortgage-backed securities (CMBS) in August, but delinquencies continue to grow, according to the credit-rating agency Fitch Ratings. The delinquency rate on CMBS loans reached 8.48%, a 23 basis point increase from July. There were $3.1 billion in new delinquencies, driven mostly by five loans recent defaults of loans worth more than $100 million.”

Housing Wire – “HAMP modifications on Fannie, Freddie loans up 65% in 2Q” (9-10-10)

“Mortgage servicers completed 88,551 permanent modifications on Fannie Mae and Freddie Mac loans through the Home Affordable Modification Program (HAMP) in the second quarter, a 65% increase from the previous quarter, according to a report from the Federal Housing Finance Agency.”

Housing Wire - “Moody’s: banks to write off another $286 billion in loans through 2011″ (9-10-10)

“Moody’s Investors Service expects continued trouble in the domestic banking industry with another $286 billion of loan losses yet to hit the books. Earlier this week, analysts said U.S. banks rated by Moody’s have incurred $476 billion of charge offs since 2008.”

Housing Wire – “ACUMA holds high expectations for credit union mortgage originations” (9-10-10)

“The American Credit Union Mortgage Association expects mortgage volumes for this year to rise above the $90 billion in originations its members completed in 2009.”

Bloomberg – “Commercial Property Losses Mount as Loan Servicers Triage Real Estate Debt” (9-10-10)

“Average losses on loans packaged into U.S. commercial mortgage-backed securities totaled $501 million in August compared with $245 million in April, according to Harris Trifon, a Deutsche Bank analyst in New York who based the estimate on a three-month average. In August 2009, the number was $41 million.”

Inman - “‘Just let housing go’” (9-10-10)

“The Fed’s Beige Book said the obvious: ‘Continued growth … mid-July through the end of August, but with widespread signs of a deceleration.’ Not double-dip, not yet. In the absence of fearful dippers buying bonds, the 10-year T-note rose to a one-month high 2.8 percent, although doing no particular damage to mortgage rates, still near 4.5 percent. The new rage: ‘Just let housing go.’ These people do not seem to remember the benefits of letting Lehman go, the simple life without banks and their deposits.”

Today’s News Synopsis:

One year ago, the Federal Reserve announced the economy was stabilizing. U.S. homebuyers paid 3.3 percent less than listing price in July 2009. Bankruptcy filings increased 22% year over year. Foreclosure filings in the U.S. exceeded 300,000 for sixth straight months.

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The Norris Group Real Estate News Roundup 9/9/10

Thursday, September 9th, 2010

Today’s News Synopsis:

Mortgage rates increased to 4.35 percent after weeks of record-breaking lows. Jobless claims fell 5.6% last wek, according to the Labor Department. Callahan & Associates reports credit unions originated $31.4 billion in mortgages during the first 2 quarters. Statistics from Real Capital Analytics show hotel purchases increased 136% during the first two quarters.

In The News:

Mercury News – “Mortgage rates edge up this week from decades low” (9-9-10)

“Mortgage buyer Freddie Mac says the average rate for a 30-year fixed loan was 4.35 percent, up from 4.32 percent the week before. It was only the second rise in the past 12 weeks. Last week’s was the lowest number since Freddie Mac began tracking rates in 1971.”

Orange County Register - “Real estate licenses fall for 30th month” (9-9-10)

“California real estate licenses dropped to 479,518 as of July, down by nearly 70,000 from an all-time high of 549,244 in November 2007.”

Housing Wire – “Weekly jobless claims fall 5.6% to 451,000″ (9-9-10)

“Initial jobless claims fell 5.6% for the week ended Sept. 4, coming in well below analysts’ estimates and marking the third-consecutive week of declines in the number of people filing for unemployment. The Labor Department said seasonally adjusted initial claims decreased by 27,000 to 451,000 from the previous week’s revised figure.”

Housing Wire – “Credit union mortgage originations down 43% from last year” (9-9-10)

“Credit unions originated $31.4 billion in mortgages through the first half of 2010, down 43% from the $55.3 billion completed in the same time last year, according to data compiled for HousingWire from research firm Callahan & Associates.”

Housing Wire – “Despite popular belief, research finds the US is not in double dip recession” (9-9-10)

“An expected decline in housing prices notwithstanding, academics are now arguing that the U.S. economy is not seeing another downturn, although that is the way it feels since recovery is so slow. During the latest recession, the U.S. shed 4.1% of gross domestic product from peak to trough. The unemployment rate more than doubled, rising to 10.% in October from 5% in December 2007, according to statistics from the Federal Reserve Bank of Cleveland.”

Bloomberg - “Hotels Lure Investors as Lodging Surpasses U.S. Offices, Retail” (9-9-10)

“Sales of hotels jumped 136 percent in the first half of 2010 from a year earlier, the biggest gain among five commercial real estate categories tracked by New York-based Real Capital Analytics Inc. Those deals were based on transactions of at least $5 million and exclude hotels attached to casinos.”

Looking Back:

One year ago, mortgage loan application volume increased 17% in one week. Mortgages with 30+ days of delinquency increased to 3.89% in the 2nd quarter. Fitch Ratings estimated that 70 percent of the option ARMs would reset by 2011. Bankruptcy declarations from wealthy families increased 73% from 2008 to 2009.

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The Norris Group Real Estate News Roundup 9/8/10

Wednesday, September 8th, 2010

Today’s News Synopsis:

The California Housing Finance Agency is offering 4 percent mortgages to low and moderate income homebuyers. The MBA’s weekly survey shows mortgage application volume decreased 1.5% this week. According to CoreLogic, 39.6% of the subprime loans are 60 days delinquent.

In The News:

Inman - “California, FHA offer 4% loans” (9-8-10)

“The California Housing Finance Agency is teaming up with the Federal Housing Administration to offer 30-year fixed-rate loans to low- and moderate-income first-time homebuyers at below-market rates. With mortgage rates already at historic lows, eligible borrowers could lock a CalHFA-FHA loan at around 4 percent.”

Mortgage Bankers Association – “Mortgage Purchase Applications Up, Refinance Applications Fall Slightly in Latest MBA Weekly Survey” (9-8-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 3, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 1.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1.9 percent compared with the previous week.”

Housing Wire – “40% of subprime mortgages stand delinquent, can prime be next?” (9-8-10)

“CoreLogic reports 2,376,120 American subprime mortgages are still active in the market in June, down 12.5% from a year ago. As of June, 39.6% of the subprime loan market is 60 days delinquent — 35% of that is 90 days delinquent, 13% of that are now in foreclosure and 3.8% of mortgages are real estate owned.”

Housing Wire – “Amherst: modified Ginnie Mae loans boost buyouts” (9-8-10)

“The reissuance of modified Ginnie Mae loans will boost transition rates, buyouts, and subsequently increase prepayment speeds on new, lower-coupon pools. Amherst Mortgage Insight analysts said avoiding Ginnie Mae interest-only mortgages is a good idea, as ‘conventionals are a better bet.’ The firm’s MBS strategy group also advises investors to review Ginnie Mae spec pools”

Housing Wire – “Beige Book: economy increasing at slower rate than prior periods” (9-8-10)

“The Fed said home sales continued to slide, hindering construction activity, as well. Most districts reported very weak or declining home sales during the period that were attributed to the expiration of the homebuyer tax credit. Residential construction decreased in most districts during the period because of weak demand, according to the Fed.”

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor event calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 9/7/10

Tuesday, September 7th, 2010

Today’s News Synopsis:

According to SiteSelection, California is experiencing a loss in total migration. FHA will now permit lenders to give more borrowers refinanced loans backed by the government. Trepp reports the delinquency rate for commercial mortage-backed securities increased to 8.92%. Zillow claims mortgage rates increased to 4.27% last week.

In The News:

Telegraph - “No defence left against double-dip recession, says Nouriel Roubini” (9-5-10)

“Dr Roubini said the US growth rate was likely to fall below 1pc in the second half of the year, despite the biggest stimulus in history: a cut in interest rates from 5pc to zero, a budget deficit of 10pc of GDP, and $3 trillion to shore up the financial system.”

Philly - “U.S. housing value down at least $4 trillion” (9-5-10)

“Since the real estate boom ground to a painful close about 31/2 years ago, the nation’s housing stock has shed from about $4 trillion to $7.1 trillion in value. The amount depends on who’s counting. A study by Equifax Inc. and Moody’s Analytics Inc. says the downturn began in early 2007 and cost $4 trillion through March. The Federal Reserve says the downturn began in the fourth quarter of 2006 and cost $7.1 trillion through March.”

CNBC - “Housing Woes Bring New Cry: Let Market Crash” (9-5-10)

“When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve. ‘Housing needs to go back to reasonable levels,’ said Anthony B. Sanders, a professor of real estate finance at George Mason University.”

Orange County Register – “More people leave California than arrive” (9-5-10)

“In California, the number of outbound moves by the 700 or so moving companies in the movers.com network increased 10.3%, while incomers rose 9.4%. In terms of population changes, New York lost 33% more people than it gained, while Texas gained 50% more people than moved out, SiteSelection says.”

San Francisco Chronicle – “Gov’t launches plan to help ‘underwater’ borrowers” (9-7-10)

“Starting Tuesday, the Federal Housing Administration will permit lenders to give these borrowers refinanced loans backed by the government. The lenders will be required to forgive at least 10 percent of the original mortgage amount. Investors who have control over the mortgages as part of their large portfolios will select which borrowers are invited to participate.”

Housing Wire - “Bank deposit balances shrink for first time since ’92″ (9-7-10)

“For the first time since 1992, bank deposit balances fell in the first half of the year. Deposits decreased 0.4% for the six months between January and June to $7.69 trillion from nearly $7.7 trillion, and the yields on the deposits fell to less than 1%, according to analysis from Market Rates Insight.”

Housing Wire – “Credit score gaps narrow for FHA loans: Quality Mortgage Services” (9-7-10)

“The credit score gap for 2010 loans through the Federal Housing Administration fell 43 points from 2006 levels, according to Quality Mortgage Services. The mortgage quality-control services firm said its data show the average credit score of FHA loans ranked as excellent in 2006 was 665 whereas the average score of a loan ranked fair was 603 for a gap of 62 points. For FHA loans originated so far this year, the firm’s data show excellent loans have average credit scores of 707 while fair loans average scores are 688 for a difference of 19 points.”

Housing Wire – “New Fed limits on yield spread premium protects mortgage servicers from defaults: Moody’s” (9-7-10)

“The new restriction prohibits a loan originator’s compensation (similar to a commission) from being based on a yield spread premium; effectively, the difference between the interest rate required by a lender and the rate the borrower actually accepts. It is essentially another another step towards borrower protection, just as Fannie Mae’s prohibition on appraisal cutting became effective last week.”

Housing Wire – “CMBS delinquencies accelerate toward 9% in August: Trepp” (9-7-10)

“After two months of moderated growth in delinquent loans backing commercial mortgage-backed securities (CMBS), the delinquency rate in August increased 21 basis points to 8.92%, according to the analytics firm Trepp. It’s an increase from the 8.71% measured in July and another new record. The August delinquency rate is more than double the 4.03% rate a year ago. Since the beginning of 2010, the delinquency rate has increased more than 200 bps.”

Housing Wire – “Zillow: 30-year, fixed rate inched up to 4.27% last week” (9-7-10)

“The 30-year, fixed mortgage rate inched up last week to 4.27% from its nadir of 4.26% the week prior, according to the Zillow Mortgage Marketplace weekly update. California’s current rate of 4.26% is down from 4.28% last week and 4.3% the week prior.”

Orange County Register – “O.C. on track for fewest mortgages in a decade” (9-7-10)

“The Pomona-based Real Estate Research Council of Southern California reported that the number of loans issued to buy or refinance Orange County homes fell 23% to 46,195 during the first half of 2010. In the first half of 2009, lenders recorded just over 60,000 ‘trust deeds,’ or home loans.”

Looking Back:

One year ago, nearly one-third of those who obtained home loans during the boom years of 2005 and 2006 couldn’t get one. The eight-county Sacramento region counted more than 42,000 foreclosures from 2007 to 2009. A report showed that 20 percent of Californians were unemployed.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor event calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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