Existing home sales dropped 9.6%, according to the NAR. A San Joaquin County investor pleaded guilty to rigging foreclosure auctions, and is now facing a federal prison sentence and $1 million in fines. LPS claims the current mortgage delinquency rate is 8.8%.

In The News:

NAR - “February Existing-Home Sales Decline following Sustained Gains” (3-21-11)

“Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 9.6 percent to a seasonally adjusted annual rate of 4.88 million in February from an upwardly revised 5.40 million in January, and are 2.8 percent below the 5.02 million pace in February 2010.”

Housing Wire – “California pending home sales spike in February” (3-21-11)

“The California Association of Realtors’ Pending Home Sales Index rose 20.6% in February to 112.1 from 93 in January. The index uses 2008 housing market activity as a baseline because it represents a more normal level of purchases and sales. An index reading of 100 corresponds with activity in 2008.”

Recordnet.com – “Guilty plea in home auction rigging” (3-21-11)

“A San Joaquin County investor pleaded guilty Friday in federal court to charges he illegally rigged bids with others at home foreclosure auctions in Stockton, the U.S. Attorney’s Office in Sacramento reported. Gregory L. Jackson is the sixth defendant so far to plead guilty in the federal probe. He faces a federal prison sentence and $1 million in fines under terms of the negotiated plea deal.”

Orange County Register – “‘Normal’ new-home market is 3-5 years off” (3-19-21)

“We decided to add Southern California (especially the O.C. market) into our business plan since we believe this market has bottomed. In today’s home building market, there is an imbalance between used and new homes in Orange County as a limited amount of new homes have been built over the last five years.”

Orange County Register – “Demand for O.C. homes at 7-month high” (3-21-11)

“Demand, the number of new pending sales over the past month, increased by 225 in just two weeks and now totals 2,982. At the beginning of the year, demand was at 1,856 pending sales. Since then, it has increased by 61%. Last year at this time there were 288 additional pending sales, propped up by the $8,000 first time homebuyer tax credit.”

Housing Wire – “Mortgage delinquency rate drops 18.4% annually: LPS” (3-21-11)

“Out of the 40 million loans evaluated by LPS last month, 8.8% qualified as delinquent (30 days or more overdue). That delinquency rate is down 1.2% from January and 18.4% from February 2010.”

Housing Wire – “Stress tests suggest economy may slide back into crisis: IRA” (3-21-11)

“Recent stress tests conducted by the Federal Reserve suggest the banking industry and economy ‘may be sliding back into crisis’ because of deflation in the housing sector, according to a new report from Institutional Risk Analytics.”

Housing Wire – “Moody’s expects temporary GSE exemption from mortgage risk rules” (3-21-11)

“Analysts at Moody’s Investors Service said Monday regulators may exempt Fannie Mae and Freddie Mac from upcoming mortgage risk retention rules – at least temporarily.”

Housing Wire – “Distressed property sales decline on foreclosure issues facing servicers” (3-21-11)

“Overall, investors stepped up their homebuying game last month even as distressed property sales fell, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. The report shows the HousingPulse Distressed Property Index — a barometer of distressed home sales — fell to 47.3% in February from 49.6% in January.”

Bloomberg – “Treasury to Sell Mortgage-Backed Holdings at Up to $10 Billion Per Month” (3-21-11)

“The U.S. Treasury Department plans to wind down its $142 billion portfolio of mortgage bonds guaranteed by Fannie Mae and Freddie Mac by selling as much as $10 billion per month.”

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

14,369 new and resale houses and condos sold in Southern California last month, according to MDA DataQuick. A survey shows the majority of large fund managers do not expect interest rates to increase in the near term. ForeclosureRadar said default notices in California decreased 29.6% year over year. A study from NAHB economists shows that a family earning $80,000 per year who buys a $200,000 house will receive $41,138 in tax benefits over the entire term of home ownership.

In The News:

MDA DataQuick – “Southland February Home Sales At 3-year Low; Investor Interest High” (3-15-11)

“Last month 14,369 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. That was down 0.6 percent from 14,458 in January, and down 6.4 percent from 15,359 in February 2010, according to DataQuick Information Systems of San Diego.”

NAR - “Tax Time Less Taxing for Home Owners” (3-15-11)

“A number of tax deductions and credits are still available for home owners; these include deductions – with specific limits – for mortgage interest and capital gains on home sales, and credits for certain energy-efficient home improvements. Even with these benefits, home owners pay 80-90 percent of all U.S. federal income taxes.”

Housing Wire – “Housing needs mortgage servicing standards: OCC” (3-15-11)

“National mortgage servicing standards will be an essential part of the new housing market, acting comptroller of the currency John Walsh said Tuesday. But reaching a consensus on how to devise those standards is a struggle that will take more work, he conceded, while speaking to the American Bankers Association.”

Housing Wire - “Oil shocks hedge against U.S. interest rate hike” (3-15-11)

“Oil price shocks greatly reduce the probability of higher interest rates in the near term, the latest Bank of America Merrill Lynch Survey of Fund Managers said Tuesday.”

NAHB - “Builder Confidence Edges Up One Point in March” (3-15-11)

“After four consecutive months hovering at the same low level, builder confidence in the market for newly built, single-family homes improved by a single point in March, rising to 17 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest level the HMI has reached since May 2010, when the survey period corresponded with the final days of the federal home buyer tax credit program.”

Housing Wire – “Foreclosure activity slows in February: ForeclosureRadar” (3-15-11)

“Notice of default filings in California fell 29.6% on a year-over-year basis. The Golden State also experienced a 24.5% drop in sales back to the bank and a 20.3% decline in properties purchased by third parties.”

NAHB - “Tax Time Can Mean Big Savings for Homeowners” (3-15-11)

“A study from NAHB economists, ‘The Tax Benefits of Homeownership,’ details sample savings for a variety of income levels and homeownership situations. In one example, a household with an $80,000 annual income that buys a home with a $200,000 mortgage will save on average $1,765 in the first year—and realize a total benefit of $41,138 over the expected period of homeownership.”

NAHB - “Builder Confidence Edges Up One Point in March” (3-15-11)

“After four consecutive months hovering at the same low level, builder confidence in the market for newly built, single-family homes improved by a single point in March, rising to 17 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest level the HMI has reached since May 2010, when the survey period corresponded with the final days of the federal home buyer tax credit program.”

Housing Wire – “More than one-third of CMBS loans make scheduled balloon payments in February” (3-15-11)

“Trepp, a provider of commercial mortgage-backed securities data, said 38.4% of CMBS loans made their scheduled balloon payments in February, compared to 38.7% a month earlier.”

Housing Wire – “GSEs inflated subprime balloon before it popped: Cato Institute” (3-15-11)

“the researcher paints the government-sponsored enterprises as culprits in the subprime debacle by citing data showing Fannie and Freddie acquired 40% of all newly issued private-label subprime securities issued during the housing boom years of 2003 and 2004.”

Bloomberg - “Lehman Seeks Partner on Real Estate Development Projects” (3-15-11)

“Lehman Brothers Holdings Inc. (LEHMQ) sent requests to at least six homebuilders and developers seeking partners for 75 real estate projects in 19 states, according to executives at three companies who reviewed the solicitations.”

Looking Back:

One year ago, builder confidence decreased by over 10 percent within half of a month. Sacramento home sales decreased by 26 percent from 2009. According to LPS, the U.S. mortgage delinquency rate was at 10.25%. California contributed $2.6trn to the total $5.7trn of US housing wealth lost since the peak of 2006.

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.

Freddie Mac reports mortgage rates have dropped again, and are now at 4.87%. Jobless claims decreased 5% last week, according to the Labor Department. California lawmakers are supporting a bill that would prevent servicers from foreclosing on borrowers in the process of applying for a loan modification. The House Financial Services Committee may end FHA’s short refi program.

In The News:

The Modesto Bee – “Mortgage deduction under renewed scrutiny” (3-3-11)

“There’s a hallowed rule in U.S. housing policy: If you own a home, you get a tax deduction on your mortgage interest. But there’s also a growing push to sacrifice this sacred cow, and the reasons are disparate. Some people argue that the policy should be changed because it doesn’t really encourage homeownership like it’s supposed to. Others say the government shouldn’t be encouraging homeownership anyway.”

San Francisco Chronicle - “Mortgage Rates in U.S. Drop for Third Week, Freddie Mac Says” (3-3-11)

“The average rate for a 30-year fixed loan fell to 4.87 percent in the week ended today from 4.95 percent a week ago, according to Freddie Mac. The average 15-year rate was 4.15 percent, down from 4.22 percent, the McLean, Virginia-based mortgage-finance company said in a statement.”

Housing Wire – “Jobless claims fell another 5% last week” (3-3-11)

“Initial jobless claims fell another 5% last week coming in lower than most analysts’ estimates and remaining below 400,000.”

Housing Wire – “California lawmakers revive bill that would kill dual-track foreclosures” (3-3-11)

“Two California lawmakers are moving ahead with a bill that would prevent servicers in the Golden State from foreclosing on homes when the borrower is in the process of applying for a loan modification.”

Housing Wire - “House committee votes to end FHA Short Refi” (3-3-11)

“The House Financial Services Committee voted Thursday to end two new programs that would provide assistance to troubled homeowners. If passed, one bill will end the Federal Housing Administration’s Short Refi program, which assists underwater homeowners with new FHA-insured loans.”

Housing Wire – “Home refinancings through HARP up 30% in fourth quarter” (3-3-11)

“The number of loan refinancings processed through the government’s Home Affordable Refinance Program grew by 30% in the fourth quarter, according to the Federal Housing Finance Agency.”

Looking Back:

Bruce Norris estimated that lenders may lose up to $2.1 to 3.8 trillion before all the bad loans are taken off their books. According to the MBA, mortgage application volume increased from last week. The FHFA reports that Orange County home values increased by 6.38 percent in 2009. Last year, nearly 1,400 lawsuits were filed against lenders by homeowners in 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.

Today’s News Synopsis:

In The News:

Bloomberg - “Home Prices in U.S. Decline 4% on Foreclosures, FHFA Says” (2-24-11)

“U.S. home prices fell 4 percent in the fourth quarter from a year earlier as record foreclosures sapped the confidence of homebuyers, according to the Federal Housing Finance Agency.”

Bloomberg - “Sales of New U.S. Homes Dropped More Than Economists Forecast in January” (2-24-11)

“Sales declined 13 percent to a 284,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease to a 305,000 rate. Demand dropped 37 percent in the West and 13 percent in the South.”

Housing Wire – “FHA REO inventory up 47% from one year ago” (2-22-11)

“The Federal Housing Administration held 60,739 properties repossessed through foreclosure on its books as of December 2010, up 47% from the year before.”

Housing Wire – “MERS rights upheld in largest foreclosure state” (2-23-11)

“An appellate judge in California last week upheld the rights of the Mortgage Electronic Registration Systems to the deed of trust, giving MERS the right to foreclose, according to court documents.”

Time - “Did Realtors Inflate Home Sales by 1.6 million in 2010?” (2-22-11)

“The National Association of Realtors said that existing home sales rose 2.7% in January from December, and were up 5.3% from a year ago. It was the first time in seven months that sales rose from the same month a year before. But before you put your home on the market, consider this: It appears the NAR may be inflating homes sales numbers, and not just for this January, but for years.”

Wall Street Journal – “Realtors’ Former Top Economist Says Don’t Blame the Messenger” (2-12-09)

“Mr. Lereah, who says he left NAR voluntarily, says he was pressured by executives to issue optimistic forecasts — then was left to shoulder the blame when things went sour.”

Yahoo - “Obama pushes multibillion-dollar mortgage pact: report” (2-23-11)

“The Obama administration is trying to push a settlement that could force the largest U.S. banks to pay for reductions in loan principal worth billions of dollars following breakdowns in mortgage servicing”

Bloomberg - “U.S. House Republicans Move to End Foreclosure Aid Programs” (2-24-11)

“U.S. House Republicans plan to move forward with bills that would end anti-foreclosure programs put in place by the administration of President Barack Obama, saying they are doing more harm than good.”

New York Daily News – “Payback time for first-time homeowners who took advantage of 2008 tax credit” (2-23-11)

“It sounded like a great deal: become a first-time homebuyer and pocket up to $7,500 in a tax credit. But if you bought that house in 2008 and received the credit, you’re required to start paying it back – now.”

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.

The FHFA claims 30-year interest rates averaged 4.85% in January, and home prices fell 4% year over year. House Republicans intend to end anti-foreclosure programs put in place by President Obama. The Commerce Department said new home sales decreased 13 percent in Janurary.

In The News:

Housing Wire - “Affordable housing ratings stabilized in 2010: S&P” (2-24-11)

“Ratings on unenhanced and unsubsidized multifamily affordable housing projects stabilized in 2010 thanks to the absence of bond insurance policies that previously had a negative impact on ratings, Standard & Poor’s said Thursday.”

Housing Wire – “Fed finalizes rule on jumbo loan escrow requirements” (2-24-11)

“The Federal Reserve finalized a rule that will raise the threshold requirements for when a first-lien jumbo mortgage is required to establish an escrow account to hold property taxes and insurance.”

Housing Wire – “FHFA and Freddie: Mortgage rates hovering near 5%” (2-24-11)

“The average interest rate for a 30-year, fixed-rate mortgage increased 24 basis points, hitting 4.85% in January, according to the Federal Housing Finance Agency.”

Bloomberg - “House Republicans Move to End Foreclosure Aid Programs” (2-24-11)

“Republicans plan to move forward with bills that would end anti-foreclosure programs put in place by President Barack Obama’s administration, saying they are doing more harm than good.”

Bloomberg - “U.S. Commercial Mortgage Defaults Decline as Prices Recover” (2-24-11)

“The default rate on loans for office buildings, malls and other commercial properties dropped to 4.28 percent of loan balances from 4.36 percent in the third quarter”

Bloomberg - “Home Prices in U.S. Decline 4% on Foreclosures, FHFA Says” (2-24-11)

“U.S. home prices fell 4 percent in the fourth quarter from a year earlier as record foreclosures sapped the confidence of homebuyers, according to the Federal Housing Finance Agency.”

Bloomberg - “Sales of New U.S. Homes Fell More Than Forecast in January” (2-24-11)

“Sales declined 13 percent to a 284,000 annual pace, figures from the Commerce Department showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease to a 305,000 rate. Demand dropped 37 percent in the West”

Orange County Register – “America’s most-searched housing markets” (2-24-11)

“Orange County landed at No. 17. Other noteworthy California markets high on Realtor.com’s survey of 250 markets were: Los Angeles (at No. 3); Riverside-San Bernadino (11th); San Diego (15th); and Oakland (29th.)”

Looking Back:

One year ago, the MBA reported that mortgage loan application volume decreased 8.5 percent from the previous week. Purchases of new single-family homes decreased by 11.2 percent in one month. Informa Research Services announced the average interest rate on 30-year fixed-rate jumbos dropped to 5.79%. Freddie Mac’s net losses for 2009 ended at $25.7bn.

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.

The NAR said existing home sales rose 2.7% in January. The FHA’s REO inventory has increased 47% year over year.  A California judge upheld the rights of the Mortgage Electronic Registration Systems to the trust deed, granting MERS the right to foreclose. A Federal Reserve economist predicts the government will soon provide an alternative to the national homebuyer tax credit

In The News:

NAR - “Existing-Home Sales Rise Again in January” (2-23-11)

“Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 2.7 percent to a seasonally adjusted annual rate of 5.36 million in January from a downwardly revised 5.22 million in December, and are 5.3 percent above the 5.09 million level in January 2010.”

Mortgage Bankers Association – “Mortgage Applications Increase in Latest MBA Weekly Survey” (2-23-11)

“mortgage loan application volume, increased 13.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 14.8 percent compared with the previous week. The Refinance Index increased 17.8 percent from the previous week. The seasonally adjusted Purchase Index increased 5.1 percent from one week earlier.”

Inman - “New CoreLogic market reports incorporate MLS data” (2-23-11)

“CoreLogic’s Listing and Market Activity Report — the first in a series of new products the company is developing to generate revenue from the data it receives from cooperating MLSs — provides key information including updated listings, comparable sales, property valuations, days on market, price trends and inventory.”

Housing Wire – “FHA REO inventory up 47% from one year ago” (2-23-11)

“The Federal Housing Administration held 60,739 properties repossessed through foreclosure on its books as of December 2010, up 47% from the year before.”

Housing Wire – “Freddie Mac finalizing major revamp of mortgage servicers” (2-23-11)

“Freddie Mac is in the final stages of changing how its 1,400 mortgage servicing companies handle its loans, and will implement a new scorecard measuring their performance. Furthermore, the government-sponsored enterprise is announcing that it will case review the way servicers treat delinquent borrowers, in order to ensure quality control.”

Housing Wire – “Bank failures hit 18-year high in 2010″ (2-23-11)

“The Federal Deposit Insurance Corp. held 884 financial institutions on its ‘Problem List’ as of the end of 2010, and the 157 insured banks that failed was the highest amount since 1992.”

Housing Wire – “MERS rights upheld in largest foreclosure state” (2-23-11)

“An appellate judge in California last week upheld the rights of the Mortgage Electronic Registration Systems to the deed of trust, giving MERS the right to foreclose, according to court documents.”

Housing Wire – “Fannie Mae to start grading mortgage servicers” (2-23-11)

“Fannie Mae will launch a new program for evaluating the performance of its mortgage servicers over the next 30 days. The Servicer Total Achievement and Rewards (STAR) program will gauge how servicers support the housing recovery and keep homeowners out of foreclosure.”

Housing Wire – “Fed economist pushes homebuyer tax credit alternative” (2-23-11)

“A Federal Reserve Bank of Cleveland research economist predicted Wednesday that the government would soon provide an alternative to the national homebuyer tax credit that expired in April.”

Bloomberg - “Existing Home Sales in U.S. Probably Fell in January From Seven-Month High” (2-22-11)

“Sales of U.S. previously owned homes probably dropped in January from a seven-month high, showing any recovery will take time to develop, economists said before a report today. Purchases decreased 1.1 percent from December to a 5.22 million annual rate, according to the median forecast of 73 economists surveyed by Bloomberg News.”

Looking Back:

The NAR predicts that the commercial real estate market will not recover until after 2011. In California, single family home sales decreased by 3 percent during January. The Standard & Poor’s index shows that national home prices increased slightly during December. 702 banks made the ‘Problem List’ for the FDIC in 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.

Fannie Mae and the MBA predict the housing market will begin a rebound that will last for the next two years, and Zandi predicts 4% gdp growth through 2012. IAS claims national home prices fell 0.8% during the 4th quarter of 2010.

In The News:

Bloomberg - “New-Home Recovery Seen in U.S. as Post-Super Bowl Selling Season Kicks Off” (2-8-11)

“The chief executive officers of six of the 10 largest U.S. homebuilders cited the potential of a sales comeback in the spring, traditionally their strongest season, during conference calls in the last four weeks. Housing forecasts from Fannie Mae and the Mortgage Bankers Association show the new-home market will begin a rebound that will last through at least 2012.”

Housing Wire – “Millions of homeowners still at risk as economy heats up: ASF panel” (2-8-11)

“Zandi expects GDP growth of close to 4% this year and in 2012. He also projects jobs growth in 2011 to more than double last year’s roughly 1.25 million new private sector jobs, climbing to about 2.5 million to 3 million. The unemployment rate should end 2011 south of 9%, dropping to lower than 8% by the end of 2012.”

Housing Wire – “Fed opens comment on Dodd-Frank regulation of nonbank firms” (2-8-11)

“The Federal Reserve Board has opened the public comment period on a proposed rule that, if implemented, would allow regulators to pull certain nonbank firms under the Fed’s regulatory scope by declaring them systemically important to the financial system.”

Housing Wire – “IAS: House price index drops in 4Q, despite gains in South” (2-8-11)

“Integrated Asset Services’ home price index fell 0.8% during the fourth quarter of 2010, compared to 3Q but gained 0.9% when compared to the year-ago quarter — a slight gain attributed mostly to the government’s homebuyer tax credit boost.”

Housing Wire – “Investors seen as key to stablizing housing market” (2-8-11)

“A panel at the American Securitization Forum in Orlando, Fla., said that the best buyers for distressed sales are housing investors, not owner-occupants. Further, the role of the former is seen as key to keeping the economy on track, they say.”

Housing Wire – “Dallas Fed CEO says he’ll dissent if quantitative easing returns” (2-8-11)

“Richard Fisher, CEO of the Federal Reserve Bank of Dallas, said he’s hard-pressed to imagine any type of scenario where he would vote for more quantitative easing by the Federal Open Market Committee.”

Housing Wire – “KBW finds meaningful decline in January mortgage prepayments” (2-8-11)

“Total prepayments for Fannie mortgage-backed securities dropped to a constant prepayment rate of 19.3% from more than 25% in December and 26% in November. The CPR is the ratio of mortgages prepaid in a certain time period. CPR for Freddie fell to 21.5% from 28.5% in December and 30.6% in November.”

Orange County Register – “Why lenders are wary of trusts” (2-8-11)

“many lenders will not fund into a trust. Typically if a lender will or will not do something it has something to do with either their ability to foreclose at a later date if need be, or cost. In the case of the living trust it is a case of both.”

Looking Back:

One year ago, the U.S. Treasury Department reported 66,465 permanent loan modifications over 8 months. Delinquencies on prime jumbo loans increased to 10 percent in one month. Distressed property sales increased in Dana Point and Laguna Beach. Unemployment in the U.S. construction industry increased to 24.7 percent in January.

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.

The CBIA reports total building permits issued during 2010 increased 23% from 2009. Statistics from Trulia show that owning a home is cheaper than renting one in 72% of the largest cities in the United States. Commercial property values rose 0.6% in November, according to Moody’s.

In The News:

Los Angeles Times – “Estimate of mortgage interest tax deduction’s effect on federal deficit is lowered” (1-23-10)

“$88 billion less in revenue losses are now projected over the next three fiscal years — than the committee estimated early in 2010.”

CBIA - “It’s Official: 2010 is Second-lowest Year on Record for Homebuilding in California” (1-24-10)

“CBIA said just 44,601 permits were issued statewide last year for new homes, apartments, condominiums and townhomes, up 23 percent from 2009, but down 31 percent from 2008, which had held the distinction of the second-lowest total on record with 64,962 permits issued. Records began being kept in 1954 with the lowest yearly total set in 2009 with 36,421 permits issued.”

Inman - “Cheaper to buy than to rent in 72% of largest U.S. cities” (1-24-10)

“Despite the rising number of renters across the country, it is cheaper to buy a home rather than rent one in 72 percent of the 50 largest cities in the U.S., according to an index released by real estate search and marketing site Trulia.”

New York Times – “Mortgage Giants Leave Legal Bills to the Taxpayers” (1-24-10)

“Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud.”

Housing Wire – “Moody’s CPPI rose 0.6% for November, down 4.3% since May” (1-24-10)

“The price of commercial property rose 0.6% in November, marking the third-consecutive month of gains following sharp declines for the previous three months, according to Moody’s Investors Service.”

Housing Wire – “Campbell Surveys: Strong distressed property sales bookend robo-signing debacle” (1-24-10)

“First-time homebuyer activity remained relatively strong last month, though still near historic lows, as purchasers rushed to close transactions before interest rates rise further, according to housing industry consultancy group Campbell Surveys. In December, the firm’s HousingPulse distressed property index shows these transactions make up 47.2% of the market, up from 44.5% in November and nearly matching the 47.5% peak reached in September.”

Housing Wire – “JPMorgan: Annual homes sales must average 5.5 million to absorb liquidations” (1-24-10)

“JPMorgan Securities said existing home sales need to average about 5.5 million units a year to absorb a projected 2.25 million to 2.5 million in liquidations.”

Orange County Register – “Demand for O.C. homes jumps 10%” (1-24-10)

“Demand, the number of new pending sales over the prior month, increased by 10% in the past two weeks, adding an additional 194 homes, and now totals 2,154 pending sales. That’s virtually identical to 2009 when it posted 2,146. Last year, there were 393 additional pending sales, but everybody was poised to take advantage of the $8,000 first time home buyer tax. From here, expect demand to continue to improve as the market prepares to enter the spring market, the strongest time of the year for Orange County housing.”

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.

Tom Anderson Chairman and Founder of PENSCO Trust Company (Full Bio)

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

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

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

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

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

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

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

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

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

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

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

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

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

Tom’s website is www.penscotrust.com

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

Tom Anderson Chairman and Founder of PENSCO Trust Company (Full Bio)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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