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By Bruce Norris .

Cary Pearce, Sales Production Manger for Provident Loans, Joins Bruce Norris on the Real Estate Radio Show #316

Friday, February 8th, 2013

Cary-Pearce


Cary Pearce

 

Sales Production Manager for Provident Loans

 

(Full Bio)

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Bruce Norris is joined again this week by Cary Pearce. Cary is the sales production manager for Provident Loans, and he has been involved over his lifetime involved in loans and about $ 1 billion and a half in closings.

One of the things Bruce and Cary began discussing was trying to qualify somebody for being a buyer. It is one thing when a loan does not close for somebody who is the lender; but when you have a hard money loan and are making a payment at 12% interest that falls out, there is a real hurt there. It is one of those situations where you would like to not have too many dry runs unless you happen to be a in a pretty bull market where you can say it is no big deal and you will make it up in price rises. This is something we have not had the luxury of in a while.

Because unemployment has been such a big factor, Bruce wondered how long somebody has to be on a job in order to receive an ok from the lender. Cary said generally with most any loan they want to see a two-year work history. There are some exceptions where if you have a college student with a four-year degree in his particular field and they get a job in that field, then you may be able to receive a loan on less than two years. Cary said in some cases they have done it with only thirty days of pay stubs. However, with a conventional loan this would never fly. The idea that improved employment will immediately help the real estate market is really not true. It is going to have a big lag affect. There are some people who had a two-year work history, were laid off after a year, and are now one month back on the job and wanting to buy a house. This is not going to work since the people at Provident want them to be back on the job for at least a year.

There are some overlays that still overwrite FHA’s 4155 and still do a manual approval. In cases like these it does not have to go through the automated system. However, most of the lenders are doing everything automated and have the overlays where they want the minimum FICO score and employment.

If you are self-employed, it is still required that you have two years of work experience. This means two years average of net income off the tax returns. Usually people try to be aggressive in their deductions, and it does not work so well nowadays. That is the biggest problem with a self-employed borrower, and that is why at Provident they would love to see the stated income loan come back for them because of the fact they write off a lot.

Bruce also asked about the down payment required by FHA since there was some talk about it increasing. It is still at 3 ½%, although they are hearing rumors that they are trying to get it to go up to 5%. However, Cary said he does not know if they will pass this or not. Cary does not think this was originally part of Dodd-Frank, but with a lot going around FHA right now there are many saying they are financially in dire straits. They have to make changes, and this is one of the things they are talking about changing to try to make their program a little bit more stable. Bruce wondered how down payment would help them financially. It may be safe for paper, but that is not much safer. What they are looking at is overall foreclosure ratios with a higher skin-in-the-game and less chance of default.

The safest loan in the country for the last 50 years is a VA nothing down loan. Down payment has nothing to do with it. You could not tell a VA loan from a Fannie 20% down loan. Bruce was able to present in front of Fannie and Freddie in Washington D.C., and they pointed this out. When they showed them the chart, they were surprised. It’s all nonsense about Dodd-Frank being the big saver for the mortgage industry. Whatever VA does must be good enough for the underwriting process. Obviously their percentage is not as high as FHA’s or Fannie or Freddie’s, but they are still doing a fair share of loans. It is the percentage, not the number of foreclosures historically. It is the nothing down borrower with whatever they are doing as far as underwriting, which apparently produces a fairly successful loan. They do scrutinize this package; so it will be full doc and they have to meet the ratios to make sure it is a quality loan.

Bruce asked about cash reserves for an occupant buyer. Cary said FHA does not have a reserve requirement. They have plugged some in where they have $500 left over after all their down payment in costs, and it was still approved. There are some exceptions on investor overlays that come into play. For instance, if the seller or a buyer is going to keep their current home as a rental and also want to buy a new primary residence, then in this situation the overlays will come in and they will want them to have at least a couple months of reserves on both houses. Conventionally it is even worse where in that same example they want them to have six months of reserves for every property that they own plus the new property.

Regarding property condition, Bruce wondered if there have been inspections recently that are really not so critical. Cary said they are still seeing repairs on a lot of their FHA approved appraisals, not so much on conventional. FHA flips are probably the worst only because you have to have two appraisals, a home inspection, and after reviewing the home inspection the underwriter will add any and all health and safety items to the appraisal as repair items. Those typically come in with more repairs, but those are usually the cleanest houses in the market.

Bruce asked what the theory is behind two appraisals. Bruce wondered if the right one or the low one wins, to which Cary said it is the low one. Although he already knew the answer, Bruce wondered why the low one is always right. Cary said it boggles the mind because when they order an FHA case number, you would think that the FHA appraisal should be the go to value. However, the second back-up appraisal is typically ordered conventionally. If it comes in lower, that is the number they are going to go with. There are some people out there who, on the flips, can still get it done with one appraisal. However, most people doing the flips have to have two. Bruce thinks this is insulting, and if he were an appraiser he would be asking the people why they even have a license if they cannot trust the number.

Bruce also asked about down payment gift programs and if any of these exist anymore. Cary said most of them do not. The Nehemiah, Heart, and others all went away because it was seller-driven. However, they knew the money was coming from the seller, and the market just did not like it. Bruce also wondered if there are still a fair amount of gifts coming from relatives now. Cary said they do see a lot of gifts on their FHA loans, approximately 30-40%. He also wondered what percentage of loans were multi-generational or multi-family qualifying. Cary said it was not a whole lot, but there are some out there. There are some other down payment programs, such as Cal FHA’s program Chittap where they do a 3% silent second. This is still a very popular program and helps many first-time buyers as long as they can meet the income limit.

Bruce also asked about fourplex limits. In Orange County it was around 1.2 million, although Cary said generally for a fourplex the number is a little over this number. FHA on Orange County is 1.4, and this is still with 3 ½% down. On multi units 3 and 4 they do a special calculation to make sure you go through an extra procedure and run all the numbers to see if it will still qualify for the 3 ½% down payment. There are some cases where it will qualify.

Bruce wondered if the deals Cary sees come through are mostly purchases or refis. Cary said last year their percentages went way up, and typically their branch runs at least 70% purchase to 30% refi. Sometimes they have been higher than that at 80/20. Just this last year they were about 55-60% with a higher concentration of refis, but this is only because rates were so low. Bruce said it occurred to him that there would not be much of a refi market once we leave this era since no one will touch a 3 ¼ mortgage. They will just keep it as a rental or leave it alone.

Bruce wondered how sensitive he thinks due on sale clauses will be. It is a very attractive niche to say you will sell a property and just wrap it. There are no assumable loans anymore, so it is a due on sale situation. A VA loan has a clause where you can swap the entitlements and someone else can take it over as long as they qualify. As to whether the lenders will actually exercise that due on sale and if somebody does take it over and start making the payment is not known. If they are making their payments on time, they may not ever touch it.

Bruce asked Cary if he gets a sense about where prices are headed over the last six months as far the local market. Cary said they are definitely increases. He and Bruce had talked earlier about how the appreciation is hopefully going to be at least 10% or more. We need this because Riverside alone was down 40-50%. What is interesting about the reticent saying they will have a price increase is they forget they are pairing it with a 3 ¼ to 3 ½% mortgage rate. You start calculating how much the price movement means per month, and it just disappears. At the height of the market there were 2 bedroom, 1 bathroom homes in the wood streets going for over $400,000. Today they are around $220,000. Regarding the interest rates back in the day, if they had to get a fix it was around 5 ½%. You start looking at the payment difference, and it is just night and day. That is why when it goes from $200-$260, which is a big move up, then you take $60 grand and compare it with 3 ¼% mortgage, you see that it is no big deal.

Bruce asked if there is any concern for the industry on the direction. The lending world is getting hit and blamed, some of it deservedly so, New York being an exception. Bruce asked about the changes that could be enacted by Dodd-Frank qualified residential mortgage, to which Cary said the biggest thorn in their side is the whole appraisal process. They used to be able to pick any appraiser in their local market and have them do the appraisal. Today, they have to go through a panel. As the loan officer, they have no say so in who gets the appraisal order. It goes to the corporate office, then they randomly assign it out to someone. Once the appraisal comes in the find out who received the order.

What is interesting is there is not really the same due diligence on the quality. It may come down to if you can do it faster and cheaper. Cary said when they were at National City they went for a short time through one of the national appraisal companies, Street Lengths. Here they would get some really low appraisals because the people there were just trying to get the reports back as quickly as possible without showing any concern about the comps. It was because they were only receiving half of the fee. This was a huge problem, and there is only so much due diligence you can do for $200. Thankfully with Provident’s philosophy, they paid appraiser the full fee, and the management company involved is only paid $25 to help them through the ordering process. However, the appraisers do receive a high quality report, and they are not seeing nearly the number of low appraisals they used to see.

Bruce wonders if Cary sees any evidence of lenders loosening standards. Cary said he does not see anything yet. Stated income is a program they would love to see come back, but it is not on the horizon as far as they know. Bruce wondered if that was always a conventional product that was outside of Fannie and Freddie, to which Cary said it is. Mainly things such as World Savings was very popular with that as well as Downey and a few others. Provident had broker relationships with them and sent them that type of loan.

Bruce asked how changes in loan policies usually take place and who the deciding body is that says when things will be okay. Cary said it is usually Wall Street and whatever they are willing to buy. In Cary’s experience when he was with Home 123, a company owned by New Century, he saw how fast things change. New Century was closing $4 billion a month in mostly subprime loans. The paper division was maybe 10-20% of the overall volume. In late 2006/early 2007 when they took $8 billion to market, Wall Street said they were not buying it. New Century was out of business in two weeks.

Bruce remembered early news articles that said we have basically gone back two decades in loan programs in ten minutes. It was so fast, and it was amazing how quickly the programs started dropping off. He immediately left Home 123 because he was forced out when he was told they could not fund loans or originate new loans. They took the whole team to National City, and slowly but surely they started pulling back all the programs. They took construction financing off the table as well as home equity lines. The alternate A products, where you had a lot of jumbo loans, were also pulled. The lenders and people working for the lenders had probably never even done one. The speed at which everything happened was just a matter of a few months, and it was just amazing how many programs died.

Coming back to today, Bruce wondered how Fannie and Freddie differ in regards to if you are an investor trying to receive a loan. Cary said typically you are looking at at least 20% down to do a non-owner occupied loan, but Fannie and Freddie both have their standard program where you can only have up to four financed properties which has to include the subject you are trying to buy. However, there is an overlay where they will go up to 10, and with that program you have to have 25% down and heavy reserves for all your properties. On this one they will let you go up to ten finance properties. Bruce asked if this is now for both Fannie and Freddie. Cary said he is not exactly sure who they are selling them to since Corporate does not really inform them of it. Bruce and Cary both think it is only for Freddie, but the sad thing they both found out is that they will not do cash out refis on them. Cary checked around with a couple sources in the industry, and they both told him their program would only do purchase and written terms as well. Thankfully for Bruce they found a source out in Orange County, so hopefully all goes well there.

What is interesting is you wonder about a cash out refi from a free and clear property and how yes answers either come about or don’t about in the lending world right now. You just look at the reasoning behind some of the programs and see that you are missing a lot of very safe loans just because you cannot do them. The investors would definitely help the market come back since there are so many of them out there. It is not only the Wall Street crowd buying them, but also the local investor who is really forced to write a check and hopefully get his money back.

If they do in fact just buy a property and want to get their money back, Bruce wondered if it is okay for them if they use One to Four loans. Cary said yes and that they have a program for that called the delayed financing program where an investor would come in, pay cash, and immediately pull some of the cash back. They will go up to 70% on a cash out on a property that has been owned for less than six months. However, you have to document where your down payment came from, and it had to be your own money. It could not be any gifts, so there are some restrictions to it. However, there is a program out there for it.

Bruce asked if you have a credit line on your residence if it counts as one. Cary said it does, but Bruce wondered about if it was unused if the maximum amount you could borrow against it is counted against you as well. Cary said it does, so if you have a $450,000 equity line and have zero owed against it, they are going to count the $450,000 owed against you as if you owed it all. They know you could go out and write a check tomorrow for that whole amount.

Bruce wondered if the eleventh loan exists yet. Cary said it does not as far as he is aware. The only thing you could probably do is go to a commercial local bank to receive either a line or have a loan with a very short fuse. There are some investors out there who have their own equity lines at their bank and are able to go out and do what they want. This is an elective relationship, and it still has to be renewed every year. It is a whole different thing since this will not necessarily work if you want a whole group of rental properties.

The problem with these programs is they can grow out of favor. This was Bruce’s first experience when he had a credit line. He had a $200 grand credit line and it was not a big deal, and they basically used it to just buy trust deeds in the margin. The difference in interest was something they earned. However, at the end of the renewal it was not renewed, and Bruce wondered why. Bruce found out it had nothing to do with him, but that his whole industry is out of favor. Bruce is a perfect borrower, has perfect credit, managed it very well, and none of this mattered. Provident had clients who had the same exact situation where they had no balance on their equity lines, and they received notices in the mail that their line was being closed. This is a bad day because sometimes that cushion is your cushion. You have the $400 grand line for a reason in case something happens and you can float on the boat for a long time. When they eliminate the boat, then that is not good.

If Bruce had a rental property for which he was receiving $1,000 a month free and clear, he wondered what percentage of the income actually gets credited to his side of the table. He wondered if there is a certain percentage that goes to expenses if the people qualify. Cary said in the old days they used to take 75% of the gross rent and minus out any payment you had. The excess was then used as income. Today, at Provident they have a chart they go through where they take your tax returns from the last two years, whatever your bottom line income or loss was, and they start adding back depreciation, mortgage interest paid, and tax and insurance. After a two-year average, out of all of that they deduct the PITI payment. If there is a positive it will count towards income, and if it is a negative it counts as a debt. The old rule went out the window; and in most cases when they look at somebody’s tax returns it hurts them and it is almost twice as bad. They could even have a positive cash flow and have a negative net result.

Bruce also wondered about trust deeds income. Bruce recalled in certain guidelines from a long time ago that if you have a short term trust deed that is one year or less, they won’t use it. It has to have three years of life left on it. If you do have a one-year trust deed, Bruce wondered if it is an asset in addition to being non-income. Cary said they should at least count it as an asset, but they will not count it as income or cash. It doesn’t really make sense since it is like an asset class with no home.

Regarding VA lending to investors, this only counts if the buyer purchases a VA property. At Provident, they do not do anything non-owner VA. It could be on their own inventory they would allow it, but nothing else. Any new buyer coming in and trying to purchase a VA has to be owner occupied. Bruce also wondered about self-employed investors and if they still exist. Cary said they see a few out there, and there are a lot of companies out there where they are showing the strong bottom-line net and are fine. The challenge with 70% of self-employed borrowers is they write off too much, and it hurts them when they go to qualify for anything.

If Bruce had a property that has a pretty strong negative cash flow, he wondered if this in itself would not end his loan app but rather was a ratio of everything he had. Cary said as long as you ratio out you should be okay. They have had some situations where the payment was $1500 and the fair market rent was only $1200. At Provident they can only use 75% of that $1200, so you have $900 offset to $1500. Now you have a $600 loss on paper that will go against you in the debt ratio.

Bruce also wondered about selling immediately after rehabbing and what the guidelines are now as far as conventional and FHA. Cary said for less than 90 days they can still get them done conventionally as well as FHA. Conventional loans will usually require an appraisal and at least a field review just to make sure that the value is solid. If an FHA loan is less than 90 days, then with Providence overlay they have to have two full appraisals and a home inspection to both check the value and make sure the house is in good condition. Bruce wondered if they looked at anything like rehab estimates or margin of profit. Cary said there are some rules when it comes to the profit that fall into the overlay. If it is over 100%, they are really going to scrutinize it.

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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Coldwell Banker Pioneer Owner Lance Martin Joins Bruce Norris on the Real Estate Radio Show #278

Friday, May 18th, 2012

Lance-Martin


Lance Martin

Owner of Coldwell Banker Pioneer Real Estate


(Full Bio)

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This week Bruce Norris joined by Lance Martin. Lance is broker/owner of Coldwell Banker Pioneer Real Estate. He began his career in real estate at 19 and has mostly been involved with the REO side of the business for over twenty years.

Lance received his license in 1986 and began selling full-time in 1987. It was not until 1992-1993 that he became involved in the REO side. What is interesting is that whenever you start your career, in your first few years there is some assumption that this is how it always is. If you got in in ’86-’87, in the next few years things got progressively better for everyone who bought something. Many people ask when the market will return to normal, but Lance said in the 25 years he has worked in the business he does not think he has ever been in a normal market. From about ’88-’91 the market was on fire. Prices were accelerating, and real estate was easy so to speak. Things then slowed down; and in the mid-90s we worked a lot with REOs, which no one said was normal. We had some recovery we had in early 2000/2001, then things caught on fire from 2002 onwards. Lance did not think this was normal, and the last five years were certainly not normal. Lance said he has pretty much given up on a normal market. Bruce said you would pretty much have to live in Oklahoma for a normal market since California bounces between extremes.

Lance’s family has been in the business forever, and he used to have conversations with his grandmother that there was a certain sense of predictability in real estate that ended right around the time Lance got into the business. From ’74-’80 prices in California tripled and separated themselves from the national average for the first time. In ’74 the median price in California was $3 grand from the national number. For whatever reason, we separated ourselves from the rest of the world and became more of a speculative market rather than simply living in it and being satisfied. These kinds of things do change. Most likely when you have people buy homes now they are probably in it for the long haul with the idea that they are going to live in it and enjoy it. Lance said the mindset has changed to a degree, and there are a certain number of investors in the marketplace right now where it would not surprise Lance if in the next few years the pendulum swings and everyone forgets the lessons that we saw in 2006 and beyond.

If you ask somebody why they are buying a new house to live in 2005, it would have been to make money more often than not, even if they were living in it. In 2012, they would be more hesitant and want to stay where they are. They will end up making money on it, it’s just a matter of time.

Bruce wondered when the REO business peaked this cycle for Lance. Lance said we have been in a long cycle, but for Coldwell they started in about early 2006. For most people, if they were not paying attention, they may have thought the market was still hot because the market for the most part did not really peak median-price wise until June 2006. He said they started seeing inventory in early 2006, and from a sheer volume standpoint it peaked in 2008. You can map the peak out, and the top of the peak from the day they passed the first foreclosure moratorium in September 2008. Ever since then we have been drifting away a little bit. We still had fairly decent levels of inventory through 2009, and 2010 was not really exciting even though we were still doing quite a bit. Lance believes 2011 was a mirror of 2010. Lance is still puzzled as to what to make of this year. Lance thought four to five months ago we were going to see some decent numbers as far as new assignments and foreclosures going through the system. The first four and a half months not only did not prove this, it proved it wrong because we have seen the exact opposite. It has been very slow as far as new assignments and properties going through the system. Percentage-wise from the peak in 2008, Lance’s inventory levels now are about 15-20% of where he was in 2008.

It is a little hard to map out a business plan when you are probably being told to get ramped up for volume. This is often something Lance is told on the lender side. Prior to the robo-signing scandal, Lance sat in a meeting in September or October 2010 and was told to get ready and that it was coming. It was 2010 when the robo-signing scandal came upon us, and this certainly put a lid on things. This is now in the past with settlements and attorney generals getting together, which is one of the reasons Lance thought we were going to see more inventory this year. However, so far and for whatever reason, whether it is Fannie and Freddie, bulk sales or balance sheet management, we still have not seen it. The first quarter, for all intents and purposes, was a write-off for Lance since there was so few new properties hitting the marketplace. It might as well have been zero.

When Lance talks to the sources that he receives inventory from, they are in the position where they are probably not in the front line as far as making decisions. Bruce wondered if they themselves were surprised by the lack of inventory. Lance said he would think so because you would have to be because a lot of the asset management companies are in the same position as himself and others like him on the street. They have to gear up their staff, and field inspectors. Lance ran a couple numbers before coming on the radio show; and from Bakersfield down to about the California/Mexico border there are over 50,000 properties with notices of sales filed and another 38,900 properties with notices of defaults filed. There are also 11,552 properties filed in REO inventory in one form or another, whether they are on the market, in a rental program, or are being evicted. If you get 11,000 in inventory that are already foreclosed on and another 88,000 that currently have a notice of sale or default, then that means there are eight times as many properties that are behind those.

In Lance’s opinion, they are all going to transfer in one form or another, whether they go short sale or ultimately end up as an REO. Just given the number of properties that are in the pipeline right now, there are eight times more. However, those numbers have not changed. You talk about trying to make a business plan, and those numbers have been fairly consistent now for several years. You now just sit back and watch those numbers continuously turn, and what comes out on the other side is such a small percentage that it is real difficult to make a new business plan.

Bruce wondered what affect loan modifications have had on the REO business and if Lance is now seeing round 2. In other words, the loan mod was taken care but the payment was not made. Bruce wondered if Lance has seen foreclosures stem from this. Lance said he has and has managed a fairly significant amount of properties throughout the Inland Empire. Therefore, he has a pretty good sample of landlords to pull from. He can share a dozen stories from the last six months from their landlords who, for whatever reason, whether they bought the property wrong or refinanced with cash over the years, are upside down and have attempted to do loan mods, some being successful and others not so much. However, Lance believes the frustration level is high, and we will probably see a whole lot of people completely giving up not only on the loan mods, Lance has had clients who are absolute candidates for short sales. Lance knows he can get them approved and get a short sale done. Their frustration level at the process is so high that they have given up on this too. Lance said he may be wrong, but he is convinced they are going to see at some point these properties being forced into the REO segment on unless the people are able to stay in the properties forever.

Bruce wondered if Lance is noticing any of his businesses being affected by the large purchaser who is coming in to stock up rentals in the Inland Empire. Lance said not yet, but it is literally the number one priority he has just from a standpoint of what he is keeping his eye on and lobbying against as a realtor and someone who owns offices in the Inland Empire or California. Lance said the bulk sale initiative coupled with the rental restriction at least as it relates to Southern California has to be the worst idea that has come down the pipeline since the first foreclosure moratorium. There has not always been agreement on what level of properties should be allowed to come through the system, and managing the number of properties might be smart. Lance has usually taken the position to just let things go, let the chips fall where they may, and if things collapse then so be it. Lance really thinks the bulk sale and rental program is awful.

The FHFA is currently the regulator who is overseeing Fannie, Freddie, and HUD. They have a pile of programs out in which they are bundling up properties throughout the country and pulling these properties from what they are describing as the hardest-hit areas. There are two additional criteria which Lance said does not make sense to him. In addition to the hardest hit areas, other criterion includes areas with high inventory levels and areas with low buyer demand. Lance said neither of these pertains to them. With two of those three criteria not fitting Southern California, this pilot program decided to target at least a piece of Southern California, specifically the Los Angeles and Riverside markets.

There is somewhere in the neighborhood of 500 properties that they decided to put into this bulk sale program. These are then going out to large institutional investors, being packaged up, and are being offered to people who have those types of funds, who would not be your typical ma and pa investor. Coupled with this, they are restricting what those purchasers can do with those properties at the purchase. There may be other restrictions, but one of the restrictions that is a big deal is they have to lock those properties into rental stock anywhere from three to seven years. They pull them out of the market, and certain investors are for the most part going to be locked out. To be selfish, realtors and offices like the ones Lance is at will be locked out. It is a really poor plan to help the local economy. If they are locking these transitions into rental stock, obviously they would be buying these properties at what you think would be something less than $.50 on the dollar. Their ability to rent those properties at something less than market seems apparent, and now Lance and Bruce will be potentially competing with the rental stock in the Inland Empire that was purchased at a discount and very well may be able to rent for a percentage or so less. Lance said he has been following this since last September, and he hated then and hates it now. Now the program is in place and is moving forward.

Lance read a letter written by FHFA Director Edward DeMarco, and the letter said there were two objectives to the rental program. The first was to look for alternative approaches to retail dispositions; in other words finding a different way to sell it. For the most part this cuts Coldwell Bank out and anybody in the transactional business as well as the small investor. The other objective of the program is to assess the investor interest, which you have to figure is pretty large if you are going to be able to purchase these properties at $.40-$.50 on the dollar. In regards of if there will be a bidding process, Lance said the first property has gone through the system, and Lance really wants to see what has gone on behind the scenes. From what Lance understood, there was a bidding process in play where you had to meet certain criteria to bid. They are now going through their due diligence, and Lance believes this first round of properties is in the process and within 60 days of either the final disposition of those properties or at least a bid being awarded to one of the investor purchases.

Bruce said what he has seen as a trustee sale buyer is Wall Street now has backed several companies in the local area to the tune of 100s of millions of dollars, and they are just buying them for very close to full value for cash. They are keeping the properties, and the goal is to get to 10,000 properties nationally. To Bruce this is the bigger threat. Lance is talking about bulking out 500 properties in the area, while Bruce would say they are buying 500 properties a week just on a one-off basis. If you have a stock of houses, you have probably been approached and then willing to buy them. Lance said he does not have as much of a problem with this, although it may put a damper on those of us sitting down at the poorhouse steps looking for those good opportunities. However, if they are buying them in that process and they are willing to pay market value and buy them on a one-off basis, then they can choose to do what they want with them. They choose to hold them for a year or turn around and try to immediately flip.

Lance said he does not really like the bulk sale thing in general, but if that is what it is going to take to move the inventory through the process, then so be it. For Lance, the part that is just the killer is the rental restriction because it is literally locking those properties up in the market for that period of time. This could mean it will be that much longer for our market to recover. We have been in an artificial marketplace, whether you are a buyer, seller, or somebody in the business of transacting real estate, since September of 2008. We are now coming up on the four-year anniversary of the foreclosure tsunami, which never came. This was when Lance started expanding his offices. He looked at the numbers in 2008, and he started to expand his footprint figuring that it made good business sense. Frankly, however, the policy makers were not looking at his business plan. What made sense in the past that all of a sudden did not happen.

Bruce wondered if lenders more commonly taking the property back and then renting it to the former occupant owner. Lance said this goes hand-in-hand with the question asked earlier about how it relates to the rental side. He tied this rental program more to the bulk sale. Starting about 2 ½ to 3 years ago, in every occupied property that goes through Fannie the owners are being offered a rental agreement. Point blank there are no questions asked. About 10-20% of those occupants are taking these rental agreements. Now, for the last few years some of those properties that have been in the system for a year have come back into the marketplace to be resold, and the system worked as it was planned. A few of those properties have actually been sold with tenants in them, and these have been good opportunities for some of the investors. They basically bought a property prepackaged with the tenant that had been there for years. Lance’s fear now is many of those properties that have been in that rental program that have already been foreclosed on, are already in the system, and have already been rented out; these properties are guaranteed to be pulled out of the stock and sold in a bulk sale program.

Bruce wondered how lenders are dealing with evictions now. Lance said not too much has changed. If they are not willing to accept cash for keys or are in a rental program and not paying their rent, they could move a little quicker as far as the process is concerned but are generally following the law and moving fairly quickly. There are some stories of evictions that have gone on for 2 ½ years, but those are the exceptions.

Right now the percentage of Lance’s business that is REO is closer to 20%, while two years ago it was 90%. The only part of the business he feels he can truly control right now is the property management business, of which he is still a big fan. From the standpoint of his agents, he sees that the focus this year is short sales. You still have a seller that still has the ability to make some decision on what to do with the property, and banks do appear to be more willing to push those short sales through. They are still taking way too long, but generally speaking we are seeing more transactional short sale business out there.

As far as the normal sellers with equity, Lance this market is small in his business but is increasing. Right now this market is about 15% of his business. Most of those equity sellers don’t have a lot of equity, and it has been exciting because they have seen some sellers enter the market recently that were buyers two years ago who bought it right. For the most part, in our market values have been flat for the last two years, and they are seeing equity sellers. This number should drift up ever so slowly granted 10 or 15% equity sellers is not anywhere close to normal. However, it is better than it has been in the past.

Tune in next week as Bruce continues his interview with Lance Martin of Coldwell Banker Pioneer Real Estate.

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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Credit expert Phil Tirone joins Bruce Norris on Real Estate Radio Show #277

Friday, May 11th, 2012

Philip Tirone


Philip Tirone


The Mortgage Equity Group, Inc. and www.7Stepsto720.com


(Full Bio)

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This week Bruce Norris is joined once again by Philip Tyrone. Philip has been an entrepreneur from the start, buying and selling gold and silver in elementary school. He later established a car audio resale business in high school. As a mortgage broker he created 720creditscore.com to help his clients increase their credit scores and improve their financial situation. Originally a book and a workbook, the product expanded to become an infomercial, a teleseminar, and an online wealth enhancement course.

Bruce had mentioned off-air that he pulled his credit score, and he said it was something that he has not seen in a long time. For Bruce, it has been a while since he has borrowed money; so when he was looking at it he was surprised to see one of the comments. Someone said, “One of the negative things that you have is you don’t have much credit.” He has 40 years of perfect payment history; but now that he does necessarily have need for credit, this is the negative and seems backward. Philip said one of the questions he gets all the time is how to improve their credit after they have read the first page. He said fundamentally it makes no sense because you can get someone with an 800 credit score who is still told they don’t have enough credit or their credit is too extended. What they are trying to do is say if there is something for us to tell you, here is what we would tell you. However, over and over these are wrong. Fundamentally, it does not give the proper picture.

For example, when someone has a lot of late payments or short sales, many times they get the response that says “Two New Late Payments.” The person would then be asking what to do with this since they know they had been late before in the past. On Bruce’s, it said he had a public record. He looked at it, and it was a supplemental tax bill, which is the kind of bill you receive after the fact. Nine years ago, he sold a house. The tax bill was mailed to that address, and he never received it. It turned into a lien, which he paid. Despite this all happening nine years ago, it is still on his credit report nine years later. This is actually a perfect example of errors. One of the key things that Philip points out in his program is the difference between high-priority errors and low-priority errors. According to a public interest research group, 80% of American’s have an error on their credit report. The reality with Bruce’s credit score is he has a low priority error on his because something nine years old should have very little impact on his credit score. To resolve a situation like this he would have to write a letter to one of the bureaus and show them that it is over seven years old, and they will drop it. It’s amazing how the computer cannot figure this out on its own.

This is why Philip points out high-priority and low-priority errors. Philip’s philosophy and what he teaches in the webinar that there are certain things you should never worry about. You are never going to have a perfect credit report, and it does not really make sense to spend 10-30 hours cleaning up errors. It won’t have any impact on your life or credit score. Philip said as long as he gets to the credit score the other person wants and they become bankable, that is all that matters. Whether or not the number is still 720 depends on the banks. Certain banks or other things such as car loans require 750 at the most, so there are a lot of different factors. It is not always like it was in the past where it has to be just a credit score. They look at what you have done with your credit, which is why if you have a short sale foreclosure or a bankruptcy. The first thing you want to do is re-establish your credit after the bankruptcy. Philip can take someone who had a bankruptcy, short sale, or foreclosure, and you can go from whatever the credit score is now to 720 in about 8 months depending on how quickly you open the program and where your credit is at this point. Philip has had 12,000 people go through the program, so he can really see what works and doesn’t work and update it. This is why he knows what works and doesn’t work. Just because you have had a bankruptcy, foreclosure, or short sale does not mean your credit is going to pay for 7-10 years.

Bruce was asked to be part of a Riverside foreclosure task force with the city. In their first meeting, one of the things he asked was how they force the lenders to accept, cram down, or reduce principle. Bruce said one of the favors that could be done for the citizenry is to tell them there is life after a foreclosure. Ultimately, the lender should have the right to say they are not getting paid, had signed up for being able to chase the asset, and this is what they will most likely ultimately do. If you could tell the people on the other end that there is a path back and they will own the home again. Some people have blown this up to say this is it, and if they lose this house it is over. Part of that misinformation comes from realtors. They do not know either. When Bruce speaks in front of a group of realtors about foreclosures and how long it takes before somebody can get a loan, he usually tells them 7 years is very common.

Philip said it feels so good to give hope to people, which is one of the reasons why Philip does what he does. When he is on his question and answer sessions with his students, is addressing specific questions, he sometimes hears someone ask him if he is sure about what he is saying. His program is not about getting a bankruptcy or foreclosure off of someone’s credit report. Instead, he is saying we are going to have good credit coexist with your past as it is, and you are still going to end up with the FICO score you need. We are seeing the recovery of credit scores happen faster than they did in the past. Philip does not know what the credit bureaus are doing or if they are doing anything. All he knows is he is seeing a quicker jump in a person’s credit score than he has ever seen before. It is so exciting, and so many of the people have a full credit score. The bureaus are looking at this and saying the average credit score has gone down so much. When you re-establish and do the right thing, you get a bigger kick.

One of the things Bruce said drives him crazy is he walked into BofA and happened to look at their mortgage rate for 30 years, and it was about 3 ¾, a number that he just never thought he would see. He happened to ask what their rate was for non-owner occupant loans. Looking at what Bruce had with him, they told him they could do four loans with him. He told them there were programs that let you do ten, and she said their bank had what was called an overlay, which they cannot do. An overlay is a bank preference that sometimes trumps what Fannie, Freddie, or FHA will do. Bruce thinks one of the most detrimental things in the housing market right now is unnecessary overlays. Bruce interviewed FHA on the radio show for the whole purpose of asking them how long after a bk or a foreclosure would they consider doing a loan. Their answer was six months. If you could have a FICO score improve and FHA is willing to loan to this person with the improved score, the problem is there may not be a lender out there who will do it. When you are going into owner financing or things like this, when you are dealing with an owner, then people will look at you and say, “Wow, this guy had a foreclosure, but he already had a 750 credit score!” This is significant.

The thing mentioned above is not really common, so we are not talking about someone, for example, who will sit down with Bruce and tell him they have a 720 FICO score but lost a house 8 months ago. He would think this was strange. However, Philip is able to accomplish this legitimately. When a person he is working with is sitting in front of a lender with a 720 FICO score and a foreclosure or bankruptcy 8 months prior, Bruce wondered which fact is looked at when these two worlds collide. Do they look at the FICO score and say in this instance this is going to trump the recent problem? Philip said from what he has heard with his clients, if you are going to traditional lenders, such as Bank of America or Fannie Mae lenders, the credit score does not trump the bankers. They will say, “Sorry, you cannot lend for 2-3 years.” It depends on what their lending rules are, which are always subject to change. You never know what these guidelines are. They may pass a law that says they are loosening the guidelines to stimulate the real estate market, but who knows.

However, when you are dealing with small credit unions and small regional banks, they make decisions based on their loan committee. Then, when you are dealing with owner financing, this is the easiest hurdle to jump. You can simply say you have had a bad experience, were hurt in the market, but you can show what you have done. What is interesting is there is a two-tiered system. One, if you have a 720 FICO score, all is well. On the other hand, sometimes if you have one it is actually not a good thing. It is really interesting how this can exist simultaneously, but now Bruce said nothing really surprises him. When he returned from Washington D.C., where he had the privilege of sitting in front of Fannie and Freddie, he was comforted to know that there would always be a need for private money because of the way the decision process works.

Most people start pretty innocently trying to figure out that they have a problem, are upside down, and are going to call their lender and see what to do. Then, somebody inside says they are not going to talk to them until they stop making their payments. This causes them to comply. When asked if this was a bad idea, Philip said the thing he has learned over the past 3-4 years is to not speak about the morality of your credit score. He has seen unbelievable people who have had bad credit for numerous reasons. What Philip teaches is how to recover from a poor credit score. He looks at the credit score as just a tool.

Philip said two years ago he had a loan with a regional bank, and he was in the mortgage business, which had gone down 90%, and he had never missed a payment. He was sent loan documents and told they needed to be resigned. He looked at the loan documents and saw a $495 processing fee. This was just his yearly renewal; there was nothing else about it. He had asked numerous times if they could give him a break since he was in the mortgage business, to which they replied that they could not do anything. He felt like he was being taken advantage of. He was one of the lenders who kept paying. He had numerous friends and people who owned mortgage companies who did their own thing and went their own way. He was so frustrated, and in the heat of the moment he said he was done and they were being unreasonable. He had asked for a break in payment and for a break in interest rates, and they kept saying no and sent him a $495 processing fee. He ended up being sued, and it was an ugly situation. They kept telling him he can’t miss his payments since he teaches on credit scoring, to which he replied that he teaches on how to raise a credit score and not on the morality of making a decision that does not fit. What ended up happening was they negotiated it out, and six months later he paid $.25 on the dollar. There was no logic since what he had told them six months prior was he would pay and did not want to walk away from the loan, but he wanted them to be reasonable with him and give him a break while he was getting on his feet. None of this happened, and he then ended up paying $.25 on the dollar and the recorder covered the fee.

Philip said this was where the shift really happened and when he began looking at credit score as a tool that you use. He does not say this because he does not think you should pay your bills. What he is trying to describe is there are certain situations that you are in where times change and you have to make a decision. When someone walks away from a home or the bank tells you to stop paying your mortgage, you have to make the decision that is right for the family in that moment. The decision he made was one he felt was right and worked out for his family, but sometimes the decision can turn into a foreclosure or other scenario. Bruce said there may sometimes be people behind the scenes giving advice who may not understand that there are ramifications outside of an attempt to put pressure on the lender.

One of the things that has been a good change is that you have lenders now seemingly willing to do short sales without you having to be late, which makes a lot more sense. They figured out a long time ago that if the lender is doing it, then it is in their best interest. They finally figured out doing a short sale was in their best interest. Bruce wondered if, credit-damage wise, there is an easier path back from a short sale than a foreclosure. Philip said the bottom line is how many times you were late before the short sale or foreclosure. For example, if you did a short sale and were late, but no one noticed the default was filed, then it is going to be easier to recover. If you had those defaults filed after a foreclosure, there are just more negative marks backed up against you. Either way, it does not matter. It does not matter if you have a 500 credit score, 4 short sales, 4 foreclosures, and a bankruptcy yesterday, you can recover.

The good news is Philip does not care how bad your situation is, it is really not that bad. As messed up as the credit system is, the good part is it looks at new credit much better and with much more weight. The weight on new credit is so much stronger than old credit. Even what is bad can be recovered; it is not as bad as it seems. The best thing to do is get two or three positives to show up on your credit as soon as possible. This means instantly, right after the event happens. It is important to reestablish credit from the beginning as if you have no credit. This is what Philip and his company does. They have a webinar absolutely free, and they give them numerous times during the week. If you go to 720creditscore.com, there is going to be a box that pops up with a free download. You sign up for the download, and it will invite you to the webinar. You can pick the time you want, and it is going to give you so much information. His webinars are really designed to educate you, and you can either do one of two things. You can take the information and deal with it yourself, which is fine. This means spreading the word, or you can enroll in a program, where they will handhold you the entire time.

Bruce said he remembers seeing on his website something called Operation Hope. This was a conference Philip was invited to go to and is a low-income financial literacy program. They had their event in Washington D.C, and now he is trying to spread the word about it because the sad thing is people who are tight financially are the ones who really get taken advantage of by the private credit scores. If someone who is making hundreds of thousands of dollars a year is overpaying $200-$300 a month, then it is no big deal. If you are making $25, $30, or $40,000 and over overpaying $200 a month, this scenario happens all the time. Philip’s average client is overpaying $302 a month on average. Therefore, this leads to $3600 a year in things that are very unnecessary, and it is because they are not playing the game according to the rules. What is interesting is that you don’t really have to like the rules; but you better know them because some of the rules don’t make sense, but this is immaterial. If someone does not have the right number of credit cards or the right balance on those credit cards, his FICO score is going to be affected. Whether you like it or not, you are being judged by a set of criteria, so you might as well figure out what the criteria is.

One of the things that surprised Bruce when he and Marsha had a discussion back in 2004/2005 was they had paid off everything they had, and his FICO score went down. He did not think this would happen. Logically, there is no logic. Some of the things that matter, Bruce does not see why they mater; while other things that he would think matter, such as assets or income, don’t matter at all. Logic makes no sense. You would think that someone who has $10 million in the bank would naturally have a higher credit score. However, this is not how it works at all. If nothing else as a lender, you think that at least there is a cushion to fall back on.

If you would like to check out Philip Tirone’s website, go to 720creditscore.com. Here you will find a free webinar you can sign up for. Sign up for the free report on the website, and it will take you to the registration page.

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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206-TNG Radio – Jon R. Daurio 12-25-10

Friday, December 24th, 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.

This week Bruce is joined once again by Jon Daurio.  Mr. Daurio is currently the chairman and chief executive officer of Kondaur Capital.  Previously, Mr. Daurio co-founded Parkplace Capital in 2001, sold that business to Ameriquest Mortgage Company in ’02.  After the sale the name of the business was changed to Sprint Funding Corp.  John remained with Sprint as president, general counsel through May of 06.  John founded Encore Capital Corp., a national wholesale residential mortgage banker.  Mr. Daurio received his juris doctorate and masters from USC and his bachelor of arts degree cum laude from Harvard, and somehow in his spare time managed to get a fifth degree black belt in Tae Kwon Do.

Note pools most frequently involve a competitive bid situation, but not always. When a large pool of loans, or any pool of loans for that matter, is being sold, the seller typically will sell those loans.  Most analogous to what I think people would understand to be a sealed bid, although it’s not literally in a sealed envelope or anything like that, so it is a competitive bid situation.  Many of our sellers that we’ve dealt with repeatedly though will sell or deal with us on a negotiated trade basis, meaning that they’ll deal directly with us, and I believe they do that because we have proven ourselves over the last 3 and a half years that we’ve been in business and buying these loans to be if not the most competitive bidder meaning we’re paying the highest prices for these loans, at least the most experienced and, I’ll use the term easiest, purchaser to deal with because the purchase of these loans is not an easy procedure, and there’s tons of laws and issues that have to be addressed when a loan is purchased and servicing is transferred.

Its hard to imagine the infrastructure you have to have to do diligence on for a pool of loans, especially if it’s all over the country. That’s one of the reasons Daurio’s company has almost 500 employees and growing.

The way the market works, which is the majority, on a competitive basis, a pool of loans is given with information about the loans, the address of the house, the credit history of the borrower, the terms of the existing loan, the payment history, especially since I focus on non-performing loans, when the last payment was made, where those payments were made and you get what’s called an indicative bid.  We at Kondaur as well as others give an indicative bid stating, “If all of the information that you’ve provided to us is true, this is what our price would be.  However, we need to conduct a due diligence review of the loans in order to A. verify that the data that you’ve given us is true, and B. determine what other types of compensating factors or issues that could change what we offer for loans.  I will note that Kondaur Capital Corporation is unique and has a reputation as being the nation’s only true loan level bidder, meaning when we receive a pool of loans; let’s say 1,000 loans, we give 1,000 individual loan prices and allow the seller to cherry pick us. Bruce was surprised to hear this.

Many of Daurio’s competitors are surprised when Daurio explains to them which loans he doesn’t like out of a pool of 1,000. For example, I might say, “Okay, well I like your prices on these 820 loans, but I don’t like it on this 180 loans.”  Many of our competitors in that situation will say, “Well wait a second, we’ve gotta re-price because we assumed we were going to purchase all the loans.”  And that’s in essence the difference.  It’s that we do a meticulous, an extensive review of each individual loan to the point that each individual price stands on its own.  So in answer to your question, ‘How long does that take?’  Typically that takes us between two and three weeks to complete.

This is not for the purpose of getting the indicative bid. The indicative bid is something that we do on a macro basis or a modeling basis that would give a price.  And then the final price takes us about two or three weeks.

The value of a loan I would say is what a ready, willing and able buyer would pay for that loan, and because I am a ready, willing and able buyer, my purchase price is an accurate depiction of what the value of that loan is.  And in turning the value of that loan, we spend a tremendous amount of efforts analyzing both what the expected sale price would be of the home securing the loan assuming that we’re going to take title to the house as part of the resolution effort which we do approximately 75% of the time.  The (indistinguishable) majority by paying for a deed in lieu of foreclosure as opposed to foreclosing on the loan, as well as an analysis of what is the current credit situation of the borrower, which we determine with very little information available to us because during that bidding process we’re not allowed to contact the borrower.  We have to rely on existing servicing and collection notes and the origination file that might or might not be available.

For every 100 loans purchases, Kondaur eventually owns the house as an REO about 75% of the time. For the other 25% of loan purchases, Kondaur is selling the loan on a one-by-one basis or refinancing it.  With the available FHA programs, Kondaur could successfully do a refinance of the loan about 4% of the time.  About 1% of the time the borrower’s actually able to come up with funds to give me a short payoff where Kondaur will forgive a fairly significant amount of the principle balance but they’ll be able to pay me.  Or Kondaur will modify the note either by principle forgiveness and/or payment reduction, but in that situation Kondaur won’t hold it; it’ll still sell the note or it’ll sell it as is.

Kondaur sells 100% of the REOs that it takes title on, even after we’ve taken property back.  As Jon said in the past segment, when Kondaur takes title to a house as REO it is very, very quick if there are people still in the house to go through any of the cash for keys process.  Or, if the occupant won’t cooperate, an eviction process, and then Kondaur rehabilitates the property to put it in turn-key condition, meaning that whoever buys the house doesn’t have to put any money into the house in order to live in it, and then sell it.  Typically, Kondaur has a REO off the books within about 3 months.

There are some opportunities for investors willing to come in and pay at a lesser price and close these things in a week.  This prevents Daurio from taking the 3 month journey. But again, we don’t take cash because we have a need for liquidity.  I’m very, very fortunate in this sense that my company is very well capitalized.  We have access to well over a billion dollars of capital.  But the reason why we do it is I am very pessimistic on a national basis and especially in the Inland Empire as to home prices in 2011 and 2012.  So if there is an expected, which I think in the Inland Empire could be as high as another 1% per month decrease in the value of the homes.  If I get cash today, it’s better than trying to get under contract in 3 months.  This is a side note:  we, with rare exception, will ever accept a purchase offer where the close of escrow is beyond 30 days.

FHA has about 555,000 people 90 days late or more, and they only have 50,000 current REOs.  Daurio is interested in getting pools of loans that are able to be purchased from the Department of Housing and Urban Development.  He is currently dealing with members of HUD.  He is trying to figure out how we might be able to buy and/or service their loans.

Another thing that makes Kondaur Capital somewhat unique in this market, especially relative to other people that are buying these loans, is I require only two representations and warranties on behalf of the seller: that they own the loan, and that they can sell it.  Meaning that if they breech either of those representations or warranties; they didn’t own the loan or they didn’t have the ability to sell it, I can mandate under contract that they have to buy it back.  Things like title, what leans are on the property, I take upon myself the responsibility for determining that, and the way we determine it is rarely by a full-blown title insurance policy, but there’s a product that many of the title companies make available called an ownership and encumbrance, or ONE report, and that’s what we rely on for trying to determine what leans exist against the property or what the situation is with who really owns the property and how title is held.

We never buy a loan that’s in the MERS system.   One of the things that we require before we close on the purchase of any loans is that the loans are out of MERS before we purchase them. From the day I started the company and built it we wanted it out of MERS.  I won’t say I anticipated these kinds of issues, but I always want to try to minimize the number of parties that are involved and the resolution of the loan.  One of the reasons why we do very few short sales is because typically in a short sale the borrower’s going to vacate the house by selling it, and we’d rather just pay them for a deed in lieu of foreclosure and then sell the house ourselves.

Daurio has noticed some attitude changes of the occupants in the 3 years that he has been doing this. This is because of the media making borrowers more aware that owners of loans, like myself, would be willing to pay them for a deed in lieu of foreclosure despite the fact that they haven’t made payments for months or even years.  We’ve seen some people that are more amiable to take that because they didn’t even know it was available.  Then we have some borrowers that because of the publicity of issues on litigation with respect to issues like modifications or MERS or the robo-signer issues or things like that they’re holding out.  I guess there’s actually a third thing, and the third thing is that people are just making economic decisions that unlike what we offer at Kondaur Capital Corporation to a borrower to vacate, the borrowers are making economic decisions saying, “Okay, you’re willing to give me X dollars, but I could stay in my house rent-free for X number of months,” and the two don’t equate.  So therefore it’s economically better for them to remain in their house rent-free than it is to accept what so many of my competitors offer which is simply a nominal amount of money.

There are many failed loan modifications within these pools. Potentially half of the loans I buy today are failed modifications. Bruce is very surprised by this. Bruce doesn’t understand why a lender would choose the pool method of selling as opposed to making it one at a time.  He would think they would net more by doing this. Daurio thinks it’s more ignorance or purposeful sticking your head in the sand to avoid the issue.  Let’s recall that there is a separation of the owner of the loan and the servicer of the loan.  Many servicers of these loans are the same servicers that were granted the right to service these loans when these were performing loans and therefore the amount of money that the servicers are being paid to service the loans is woefully inadequate for the servicer to properly staff both in terms of quantity and quality of people.  Quite frankly these servicers aren’t staffed to be able to service these loans on a one-by-one basis; and the owner of the loans, even if they get smart enough to realize that this is an issue, is unwilling to pay the servicers to adequately staff.  This is not that bad of a decision because so many of the relationships are adversarial in the sense that a servicer typically makes money on servicing fees and therefore liquidating the loan is not in their best interest.  But it may be for the owner of the loan.  That’s why at Kondaur, we’re an owner servicer.  We do third-party service for some, but those are the entities that understand and we actually make our self obligated to take the route that is the best for the owner of the loan and not necessarily for us.  Daurio tries to align those interests in the contracts he has with them.

This round of foreclosures and not receiving payments is probably creating a lot more overhead for the servicers than they were anticipating. At Kondaur Capital Corporation, when we service with third party service, in our servicing agreements we really retain a tremendous amount of flexibility and authority to do what we think is best.  In fact, I have not taken on third party servicing assignments where the owner of the loan wants to inject their opinion.  In other words, they want to put a limit on how much I could offer for a cash for keys or for a deed in lieu of foreclosure based on things like a percentage of what the loan is worth or a percentage of what the house is worth or a percentage of the unpaid principle balance, all things which I think are irrelevant in determining how much should be offered to a borrower for cash for keys.  What should be offered to a borrower for cash for keys should be the subject of two analyses.  One, if the borrower were to make an economic decision and continue to live rent-free, what is that value relative to what is being offered?  And then secondly, what is the benefit to getting the house quickly, especially when you are like I am where you think housing prices are still going to depreciate fairly significantly in the upcoming months and years.

Bruce just did some research on not just the pricing of California in terms of what homes are selling for, but the cost per month. Cal Poly Pomona does a report and has for several decades, and twice a year they reappraise the same address in many different cities in California.  I went back to 1990 level pricing and compared it to 2010, and I’ll just pick Lancaster/Palmdale.  The actual price is -11% for that 20 year period, dollar for dollar, not inflation adjusted.  Interest rates were 10.2% in 1990, and interest rates now are say 4 and a half.  So you have a 55% discount on the cost of a loan and you have income that’s increased.   So it’s interesting that the market is so unwilling to buy a product that’s virtually on sale at an all-time level monthly.

Daurio agrees, but there are other situations in which, for an owner of a loan such as himself, getting ownership of that house can be faster and better.  It’s not just because he expects housing prices to continue to deteriorate, but also because rent-free borrowers in the house are not expending money on maintenance, and so there is an increased amount of what we call deferred maintenance, which is a great cost.  Thirdly, when we take title to a house by paying a borrower for a deed in lieu of foreclosure, the borrowers are not vindictive as we have heard borrowers have been in other foreclosures where they rip out the piping or cabinetry or plumbing or things like that.  Most of Kondaur’s borrowers, nobody happy about the fact that they’ve lost their home, but they feel like they’re definitely treated better and better off than with their previous servicer.

Bruce feels that is a good point, because somebody can do an awful lot of damage in a bad mood in one day, no doubt about that. Daurio considers this sort of property damage to be criminal. Bruce has found it very hard for anyone to acknowledge that this might be true.  We buy at the trustees sales, and we have sometimes people very blatantly doing things that were detrimental to the property.   You can call the police; you can even go to the extent of a lawsuit and it would be very tough to justify the activity just because it doesn’t seem like you have too many people on your side.

Daurio believes there will be some different occurrences in 2011 from 2010. He see more loans going to default. Also, he see more loss severities, because he believes housing prices will depreciate more in 2011 than 2010.

Kondaur Capital Corporation will begin purchasing commercial loans. Daurio started a subsidiary company called Kondaur Commercial; and it is going to both third-party service and purchase initially small balance commercial loans. By small balance he means 5 million or less.

Kondaur Capital has purchased quite a number of land loans.  It’s just not as large a market as one to four family or small balance commercial. Bruce thinks this would probably entail holding it at this point.  Daurio disagrees saying, “No actually, again, it’s all of a function of so many things in real estate:  you make money on the buy.  We buy land loans when we think we have an exit strategy that is profitable.”

For m ore 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 12/07/10

Tuesday, December 7th, 2010

Today’s News Synopsis:

UCLA economists expect unemployment to remain above 10% until the end of 2012. TransUnion predicts the national mortgage delinquency rate could fall below 5% in 2011. A survey from RealtyTrac shows 60% of Americans believe housing will not recover for another 2 years. According to HOPE NOW, 1.54 million permanent mortgage modifications were completed in the first 3 quarters of this year.

In The News:

The Press Enterprise – “Economic recovery to stay muted” (12-7-10)

“Unemployment in California should start to decline next year but is likely to remain above 10 percent until the end of 2012, an economic forecast released today found. The quarterly forecast from UCLA’s Anderson School of Management suggests that the state will see something in 2011 that has been lacking for more than two years: job growth.”

Wall Street Journal – “U.S. Mortgage Delinquency Rate Could Fall to 5% in ’11″ (12-7-10)

“The percentage of U.S. consumers who are delinquent on their mortgages could fall to about 5% by the end of 2011, from an expected 6.2% at the end of this year, according to a leading credit bureau. Even so, the proportion of consumers who are 60 or more days overdue on their mortgages would still be sharply higher than the historical range of 1.5% to 2%, according to TransUnion LLC, which analyzed about 27 million randomly selected consumer records from its database.”

Housing Wire – “JPMorgan sees GSE prepayment rates slowing in January” (12-7-10)

“The prepayment speeds on Fannie 15-year mortgages increased 5% last month from October, while Freddie prepayments climbed 8%, according to JPMorgan.”

Housing Wire – “Private mortgage modifications reach 1.5 million to date, 125,000 in October” (12-7-10)

“Hope Now, a private sector mortgage alliance, said the mortgage industry has completed more than 1.54 million permanent loan modifications for homeowners from January through October, as foreclosure suspensions affected foreclosure sales and starts.”

Housing Wire – “American homebuyers suffer from a crisis of faith: survey” (12-7-10)

“A housing conference call organized by real estate listing websites, Trulia and RealtyTrac, revealed 48% of potential homebuyers in America have lost faith in the ability of the mortgage industry and 24% percent lost faith in the ability of the government to manage said market.”

Bloomberg – “Half of Americans Say Home Recovery at Least Two Years Away” (12-7-10)

“Almost six in 10 U.S. adults say a housing recovery is at least two years away, and more than a third say flawed lender practices are partially to blame, according to a survey by Trulia Inc. and RealtyTrac Inc.”

Orange County Register – “Chapman says prospects dim for housing” (12-7-10)

“Although Chapman University foresees modest price gains and increased homebuilding in Orange County next year, lingering problems from the housing bust will continue to dog the market. The number of homes for sale will be large, defaults and foreclosures will grow and consumer anxiety will be high, according to Chapman University’s 2011 economic forecast.”

Looking Back:

One year ago, the MBA reported that delinquency rates increased during the third quarter for most mortgage investor groups. Bernanke claimed the recovery would continue for at least a year, but that the U.S. still had  some trouble to overcome. Six banks were shut down Friday, which would cost the FDIC a total of $2.384billion.

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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192-TNG Radio – Ivan Choi 9-18-10

Friday, September 17th, 2010

Ivan Choi

President of REOMac


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September 17th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate Investors Association and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, Claudia Buys Houses, The Business Press, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by Ivan Choi. He is a fifteen year veteran in mortgage banking with a background in finance, technology, retail loan origination, and servicing. He just started his own company called Savia Home Loans. Also, he is president of REOMac; a national non-profit trade organization.

Ivan currently lives in Corona, and previously lived in Irvine. For the last 15 years he has been working in retail mortgage banking. For 14 of those years, he worked with Countrywide Home Loan, which was acquired by Bank of America. He worked with Bank of America for another year, and then decided to start his own mortgage banking company. He has a second job with a national REO outsourcing company.

Mortgage banking is different than mortgage brokering. A mortgage broker originates loans, and puts them through to a major bank for funding. The broker attempts to find the best possible fit, and best possible pricing, for the homebuyer. The mortgage banker is fulfilling loans directly out of their own funding capacity. The money that a mortgage banker uses is essentially his or her own.

Presently, it is very difficult to start a mortgage banking company, because of the meltdown. Another prominent mortgage executive, who worked with one of the big banks until 2008, decided to start his own mortgage banking company. The biggest warehouse line he was able to get was worth about $700,000. That is not worth a week’s worth of loans.

Once your loan money is entirely lent out, you can try to keep that loan in your books, or you can try to sell it to an investor. That investor will provide you with liquidity to buy and sell another loan. You can either sell the underlying note and service the loan yourself, or you can sell both the note and the servicing rights. This is not understood by all people, but servicing rights to the loan has a certain monetary value as well.

In 2006, mortgage bankers were amazed by how generous loan guidelines were. On the flip side, when the mortgage market melted down, Ivan could not believe how difficult it was to obtain credit. We swung the pendulum from allowing too many people to obtain credit, to now allowing too few to obtain it. What is traditionally observed as a “makes sense” loan is now very difficult to obtain.

The present model of mortgage banking is that an originator makes a lot of loans for home buyers, they then package those loans into securities and sell them on the secondary market. Unfortunately, the demand for those securities in the secondary market has dried up, so we no longer have the liquidity that mortgage originators relied on to make loans in the first place. That is why many of those “makes sense” loans can no longer be made today. Currently, Fannie, Freddie, and FHA make up over 70% of the business for mortgage originators and lenders.

New Vista Asset Management Company is a San Diego-based company established 4 years ago by two veterans of the mortgage banking business. The two partners, Jim Park and Jerry Acosta, have a lot of connections both in the mortgage industry and the political world. New Vista serves as an REO asset management company. Any bank that cannot handle REO inventory can hire a company like New Vista to offload those REOs. New Vista is special because it is a multicultural company. Normally, Ivan does not pay attention to the cultural differences between companies, however, this is currently a significant difference because the government is more willing to work with culturally diverse businesses.

Inventory levels have changed pretty dramatically over the last couple years. Foreclosure inventory has been building up for the past couple years. This is because the foreclosure process has slowed down. Ivan believes it will take another 6 to 12 months before we can feel that we are in a foreclosure market. This will be a big relief for real estate agents, because many of them were hurt in 2007 and 2008.

Ivan defines “shadow inventory” as the backlog of foreclosures that have not yet finished the foreclosure process. When people use the term shadow inventory, they often use it to imply there was some evil conspiracy by big banks and the government to artificially hold in properties from the market to do 1 of 2 things: 1) to hold properties back and parcel them out, on a limited basis, to preserve valuations and earn a better return than what they would have received. 2) Mortgage bankers are holding inventory from the market to play magic accounting on the backside, which enables them to put out good quarterly earnings reports, so that their stocks won’t drop. As a former worker for Countrywide and Bank of America, Ivan believes these theories to be untrue.

Fannie and Freddie have double the REOs from last year, but the REO agents do not. Fannie expects approximately 1 million properties to finish the foreclosure process between the 4th quarter of 2010 and the 1st quarter of 2011. Asset management companies and banks can only process so many of those properties. Ivan believes that California cities are probably not capable of getting rid of that many properties with their current level of staff.

In 2008, Mike Novak-Smith had 900 REO listings. Today, he has 105, yet Fannie has double their amount of REOs. There does seem to be a disconnect between their ability to get properties onto the market. Perhaps the players have shifted, and the GSEs are understaffed.

On another topic, delinquencies are very high. In California, delinquency numbers have gone from 5% to 12% in the last 18 months, yet foreclosure numbers have gone down. Bruce believes that lenders do not actually own all these properties. Bruce believes that banks are refusing to foreclose on properties.

The government is involved in the foreclosure process now. There is a huge motivation for the federal government to modify loans or do short sales. The major servicers are now paranoid about going through the normal foreclosure process now, because if they do not fully document everything without offering ever possible solution to the borrower, the government will attack them. If the government believes the lender could have offered a loan modification but chose not to, then the lender gets dragged through the mud. There is a lot of pressure on the lenders to find other solutions.

REOMAC is having an educational event in October in Hollywood, Florida. The title of the event is “New Challenges, New Approaches”. The industry is preparing for a very different new year. Banks and servicers must satisfy their homeowners and their loan investors. At the same time, the government is beating up the banks. The end result is that we have a lot of government initiative and legal changes. The servicer must still find a way to make everyone happy, including the loan investor who has ultimate responsibility for the underlying note. Ivan believes many of the changes in 2011 will be legal related. Ivan does not believe there will be much of a change in public perception, because now everyone has had their shot at beating up people involved in the real estate industry.

The REO business is a very low margin business, and you must have a big team to run a lot of volume. REO inventory has decreased so dramatically that many professional REO broker shops have had to lay off people in the midst of the impending surge in inventory. All the good REO brokers are trying to figure out ways to scale up rapidly, because they don’t want to get caught with their pants down. It’s a Catch 22, because you can’t staff up too far in advance, but you still want to be ready when the opportunity hits.

HAFA guidelines were released on April 1st. Those guidelines were a game changer, because it caused the government to be heavily involved in mortgage servicing and foreclosure processing. Ivan does not believe that short sales will pick up to the high degree that we need them to pick up. Short sale numbers are increasing right now, but when you compare the overall number of short sales to the number of foreclosures, you can see that short sale numbers are still very small. REO is where all the business is going to go.

The event for REOMAC is taking place on October 20th thru the 23rd in Hollywood, Florida. It is the 25th anniversary of a very worthwhile organization.

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

Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Adrenaline Athletics, Benton Investment Group, Community RE-Invest Group, Delmae Properties, Elite Auctions, Entrust California, Everlast Photography, Inland Empire Investors Forum, Keystone CPA, Landwood Title, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Rick and LeeAnne Rossiter, San Jose Real Estate Investor Association, Starz Photography, Summit Solutions, Tony Alvarez, Wealth Point, and Westin South Coast Plaza.

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The Norris Group Real Estate News Roundup 9/13/10

Monday, September 13th, 2010

Today’s News Synopsis:

Many predictions are being made regarding the economy and the housing market. Most of the articles have an overall positive outlook on the economy, while most had a negative outlook for the housing market. New delinquencies decreased 8.5% in August. The FDIC said 119 banks failed so far this year.

In The News:

CNBC - “No Double Dip, Stimulus Did Help: IMF Chief” (9-13-10)

“There is unlikely to be a double-dip recession, while the fact that stimulus spending was helpful in containing the crisis is undisputable, Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), told CNBC Monday.”

Housing Wire – “Economist calls latest Basel 3 timeline ‘nonsense’” (9-13-10)

“The Basel Committee on Banking Supervision adopted new standards for the capital requirements of the world’s largest financial firms, mandating the banks hold capital equal to 7% of assets. As HousingWire reported in the Monday Morning Cup of Coffee, the committee increased the minimum common-equity requirement to 4.5% from 2% and stipulated banks hold a capital conservation buffer of 2.5% to withstand potential stress, raising the total common-equity requirement to 7%.”

Housing Wire – “Radian’s new delinquencies drop 8.5% in August” (9-13-10)

“Mortgage servicers reported 9,084 in new delinquent loans insured by Radian Group (RDN: 7.865 +3.49%), a mortgage insurer based in Philadelphia. It’s an 8.5% drop from the 9,930 of newly delinquent loans for Radian in July. Radian’s primary inventory of delinquent mortgages did fall to 137,374 in August, too, down from 138,015 delinquent mortgages in July.”

Housing Wire – “REITs outperform Barclays expectations, long term outlook positive” (9-13-10)

“Real estate investment trusts (REITs) outperformed analyst expectations in the first quarter of 2010, according to a weekly report released today by Barclays Capital. Week-over-week, the National Association of Realtors’ (NAR) composite REIT return index dropped 0.9% to 3,153.3. Despite the decrease, the index is 0.9% higher than one month ago and 33.7% higher than one year ago. The composite return index year-to-date is up 17.2% from 2,690.1 for the same period last year.”

Housing Wire – “JPMorgan analysts bearish on housing recovery” (9-13-10)

“JPMorgan Chase (JPM: 41.20 +3.62%) analysts lowered estimates for a recovery in the housing market between next year and 2014 because the expiration of the homebuyer tax credit slowed demand and overall economic malaise pushed some indicators lower in July.”

Housing Wire – “BofA’s Moynihan see 25% chance of double dip recession” (9-13-10)

“The discussion now is whether we might have a so-called double dip recession – although our experts think the chance of that is low… we’re now putting the chances of a double-dip at around 25%.”

Housing Wire – “Monday Morning Cup of Coffee” (9-13-10)

“At June 30, Horizon Bank had total assets of $187.8 million total deposits of $164.6 million. The FDIC said 119 bank have failed this year, including 23 in Florida. The FDIC recently said the number of banks on its “problem list” is at the highest level since 1993.”

Bloomberg - “U.S. Accelerates in 2011 as Demise of Consumer Is Exaggerated” (9-13-10)

“Debt payments as a share of disposable income fell to 12.46 percent in the first quarter from a peak of 13.96 percent in 2008 and are about in line with the 12.09 percent average of the last 30 years, based on Federal Reserve data. Berner sees the ratio falling to what he considers a sustainable range of 11 percent to 12 percent by year-end. This improvement will help the U.S. economy avoid a relapse into recession and put it on course for 3 percent growth next year, he said. The economy grew 1.6 percent in the second quarter.”

Bloomberg - “Fannie, Freddie Regulator Blames Mortgage-Loan Pools for Poor Performance” (9-13-10)

“Mortgage pools purchased as investments by Fannie Mae and Freddie Mac during the housing boom included more risky and poor-performing loans than those guaranteed by the government-backed firms, their regulator said. So-called private-label securities bought by the two firms from 2001 through 2008 had a bigger share of mortgages with adjustable interest rates and more borrowers with credit scores below 660, two indicators of loans at higher risk of default, the Federal Housing Finance Agency said in a report 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 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 7/12/10

Monday, July 12th, 2010

Today’s News Synopsis:

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

In The News

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Monday, November 2nd, 2009

Today’s News Synopsis:

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

In The News:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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