Sources:
Multifamily mortgage originations jump 13%
Builder Confidence for the 55+ Housing Market Ends Fourth Quarter on an Upswing
HAMP Mods Approach 1M Mark
Mortgage mods in 2011 down 40% from prior year
Fewer young adults hold jobs than ever before
Report Reveals Number of Foreclosures Down From Last Year
Mortgage giants to pay $25 billion in foreclosure settlement
REAL ESTATE: California receives up to $18 billion in multistate settlement
Wells Fargo to start $5.3 billion foreclosure settlement relief in March
Banks Paying Homeowners a Bonus to Avoid Foreclosures: Mortgages

Today’s News Synopsis:

In this week’s video, Aaron Norris gives the news of the week in the world of real estate and other big news of the week.  30-year mortgage rates continue to hold at record lows of 3.87%.  DS News reported Bank of America will be required to pay $1 billion in settlement fees for their part in mortgage fraud.  In other news, the values of homes decreased over 1% in the fourth quarter, although the decrease for this year is expected to be lower than 2011.

In The News:

San Francisco Chronicle – “30-year mortgage rates hold at record low of 3.87%” (2-10-12)

“Rates for 30-year U.S. mortgages held at the lowest level on record as fewer Americans sought loans for home purchases.  The average rate for a 30-year fixed loan was unchanged in the week ending Thursday at 3.87 percent, the lowest in records dating to 1971, Freddie Mac said in a statement.”

DS News – “U.S. Resolves Claims Against BofA Through $1 Billion Settlement” (2-10-12)

“Bank of America will pay $1 billion to settle on the largest False Claims Act relating to mortgage fraud.   As part of the $25 billion settlement, Loretta E. Lynch, U.S. attorney for the Eastern District of New York, announced that the government will resolve its claims against Bank of America, Countrywide, and certain Countrywide subsidiaries and affiliates for underwriting and origination mortgage fraud.”

Housing Wire – “Construction job cuts account for one-third of 4Q mass layoffs” (2-10-12)

“Mass layoffs in the fourth quarter of 2011 declined to their lowest level in six years, but construction jobs still took a big hit on the end of seasonal hiring, the government said Friday.”

Bloomberg - “Pimco: Foreclosure Deal Cheap for Banks” (2-10-12)

“The government’s deal with banks over their foreclosure practices after 16 months of investigations is cheap for the loan servicers while costly for bond investors including pension funds, according to Pacific Investment Management Co.’s Scott Simon.”

CNN Money – “Mortgage deal: What the critics say” (2-10-12)

“The $26 billion mortgage settlement had a lot of support — as evidenced by the 49 out of 50 state attorneys general that signed on to it.  The deal, which was announced Thursday, also won praise from groups as diverse as the Mortgage Bankers Association, the industry trade group for lenders, and the Center for Responsible Lending, a public interest group advocating for borrowers.”

Housing Wire – “Three California real estate investors plead guilty to bid rigging” (2-10-12)

“Three Northern California real estate investors agreed to plead guilty to forming a conspiracy to rig bids at foreclosure auctions, the Department of Justice Financial Fraud Enforcement Division said Thursday.”

DS News – “Home Values Declined 1.1 Percent for Fourth Quarter” (2-10-12)

“Zillow forecasts home values will be on the decline through December 2012, but the decrease will be smaller than 2011.”

Inman – “Markets with largest percentage-based price declines in Q4 2011″ (2-10-12)

“The Boise City-Nampa, Idaho, metro area led the nation with a 20.2 percent drop in its single-family existing-home median home price in fourth-quarter 2011 compared to the same quarter in 2010, the National Association of Realtors reported this week.”

Housing Wire – “Fannie defends ending pilot principal reduction program” (2-10-12)

“A small pilot principal reduction program Fannie Mae killed in 2010 was not performing well enough for executives to expand, the mortgage giant claims.”

DS News - “Illinois Introduces Two Initiatives to Tackle Foreclosure Issues” (2-10-12)

“To alleviate issues of foreclosure in one of the hardest hit areas, Illinois Governor Pat Quinn launched two initiatives. One effort will connect homeowners to resources to keep them in their homes, and another will help revitalize areas affected by foreclosed and vacation properties.”

Hard Money Loan Closed

West Covina, California hard money loan closed by The Norris Group private lending. Real estate investor received loan for $270,000 on a 7 bedroom, 4 bathroom home appraised for $420,000.

California Real Estate Investor Events:

The Norris Group will be holding their monthly REO Boot Camp, February 14, 2012.

Bruce Norris of The Norris Group will be at the 2012 Kick Off Brunch on February 18, 2012.

Looking Back:

Existing home sales increased 15.4% in the 4th quarter of 2010, according to the NAR.  Housing affordability for first-time buyers increased to 69% during the final quarter of 2010, said the CAR. RealtyTrac reported foreclosure filings fell 17% year over year.  Kevin Warch resigned from the Federal Reserve Board of Governors.

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.

The prices of homes in the U.S. declines last November by 4.3% according to CoreLogic.  On a positive note, the sales of homes, both new and existing, increased for the year according to HUD.  The Mortgage Bankers Association reported a 3.7% decrease in mortgage applications.

In The News:

Housing Wire – “Home prices decline 4.3% in November: CoreLogic” (1-9-12)

“Home prices nationwide fell 4.3% year-over-year in the month of November, according to analytics firm CoreLogic (CLGX: 12.79 +1.35%) in its November Home Price Index.”

Bloomberg - “Countrywide Sued by U.K. Banks ‘Looking for Someone to Blame’ on Mortgage” (1-9-12)

“Suninder Sandha bought his luxury apartment in Coleorton Hall, a 19th century country mansion near Leicester in central England, using a 1.2 million-pound loan ($1.86 million) from Barclays Plc (BARC) in 2005.”

Realty Times - “Real Estate Outlook: Mortgage Applications Down” (1-9-12)

“Mortgage applications took their own vacation this holiday season, falling during the final two week span of the year.  They were down by 3.7 percent from the first half of the month according to the latest release from the Mortgage Bankers Association.”

Housing Wire – “Fed governor calls for new housing regulatory regime” (1-9-12)

“The number of Americans filing initial jobless claims declined last week, coming in lower than analysts’ estimates. The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Dec. 31 decreased to 372,000 from 387,000 the previous week, which was revised upward 6,000.”

NAHB - “List of Improving Housing Markets Nearly Doubles in January” (1-9-12)

“The number of housing markets showing measurable improvement nearly doubled in January with the addition of 40 new metros to the National Association of Home Builders/First American Improving Markets Index (IMI), released today.  The IMI now boasts 76 improving markets, up from 41 in December, with 31 states and the District of Columbia represented by at least one entry.”

Housing Wire - “December employment gains boost CRE demand as firms expand” (1-9-12)

“Jobs growth in 2011 increased full-time office employment by 327,000 jobs, giving the commercial real estate segment a slight boost, according to a new report from Marcus & Millichap Real Estate Services.”

DS News - “Fed: Enforcement Actions, Monetary Penalties Necessary for Servicers” (1-9-12)

“Standing before the Association of American Law Schools in Washington D.C., Sunday, Federal Reserve Governor Sarah Bloom Raskin discussed the importance of enforcement in the mortgage servicing industry and argued that monetary penalties are an important part of that enforcement.”

Bloomberg – “Fannie Rating Faces Cut as Lawmakers Siphon Funds, BofA Says” (1-9-12)

“The odds of credit rating downgrades on the bonds of Fannie Mae (FNMA) and Freddie Mac (FMCC) rose after lawmakers tapped the government-supported mortgage companies to pay for last month’s extension of a payroll tax cut, according to Bank of America Corp.”

Housing Wire – “Home sales rise as prices hit historic lows in December” (1-9-12)

“New and existing-home sales increased year-over-year in December, while home prices continued to plummet, hitting levels of affordability not experienced since 1971, the Obama Administration said Monday.”

Hard Money Loan Closed

Compton, California hard money loan closed by The Norris Group private lending. Real estate investor received loan for $110,000 on a 3 bedroom, 1 bathroom home appraised for $218,000.

California Real Estate Investor Events:

The Norris Group posted a new event. The Norris Group will be at the Real Estate Investor Rewind at CVREIA on January 10, 2011.

Bruce Norris will be speaking at the Apartment Owners Association-Discover Wealth Strategies for 2012 Los Angeles on January 12, 2012.

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.

Mortgage application volume decreased 10.5% from last week, said the Mortgage Bankers Association. RealPoint reports CMBS delinquencies increased 1.3% in August. The Federal Reserve’s Beige Book shows economic growth continued in September. Fannie Mae expects total economic growth for this year to equal approximately 2.5%.

In The News:

Mortgage Bankers Association – “Mortgage Applications Decrease in Latest MBA Weekly Survey” (10-20-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending October 15, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 10.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index also decreased 10.5 percent compared with the previous week.”

North State Building Industry Association – “CA Mechanic’s Lien Law – Be Current on the Changes, eff 1/1/11″ (9-1-10)

“This presentation will provide critical updates to builders, suppliers, and subcontractors regarding changes in California Mechanic’s Lien Law that will take effect beginning January 1, 2011. The importance of the changes cannot be overstated – claimants will lose their lien rights if the changes are not taken into account on active construction projects after the first of the coming year.”

Los Angeles Times – “Investors pressure Bank of America to buy back bad mortgages” (10-20-10)

“Several major investment firms are moving to force Bank of America Corp. to buy back bad mortgages that were issued by Countrywide before the lender was acquired by the financial giant.”

Housing Wire – “Architectural billings positive for first time since 2008: AIA” (10-20-10)

“The Architectural Billings Index indicated a growth in design activity in September for the first time since January 2008. The index reached 50.4, according to the American Institute of Architects which released its data Wednesday. The index was 48.2 in August and has increased for four consecutive months.”

Housing Wire – “CMBS unpaid balances reach $62.19 billion, CRE CDO delinquencies up” (10-20-10)

“In its monthly delinquency report, Realpoint said the delinquent unpaid balance for CMBS last month rose 1.3% to $62.19 billion from $61.39 billion in August. The gain of $801.2 million in September is higher than the previous two months, but below the average of $3.14 billion a month during the first half of 2010, according to Realpoint. A year ago, the delinquent unpaid balance was $31.73 billion.”

Housing Wire – “Beige Book shows modest growth in economy” (10-20-10)

“The economy continued growing between September and early October but at a modest pace, according to the Federal Reserve. Still, the Beige Book, which gathers anecdotal evidence of economic conditions in the dozen Fed districts nationwide, showed lingering weakness in the housing market with lower home sales in most districts.”

Housing Wire – “Fannie Mae puts 2011 economic growth at 2.5%” (10-20-10)

“In its October economic outlook, the government-sponsored entity’s economics and mortgage market analysis group said the economic outlook remains clouded. The GSE sees growth of less than 2% as 2010 closes, with modest gains in the first half of next year and a ‘strengthening’ in the second half of next year.”

Bloomberg - “Apartment Rents Rise in U.S. West as Foreclosures Boost Apartment Demand” (10-20-10)

“Apartment rents rose across the U.S. West and South for the third straight quarter as record foreclosures boosted demand for rental housing, RealFacts said. The average asking rent climbed to $958 a month from $950 in the second quarter, according to a report released today by the Novato, California-based research company. It declined 0.7 percent from a year earlier.”

Looking Back:

One year ago, RealtyTrac’s Rick Sharga believed that approximately 450,000 to 500,000 repossessed properties had not yet been placed on the market. Default notices in California had decreased by 10.3 percent from the previous quarter and had increased by 18.5 percent from the previous year. The Commerce Department reported that housing and apartment construction increased by .5 percent with 1 month.

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.

Think Big Work Small Video on MERS

American Land Title view on title issue

See if your property is on the MERS system

Information on MERS

Statement by R.K. Arnold, President and CEO of MERSCORP, Inc.

Washington Post - “U.S. presses mortgage lenders to fix documents, but foreclosures can continue”

Lawyer puts former foreclosed family back into property

Today’s News Synopsis:

Some evicted homeowners are breaking into their previously owned homes, and claiming that they were wrongfully foreclosed on. Bernanke is giving signs that the Federal Reserve will continue its strategy of quantitative easing. As a percentage of gross domestic product, the national deficit decreased 1.1% in 2010.

In The News:

Orange County Register – “Newport Beach man says foreclosure was illegal” (10-15-10)

“A Newport Beach man was arrested Wednesday after an attempt to regain possession of the home he claims his family was wrongfully evicted from 16 months ago.”

New York Times – “Bernanke Signals Intent to Further Spur Economy” (10-15-10)

“The impact of the Fed’s most likely course — resuming vast purchases of government debt to lower long-term interest rates — would ripple far beyond American shores. The new actions could contribute to the weakening of the dollar and complicate a festering currency dispute that threatens to disrupt global trade relations.”

Housing Wire – “BofA hiring 1,000 small business lenders as analyst warns on bank’s repurchases” (10-15-10)

“Bank of America (BAC: 11.99 -4.84%) will hire more than 1,000 small business bankers by early 2012, president and CEO of the bank Brian Moynihan announced Thursday. During his speech at the Chief Executive Club of Boston. Moynihan said the hiring is part of BofA’s effort to expand its small business presence in the marketplace.”

Housing Wire – “JPM: Robo-signing now borrower strategy to avoid foreclosure” (10-15-10)

“One of the largest investment banks at the center of the robo-signing scandal is claiming that distressed borrowers are using the allegations as a stall tactic to prevent losing their homes. Further, the secondary industry is rejecting claims that the current transfer of mortgage titles into the bond market is faulty.”

Housing Wire – “Government outlays to Fannie, Freddie 24% below estimates” (10-15-10)

“Obama administration officials said Friday that lower-than-expected outlays to the Troubled Asset Relief Program and government-sponsored entities resulted in a reduction in the deficit. As a percentage of gross domestic product, the national deficit fell to 8.9% for fiscal 2010, down from 10% a year earlier.”

Bloomberg - “`Ninja Nightmare’ for U.S. Homes May Lead to Double-Dip, BNP Paribas Says” (10-15-10)

“U.S. banks embroiled in an investigation into faulty home foreclosures may be forced to scale back lending, pushing the economy back into recession, according to BNP Paribas SA.”

Orange County Register – “Countrywide icon settles fraud claim for $67M” (10-15-10)

“Former Countrywide Financial Corp. Chief Executive Angelo Mozilo agreed to pay $67.5 million in financial penalties to settle the Securities and Exchange Commission’s high-profile civil fraud suit against him. The two other defendants in the case, former Countrywide President David Sambol and former Chief Financial Officer Eric Sieracki, also reached settlements with the SEC. Mr. Sambol agreed to pay just over $5.5 million in penalties while Mr. Sieracki agreed to pay $130,000. All three defendants, who reached the settlements without admitting or denying wrongdoing, also agreed to injunctions against future violations of securities law.”

Looking Back:

One year ago, Comptroller of the Currency John C. Dugan said that although credit quality was worsening, most banks had the strength to absorb oncoming damage. Fitch Ratings saw positive signs for home sales, but warned that the recovery will involve ups and downs. RealtyTrac reported that 1 in every 136 U.S. homes received a foreclosure notice during Q3 of 2009. According to MDA DataQuick, San Francisco home and condo sales increased by 4.8 percent in September 2009.

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.

Ivan Choi President of REOMac (Full Bio)

September 17^th, 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 4^th quarter of 2010 and the 1^st 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 1^st. 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 20^th thru the 23^rd in Hollywood, Florida. It is the 25^th 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.

Sean O’Toole Founder and CEO of ForeclosureRadar (Full Bio)

September 17^th, 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 InvestorsAssociation and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, San Jose Real Estate Investors Association and Geraldine Barry, Claudia Buys Houses, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by Sean O’Toole. Sean is the Founder and CEO of ForeclosureRadar.com. ForeclosureRadar is the only company that tracks every foreclosure in California, Arizona, Nevada, Washington and Oregon. It makes updates daily on all foreclosure auctions. Prior to ForeclosureRadar, Sean spent 15 years building and launching software companies. In 2002, Sean entered the foreclosure business, and bought and sold over 150 properties.

Bruce thinks everyone who is a trustee sale buyer should be a member of ForeclosureRadar. When Sean started Foreclosure Radar, there were only about 40 trustee sale buyers who bought the majority of the deals within the state, but now there are thousands. The invention of the lower bid has created activity. We wish they would drop their opening bids even lower.

5 to 10 billion dollars worth in properties go to the courthouse steps every month. 80 percent of those properties go back to the bank as REOs. The number of REOs have decreased 50 percent from July 2008. However, there are still a huge number of properties being taken back by banks. From a historical perspective, we still have an outrageously high number of REOs.

People tend to have this mentality that nothing bad can happen from here on out, because they don’t think the lenders will unload a bunch of inventory into the market. However, in 2007 and 2008, that is exactly what they did. Up until the end of 2008, regulations required you to file a notice of default after 60 to 90 days of delinquency. In September of 2008, Paulson changed the rules, and since then, they have changed the rules to mark to market. Lenders now have this mentality that discourages them from foreclosing so long as there is some hope of receiving payment at some point in the future.

People are wondering when all the shadow inventory is going to show up and ruin everyone’s day. Shadow inventory has a few different holding tanks. The banks are holding it and not releasing it. In 2008, there was growing evidence that banks had inventory that were not being listed. In 2009, banks started selling more foreclosures than they were taking back. In the mean time, we had delinquencies that were over 90 days delinquent and were not going into foreclosure. Some properties are as much as 180 days delinquent. We have 1 million homeowners in California that are not making payment, but only 200,000 in foreclosure, and only 15,000 to 20,000 being foreclosed on per month.

There is a report claiming that “once a person is behind, the odds of them making that payment current again without a loan modification is 1%”. Sean thinks that may be true historically, but right now, the situation is worse than that. In the past, people went delinquent because of job problems, but this time, they are going late because we had a massive credit bubble that doubled home prices fictitiously. We have now corrected those prices, but we have 4 trillion dollars in excess mortgage debt. People are realizing that they are never going to get that money back, and paying the interest doesn’t help them.

ForeclosureRadar noticed an increase in investor activity in 2009. Subscriptions increased slightly around that time. Right now, people are concerned that the economy and housing might double-dip. Bruce thinks that a double-dip will probably occur.

A lot of ForeclosureRadar’s growth has come from builders and commercial real estate brokers. The court house steps have become much more competitive because of these two groups. They can’t just stop working because their niche isn’t doing well.

From 2002 to 2006, good investors could get a 50 to 75 percent return on capital. In 2007, the market went away because the banks weren’t dropping the bids. In 2008 and 2009, Sean heard plenty of stories about investors getting an 80 percent return on capital. It got really good for a little while, but over the past six months, the market got a lot more competitive. There are plenty of risks with buying at auctions. Bruce believes that someone makes a mistake every day at the courthouse that alters their financial life for a while.

The government has decided that it is better to avoid taking a property back to the lender. ForeclosureRadar is tracking the lenders who are willing to work problems out. Investor short sales concern Sean, especially if the deal is being bought to be flipped. Some people are claiming you can make a lot of money by doing a short sale through a double escrow. Sean thinks people who do that are going to get themselves into trouble. Bruce interviewed the FBI on this subject, and the FBI described the people who do double escrows as perpetrators. There are short sale opportunities out there, but there is a lot of risk involved. It can be difficult to convince lenders that you have added a significant amount of value to a recent short sale.

Lenders understand that auctioned properties are being sold at a discount. On a short sale, lenders believe that a market sale is being made, and they will not like the idea of selling a short sale at $100,000 below market.

Deutsche Bank recently made a report on mortgage servicers and how long it takes to do a short sale. With prime mortgages, GMAC took six months on average, CitiGroup took 7.5 months, Wells Fargo took 8 months, and Countrywide took 13 months. There is a buyer attached to the end of these deals, and no one is going to wait 13 months.

People involved with HAFA brag about their ability to sell within six months, and Bruce thinks that is ridiculous. The problem is that people are not coming to terms with the losses they are going to take. The government also has a few policies that are affecting speed. If Bruce was attached to that business, he would be very frustrated.

Mortgage insurance companies know they will have a better income and have less of a loss with a short sale, but if they have that loss right now, then they’ve got a payout to make. If they do not approve a short sale, and force a property into foreclosure, they may not have to payout for 8 or 9 months.

Sean believes that companies are moving away from principal reductions. Freddie claimed that they are not going to do principal reductions, because they have been tasked with protecting tax payer funds and they cannot just give out principal. If GSEs, who hold a lot of the mortgage debt, start giving out principal reductions, then that comes directly at the cost of the taxpayers. Freddie has a deed-in-lieu lease back program with a lease option. If someone does a deed-in-lieu under this program, they have a two year waiting period before they get to buy a property, and Bruce has the feeling that the property they will buy is that same property they were previously in. That would cause less volatility in the market, because it would discourage buyers from moving around.

Sean recently did some research for American Banker Magazine on jumbo loans. Loans under $417,000 are the fastest to be foreclosed on. Mini jumbos, which range from $417,000 to $729,000, take 30 days longer to foreclose on, and it takes even longer to foreclose on big jumbos. If lenders are struggling to deal with reality anywhere, it is at the high end of the market. Lenders sometimes try to aggressively foreclose with the hope of scaring the borrower into paying, but when they don’t get scared, the borrowers will simply vacate and move, and then the foreclosure gets cancelled. When lenders do not foreclose because they do not want the house, they are usually cancelling foreclosure by the masses. These lenders are often working to get people into the HAFA program, so that they can get a short sale or deed-in-lieu. Sean thinks the HAFA program is just like HAMP last year. It is not meant to conclude a bunch of short sales, it is meant to put people through another six months of delay only to tell them that they do not qualify.

Sean O’Toole’s website is www.foreclosureradar.com

Sean will be on the I Survived Real Estate 2010 panel in September.

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.

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Homebuilders pulled 46 percent fewer permits from November of last year. According to the Mortgage Bankers Association, mortgage application volume decreased by 10.7 percent from last week. Freddie Mac purchased 13 percent fewer mortgage purchases from the previous month. Equifax reports that HELOC originations fell 36 percent from one year ago.

In The News:

CBIA - “Housing Production Posts Decrease in November, CBIA Announces” (12-13-09)

“According to statistics compiled by the Construction Industry Research Board (CIRB), homebuilders pulled permits for 2,540 total housing units in November, down 12 percent from October, and down 46 percent from November 2008. Permits for single-family homes totaled 1,710, down 20 percent from the previous month, but up 18 percent from the same period last year, while multifamily permits totaled 830, up 9 percent from October but down 74 percent from a year ago.”

Mortgage Bankers Association – “Mortgage Applications Decrease in Latest MBA Weekly Survey” (12-23-09)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending December 18, 2009.  The Market Composite Index, a measure of mortgage loan application volume decreased 10.7 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 10.9 percent compared with the previous week.”

Housing Wire – “BofA Sues MGIC Over Unpaid Insurance Claims” (12-23-09)

“Bank of America’s (BAC: 15.18 -0.98%) Countrywide Home Loans unit sued Mortgage Guaranty Investment Corp. (MTG: 5.7798 -9.12%) over allegations the Wisconsin-based mortgage insurer denied millions of valid claims.”

Housing Wire – “Freddie Buys 7% More Refi Mortgages in November” (12-23-09)

“Mortgage giant Freddie Mac (FRE: 1.3295 -1.52%) reported $27.9bn in mortgage purchases and issuances in November, a 13% drop from $32.1bn in October, according to a monthly summary of the agency’s portfolio.”

Housing Wire – “HUD Delays New FHA Appraiser Guidelines” (12-23-09)

“According to an FHA memo obtained by HousingWire, the January 1, 2010 implementation of Mortgagee Letter (ML) 2009-28 (download here) won’t take affect until February 15, 2010. The new FHA regulations are similar to those implemented by the government-sponsored enterprises (GSEs) to ensure appraiser independence with the Home Valuation Code of Conduct (HVCC).”

Housing Wire – “Equifax: HELOC Origination Down 36%” (12-23-09)

“Origination of new home equity lines of credit (HELOC) accounts is down 36% from year-ago levels, Equifax (EFX: 31.28 -0.26%) said. There were 75,600 HELOC accounts originated in September 2009, down from 117,800 in September 2008, according to the Atlanta-based credit bureau’s most recent monthly credit trend report, derived from Equifax’s nearly 200m US consumer credit files.”

Bloomberg - “U.S. Economy: Spending and Incomes Climb, New-Home Sales Drop” (12-23-09)

“American consumers’ spending and incomes climbed in November, indicating the biggest part of the economy is poised to strengthen as the labor market recovers. Purchases rose 0.5 percent as households took advantage of discounts on autos and electronics, figures from the Commerce Department showed today in Washington. The gain was smaller than anticipated as unseasonably warm weather depressed utility use. Another report showed new-home sales unexpectedly fell as potential buyers were discouraged by the scheduled expiration of a tax credit. The tax break was later extended.”

Bloomberg - “General Growth Has Deals to Restructure $11.6 Billion of Debt” (12-23-09)

“General Growth Properties Inc., the second-largest U.S. mall owner, has won approval from creditors and a federal court to restructure loans totaling $11.6 billion, according to a lawyer.”

Looking Back:

One year ago, existing home sales fell 8.6 percent from October to November. Mortgage default filings against homeowners decreased for the first time in 3 years. Moorlach predicted that 10 municipal bankruptcies would occur in 2009. The U.S. economy shrank by 0.5 percent from the previous month.

The MBA’s survey shows that mortgage applications decreased by 4.5 on a seasonally adjusted basis from last week. Freddie Mac’s survey shows that the 30-year FRM decreased by 0.7 points from the previous week. Standard & Poor’s, Moody’s, and Fitch are being sued for inflating ratings.

In The News:

Mortgage Bankers Association - “Mortgage Applications Decrease in Latest MBA Weekly Survey” (11-25-09)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending November 20, 2009.  The Market Composite Index, a measure of mortgage loan application volume, decreased 4.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5.8 percent compared with the previous week.”

Housing Wire – “30-Year Fixed Mortgage Rates at Historic Lows” (11-25-09)

“Freddie Mac’s (FRE: 1.12 -0.88%) weekly survey put the 30-year FRM at 4.78% with a 0.7 point, down from last week when it was 4.83% and one year ago when it was 5.97%. This week’s rate ties the record for lowest ever in the weekly survey’s history, which was previously reached twice in April this year.”

Housing Wire – “Fannie’s MBS Issuance Slides 31% in October” (11-25-09)

“Fannie’s gross mortgage portfolio declined at an annualized rate of 27.8% and stood at $771.4m at the end of the month, according to the monthly summary”

DSNews - “Rating Agencies Face Lawsuit for Allegedly Misleading MBS Investors” (11-24-09)

“Cordray is suing Standard & Poor’s, Moody’s, and Fitch for allegedly providing inflated ratings of mortgage-backed securities (MBS) in exchange for lucrative fees from the securities issuers the agencies say they were objectively evaluating. The lawsuit was filed Friday in a U. S. District Court on behalf of five Ohio public employee retirement and pension funds. Cordray says the case is not intended to take on the status of a class-action lawsuit.”

DSNews - “Bank of America Helps 100,000 Homeowners Avoid Foreclosure” (11-24-09)

“In an effort to help borrowers with Countrywide subprime and option-ARM mortgages avoid foreclosure, Bank of America created its National Homeownership Retention Program (NHRP), providing mortgage relief to 100,000 eligible homeowners in just 10 months. In the third quarter alone, more than 31,000 customers received assistant through the NHRP, according to the bank’s quarterly progress report.”

Bloomberg - “Sales of New Homes in U.S. Rise to Highest Since 2008″ (11-25-09)

“Purchases of new homes in the U.S. rebounded more than anticipated in October as buyers rushed to take advantage of a government tax credit before it expired. Sales rose 6.2 percent to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today in Washington. The median sales price fell 0.5 percent and the number of unsold homes reached a four-decade low. ”

Bloomberg - “Fed Officials Watch Asset Prices for Signs of ‘Excessive Risk’” (11-25-09)

“Federal Reserve policy makers said for the first time that their decision to cut interest rates to zero may be fueling undue financial-market speculation even as they called the dollar’s decline ‘orderly.’ The Federal Open Market Committee said its policy of keeping rates low might cause ‘excessive risk-taking’ or an ‘unanchoring of inflation expectations,’ according to minutes of its Nov. 3-4 meeting released yesterday.”

Bloomberg - “First American Flips Real Estate Stocks to Beat Fund Rivals” (11-25-09)

“John Wenker and Jay Rosenberg, managers of First American Real Estate Fund, buy and sell stocks more often than their peers, a strategy that helped them outperform 98 percent of rivals in the past decade. The $1.1 billion fund’s turnover ratio, a measure of how often its holdings are traded, is 150 percent, according to data from Morningstar Inc. That compares with an average of 104 percent for all real estate funds. ”

Realty Times – “Internet Stealth Auctions Protect Brand, Generate New Homes Sales” (11-25-09)

“Brown needed to sell his five models. He hired an internet marketing company to help him, then challenged them to design a program around a ‘call to action.’ The company, SaleAMP, suggested the developer give new home buyers what resale real estate thrives on: the opportunity to make an offer- but to do it quietly, fast and with internet marketing thrust at full throttle.”

Realty Times – “Short Sale Sellers Need To Guard Against ‘Double Whammy’ By Bank and I.R.S.” (11-25-09)

“Bad enough that a short sale involves the loss of one’s home with no equity to show for it, and a credit negative that may last for years; it also has the potential to produce two very bad after-effects. One is that the lender, or the lender’s assignee, may continue to pursue the beleaguered seller for the remainder of the debt. The other is that the I.R.S. may come knocking on the seller’s door, seeking tax on the amount of debt that was unpaid. ”

Looking Back:

One year ago, a survey from AARP showed that 25 percent of baby boomers desired to move from their current home. The MBA reported that 32.9 percent of all mortgage applications were government-insured. Total home sales in 2008 increased by 17 percent from 2007.