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248-TNG Radio – I Survived Real Estate 2011 10-22-11

Friday, October 21st, 2011

I Survived Real Estate 2011

I Survived Real Estate 2011


(Full Bio)

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On October 14, 2011, The Norris Group returned with its award-winning event I Survived Real Estate. An expert line-up of industry specialists joined Bruce Norris to discuss current industry regulation, head-scratching legislation, and the opportunities emerging for savvy real estate professionals. 100% of the proceeds support the Orange County Affiliate of Susan G. Komen for the Cure. This event would not have been possible without the generous help of the following platinum sponsors: ForeclosureRadar and Sean O’Toole, Housing Wire, the San Diego Creative Real Estate Investors Association and President Bill Tan, Investors Workshops with President Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobbie Alexander, San Jose Real Estate Investors Association and Geraldine Berry, Real Wealth Networks, Frye Wyles, MVT Productions, and White House Catering. The event video can be found on isurvived2011.com.

I Survived Real Estate started just four years ago. For those who had been there for a long time, it has gone by fast. It started with a simple formula, a conversation, and a cause. The last four years in real estate have been particularly difficult. Many who attended the live event would be considered survivors. Long gone are the days of condo hotel investing in Las Vegas, a realtor in every household, stated income loans, and 10% price increases every month. True professionals working in the environment today stay on top of trends, challenges, and all different facets that makes up the market. The event featured six special guests from all over the nation. Some have or soon will be representing their national organizations in Congress trying to influence change. The conversations on stage covered what we should expect in 2012 and how our businesses might change. 100% of the proceeds went to Susan G. Komen for the Cure, and this year alone they raised close to $80,000. The walkers alone raised $15,000. On September 30 several people walked in a breast cancer walk, and some joined the walk to earn a seat at I Survived Real Estate 2011. Over 50 people participated in the walk.

Rebecca Hultquist thanked the Norris family and everyone at the event for their support over the past three years. Over all the years they have raised over $250,000 for women in need in the Orange County area and other surrounding areas. Rebecca recently had a friend who was diagnosed, and because she was under the age of 40 was able to have a mammogram through the funds that Komen offered her. In turn, these funds came from the supporters of I Survived Real Estate, and with their donations they became advocates, volunteering and becoming a part of the movement. Rebecca herself is breast cancer survivor, which she first had when she was 33. She was a wife and a mom with three daughters, and if it wasn’t for a life-saving mammogram that she had that year, she would not be here today. It was stage 2 invasive breast cancer, through which she endured chemotherapy radiation and surgery. Through this, she became involved with Susan G. Komen for the cure. 75% of the funds raised stay in the area to help women in need through treatment and clinical mammograms. Women can get the treatment they need. Early detection was what saved Rebecca’s life and what will save the lives of the future women. Through the science being funded, we look forward to a day when our daughters, children, and granddaughters live in a world without breast cancer.

Aaron talked about his mother, Marsha Norris, who passed away last January after a 17 year brave fight against cancer. The first three years of I Survived Real Estate were launched with a radio show between Marsha and Bruce, and each of the past events really showed her spirit, her stubbornness, her unwillingness to give up, and her faith.

Bruce took a moment to talk about his wife Marsha. She started every day by doing two things. She said prayers for everyone in her family every day, and she took time to think of all the things that were blessings in her life. The one thing you could not mistake about her was that she was thankful for the smallest things. If you took her out for coffee, you never failed to hear her say thank you. Marsha was an amazing blend of stubborn determination and kindness. She had an iron will when it came to some things, and one of those things was dealing with breast cancer. She decided early on that breast cancer was not going to rule her life and that she was going to put it in a little corner and tell it to stay there. There were times she was afraid and was hurting, but that was dominated by her wanting to go on cruises and live a life. If you know somebody who has cancer, it’s a choice on how to handle it. Marsha handled it with such grace and dignity that it was amazing. The people in the audience put a smile on her face constantly during her 17-year journey with cancer. She received cards, calls, flowers, and she felt everyone’s love when she came to meetings.

This year’s I Survived Real Estate was the most important meeting they had, as there is a lot at stake for not only investors but collectively as well. Sometimes as investors we think of ourselves as the lone Mohican, but all of a sudden there is legislation that really deals with the entire industry, how it affects how people buy property, and how much down payment they have to have. We have a common enemy with everyone in the industry. On the other side of things, there is a lot going on in the world that Bruce never thought he would have to think about as a real estate investor. All of a sudden, Bruce found himself staying up late at night watching Europe to see if Greek is going to default. The goal at the event was to bat it around with people at the top of the industry. We had to have a lot of respect for the journey it took to have the positions the speakers had. It’s a lifetime commitment to get to where they are in the industry. They have dedicated themselves and therefore we have a lot more in common than not.

During the presentation, Bruce showed a property that The Norris Group had bought that sold at the peak of the market for $436,000 in Moreno Valley earlier. About two and a half years later, The Norris Group bought it for $64,000. They put $35,000 into it, and they rented it out for $1,400 a month. The property was much nicer when they fixed it up, and Bruce said this was exactly how they fixed their rentals. One of the things Bruce wanted people to realize is sometimes there is just an assumption that when you have rentals, then you are a slumlord. Not true. The reason The Norris Group does what they do with rentals is because they do not have any competition because no one is going to put granite into rentals unless they think like The Norris Group. The way they think is they are going to get the best tenant, the most applicants, the least amount of people to move out, and fix everything nice right now since labor is on sale right now.

Sometimes cities are worried about there being too big a percentage of rentals, but there were most likely a lot of people at the event who fix the houses the same way. One of the problems is someone bought the house across the street for $436,000, and they still owe this same amount. This house may be worth $150,000 or $170,000, but where the problem lies is we have a very large percentage of people who are upside down. In California, we have about 30% of the people who are upside down with another 4-5% who are very close. This is a big problem, and some of the cities are a lot worse. In one particular city, Hesperia, people owed twice as much as the house was worth on 9,000+ households; while 5,793 owe 120%-200%. If you add the entire negative up, you have 76.9% of the people in Hesperia who are not going anywhere; they cannot move up or out. This is a problem when 76% of your city is stationary and cannot go anywhere. This is an extreme example, but the whole state has problems.

One of the things that is occurring is we are having a decent volume in sales in California. This is a historic look at volume in the brown line. In 2010 there were about 500,000 sales, and in 2011 there were similar sales. The difference is the mix of sales. You look at the mix of sales released by the California Association of Realtors for August of 2011, and you see that you have about 43-44% of all sales either being short sales or REOs. If you think about a short sale or REO, the person that leaves that closing has damaged credit. They are not buying another house, so you have just lost 43% of your former owners to non-ownership status, which has never happened in the past. This is the average for the state of California. If you go to areas such as Riverside, it’s 65% combination of short sales and REOs. For every 1,000 sales, 650 buyers no longer emerge as an owner-occupant. They have to be sold to an investor, or you have to have new people migrate into the area.

In Riverside, we have about 15% unemployment, so the likelihood of them showing up is not as good as it once was. This is the dilemma because we have some dominoes to solve, so one of the things we have to ask is how we fix unemployment. In our area, you don’t fix unemployment without fixing construction; and you can’t fix construction until you have a price per square foot that makes a builder a profit. Unfortunately, we are a tad away from this. We have to figure out how to move a lot of properties to another group of people. CAR also released data showing a portion of sellers planning to repurchase, and it showed about 37% of people when they close escrow are saying they will buy another property right away. You have the damage group, but you also have the people who are mentally beat up. This could include people who just closed escrow who used to have a $400,000 house that closed for $190,000. These are the people who do not want to participate in another one right away. You have this lag effect that goes on when you are not too excited about real estate. Consequently, what is going on is the cash sales have exploded. You have people buying properties, but the problem is when we buy properties for cash we eventually run out of the cash. Therefore, we have to shove the same property in a better condition on the market. Instead of it being able to back up the truck with the REOs and unloading a lot of them, you are constantly competing with very nice inventory that is coming back around. If we can get financing, we would not have to do this.

33% of loans in foreclosure have not made a payment in over two years. 41% of the people have not made their payments in a year or more. People stay in foreclosure for a long time. There was a news article in the Riverside Press where a family being interviewed said they were actually pretty delighted about how their lifestyle had changed since they stopped making their house payments. They believed life was so much better: they had extra money for the business, went on a vacation, and bought a barbeque. The problem is eventually this inventory might show up, and this is the ball of inventory that is turning behind the scenes; 90 days late all the way through properties already foreclosed is 4 million properties. This is about 8% of the entire inventory in the country. If you think this is over with, it’s not. The question is why we are letting this happen and why this is the best strategy that is going on right now.

One of the things that is happening right now, and this is important for everyone in the industry, is there is trying to be a retooling of our minds toward ownership of homes. On the recent cover of Time Magazine, the title was “Rethinking Home Ownership: Why Owning a Home May No Longer Make Economic Sense.” They could have said anything else but that. You have half-priced real estate and interest rates at 4%. This is economically a bad idea. People need to call up their landlords and see if they can get a 30-year fixed rental rate. This is not going to happen. It’s not economically infeasible; it’s actually the smartest thing you could possibly do. However, what is interesting is we have decided that, media-wise, we are going to say that we have had it wrong the whole time about owning a home since it has damaged so many people recently.

Bruce was married when he was 17, and he did not catch on to work very well at the time. He was fired 5 times very quickly because he did not know how to disagree with an owner. The first time he came home with cash, Marsha was really happy, but after that she knew it was severance pay. When they were 21, they had a chance to buy a home in Mira Loma, and he had rectified his problems with working. They bought a house, and they did not know what they were doing at the time. The toilets flushed the wrong way, the windows did not work. The Sunday morning they fixed Sunday dinner, they had a swamp cooler that coughed dirt all over their dinner when they started it up, so they had to eat out. However, the next day Bruce got to mow his own grass for the first time. This was the first day he felt like a man.

To find out more, tune in next week for I Survived Real Estate 2011, part 2. The Norris Group would like to thank their gold sponsors for the event: Adrenaline Athletics, Coldwell Banker Pioneer Real Estate, Conaway and Conaway, Delmae Properties, Elite Auctions, Inland Empire Investors Forum, Inland Valley Association of Realtors, Keller Williams of Corona, Keystone CPA, Kucan & Clark Partners, LLC, Las Brisas Escrow, Leivas Associates, Mike Cantu, Northern California Real Estate Investors Association, Northern San Diego Real Estate Investors Association, Pacific Sunrise Mortgage, Personal Real Estate Magazine, Raven Paul and Company, Realty 411 Magazine, Rick and LeaAnne Rossiter, Southwest Riverside County Board of Realtors, Starz Photography, uDirect IRA, Wilson Investment Properties, Tony Alvarez, Tri-Emerald Financial Group, and Westin South Coast Plaza. Visit isurvived2011.com for more details.

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

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The Norris Group Real Estate News Roundup 3/18/11

Friday, March 18th, 2011

Sources:
Bay Area Housing Market Stuck In Neutral; Investors, Cash Buyers Active
California February Home Sales
Southland February Home Sales At 3-year Low; Investor Interest High
Foreclosure activity slows in February: ForeclosureRadar
California Foreclosure Losses in Billions, Lawmaker Wants Banks to Pay
Congressional Panel Report Says Foreclosure Mitigation “Largely Failed”
Internet whistle-blower e-mails show loose link to Bank of America
GSEs inflated subprime balloon before it popped: Cato Institute
A Red Flag on Reverse Mortgages
Young Home Buyers Will Lead Housing Market Recovery, Says NAHB

Today’s News Synopsis:

The SEC may charge top executives of Fannie and Freddie with violations related to the financial crisis. RCA claims commercial real estate defaults dropped to 4.28% in the 4th quarter. The Bureau of Labor Statistics reports Southern California rents rose by 1.3% in February. According to Freddie Mac, 30 year mortgage rates fell to 4.76% this week.

In The News:

Washington Post – “SEC moves to charge Fannie, Freddie execs” (3-18-11)

“The Securities and Exchange Commission is moving toward charging former and current Fannie Mae and Freddie Mac executives with violations related to the financial crisis, setting up a clash with the housing regulator that oversees the companies, according to sources familiar with the matter.”

Housing Wire – “Bill would provide HUD grants for foreclosure mediation” (3-18-11)

“Under the bill, HUD would create a competitive grants program for state and local governments to provide mediation programs to assist homeowners facing foreclosure. It would refer homeowners to a pro-bono attorney or a HUD-certified counselor. It would also require mediation between the homeowner and the lender as soon as practicable after a foreclosure proceeding is filed. If the homeowner doesn’t show up for the mediation, the requirement for a mediation conference is deemed to be fulfilled, according to the bill.”

Housing Wire – “CRE defaults fell for first time in four years in 4Q: RCA” (3-18-11)

“Commercial real estate defaults fell to 4.28% in the fourth quarter, down from 4.36%, according to RCA. The New York-based analytics firm also reported that defaulted loan balances fell to $45.8 billion after 17 consecutive quarterly increases.”

San Francisco Chronicle – “Field Poll: Quality of life plunges in California” (3-18-11)

“The Golden State’s residents rated their quality of life at its lowest mark in almost 20 years, citing the economic downturn and stagnant personal finances, according to a joint UC Berkeley and Field Poll.”

Housing Wire – “House Republicans introduce bill to reform Fannie, Freddie” (3-18-11)

“Rep. Jeb Hensarling (R-Texas) re-introduced legislation late Thursday that would end the bailouts of Fannie Mae and Freddie Mac and end their conservatorship in two years.”

Housing Wire – “Republican senators join fight to end HAMP” (3-18-11)

“Three Republicans submitted a bill in the U.S. Senate that would end the Home Affordable Modification Program, a companion to a bill that is scheduled for a vote in the GOP-controlled House of Representatives next week.”

Orange County Register – “SoCal rents rise for 6th straight month” (3-18-11)

“Rents in Southern California — at least, as measured by the local version of the Consumer Price Index — were rising in February at a 1.3% annual rate, according to the Bureau of Labor Statistics. That rise compares to an increase at a 1.1% annual rate in the previous month. It was the sixth consecutive month of year-over-year increases and the biggest jump since July 2009 when rents were rising at a 1.7% annual rate.”

Realty Times – “30-Year Fixed-Rate Mortgage Drops Amid Japan Crisis” (3-18-11)

“Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey (PMMS), which shows the 30-year fixed-rate dropping to 4.76 percent while the 15-year fixed-rate hit its lowest rate at 3.97 percent since December 2010.”

Looking Back:

One year ago, statistics from MDA Dataquick showed that 4,987 homes and condos closed escrow within a month. Fannie Mae predicted the housing market would bounce back by the end of the year. Freddie Mac’s weekly survey showed that interest rates were at 4.96 percent, which was just .02 percent lower from the previous year. The MBA reported that commercial/multifamily mortgage debt decreased by 1.7 percent in the 4th quarter of 2009.

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 10/7/10

Thursday, October 7th, 2010

Today’s News Synopsis:

Governor Schwarzenegger signed a bill protecting homeowners, with lender approval, from deficiency judgments. 30-year mortgage rates dropped to 4.27%, said Freddie Mac. President Obama refused to sign the Interstate Recognition of Notarizations Act, which would have allowed federal and state courts to recognize notary signatures from other states. Realtytrac users will soon be able to view sales prices, sale dates, and other sorts of information on foreclosure sales.

In The News:

Inman - “Calif. short-sellers avoid deficiency judgments” (10-7-10)

“California Gov. Arnold Schwarzenegger has signed into law a bill that protects homeowners who get their lender’s approval for a short sale from deficiency judgments, but vetoed related legislation that would have extended similar protections to homeowners who have refinanced their mortgage.”

Associated Press – “Mortgage rates fall to decades-low of 4.27 pct.” (10-7-10)

“The average rate for 30-year fixed loans dropped to 4.27 percent, mortgage buyer Freddie Mac said Thursday. That’s the lowest on records dating back to 1971, and down from 4.32 percent the previous week.”

Housing Wire – “Government Oversight Chairman seeks nationwide foreclosure moratorium” (10-7-10)

“Rep. Edolphus Towns (D-NY), chairman of the House Committee on Oversight and Government Reform, called for top banks to suspend foreclosures and for New York Attorney General Andrew Cuomo to investigate foreclosure practices.”

Housing Wire - “President Obama won’t sign notary bill, sends back to Congress” (10-7-10)

“President Obama will not sign H.R. 3808, the Interstate Recognition of Notarizations Act, which would have allowed federal and state courts to recognize notary signatures from other states.”

Housing Wire – “RealtyTrac to provide pricing on previously sold foreclosures” (10-7-10)

“RealtyTrac, an online foreclosure marketplace, added a new feature that allows users to see information such as pricing on properties sold in the last nine months. The data will be available for more than 2.5 million recently sold properties. Users will be able to view sales prices, sale dates, foreclosure status of the property when it was sold, number of bedrooms, bathrooms, square footage, lot size and the year the home was built.”

Housing Wire – “FHFA faces another lawsuit over PACE program” (10-7-10)

“The Natural Resources Defense Council has sued the Federal Housing Finance Agency and the Office of the Comptroller of the Currency claiming the agencies illegally halted the Property Assessed Clean Energy program, known as PACE.”

Housing Wire – “Hope Now: Industry completes nearly 150,000 loan mods in August” (10-7-10)

“Hope Now, a private sector alliance of mortgage servicers, investors, mortgage insurers and nonprofits, said the industry completed nearly 150,000 permanent loan modifications in August, with 91% of proprietary modifications including a reduction of principal and interest.”

Housing Wire – “Weekly jobless claims down 2.4% to 445,000″ (10-7-10)

“Initial jobless claims fell 2.4% last week to 445,000, which is the lowest level in a few months and lower than most analysts’ estimates. The Labor Department said the seasonally adjusted figure of actual initial claims for the week ended Oct. 2 decreased by 11,000 from the previous week’s upwardly revised figure of 456,000.”

Orange County Register – “First-time homebuyers at record high” (10-7-10)

“The leading edge of the 10- to 30-year-old age group — also known as Gen Y or echo boomers — already is emerging as a factor in the housing market, said Joel Singer. For example, the average age of first-time buyers is 30 years old, and first-time buyers now make up 46% of the the market. First-time sellers make up 47% of the market.”

Looking Back:

One year ago, John Burns Real Estate Consulting claimed home prices would likely decrease again. Both the NAR and the MBA were in favor of extending the first time home buyer tax credit. A survey from the California Association of Realtors showed that 46 percent of California Realtors used some sort of social networking website in their work.

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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193-TNG Radio – I Survived Real Estate 2010 9-24-10

Friday, September 24th, 2010

I Survived Real Estate 2010

I Survived Real Estate 2010


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September 17th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The video also now available on The Norris Group website.

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 The Norris Group Real Estate Radio Show is broadcasting the first segment of I Survived Real Estate 2010.

This is our 3rd I Survived Real Estate event. Over the last few years we have covered the reasons for the meltdown, ever changing legislation, government stimulus, and possible industry solutions. That is part of the conversation for I Survived Real Estate 2010, but this year we are focusing on “the state of REO from a multi-sector viewpoint.” We are proud of the ensemble we have put together for this event. Thank you for listening online. We appreciate your support.

The benefactor for this event is Susan G. Komen. Susan G. Komen is the world’s largest grass roots network of breast cancer survivors and activists, which works to save lives, empower people, ensure quality care for all, and aid science in finding the cure. As of 2pm on September 23, 2010, our sponsors raised $63,000 for Susan G. Komen. That brings our 3 year total to over $160,000.

I Survived Real Estate 2010 would not be possible without out platinum sponsors, who allowed us to dedicate 100% of the ticket sales to Komen. Those sponsors include Foreclosure Radar and Sean O’Toole, San Diego Creative Investors Association and Bill Tan, The Investors Workshop, Shawn Watkins, Angel Bronsgeest, Frye Wiles, Invest Club for Women and Iris Veneracion, Bobi Alexander, The Business Press, MVT Productions, San Jose Real Estate Investors Association and Geraldine Barry, Claudia Buy’s Houses, White House Catering, and The Nixon Library. Thank you as well to all our gold sponsors. Their information can be found on www.isurvived2010.com. We are grateful to all who have participated.

We would like to thank two heroes. First, we would like to thank Marsha Norris. Her 17 year fight with cancer has been nothing less than spectacular. Its not just about strength, but its also about attitude. “Surviving is important, but thriving is elegant.” Second, we would like to thank Bruce Norris. Thank you for giving us an incredible example of what it means to be a great partner through thick and thin, and through better or worse. You show incredible grace when under fire.

Our host for this evening is Bruce Norris. He has been in real estate for almost 30 years as a builder, money partner, and investor. He has over 2,000 transactions under his belt. He is most known for his market timing predictions and his research.

This event would never have occurred if Aaron Norris had not developed our radio show. When Aaron originally told Bruce that The Norris Group should have its own radio show, Bruce asked, “Why in the world would we do a radio show?” Aaron responded saying, “I think it would be a great service to our industry.” It has been on of the best things Bruce has ever done in his life. Every week Bruce is challenged to interview someone who is an expert in their field. He has to read and work a lot to prepare for those interviews. We now have the opportunity to put a panel of those interviewees in front of you, and discuss solutions for our industry. Two of the panelists gave Bruce home work assignments. He bought those books and did his homework, so we will be discussing some of the issues in those books. Christopher Thornberg is back. When Bruce recalled memories of last year’s event with Thornberg, he decided to buy head gear just in case Thornberg’s speech gets rough again.

Bruce wants to be able to share good ideas for good questions during this event. Bruce has been a part of panels in which he did not feel like anything was accomplished, because no one was willing to cross a line or two. With this group of panelists, we may need more than one set of head gear. One of the hardest things for Bruce to do is disagree with a conclusion that is probably correct but not understood. Tonight, Bruce is going to do that. Bruce is going to be asking questions about issues that he does not fully understand.

Are we going to inflate or deflate? That is a very important question, because investors do something very different if they expect one or the other. Thornberg and Bruce will be discussing that issue. Thornberg gave Bruce a book to read, but Bruce still doesn’t agree with him. This event is about getting answers to important questions for real estate investors. Bruce would like to develop his business plan for the next few years based on what is said during this event.

Bruce would like to thank his company for the hard work they put into preparing this event. Aaron and Diana did as much work for this event as most people do for a wedding. Bruce gets to show and get a standing ovation because of their work. It doesn’t get any better than that.

Bruce and Marsha recently moved after living in the same home for 25 years. One of the first problems that came up during the move was what to do with the wheat? For those who have not heard that story, Bruce would like to tell it again. In 1975, Bruce got married and bought his first house. During that time, he read a book called The Coming Bad Years. The book claimed that if you are concerned for your financial future, then you need to buy 200 pounds of wheat per person in your family, so that you will have food to make it through the coming rough times. Bruce only had 4 people in his family at that time, but he bought 1,000 pounds to make sure he had plenty. So 35 years later, Bruce had to decide what to do with what is left of the wheat. He sill has a bucket of about 5 pounds of wheat, and he doesn’t want to give it up, because that wheat taught him something. First of all, it taught him that wheat lasts a long time. The second lesson was that when you get input from somebody else, listen to them, but don’t just let their input determine your opinion on the issue. Your informer may not be right. Bruce managed to build a house in a very nice neighborhood during a time in which he falsely expected a depression.

We have an important year coming up. We’ve experienced the great recession of real estate, and we are now in its aftermath. Just 24 months ago, Lehman Bros failed and set off catastrophic losses on Wall Street. Just like the wheat example, we now have groups of people overreacting. Policy changes are about to be made that could have very negative outcomes. The title for a recent article in the Los Angeles Times read, “Rethinking Homeownership: Why Owning A Home May No Longer Make Economic Sense”. That is not the mentality we want to have as a country. The little house purchase that Bruce started with was a “subject to” deal before Bruce knew what a “subject to” deal was. He bought the home with 500 dollars down, and he probably couldn’t have qualified for the financing on his own. Many good things happened in his life because he bought that property.

In the article titled “Rethinking Homeownership: Why Owning A Home May No Longer Make Economic Sense”, the author claimed we should take all tax benefits away from real estate. The article said, “there is only one affect that seems consistently caused by homeownership. Owners invest more time and money in the physical upkeep of their homes. They are more likely to make repairs and guard it.” Isn’t that called pride of ownership?

Tommy Williams once said that whenever he auctions off a house, that house stops being loved by somebody. An auction finds somebody that will love it next. We all want to live in a neighborhood that is well kept. Society is better off when the majority of us have a chance to own a house.

Some people are in positions were they can make policies. Raphael Bostic is the Secretary for Policy Development and Research for HUD. This is a statement from HUD: “There is this notion that being housed well is synonymous with being a home owner. That narrative has got to change.” That is an interesting statement coming from people who provide a lot of houses. The Chairman of the Federal Deposit Insurance Corporation said, “Clearly there is a strong correlation between the amount of skin in the game a borrower puts up front and how that loan performs. Its only common sense. If you put 20 percent down, you are committed to that house. If you walk away from that house, you are going to lose a lot of money.” Her solution would be to go to a 20 percent mortgage, but Bruce does not feel that is necessary.

In the mailing business, there is something called a control piece. A control piece is something that gets a known result when used. People in advertising use control pieces all the time. They send mailers designed to get a specific response repetitively. If they want to change something, they do the changes one at a time. If the change improves their control piece, then they add the changes to their mix.

We already have a control piece that has worked for 40 years. This control piece is called low down payment purchases. We have statistics showing that the damages caused by low down payment purchases have not been consistent over the past few years. Giving someone a VA loan with no down payment does not cause society big losses. Look at 1970 through 2002. During that time, we had FHA loans with only 3% down, but we did not have many foreclosures. Foreclosures were between 5 to 10% during that time. Foreclosures did not significantly increase until after 2003. The low down payment deals did not cause the problem. The subprime, low qualification, and option-ARM deals that caused the problems. We already know what works. We don’t need to reinvent our control piece, and we don’t have to practice over kill.

From 1975 to 2005, you did not have significant price decreases. If low down payment programs were causing the problem, why don’t the statistics show it? Bruce thinks that changing the low down payment policy would be a big mistake. Right now, a decline of ownership is occurring, and that is probably healthy. If the Chairman of the FDIC has her proposition in place, then homeownership will probably dip below 60%. Sellers are not netting very much when they sell properties. It would be difficult to crank up 20% from this price.

If we get rid of low down payment programs, you will have a lot more vacant properties. There is not enough financing for investors to absorb this inventory. You will have less stable housing costs for people who don’t own. When you buy a home, it can be rough at first, but once you’ve owned for a few years, you adjust to the cost, and it becomes easy. If we have more vacant homes, then we will also have lower quality neighborhoods with more unkempt houses. We will also have less equity to access other investments with.

Right now, Bruce believes that a zero down payment program would work perfectly. Warren Buffet believes that when other people are greedy, you should be fearful. If he had been in the loan business during 2006, he would have gotten out. In 2010, he would probably suggest making a lot of loans, because the payment on these loans is probably less than rent. If you are ever going to take a risk, you should take it in 2010 and 2011, because interest rates are at all time lows. Right now, people between the ages of 20 to 30 are underserved in the mortgage industry. Under Bruce’s proposed program, people would still have to qualify, but they wouldn’t need a down payment. Some people think this is crazy, but if you think about it, we’ve already done this for people with the $8,000 tax credit. We were giving homebuyers tax credits, so that they could make an $8,000 down payment. 48 percent of the 2 million people who received the tax credits will have to pay the $8,000 back.

People over the age of 35 have a homeownership rate of over 60 percent. People from the ages of 20 to 30 are underserved, and they probably did not receive the credit damage that many of their elders received from losing their houses. What is wrong with giving these younger adults a shot at homeownership? You must have 2 different criteria for Bruce’s no down payment program in order to prevent foreclosures. The reason why this program will work is because it is set up to serve 3 borrowers simultaneously. Yes, you are going to have a failure rate with a no-down mortgage, but you pick the percentage. When your payment is less than rent, is it going to be 20 percent? Bruce doubts it. But for the sake of argument, let’s say that foreclosure rates are at 20 percent under this program. If 2 million people sign up for the no-down program, and 400,000 people walk away, then let that loan get assumed by the next buyer without qualification. The likely target buyer will be the person who lost their house in foreclosure during the past 3 years. They can’t get new credit, but they might want to return to those “pride of ownership” homes. They will write a check, and save the system from 1 more foreclosure.

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

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The Norris Group Real Estate News Roundup 12/16/09

Wednesday, December 16th, 2009

Today’s News Synopsis:

The Wall Street Journal reports that people are increasingly willing to abandon mortgage payments for becoming renters, housing starts climb almost 9%, the FDIC offers some reprieve from securities accounting rules for the next year, and the Bureau of statistics released their real earnings report stating that average hourly earnings fell by .5%.

In The News:

DSNews - “Trulia and RealtyTrac Release Survey Results of Homebuyers’ Attitudes Toward Foreclosures” (12-15-09)

“n Tuesday, Irvine, California- based RealtyTrac and Trulia Inc., headquartered in San Francisco released the results of a new survey revealing insights to how consumers feel about purchasing a foreclosed property, conducted on their behalf by Harris Interactive, a market research firm based in New York City. Beginning in May 2008, the survey has been conducted every six months, making this the fourth survey of its type.”

Wall Street Jounral – “American Dream 2: Default, Then Rent” (12-16-09)

“People’s increasing willingness to abandon their own piece of America illustrates a paradoxical change wrought by the housing bust: Even as it tarnishes the near-sacred image of home ownership, it might be clearing the way for an economic recovery.”

Mortgage Brokers Association – “Mortgage Applications Increase Slightly in Latest MBA Weekly Survey” (12-16-09)

“The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending December 11, 2009. The Market Composite Index, a measure of mortgage loan application volume increased 0.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.3 percent compared with the previous week.”

Bloomberg – “Housing Starts in U.S. Climb 8.9% to 574,000 Pace “ (12-16-09)

“Builders in November broke ground on more U.S. homes, a sign the recovery in homebuilding may carry through into 2010. Housing starts rose 8.9 percent to an annual rate of 574,000, the Commerce Department said today in Washington. Building permits, a sign of future construction, climbed to the highest level in a year.”

DSNews – “FDIC Offers Reprieve for Securities Accounting Rules” (12-16-09)

“The FDIC has finalized a new regulatory capital rule that will give lenders who package and resell mortgages a little breathing room when it comes to accounting for these assets on their books. The federal agency’s rule directly addresses FAS 166 and 167, which beginning January 1, 2010 moves most securitizations – including residential and commercial mortgage-backed securities – back onto the issuer’s balance sheet. Banks had pushed for a three-year transition period to phase in the new accounting directives. The FDIC gave them 12 months.”

DSNews – “HUD Establishes Standards for State Compliance with SAFE Act” (12-16-09)

“On Tuesday, HUD announced the publication of a proposed rule setting the minimum standards that states must meet in licensing loan originators to comply with the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (Safe Act). The proposed rule was posted in Tuesday’s federal register and on HUD’s website.”

National Mortgage Magazine – “NAMB forms Legislative & Regulatory Action Fund to protect broker industry” (12-16-09)

“The National Association of Mortgage Brokers (NAMB) has announced the launch of its Legislative & Regulatory Action Fund to collect donations that will be used for protecting the interests of the mortgage broker industry. The mortgage broker profession has underwent extensive scrutiny and is being portrayed unfavorably in the mainstream media, as the housing industry undergoes sweeping legislative and regulatory initiatives to stimulate the economy and implement safeguards aimed at preventing another housing bubble. NAMB has worked hard to defend mortgage brokers against deceptive and misleading information, and has been successful in many instances. NAMB continues the fight to protect and preserve your industry.”

Housing Wire – “Fed Orders Credit Suisse to Cease and Desist” (12-16-09)

“The US Department of Treasury’s Office of Foreign Assets Control (OFAC), along with the US Department of Justice and the New York County District Attorney’s Office, separately announced a $536m settlement with Credit Suisse. The firm will pay $268m each to the US and to New York.”

Housing Wire – “FDIC OKs Delay of FAS 166, 167 Effect on Capital” (12-16-09)

“The board of directors at the Federal Deposit Insurance Corp. on Wednesday finalized a new capital rule that addresses industry concerns raised by Financial Accounting Standards (FAS) 166 and 167. FAS 166 and 167, which take effect in January, will require financial institutions to bring certain securitized assets onto balance sheets.”

Bureau of Labor and Statistics – “Real Earnings” (12-16-09)

“Real average hourly earnings fell 0.5 percent from October to November, seasonally adjusted, the Bureau of Labor Statistics reported today. A 0.5 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) more than offset a 0.1 percent increase in average hourly earnings for production and nonsupervisory workers.”

HUD – “Shopping for Your Home Loan” (12-16-09)

“The Real Estate Settlement Procedures Act (RESPA) requires lenders and mortgage brokers to give this booklet to buyers within three days of applying for a mortgage loan. RESPA is a federal law that helps protect consumers from unfair practices by settlement service providers during the home-buying and loan process.”

Looking Back:

One year ago, the California Association of Realtors projected a 12.5% increase in California real estate prices for 2009 with the prediction that REOs would be absorbed in 2009. The National Association of Realtors came out with concerns on the commercial real estate forecast and Bloomberg reported that the cost of credit writedowns topped one trillion.

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148-TNG Radio – I Survived Real Estate 2009 11-14-09

Friday, November 13th, 2009

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I Survived Real Estate 2009

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This week The Norris Group Real Estate Radio Show and Podcast presents Part 9 of I Survived Real Estate 2009. This is the final installation of the audio for this event.

This week The Norris Group Real Estate Radio Show presents Bruce Norris’ segment of I Survived Real Estate 2009.
Bruce begins by discussing the declining housing inventory. A declining inventory typically means that the market is doing well, because you have multiple offers being placed on homes. We currently have the highest affordability rates in the history of California. The volume of sales has gone up to normal, but we have high unemployment.
Delinquencies have exploded. From July 08 to July 09, we have gone from 5.3 percent to 9.7 percent delinquencies. The inventory of REOs has gone down, because banks have not taken back as many as they should. Some people have not made payments in 14 months. Trustee sales have also declined during this same time period. We had 28,795 trustee sales in July 08 and then we progressed to the 9.7 percent delinquency rate. We are currently 306,000 trustee sales short of where we should be. That averages 25,000 homes going out per month in the future. We have not peaked at delinquencies, and according to reports, we will soon be at 13 percent delinquencies. At 13 percent, we will be releasing 70,000 homes per month. Bruce does not believe that we can have a positive market if these statistics are true.
FHA is going to have a large number of defaults next year. They once had a 203K loan for investors in which investors could buy a property and include the repair bill in the loan. A lot of people would use this kind of loan and they would buy up to 7 homes and use them as rentals. Bruce thinks this would help clear up a lot of inventory.
Bruce thinks that Fannie and Freddie programs should be expanded so that qualified buyers can get unlimited loans. We are currently stuck at 10, and many investors are capped out because they exchanged their homes out of California and moved their investments to another state. Those investors cannot sell their property and come back to California.
We are currently giving away homes for 8,000 dollars. That money is coming from tax payers. Bruce thinks that we should just let people take these homes for no down payment. We will have people walk away, but the next buyer will be able to easily take it. Under this kind of proposed program, it would not matter if the buyer qualified or not because this loan can be continually passed down. These houses could go to investors with a 5 percent interest rate. This program would not have foreclosure, because the problems would be solved by the next buyer. The people who have recently foreclosed on their homes will not be able to qualify for homes, which may keep them out of the market for the next few years. We could just reintroduce these people as buyers if they did not have to qualify. This is not a program that we have never seen before. We are trying to solve this problem by selling the next house to the owner occupant who was shoved into home buying by the nonsense financing of 05 and 06.
We are already doing zero down deals. When Bruce sells a property, he usually pays part of the closing cost. The person getting 3.5 percent down on a 100 grand purchase is getting an 8,000 dollar check; that is better than nothing down. If you just had nothing down and these people qualified, we would get rid of a lot of homes.
Bruce and many other investors believe that we need to get rid of the FHA 90 day flip rule. When an investor fixes a property, which may only take 3 to 4 weeks, and they sell it within 90 days, the investor is believed to be guilty of fraud. The lender has to pay the cost for this, because the investor will subtract the amount that he or she must pay the lender for the property. We need to start looking at investors as people who can help this problem. At some point, we must either choose to not foreclose, or we must pay catch-up in a painful market.
Bruce asks Christopher Thornberg if he expects the dollar to lose value, and how the value of the dollar impacts interest rates. As the trade deficit gets wider, the dollar goes up. Now the trade deficit is going to close, so the dollar will get weaker. There is very little doubt that the dollar will weaken. Interest rates are undoubtedly going to go up. The federal reserve has increased the money substantially and that money is going to cause inflation. The Federal Reserve is either going to let inflation happen, which will raise interest rates, or they will fight inflation by selling the long range securities they bought, which will also raise interest rates. One way or another, interest rates are going to go up. In the shorter run, it will be faster to allow inflation to occur, because that would bail out the asset markets. In 1982, the mortgage rate was 18 percent, because of the fear of inflation.
Bruce thinks that we can absorb a higher interest rate and still have a good real estate market, because the combination with the cheap price could absorb a double digit interest rate, just like in the 70s. Thornberg says that a 1 percent increase in the mortgage rate means a 10 percent decline in prices. Bruce disagrees with this, because between 1974 and 1980 we had a tripling in real estate prices and interest rates doubled. Thornberg tells Bruce that he is talking about the real mortgage rate, which is the mortgage rate minus the rate of inflation.
Bruce asks Thornberg what the statement “Unemployment is a lagging indicator” means. Thornberg says that means that “the labor markets are the last to go into the toilet and the last to dry off.” Bruce asks if that means “when labor improves, every other category of real estate should have already started to improve”. Thornberg says that residential real estate leads commercial. Now, we keep waiting to hear about the collapse in the commercial market, but we are not seeing this at all. Thornberg says that this sort of lead and lag mentality can be exaggerated.
This is why Bruce brought this up, because in the last cycle, employment improved in California from 1994-96 but we did not have a price increase until 1997. If we do not have price increases, builders will not build anything. Bruce asks if you can have an improved labor market if builders do not have any work to do. Thornberg says that these two factors do kind of work together. The prices started to go up after the labor increases from 1994-96. Thornberg reminds Bruce that in the early 90’s we lost zero space, defense, and migration. In that market, the real estate was hampered by the excess supply. Thornberg takes issue with the idea that we should subsidize the building of new homes, because he believes that we have too many homes. Thornberg believes it would be a bad idea to subsidize the construction of homes when there is already too much inventory. Bruce says that some builders have been fixing existing inventory, and Thornberg believes that is all the builders can really do.
Robert Toll made 700 million dollars between 2000 and 2007 because he was selling too many houses at too high of a price, and now he wants tax payers to bail him out.
Bruce Norris asks Rick Sharga if people foreclosed for different reasons in 2008 versus 2009. Rick says that the reasons are not as different as the press would lead you to believe. The media has jumped ahead to the next wave of foreclosures. We are looking at a 3 wave foreclosure tsunami. The first wave began in the first quarter of 2006, because of the subprime meltdown and ARMs. The MBA numbers suggest that 33 percent of the new foreclosures are unemployment. That means that 2/3 of the foreclosure activity is not employment related.
What we are really seeing is increasing levels of foreclosure activity from the first wave, which is being made worse from the second wave. The second wave is about to pick up steam. If unemployment peaks around the first quarter of next year, we will see the foreclosures related to that peak around the 3rd or 4th quarter next year. That will be just in time for them to be augmented by the next wave. This next wave will be caused by the option ARMs. Many loans are going to reset, and people will owe more on their reset loans than their original loans.
Strategic defaults are going to be a problem. In the past American culture, people honored their contracts and chose to make their payments. Now people are realizing that the house they bought is worth half of what they owe, and they are wondering if it is in their family’s best interest to keep paying. If someone is only 10 percent upside-down on a loan then they will probably stick with the loan, but if they are upside-down by 50 percent then they will probably default.
Thornberg asks people if their credit or their equity will hear quicker. Thornberg says that most of these people will have their credit heal faster. Sharga responded to Thornberg with a story about a Coldwell Bankerk agent that was fired. This agent counseled her customers to default on their current loan after qualifying and buying a second house. Bruce feels that there is still a lot of character being shown in California; a state with a 9.7 default rate that has had a 50 percent value drop.

An economist from the building industry claimed that California needed to build 230,000 homes, but John was only able to build 70 homes this year. Economists who say things like this ruin the credibility of the people in their industry. Bruce feels that people owe more to their industry than they give.

Bruce thinks that now is a good time to buy property even though he thinks property values will go down. There is a combination of good interest rates and prices that make paying for properties an easy thing to do. Bruce thinks that the price declines that are coming will mostly affect the “as is” inventory, because loans will not be available to homes without kitchens.

Right now, investors are not being rewarded for the $35,000 they spend on repairs. The appraisal business is using a broken model which does not allow for proper adjustments on repaired properties. Every sale we have is an anomaly. The neighborhoods that Bruce is buying and selling in contain homes that are worth $60,000, but buyers want Bruce’s property at $130,000 because it has a kitchen and financing. If investors are going to make these improvements in the real estate market then they need to be rewarded for their efforts. The appraisal model being used right now is telling buyers that their decision to buy a repaired property is unwise. This hurts the market because fixed homes make neighborhoods more valuable. If these homes are left unfixed then more foreclosures will occur.

Joseph agrees with Bruce’s opinion that the appraisal process is broken. There is no magic number in appraising that makes it impossible to make a line item adjustment impossible. If an appraiser is going to make an adjustment worth more than 10 percent of the sales price, then they need to give an explanation for that. When there are multiple offers on a property, then an appraiser should consider those offers in their property evaluation. Unfortunately, the underwriters are not allowing these adjustments to take place.

For the final segment of the show, Bruce asks each speaker what they feel the biggest problem in real estate is.

Joseph believes that real estate’s biggest problem is appraisal management companies that hire incompetent people who are not qualified and do not have enough experience. Those people make bad decisions and they ruin deals.

Patt says that it is hard to tell what the biggest problem is. The biggest problem for Patt and many other realtors is getting inventory out of the market place. There are too many short sales that no one knows how to sell. When someone performs a search on the MLS and finds that 75 percent of the properties are being labeled as “subject to short sale”, you have a problem. 90 percent of the time, those sales will not close. The foreclosed homes are easy to get rid of, because a bank owns them, and they have answers for someone who wants the property.

Tommy thinks that the biggest problem is the tremendous volume of deteriorating, empty homes. These homes need to be put into the hands of investors or home owners as quickly as possible, and Tommy thinks that auctions do that very well.

 John Young agrees that we need to get through this inventory as quickly as possible. Previously in the show, Bruce proposed multiple solutions to the inventory problem such as zero down deals. He believes that this problem will not be solved by just one helping factor.

David Kittle believes that the biggest problem in real estate is the people who are making laws who do not understand the business, and have never run a business.

Rick Sharga believes that the entire real estate “ecosystem” is imbalanced. Valuations are imbalanced because we have less professional and competent appraisers who are under valuing properties. There is a freeze in the capital market, because lenders are afraid to risk lending money on homes that may not have proper valuations. Hundreds of thousands of homeowners are under water on their loans, and there is too much inventory for the market to buy. He does not believe that there is one central problem that has caused this real estate mess.

Real estate is a boom-bust phenomenon. When times are good, it is very good, but when times are bad, it is very bad. 2001 to 2006 was a phenomenal time for people in the industry, but because of that boom, they are suffering from a terrible crash. From a long run perspective, we are dealing with a mess of rules, regulations, subsidies and taxes. Local governments are constantly pushing all sorts of taxes on builders. Those taxes drive up prices on homes, and as a result, a constituency cannot afford those homes. Then they try to subsidize the price of a home by having an FHA mortgage. You do not want a loan on a house to be a normal loan, so you make it a no recourse loan, but then third party appraisers are more important than what someone is trying to buy a home for. We keep creating problems by trying to fix problems. Christopher believes that we need a massive deregulation of the market. We need to clear these regulations so the market can work efficiently.

Bruce hopes that the investor will have the chance to influence congress. Right now, investors are a very important solution to this problem, but they are currently having trouble. If investors are able to get financing, they will be able to fix homes and prevent them from returning as “for sale” inventory. If investors cannot get financing, then they must either leave these homes alone or they must pay for these homes with cash. Unfortunately, investors have a limited amount of cash to spend.

The video of the live event is not being aired online HERE.

You can visit isurvived2009.com to learn more about our sponsors and speakers.

Here are the speakers involved in the event:

Bruce Norris of the Norris Group

Bruce Norris

President

The Norris Group

David Kittle, President of the Mortgage Bankers Association

David Kittle

2009 Chairman

Mortgage Bankers Association

2007 President, National Association of Realtors

Pat Vredevoogd Combs

2007 President

National Association of Realtors

Tommy Williams, 2008 President National Auctioneers Association

Tommy Williams

2008 President

National Auctioneers Association

Christopher Thornberg, Principal and Beacon Economics

Christopher Thornberg

Principal

Beacon Economics

 

John Young

Vice President

California Builders Industry Association

Joseph Magdziarz, VP Appraisal Institute

Joseph Magdziarz

Vice President

Appraisal Institute

Rick Sharga, Senior VP RealtyTrac

Rick Sharga

Senior Vice President

RealtyTrac

To Benefit:

I Survived Real Estate 2009 Sponsors

A huge thank you to all of our sponsors who made this event possible.

Platinum Sponsors
San Diego Creative Investors Association
investClub for Women
Investors Workshop
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Entrust California
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JK Short Sale
The Business Press
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National Fix and Flip Network
  

Gold Sponsors
1 m 1 Properties
 Appraisal Institute of Southern California
Dalmae
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Inland Empire Investors Forum
Las Brisas Escrow
Los Angeles Meeting and Event Center
Mortgage Equity Group
Northern California Real Estate Investors Association
Northern San Diego Real Estate Investors Association
Real Wealth Network
RE 411 Magazine
San Jose Real Estate Investors Association
Daniel Dear
Women\'s Council of Realtors - Inland Valley Chapter
Westin South Coast Plaza
Saddleback Valley Communities Petere Apostolos Awesome Limousines
RealtyTrac National Association of Real Estate Investors Far Below Market

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The Norris Group Real Estate News Roundup 10/16/09

Friday, October 16th, 2009

Today’s News Synopsis:

President of John Burns Real Estate Consulting expects the commercial real estate market to do further damage to residential real estate. New legislation requires swap dealers and major swap participants to register with regulators and requires clearing organizations to provide transaction information to appropriate regulators. GE, MGIC, and Bank of America lost over 500 million in Q3 of 2009.

In The News:

Housing Wire – “BofA Loses $1bn as Net Loss on Home Loans Widens” (10-16-09)

“Bank of America (BAC: 17.26 -4.64%) lost $1bn or $0.26 per share during Q309, compared to a profit of $1.2bn during Q308. But company year-to-date income through Q309 was $6.5bn, compared with $5.8bn during the same period of 2008. BofA paid $1.2bn in preferred dividends for the quarter, including $893m in dividends to the US government”

Housing Wire – “BarCap Expects $2bn of CMBS TALF Requests” (10-16-09)

“Researchers at Barclays Capital (BarCap) expect the October facility date for a government loan program to receive an uptick of requests over the last subscription date. The October 21 Term Asset-Backed Securities Loan Facility (TALF) for commercial mortgage-backed securities (CMBS) will likely see an increase in subscription volume over last month, BarCap said in a research report Friday”

Housing Wire – “MGIC Loses $971m on Increasing Delinquencies” (10-16-09)

“MGIC Investment Corp. (MTG: 6.42 -12.30%) posted a $517.8m net loss in Q309, compared to losses of $115.4m in Q308 and $184.6m in Q209. The net loss for the first nine months of 2009 was more than $1bn, compared to a net loss of $250m during the same period of 2008.”

Housing Wire – “John Burns Sees Distressed CRE’s Dual Effect on Housing” (10-16-09)

“The pain felt in the distressed commercial real estate (CRE) sector will affect the residential mortgage industry on two fronts. The affects range from banks’ disposition of residential assets to a reluctance to lend to the residential sector at all, according to commentary Friday by John Burns Real Estate Consulting. The consulting firm indicated banks may need to dispose of residential assets to concentrate on commercial real estate distress as it continues to pressure the banks. This should have the affect of creating land-buying opportunities at low prices and sparking a bit of recovery, the firm said”

Housing Wire – “Investor Coalition Says No to Interest-Only Mods” (10-16-09)

“The Mortgage Investors Coalition called on the Treasury Department to reject a proposal to offer distressed borrowers interest-only payments for a certain length of time as part of the terms of a Making Home Affordable Modification Program (HAMP) workout. The coalition said a proposal being formed by large banks to allow borrowers the option to make interest-only payments as part of a new HAMP workout plan fails to address the issue of negative equity. Such a proposal is not in the best interest of the housing industry and consumers, said the coalition, a recently formed trade group of asset managers holding more than $100bn in residential mortgage-backed securitizations (RMBS) on behalf of pension funds, college endowments and other investors.”

Housing Wire – “House Moves on Financial Regulatory Reform” (10-16-09)

“The legislation passed Thursday requires swap dealers and major swap participants to register with regulators and requires clearing organizations to provide transaction information to appropriate regulators. The bill also provides for public disclosure of aggregate data on swap trading volumes and positions in a way that protects the business transactions and market positions of individuals”

Housing Wire – “GE Real Estate Revenue Falls 46% from 2008″ (10-16-09)

“Revenue from General Electric’s (GE: 16.08 -4.23%) real estate division for the first nine months of 2009 declined 46% compared to 2008, the company said in its Q309 report. GE Capital Real Estate, which creates real estate debt and equity investment funds for institutional investors as well as finances commercial real estate transactions through commercial mortgages in North America, lost $538m in Q309, compared to profit of $244m in Q308. Year-to-date losses through Q309 were $948m.”

Housing Wire – “Calif. Bank Mod Program Beats Redefault Average” (10-16-09)

“Due to the modifications, overall loan delinquencies dropped as of Sept. 30, 2009, compared to peak levels. Loans 30 to 59 days delinquent fell to $70.6m, 55% lower than the $157.5m on January 31, 2009. Loans 60 or more days delinquent decreased to $16.8m, or 95% lower than the $431.3m on Feb. 28, 2009. Loans in foreclosure fell 38% to $281.8m from $456.2m on June 30, 2009.”

Bloomberg - “MGIC Declines After Posting Ninth Consecutive Loss” (10-16-09)

“MGIC Investment Corp., the largest U.S. mortgage insurer, fell 12 percent as the company’s quarterly loss quadrupled after a record number of homeowners failed to meet mortgage payments.”

Inman - “Pig-in-a-python economics” (10-16-09)

“Long-term rates rose again this week, the 10-year Treasury note and mortgages continuing the spurt that began last Friday, to 3.46 percent and just shy of 5.25 percent, respectively.”

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The Norris Group Real Estate News Roundup 9/8/09

Tuesday, September 8th, 2009

Todays News Synopsis:
A recent report shows that 2 out of 5 working-age Californians are unemployed. The Treasury expects to spend over $45 billion dollars in bail out money for Fannie Mae and Freddie Mac by September 30th. U.S. regulations are making it considerably more difficult to obtain home loans. Aliso Viejo has been named Orange County’s “hottest” home market.

New York Times – “They Left Fannie Mae, but We Got the Legal Bills” (9-5-09)

“PRECISELY one year ago, we lucky taxpayers took over Fannie Mae and Freddie Mac, the mortgage finance giants that contributed mightily to the wild and crazy home-loan-boom-turned-bust. In that rescue operation, the Treasury agreed to pony up as much as $200 billion to keep Fannie in the black, coughing up cash whenever its liabilities exceed its assets. According to the company’s most recent quarterly financial statement, the Treasury will, by Sept. 30, have handed over $45 billion to shore up the company’s net worth.”

Washington Post – “Mortgage Market Bound by Major U.S. Role” (9-7-09)

“Nearly one-third of those who obtained home loans during the boom years of 2005 and 2006 couldn’t get one today, according to mortgage industry analysts. Many of these borrowers were never really able to afford their homes and should not have gotten loans. But many others could, and borrowers like them are now running into tougher government standards.”

Sacramento Bee – “Backlash against banks growing over mortgage modifications” (9-6-09)

“The eight-county Sacramento region has counted more than 42,000 foreclosures since the start of 2007. Many area neighborhoods are scarred by vacant repos and dead lawns that pull down property values of other homeowners. Statewide, the foreclosure tally has passed 410,000, and it’s believed thousands more are inevitable.”

Los Angeles Times – “We all want a deal — that’s what’s scary” (9-5-09)

“When a 20-something friend of mine recently told me she was looking for an apartment to rent in Los Angeles, I had only one bit of advice for her: Don’t accept any advertised rent — haggle with the landlord to get the price down, and demand concessions on anything and everything. The housing crash and the recession have made this a renter’s market. The cost of apartments and homes for rent can only decline. Just look at the number of ‘for lease’ signs in every L.A. neighborhood.”

San Francisco Chronicle – “Study: 2 out of 5 working-age Californians jobless” (9-6-09)

“A report released Sunday says two of five working-age Californians do not have a job, underscoring the challenges in one of the toughest job markets in decades. A new study has found that the last time employment levels among this group were this low was February 1977.”

Bloomberg - “Missing Lehman Lesson of Shakeout Means Too Big Banks May Fail“ (9-6-09)

“Rather than break up institutions such as Bank of America Corp. and Citigroup Inc., or limit their expansion, the U.S. has given them billions of dollars in tax incentives and loan guarantees that enabled them to grow even bigger. To protect against a bank collapse touching off another freefall, President Barack Obama has proposed regulatory changes that rely on the wisdom of bankers and government overseers — the same people who created the conditions that led to Lehman’s bankruptcy and were unable to foresee its consequences.”

Orange County Register – “Where do homes sell in less than a month?” (9-8-09)

“The hardest place in Orange County to find a home to buy — or the ‘hottest’ O.C. market — in terms of ‘market time’ (supply of homes for sale vs. new purchase deals inked in past month) is Aliso Viejo. It takes 0.9 months”

Orange County Register – “Distressed inventory slippery in south coast cities” (9-8-09)

“The number of active short sales and foreclosures has risen in two beach cities that previously saw their distressed inventory shrink, according to a biweekly report by Steven Thomas of Altera Real Estate.”

Inman - “Title industry steps up lobbying” (9-8-09)

“As it steps up its lobbying efforts, the American Land Title Association has decided charge an annual licensing fee of $195 license to non-members who use the trade association’s uniform title insurance policy forms to help generate revenue to cover those and other expenses. ALTA is granting free memberships for the remainder of 2009, but companies must choose to either continue their ALTA membership or pay the annual licensing fee if they want to continue using ALTA’s uniform title insurance policy forms in 2010, the group said.”

Don’t forget I Survived Real Estate 2009 is this coming Friday evening at the Nixon Library. The Business Press, a Platinum Sponsor, is airing the event live online so all can watch on no cost. More at www.ISurvived2009.com.

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138-TNG Radio – National Real Estate Investors Association 9-5-09

Saturday, September 5th, 2009

nreia

The National Real Estate Investors Assocation

Director, Rebecca McLean & Charles Tassle

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This week Bruce is joined by Rebecca McLean and Charles Tassle. Rebecca is the Executive Director of Nation Real Estate Investors Association, and Charles is the Director of legislation affairs.

From 2000 to 2005 NREIA’s membership greatly increased. In 2002, NREIA only had 44 groups. In 2004-2005 the membership grew to over 200 groups, and in 2006-2007 the membership grew to 250 organizations. Rebecca estimates that NREIA’s peak membership was around 45,000. NREIA is a federation of local real estate investing associations. Since the market peaked, NREIA has gone down to 230 groups, but there are still people sending in applications every day asking if they can start a local REIA.

Bruce wonders if some of these groups have developed from a group of speculators to a group of investors in which they have the mentality of holding on to real estate. There are more experienced people in the real estate business now than there are people who are new and curious about real estate.

Charles believes it is better to approach legislation with a group of people who are viewed as investors rather than speculators. When NREIA representatives present themselves to state and federal legislation, they try to explain to the government that they are just as much of an investor as they are a local business owner. They contribute a significant amount to the community just like associations such as CAR and NAR. Bruce thinks that too many associations approach Congress with a single minded purpose. They do not consider the investors when they work with the government to change things. Rebecca agrees with Bruce on this issue. What makes NREIA unique is that membership includes Realtors, appraisers, and investors, and this has helped open the eyes of government leaders to realize that NREIA’s members represent a different segment of the real estate industry.

California has too many homes that are going to go back to the lenders in disrepair. Most of the loan programs are geared towards selling the next home to owner occupants, but owner occupants will not be interested in buying these damaged homes. These loan programs will not work without the help of investors, and NREIA has tried explaining this to congress.

Part of the purpose that NREIA has in coming before Congress is to gain respect, so Congress will be more interested in hearing NREIA’s opinions on important topics. Congress has a niche mentality. Each Congressional office latches onto different groups that deal with specific issues.

Bruce has interviewed many people and he has found that people appreciate when he helps to explain what his interviewees are trying to write about. Bruce asks if Charles gets to assist Congress by explaining legislation. Charles says that Congress does ask for NREIA’s perspective.

Bruce asks how politically motivated Congress members are to stand up for certain ideas that may be unpopular. Charles says that in the end, it comes down to the impact of voters. NREIA is supporting the bill HR 3440 which changes the way Realtors and dealers are recognized so that people will not be considered a dealer just because they have done a couple installment loans. This will increase the number of land contracts. As NREIA has explained this to Congress, they gained an understanding of how their voters would benefit from the bill and they started to gain interest in the bill.

203K loans were once available to investors, but that program was taken away from investors in 1996. The program allows people to get financing for a house including the repairs. Bruce asks if it is politically unfavorable to help investors. Charles says that investors are no longer an unfavorable group to support. The mortgage brokers and the appraisers are currently the politically unfavorable groups. People who are rehabbing properties are considered politically favorable. REIA has been making an effort to display investors as an important group of people in the real estate industry. Communities that were once not so open to investors are now open because investors have done a great service for them. There are a lot of misconceptions about what happens to an area when there are a lot of rentals there. Bruce was recently interviewed on a television show and the people who viewed his properties were astonished and pleased by the results they saw. People need to be exposed to the changes that investors make in communities. The work that investors do increase employment, increase the values of neighborhoods, and also increase tax revenue. Rebecca estimates that investors contribute about $3 billion dollars to the economy because of the other businesses that are affected by investors.

Bruce asks how investors can send a message to the people who are in charge of financing options that we need more generous financing because it is very difficult to get financing for rentals and properties that need to be fixed. Charles says that banks are looking for a 750 credit score. Right now the banks are sitting on a lot of cash, and NREIA is hoping that HR 3440 will help encourage the banks to lend that cash out.

Right now there is a program that gives owner occupants an $8,000 check for buying their first property. Bruce thinks that it would be better if existing loans could be taken over subject to without worrying about an assumption fee or the lender calling the loan due. FHA once had a loan in which people did not have to qualify for taking over the payment. Under this loan, all you had to do was send in a fee. Bruce asks if there has been any talk about this sort of loan being available again. Charles says that this has not been discussed, but the chances of this showing up will increase as long as NREIA has an influence on Congress.

In California, there are many investors who 1031 exchanged to other states, but cannot return back now. If they exchange without financing, they will have to pay a hefty tax bill, and they cannot get financing once they pass the 10 property limit. A lot of the decisions we are making are preventing our problems from being solved more easily. Rebecca says that part of the problem is that making good changes, which will help investors, may not be politically favorable. As investors continue to be displayed in a positive light, our chances of having helpful legislation get passed will increase.

Bruce asks what date NREIA’s “Day on the Hill” is scheduled for. This event traditionally goes on during April. The technology conference is coming up soon. This conference will allow NREIA to tell people about what NREIA is doing legislatively. NREIA is trying to make investors look good to the public. Information for “Day on the Hill” will be posted on the website after the technology conference, and people will also have the ability to register there.

Bruce asks Charles if there are any bills coming up that are bad for investors. Charles says that there a couple bill trends that are concerning. One is the foreclosure moratoriums, and there is a foreclosure modification process being proposed. This means that judges or someone else will be given the power to modify loans. This modification process is meant to save people from foreclosure, which seems good, but if we do not deal with our problems on a piece by piece basis we will cause more problems.

To find out more about the National Real Estate Investors Association, visit their website at nationalreia.com

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137-TNG Radio – Joseph Magdziarz 8-29-09

Friday, August 28th, 2009

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Joseph Magdziarz

2009 Vice President, The Appraisal Institute

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This week Bruce is joined by Joseph Magdziarz. He is the current Vice President of the Appraisal Institute and he will become the President Elect in 2010 and President in 2011. He has been associated with the Appraisal Institute for 38 years.

Bruce begins by asking if Joseph if he considers business nowadays to be usual or unusual. Joseph has seen similar conditions in the late 80s and early 90s, but for many people, this is a new experience.

Bruce asks Joseph to explain what is similar about our current market and the market of the late 80s. The declining prices of real estate but the cause of these declines is significantly different.

Something radically changed a few months ago in the appraisal business. The Home Valuation Code of Conduct (HVCC) agreement between the Attorney General Cuomo and Fannie Mae and Freddie Mac caused this change. A few years before the HVCC came out, Joseph was lobbying with Congress about the pressure being put on appraisers to make inflated home appraisals. People were happy with many appraisers, because they received high appraisals, but this problem put ethical appraisers out of business, because they would not cooperate with people who wanted their home values inflated. Some of the new people coming into the business may have given into the pressure to make bad appraisals because they did not have the established relationships with lenders that some of the well known appraisers had.

The goal number for an appraiser is market value. Bruce asks if that is still the goal that appraisers are shooting for. Joseph says that is what appraisers are trying to estimate but some of the values coming out are closer to distressed asset value rather than market value.

Bruce asks if something has changed in the appraising process or if the changes are coming in after the appraiser states a market value and someone attempts to correct them. The definition of market value has not changed since 1989. The methodology has not changed either. Joseph thinks that many appraisers have not experienced a distressed market such as the market we are currently in. The HVCC, and the lenders’ choice to move much of their business to appraisal management companies, have caused a lot of problems.

This is one of the first markets we have had in 10 years in which we have declining prices. It is legitimate to have a 90 day old comp that is worth less today than it was when you first got it. Bruce asks if the big problem is that we do not have enough fully repaired homes as comps in comparison to vacant REOs. Jospeh says it’s very localized. Joseph says this is a big problem in some parts of the country, but the real problem occurs when all the occurring sales are foreclosures and short sales.

The definition of market value is the meeting of the minds between a buyer and a seller, each equally motivated and knowledgeable, and without undue pressure. If you have a bank with many foreclosures, they are more motivated than a typical seller would be. They will often dispose of those assets at a lower price which makes none of those properties a valid comp. The motivation of the buyer and seller is important when evaluating market value.

TNG’s business is buying and fixing properties that need work. TNG typically puts $35,000 dollars into a repair job, and they typically end up with a property that is worth about $140,000. It is very hard to get $35 grand worth of credit. There seems to be a rule which only allows a ten percent credit limit for the kind of properties that TNG deals with. Bruce asks Joseph to explain this issue. Joseph explains that this issue relates back to a Fannie Mae/Freddie Mac guideline that says when you have an adjustment greater than 10 percent, you need to explain it. As the percent of adjustment increases, the sale becomes less comparable. There is no ten percent requirement. This is just a guideline, but unfortunately, some of the underwriters believe it to be a rule.

Bruce has had trouble with this guideline. For example, Bruce had 6 offers on a property being sold at 122,000, but then the appraisal came at 102,000, and then the review appraisal came in at 85,000. That is far from what 6 buyers thought the market value was. In the end, Bruce did not sell this property and he kept it as a rental home. If an appraiser is not able to honor the market decision of a buyer, then the market price in some areas will go down further for no good reason. Part of this problem goes back to the HVCC stating that there needs to be a firewall between people originating a loan and people doing appraisals. At this time, that firewall is the appraisal management company. One of the main complaints that Joseph is getting is that many appraisals are being done by appraisers who are not experienced enough in their geographic region.

Bruce asks how appraisers are assigned properties to appraise. Some companies broadcast assignments to everyone on their approved list, so the first person to sign up for the job gets it. The problem with the AMC is that they are not giving these jobs to experienced appraisers. The AMC is focused on getting these jobs done quickly rather than effectively. Better appraisers are missing out on jobs because they cost more. They are hiring people with not enough experience.

The Appraiser’s Institute company has 26,000 members. Each one of these members receives notifications saying that they need to have the proper experience necessary to get jobs done properly, otherwise the Appraisers Institute will take aggressive enforcement against any member who accepts a job that they are not qualified for. These members are also given information on how to turn in unqualified appraisers.

In July, the current president of the Appraisal Institute met with Congress to discuss this issue. He also reminded them a few years before that these problems were occurring, and they failed to act on those problems back then. These problems do not look like they will be dealt with until some time next year. A few bill are pending but nothing will be done until next year.

Bruce asks if the Appraisal Management Companies has to be run by someone with an appraisal background. This is a problem that the Appraisal Institute has been lobbying for as well. There are appraisers who have had their licenses revoked that are now supervising other appraisers. Joseph thinks it would be better if appraisers were required to be licensed within their state.

Bruce asks if communication is allowed between agents and appraisers who are working for Fannie or Freddie. Joseph says this is not forbidden. The loan officer is not allowed to communicate with the appraiser, but Realtors and management companies can communicate with appraisers. Appraisers have an obligation to verify information given to them about a sale. This is a misunderstood rule that Bruce has had difficulty with. Bruce has called appraisers who told him that he was not allowed to talk to them.

Bruce asks Joseph about what the fee was for an appraiser before HVCC and what that fee is now. This is one of the five biggest problems that the Appraisals Institute currently has. Not all appraisal management companies are the same. In Chicago, GAMCO uses Appraisal Institute members, and they give designated members 90 percent of the fee, and they give non designated members 80 percent of the fee. What Joseph has heard nowadays is that management companies are starting to take 50 to 60 percent of the fees. When that happens, the better appraisers refuse to work for those companies. That leaves the new appraisers with the ability to get into the business, and they may not be qualified. Joseph fears that these rules may cause some very knowledgeable people leaving the business. Another problem with management companies is that they require a 24 to 48 hour turn around time. This does not allow appraisers to get to know the market value of a specific market.

We now have the ability to use automated appraisals (AVM), but these automated appraisals are trumping appraisals made by actual appraisers. These automated appraisals are done on a statistical basis. The problem with these reports is that they do not use comparable sales. These automated appraisals essentially come up with a median value rather than a market value. These mechanical appraisers are not capable of looking next door to a certain property in order to obtain a better understanding of the value of the home being examined.

Joseph is can be seen September 11th at our I Survived Real Estate 2009 event.

Joseph C. Magdziarz, MAI, SRA is the 2009 vice president of the Appraisal Institute. He will become the president elect in 2010 and president of the Appraisal Institute in 2011.

Magdziarz has been an active member of the Appraisal Institute for 38 years. He has served in a variety of capacities at all levels of the organization.

At the regional level, Magdziarz has served two terms as Regional Vice Chair and two terms as Region III Chair. He has also been a regional representative for many years. On the national level, Magdziarz served two terms on the Appraisal Institute’s National Board of Directors. He has served as Chair of the Education Committee for five years and has also chaired the National Audit Committee, Instructor and Faculty Committees, and Education and Publications Committees. In addition, he has served on a number of project teams. Presently, he is serving on the ADAPT (MAI demonstration report alternative) project team and the International Education and Designation project team.

Magdziarz has been President of Appraisal Research, Inc. in Rockford, Illinois for 38 years. He resides in Rockford, Illinois with his wife Sandra of 41 years and his bulldog Bella.

Magdziarz is an approved Appraisal Institute instructor for 26 courses in the Appraisal Institute’s QE, AE, CE, and USPAP curriculums. He has also had international assignments in Naples, Italy; Istanbul, Turkey; Seoul, South Korea; and Beijing, Tianjin, and Shanghai, China.

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