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The Norris Group Real Estate News Roundup 11/2/09

Monday, November 2nd, 2009

Today’s News Synopsis:

The NAR’s Pending Home Sales Index increased by 6.1 percent from August. The Mortgage Bankers Association reports that mortgage bankers and subsidiaries made an average profit of $1,358 per loan. The Housing Financial Services Committee has approved of an amendment that may terminate the HVCC. According to the FDIC, the total number of bank failures in 2009 has now reached 115.

In The News:

NAR - “Pending Home Sales Rise for Record Eight Straight Months” (11-2-09)

“The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in September, rose 6.1 percent to 110.1 from a reading of 103.8 in August, and is 21.2 percent higher than September 2008 when it stood at 90.9. The gain from a year ago is the largest annual increase on record, and the index is at the highest level since December 2006 when it was 112.8.”

Mortgage Bankers Association – “MBA Study Shows Continued Production Profits For Independent Mortgage Bankers and Subsidiaries” (11-2-09)

“Independent mortgage bankers and subsidiaries made an average profit of $1,358 on each loan they originated in the second quarter of 2009, according to the Mortgage Bankers Association (MBA). This profit marks an increase from the first quarter of 2009 when profits averaged $1,088 per loan, according to the MBA’s most recent Quarterly Mortgage Bankers Performance Report. This report measures the performance of independent mortgage bankers and subsidiaries of banks, thrifts and hedge funds.”

Inman - “Vote on tax credit expected this week” (11-2-09)

“Congress has approved a one-year extension of higher loan limits for mortgages backed by the Federal Housing Administration, Fannie Mae or Freddie Mac, and an amendment that would extend the first-time homebuyer tax credit has been incorporated into a Senate bill to prolong unemployment benefits. A procedural vote on the unemployment benefit legislation, HR 3548, is expected today, Congressional Quarterly reported, with final passage by the end of the week.”

Los Angeles Times – “Home valuation code could soon undergo major revamp” (11-2-09)

“Could the controversial appraisal system imposed nationwide by mortgage giants Fannie Mae and Freddie Mac in May — and now tied to lowball property valuations, busted home sale transactions and higher fees to consumers — be on its way out? It just might be. Under a bipartisan amendment approved Oct. 22 by the House Financial Services Committee, the Home Valuation Code of Conduct would be terminated early in the existence of a proposed new Consumer Financial Protection Agency.”

Housing Wire – “CIT Seeks Bankruptcy After $4.5bn Bailout” (11-2-09)

“Commercial lender CIT Group Inc. (CIT: 0.2676 -62.83%) on Sunday confirmed weekend reports that it would proceed with a bankruptcy filing shortly after receiving its second multi-billion-dollar private capital bailout in just over three months.”

Market Watch – “9 more U.S. banks fail; $2.5 billion hit for FDIC fund” (10-30-09)

“The closings brought the 2009 total to 115 in 2009 — the first year since 1992 that more than 100 banks have gone under. The banks as of Sept. 30 had combined assets of $19.4 billion and deposits of $15.4 billion, the FDIC said.”

McClatchy – “How Goldman secretly bet on the U.S. housing crash” (11-1-09)

“In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.”

Bloomberg - “Washington Beats U.S. Housing Slump on Obama Budget” (11-2-09)

“Demand for new homes is growing faster in the Washington area than in any other major U.S. city as existing inventory shrinks and a record $3.52 trillion federal budget fuels the local economy. Builders took out construction permits on 4,442 single- family homes in the Washington metropolitan area in the third quarter, up 11 percent from a year earlier, according to the Census Bureau. Nationwide, permits fell 17 percent.”

Bloomberg - “Commercial Real Estate Debt Spreads Rise as Fed Rejects Bonds” (11-2-09)

“Yields on bonds backed by hotel, shopping-center and skyscraper loans rose relative to benchmarks amid concern that a U.S. program to spur lending may see a slowdown in demand after Federal Reserve rejected five securities, according to Barclays Capital. The gap, or spread, on top-ranked commercial-mortgage backed securities increased 0.15 percentage point to 6.10 percentage points more than benchmark swap rates for the week ended Oct. 29, Barclays data show.”

Orange County Register – “Forecast predicts 9.5% O.C. house-price gain” (11-2-09)

“Home-data firm First American CoreLogic (Santa Ana HQ pictured left) predicts that Orange County house prices will be up 9.5% next August from this past summer. If accurate, the median price of an Orange County house would increase by nearly $48,000 from the $500,000 median reported by DataQuick in August and September.”

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The Norris Group Real Estate News Roundup 10/5/09

Monday, October 5th, 2009

Today’s News Synopsis:

First American CoreLogic expects about 10 percent of all U.S. mortgages to adjust within the next few years. FHA plans to reduce the maximum lending amount that seniors can receive for reverse mortgages. Consumers are claiming that Wells Fargo is guilty of cutting their credit lines for no apparent reason. Whitehouse spokesman Robert Gibbs has confirmed that president Obama is in favor of extending the first time home buyer tax credit.

In The News:

Chron - “New round of foreclosures looms in U.S.” (10-5-09)

“About 10 percent of all mortgages in this country are scheduled to adjust in the next few years, with the numbers peaking in mid- to late 2011, according to First American CoreLogic. Those loans are worth about $1 trillion, and nearly 20 percent of the borrowers who have them are already seriously behind on their monthly payments.”

San Francisco Chronicle – “Declining home values squeeze reverse mortgages” (10-5-09)

“In a letter to reverse mortgage lenders Sept. 23, FHA Commissioner David Stevens said his agency must reduce the maximum amounts seniors can receive on reverse mortgages because of a $798 million estimated deficit in the program in the coming fiscal year.”

Calculated Risk – “The Impact of the Declining Homeownership Rate” (10-5-09)

“Since about 2/3s of all households are owner occupied, an increase of 1.25 million households per year would imply an increase in homes owned of about 800K+ per year. If an additional 500K per year moved to homeownership – as indicated by the increase in the homeownership rate from 1995 to 2005 – then the U.S. would have needed 1.3 million additional owner occupied homes per year.”

Los Angeles Times – “Too many palatial homes, too few princely buyers” (10-5-09)

“Spec mansions are now amassed in some areas like rising floodwater behind a dam. A search of homes for sale built since 2007 and priced above $3 million shows 39 such properties in Newport Beach and Newport Coast, 27 in Laguna Beach, 19 in Manhattan Beach, 18 in Irvine and 11 on the Palos Verdes Peninsula.”

San Francisco Chronicle – “Wells Fargo cutting customers’ lines of credit” (10-4-09)

“This is not the first time I’ve heard from readers saying banks have cut off their credit for no apparent good reason, and sometimes without warning. Officers at the Wells Fargo branch in question said they could not comment. A corporate spokesman would not confirm that the bank had sent out letters last week, except to say the reader’s e-mail ‘isn’t accurate about the purported quantity of letters suggested.’”

Inman - “Obama backs extension of tax credit” (10-5-09)

“White House spokesman Robert Gibbs today confirmed that President Obama supports an extension of the first-time homebuyer tax credit, along with prolonging jobless benefits and health care subsidies for unemployed workers.”

Housing Wire – “FHA is Replacing Securitization in Mortgage Financing” (10-5-09)

“The collapse of the private securitization market in 2007 and retrenchment by the private mortgage insurers led to a huge funding gap in mortgage finance, especially in the higher loan-to-value (LTV) sector. That gap that is quickly being filled by Federal Housing Administration (FHA)-insured loans, according to a panel of regulators and enforcers speaking at the CRA & Fair Lending Colloquium, hosted by Wolters Kluwer Financial Services and now underway in New Orleans.”

Wall Street Journal – “A Return to Real Estate” (10-5-09)

“Individuals looking to dip their toes into real-estate securities should consider buying a mutual fund that invests both in the U.S. and abroad, says Dave Yeske, a financial planner in San Francisco. When buying risky assets like real estate, it’s best to spread your bets across companies and countries, he says.”

National Mortgage News – “Panel May Look at New FHA Net Worth Requirements” (10-5-09)

“One topic a panel titled ‘The Recent Evolution of Independent Mortgage Bankers’ may end up covering is the Federal Housing Administration’s plan for a $1 million net-worth lender requirement. Net worth may be a ‘significant’ problem for the smaller nondepository, said Tim Stern, co-founder and president of Lenders One, St. Louis, in a phone interview. He said his cooperative group, which helps mortgage bankers collectively achieve scale, also requires at least $1 million in net worth.”

Housing Wire – “IBM to Purchase Wilshire Credit from BofA” (10-5-09)

“Global IT services giant IBM (IBM: 119.75 +0.61%) is in the process of acquiring mortgage servicer Wilshire Credit Corp. from Bank of America (BAC: 16.96 +3.79%), numerous sources with knowledge of the transaction confirmed to Housing Wire over the weekend.”

Bloomberg – “General Growth Proposes $11.6 Million Bonus Pool” (10-5-09)

“General Growth Properties Inc., the second-largest shopping mall owner in the U.S., asked for court permission to pay as much as $11.6 million in incentive bonuses to 12 executives including Chief Executive Officer Adam Metz and Chief Operating Officer Thomas Nolan.”

Bloomberg - “Mortgage-Bond Prices Double From March Lows in Rally” (10-5-09)

“Typical prices for the most-senior prime-jumbo securities rose 2 cents on the dollar last week to 84 cents, according to Barclays Capital data. Similar bonds backed by Alt-A loans with a few years of fixed rates increased 2 cents to 60 cents. The jumbo bonds are up from about 75 cents three months earlier, while the Alt-A bonds have climbed from 47 cents.”

Bloomberg - “Treasury Says Three More Money Managers Receive PPIP Funding” (10-5-09)

“The U.S. Treasury Department said AllianceBernstein Holding LP, BlackRock Inc. and Wellington Management Co. have raised a combined $1.94 billion for their funds participating in the U.S. effort to buy toxic assets from banks. By getting that money from private investors, the three firms qualify for federal funds under the Public Private Investment Program. The U.S. will match the funds each money manager raised, and provide debt financing that will give them a combined purchasing power of $7.74 billion.”

Orange County Register – “Brightwater developer misses $1.7 million payment” (10-5-09)

“The troubled builder of the Brightwater development by the Bolsa Chica wetlands announced today that it skipped a $1.7 million debt payment that was due this week but is working with the lender to restructure its loans.”

Orange County Register – “Foreclosures total 4% of houses for sale” (10-5-09)

“Steve Thomas at Altera Real Estate in Aliso Viejo reports that the number of O.C. distressed properties (homes listed by agents as foreclosures or short sales) was 2,346 last week, -38 vs. two weeks earlier or a -1.6% change.”

Looking Back:

The Hope for Homeowners program gave permission to FHA to guarantee $300 billion dollars worth of 30 year, fixed rate home loans. Countrywide Financial Corp. settled fraud complaints in 11 states by cutting interest rates and borrowers’ owed amounts. The Federal Reserve boosted its auctions of cash to banks up to $900 billion.

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91-TNG Radio – I Survived Real Estate 10-11-08

Friday, October 10th, 2008

isurvived2008

I Survived Real Estate 2008

Part Nine

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Part nine of “I Survived Real Estate 2008” is the final portion of the radio segments for the event. The show picks up with a bit of a rerun from last week. All new discussions around minute 14.

We pick up where Tommy Williams chimes in and says there are other states that had the same inventory for half the price of the states that got overheated. Overheated states have to come back to “normal.”

Bruce says he agrees but says that’s part of the reason he loves California real estate. California wins so many tie breakers. There’s exciting volatility you don’t get in other states.

Bruce talks about Fannie and Freddie and if we’ll see them stay in private ownership.

Christopher Thornberg says they are clearly insolvent and he doesn’t know what they will do or how they will react. Typically they overact.

Bruce asks the panel if the government writing these big checks will increase inflation and if we’ll see much different interest rates three years from now.

Christopher describes the two ways our government pays the bills; issue debt or printing money. Christopher says our government assumes that investors have confidence in the system. If investors see the bottom drop out of the public bond market and the treasuries go crazy then there’s a problem but he says we’re far from that. Christopher says interest rates are now adjusting for the increased risk. Eventually they’ll come down when this crisis passes.

Bruce talks about when he became an investor he refinanced his house at 17% interest. Many people were telling him at the time he’d never see single digit interest rates again. Bruce says interest rates can be very high as long as the income to median price ratio makes sense. There could still be a healthy market.

Rick talks about market psychology and how nervous buyers and lenders are at the moment.

Bruce talks about the velocity of price drops in the market being historical and some are unaware. 35-50% price declines are shocking.

Joel discusses a Zillow study where 7 out of 10 people thought their home was still appreciating. Christopher Thornberg calls that homo-illucination and what it stands for.

Bruce asks Phil Tirone if lenders are skewing too conservative and not making loans at all. The automated underwriting was such a blessing at the time because it made things ease and now it’s making it worse. Phil describes people putting 50% down and he still can’t get financing because his client’s credit score is low.

Christopher says those automated systems were a disaster and that lenders knew how to manipulate the systems. Philip says these systems did help cause the problem. Christopher says once the price gets down low everyone will qualify.

Bruce touches on affordability. Bruce describes affordability and what it solves and does not solve. He describes past cycles and what he looks for in a turned around market. Bruce looks for migration coming back as the true indicator as the decline for foreclosures. We’ve gone from 16 months of inventory to under 7 months but sees it as a false indicator. Those that didn’t have to sell left the market.

Joel Singer disagrees. He’s assuming 85% of homes are owner occupied. He doesn’t see too many rentals occurring for those pulling out of the market since they don’t have to sell, especially in coastal regions. Inland Empire is where most of the vacancies are occurring. He agrees that people who don’t have to sell don’t and pull out of the market. He said it was like this in the 90s. Affordability tells you about first time buyers but not the trade up market. We still have to consider unemployment rate. Affordability is not perfect but decent indicator of first time buyers. Psychology is important too.

Joel says 50% more sales are occurring on top of tight lending so things could be changing. He thinks more investors are going to be needed for a certain period of time. He thinks a few of Bruce’s ideas could be sold but others could not. He does think from a policy point of view that affordability going up is a good thing.

The vacancy rate is getting close to the national average but it’s always different here in California. Joel thinks the loan assumptions idea won’t work. 90 day seasoning period for investors should be able to work with some sort of certification that the repairs have been done.

Bruce asks Christopher which chart he’s looking at for an end of the downturn. He says when prices stop dropping. Joel says that seasonally prices are sure to fall in the coming months as they typically do. Christopher rephrases his original comment to seasonally adjusted.

Joel feels prices in some areas are already improving and multiple bidding is occurring. Joel feels a bottom floor is starting to appear in some areas. The overall economy will be important in deciding the outcome as will the outcome for Fannie and Freddie.

Christopher says we have way too many 4,000 square foot houses. He also brings up unemployment so there are still other things to consider before he calls it over.

Joel reminds the audience that markets are local and that San Bernardino and South Bay are very different. He says most people will miss the bottom.

Bruce beings up the list of properties the Norris Group purchased. Homes The Norris Group purchased for $110k are now being bought for $85k. These properties often also have multiple bids but our offers are stronger. Bruce is worried about twice as many trustees deeds then sales in Riverside County. That ratio is much worse then last time.

Joel says statewide though it’s different and there’s still more sales than foreclosures. He’s actually surprised. If you go up to 400,000 foreclosures then there’s a much more serious problem.

Philip says there are portfolio lenders that are stepping up with non-owner occupied with low 7%-high 6%, 30% down, with no limit for investors. So there is financing out there.

Bruce thanks the panel and the evening ends. See also the video on YouTube or Google video.

The following partners and sponsors without whom the event would not have been possible:

Platinum Sponsors:

The San Diego Creative Investors Association (SDCIA): sdcia.com

Investors Workshops: investorsworkshops.com

Frye Wiles: fryewiles.com

Proxibid: proxibid.com

White House Catering: whcatering.com

MVT Productions: mvtpro.com

Pechanga Resort and Casino: pechanga.com

The Denver Nuggets: nba.com nuggets

The Chicago Bulls: nba.com bulls

The Cleveland Cavaliers: nba.com cavaliers

Gold Sponsors:

7 Steps to a 720 Credit Score and Philip X. Tirone – 7stepsto720.com

Chicago Title – ctic.com

Elite Auctions – sellwithauction.com

Foreclosure Trackers – foreclosuretrackers.com

Investors Resource Center of America LA and Steve and Robyn Love – irca-losangeles.com

Las Brisas Escrow – lasbrisasescrow.com

National Club of Real Estate Investors and Sam Saddat – ncrei.com

Northern California Real Estate Investors Association (Norcalreia) and David Granzella – norcalreia.com

North San Diego Real Estate Investors and Linda Wessels – nsdrei.org

RealtyTrac – realtytrac.com

RE Ventures and Michael Pines – reventuresrealty.com

Real Estate Investors Club of Los Angeles and Phyllis Rockower – realestateclubla.com

Real Wealth Investor and Scott Whaley – realwealthinvestor.com

Saddleback Valley Communities – svc4.com

Silverstar Finance and Janet French – silverstarfinance.com

Sunset Hills Memorial Park and Mortuary – sunsethills.cc

The Mission Inn – missioninn.com

The Mortgage Equity Group – http: themeg.net

The Naked Real Estate Investor Club – Rosie Nieto – nakedrealestateinvestorsclub.com

The Short Sale Processor and Nick Manfredi – theshortsaleprocessor.com

Virtual Real Estate Tour and Layla Tusko – 1wealthcreation.com

Wholesale Capital Corporation – wccmtg.com

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90-TNG Radio – I Survived Real Estate 10-11-08

Friday, October 10th, 2008

isurvived2008

I Survived Real Estate 2008

Part Eight

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Part eight of “I Survived Real Estate 2008” picks up with Rick Sharga of RealtyTrac talking about a discussion he had with a man who handled the REO assets at a credit union. The man was wondering if RealtyTrac could supply him a list of who owned the firsts on a list properties. Rick was surprised since he thought that would have been information that was gathered. The man said they did not have the information as little information was gathered on the first mortgage and little was taken on the homebuyer.

Rick says this downturn is different from others in that other downturns were preceded by an economic downturn. RealtyTrac feels this kicked in first quarter of 2006. Unemployment was historically low as were interest rates. Rick sees we saw capitalism at its worst. We saw Realtors and mortgage brokers getting greedy along with Wall Street. Tools were being used in ways they never should have been used. The wheels this time all came off at once.

Bruce says there are a lot of new people in business. The greatest bull run got more and more people in and they rationalized that it would continue. Bruce talks about the discussions people make in a boom market and why it’s unwinding. Bruce also mentions a bet with a friend he made where he thought oil prices would be at $50 before they hit $150. This was when the price was $142.

Bruce asks Richard Lambros how the building industry looks at this market and the possibility of building. Richard talks about the builder journey through the last few years. This is a housing crisis combined with a credit crisis. Richard brings up how most people don’t like the solutions being presented but feels the solutions may be less painful then letting it correct on its own. He says builders are really in a position of waiting and the core issues are still an issue. California homes are very expensive to create and the government doesn’t seem to realize that.

Bruce asks Richard if when building resumes if the size of the homes will decline. Richard says the average went from 2,200 to 2,500 square feet and builders were looking at demand.

Bruce says he thinks this is an unusual event and this might never been happen again in our lifetime. Prices might skew so low that it will eventually attract mass migration. Once our home prices dip below those of neighboring states, we win the climate and coast battle and win migration. Once we get the migration, building will really be up and running again.

Tommy chimes in and says there are other states that had the same inventory for half the price of the states that got overheated. Overheated states have to come back to “normal.”

Bruce says he agrees but says that’s part of the reason he loves California real estate. California wins so many tie breakers. There’s exciting volatility you don’t get in other states.

Bruce talks about Fannie and Freddie and if we’ll see them stay in private ownership.

Christopher Thornberg says they are clearly insolvent and he doesn’t know what they will do or how they will react. Typically they overact.

Bruce asks the panel if the government writing these big checks will increase inflation and if we’ll see much different interest rates three years from now.

Christopher describes the two ways our government pays the bills; issue debt or printing money. Christopher says our government assumes that investors have confidence in the system. If investors see the bottom drop out of the public bond market and the treasuries go crazy then there’s a problem but he says we’re far from that. Christopher says interest rates are now adjusting for the increased risk. Eventually they’ll come down when this crisis passes.

Bruce talks about when he became an investor he refinanced his house at 17% interest. Many people were telling him at the time he’d never see single digit interest rates again. Bruce says interest rates can be very high as long as the income to median price ratio makes sense. There could still be a healthy market.

Rick talks about market psychology and how nervous buyers and lenders are at the moment.

Bruce talks about the velocity of price drops in the market being historical and some are unaware. 35-50% price declines are shocking.

Joel discusses a Zillow study where 7 out of 10 people thought their home was still appreciating. Christopher Thornberg calls that homo-illucination and what it stands for.

Bruce asks Phil Tirone if lenders are skewing too conservative and not making loans at all. The automated underwriting was such a blessing at the time because it made things ease and now it’s making it worse. Phil describes people putting 50% down and he still can’t get financing because his client’s credit score is low.

Christopher says those automated systems were a disaster and that lenders knew how to manipulate the systems. Philip says these systems did help cause the problem. Christopher says once the price gets down low everyone will qualify.

Bruce touches on affordability. Bruce describes affordability and what it solves and does not solve. He describes past cycles and what he looks for in a turned around market.

More in the last and final show. See also the video on YouTube or Google video.

The following partners and sponsors without whom the event would not have been possible:

Platinum Sponsors:

The San Diego Creative Investors Association (SDCIA): sdcia.com

Investors Workshops: investorsworkshops.com

Frye Wiles: fryewiles.com

Proxibid: proxibid.com

White House Catering: whcatering.com

MVT Productions: mvtpro.com

Pechanga Resort and Casino: pechanga.com

The Denver Nuggets: nba.com nuggets

The Chicago Bulls: nba.com bulls

The Cleveland Cavaliers: nba.com cavaliers

Gold Sponsors:

7 Steps to a 720 Credit Score and Philip X. Tirone – 7stepsto720.com

Chicago Title – ctic.com

Elite Auctions – sellwithauction.com

Foreclosure Trackers – foreclosuretrackers.com

Investors Resource Center of America LA and Steve and Robyn Love – irca-losangeles.com

Las Brisas Escrow – lasbrisasescrow.com

National Club of Real Estate Investors and Sam Saddat – ncrei.com

Northern California Real Estate Investors Association (Norcalreia) and David Granzella – norcalreia.com

North San Diego Real Estate Investors and Linda Wessels – nsdrei.org

RealtyTrac – realtytrac.com

RE Ventures and Michael Pines – reventuresrealty.com

Real Estate Investors Club of Los Angeles and Phyllis Rockower – realestateclubla.com

Real Wealth Investor and Scott Whaley – realwealthinvestor.com

Saddleback Valley Communities – svc4.com

Silverstar Finance and Janet French – silverstarfinance.com

Sunset Hills Memorial Park and Mortuary – sunsethills.cc

The Mission Inn – missioninn.com

The Mortgage Equity Group – http: themeg.net

The Naked Real Estate Investor Club – Rosie Nieto – nakedrealestateinvestorsclub.com

The Short Sale Processor and Nick Manfredi – theshortsaleprocessor.com

Virtual Real Estate Tour and Layla Tusko – 1wealthcreation.com

Wholesale Capital Corporation – wccmtg.com

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88-TNG Radio – I Survived Real Estate 10-4-08

Friday, October 3rd, 2008

isurvived2008

I Survived Real Estate 2008

Part Six

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Part six of “I Survived Real Estate 2008” picks up with review from last week. Since this is the solution portion it’s very important. Later in the interview the Q&A with all panelists begins.

Bruce shows the audience a list of 20 homes The Norris Group purchased in the past 45 days through auction or out of the MLS and the huge price hits lenders are taking. On 20 transactions, the banks took a $4.6 million dollar loss. Bruce says he’s worried about the domino effect. Too many people owe more than their property is worth.

Bruce says there are three ways to solve a vacancy. We can tear down houses and create an artificial housing shortage. We can leave it vacant and wait for till household formation catches up with supply. Or, we could make it possible for investors to have financing to hold them.

Four solutions that are needed to get us back on track. The 203k loan program from FHA should be made available to investors. It was available to investors until 1996 and then FHA discontinued because it had done its job of getting rid of foreclosures. FHA doesn’t have a ton of foreclosures because they didn’t make a ton of loans. However, the loan program needs to be made available for investors to expedite the foreclosure problem.

Fannie and Freddie need to increase the number of loans they will give to investors. Both want to open offices in California to help unload inventory more quickly and investors are likely candidates. At the same time, they are cutting back on financing available. Both are in a dire situation. Fannie and Freddie hold a huge amount of the foreclosures.

Option Arms are the next wave and these loans represent 50% of Fannie and Freddie losses. Bruce shows the Option Arm reset chart. The chart shows the expected resets and what’s currently happening now. A huge number of these Option Arm loan holders are making teaser payments. Once the loan balance hits a certain percentage, the loan resets. 90% of the borrowers of these loans made the minimum payment. Many won’t walk until the reset because the payment is cheaper than rent.

The foreclosure process is now taking longer because the banks are so slammed but because of the new regulations as well. The bulk of these are set to land in 2009. The loan amounts were typically more than subprime and the lenders will have to recalculate what they made because of how they were writing things off.

Bruce says a due on sale moratorium would make it possible for investors to buy properties that would undoubtedly become foreclosures, it would allow Realtors and auctioneers to make commission on properties with no equity but favorable financing, allow a consumer to move on with credit intact, and improve liquidity in the system.

In the 1980s, foreclosures exploded but price deterioration wasn’t bad. Assumptions of loans saved the market. When interest rates were 17%, people were able to assume better financing. Bringing back the simple assumption could really help.

Bruce also suggests the 90 day seasoning period on properties to be removed so investors can fix houses and sell them more quickly. Bruce shows the audience the picture of one of The Norris Group’s fixed up properties. Bruce describes why our fixed up inventory is so important for the market. The assumption that investors are committing fraud is completely wrong and is actually causing more problems. The creation of the two levels of comps is necessary to keep prices stable.

Bruce also wants to see long-term financing for investors so we can get the market cranking again.

Bruce then starts the second part of event. All eight guests appear on the stage to discuss the solutions brought forward.

Tommy Williams starts off by speaking on the point that there are some properties that should be bulldozed as some neighborhoods would actually be better off.

Christopher Thornberg brings up the political ramifications and complications of solutions and the difficulty of getting people to listen. Christopher also brings up the myth where some people renting must mean that person’s life is a complete wash. Christopher also brings up how investors were blamed for the current market.

Bruce brings up the fact that all the solutions he proposed are not new and that they had existed at one time in the past. It’s nothing new and they worked before.

Rick Sharga says the number of properties in foreclosure that are not owner occupied have not gone up that much. The myth that the investor caused it is not correct. Rick points out that many of the solutions would have to be implemented one piece at a time and it would take time. Rick also talks about non profits getting involved. Habitat for Humanity is taking REOs and rehabbing them instead of starting from scratch. Rick also talks about how numerous investors are coming in with large pools of money ready to take down portfolios of notes.

Bruce talks about how he gets called by Wall Street often and how they are putting together multi-million dollar pools to do that and they want to know when bottom is. Bruce is not excited about the thought that the very companies that helped get us into this mess will be the ones who also take advantage of the current situation. More to come.

The following partners and sponsors without whom the event would not have been possible:

Platinum Sponsors:

The San Diego Creative Investors Association (SDCIA): sdcia.com

Investors Workshops: investorsworkshops.com

Frye Wiles: fryewiles.com

Proxibid: proxibid.com

White House Catering: whcatering.com

MVT Productions: mvtproductions.tv

Pechanga Resort and Casino: pechanga.com

The Denver Nuggets: nba.com nuggets

The Chicago Bulls: nba.com bulls

The Cleveland Cavaliers: nba.com cavaliers

Gold Sponsors:

7 Steps to a 720 Credit Score and Philip X. Tirone – 7stepsto720.com

Chicago Title – ctic.com

Elite Auctions – sellwithauction.com

Foreclosure Trackers – foreclosuretrackers.com

Investors Resource Center of America LA and Steve and Robyn Love – irca-losangeles.com

Las Brisas Escrow – lasbrisasescrow.com

National Club of Real Estate Investors and Sam Saddat – ncrei.com

Northern California Real Estate Investors Association (Norcalreia) and David Granzella – norcalreia.com

North San Diego Real Estate Investors and Linda Wessels – nsdrei.org

RealtyTrac – realtytrac.com

RE Ventures and Michael Pines – reventuresrealty.com

Real Estate Investors Club of Los Angeles and Phyllis Rockower – realestateclubla.com

Real Wealth Investor and Scott Whaley – realwealthinvestor.com

Saddleback Valley Communities – svc4.com

Silverstar Finance and Janet French – silverstarfinance.com

Sunset Hills Memorial Park and Mortuary – sunsethills.cc

The Mission Inn – missioninn.com

The Mortgage Equity Group – http: themeg.net

The Naked Real Estate Investor Club – Rosie Nieto – nakedrealestateinvestorsclub.com

The Short Sale Processor and Nick Manfredi – theshortsaleprocessor.com

Virtual Real Estate Tour and Layla Tusko – 1wealthcreation.com

Wholesale Capital Corporation – wccmtg.com

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87-TNG Radio – I Survived Real Estate 9-27-08

Friday, September 26th, 2008

isurvived2008

I Survived Real Estate 2008

Part Five

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Part five of “I Survived Real Estate 2008” picks up with Bruce Norris introducing Tommy Williams, president of the National Auctioneers Association and co-founder of Williams and Williams Auction Company. Tommy has been involved in over 10,000 real estate transactions in his very lengthy career.

Tommy starts right away with his solution. Tommy brings to the table an idea he’s been passionate about for many years. Reality in the market place is what it is and there’s no way around it. The entire world sets prices by the auction process and not just real estate.

Instead of having a foreclosure process, Tommy suggests we skip foreclosures all together. The foreclosure process leaves an empty house and starts a very expensive process for the bank. The neighboring homes next door to the foreclosure see house values go down because of blight, the bank goes the a long and expensive process, and the foreclosed consumer leaves with damaged credit.

Tommy suggests a short sale auction hybrid. The consumer about to foreclosure would still be in the home when the auction took place and the home would be handed to someone ready to fill the home and at true market price. After the auction, the foreclosed consumer and the bank would need to deal with the deficiency but at the least the property would never be vacant.

The free market needs to work and the auction process needs to be involved. It would help us get back on track more quickly.

Bruce is the last speaker of the evening and starts talking about the cycles we go through and how we as humans often repeat the same mistakes. Solutions can also be from the past.

Bruce says that when we have a euphoric period there’s an exuberance that gets people in the market that should not be. The last to get in are usually the ones that are least capable. Emotions come into play and typically they cannot afford the home they purchased. This cycle we saw a record number of home owners but maybe we should never have got to such a high number.

Bruce shows a vacancy chart and how it climbed since 1985. Now it’s declining and rightfully so. Bruce thinks about 6% of homes will end up being vacant.

Tightening loan standards are creating issues. Bruce reads an article about lenders tightening programs. It makes it harder for people hard to qualify and refi what the already have which will make it worse.

We now have to deal with the largest foreclosure issue in history. Foreclosures are already at an all time high and will continue. These foreclosures have caused huge price erosions.

Bruce shows the audience a list of 20 homes The Norris Group purchased in the past 45 days through auction or out of the MLS and the huge price hits lenders are taking. On 20 transactions, the banks took a $4.6 million dollar loss. Bruce says he’s worried about the domino effect. Too many people owe more than their property is worth.

Bruce says there are three ways to solve a vacancy. We can tear down houses and create an artificial housing shortage. We can leave it vacant and wait for till household formation catches up with supply. Or, we could make it possible for investors to have financing to hold them.

Four solutions that are needed to get us back on track. The 203k loan program from FHA should be made available to investors. It was available to investors until 1996 and then FHA discontinued because it had done its job of getting rid of foreclosures. FHA doesn’t have a ton of foreclosures because they didn’t make a ton of loans. However, the loan program needs to be made available for investors to expedite the foreclosure problem.

Fannie and Freddie need to increase the number of loans they will give to investors. Both want to open offices in California to help unload inventory more quickly and investors are likely candidates. At the same time, they are cutting back on financing available. Both are in a dire situation. Fannie and Freddie hold a huge amount of the foreclosures.

Option Arms are the next wave and these loans represent 50% of Fannie and Freddie losses. Bruce shows the Option Arm reset chart. The chart shows the expected resets and what’s currently happening now. A huge number of these Option Arm loan holders are making teaser payments. Once the loan balance hits a certain percentage, the loan resets. 90% of the borrowers of these loans made the minimum payment. Many won’t walk until the reset because the payment is cheaper than rent.

The foreclosure process is now taking longer because the banks are so slammed but because of the new regulations as well. The bulk of these are set to land in 2009. The loan amounts were typically more than subprime and the lenders will have to recalculate what they made because of how they were writing things off.

Bruce says a due on sale moratorium would make it possible for investors to buy properties that would undoubtedly become foreclosures, it would allow Realtors and auctioneers to make commission on properties with no equity but favorable financing, allow a consumer to move on with credit intact, and improve liquidity in the system.

In the 1980s, foreclosures exploded but price deterioration wasn’t bad. Assumptions of loans saved the market. When interest rates were 17%, people were able to assume better financing. It saved the system.

Bruce also suggests the 90 day seasoning period on properties to be removed so investors can fix houses and sell them more quickly. More to come next week. Thenorrisgroup.com

Special thanks to the following partners and sponsors without whom the event would not have been possible:

Platinum Sponsors:

The San Diego Creative Investors Association (SDCIA): sdcia.com

Investors Workshops: investorsworkshops.com

Frye Wiles: fryewiles.com

Proxibid: proxibid.com

White House Catering: whcatering.com

MVT Productions: mvtproductions.tv

Pechanga Resort and Casino: pechanga.com

The Denver Nuggets: nba.com nuggets

The Chicago Bulls: nba.com bulls

The Cleveland Cavaliers: nba.com cavaliers

Gold Sponsors:

7 Steps to a 720 Credit Score and Philip X. Tirone – 7stepsto720.com

Chicago Title – ctic.com

Elite Auctions – sellwithauction.com

Foreclosure Trackers – foreclosuretrackers.com

Investors Resource Center of America LA and Steve and Robyn Love – irca-losangeles.com

Las Brisas Escrow – lasbrisasescrow.com

National Club of Real Estate Investors and Sam Saddat – ncrei.com

Northern California Real Estate Investors Association (Norcalreia) and David Granzella – norcalreia.com

North San Diego Real Estate Investors and Linda Wessels – nsdrei.org

RealtyTrac – realtytrac.com

RE Ventures and Michael Pines – reventuresrealty.com

Real Estate Investors Club of Los Angeles and Phyllis Rockower – realestateclubla.com

Real Wealth Investor and Scott Whaley – realwealthinvestor.com

Saddleback Valley Communities – svc4.com

Silverstar Finance and Janet French – silverstarfinance.com

Sunset Hills Memorial Park and Mortuary – sunsethills.cc

The Mission Inn – missioninn.com

The Mortgage Equity Group – http: themeg.net

The Naked Real Estate Investor Club – Rosie Nieto – nakedrealestateinvestorsclub.com

The Short Sale Processor and Nick Manfredi – theshortsaleprocessor.com

Virtual Real Estate Tour and Layla Tusko – 1wealthcreation.com

Wholesale Capital Corporation – wccmtg.com

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85-TNG Radio – I Survived Real Estate 9-13-08

Saturday, August 30th, 2008

isurvived2008

I Survived Real Estate 2008

Part Three

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Part three of “I Survived Real Estate 2008” picks up with Bruce Norris introducing Philip Tirone who is author of the “7 Steps to a 720 Credit Score” and President of the Mortgage Equity Group. Philip brings to the table experience from the lending and consumer side of the equations.

Philip talks about people still wanting stated income and how much harder consumers are have to work to get financing. Banks are going after co-borrowers more aggressively and doing much more background checking.

Philip discusses the issue of consumers that owe much more on their home as a similar home in the same neighborhood because of the market at the desire to buy the new one and foreclosure on the current home. Philip says that lenders are catching on to this practice and has revised lending policy accordingly. As of August 1st, if a consumer wants to buy a home in the same neighborhood, it needs to make logical sense that the consumer needs the new home due to extra bedroom, more space, etc. And if the consumer has less than 30% equity, the consumer cannot accept rental income on previous home and must have 6 months reserves.

Philip discusses the top three lending strategies for investors. Many investors that have purchased for cash want to refinance. The best financing is available within the first 60 days. If buying in an LLC, Philip says a single member LLC will get an investor a better rate. Philip also says to go to portfolio lenders for loans. They don’t have the limitations that Fannie and Freddie currently have in place.

For sellers, Philip discusses the natural inclination for sellers to drop price if a property is not selling. Instead of dropping price, Philip thinks sellers should consider buying down the buyer’s interest rate. This could save the consumer a great deal of money and also support prices in the area. Philip also addresses buyers that don’t qualify because lack of down payment. If buyers don’t have down payment, FHA allows gifts for down payments. Philip says that although there is a seasoning rule for FHA, investors should make sure all due diligence is done up front so at the 90 day mark the loan will fund quickly.

Philip also says consumers and investors should manage their credit actively. 80% of people have an error on their credit report that could possibly hinder them from getting a loan. Philip says credit is really easy to manage and scores can swing 100 points. Using credit to your advantage isn’t as hard as many people think.

Bruce then introduces Annemaria Allen who is President of the Compliance Group who specializes in loan complains and is the representative for the California Mortgage Bankers Association.

Annemaria talks about the lending industry yesterday being full of unsophisticated borrows, greedy lenders, minimal loan compliance, and inflated home prices. Today, a complete overhaul is taking place. Lending has somewhat stabilized because subprime is gone and full document loans are back. She calls it “back to the basics” of underwriting. Annemaria says automatic underwriting isn’t used as much and lenders are doing much more due diligence.

Annemaria thinks home prices still are too high and that we haven’t seen the worst of it. The adjustable rate mortgages will cause more problems in the next year. HERA (Housing Economic Recovery Act) was signed into law by Bush in July. The Safe Act that passed seeks to protect consumers by requiring loan originators, lenders, and brokers will have to register with the system. Some of these news acts are several hundred pages long and are still being reviewed.

Regulation Z means more disclosures to consumers. It is supposed to capture all subprime and Alt-A loans. There will be more advertising restrictions and more disclosures.

California has 30 bills in legislature to help with current issues. Foreclosure prevention laws are being passed nationwide along with loan modification and servicing laws. The Non-Traditional Mortgage Guidelines are being adopted nationawide.

Annemaria feels it’s a little too late but the biggest solution moving forward will be consumers being more educated and for the industry to prevent fraud. Annemaria feels stronger standards in compliance and safety will prevent this from happening in the future.

Bruce then brings forward the CEO of the California Builders Industry Association of the Southern California, Richard Lambros.

Richard discusses real estate as a speculative investment and the cycles. Richard warns us not to think of it as a cycle because that means we can have no influence over the outcome. Total new home production is down and will produce the lowest number of homes in history. In the building industry, they say it’s a building depression. In three years, production has been cut by one third.

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