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204-TNG Radio – Tom Anderson 12-11-10

Friday, December 10th, 2010

Tom Anderson

Chairman and Founder of PENSCO Trust Company


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

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

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

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

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

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

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

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

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

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

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

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

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

Tom’s website is www.penscotrust.com

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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203-TNG Radio – Tom Anderson 12-04-10

Friday, December 3rd, 2010

Tom Anderson

Chairman and Founder of PENSCO Trust Company


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 12/02/10

Thursday, December 2nd, 2010

Today’s News Synopsis:

The NAR reports pending home sales increased 10.4% in October. According to RealtyTrac, foreclosure sales decreased 25% in the 3rd quarter. Statistics from the Labor Department show jobless claims rose 6.3% last week. Greg Lippmann of LibreMax Capital predicts national home prices will drop another 10%.

In The News:

NAR - “Strong Rebound in Pending Home Sales” (12-2-10)

“The Pending Home Sales Index,* a forward-looking indicator, rose 10.4 percent to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009, which was the highest level since May 2006 when it hit 112.6.”

San Francisco Chronicle – “Mortgage rates rise to 4.46 pct. as economy lifts” (12-2-10)

“Freddie Mac said Thursday that the average rate for 30-year fixed loans rose to 4.46 percent from 4.40 percent last week. Three weeks ago, the rate hit 4.17 percent, the lowest level on records dating back to 1971.”

Los Angeles Times – “Sales of foreclosed and distressed properties fall 25% in third quarter” (12-2-10)

“Irvine-based RealtyTrac, a company that publishes listings of foreclosed properties online, said in a report Wednesday that sales of U.S. properties in some stage of foreclosure dropped 25% in the third quarter from the previous quarter and 31% from the third quarter of 2009.”

Housing Wire – “Jobless claims continue bouncing around with 6.3% rise last week” (12-2-10)

“Initial jobless claims rose 6.3% last week to 436,000 after coming in at the lowest level in two years the prior week. The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Nov. 27 increased by 26,000 from the previous week’s figure of 410,000, which was revised slightly upward.”

Wall Street Journal – “Banks in Talks to End Bond Probe” (12-2-10)

“Banks churned out more than $1 trillion of CDOs. They often created them at the request of investors who made bets against the deals. Some banks made their own bearish bets. Such bets paid off when the mortgage market crashed, though financial firms also suffered steep losses from CDOs stuck on their books.”

Housing Wire – “Basel 3 rules approved, banks still have years to comply” (12-2-10)

“banks have years to comply with key elements in the rules. For instance, a bank must hold a minimum Tier 1 capital ratio of 4.5% by 2013 and 6% by 2015. A bank’s minimum capital conservation buffer – a fund the bank can draw on in times of economic stress – must reach 0.625% by 2016 and 2.5% by Jan. 1, 2019.”

Housing Wire – “Fed data shows 60% of TALF loans repaid” (12-1-10)

“Federal Reserve data released Wednesday show more than 60% of the $71 billion lent through the Troubled Asset-Backed Securities Loan Facility has been repaid.”

Bloomberg - “Home Prices to Drop 10%, LibreMax’s Lippmann Says” (12-2-10)

“U.S. home prices will drop an additional 10 percent, according to Greg Lippmann, a founder of hedge fund LibreMax Capital LLC and former Deutsche Bank AG trader who gained fame for his bets against subprime-mortgage securities.”

Looking Back:

One year ago, the MBA’s weekly survey showed that mortgage applications increased by 2.1 percent from the previous week. Trepp reported that overall delinquency rates for commercial mortgage-backed securities increased to 5.65 percent. According to ADP Employer Services, 169,000 jobs were cut in one month.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor event calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 200 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 9/22/10

Wednesday, September 22nd, 2010

Today’s News Synopsis:

Mortgage loan applications decreased 1.4% this week. FHFA reports national house prices fell 0.5% in July. HAMP converted 33,342 trial modifications into permanent status last month. The Bush tax cuts may end soon.

In The News:

Naked Capitalism – “Latest Real Estate Time Bomb: Title of Foreclosed Properties Clouded; Wells Fargo Dumping Risk on Hapless Buyers” (9-22-10)

“there is a lot of actual and shadow residential real estate inventory in the US. The time from serious delinquency to foreclosure has lengthened considerably, due not just to crowded court dockets, but also bank/servicer disinclination to take possession (reasons include that investors take a dim view of bank real estate holdings; the bank is liable for expenses, most important real estate taxes, once it takes possession; more foreclosures would lead banks to have to write down clearly overvalued second mortgages, leading to losses and lowering bank capital levels).”

Mortgage Bankers Association – “MBA Hails Extension of National Flood Insurance Program” (9-22-10)

“Flooding is the most common natural disaster in the United States. In fact, more than five million Americans rely on the National Flood Insurance Program as their primary protection against flooding. This program has expired regularly in recent times, which has frustrated residential and commercial lenders and borrowers alike.”

Mortgage Bankers Association – “Mortgage Applications Decrease in Latest MBA Weekly Survey” (9-22-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending September 17, 2010.  The Market Composite Index, a measure of mortgage loan application volume, decreased 1.4 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 22.9 percent compared with the previous week, which included the Labor Day holiday.”

Sacramento Bee – “Viewpoints: Is ‘smart growth’ law on right track? No” (9-22-10)

“Now, more than ever, the men and women out of work, construction companies that have no projects in the pipeline and local officials trying to maintain vital services are looking for a process that will bring all parties together to work toward a successful, responsible program. Unfortunately, the air board’s staff chose a path that will wreak havoc in the construction industry, prevent economic recovery, and stand as a major disincentive to future developments in our state.”

Housing Wire – “FHFA house prices slip 0.5% in July” (9-22-10)

“U.S. house prices fell 0.5% in July after increases through the second quarter, according the Federal Housing Finance Agency monthly House Price Index (HPI). The July numbers follow 1.2% drop in July, revised from a 0.3% decline.”

Housing Wire - “SEC charges 4 with fraud after failing to disclose real estate investment fund collapse” (9-22-10)

“The Securities Exchange Commission Monday charged a Minneapolis attorney and two San Francisco promoters with fraud after they failed to disclose the financial collapse of a real estate lending fund to relevant investors. Todd Duckson, Michael Bozora and Timothy Redpath allegedly raised more than $21 million from investors in the Capital Solutions Monthly Income Fund after the sole business partner defaulted on financial obligations. The fund raised approximately $74 million from 450 investors between 2004 and August 2009.”

Housing Wire – “Obama housing scorecard touts ‘advances’ in August” (9-22-10)

“The Department of Housing and Urban Development and the Treasury Department compiled data for the monthly scorecard. According to the administration, stabilizing housing prices leveled off in the past year after 30 straight months of declines. Homeowners added $95 billion in home equity in the second quarter. The scorecard did acknowledge ‘a dip’ in home sale figures in July after the expiration of the homebuyer tax credit. But since April 2009, record low mortgage rates have helped more than 7.1 million families refinance, saving more than $12.7 billion.”

Housing Wire – “Permanent HAMP mods fall 26% in August” (9-22-10)

“Servicers participating in the Home Affordable Modification Program converted 33,342 trial modifications into permanent status in August, down 26.7% from the 45,512 in July. The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Since then, the participating servicers have provided 468,058 permanent modifications.”

Housing Wire – “Right to Rent could change the nation’s foreclosure crisis: CEPR” (9-22-10)

“The report dissects the benefits of a drafted bill, H.R. 5028, also known as The Right to Rent. Under the legislation, homeowners entering the foreclosure process would be able to occupy their homes for up to five years, while paying rent to a lender. Rent would be based on fair market price as determined by an independent appraiser and adjusted annually.”

Bloomberg - “Obama Tricks Voters as Enron Hoodwinked Public: Amity Shlaes” (9-22-10)

“Republicans want to keep the top rate at its current level while Democrats prefer to let the George W. Bush-era rate cuts expire. And some of us may even know that the tax code’s current 35 percent figure would rise to 39.6 percent if President Barack Obama gets his way.”

Looking Back:

One year ago, the Federal Housing Finance Agency announced that national home prices increased by .3% in July.  The FDIC considered borrowing money from banks to protect the insurance fund. ZipRealty reported that 25 markets displayed a reduction in home inventory from July to August.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor event calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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

Monday, June 28th, 2010

Today’s News Synopsis:

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

In The News:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Looking Back:

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

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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The Norris Group Real Estate News Roundup 4/14/10

Wednesday, April 14th, 2010

Today’s News Synopsis:

The U.S. Treasury reports more than 1.4 million borrowers have been offered trial modifications under HAMP. The MBA’s weekly survey shows that mortgage application volume decreased by 9.6 percent from last week. Banks required over 25 percent more time to foreclose a property in in California last month than in March 2009. According to statistics from the Federal Reserve’s Beige Book, overall economic activity increased in nearly all parts of the country since March.

In The News:

MBA - “MBA’s Story Testifies on Revisions to the Home Affordable Modification Program” (4-14-10)

“According to Treasury, more than 1.4 million borrowers have been offered trial modifications under HAMP.  One million borrowers are in active modifications, of which almost 230,000 represent permanent modifications.  An additional 100,000 permanent modifications are pending borrower acceptance.  And servicers have substantially increased the pace with which permanent modifications are being done.”

MBA - “Mortgage Applications Decrease in Latest MBA Weekly Survey” (4-14-10)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending April 9, 2010.  The Market Composite Index, a measure of mortgage loan application volume, decreased 9.6 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 9.5 percent compared with the previous week.  This is the third lowest Market Index recorded in the survey since the end of June 2009.”

Inman - “Foreclosure process slows in California” (4-14-10)

“It took banks 27.9 percent longer, or 225 days, to foreclose on a property in California last month than it did in March 2009, and 0.45 percent longer than it did in February, according to data tracked by foreclosure data company ForeclosureRadar.com.”

CNN - “10 foreclosures for every home saved” (4-14-10)

“The Obama administration’s mortgage-modification program is not keeping pace with the deluge of foreclosures hitting the market, a government watchdog found. Only 168,708 homeowners have received long-term mortgage modifications under the president’s plan, as of February, a small fraction of the 6 million borrowers who are more than 60 days behind on their loans, according to the Congressional Oversight Panel’s latest report, released Wednesday.”

Mercury News – “Mortgage market: Government asks for advice on how to improve it” (4-14-10)

“The administration has not drafted any formal proposals to reform the housing finance system. Mortgage finance companies Fannie Mae and Freddie Mac nearly collapsed in September 2008. Propping them up has cost taxpayers about $126 billion so far. Among the questions the Treasury Department is asking are: What level should the federal government play in stabilizing the housing market? What kind of lending standards should be established? How should consumers be protected from abusive practices?”

Housing Wire – “Fed Beige Book Sees Increase in Housing Activity” (4-14-10)

“Overall economic activity increased in nearly all parts of the country, with many districts reporting increased activity in residential housing markets, according to the latest edition of the Federal Reserve’s Beige Book. The St. Louis district was the only one to not report an increase in overall economic activity, indicating a thaw may be in the works since the March edition of the Beige Book showed the toll taken by harsh winter weather.”

Housing Wire – “Donovan: Eliminating GSEs May Threaten Fragile Recovery” (4-14-10)

“Hasty action to quickly change the composition of the GSEs or to eliminate them would further drive down this housing market and cause taxpayer losses to increase”

Housing Wire – “One Year Down the Road, COP Says Success Still Escapes HAMP” (4-14-10)

“The private sector has found less success in modifying mortgages through HAMP than through other in-house strategies. According to testimony by Bank of America (BAC: 19.40 +3.91%) Home Loans president Barbara Desoer to the House Financial Services Committee this week, of BofA’s 14m mortgages, 1.4m are 60 or more days delinquent. All told, BofA completed 560,000 of its own modifications to those borrowers. Similar success escapes government-led initiatives as even though 391,000 borrowers at BofA were offered a HAMP mod, only 33,000 are now permanent through HAMP.”

Bloomberg - “FDIC Plans $1.97 Billion Sale of Loans From 22 Seized Banks” (4-14-10)

“The Federal Deposit Insurance Corp. is seeking bids on a $1.97 billion portfolio of loans from 22 seized banks, pushing the agency’s structured asset sales this year beyond the 2009 total. The sale consists of 1,739 loans mostly tied to commercial real estate, with borrowers late on payments for almost half the portfolio, according to a preliminary announcement obtained by Bloomberg News.”

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