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The Norris Group Real Estate News Roundup 5/4/11

Wednesday, May 4th, 2011

Today’s News Synopsis:

A survey shows that 45% of homebuyers think they should always buy mortgage discount points. Freddie Mac ended the first three months of the year with a positive net worth of $1.2 billion, and will need no additional funding from Treasury for the first quarter. Automatic Data Processing Inc said the private sector added 179,000 jobs in April.

In The News:

Mortgage Bankers Association – “Latest MBA Weekly Survey Shows Increase in Mortgage Applications, Driven by Refinances” (5-4-11)

“Mortgage applications increased 4.0 percent from one week earlier, according to data from the Mortgage Bankers Association”

Washington Post – “House GOP set to move ahead with legislation to limit new consumer bureau” (5-4-11)

“The political tug of war over the new Consumer Financial Protection Bureau will enter another round Wednesday, when House Republicans forge ahead with legislation aimed at curbing the fledgling watchdog’s powers even before it officially opens its doors in July.”

Sign On San Diego – “Quiz: Homebuyers lack mortgage know-how” (5-4-11)

“Forty-five percent of those surveyed think they should always buy mortgage discount points, which are prepaid interest. The fact is, the decision hinges on how long you plan to own the property. It would not be worthwhile to buy them in certain cases.”

Bloomberg - “U.S. May Pursue More Lenders After Suing Deutsche Bank on Faulty Mortgages” (5-4-11)

“The U.S. Department of Justice may pursue claims against other lenders after suing Deutsche Bank AG for more than $1 billion, alleging the firm lied while arranging federal insurance on faulty mortgages.”

DSNews - “Trepp Reports Jump in CMBS Delinquencies to New Record-High” (5-4-11)

“The New York-based research firm says the percentage of loans 30-plus days delinquent, in foreclosure, or REO climbed 23 basis points last month to hit 9.65 percent. That number is, once again, the highest reading in the history of the CMBS market, according to Trepp.”

DSNews - “Freddie Mac Turns $676M Profit in Q1, Needs No Taxpayer Funding” (5-4-11)

“The nation’s second largest mortgage company reported Wednesday that it pulled in net income of $676 million during the first three months of this year. Freddie Mac closed the quarter with positive net worth of $1.2 billion. As a result, no additional funding from Treasury was required for the first quarter of 2011.”

Housing Wire – “Private sector added 179,000 jobs in April” (5-4-11)

“Automatic Data Processing Inc. reported the private sector tacked on 179,000 jobs last month. The payroll giant conducts the monthly survey, which excludes federal jobs, in conjunction with Macroeconomic Advisers.”

Housing Wire – “FDIC study blames mortgage servicing mess on big banks” (5-4-11)

“The Federal Deposit Insurance Corp. took a look into the foreclosure operations at the largest mortgage servicers and found significant breakdowns at almost every stage of the process. However, these issues are largely isolated to the servicers that hold the largest share of the mortgage finance business.”

Housing Wire – “Revival in commercial real estate, mortgage finance needs more jobs” (5-4-11)

“absent strong improvement in U.S. job markets and demand for business space, the nation’s commercial real estate sector will likely continue its slow, bifurcated recovery over the coming year — with top urban markets outpacing recovery in secondary, non-gateway markets.”

Looking Back:

One year ago, pending home sales increased by 5.3 percent in February. Statistics from PMI indicated the home price reduction risk was significantly decreasing across most U.S. regions. The percentage of loans 30+ days delinquent, in foreclosure or real estate owned (REO) status increased to 8.02 percent in March 2010. McGraw-Hill reports the residential sector is up 35% in the first three months of 2010 compared to the same time one year ago.

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 4/26/11

Tuesday, April 26th, 2011

Today’s News Synopsis:

The Commerce Department reports new home sales increased 11% in March. A study shows that short sales and foreclosures equally damage FICO scores. A survey from Pew shows 81% of adults believe purchasing a home is the best long-term investment a person can make. Morgan Stanley believes home prices will fall 6-11% this year.

In The News:

Mortgage Bankers Association – “Study Examines the Impact of Homebuyer Education and Counseling on Mortgage Performance” (4-26-11)

“Potential homeowners who participate in prepurchase education and counseling programs may be more likely to pay their mortgages on time, although the evidence on this point is not consistent and compelling, according to a study released today by the Mortgage Bankers Association (MBA). The study also finds that those who participate in default counseling are more likely to have their loans modified.”

MSNBC - “Housing reality trumps dogma for some in GOP” (4-26-11)

“leading proponents of doing away with Fannie and Freddie aren’t predicting victory. As a precaution, they’re advancing eight bills taking bite-sized swipes at the issue. In the Democratic-led Senate, a sister measure by 2008 presidential candidate Sen. John McCain, R-Ariz., faces long odds, and the Banking Committee’s top Democrat and Republican are wary of quickly reshaping the market for financing home purchases.”

CNN - “Home prices in ‘double dip’” (4-26-11)

“Home prices in February sank 3.3% to just above the post-crisis lows reached in April 2009. It was the seventh straight month of declines. Home values are down 32% from their peak set in May of 2006, according to the S&P/Case-Shiller index of home prices in 20 cities.”

Housing Wire – “Harvard finds dwindling housing supply abolishes affordable rentals” (4-26-11)

“The Harvard University Joint Center for Housing Studies released a report Tuesday, analyzing conditions in the housing market from 1999 to 2010. The study found the price to rent a home is trending inversely to renters’ annual income, just one of many factors hindering growth in the rental space.”

Housing Wire – “FHFA: 30-year fixed-rate mortgage passes 5%” (4-26-11)

“The average interest rate on a 30-year, fixed-rate mortgage reached 5.06% in March, an increase of 9 basis points from the previous month, according the Federal Housing Finance Agency.”

Housing Wire – “Study finds recent housing counseling cuts made in the dark” (4-26-11)

“Republicans and Democrats struck a late-hour deal in April on how to continue funding the U.S. government. But among the cuts, was $88 million used to fund nonprofit counseling groups approved by the Department of Housing and Urban Development.”

Housing Wire – “Freddie Mac mortgage purchases plummet 31%” (4-26-11)

“The amount of monthly mortgages purchased for securitization by Freddie Mac fell nearly 31% in March to $26.9 billion. The government-sponsored enterprise reported its total mortgage portfolio decreased at an annualized rate of 4.7% during the month to $2.14 trillion.”

Los Angeles Times - “New home sales rose in March after weak winter” (4-25-11)

“New-home sales rose 11 percent last month from February to a seasonally adjusted rate of 300,000 homes, the Commerce Department said Monday. That follows three straight monthly declines. Still, the pace remains far below the 700,000 homes a year that economists view as healthy.”

New York Times – “Stimulus by Fed Is Disappointing, Economists Say” (4-24-11)

“Mr. Bernanke and his supporters say that the purchases have improved economic conditions, all but erasing fears of deflation, a pattern of falling prices that can delay purchases and stall growth. Inflation, which is beneficial in moderation, has climbed closer to healthy levels since the Fed started buying bonds.”

Housing Wire – “Short sales and foreclosures equally degrade FICO scores” (4-25-11)

“homeowners that entered short-sales found themselves with FICO scores in the 575-to-595 range — the same range reported for parties with foreclosures on their records.”

Housing Wire – “Homeownership still considered best long-term investment: Pew” (4-25-11)

“The housing crash seems to have had little impact on consumer confidence, as 81% of adults believe buying a home is the best long-term investment a person can make”

Housing Wire – “Distressed property index rises in March: Campbell/Inside Mortgage Finance”
(4-25-11)

“A distressed property index rose to 48.6% in March – the second highest level in the past 12 months while owner-occupant home purchases slowed during the same time period according to another index.”

Housing Wire – “Wells economist: Foreclosure supply points to ‘long, arduous’ recovery” (4-25-11)

“Despite better-than-expected new home sales in March, a Wells Fargo (WFC: 28.56 +0.07%) economist said builders will continue to struggle until the foreclosure wave begins to recede.”

Bloomberg - “U.S. Home Prices May Decrease 6% to 11% This Year, Morgan Stanley Says” (4-25-11)

“U.S. home prices will fall 6 percent to 11 percent this year, more than previously forecast, as mortgages become harder to obtain and distressed sales drive down values, according to Morgan Stanley. ”

Bloomberg - “Fed Officials Count on Untested Tool to Hold Off Inflation” (4-25-11)

“Raising the rate, currently at 0.25 percent, is intended to entice banks to keep their money on deposit at the Fed instead of loaning it out and stoking inflation.”

Bloomberg - “Sales of New U.S. Homes Probably Rose From Record Low as Market Struggled” (4-25-11)

“New-home sales, tabulated when contracts are signed, climbed 12 percent to a 280,000 annual pace last month, according to the median estimate in a Bloomberg News survey of 64 economists. Purchases slumped 17 percent in February to a 250,000 rate, the weakest in data going back to 1963.”

Looking Back:

One year ago, the CIRB reported that permits were pulled for 3,714 total California housing units in March. Commercial mortgage delinquencies fell to 0.63% in Q1 of 2010. The MARI saw a 50 percent increase in appraisal fraud in 2009. Homeownership rates in Q1 of 2010 decreased to the lowest levels since 2000.

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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221-TNG Radio – FBI – Richard Ryan 4-16-11

Friday, April 15th, 2011

FBI Mortgage Fraud

Richard Ryan

Supervisory Special Agent for the FBI


(Full Bio)

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This week Bruce is joined by Supervisory Special Agent Richard Ryan with the FBI. Ryan supervises a cadre of special agents and detectives from various law enforcement agencies throughout Southern California. Mr. Ryan oversees white collar crime in Los Angeles, which includes financial institution fraud, money laundering, and identity theft. During his career, he successfully worked major frauds, counter terrorism, gangs and criminal enterprises, and narcotics. In 2009, Ryan was deployed to Haiti for the search and rescue of U.S. citizens being held hostage for ransom.

Mortgage fraud is much more complex than a homeowner trying to get out from underneath their home, or someone looking to prey on another person’s equity.

There is a difference between fraud for ownership and fraud for profit. Mortgage and bank fraud involves profit. Homeownership or dehomeownership fraud often involves getting away from an underwater mortgage. Many people are trying to get away from their properties because of unemployment, having a bad loan, or having a fraudulently obtained loan. Many fraudulently obtained loans occurred while lenders were using no documentation loans.

Foreclosure rescue and loan modification schemes are a big problem right now. There are some companies honestly working with people to save their homes, but most of these companies are sponsored by the government. You should be cautious of foreclosure rescue companies that make you pay up front. Legitimate companies are more likely to bill you after they have completed their service.

Bruce heard a radio advertisement that said, “If you are trying to do a loan modification, without us assisting you in preparing your financial statement to look correct, you will probably not get your loan modification.” Ryan says that is completely false. That company is preying upon the emotions of people who are already desperate. They are pretending that their company is the only company that can help with loan modifications.

Many people are currently attempting to make their financial status look worse than it truly is to get a loan modification.

Fraudulently under-evaluating a property allows someone to flip it at a later point with a higher appraised value. This type of fraud involves a conspiracy of a homeowner and an appraiser. The appraiser gives an undervalued appraisal, and then encourages the bank to accept less than what it owed on the property. The property is then bought by the conspirators and sold for a price near market value.

There are many people who buy damaged properties with low values, fix them, and sell them at a higher value. The FBI encourages people to do this, because it is not manipulative, and not only does it provide a profit to the investor, but it helps raise the value of the entire neighborhood. There are perfectly legitimate reasons for buying a property at a low value and selling it at a higher one.

Sometimes there are conspirators in a short sale that are not going to receive any money. Occasionally, a homeowner will have a need to sell his home so he will personally ask a certain company to buy the property at a specific price. The conspiring homeowner will then have the opportunity to buy back the same property at a later date for a lower price. This is not considered a fair deal for the bank, and it is considered fraud.

Fraud occurs when skirting of reporting requirements occurs. Fraud occurs if you are not putting legitimate information on a loan application. It occurs if you are providing kick backs for a benefit to someone such as an appraiser or a notary.

Fraud evolves based on the conditions and environment of the day. We did not have short sales when people were making double digit profits every month in 2006. The banks were handing loans out prevalently. We are currently seeing a lot of foreclosures, short sales and vacancies. Ryan has also noticed a “squatting” trend developing in the world of fraud. Squatting is finding vacant properties, breaking into them, changing the locks, live in them without rent, and demanding the bank to give them $25,000 to leave.

Bruce says that owner occupants are not being punished when they allow their mortgage to become seriously delinquent and then destroy the property they are losing. Quite often, these people will dismantle things such as the cabinets, and decide that those cabinets should be theirs, even after they have lost the property. If someone is in bankruptcy and they strip the house for a profit they have committed fraud.

200 banks went into FDIC receivership last year. Many of these banks closed down because of their loan process. The FDIC is also a federal investigation agency that can detect loan fraud.

Insider fraud involves participants in the management of the bank who do perform certain actions to help themselves. Insider fraud can also involve a bank’s underwrite or loan processor.

The FBI has seen almost every kind of fraud. Bruce has people come to him with investment ideas, and their ideas sometimes involve fraud. Richard Ryan understands what a straw buyer is. There are some individuals who purchase homes but never make a payment. When the FBI interviews these people, the FBI discovers that these people had no idea that they were on title. They may have been told that they would receive $10,000 just to use their name to obtain a loan, and that their name would not be attached to the loan. Ryan has spoken to people who owned 30 properties without knowing it. These people are known as straw buyers.

Organized crime is very prevalent in mortgage fraud and bank fraud. Companies have purchased hundreds of homes underneath the names of the unknowing owners. Ryan met a person who owned his home outright, but had his home placed on the market without his knowledge, and had bids placed on the home. The real homeowner had no idea while the fraudulent homeowner was taking money from escrow and attempting to sell the house.

The FBI tries to conduct its investigations covertly. They do not want criminals to run and hide. The nice thing about mortgage fraud is that criminals cannot change their paper trail. You cannot unfile mortgage documents, and once those documents are filed there is a trail to follow.

The FBI has about 300 special agents dedicated to mortgage and bank fraud. Millions of schemes have been attempted, so the FBI is not well staffed to handle all these problems. However, if you do commit fraud, the FBI will come for you eventually.

There are currently around 3000 fraud investigations. California, Florida, Nevada and Arizona are the top places for mortgage fraud. The properties under investigation in California are typically much more valuable than the properties under investigation in Oklahoma.

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 3/28/11

Monday, March 28th, 2011

Today’s News Synopsis:

Pending home sales increased by 2.1%, according to the NAR. Interthinx claims California’s fraud risk decreased last year. A cash for keys program was recently proposed to Congress members, but has been strongly ridiculed. California had the largest gain in construction jobs in the nation during February.

In The News:

NAR - “February Pending Home Sales Rise” (3-28-11)

“The Pending Home Sales Index,* a forward-looking indicator, rose 2.1 percent to 90.8, based on contracts signed in February, from 88.9 in January. The index is 8.2 percent below 98.9 recorded in February 2010.”

DSNews - “Fraud Criminals Migrate to Hardest Hit Areas” (3-28-11)

“California’s overall risk index value actually decreased to 180 points, from 222 in 2009. According to California-based Interthinx, this can be explained by a migration of fraudulent criminals to more vulnerable areas, such as Nevada, which saw its overall risk index value increase more than 30 points last years.”

Housing Wire – “Monday Morning Cup of Coffee” (3-28-11)

“The Federal Deposit Insurance Corp. is expected to unveil suggested guidelines for the new qualified residential mortgage rule on Tuesday.”

Housing Wire – “Electronic mortages: There is a way, but not enough will, tech panel finds” (3-28-11)

“Moving mortgage documents onto entirely electronic platforms provides numerous cost and operating efficiencies. It also doesn’t help that the industry is slow to adopt the necessary technology, experts say.”

Housing Wire – “‘Dreamed up’ cash for keys proposal draws heavy criticism” (3-28-11)

“Sources are downplaying discussions over a mandatory cash-for-keys program that would pay a reported $21,000 to a delinquent borrower, with one prominent Republican quickly shooting down the idea.”

Bloomberg - “Fed Should Weigh Curtailing $600 Billion in Bond Purchases, Bullard Says” (3-28-11)

“St. Louis Federal Reserve Bank President James Bullard said policy makers should review whether to curtail a plan to buy $600 billion in Treasury securities, noting that the U.S. recovery may not need that much stimulus.”

Housing Wire – “ALTA reports increases in FY, Q4 2010 title insurance premiums” (3-28-11)

“According to ALTA’s preliminary 2010 year-end market share analysis, the title insurance industry generated $9.61 billion in title insurance premiums in 2010 — up 0.2% from 2009.”

Orange County Register – “Calif. tops in new construction jobs” (3-28-11)

“California had the largest construction gain in the nation in February — adding 15,500 jobs, or 2.7 percent, from January, says an Associated General Contractors of America analysis of state employment data from the U.S. Labor Department.”

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 3/23/11

Wednesday, March 23rd, 2011

Today’s News Synopsis:

The Commerce Department said single-family home sales dropped 16.9% in February. However, a survey from Bloomberg shows many economists believe home sales probably increased in February. Mortgage applications increased 2.7% last week, according to the MBA.

In The News:

MBA - “Mortgage Applications Increase in Latest MBA Weekly Survey” (3-23-11)

“Mortgage applications increased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending March 18, 2011.”

NAHB - “New-Home Sales Hit Record Low in February” (3-23-11)

“Sales of newly built, single-family homes declined 16.9 percent in February to a record-low seasonally adjusted annual rate of 250,000 units, according to figures released today by the U.S. Commerce Department.”

Bloomberg - “Sales of New U.S. Homes Probably Rose in February After Slump in January” (3-23-11)

“Purchases, tabulated when contracts are signed, climbed 2.1 percent to a 290,000 annual pace after slumping 13 percent in January, according to the median estimate in a Bloomberg News survey of 77 economists. Even with the gain, sales are close to the record-low 274,000 pace reached in August.”

Housing Wire – “Architectural design industry making slow recovery: AIA” (3-23-11)

“The Architecture Billings Index increased slightly, up to 50.6 in February from 50 in January, according to American Institute of Architects data released Wednesday.”

Bloomberg - “Foreclosure Terms May Pose ‘Moral Hazard,’ State Attorneys General Say” (3-23-11)

“The settlement offer ‘appears to reach well beyond the scope of our enforcement role, and, in some instances, far exceeds the scope of the misconduct which was the subject of our original investigation,’ according to the letter, which was verified by Brian Gottstein, a spokesman for Cuccinelli.”

Housing Wire – “SEC clears shareholder vote for foreclosure reviews at major banks” (3-23-11)

“The Securities and Exchange Commission upheld a New York City pension funds request that big bank shareholders will get to vote on whether or not those vested financial institutions conduct foreclosure reviews.”

Housing Wire – “FDIC’s Bair: Dodd-Frank will strengthen smaller banks” (3-23-11)

“Reforms under the Dodd-Frank Act will go further to benefit smaller community banks than the ineffective rules established just before the crisis, Federal Deposit Insurance Corp. Chairman Sheila Bair said before the Independent Community Bankers Association Tuesday.”

Orange County Register – “Forecast: Calif. home prices to rise 23%” (3-23-11)

“All told, Beacon is basically projecting that California home prices will jump 23% in five years ($57,800) – from a typical selling price of $256,136 in 2010 to $323,368 in 2015. Depending on one’s view, that projected 2015 pricing would be equal to the highest since 2008, back at early 2004 levels – or still 38% off the 2007 peak.”

Looking Back:

One year ago, existing home sales decreased by 0.6 percent within one month. The California senate approved of a new homebuyer tax credit. Nothaft claimed the 30-year fixed mortgage rate would reach 5.6 percent by the end of 2010. The Los Angeles-based home builder, KB Homes, experienced a profit loss beyond which was previously expected.

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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216-TNG Radio – Sean O’Toole 3-12-11

Friday, March 11th, 2011

Sean O’Toole

President of ForeclosureRadar

(Full Bio)


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This week Bruce is joined by Sean O’Toole. Sean is president and founder of ForeclosureRadar. He has successfully purchased and flipped over 150 commercial and residential properties in foreclosure. He has leveraged the software industry for 15 years to make a successful trustee sale business.

Sean does not believe we will see a growth in REOs in 2011. He believes we should see a growth in REOS, but we won’t. Since September 2008, when the financial world drastically changed, foreclosures have just been trickling out. He thinks this fact is due to bank and financial institution solvency.

Sean tracks the amount of time a property remains in the foreclosure process. In California, that time period is now up to 285 days, but it should only take 120 days. The average delinquency period for homes before reaching the foreclosure process is 334 days. If you add 334 days on top of the 285 days for the foreclosure process, it is a long period of time.

Some bills are being suggested right now to end the HAMP program and the Neighborhood Stabilization program. Sean believes those programs have been largely irrelevant from the beginning. In California, the total amount of money given to neighborhood stabilization was equivalent to one week of foreclosures. The billions of dollars spent on these programs seems like a lot of money, but when you look at the big picture, it really is not.

Sean’s company created a short sale tool because he wanted to give realtors and homeowners a way to see if certain lenders are approving short sales or not. Sean believes this is a very important resource, and he will be promoting it a lot this year. Wachovia was very good at approving short sales last year, and realtors that focused on Wachovia deals were able to perform more deals than other realtors.

ForeclosureRadar has also added multiple title related services. These services are primarily for auction investors who are interested in the state of a property. ForeclosureRadar offers links to county indexes, and webinars to train investors on how to look up title issues and figure out whether or not you are buying a first or second. Knowing the position of your loan is critical, because if you buy a second then you still have to pay for the first.

The average opening bid at the end of January 2011 was $254,000, and at the beginning it was $261,000. At the end of January average, about 80% go back to the bank, so that price range is still too high for most buyers. The average debt of a foreclosure by the end of January 2011 was $397,000, and at the beginning of the year it was $385,000. We have not seen a big change in the kind of inventory being foreclosed on.

The average opening bid for a foreclosure property is 15% above market value. Properties purchased by third parties are typically 25% below market value. If a lender successfully sells at a trustee sale, they typically take a 43% hit. Sean still sees properties going for sale at 50% of what they are worth. This is why programs like HAMP have been so ineffective in high equity states like California and Florida, because the problem is not payment affordability, the problem is the fact that they are 50% under water. When their payment adjusts back to a full rate, they will still not have the income level necessary to pay off their house. Also, unemployment and job transfers can occur which severely dampens a family’s ability to pay.

Lenders have not discovered whether or not drop bids, short sales, or REO sales make the maximum profit, and Sean does not think they are too concerned about that. Many things are controlled by servicers who do not suffer a loss from the losses they help cause.

FHA is developing a program for short refis. Obama is supportive of these programs to keep people in their homes, but on the other hand, Fannie Mae and Freddie Mac are concerned with maintaining equity.

A 30 page document just came out which discussed the future of financing. The goal of the document was to tell people that Fannie Mae and Freddie Mac will not exist. Sean believes this would be a good thing. He does not like our current 0% interest rate policy. We have baby boomers close to retirement, and they cannot make a decent living on fixed income in a zero interest rate environment. You could have saved a million dollars, but if you put it into something with nearly zero risk, such as a T Bill, you would be living off of $30,000 per year.

The U.S. has $14 trillion in debt right now. We have 115 million households, but only half of those households pay taxes. Of those tax payers, the top 20% pay about 80% of all taxes.

Currently, banks are being incentivized to push commercial foreclosures into the future, rather than deal with them now. The FDIC would be insolvent if they had to get rid of foreclosures in a timely matter. We have changed the accounting rules from mark-to-market to mark-to-model. The mark-to-model philosophy is driven by the idea that certain assets will increase in the future, which encourages businesses to set aside less for loan loss reserves.

As a nation, we went from a 45% debt to equity ratio, so we had 4.5 trillion dollars worth of residential mortgage debt on 10 trillion dollars of real estate. At the peak, we went to 10.5 trillion dollars worth of mortgage debt on a false market value of 20 trillion dollars. That market value was fictitious, and our market value is down to 13$ trillion, but we still have about $10 trillion in debt. We created about $4 trillion in excess debt, which we fundamentally do not have the proper level of household income to afford. In California, we have 2.8 million homeowners who either have negative equity or don’t have enough equity to sell their house and pay commissions. In Nevada, the loan to value ratio is 123%. They owe 23% more in their mortgages than what their real estate is worth.

The next big pile of REOs will probably come from HUD. FHA has a program to perform short sale refis. It required the lender to take at least a 10% hit, and a loan to value rate of at least 115%. FHA would provide government insurance on a loan up to 115% of the house’s value for the purpose of refinancing, so long as the lender would take a 10% principal loss. They have had difficulty getting this program off the ground, and now they are talking about ending the program.

Sean believes real estate prices will decline this year. However, Sean is a believer in holding real estate. He also believes the only way out of our debt problem is inflation, and real estate is a good investment during inflationary times.

Sean’s website is www.ForeclosureRadar.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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The Norris Group Real Estate News Roundup 2/7/11

Monday, February 7th, 2011

Today’s News Synopsis:

The MBA reports $110 billion in commercial and multifamily mortgages were originated in 2010. 36,500 mortgages were modified through government and proprietary programs in December, according to Fitch Ratings. Altos Research announced plans to release a new, forward valuation model for real estate. S&P claims 80% of the loan modifications that took place over the last 3 years defaulted again within 2 years.

In The News:

Mortgage Bankers Association – “MBA: Strong Fourth Quarter Drives 2010 Commercial/Multifamily Mortgage Bankers Originations 36 Percent Above 2009 Levels” (2-7-11)

“Mortgage bankers originated $110 billion of commercial and multifamily mortgages during 2010 – an increase of 36 percent from 2009″

Mortgage Bankers Association – “MBA: Only 11 Percent of $1.4 trillion of Non-Bank Commercial/Multifamily Mortgage Debt Set to Mature in 2011″ (2-7-11)

“Of the $1.4 trillion balance of outstanding commercial/multifamily mortgages held by non-bank investors, only 11 percent of the total ($155 billion) will mature in 2011, and 9 percent ($125 billion) in 2012″

Press Enterprise – “Surveys project Gen Y’s impact on for-sale and rental housing” (2-7-11)

“Gen Y forms a large consumer group–even a bit larger than the Baby Boomers, according to a report published by Meyers LLC, an Orange County based real estate research company. Meyers cites a report by the Marcus and Millichap commercial brokerage that 20-to-34 year olds constituted a 65 percent share of job gains in 2010.”

Washington Post – “Republicans call for swift action to weaken Fannie and Freddie” (2-7-11)

“Republicans unveiled a four-point outline of how they want to overhaul the nation’s troubled mortgage system, including shrinking the number of mortgages owned by the troubled companies.”

Housing Wire - “Mortgage modifications drop 57% from 2009 peak: Fitch” (2-7-11)

“Servicers modified 36,500 mortgages through government and proprietary programs in December 2010, down 57% from the peak of 86,500 in April 2009, according to Fitch Ratings.”

Housing Wire – “Altos unveils forward-looking valuation model” (2-7-11)

“The AltosEvaluate forward valuation modeling forecasts changes in a property’s sale price three, six, or 12 months into the future based on the strength or weakness of any local real estate market.”

Housing Wire - “BarCap reveals a new mess in mortgage servicing: Remittance reports” (2-7-11)

“For modified loans, remittance reports are not specifying the exact amount of forgiveness, forbearance and the recapitalization of principal. But they are added to the cash flows, confusing investors who can only see a hole of information between the beginning and ending loan balance.”

Housing Wire – “Fannie Mae multifamily funding drops 14% in 2010″ (2-7-11)

“Fannie Mae financing for multifamily properties in 2010 dropped 14% compared to 2009, with substantial decreases in funding to manufactured housing communities and senior housing.”

Housing Wire – “S&P: Loan mods fail to keep distressed borrowers afloat” (2-7-11)

“The New York-based rating agency said 80% of the loans cured by a modification in the time period stretching from 2007 to 2010 defaulted again within 24 months.”

Housing Wire – “FDIC will base insurance charges to banks on risk, not deposits” (2-7-11)

“Banks that take more risk with their investments will be forced to pay more in insurance costs to the Federal Deposit Insurance Corp., according to rules finalized on Monday.”

Bloomberg - “REITs Seek to Lure Pension-Fund Money From Private Equity” (2-7-11)

“The National Association of REITs found that a portfolio 30 percent invested in commercial property shares delivered a higher return relative to one more heavily tilted toward private-equity funds, based on a study to be published today on the group’s website.”

Housing Wire - “U.S. Homeowners in Foreclosure Process Were 507 Days Late Paying” (2-7-11)

“U.S. homeowners in the foreclosure process were an average of 507 days late on payments at the end of last year as lenders handled a record rate of mortgage delinquencies, Lender Processing Services Inc. said today.”

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor 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 2/4/11

Friday, February 4th, 2011

Resources:

Yahoo! and Zillow go live with largest online real estate network

Failure to Raise U.S. Debt Ceiling would be Dangerous, Top Obama Aid Says

Costs for home mortgages rise as Fannie, Freddie hike fees 

Mortgage modifications increase 42% in 2010: Hope Now 

DBRS finds half of mortgage modifications redefault

Senate committee considers foreclosure mediation program

Today’s News Synopsis:

The Labor Department reports the economy added 36,000 jobs in January. The Congressional Oversight Panel expects future losses on commercial real estate loans to cost between $200 billion and $300 billion. Orange County construction unemployment increased to 22.5%.

In The News:

Washington Post – “Housing finance changes likely to mean less government backing for some buyers” (2-4-11)

“The Obama administration is likely to recommend reducing the size of mortgages eligible for government backing, according to current and former officials”

Housing Wire – “Nonfarm payrolls add 36,000 jobs, unemployment down to 9%” (2-4-11)

“The Labor Department’s Bureau of Labor Statistics said the economy added 36,000 jobs during the first month of 2011 with gains in manufacturing and retail. Employment levels fell in the construction, transportation and warehousing sectors with little change in most other industries.”

Housing Wire – “Multifamily delinquency rate in CMBS climbs to 17.4%, highest ever recorded by Fitch” (2-4-11)

“The delinquency rate in the multifamily sector rose to 17.4% in January, up from 15.63% the prior month and at the highest level since Fitch began tracking CMBS delinquencies.”

Housing Wire – “Easing tax burdens on investors could stem CRE losses: COP” (2-4-11)

“Future losses on commercial real estate loans could cost between $200 billion and $300 billion, but easing certain tax levies against investors could alleviate the problem, according to the Congressional Oversight Panel.”

Housing Wire – “Hudson & Marshall to auction more than 700 homes in Southwest” (2-4-11)

“Several hundreds of real estate-owned properties in the Southwest United States are up for auction and, according to auction house Hudson & Marshall, that volume will be meeting equal demand. The firm is auctioning off more than 700 homes in Arizona, California and Nevada over the next two weeks.”

Housing Wire – “FDIC, SEC both name new general counsel” (2-4-11)

“The Federal Deposit Insurance Corp. named Michael Krimminger FDIC general counsel on Friday.”

Bloomberg - “U.S. Commercial Property Recovery Spares Economy” (2-4-11)

“Prices of commercial properties sold by institutional investors surged 19 percent in 2010, the second-biggest gain on record, according to an index developed by the MIT Center for Real Estate. Investments in office properties, the largest part of the market, more than doubled last year to $41.6 billion, according to Real Capital Analytics Inc., which tracks commercial property sales globally.”

Orange County Register – “Construction umeployment hits 22.5%” (2-4-11)

“Construction unemployment jumped to 22.5 percent. December’s construction unemployment was 20.7 percent.”

Orange County Register – “Bottom near for biggest O.C. properties” (2-4-11)

“I’m not quite sure where the apartment recession is. It’s definitely down in rents. There’s no doubt about that. (But) people are buying Southern California apartments like they’ll never be built again. And some of the smartest people I know — Donald Bren, the Lewis family — are building like mad.”

Looking Back:

One year ago, Marcus & Millichap annual apartment report placed San Diego in second place for stability and possible growth in 2010. Statistics from MDA DataQuick showed that 18,621 California homes sold for over 1 million dollars in 2009. Freddie Mac reported the rate for 30-year fixed rate mortgages increased to 5.01 percent. PMI predicted that home values were near to the bottom.

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 1/13/11

Thursday, January 13th, 2011

Today’s News Synopsis:

Top News Stories: Several sources have reported that the number of foreclosures are expected to increase in 2011.  Bloomberg expected them to rise almost 20%.  In other news, a top story is that mortgage rates declined for the second week in a row according to Freddie Mac. Corelogic reported that home prices continued to decline.  On a positive note, however, John Burns said this has not stopped consumers from wanting to purchase homes.

In The News:

Housing Wire- “Foreclosures getting more erratic out West: ForeclosureRadar” (1-13-11)

“As mortgage servicers grapple with unique foreclosure issues from state to state, the amount of filings varied just as widely in December.”

Inman - “Steady growth foreseen, but no ‘housing revival’” (1-13-11)

“A recovering economy should translate into a spring home-selling season that’s better than last year’s, according to two economic forecasts presented jointly here at the annual meeting of the National Association of Home Builders.”

Bloomberg - “U.S. Foreclosure Filings May Jump 20% in 2011 as Crisis Peaks” (1-13-11)

“The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, RealtyTrac Inc. said.”

RisMedia - “RealtyTrac Releases Year-End Foreclosure Report” (1-13-11)

“RealtyTrac, a leading online marketplace for foreclosure properties, released its Year-End 2010 U.S. Foreclosure Market Report, which shows a total of 3,825,637 foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on a record 2,871,891 U.S. properties in 2010, an increase of nearly 2% from 2009 and an increase of 23% from 2008.”

Housing Wire – “Freddie Mac mortgage rates decline for second consecutive week” (1-13-11)

“After about a month and half of increases, Freddie Mac mortgage rates declined for a second consecutive week.”

CNN Money - “Regulators: Wake up and smell the loan risks” (1-13-11)

“Disputes related to failed mortgages are ballooning amid the fallout of loan securitizations and sales made by some of the biggest banks. But, for the time being, it doesn’t look like the primary bank regulators are doing much about it.”

DS News - “Pro Teck Valuation Services Partners with Collateral Analytics” (1-13-11)

“Pro Teck Valuation Services, a Massachusetts-based national provider of residential real estate valuations, recently partnered with Collateral Analytics, a developerof real estate analytic products and tools headquartered in Hawaii, to offer a suite of real estate analytic products to Pro Teck customers.”

Realtor - “More Borrowers Face Expiring Lock-in Rates “ (1-13-11)

“Many borrowers opt to lock in mortgage rates when buying a home or refinancing to help protect themselves against any sudden increases in interest rates while the loan is being processed.”

The O.C. Register - “Calif. home prices decline again” (1-13-11)

“Whatever momentum the California housing market may have had early last year seems to have evaporated. California home prices were falling at a 2.03 percent annual rate in November, the second consecutive year-over-year drop, according to CoreLogic’s math.”

Housing Wire - “John Burns: Despite the housing struggle, people still want to buy” (1-13-11)

“While the overall economy is starting to head forward through recovery, housing continues to stumble behind, according to a recent report card from John Burns Real Estate.”

Looking Back:

CBIA reported that condominium sales were 39 percent higher from 2009. The MBA’s weekly survey showed that mortgage loan application volume increased by 14.3 percent from the prior week. Jumbo residential mortgage-backed securities increased to 9.2 percent from December 2008 to December 2009. All but two of the Federal Reserve districts reported increased activity or improved conditions.

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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205-TNG Radio – Jon R. Daurio 12-17-10

Friday, December 17th, 2010

Jon Daurio

Jon R. Daurio

Chairman of Kondaur Capital


 

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This week Bruce is joined by Jon R. Duario. Jon is the chairman and chief exective officer of Kondaur Capital. He founded Park Place Capital in 2001, and sold it to Ameriquest Mortgage Company in 2002. After the sale, the name of the business changed to Sprint Funding Corp, and Jon remained as president through May 2006. He received his Juris doctorate and Masters from UFC, and his BA Cum Laude from Harvard. He is also a fifth degree black belt in Tae Kwon Do. 

During the boom years, when stated income and subprime loans were being frequently approved, Jon had a feeling that someone was going to be damaged. He was concerned about what the effect would be on default ratios and loss severities. Nonetheless, his company originated those loans because they were being paid well to do so. Most loans at that time were being securitized. 

During that time, Encore Credit Corporation was one of the nation’s largest subprime wholesale originators. They were selling those loans at a substantial profit. Encore formed a real estate investment trust called ECC Capital Corporation. 

Jon had a good understanding of what CDOs and credit default swaps were during the boom. However, it was difficult to track cash flow and how each obligation worked. 

Jon never placed bets against the outcomes of certain loans. He could not have imagined the magnitude and speed at which the real estate market collapsed. Had it no collapsed at that speed, those shorts would not have been worth much. There was a 7 day period where they went from being worth very little to being worth a fortune. 

Kondaur Capital opened in July of 2007. It currently has a little less than 500 employees. The company is known to be the premier purchaser of non-performing loans secured by 1-4 family residences. Kondaur Capital is the country’s largest buyer of those loans. Not many large companies desire to participate in Kondaur Capital’s sector, because it can be difficult to do business profitably. It can be challenging to earn a profit from these non-performing loans because it is difficult to estimate the current underlying value of the home, what the value would be if you took title to that home, and how to effectuate a liquidation of that asset in accordance with the regulations for this industry. Earning a profit from this business model takes more than just the ability to write a check. 

Jon would define a sizable portfolio as several hundred loans, and he purchased a portfolio that large in 2007. It can be difficult to predict what a house will sell for 6 months after the purchase. You must accurately predict what the liquidation value of the asset would be at the time of its liquidation. Kondaur Capital is very good at doing this. His predictions are typically off by less than 1%. Kondaur Capital is very effective at spending the appropriate amount of time and effort to analyze the collateral and the borrower. 60% of the time, Kondaur Capital pays borrowers a substantial amount of money for a deed in lieu of foreclosure, so that they can accelerate the title process. With rare exception, they never put a house on the market unless it is in perfectly livable condition. All utilities are sold in working condition, the walls are painted, and the roof will not leak. 

Sizable portfolios in 2007 were rare. Most sellers at that time were warehouse lenders. The warehouse lender did financing to loan originators. The loan originator went out of business or was unable to sell the loans. The warehouse lender would then seize those loans as collateral. In 2008, many of those warehouse lenders cleared their inventory, and then Jon began buying from Wall Street firms. Wall Street firms had a lot of loans at that time because the securitization market was disappearing. In 2009, the Wall Street firms got rid of their inventory, and most of Jon’s purchases came from large regional banks. In 2010, the availability of loans increased substantially. Potentially $20-25 billion worth in unpaid principle balance on loans. Most of these loans were still coming from large regional banks, but Wall Street was involved as well. 

Bruce knows an agent who had 1,000 REOs in 2008, but his business has decreased by 90% this year. On the other hand, Jon had a large amount of business in 2010. The lenders seem to be making a new decision to not take properties down the foreclosure route. Jon believes this may be partially due to the fact that the number of Realtors has increased. Jon has literally 1,000s of Realtors contacting him now for business. Also, in 2009, the government began delaying foreclosures. Joe believes lenders do not need the government to tell them whether or not a modification is the most valuable decision to them. The value of a modified loan is what a ready and able buyer would pay for that loan at the time of modification. There is no need for complex valuing formulas. There has been a tremendous delay in foreclosures, and there is a large amount of shadow inventory. Jon believes there are millions of REOs waiting to come onto the market. 

Bruce thought that banks were not making individual decisions, but that their decisions were being dictated by government policy. There are two key parties involved with the loan: the owner and the servicer. There are often conflicting interests in regards to who services the loan. Many servicers do not do an individual loan by loan analysis. Kondaur Capital does look at loans individually, which makes it unique and elite. Kondaur Capital asset managers have a maximum of 55 assets. Many servicers have assets in the hundreds, so they are making decisions for a pool of loans. Jon believes that every loan, borrower and house is unique, and should be treated as if they were. 

In the 90s downturn, some lenders were not interested in foreclosing. The FDIC then intervened and demanded that the lenders file for foreclosure after 90 days. This is what helped Bruce to realize that our recent problems were very different. Our current lenders were being told to do whatever is necessary to survive. 

The government is trying to keep borrowers in their homes. It seems that politicians are now more focused on getting re-elected. Jon believes this is influencing our leaders’ decision to protect homeowners regardless of delinquency. 

The pools Jon invests in spread across the country. Kondaur Capital is the nation’s largest and most efficient buyer of pooled loans. 

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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