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207-TNG Radio – Norris Group 1-1-11

Friday, December 31st, 2010

Greg Norris

(Full Bio)

 

Craig Hill

(Full Bio)

The Norris Group

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This week Bruce is joined by Greg Norris and Craig Hill. Greg is the vice president of TNG Auctions. He buys properties and resells them. Craig has been working with Bruce for 15 years, and is responsible for speaking to all potential borrowers for The Norris Group.  

Craig’s business was extremely busy during the first part of the year, but it became even busier toward the end as inventory decreased.  Inventory is down 75% for REO buyers.  

When Bruce and Craig first met, most of the business revolved around doing seconds for owner occupants in financial trouble. At this point, most of Craig’s business involves doing short term loans for investors who buy fixer properties and long term loans for investors who hold rental properties. This business works well for TNG, because banks do not want to loan money out to investors. Banks have stopped making common sense loans. The TNG hard money program allows investors to own property at 9.9% interest. These properties often cash flow well, and the monthly payment is often cheaper than rent.  

Greg has discovered that most homes found at trustee sales involve smaller rehabs, newer homes and bidder areas. Trustee sales have made Greg’s job simpler, because the best deals for REOs usually involve heavier REOs. Discounts on trustee sales are smaller than on REO sales, and trustee sales are much more competitive.  

The number of people who attend trustee sales depends on the amount of inventory and the kind of inventory. The largest number of people Greg has ever seen at a trustee sale is 50 to 70, but out of that group only about 8 to 10 were big investors.  

10 years ago, trustee sales did not involve drop-bids, people had equity, and the investors involved in the business had been doing it for a long time. In some ways, Greg thinks the changes that have occurred in the trustee sales have made it more difficult for individual investors, but in other ways, it has become easier. Some of the individual investors are using their own money, so they don’t have another investor they need to repay, and they do smaller volumes. Sometimes you cannot compete with those people, because they are doing their own rehabs and they only buy a few properties every year. Some of them will buy properties for $20,000 over what Greg would be willing to pay. Because those buyers have limited research ability, Greg prefers to simply wait for those buyers to leave.  

Greg’s typical day begins by doing research on properties with open bids, and other properties that may potentially drop into open bid. At 9AM, he attends the sales. After he attends the sales, he deals with real estate and repair contracts, and then prepares for the next day’s sales.  

TNG’s loan clients have an unmatched level of experience in the industry, and Craig truly appreciates this. Craig’s phone is nearly constantly ringing. Many people discover TNG’s program through the internet, referrals, and from Bruce’s many speeches. TNG has gained a lot of respect for being a Southern California only real estate business and for being in the investment business for a long time. The most rewarding referrals come from people who have heard about TNG from multiple people, and decide to talk to us out of curiosity. Sometimes investors in the field are referred to TNG from agents who tell the investors, “If you can get a preapproval letter from The Norris Group, I will accept the offer.” That speaks more than any referral, because it means people know that TNG only approves of deals that are closable.  

This year, Craig was surprised by how much volume picked up on long-term financing. There is a huge demand for this. Bruce believes TNG’s long term financing will perform at a very high level, because a lot of inventory will come out. This kind of financing will not work as often with an owner occupant as it will with an investor. A lot of rehabs and lower priced properties are turning into buy and holds, rather than flips. Craig believes it is challenging for investors to flip $100,000 to $150,000 homes in this market, because there are many investors willing to buy and hold. An investor who can buy and hold can probably pay more, because they will receive a cash flowing property that will give them a profit for 10 more years.  

Bruce believes the 203K FHA loan program will probably return next summer. The problem with that program is that it probably takes 45 days to fund it. That makes the loan hard to sell, because a deal can be closed much quicker than that. In some cases, TNG will do a deal in 7 days or less. The speed of the deal makes a big difference in an investor’s willingness to buy.  

The automation of TNG’s website has helped Craig tremendously, because it allows him to handle phone calls and it has automated TNG’s loan process. TNG’s loan business has doubled over the last 12 months, and the time to fund those loans has gone down.  

Greg only gets to see the inside of his potential property purchases about 5-10% of the time. Only 10-15% of those properties are unoccupied.  

Two of Greg’s employers, Joe and Kenneth, are responsible for going to every house, evaluating repairs, and talking to the owners to determine whether or not they are difficult to deal with. When Joe and Kenneth are not viewing houses, they are doing construction contracts.  

Guessing the cost of a rehab when you cannot see inside requires a lot of experience. Greg often guesses based on the age of the home. For example, a house built in the 80s will probably require more cabinets than a house in the 1990s or the 2000s. You can learn a lot more about this if you come to a TNG bootcamp.  

Realtors are very pleased with TNG homes, because they are in great condition and they are standard sales. Realtors get tired of wasting their time with REO and short sales. Also, TNG is easy to deal with so long as they do their job. Bruce Norris once attended a Realtor group meeting in which an agent stood up and said, “We wish The Norris Group would buy every REO in town, because of how they deal with properties, and how they turn out.”  

Finding a reliable contractor can be tough. TNG has improved its business because of the relationships it has built with contractors over an extended period of time. If you keep your rehabs consistent, then your rehabs will get easier for your contractors, and they will have your same mentality. When a contractor has done enough repetitive jobs with you, they can advise you on how to best rehab your properties based on previous jobs.  

It takes a while to build a good investment team, and your team doesn’t just involve your contractor; you need to have lenders and escrow partners. All those people will help you get to the finish line faster, and if you aren’t going to get to the finish line, then you will be notified sooner, so you don’t waste time on the market. Dishonest lenders do not want their deals to fall out, and will lie with the hope that some money might show up. Greg tries to make sure that he is working with a serious buyer by making them spend money to finish the deal.  

When Greg first started doing trustee sales, a lot of people were using all cash and conventional loans. A lot of people got fooled into feeling that they had to buy because of the government incentive. If they had waited 6 months, they would have gotten more than $10,000 back, because the market adjusted down. Right now, Greg is seeing a lot of VA and FHA offers, and very few conventional offers. Only 1 out of every 10 of Greg’s deals fall out. Greg does a good job of weeding out bad buyers before escrow. Bruce feels that Greg has made a wise decision to force potential buyers to put effort into the property before it goes to escrow.  

Every year or two, trends change in the loan business. In 2009, TNG dealt almost exclusively with REO. In 2010, we got more trustee sale buyer refinances. Those were people like Greg who would attend trustee sales, and then refinance to leverage the property. In the last six months, Craig has noticed an increase in people buying short sales. The short sale process is no longer a half year long process. Some short sales can be completed in less than 60 days. The bulk of TNG’s business is still REOs. This is probably due to the fact that TNG’s clients are experienced, and they have relationships with REO agents.  

Short sale agents do repetitive business with buyers they are comfortable with, so developing a relationship with an agent can lead to repetitive purchases. The nice thing about a short sale is that you get to see the inside of the property, title insurance, and it is less likely to be in bad condition.

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204-TNG Radio – Tom Anderson 12-11-10

Friday, December 10th, 2010

Tom Anderson

Chairman and Founder of PENSCO Trust Company


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This week Bruce is joined again by Tom Anderson. Tom is the chairman and founder of PENSCO Trust Company. He is considered by many to be the national expert on the topic of self directed IRAs. He focuses on how investors can increase their wealth-building potential with real estate and private equity investments. He has written articles for nearly all the nation’s and financial magazines. He was recently invited to Washington as part of the “Future of Finance Initiative” for the Obama Administration.

You can loan money to your IRA if you attempting to protect the existence of the IRA. You cannot loan money to your IRA to buy new lots. The loan must also be interest free. If it did have an interest rate, the loan would be considered self dealing, because you would be taking profit out of your IRA. Lastly, if the loan extends more than 60 days, you must provide the custodian with a note explaining that the IRA owes you money.

Tom recently spoke to a member of the Department of Labor who created this exemption, and the member confirmed that you could loan money to your IRA to bail it out of mortgage delinquency.

There are some IRA investments which may or may not be considered illegal depending on which government official is reviewing the investment. For example, Tom once heard of a man who used his IRA to buy a classic car. Because the car is a classic, there is good reason to believe the car will appreciate. However, a government official might consider this self dealing, because they may or may not perceive the classic car to be for personal use. If the government perceives the car to be for personal use, then the car purchase would be labeled self dealing. Depending on which day the car purchase was reviewed, and depending on who reviewed the purchase, this may or may not be a legal IRA purchase. You can perform a large variety of transactions within your IRA, but you must be careful not to purchase anything that the government might perceive as self dealing. If the government believes you are self dealing with your IRA, then your IRA will lose its tax-deferred status.

Bruce’s business is set up to buy and sell real estate. Bruce asks Tom if there is a limit on how much money, or how many houses, he could use for his IRA. Tom believes that this is up for interpretation. In Bruce’s case, he owns a real estate business, so if he performs many transactions through his IRA, the government may possibly perceive Bruce to be running a business through his IRA. All businesses must pay taxes, and if the government determined that Bruce was running his business through his IRA, then he might lose the tax-deferred status of his IRA. Tom believes that if Bruce was both working in his IRA for retirement investments, and out of it for business use, then it would be hard for the government to label Bruce’s IRA as a business. However, if Bruce was retired, and he only purchased and sold properties through his IRA, then the government may perceive Bruce to be running a business through his IRA. You should consult with your CPA to determine whether or not you will be subject to taxes.

A disqualified person is a term in the Internal Revenue Code 4975 which defines certain entities as people you cannot perform transactions with. The government does not want you to touch your IRA assets, because they want your assets to be there when you retire. So you cannot buy a condo in a vacation spot with your IRA, and then use that condo on the weekends. Disqualified persons include yourself, your spouse, your children, and the spouses of your children. Most people in your family are considered disqualified persons, except for siblings, nephews and uncles. If you deal with a sibling or nephew, you should not offer them less than market rates. Giving a member of your family the benefit of low payments through an IRA asset could be considered self dealing.

Bruce heard an unusual example of someone who was taxed for self dealing. An investor owned a commercial building, and his IRA owned the let next to it. The investor would park in the lot next door, and that was considered illegal personal use. You are not allowed to gain a personal benefit from your IRA while the IRA is growing. If a mistake like this occurs, you have 14 days to correct it. However, if the custodian was the cause of the mistake, then you can argue in court that the custodian should be held responsible.

Tom’s company will not accept any member that is not a part of a regulated institution. If he did not check to determine whether or not his members were being regulated, many bad people would have the opportunity to deal through them. A non-regulated company may enter into an agreement with a bank who is a custodian. All banks, credit unions and trust companies are automatically qualified to hold IRAs. If you are not one of those institutions, then you must be authorized by the IRS. There are 257 mutual fund companies, insurance companies, and broker dealers that are licensed by the IRS.

It is good business to protect the consumer, and the government supports that mentality. PENSCO will not help someone enter into a prohibited transaction. If a lender was involved in a prohibited transaction on an IRA, then they would be subject to a 15% tax on the amount of the transaction. So a lender that made a $100,000 bill would receive a $15,000 bill. If the lender was not aware of the prohibited transaction, then they may be exempt from the tax.

When an investor is told that he cannot buy a property from himself with his IRA, he may get the idea of having a friend buy his property, and then re-buying from his friend. However, this is still considered an illegal transaction. This is considered a linked transaction by the IRS. You will not go to jail for performing a transaction like this unless you fail to pay the penalty taxes. However, the IRS tends to not inform you of your mistakes until 3 years later, so you can get caught off guard if you are not careful.

If you buy a property through your IRA while using your brother as a lender, you will not be taxed so long as your brother does not receive more than his regular fee.

A Prohibited Transaction Exemption (PTE) is a request submitted to the Department of Labor when you anticipate that your potential transaction may be prohibited. A PTE is usually granted on the basis that there is no increase or decrease in value because of the transaction. You cannot submit a PTE after the transaction takes place. The exemption comes in writing, so the Good Day rule does not apply.

There are some custodians who offer check book IRAs. Tom believes this practice will probably be extinct soon. There are only two custodians Tom knows of that will do check book IRAs, and PENSCO is one of them.

Tom’s website is www.penscotrust.com

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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203-TNG Radio – Tom Anderson 12-04-10

Friday, December 3rd, 2010

Tom Anderson

Chairman and Founder of PENSCO Trust Company


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This week Bruce is joined by Tom Anderson. Tom is the chairman and founder of PENSCO Trust Company. He is considered by many to be the national expert on the topic of self directed IRAs. He focuses on how investors can increase their wealth-building potential with real estate and private equity investments. He has written articles for nearly all nations and financial magazines. He was recently invited to Washington as part of the “Future of Finance Initiative” for the Obama Administration.

Tom has been in the banking business for 41 years and in the self-directed investment business for 22. The government is paying more attention to retirement issues, because there is concern over social security. Unfortunately, we are still in the dark ages in regards to knowledge of self directed investments. Many people are surprised by the idea that you can buy mutual funds with your retirement account. Many Americans are unhappy with being locked into their 401Ks, other pension plans, and other IRAs. Those retirement plans only offer a limited range of investments, and most of the options are related to Wall Street, which many people have lost a lot of money on recently. The only commodity that hasn’t taken much damage is gold, but Tom thinks most people didn’t get into Gold until after it had already experienced increases, so gold probably won’t be a good long term investment.

When Tom was in Washington, he was surprised by how interested the government was in hearing about his industry. The Retirement Industry Trust Association, which represents 90% of the self-directed custodians in the U.S., was invited to write a white paper on the need for more diversification in retirement accounts. Unfortunately, many of the government workers that Tom was speaking to before have been replace, so he has some influential ground to recover. He does feel though that the government in general has become more open to new ideas on improving retirement savings. As the president of the RITA, it is Tom’s goal to use any opportunity to discuss retirement issues with the government.

IRAs were created in 1974 as part of the ERISA Act. You could self direct an IRA back then. You could buy real estate in New Zealand if you desired to, but most people weren’t aware of that, because the securities and mutual fund companies began lobbying against real estate as a prudent retirement investment plan.

Real estate is a great long term investment. Real estate generally out paces the stock market on a long term basis. In California, you can buy properties that cashflow. When there is a down turn, it’s a great time to take advantage of real estate and ride the curve up.

Before 1974, there were pension plans but no IRAs. One of the reasons IRAs were created was because trustees were abusing their privileges. The trustees were spending the money they received to buy yachts and they would frequently lose the money given to them. Because of this, the government felt it was necessary to allow people to save on their own.

Self-directed is a frequently misunderstood word. IRAs are IRas regardless of where they are held, and the rules are dictated by the IRS. Depending on where the IRA is held, the custodian may limit what an investor can do with their IRA. There are two types of self-directed IRAs. The first is known as a self-directed brokerage account. With a self-directed brokerage account, you can pick from stocks and mutual funds to invest in, but you cannot invest in real estate or private equity. The other type of IRA allows you to invest in anything permitted by law. Some of Tom’s clients have bought companies in Spain and properties in New Zealand. When you buy outside the country, you have to consider the exchange differences. If the foreign monetary value increases against the U.S. dollar, then you can profit from both the investment and the monetary change.

There is a level of sophistication required to invest in certain categories. Tom encourages people to stick to what they know. If you own a gas station and know about gas as an investment, then you may want to use your IRA to invest in another gas station.

There are some laws regarding who and how you can deal with your IRA. There is that limits one’s ability to work with more than 3 unaccredited investors. In some cases, you cannot work with any unaccredited investors. To be an accredited investor you must have a minimum net worth of $1 million, and at least $200,000 in income for the last two years. The SEC may change their definition of “accredited investor”. Tom believes the requirements for an accredited investor will increase, because many people have lost money in stocks and private equity.

If someone wants to buy a trust deed or rental unit, they are free to do that, even if they only have $80,000 in their account.

Tom believes that IRAs are a great form of capital formation in the U.S. PENSCO started out with no assets and now has $3 billion worth of assets. PENSCO is also now funding thousands of companies that could not be started without IRAs, because they couldn’t get funding from traditional sources. There are about $4 trillion in IRA accounts.

Tom had a client who opened a $300 ROTH IRA. His company charges a $375 fee, so Tom knew the client must have had a plan. The client instructed PENSCO to send a $10 check to a lawyer in order to consummate a real estate option contract. This contract gave them the right for 30 days to buy property from a developer. The developer needed cash for $350,000. While the contract was being negotiated, the client found a buyer for a property for $525,000. Once he took the $525,000 from the buyer, he paid the seller $350,000, and moved the profit into his IRA account.

A ROTH IRA offers tax free growth for life and a great rate of return. One of Tom’s clients started a ROTH IRA with $1,800. This client used his ROTH IRA to develop a successful venture, and in 2002, that client cashed out with $32 million. He then took that $32 million and invested in other start ups. He has now increased his IRA holdings into 9 digit levels. Bruce thinks it is hard to believe that the IRS isn’t suspicious of this kind of tax free profit. Tom explains that this client helped create thousands of jobs. This fortunate client stimulated the economy and created tax revenue. 40% of new jobs are from start ups, and 70% are from small, private companies.

We still have 35 days to take advantage of a one time opportunity. Your IRA is now a portable pension plan, and can be converted into a ROTH IRA regardless of your income. Before 2006, this was not allowed. Before January 2010, if you made more than $100,000, you were prohibited from such conversions. You also have the opportunity this year to do the conversion to ROTH IRA and defer the taxation on the converted amount to 2011 and 2012. This means that if you convert in 2010, then in 2011 you must claim 50% of the converted amount on your income. The other 50% of the 2010 amount must be claimed in 2012. If you are expecting to be in a lower tax bracket in the future, this is a great opportunity for you. The government is very supportive of these conversions, because they get to collect the tax upfront.

If you bought assets that are currently depreciating, and if you have these assets in your IRA, then you can convert to a ROTH IRA and pay tax at a lower amount. This can allow those assets some time to recover. It is much better to convert a depreciated asset than an appreciated asset.

Capital gains rules do not apply within an IRA. When you take money out of an IRA, that money is taxed at a normal rate. However, if you have a ROTH IRA that has existed for 5 years, and if you are at age 59 and a half, then you can take out all your money tax free.

If you have a traditional IRA, at age 70 and a half, you have to take out minimum distributions. However, if you have a ROTH IRA, you can leave the money in the IRA as long as you want, and you can leave it to your children after you have died. There is also no estate tax, because the taxes have already been paid.

The use of leverage to purchase real estate is allowed with a ROTH IRA. It is possible to borrow up to 70% on any income producing property types on an IRA. You must put at least 30% down on the property though, because if the loan is recourse, then you would be self-dealing, which is prohibited. The 70% limit is according to bank policy, and they have had great success with this limit. They have very few foreclosures. Rates for loans are generally two points above prime. Many things can be negotiated as well.

There is actually a rule which allows you to bail out you IRA. If you got a 70% loan on a $100,000 house, and you put $30,000 down with your IRA. If you lose your tenant, and you do not have enough money in your IRA to make the payment, then you would typically be foreclosed on. In this kind of situation, there is a Department of Labor provision called AD-26, which allows you to lend money to your own IRA without limitation, so long as the money is being used to bail out the IRA account.

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 11/12/10

Monday, November 15th, 2010

Resources:
Home Values Near Unprecedented Decline as Hints of Stabilization Wane in Third Quarter
FDIC prepares to crack down on officials of failed banks
FDIC OKs plan to overhaul insurance fund payments
Obama commission considers limits to mortgage interest tax deductions

Today’s News Synopsis:

Freddie Mac reports 30-year loan rates decreased to 2.24%. Freddie Mac economists said bank foreclosure programs could cause housing to drop to a new low. President Obama intends to select Joseph Smith as the new director of the Federal Housing Finance Agency. D.R. Horton expects 2011 to be a weak year for the home-building industry.

USA Today – “Stable home prices, low mortgage rates could gas economy” (11-12-10)

“Rates on 30-year fixed loans averaged 4.17%, down from 4.24% a week ago, Freddie Mac reported Thursday. They’ve been below 5% since early May.”

Housing Wire – “California Realtors say cutting mortgage interest tax deduction will devastate nation” (11-12-10)

“Home prices in the affluent California county increased roughly 6% to $699,174 in October, according to the association. It’s up 11% from a year ago. The National Commission on Fiscal Responsibility and Reform, proposed two options in their efforts to overhaul the tax system. One was to reduce how much homeowners could deduct by 20%, and the other was to exclude second residences, home equity loans or mortgages over $500,000.”

Housing Wire – “Excessive risk retention may throttle mortgage finance: ASF” (11-12-10)

“Under the sweeping reforms of Dodd-Frank, federal financial regulators are tasked with defining a qualified residential mortgage to determine which loans will be exempt from new risk-retention requirements. The American Securitization Forum wants the regulators to establish new standards for income and asset verification, minimum borrower equity, and debt-to-income ratios that its members believe significantly strengthen the mortgage pools and ‘ensures appropriate credit can resume flowing to American homebuyers.’”

Housing Wire – “Freddie Mac says foreclosure problems may drain recovery” (11-12-10)

“Freddie Mac economists said recent problems in the banks’ foreclosure processes could slow what little momentum the recovery holds, and perhaps send the housing market down to a new low.”

Housing Wire – “KBW says market ‘overly pessimistic’ on Fannie, Freddie losses” (11-12-10)

“Analysts at investment bank Keefe, Bruyette & Woods said both Fannie Mae and Freddie Mac have enough in reserves to absorb losses from legacy portfolios and that market estimates of potential losses are ‘overly pessimistic.’”

Housing Wire – “Obama to nominate Joseph Smith as director of FHFA” (11-12-10)

“President Obama will nominate Joseph Smith as the new director of the Federal Housing Finance Agency, according to the White House.”

Housing Wire – “Barclays Capital expects Fed to buy Treasurys beyond 2Q” (11-12-10)

“Barclays Capital expects the Federal Reserve will continue buying Treasury securities past the second quarter, although it appears investors feel otherwise as there has been considerable sell-off in long-term bonds this week.”

Bloomberg – “D.R. Horton Sees `Challenging’ Year as Home Sales May Decline” (11-12-10)

“D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, expects 2011 to be ‘challenging’ for the industry as consumer confidence and employment remain weak, Chief Executive Officer Donald Tomnitz said.”

Looking Back:

One year ago, foreclosure filings were found in approximately one out of every 385 U.S. homes. The MBA reported that mortgage loan application volume increased by 3.2 percent in one week. The jumbo loan limit that was set to expire at the end of 2009 was extended through 2010.

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 200 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 11/1/10

Monday, November 1st, 2010

Today’s News Synopsis:

Credit Suisse estimates Fannie Mae and Freddie Mac will have cumulative losses of $321 billion. Private mortgage servicers modified 119,585 loans in September, over 4 times as many modifications performed through HAMP. Statistics from the Federal Reserve show home equity accounted for 16.2% of net worth in the 2nd quarter.

In The News:

RecordNet.com - “Economic forecast heads south” (10-31-10)

“He previously forecast California’s unemployment rate would drop to 11 percent in 2011 and to less than 10 percent the year after. The October report now has state jobless rates remaining above 10 percent well into 2013. San Joaquin County will remain in the doldrums a while longer, with annual jobless rates hovering above 17 percent for the next two years before easing to 16.4 percent in 2013, according to the Pacific forecast.”

Market Watch – “White-collar recession, blue-collar depression” (10-30-10)

“the disparity between white-collar and blue-collar unemployment is stunning: 4.5% among college graduates versus 10.8% for those with a high-school diploma, and 14.3% for those without one.”

Daily Finance – “The Foreclosure Mess: It’s Even Worse in ‘Nonjudicial’ States” (10-30-10)

“In 23 states, before a lender can foreclose on a homeowner for defaulting on a mortgage, it must take the homeowner to court. As we’ve seen, even with judicial review that process has still been shot through with problems. But for a troubled homeowner in California, Texas and 25 other ‘nonjudicial’ states, the robo-signing scandal and foreclosure mess are even more dangerous because the lender doesn’t have to go to court to foreclose. Fraudulent paperwork can be used with impunity unless the homeowner is in bankruptcy, which is a judicial process, or unless the homeowner is represented in the foreclosure by an attorney who knows what to look for.”

Housing Wire – “SEC reminds banks to disclose impacts of mortgage repurchases, foreclosure reviews” (11-1-10)

“Major banks are struggling to get an accurate estimate on how much agency and private-label mortgage-backed securities losses they will be responsible for repaying to the purchasers of those securities, such as Fannie Mae and Freddie Mac.”

Housing Wire – “Credit Suisse projects $321 billion more losses for Fannie, Freddie” (11-1-10)

“Credit Suisse analysts estimate $321 billion in cumulative losses at Fannie Mae and Freddie Mac, based on a further 10% decline in home prices over the next year. Under that scenario, prices would flatten over in following year and experience a 3% annual appreciation going forward.”

Housing Wire – “TransUnion: delinquent mortgage roll rates highest in month after recession” (11-1-10)

“The number of delinquent mortgages that moved to a more serious status peaked the month after the recession officially ended, according to a study by TransUnion. The credit information company said the level of consumers who rolled their delinquency status to 60 days from 30 and to 90 days from 60 reached its highest point in July 2009. Nearly a quarter of those who were 30-days late on their mortgage payments in June 2009 became 60 days past due in July 2009, according to TransUnion”

Housing Wire – “Private mortgage modifications outnumber HAMP 4 to 1 in September” (11-1-10)

“Mortgage servicers modified 119,585 loans through private programs in September, more than four times the 27,840 done through the Treasury’s Home Affordable Modification Program, according to the Hope Now alliance.”

Housing Wire – “Monday Morning Cup of Coffee” (11-1-10)

“Fannie Mae directed servicers to work closely with Housing Finance Agencies across the country now that the HFAs received a total $7.6 billion in Hardest Hit Funds from the Treasury Department. The money will be used to provide temporary relief to unemployed mortgage borrowers through the HHF Unemployment Programs and delinquent borrowers through the HHF Reinstatement Programs.”

Bloomberg - “Housing Matters Little to U.S. Consumers’ Wealth: Chart of the Day” (11-1-10)

“home equity accounted for 16.2 percent of net worth at the end of the second quarter, the Fed’s data showed.”

Bloomberg - “JPMorgan Trims Biggest Mortgage Putback Estimate to $90 Billion” (11-1-10)

“JPMorgan Chase & Co. analysts lowered their estimate for the cost to sellers of repurchasing soured U.S. mortgages to as much as $90 billion from a range that went as high as $120 billion.”

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 10/5/10

Tuesday, October 5th, 2010

Today’s News Synopsis:

The CAR predicts the housing market will require a more lengthy amount of time to recover. Trepp reports CMBS delinquencies increased to 9.05% last month. Zillow claims California’s 30-year mortgage rate decreased to 4.18%.

In The News:

The Press Enterprise – “Forecasters: Inland housing comeback ‘long, bumpy’” (10-5-10)

“While the housing sector has led the nation out of previous recessions, this time it will take longer for housing to revive because of an unprecedented fall in home values that was caused by a crisis in the financial market, the California Association of Realtors said in releasing its 2011 forecast.”

Housing Wire – “ABA: Bank card delinquencies on the decline” (10-5-10)

“Consumer past due balances also generally improved on home equity loans and auto loans. The report defines delinquency as an account that is 30 days overdue. The report looks at credit cards that are issued by banks. Bank card delinquencies fell 26 basis points from 3.88% to about 3.6%, below the 15-year average of just under 4%. It’s also the lowest delinquency rate since the first quarter of 2001.”

Housing Wire – “Trepp: CMBS delinquency rate tops 9% for first time in September” (10-5-10)

“The delinquency rate on commercial mortgage-backed securities surpassed 9% for the first time in September, according to analytics firm Trepp. The rate for loans more than 30-days delinquent has increased steadily the past 12 months to 9.05% last month, up from 4.36% a year ago and 13 basis points higher than 8.92% for August.”

Housing Wire – “Radar Logic sees foreclosure halts dragging down housing recovery” (10-5-10)

“In lieu of the robo-signing scandal that caused states and lenders suspending home foreclosures, many economists are evaluating how this temporary lull in the housing market will affect the economic recovery. Radar Logic analysts said Tuesday they are skeptical that the market will improve in the meantime.”

Housing Wire – “Zillow: 30-year FRMs hit record low at 4.16%” (10-5-10)

“The 30-year, fixed-mortgage rate decreased from a week earlier, setting a new record low at 4.16%, according to the Zillow Mortgage Marketplace weekly update. California’s rate decreased to 4.18% from 4.21%”

Bloomberg - “`Underwater’ Mortgages Threaten Rally in Jumbo Debt, Seer’s Weingord Says” (10-5-10)

“The rally in securities tied to the biggest U.S. home loans probably has gone too far because defaults are set to rise for properties worth less than the mortgages on them, according to hedge-fund firm Seer Capital Management LP.”

Bloomberg - “U.S. Office Rent Decline Slowed in Third Quarter, Reis Says” (10-5-10)

“Actual rents paid by office tenants, known as effective rents, dropped 3.6 percent from a year earlier to an average of $22.05 a square foot, Reis said in a statement today. They were little changed from the second quarter’s $22.06 a square foot.”

Bloomberg - “Fed May Buy More Assets Buys to Spur U.S. Growth, Pimco Says” (10-5-10)

“Pimco, which runs the world’s biggest mutual fund, estimates U.S. gross domestic product growth will be in a range of 1.5 percent to 2 percent for the next year, versus 1.7 percent that the Commerce Department reported for the second quarter. Inflation will slow to a band of 0.75 percent to 1.25 percent, McCulley said in his report. The figure was 1.4 percent in August from the year before, Commerce Department data show.”

Looking Back:

One year ago, First American CoreLogic expected about 10 percent of all U.S. mortgages to adjust over the next few years. FHA planned to reduce the maximum lending amount that seniors could receive for reverse mortgages. Consumers were claiming that Wells Fargo was guilty of cutting their credit lines for no apparent reason. Whitehouse spokesman Robert Gibbs confirmed that president Obama was in favor of extending the first time home buyer tax credit.

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 8/26/10

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 8/9/10

Monday, August 9th, 2010

Today’s News Synopsis:

The percentage of American single-family homes with mortgages in negative equity decreased by 1.8% from the first to second quarter.  Freddie Mac is requesting $1.8 billion in federal aid after a $6 billion loss in the second quarter. Freddie Mac’s single-family inventory rose by 84.2% and its multifamily inventory doubled from last year. PIMCO fears the U.S. may be entering a period of deflation, and JPMorgan Chase expressed concerns that our financial system may crash in 2015.

In The News:

MSNBC - “Fewer U.S. homeowners have ‘underwater mortgages’” (8-9-10)

“The percentage of American single-family homes with mortgages in negative equity fell to 21.5 percent in the second quarter from 23.3 percent in the first quarter and 23 percent a year ago, according to the Zillow Real Estate Market Reports.”

Los Angeles Times – “Freddie Mac requests $1.8 billion in aid after loss” (8-9-10)

“Government-controlled mortgage buyer Freddie Mac is asking for $1.8 billion in additional federal aid after posting a larger loss in the second quarter. Freddie Mac said Monday it lost $6 billion, or $1.85 per share, in the April-to-June period. That takes into account $1.3 billion in dividends paid to the Treasury Department. It compares with a loss of $840 million, or 26 cents a share, in the second quarter a year ago.”

Housing Wire – “Flooded with Housing Inventory, Freddie REO Sales Surge Despite Foreclosure Alternatives” (8-9-10)

“Year-over-year, Freddie’s single-family portfolio increased 84.2% and the multifamily portfolio doubled. Monday morning’s quarterly results reveal a 655% increase in forbearance agreements, where distressed homeowners simply get more time to begin paying back the mortgage. These forbearance agreements numbered 21,673 at the end of the first half of 2010, up from 2,869 at the end of the first half of 2009.”

Housing Wire - “The Scope: JP Morgan Estimates Nearly 9m Mortgages Eligible for New FHA Refinancing” (8-9-10)

“There is $870bn worth of underwater mortgages that could be eligible for the new Federal Housing Administration (FHA) short refinance program announced last week, according to JPMorgan. Additionally, there could be as many as 8.9m loans eligible for the program, worth an aggregate balance of $2.3trn, which includes underwater borrowers and mortgages eligible for the Home Affordable Modification Program (HAMP).”

Housing Wire – “Zillow Sees 3.6% Dip in US Home Prices as More Underwater Mortgages Come up for Air” (8-9-10)

“For the 14th consecutive quarter, national US home values declined 3.2% year-over-year during Q210, according to a quarterly market report produced by real estate listing website Zillow. The average sales price for residential properties was $182,500 during the quarter, down 0.6% from the Q110 price of $183,700. In Q210, 21.5% of mortgage properties were in negative equity positions, compared with 23.3% in Q110.”

Housing Wire – “PIMCO: US On Verge of Turning Japanese?” (8-9-10)

“The US may be nearing a long period of limited growth with the risk of deflation that would bring the nation’s economy very close to that of Japan during the 1990s, according to investment-management firm PIMCO.”

Housing Wire – “Monday Morning Cup of Coffee” (8-9-10)

“Federal Reserve chairman Ben Bernanke said there are options to re-shape US housing finance that don’t involve government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. ‘There are a variety of organizational forms that might replace Fannie Mae and Freddie Mac that could likely provide mortgage credit without the systemic risks associated with these institutions in the past,’ Bernanke said in a July 23 letter to Ohio Democrat Rep. Marcy Kaptur, according to reports by multiple media reports.”

Bloomberg - “Crash of 2015 Won’t Wait for Regulators to Rein in Wall Street” (8-9-10)

“The financial system experiences a crisis ‘every five to seven years,’ JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon told the Financial Crisis Inquiry Commission in January. By that measure, the next crash could come by 2015 — years before new banking reforms are in place. Many of the measures ordered by Congress and global regulators, aimed at cushioning the financial system in future crises, are years away from being implemented. The Basel Committee on Banking Supervision plans to give the world’s banks until 2018 to comply with limits on how much they can borrow.”

Orange County Register – “Real estate loss hammers Calif. pensions” (8-9-10)

“The $200 billion California Public Employees’ Retirement System (CalPERS) earned 11.4 percent return in the year ended June 30 — despite losing 37.1% on its real estate bets through March 31. The $130 billion California State Teachers’ Retirement System (CalSTRS) was up 12.3 percent in the same year after losing 12.4% on its property holdings.”

Orange County Register – “Unsold homes up 57% this year” (8-9-10)

“The number of homes for sale on the Orange County housing market has mushroomed to 11,414 in the 30 days ending last Thursday. That’s up 57% since ‘inventory’ began a steady rise at the start of the year, according to the latest report by Altera’s Steven Thomas.”

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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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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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 7/16/10

Friday, July 16th, 2010

Sources:
http://www.latimes.com/business/realestate/la-fi-foreclosures-20100715,0,5786857.story
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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