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The Norris Group Real Estate News Roundup 9/1/10

Wednesday, September 1st, 2010

Today’s News Synopsis:

The MBA’s weekly survey shows mortgage applications increased 2.7% this week. SB1275, the foreclosure/modification bill, was rejected by congress in a 36-30 vote. Fannie Mae’s new rule regarding appraisal cutting takes effect today. Construction spending decreased 1 percent in July, according to the Commerce Department.

In The News:

Mortgage Bankers Association – “Mortgage Applications Increase as Rates Hit New Low in MBA Weekly Survey” (9-1-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 27, 2010.  The Market Composite Index, a measure of mortgage loan application volume, increased 2.7 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 2.3 percent compared with the previous week.”

Reuters - “Loan picture improves but troubles remain: FDIC” (9-1-10)

“The Federal Deposit Insurance Corp revealed some encouraging figures about the bank industry, saying the sector earned $21.6 billion during the quarter largely due to banks putting away less money to cover expected loan losses. During the first quarter, the industry earned $17.8 billion.”

San Francisco Chronicle – “Assembly rejects foreclosure/modification bill” (9-1-10)

“SB1275, which was rejected 36-30 late Monday, would have required lenders to provide homeowners with a fully considered loan modification decision prior to foreclosing. Unlike federal initiatives, it would have given homeowners the right to sue the lender if that process did not occur.”

Housing Wire – “Fannie’s appraisal cutting ban takes effect” (9-1-10)

“Fannie Mae’s new policy to reduce appraisal cutting takes effect today. If a lender is trying to sell the GSE a loan, they are now prohibited from changing the market value of a home on the request form. Fannie Mae said Tuesday if a loan servicer does not properly handle a troubled mortgage loan in a timely manner, it will demand compensation from the servicer for the mortgage.”

Housing Wire – “Fed buys $900 million of Treasury debt” (9-1-10)

“Dealers offered to sell the Fed $25.79 billion in debt. The three slices of debt purchased by the Fed include $131 million maturing Nov. 15, 2012; $345 million maturing Dec. 15, 2012; and $424 million maturing Jan. 31, 2013. At its meeting from earlier this month, the Federal Open Markets Committee directed the New York Fed to maintain the total face value of domestic securities held in the system open market account at about $2 trillion.”

Housing Wire – “DebtX July CRE loan value up to 79.4%” (9-1-10)

“The value of commercial loans priced by The Debt Exchange in July that collateralize commercial mortgage-backed securities rose to 79.4% of the original balance. DebtX said the value is up from 77.4% in June, marking the fourth-straight month of increases, and is higher than the 71.1% for the year-ago July. The values are based on loans priced by DebtX. In July, the company priced 57,801 CRE loans with an aggregate principle balance of $679.5 billion that collateralize 623 CMBS trusts.”

Bloomberg - “Construction Spending in U.S. Declined Twice as Much as Forecast in July” (9-1-10)

“The 1 percent drop brought spending to $805.2 billion, the lowest level in a decade, after a revised 0.8 percent drop in June that wiped out a previously estimated gain, Commerce Department figures showed today in Washington. Spending on federal government projects fell by the most in a year.”

Bloomberg - “Real Estate Premium Near Record to U.S. Bonds Signals Time to Buy Property” (9-1-10)

“Capitalization rates, a measure of real estate yields, averaged 7.22 percent in the second quarter, based on an index calculated by the National Council of Real Estate Investment Fiduciaries. That was 429 basis points, or 4.29 percentage points, higher than the yield on 10-year government bonds as of June 30, according to data compiled by Bloomberg. It’s about 475 basis points higher than Treasury yields as of yesterday.”

Looking Back:

One year ago, the NAR reported that pending home sales increased 3.2 percent in one month. The average price of homes bought with mortgages funded by Freddie Mac increased 1.7% during the 2nd quarter of 2009. A wildfire north of Los Angeles threatened more than 12,000 homes and forced the evacuation of more than 4,300 people.

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The Norris Group Real Estate News Roundup 8/26/10

Thursday, August 26th, 2010

 

 

Today’s News Synopsis:

The MBA’s second quarter survey shows the delinquency rate for mortgage loans on residential properties dropped to 9.85 percent. Freddie Mac reports that interest rates have dropped AGAIN to 4.36%. According to CoreLogic, 23 percent of residential homes with mortgages were in negative equity at the end of the 2nd quarter. Barclays Capital claims existing home sales decreased 30% last month.

In The News:

NAR - “Commercial Real Estate Remains Soft but Favors Business Expansion” (8-26-10)

“The SIOR index, measuring 10 variables, rose 2.8 percentage points to 41.0 in the second quarter, but remains well below a level of 100 that represents a balanced marketplace.  This is the third consecutive quarterly improvement after nearly three years of decline; the last time the commercial market was in equilibrium at the 100 level was in the third quarter of 2007.”

MBA - “Delinquencies and Foreclosure Starts Decrease in Latest MBA National Delinquency Survey” (8-26-10)

“The delinquency rate for mortgage loans on one-to-four-unit residential properties dropped to a seasonally adjusted rate of 9.85 percent of all loans outstanding as of the end of the second quarter of 2010, a decrease of 21 basis points from the first quarter of 2010, and an increase of 61 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased two basis points to 9.40 percent this quarter from 9.38 percent last quarter.”

Los Angeles Times – “Home loan rates drop yet again to record low” (8-26-10)

“Freddie Mac said rates for both 30-year and 15-year fixed mortgages dropped for the ninth time in the past 10 weeks. The mortgage giant’s weekly survey said the average rate that lenders were offering on the 30-year loan was 4.36% during the week that ended Thursday, down from 4.42% a week earlier and 5.14% a year ago. Borrowers would have paid 0.7% of the loan amount in upfront lender fees.”

Housing Wire – “Ranks of Underwater Borrowers Decline, Thanks to Foreclosure” (8-26-10)

“The number of Americans that owe more on their mortgages than their homes are worth declined during the second quarter of 2010, but not because home prices have improved. Instead, according to a new report, increased foreclosures have helped flush underwater borrowers out of the nation’s housing markets. According to a report from information services provider CoreLogic (CLGX: 17.77 +0.28%) released Thursday morning, 11 million — or 23% — of all residential properties with mortgages were in a negative equity position at the end of the second quarter.”

Housing Wire – “Amherst Sees HARP Failing Over Fees” (8-26-10)

“The Home Affordable Refinance Program, which started early last year, was supposed to ’solve the key inhibitor to many borrowers refinancing in our current housing market – negative equity,’ the research firm’s MBS strategy group said in its most-recent mortgage insight report. However, high levels of due diligence and onerous fees for borrowers mean that those who should get the refi, likely won’t.”

Housing Wire – “Fed Buys $1.41bn of Treasuries” (8-26-10)

“The Federal Reserve purchased $1.41 billion of Treasury debt Thursday, including $1.14 billion of notes maturing in November 2021.”

Housing Wire – “Freddie Mac Mortgage Purchases and Issuances Fall in July, 2010 Total Pushes $207bn” (8-26-10)

“Mortgage purchases and issuance at government-sponsored enterprise (GSE) Freddie Mac fell to nearly $28.4bn, from $30.9bn in June — bringing the year-to-date totally to $207.4bn so far in 2010. Refinance-loan purchase and guarantee volume at Freddie fell to $18.1bn in July, from $19.1bn in June, according to the firm’s monthly volume summary (download here). The aggregate unpaid principal balance of the GSE’s mortgage-related investments decreased by $13.6bn.”

Housing Wire – “Barclays Capital Expects Home Prices to Dip Another 7%” (8-26-10)

“Existing home sales plummeted 30% in July after the homebuyer tax credit brought forward 300,000 to 600,000 of housing demand, assuming 4 million homes sell annually, according to research today from Barclays Capital.”

Housing Wire – “Weekly Initial Jobless Claims Down 6.1% to 473,000″ (8-26-10)

“The Labor Department said Thursday that seasonally-adjusted initial claims slid to 473,000 last week, down from an upwardly revised 504,000 for the previous week. Briefing.com consensus had expected claims to drop to 485,000.”

Looking Back:

One year ago, the NAR reported nearly one-third of all existing homes sales were either short sales or foreclosures. Home sales in July 2009 increased by 30 percent from January 2009. Office space availability increased in the second quarter of 2009 in Orange County.

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 8/25/10

Wednesday, August 25th, 2010

Today’s News Synopsis:

The MBA’s weekly survey shows that mortgage loan application volume increased by 4.9%. The Commerce Department reported new homes sales decreased 12.4% in July. According to Zillow, most Western states experienced a decrease in 20-year mortgage rates last week. California’s 30-year rate decreased to 4.30%.

In The News:

Mortgage Bankers Association - “Mortgage Refinance Applications Continue to Increase as Rates Decrease in Latest MBA Weekly Survey” (8-25-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending August 20, 2010.  The Market Composite Index, a measure of mortgage loan application volume, increased 4.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 4.5 percent compared with the previous week”

Washington Post – “New home sales hit lowest level” (8-25-10)

“The Commerce Department reported Wednesday that new homes sold in July at an annual rate of 276,000, down 12.4 percent from June and down 32.4 percent compared with the same time last year”

Housing Wire – “Dow Closes Down Nearly 134 Points Following Bad Housing Data” (8-25-10)

“The American stock markets closed lower today following the news of homes sales dropping a staggering 27%. Stocks of big banks that have large mortgage-finance operations such as Citigroup (C: 3.68 -0.81%), Bank of America (BAC: 12.63 -0.08%), Wells Fargo (WFC: 23.4907 -0.63%) and JPMorgan (JPM: 36.179 -0.09%) closed lower despite doing large amounts of trading volume, according to the New York Stock Exchange”

Housing Wire – “Zillow: Rate on 30-Year Mortgage Remains Flat on Average” (8-25-10)

“Most western states saw a decline in rates: California’s current rate of 4.3% is down from 4.33% last week; Colorado’s at 4.17% is down from 4.19%; Washington’s at 4.29% is down from 4.33%; Illinois’ at 4.24% is down from 4.3%, and Florida’s at 4.2% is down from 4.21%.”

Housing Wire – “Deutsche Bank Summarizes Future of GSEs, Government Guarantee” (8-25-10)

“Key elements included re-launching of the MBS guarantee business backed by catastrophe insurance from the US government. This guarantee would implicitly serve as a backstop to the TBA pass-through market. In a panel with investors in the space, both of these aspects were considered key to maintaining adequate liquidity at the GSEs.”

Housing Wire – “House Prices Begin to Climb, Up 0.9% in Q2 in FHFA Index” (8-25-10)

“The agency said its second quarter HPI – calculated using information from mortgages acquired by Fannie Mae and Freddie Mac – rose 0.9% on a seasonally adjusted basis from the prior quarter, yet fell 1.6% from the year ago. Still, prices of other goods and services in the second quarter were 3% higher than the year earlier. This puts the second quarter inflation-adjusted home price about 4.4% higher than last year, according to the FHFA.”

Housing Wire - “Americans Continue to Deleverage with Credit Card Debt Below $5k per Person” (8-25-10)

“The average national credit card borrower debt slid downward for the fifth consecutive quarter by 4.1% to $4,951, marking the first time the average has been below $5,000 since 2002, according to a report released today by TransUnion. This, coupled with the fact the national credit card delinquency rate for borrowers 90-plus days delinquent plummeted to 0.92% in Q210 (down 17.1% from the first quarter and 21.3% from last year) suggests that borrowers are saving more and spending more responsibly.”

Orange County Register – “Thinking of a refi? Tips for borrowers” (8-25-10)

“This summer’s bout of falling mortgage rates has sparked yet another frenzy of homeowners looking to refinance their loans. Now could be a good time to do it, too, with interest rates at their lowest in decades — lower than in 2001, lower than in 2003 and even lower than in 2004, when we last told you rates were at record lows. They’re lower now.”

Orange County Register – “O.C. housing risk 9th highest in U.S.” (8-25-10)

“Orange County home prices have 99.7% chance of price loss in two years, or by the winter of 2012. PMI Group doesn’t say how big of a price drop that would be, so the declines could be small or large. Nationwide, the average risk for price drops was 51.9% — down from 53.8% the previous quarter.”

Looking Back:

One year ago, the CAR reported Home sales increased 12 percent in July in California. Nationally home prices fell 6.1 percent in the second quarter from 2008, claimed the FHFA.

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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187-TNG Radio – Sean O’Toole 8-14-10

Friday, August 13th, 2010

Sean O'Toole from Foreclosure Radar

 

Sean O’Toole

Founder and CEO of ForeclosureRadar


 

 

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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 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.

Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Delmae Properties, Elite Auctions, Entrust California, Inland Empire Investors Forum, Keystone CPA, 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, Tony Alvarez, and Westin South Coast Plaza.

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186-TNG Radio – Daniel Phelan 8-7-10

Friday, August 6th, 2010

daniel-phelan

Daniel Phelan

CEO of Pacific Southwest Realty Services


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itunes

download

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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 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 Daniel Phelan. Daniel is the CEO of Pacific Southwest Realty Services. He is responsible for this company’s mortgage operations. Pacific Southwest Realty Services is an investment firm focused on commercial real estate. It represents and advises both real estate clients and institutional investors in debt. It is involved in equity placement, strategic planning, property sales and loan administration.

In 2006, Daniel’s company was heavily involved in the financing of commercial real estate. His company financed $1.5 billion of commercial real estate per year for every year of the boom.

Daniel does not think that investors perceived a high level of risk in the prices they were paying for real estate during the boom. Prices had been steadily increasing since July 1993. Commercial real estate had a continuous growth pattern all the way to 2007. If you had only been in the business for 15 years and had only seen positive growth, then you probably wouldn’t feel at risk.

The lending side was probably looking at the boom similarly. There was a lot of competition, because Wall Street entered the market. There was a tremendous amount of debt capital in the market, and it was extremely competitively priced. These prices made real estate investments that much more enticing. People saw the need to get their capital invested in some form, and commercial real estate was perceived to be a safe investment.

In 2006 to 2007, down payments were reduced because of the confidence of the market. Borrowers were getting into commercial properties with only 20 percent. Historically, you could probably get most properties financed with 25 to 30 percent down. However, 75 percent is considered to be a more appropriate and safe number.

There are two tiers of debt. Most banks is recourse, but most non-bank debt is nonrecourse. 99.9 percent of the debt for life insurance companies and pension funds is nonrecourse. Because Daniel’s company works with these kinds of firms, they could only look to the real estate for satisfaction of a debt following a default. From 2005 to 2007, many banks backed off their recourse loans and went nonrecourse.

The source of capital during the boom came from portfolio lenders, such as life insurance companies and banks, and nonportfolio lenders, such as securitized lenders and Wall Street lenders. If you were trying to accomplish high loan to value with lower rates, then you probably got involved in the commercial mortgage backed securities market. You would expect a rate of 110-120 over treasuries. Those loans would be pooled into $2 billion pools, and then sold on Wall Street.

Mortgages made near 2006 are not doing well right now. Underwriting standards were very loose at that time. The default rates for those issuances are above 5 percent, and sometimes above 10 percent.

Mezzanine financing can be compared to second trust deed. It is a debt placed behind a first trust deed. It is used for taking cash out of a property, cover tenant improvements, or buy out existing partners to recapitalize the partnership.

During the boom, mezzanine debt could be taken at a 7 to 8 percent rate on the low end. The mezzanine debt today is going for above 10 percent. It is not available for the same loan to value rate. In 2006, you could get 90 percent loan to value. Today, you would be lucky if you got mezzanine debt for 65 percent loan to value. You may not be able to get it at all.

If you intend to occupy a commercial building, you could get 90 percent financing from a bank loan. This is only available to owner occupants, and it is only available in a purchase situation, not a refinance situation. If you were buying a multi-tenant investment property, you probably would get financing from life insurance companies. Banks are beginning to come back to the commercial investment market. With these deals, banks are looking for a full relationship with bank accounts and operating accounts. During the second quarter, the commercial mortgage backed securities market starting coming back. However, this market is not coming back quickly. Daniel’s company funded its first two cmbs loans since 2007.

Daniel’s company always looks at the operating history and income of a property, and then he makes a reasonable expectation of how well that property will operate over time. The projection for those properties is typically not very good. In 2006-07 we had not been hit by unemployment. Most tenants were performing well, and occupancy rates were above 90 percent.

Many commercial loans are coming due in 2012. These loans were underwritten in 2002. These loans are going to cause a big problem. In 2002, underwriting standards were not that “out of wack”. Prices have come down a lot, but they are still greater than what they were in 2002. Daniel think there is plenty of capital to refinance the debt on those properties, and in many cases, lenders are willing to roll over those loans. The bigger problem comes in during 2014 to 2017. During these years, you will have loans on properties with significantly diminished values. At that time, you may start having tenant default issues.

Construction on commercial real estate is not going to perform well. Daniel does not know of any bank that did a commercial construction loan in 2008-09. However, there are some banks now that are willing to loan on a multifamily property now.

Residential real estate is beginning to experience a large number of strategic defaults. Commercial loans are also beginning to default, but not as badly. Commercial property owners can make their payments so long as 70 percent of the tenants are making their payments. Commercial loans are made based on the ability of a property to make income. The commercial property owners that will experience difficulty are the ones that have let go of workers. They may have a large amount of space, but are only using a small portion of it. When their leases come due, these owners will probably move out to a smaller space. This will hurt larger commercial properties.

Most cap rates during the peak were around 6 to 7 percent. For multifamily properties and apartments, cap rates were around 5 percent. As of last year, most cap rates have moved up to 8 to 9 percent. The reason why we have not experienced a dramatic change in cap rates is because of Fannie and Freddy’s involvement.

Daniel believes we are going to see more problems in 2010 rather than improvement. Sales are going to start again, but they are going to have to pay 35 percent down rather than 25 percent.

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: Delmae Properties, Elite Auctions, Entrust California, Inland Empire Investors Forum, Keystone CPA, 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, Tony Alvarez, and Westin South Coast Plaza.

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The Norris Group Real Estate News Roundup 7/23/10

Friday, July 23rd, 2010

Sources:
http://money.cnn.com/2010/07/20/real_estate/housing_starts/
http://www.inman.com/news/2010/07/20/fha-raising-fico-floor-reducing-seller-concessions
http://www.housingwire.com/2010/07/19/june-home-sales-prices-up-from-2009-remax-survey
http://www.realtor.org/press_room/news_releases/2010/07/ehs_june_above
http://www.mbaa.org/NewsandMedia/PressCenter/73447.htm
http://www.dqnews.com/Articles/2010/News/California/CA-Foreclosures/RRFor100721.aspx
http://www.car.org/newsstand/newsreleases/junereport/

Today’s News Synopsis:

The HVCC will be eliminated in less than 90 days. A national survey from Citi shows that 62 percent of Americans believe the economy has not bottomed. Mortgage purchase and issuance at Freddie Mac totaled $179 billion during the first half of 2010.

In The News:

Housing Wire – “Obama Signs Bill Eliminating HVCC” (7-23-10)

“When President Barack Obama signed the Dodd-Frank Act this week to reform the financial markets, the Home Valuation Code of Conduct (HVCC) was officially set for elimination in 90 days.”

Housing Wire – “Citi Survey: Most Americans Don’t See Economic Recovery Any Time Soon” (7-23-10)

“According to a nationwide survey released Thursday by Citi and Hart Research Associates, nearly two-thirds of Americans (62%) believe the economy still has yet to hit bottom, with a lack of jobs and troubles managing debt largely responsible for the gloomy outlook.”

Housing Wire – “Fed Off to Slow Start Unwinding Billions in Mortgage Assets” (7-23-10)

“The Federal Reserve, which responded to the financial crisis with unprecedented monetary policy, is off to a slow start in settling mortgage assets it bought from government-sponsored enterprises, according to Federal Reserve Bank of Cleveland (FRBC) vice presidents John Carlson and Joseph Haubrich and research assistant John Linder.”

Housing Wire – “If HAMP Is a Band-Aid, HAFA’s an Exit Strategy” (7-23-10)

“I bought my home in 2006 for $500,000 and put $50,000 down, and I got a loan for $450,000 at 7% for 30 years. I could afford the payment, and I paid on time. Fast forward to 2009. I am not making the bonuses I was in 2006, and my wife’s hours have been cut so our family income is not what it was. It seems that the HAMP program was made for me. Now comes the real question. Do I want to stay in the house? I owe essentially $450,000 on my home. From 2006 through 2009 the value of my home decreased from $500,000 to $240,000. I now owe $450,000 on an asset that is worth $240,000. Even if I were offered a mod to 3% and the term extended to 40 years do I really want continue to pay on a loan when the asset is worth about half of what I owe?”

California Builder - “Five Common Mistakes When Remodeling Your Kitchen” (7-23-10)

“Make sure you have the specs in the contractors’ hands prior to cabinets being ordered. This will result in a better fit for the appliance into the cabinets — especially wall ovens, built-in microwaves, cook tops and large fridges.”

Orange County Register - “Home sales up in only 42 of 83 ZIPs” (7-23-10)

“Only 42 of 83 O.C. ZIPs had year-over-year sales gains in the period. 5 of 83 O.C. ZIPs has sales gains of 100% or more in the period. Overall, countywide sales were +9% vs. a year ago.”

Housing Wire – “Freddie’s Mortgage Purchase and Issuance Reaches $179bn in H110″ (7-23-10)

“Mortgage purchase and issuance at Freddie Mac rose to $30.9bn in June, from $25.1bn in May, bringing the year-to-date total to $179bn for the first half of 2010 (HI10), according to a monthly volume summary (download here). Freddie’s total mortgage portfolio decreased at an annualized rate of 0.9% in June. Total guaranteed Participation Certificates (PCs) and structured securities issued fell at an annualized rate of 0.6%.”

Looking Back:

One year ago, the average 30-year mortgage rate increased to 5.2 percent. The National Association of Realtors said that home sales rose annual rate of 4.89 million. The FBI documented nearly 29,000 mortgage fraud SARs in the first two months of 2009.

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The Norris Group Real Estate News Roundup 7/16/10

Friday, July 16th, 2010

Sources:
http://www.latimes.com/business/realestate/la-fi-foreclosures-20100715,0,5786857.story?source=patrick.net
http://www.boston.com/business/articles/2010/07/09/banks_fight_changes_to_accounting_rules/
http://www.aba.com/Industry+Issues/FASB_advocacy.htm
http://www.dsnews.com/articles/gses-face-lawsuit-over-resistance-to-going-greener-energy-loans-2010-07-15
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-150
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-145
http://www.dsnews.com/articles/senate-approves-landmark-financial-reform-legislation-2010-07-15
http://www.dsnews.com/articles/senate-approves-landmark-financial-reform-legislation-2010-07-15
http://www.reuters.com/article/idUSTRE66E4FP20100715

Today’s News Synopsis:

According to MDA DataQuick, 43,964 new and resale houses and condos were sold in California last month. The California Employment Development Department reports that unemployment levels remained stagnant in June while 400,000 people lost their unemployment benefits. The SEC is charging Goldman Sachs with a $550 million fee for misleading its investors. HR 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, is expected to be signed. This bill will end the HVCC.

In The News:

DQNews - “California June Home Sales” (7-15-10)

“An estimated 43,964 new and resale houses and condos were sold statewide last month. That was up 7.3 percent from 40,965 in May, and down 0.5 percent from 44,167 for June 2009. California sales for the month of June have varied from a low of 35,202 in 2008 to a peak of 76,669 in 2004, while the average is 50,405. MDA DataQuick’s statistics go back to 1988.”

Los Angeles Times – “California job climate stagnant in June” (7-16-10)

“California’s jobs climate stagnated in June as part-time federal census workers lost their jobs and about 400,000 out-of-work people lost their unemployment benefits. Although the monthly, seasonably adjusted unemployment rate crept down a tenth of a percentage point to 12.3%, the economy lost 27,600 jobs, according to the California Employment Development Department. The state’s unemployment rate was 11.6% in June 2009. Nationally, it hit 9.5% last month.”

Sacramento Bee – “Home Front: Idea to reduce principal is gaining” (7-16-10)

“The financial system, federal government and California’s state government have favored loan modifications, and more recently, short sales. Both are chaotic. Neither has proved equal to the problem of negative equity. About 45 percent of Sacramento-area borrowers still owe more than their houses are worth. About 12 percent of Sacramento-area home loans are delinquent or headed toward foreclosure.”

San Francisco Chronicle – “Bill would shield homeowners’ credit ratings” (7-16-10)

“Struggling homeowners who get loan modifications to stave off foreclosure often discover that their credit score takes a big hit. A bill introduced on Thursday by U.S. Rep. Jackie Speier, D-Hillsborough, would shield homeowner credit ratings after a loan modification.”

Housing Wire – “Goldman to Pay $550m and Reform Subprime Mortgage Investment Activity” (7-15-10)

“The Securities and Exchange Commission (SEC) today announced that Goldman, Sachs & Co. (GS: 146.45 +0.85%) will pay the largest-ever penalty by a Wall Street firm.”

Housing Wire – “House Approves Flood Insurance Reform” (7-15-10)

“The US House of Representatives on Thursday approved a flood insurance reform bill that would reauthorize the National Flood Insurance Program (NFIP) for five years. The provision, which extends the program to Sept. 30, 2015, passed by a wide margin, 329 to 90, with support from both Democrats and Republicans.”

Housing Wire – “Home Asking Prices, Listing Inventory Up in Q210: Altos Research” (7-16-10)

“The June median listing sales price for single-family existing homes was $477,937 in June, down $146, about 0.03%, below the May 2010 median of $478,083 for homes in Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington DC.”

Bloomberg - “Housing Bubble Leaves $4 Trillion Hangover: Chart of the Day” (7-16-10)

“The bursting of the U.S. housing bubble has left homeowners buried under about $4 trillion of excess mortgage debt, according to Dhaval Joshi, the chief strategist at RAB Capital. The CHART OF THE DAY compares the total amount of home loans outstanding with the value of residential real estate, as compiled by the Federal Reserve, for the past two decades. The latter is adjusted to reflect the average 40 percent debt-to- value ratio that prevailed from 1990 to 2005. Mortgage balances were $3.64 trillion higher than the adjusted figure as of March 31, as shown in the top panel. The actual ratio, which stood at 62 percent at the end of the first quarter, appears in the bottom panel.”

Inman - “Goodbye, Home Valuation Code of Conduct” (7-16-10)

“HR 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, includes appraisal independence requirements and provides grant funding for state oversight and enforcement of those regulations. The bill creates a new Bureau of Consumer Financial Protection that’s charged — among many things — with drafting new interim final regulations that specifically define acts or practices that violate the bill’s appraisal independence requirements. The regulations are to be drafted within 90 days of the bill’s signing, superseding the Home Valuation Code of Conduct, rules adopted by Fannie Mae and Freddie Mac in May 2009.”

Looking Back:

One year ago, 44,167 new and resale houses and condos were sold statewide in June. The Commerce Department announced that housing starts increased by 3.6 percent. The government was considering a proposal to allow homeowners to stay in their home as renters after a foreclosure. Voit Real Estate Services reported that office vacancies increased to 16.3% from April to May 2009.

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The Norris Group Real Estate News Roundup 7/12/10

Monday, July 12th, 2010

Today’s News Synopsis:

A study from Wells Fargo suggests that California may not experience a double dip in the real estate market. FICO Inc reports 25.5 percent of customers  now have a credit score of 599 or below. HUD is offering a 10 percent discount on its REO properties for non-profit buyers. Orange County housing inventory has inflated by 48% since the beginning of the year.

In The News

Orange County Register – “Homebuilders face ’slow climb’ to recovery” (7-11-10)

“It’s a challenging market, no doubt about it. But builders can find a way to sell homes as long as they pay close attention to their potential buyers. We’ve never subscribed to the idea that the same floor plan and the same marketing campaign will be effective in every situation. It just doesn’t work that way. Builders need to understand exactly what price point, what square footage, what location and what product type will speak to the buyers in a given community. When you understand all those elements, your homes will sell. Take the live-work model, which many builders have struggled with. Earlier this year we opened a live-work community in Stanton, with prices starting at $350,000. So far we have sold all but four units.”

Orange County Register – “Short sales up 74% in region” (7-11-10)

“Riverside County had 3,444 short sales this year, the second-highest number in the region. That’s up 116% from 2009, when the county had 1,593 short sales. San Bernardino County short sales increased 96.7%, to 2,089. During the first five months of 2009, the county had 1,062 short sales.”

Orange County Register – “Tips for the first-time homebuyer” (7-10-10)

“Be prepared. You will be asked for the amount and source of your income; the same for funds for down payment and closing costs; your credit and debt obligations; and permission to run a credit report. Gather your most recent federal tax returns; W2s or 1099s, depending on how you are paid; most recent pay stubs, if salaried; and your most recent statements for bank, investment or retirement accounts. If there are recent large and unusual deposits, be ready to explain where the money came from.”

Sacramento Bee – “Wells Fargo: Housing double-dip not likely in California” (7-12-10)

“San Francisco-based Wells Fargo Bank just released its new California Economic Outlook, saying widespread fears of a derailed housing recovery aren’t likely to materialize in California.”

MSNBC - “Gov’t tries to recoup some Fannie, Freddie losses” (7-12-10)

“The regulatory agency said it has issued 64 subpoenas seeking loan files and other documents to determine whether the sellers of those securities made any false statements or omissions. Fannie and Freddie had tried to do so themselves but have faced resistance in getting the loan documents, said the agency, which was given subpoena power two years ago.”

San Francisco Chronicle – “More consumer credit scores dip to new lows” (7-12-10)

“Figures provided by FICO Inc. show that 25.5 percent of consumers – nearly 43.4 million people – now have a credit score of 599 or below, marking them as poor loan risks. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use. And it could be years before this group can restore their scores, even if they had strong credit histories in the past.”

Housing Wire – “HUD Gives Nonprofits, Governments 10% Discount on REO” (7-12-10)

“The Department of Housing and Urban and Development (HUD) will give state and local governments and nonprofits participating in the Neighborhood Stabilization Program (NSP) preference to buy its REO at 10% below the appraised value.”

Orange County Register – “Corona del Mar homes hardest to sell” (7-12-10)

“‘Hardest’ market to sell a home in terms of ‘market time’ (supply of homes for sale vs. new purchase deals inked in past month) is Corona Del Mar. Its market time was 15.3 months to theoretically sell all for-sale homes at the current buying pace. A year ago, this town was at 8.3 months.”

Orange County Register – “‘Unrealistic’ sellers flood O.C. home market” (7-12-10)

“Orange County housing inventory has inflated by 48% since the beginning of the year on the backs of unrealistic sellers. … The bottom line: sellers really need to take a hard look in the mirror and ask whether or not they really can drop to the realistic fair market value of their home. If not, they need to stop wasting everybody’s time and pull their home off of the market.”

Orange County Register – “O.C.’s distressed home market grows by 29%” (7-12-10)

“The active distressed inventory has increased from 2,555 homes at the beginning of the year to 3,307, levels not seen since May of 2009. The distressed inventory now represents 31% of the current active inventory. Last year at this time, there were 2,766 distressed homes on the market, 541 fewer than today.”

Realty Times – “Three Levels of Lead Generation” (7-12-10)

“you should have 6 pictures that show off the house to prospective buyers in under a minute and these should include: 1. The front of the house (try to skip the double garage doors!) 2. The Living Room or Area 3. The Kitchen (2 shots of the kitchen focusing on different aspects from different angles if possible) 4. The master bedroom 5. The master bathroom (put the toilet seat down!) 6. The backyard or area”

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

Friday, July 9th, 2010

Sources:
http://www.nytimes.com/2010/07/09/business/economy/09rich.html?_r=2
http://blogs.wsj.com/wealth/2010/06/29/mansion-foreclosures-surge/?source=patrick.net
http://latimesblogs.latimes.com/money_co/2010/07/30year-mortgage-rate-edges-down-to-new-record-low.html
http://www.boston.com/business/articles/2010/07/09/banks_fight_changes_to_accounting_rules/
http://www.aba.com/Industry+Issues/FASB_advocacy.htm
http://www.dsnews.com/articles/fannie-mae-adopts-new-rules-for-pre-mod-income-verification-2010-06-28
http://www.lpsvcs.com/NewsRoom/IndustryData/Documents/06-2010%20Mortgage%20Monitor/LPS_Mortgage_Monitor_May_2010_Final.pdf

Today’s News Synopsis:

According to Greg Paquin, Sacramento new home sales decreased by 21.3 percent in the second quarter. Foreign home buyers purchased $66 billion of US residential property during the year ending May 2010. The VP of the Federal Reserve Bank of Cleveland believes that the high foreclosure rate is likely to continue for some time. Multiple economic statistics show that the tax credits may have simply hid an ongoing recession in real estate.

In The News:

Sacramento Bee – “New-home sales plunge in Sacramento area” (7-9-10)

“Second-quarter new-home sales in the Sacramento area fell 21.3 percent from the first quarter and by 50.1 percent from the already dismal second quarter of 2009, said Greg Paquin, a Folsom consultant who issued the sales report.”

Housing Wire – “REITs Raised $22bn for Real Estate Investments in 2010: NAREIT” (7-9-10)

“The US Real Estate Investment Trusts (REITs) raised $22bn in initial, debt and equity capital offerings in 2010, and as a whole the industry owns $500bn of commercial real estate assets, approximately 10% to 15% of total institutionally owned commercial real estate, according to a mid-year report by the National Association of REITs, NAREIT.”

Housing Wire – “International Investment in US Housing Market Rises: NAR” (7-9-10)

“Foreign home buyers — those with residency outside the US as well as recent immigrants and temporary visa holders — purchased $66bn of US residential property, or 7.27% of the market, in the year ending March 2010, according to the National Association of Realtors (NAR). Based on NAR’s existing home sales information, $907bn of residential sales occurred in the 12 months ending March 2010.”

Housing Wire – “DebtX Sees Commercial Mortgage Values Recover Slightly in May” (7-9-10)

“The aggregate value of commercial real estate (CRE) loans that collateralize commercial mortgage-backed securities (CMBS) rose to 76.6% of the original balance in May, from 76.4% in April, according to loan sale advisor DebtX. Values are up from 75.9% in March and 76.5% in February. CRE loan values are down from 77.6% in May 2009, according to DebtX.”

Housing Wire - “High Foreclosure Rate Likely to Persist, Cleveland Fed VP Says” (7-9-10)

“If past recessions are a guide, the nation’s high foreclosure rate is likely to persist, according to authors at the Federal Reserve Bank of Cleveland.”

Housing Wire – “Bank Bailout May Turn a Profit for Treasury, KB&W Report Finds” (7-9-10)

“The Capital Purchase Program, $205bn in financial firm relief funds from the Treasury’s $700bn stimulus package, the Troubled Asset Relief Program (TARP), is nearly repaid in full and likely to turn a profit, according to a report from broker/dealer investment bank Keefe, Bruyette and Woods.”

Housing Wire – “Ginnie Guarantees $33.4bn of MBS in June” (7-9-10)

“The Government National Mortgage Association — or Ginnie Mae — guaranteed more than $33.4bn of mortgage backed securities (MBS) in June.”

Inman - “Tax credits hid ongoing real estate slide?” (7-9-10)

“The economic data that did arrive confirmed a slipping recovery, but not a double-dip. The Institute for Supply Management service-sector report for June followed last week’s pattern: softer than prior month, and well below forecast (May 55.4, forecast 55, actual 53.8). New claims for unemployment insurance came down 21,000 last week to 454,000, but have been stuck in that range all year long. Mortgage refi applications have begun to rise, but purchase ones fell again, by 2 percent last week, now 42 percent below the end of April.”

Looking Back:

One year ago, the government-insured (FHA and VA loans) share of mortgage applications was 35.9 percent. The average 30-year rate dropped to 5.2 percent. UCLA economists predicted that commercial real estate demand would not return to 2006 levels until 2014. The Financial Crimes Enforcement Network reported that suspicious mortgage activities were increasing significantly.

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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The Norris Group Real Estate News Roundup 6/28/10

Monday, June 28th, 2010

Today’s News Synopsis:

Statistics from the Federal Reserve show the median borrower who ’strategically’ defaults doesn’t walk away from the mortgage until the amount owed exceeds the value of the home by 62%. McGraw-Hill Construction reports new construction starts increased 3% in April. According to CoreLogic, more than 11 million borrowers currently owe more on their mortgage than it is worth. Experian statistics show that 19 percent of all defaults in 2009 were strategic.

In The News:

Press Enterprise – “Crash opens market for luxury apartments” (6-26-10)

“While homebuilders are aiming at a more frugal consumer by cutting frills, some apartment developments in San Bernardino and Riverside counties are going upscale with features like granite countertops and hardwood floors and rents comparable to a home mortgage. The Lewis Group of Cos., an Upland-based developer of master-planned communities and apartments, figures that partly because many people have been burned by the housing crash, there is demand from prospective tenants moving out of houses who want and can afford a house-like apartment experience.”

Chicago Tribune – “Moral bankruptcy?” (6-27-10)

“Some have struggled unsuccessfully to keep their homes, and others have just walked away. Phillips decided he wanted revenge and was willing to ruin his credit record for it. When a short sale didn’t work out as planned, the 32-year-old Chicagoan opted for Chapter 7 bankruptcy liquidation, a move that will leave Phillips with little except for the scant possessions in his one-bedroom condo. It also will leave his lender, Chase, with little except for, eventually, a condo that has lost value. Meanwhile, Phillips continues to live there, mortgage-free.”

Los Angeles Times – “Undone by their dreams” (6-26-10)

“In the last four years, according to the San Bernardino County assessor’s office, 373 of the 941 single-family homes in Mission Crest — nearly 40% — have been foreclosed on. Thirty-five have gone through foreclosure more than once. Properties that once sold for nearly $400,000 are worth less than $200,000.”

Mercury News – “Santa Clara County assessor adds Web tools to help homeowners” (6-28-10)

“More than 100,000 residents will be given access to a special website — tracking home sales by neighborhood — where they can see precisely why the assessor’s office decided to assign a particular home its worth.”

Wall Street Journal – “How Far Underwater Do Borrowers Sink Before Walking Away?” (6-28-10)

“At what point do borrowers who owe more than their homes are worth decide to stop paying the mortgage? A new study from economists at the Federal Reserve Board aims to answer that question. The research found that the median borrower who ’strategically’ defaults doesn’t walk away from the mortgage until the amount owed exceeds the value of the home by 62%.”

Housing Wire – “Monday Morning Cup of Coffee” (6-28-10)

“The House Financial Services Committee issued a statement Sunday urging ‘bold action’ on the Dodd-Frank bill, the reconciled financial reform bill agreed to by a Congressional committee last week and named after Sen Christopher Dodd (D-CT) and Rep Barney Frank (D-MA). The final bill now travels to separate House and Senate votes and then, upon passage by Congress, to a Presidential signature into law.”

Housing Wire – “Surge in Nonresidential Building Boosts May Construction Starts” (6-28-10)

“New construction starts increased 3% from April to May, according to a monthly survey by McGraw-Hill Construction. The seasonally adjusted annual rate of total construction starts was $406.3bn in May, up 3% from $392,988bn in April. For the first five months of 2010, the unadjusted value of total construction starts was $162bn, down 2% from $165bn during the same period of 2009.”

Housing Wire – “The Slippery Slope of Short Sales” (6-28-10)

“More than 11 million borrowers currently owe more on their mortgage than it is worth, according to CoreLogic (CLGX: 18.11 +0.28%)—and this group of borrowers would love nothing more than to replace their current underwater mortgage with whatever the accepted ’short sale price’ is deemed to be. I don’t know that such a response on the part of borrowers could be deemed irrational, either. Many will ask themselves why they have a mortgage at a higher amount, especially if the bank is willing to sell the house to another buyer for less money.”

Housing Wire – “G20 Applauds Dodd-Frank Bill in Pushing its own Global Financial Reform” (6-28-10)

“The meeting of G20 nations concluded this weekend in Toronto with communiqués reflecting a strong support for the US financial reform, called the Dodd-Frank bill. Indeed, information released from the summit show a mix of ambitious plans for growth, mixed with further calls to reduce spending, especially among countries with higher debt burdens.”

Housing Wire – “Experian Finds 19% of Mortgage Defaults in Q209 are Strategic” (6-28-10)

“Of all mortgage delinquencies in the second quarter of 2009 (Q209), nearly one in five — or 19% — were considered strategic defaults, according to the latest study of default trends by information services firm Experian.”

Bloomberg - “Commercial Mortgages Fail to Pay as Lending Increases” (6-28-10)

“Between 50 percent and 60 percent of loans on skyscrapers, hotels, shopping malls and apartment complexes failed to refinance within a few months of their maturity date this year, Bank of America Merrill Lynch analysts said in a report. That compares with 15 percent to 20 percent in 2008, according to the analysts led by Roger Lehman in New York. About $11 billion in loans, or one-third of the 2010 total, had hit their expected maturity dates through late May.”

Bloomberg - “Fannie Mae, Freddie Mac Should ‘Unwind’ Portfolios, Pimco Says” (6-28-10)

“Fannie Mae and Freddie Mac, the housing-finance companies supported by U.S. taxpayers, should take advantage of demand for government-backed mortgage debt and sell their holdings, according to Pacific Investment Management Co. ‘Since the government’s going to want to unwind them at some point anyway, why not do it at the best levels ever?’ Scott Simon, the mortgage-bond head at Newport Beach, California-based Pimco, manager of the world’s biggest fixed- income fund, said in a telephone interview.”

Inman - “Top 10 states for pending tax credit closings” (6-28-10)

“NAR estimates as many as 180,000 homebuyers who were under contract by April 30 may miss the June 30 closing deadline. To prod lawmakers into find a way to extend the deadline, NAR released a breakdown of how many home purchases are affected in each state.”

Looking Back:

One year ago, Freddie Mac estimated that sales of new and existing homes might increase to an annual pace of 5.1 million in the 3rd quarter. Real Capital Analytics forecasted that $16 billion of office transactions would be completed by the end of 2009. The number of Orange County property owners disputing their taxes jumped 23% near last year’s deadline.

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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