“The best way to persuade people is with your ears—by listening to them.” — Dean Rusk: Was secretary of state under Kennedy and Johnson

 

“Well, at least Fannie & Freddie didn’t blame the brokers for the foreclosure mess!” Foreclosures

Anyone seeing this headline probably did a double take: “FDIC Announces Settlement With World’s Foremost Bank.” It turns out that it is in Sidney, Nebraska – but even the initials could turn some banking heads. “The FDIC announced a settlement with World’s Foremost Bank, Sidney, Nebraska (WFB), for alleged unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission Act as well as violations of the Truth in Lending Act. The FDIC also issued its list of state nonmember banks recently evaluated for compliance with the FDICCRA

How are short sales in California going? Well, according to Realtors, not so good: ShortSaleDelays

Yesterday’s results of the 3-year note auction were strong, but not strong enough to turn the market around. It drew the highest cover ratio (an indication of demand) since November, and the yield came in at about 1.30%. Slightly lower oil prices, and no market-moving news, the 10-year note lost about .375 (3.55%) while the Dow closed up over 120 points. Overall, MBS volume held below normal.

Today, as with every Wednesday, we saw the MBA’s Mortgage Application Survey for last week. Mortgage applications increased 15.5%, with the refi number up 17% and the purchase number up 12%. “An improving job market is beginning to pave the way for an improving housing market.” Refi’s accounted for about 65% of applications, and ARM loans are up to 6% of apps.

The day’s major highlight, outside of watching oil prices (above $105 per barrel), is the second leg of the latest round of Treasury auctions with $21 billion in 10-year notes at 1:00PM EST (tomorrow is the 30-yr auction). On Friday we have Retail Sales (Feb) and Michigan Sentiment (Mar). We find the 10-yr sitting around 3.53 and MBS prices sitting around unchanged.

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HIRE A SMART DUCK

You can learn so much just by observing nature. I was having lunch at an outside table at a restaurant. It was impossible not to notice the ducks that gathered around the tables at the restaurant looking for food. The birds would wait for the people to leave and then they would flock to the tables looking for crumbs that were dropped to the floor. There were dozens of birds fighting over the scraps left behind. Every duck did the same thing; except for one.

This duck was different. Instead of waiting for the couples to leave, this duck would wait only until the food was originally delivered. At the moment the staff delivered the food, the duck would race to the table and look up at the people who were about to eat. Surprisingly, every person immediately took something from their plate and feed it to this duck. They fed the duck BEFORE they began to eat.

This duck didn’t settle for scraps and leftovers. He ate the best food off the plate. This duck didn’t fight with dozens of others. He was alone when the customers fed him.

It was truly amazing.

It made me think about the difference in real estate agents. Some will list a house, put it on MLS and hope for the best. Others will represent a buyer by simply checking the MLS to see if a suitable house is available for sale. They are like many agents in the marketplace. They are waiting for something to happen. Just like all those other ducks.

Then there are agents who will take it upon themselves to make something happen. They will diligently search for the buyer of their new listing. They will knock door-to-door looking for the perfect house for their new client who is dreaming of a new home for their family. They are like that special duck. They are not waiting for the leftovers.

Bottom Line

In all of nature, some wait for things to happen and others make things happen. When hiring a real estate agent, look for the later. Don’t settle for scraps.

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MORE BORROWERS UNDERWATER: WHY WE SHOULD CARE

Falling home prices at the turn of the year pushed more borrowers into a negative equity position, meaning they owe more on their mortgages than their homes are worth.

In Q4, 23 percent of borrowers nationwide, or 11.1 million, were holding “underwater” mortgages; that’s a collective $750 billion of negative equity, according to the latest survey from CoreLogic (NYSE: clgx). That’s up from 22.5 percent, or 10.8 million, in Q3, again, thanks to falling home prices. To make matters worse, 2.4 million borrowers have less than 5 percent equity in their homes, deemed as “near-negative” equity.

Of course negative equity is concentrated in the hardest hit states: Nevada (65 percent), Arizona (51 percent), Florida (47 percent), Michigan (36 percent) and California (32 percent). This as the consensus among housing watchers is that home prices will fall another 5 to 10 percent this year before slowly climbing back. That means negative equity will climb another ten percentage points.

So why should we care if the bulk of these underwater borrowers can still make their monthly mortgage payments? “Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties,” notes CoreLogic’s chief economist Mark Fleming. “Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish.”

Negative equity will slow the pace of home sales, no question, but it will also provide more problems for policymakers and state and federal regulators. Right now the mortgage market is at the mercy of a huge potential settlement with the state attorneys general and a whole bunch of feds, part of which will be a push for principal write down on troubled loans. With negative equity continuing to rise, the principal write down argument gains strength. I spoke with Missouri state AG Chris Koster yesterday at a conference in DC:

“I think principal write-down is the right way to go. Twenty to 25 billion dollars is a significant amount of money. The big question is are we talking about five banks, 15 banks who chip in on that fund? We don’t know the answer to that until we get through these negotiations, but we’re at the beginning of something serious that could be successful.”

But the head of the new Consumer Financial Protection Bureau, Elizabeth Warren, told a Reuters summit last week, with regards to punishing the banks with a monetary fund or fine, “I don’t think this is about a pound of flesh. I think that’s the wrong way to think about it.” She seems more interested in repairing the market than giving borrowers back equity, the loss of which may or may not have been their own doing.

My concern is that the more borrowers in a negative equity position, the more may intentionally default on their loans in order to try for principal write down. Yes, it’s the moral hazard, slippery slope argument, which I know appears to be losing some steam in Washington at least.

The negative equity issue also comes into play as regulators decide on risk retention rules and what exactly will qualify as a “Qualified Residential Mortgage.” QRM’s will be exempt from risk retention, so banks will not have to hold on to 5 percent of the risk on those loans before securitizing them. Rising negative equity bolsters the case for higher down payments for QRMs, especially as home prices continue to slide.

So yes, it’s just another new number of how a lot of borrowers look on paper. It doesn’t mean every underwater borrower will go delinquent on his or her mortgage. But it does add to risk, which this housing market does not like one bit.

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‘SPREAD THE WORD’: HOME OWNERSHIP MATTERS

The day before the National Association of REALTORS® starts its Home Ownership Matters Bus Tour at the Chicago Flower & Garden Show, REALTORS® from the Chicago area gathered at NAR headquarters Friday for a town hall-style meeting. The topic: the state of home ownership in America today.

2011 NAR President-Elect Moe Veissi, in Chicago for the kick-off, encouraged REALTORS® attending the meeting to start talking with peers and clients about how much the U.S. economy is affected by home ownership. “We need to spread the word,” he told the 100 or so REALTORS® in the audience. Key messages he asked members to share:

• The housing market makes up $4 trillion, or about 15 percent, of the total U.S. gross domestic product.
• The housing industry has led the way out of six of the last eight U.S. recessions.
• For every two homes sold in the United States, one job is created.

Veissi asked members to join in the fight by voicing their concerns to their elected officials and by sharing these statistics publicly in their community. “Let’s help the American consumer understand how vital home ownership is to a healthy U.S. economy,” he said, “and how it helps to create the thing we need most right now, jobs.”

One of NAR’s key priorities is preventing any chipping away of the mortgage interest deduction as a means of helping to reduce the federal deficit. The push comes at a time when editorial boards of major newspapers such as The New York Times and The Washington Post have come out in favor of eliminating or reducing this tax benefit, which has been in place for almost 100 years.”Home owners already pay a majority of the taxes in this country,” Veissi said.

“The deduction didn’t cause the deficit problem,” agreed Chicago Association of REALTORS® President Mab Guzman, who joined Veissi for the question-and-answer session. Rather that taking away the deduction, the government needs to look internally at how it can streamline its operations, she said. “Small businesses have been making these kind of cuts for years.”

“It seems so illogical to take away the mortgage interest deduction,” said Joe Siciliano, CRS, after the meeting. “It’s creating jobs, which is important,” said Siciliano, managing broker of Coldwell Banker Residential Brokerage in Chicago. “But also, people bought their home years ago based on this tax benefit. I feel more strongly after hearing Moe speak today that we need to keep this benefit.”

Also top of mind for members was the need to fix the financial system and free up capital for qualified buyers. “The pendulum swung too far in one direction. Now, it’s swinging too far the other way,” Veissi said.

“If we had more financing options, we would sell more real estate today,” agreed Marki Lemons-Ryhal, ABR, CRS, a team leader with Keller Williams Realty in Chicago.

Veissi said NAR strongly favors reforming “rather than eliminating” the government-sponsored enterprises that enable the secondary mortgage market to operate. “The GSEs are broken but they’re fixable,” Veissi said. “Without them, we’ll lose the system that helped many of our parents and grandparents become homeowners. If you privatize the secondary mortgage market, you eliminate the concept of the 30-year mortgage,” he said.

The Home Ownership Matters bus tour is an opportunity for NAR to engage with American consumers on these issues. The bus travels from Chicago to Denver to Portland during the month of March, with a few intermediate stops along the way. The tour’s message is simple but powerful: Home ownership matters to individuals, to communities, and to the country. We hope to see a lot of you as we travel from city to city!

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LET’S MAKE A DEAL TO HELP HOMEOWNERS

State attorneys general have launched talks with big banks accused of illegally foreclosing on homeowners with the hopes of reaching a deal that could result in more mortgage modifications, a top negotiator said Monday.

Iowa Attorney General Tom Miller has been leading a 50-state probe into mortgage servicers’ foreclosure practices since October.

The negotiations are between the attorneys general and federal agencies on one side, and the five largest mortgage servicers, which comprise 59% of the market.

The AGs did not indicate which banks they are negotiating with. However, the five largest servicers are Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500),), J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM), according to Inside Mortgage Finance.

Miller refused to confirm reports that the talks have included a proposed $20 billion settlement or a requirement that servicers provide that amount in mortgage modifications to underwater homeowners.

But the final deal could have a major impact on the housing market, making it easier for homeowners to get mortgage modifications, including reductions in the principal amount they owe on their house in some cases, Miller said.

Federal and state officials gave the mortgage servicers a 27-page opening offer late last week but Miller refused to give details of the offer, citing the ongoing negotiations.

So far, the federal government has shied away from forcing banks to offer principal reductions. Instead, the priority has been to lower interest rate payments. And several congressional efforts to pass bills allowing bankruptcy judges to modify loans have all failed.

“We realize the result we come to can have an impact on the housing market and hence the economy,” said North Carolina Attorney General Roy Cooper. “That’s why all of us at the table want it to be a positive impact.”

However, Miller also added that the first offer made to the servicers lacked specifics on the two “most important” things: a proposed settlement figure and a proposal to make way for more mortgage modifications.

The big reason it was missing was because: “We struggled with it.”

“Whatever that proposal is, it’s going to have some limitations and leave some people out,” Miller said.

The government probe of mortgage servicers followed reports that the institutions were using shoddy documentation to improperly foreclose on homeowners. That news prompted several servicers to halt foreclosures for a short period of time.

The attorneys general launched the probe in October to review improper documentation and mortgage modifications.

The government agencies involved include states attorneys general, the Department of Justice, the Department of Housing and Urban Development, the Department of Treasury, the Federal Trade Commission as well as the new Consumer Financial Protection Bureau.

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“This is the time. This is the place. This is the vastness. Right here is paradise. Always. Always.” — Byron Katie: Speaker and author of self-inquiry

 

SHORT SALES FLUSTER CALIFORNIA REALTORS

Four out of 10 California Realtors say the last short sale they handled didn’t close, and most are frustrated at how long it takes lenders to respond to offers and other inquiries.

The California Association of Realtors says a survey of 2,150 members highlights the lack of standardization among lenders, long approval timelines, and a reluctance on the part of lenders to approve short sales.

Asked in December whether their most recent short-sale transaction closed, 57 percent of California Realtors said it did, and 43 percent said it did not.

Once Realtors had submitted a short-sale agreement to lenders, 63 percent said it took more than 60 days to get a written response approving or disapproving the sale. Only 4 percent said they received a response in less than 14 days.

Nearly half (44 percent) said it took more than five business days to get a response to other types of inquiries about a short-sale property, with only 14 percent saying lenders responded within one day.

Some 64 percent of Realtors surveyed reported that they were “not satisfied” or “not at all satisfied” with how long it took to hear back from lenders. About one in five (22 percent) said they were “satisfied” or “extremely satisfied” with the timeliness of lenders’ responses.

The survey was delivered to 20,000 Realtors, and 94 percent of those who filled it out said they handled a short-sale listing or participated in a short sale in 2010.

The Obama administration has relaxed some requirements for short-sale incentives that the Treasury Department provides to borrowers and lenders through the Home Affordable Foreclosure Alternatives program (HAFA), and said it would hold lenders to stricter timelines for approving or rejecting transactions.

CAR President Beth Peerce wrote the Treasury Department and the heads of Fannie Mae and Freddie Mac in December, saying HAFA short-sale approvals “are not only few and far between, but also generally unworkable.”

When the Nevada Association of Realtors in August surveyed homeowners who’d been in foreclosure, 61 percent said they’d never heard of the HAFA program. While 10 percent of those surveyed said they’d used HAFA, only 2 percent said it did any good.

Loan servicers working for Fannie Mae and Freddie Mac signed off on 107,953 short sales in 2010, nearly double the 55,447 approved in 2009.

But the robo-signing controversy may have helped put a dent in the pace of short sales in the final three months of the year. Fannie and Freddie’s loan servicers signed off on 25,734 short sales during the fourth quarter of 2010, down nearly 13 percent from the previous quarter.

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HOMEOWNERSHIP: WHAT AMERICANS THINK

There is a growing number of people debating whether the government should continue its level of support for homeownership. Mortgage assistance is being pulled back and even the mortgage-tax-deduction is now up for debate. We want to look at how the people of this country view owning a home and the reasons they buy. Last week, Fannie Mae released the National Housing Survey. Here are the survey’s more interesting findings.

Belief in Homeownership

96% of all homeowners said homeownership has been a positive experience.

84% of Americans still believe that owning a home makes more sense than renting. Even 68% of renters believe owning makes more sense.

64% consider buying a home as a safe investment. Buying a home was considered safer than buying stocks by over three times the number of people (64% vs 17%).

2 in 3 Americans believe that lifestyle benefits of homeownership (65%) are superior to the financial benefits (32%).

Top Non-Financial Reasons to Buy a Home

Lifestyle Benefits: The broader security and lifestyle benefits of homeownership, such as providing a good and secure place for your family and children, where you have the control to make renovations and updates if you want, and in a place that’s in a community and location that you prefer.

It means having a good place to raise children and provide a good education

You have a physical structure where you and your family feel safe

It allows you to have more space for your family

It gives you control over what you do with your living space (renovations & updates)

It allows you to live in a nicer home

It allows you to live in a location that is closer to work, family, or friends

Top Financial Reasons to Buy a Home

Financial Benefits: The financial benefits of homeownership: its value as an investment (especially compared to paying rent), its value as a way to build up wealth for retirement or to pass on to your family, and the tax benefit.

Paying rent is not a good investment

Buying a home provides a good financial opportunity

Owning a home is a good way to build up wealth and pass it along to my family

It is a good retirement investment

Owning a home provides tax benefits

Owning a home gives me something I can borrow against if I need it

Bottom Line

The people of this country have always seen great value in owning their own home. They still do. We believe we should never underestimate the importance of homeownership as a crucial piece of the American Dream.

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 TIPS TO SEGMENT YOUR ONLINE AUDIENCE

In the chatter of online marketing tools — buy this, get that, need to have, gotta have — the purpose is often unclear. Sure, I suppose having all the newest tools might make you seem … newer? Cooler? More on top of trends? Who knows.

What matters is how you reach customers and homebuyers. Another thing that matters: how you communicate with those groups. This week’s column is about some old technology that easily gets forgotten in the hype and buzz: e-mail.

E-mail has been the workhouse of the Internet for ages. It predates the Web and chat rooms and bulletin board systems. It is, in technological terms, older than dirt. And it’s a fundamental part of so many of the hip new technologies.

Want a Facebook account? Your e-mail address is your login. Want a Twitter account? They want your e-mail address. Want all the Google goodies? They want your current e-mail address and then they want you to switch to one of their e-mail addresses.

E-mail in real estate

How do real estate professionals use e-mail? Certainly it’s important to open that very important communication channel with customers and use it effectively.

Some property search sites require visitors to register in order to see the search results. What happens with that e-mail address?

Some real estate blogs let you subscribe to the posts via e-mail. What happens with those e-mail addresses?

What about e-mail addresses you gather in the course of your real world networking or even your online networking? What happens to those addresses?

And the biggie: past customers. I bet most real estate professionals have the e-mail addresses of their past customers. What happens to those?

Making sense of online audiences

One of the common issues I see when I talk with real estate professionals is the tendency to group sets of e-mail addresses based on channel: “This is my list of people from my blog and this is my list of people from Facebook and this is my list of people from an open house I did last weekend.”

This can lead to confusion for both the real estate professional (“What message should I be sending to this list?”) and the customer (“Why am I getting this open house announcement for a house that’s 1,000 miles away?”).

If you currently group your collection of e-mail addresses based on the channel or source where you gathered them, try this instead:

1. Make a group of e-mail addresses that contains just people who are interested in your geography, but not necessarily interested in real estate.

These people might be ready to buy a house, but probably not. Places where you got their e-mail address might be your community-news focused blog or a Facebook page that’s more about what happens in your town than about the real estate market.

This group might be composed of locals but it could just as easily contain people who are considering relocating to your area or people who vacation in your area.

This is your “general community” group. It’s a list to focus on sharing your community and brand-building activities.

2. Make another group of e-mail addresses that contains only people who have expressed interest in buying or selling property in your geography.

These people might have registered on your property search. Or maybe they’ve contacted you directly via your blog or other social media channels. Either way, the people on this list are all explicitly interested in real estate in a geography that you serve.

This group, again, could be composed of locals or people relocating or people who are interested in buying or selling vacation property.

This is your “real estate specific” group. It’s a list to focus on your service and results.

Consider how the people move from one list to the other

Your general community group will probably be bigger. There probably will be more people interested in your community in general than in buying real estate in your community.

You will send these people information about your town and likely make mention of the fact that you do real estate, and so on. If you hammer hard on real estate, people will leave this list.

If you include a simple method for them to get into a different list that focuses on real estate, then when they’re ready they will flow into your real estate-specific list.

Once someone moves into your real estate-specific list, hopefully you will work with them and help them buy or sell a house. Once that’s happened, the person really doesn’t need to be on the real estate-specific list. Provide an easy way for them to migrate back to the general community group.

If you focus on these two groups: people interested in your community and people interested in real estate in your community, then you can untangle the mess of communication. Remembering that someone may be a member of both at the same time and that people will naturally flow their attention from one group to the other is important.

Oh yeah, and stating the obvious: Don’t send e-mail to someone who didn’t specifically ask you to send them e-mail.

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 5 FACTORS THAT AFFECT HOME VALUES

Location has long been touted as the most important variable affecting the value of residential real estate. Recently, the S&P/Case-Shiller Home Price Indices suggested that location is still a front-runner in terms of determining valuation.

In October 2010, four cities in the 10-city composite index registered price gains from the previous year: Los Angeles (3.3 percent), San Diego (3 percent), San Francisco (2.2 percent) and Washington, D.C. (3.7 percent). In many cities around the country, like Las Vegas and Detroit, home prices continue to decline.

The front-runners listed above are coastal port-of-entry cities. Three are in California. However, the inland cities of California — Fresno, Merced, Bakersfield and Riverside, to name a few — are not experiencing the same relatively good price performance. They are still plagued with a surplus of foreclosure inventory and high unemployment.

A large number of foreclosures and short sales in an area can bring the overall price of homes down. It’s difficult for appraisers to find nondistressed comparable sales to support higher prices because of the lack of conventional, nondistressed sales. However, if there are only a few distressed sales in an area, the distressed sales will probably not have much if any effect on the valuation of conventional sales.

Location within an area can also influence home values. Some market niches in an area are doing better than others. A niche need not be a physical location. It could be a price range. For example, well-priced listings in the $1 million to $1.4 million price range in Piedmont, Calif., have been selling relatively quickly, sometimes with more than one offer. The $3 million and above price range has not been doing as well.

HOUSE-HUNTING TIP: Today’s buyers are usually willing to pay more for homes that have a good “walk to” score. That is, they are within walking distance of shops, parks, cafes and transportation. Buyers with children often prefer a location close to schools. However, the value of a home might be diminished if it is located too close to a school — such as across the street.

Proximity to a major metropolitan area usually has a positive impact on prices, particularly when combined with a good public transportation. Employment opportunities in the area also boost home prices.

Supply and demand are up there with location in terms of impact on price. A surplus of unsold inventory gives buyers choice and a lack of a sense of urgency. Too little inventory relative to demand has the reverse effect. This usually puts an upward pressure on prices. Sellers in sought-after neighborhoods who put their homes on the market when there’s little for sale often sell for more than they anticipated.

Buyers take the condition of the property into account before they make an offer to purchase. A home with a lot of deferred maintenance might put off buyers altogether, particularly in the current market. If buyers make offers on homes that have been neglected, they will factor work that needs to be done into their price.

Deferred maintenance can be corrected. Incurable defects can put a bigger damper on price, particularly in a down market. An incurable defect, like being located next to a freeway or on a busy street, is something that can’t be corrected. You’ll have to live with it.

In a hot market, buyers often overlook these defects because prices are rising and buyers are more willing to make compromises. In a slow market, with no urgency to buy immediately, buyers are pickier. They take their time and buy when they find the right house.

THE CLOSING: Price accommodations need to be made to overcome buyers’ objections to incurable defects.

“We are at our very best, and we are happiest, when we are fully engaged in work we enjoy on the journey toward the goal we’ve established for ourselves. It gives meaning to our time off and comfort to our sleep. It makes everything else in life so wonderful, so worthwhile.” — Earl Nightingale: Was a motivational speaker and author

NEWS & HEADLINES

Fannie Mae recently sent out requirements delineating what 1003 information must be provided to the agency during loan delivery, including the loan origination company’s (not the branch, or state-level) unique NMLSR identifier: FannieNMLSR

Factory Orders increased 3.1% in February, the biggest gain since September 2006, after an upwardly revised 1.4% gain in December. Ex-transportation orders advanced 0.7%, propelled by a jump in demand for non-durable goods that may reflect higher commodity prices.

Fed Policy Makers Signal Abrupt End to Bond Purchases in June. Federal Reserve policy makers are signaling they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets.

Freddie Mac: 30-Year Fixed-Rate Mortgage Drops for Third Consecutive Week, with the 30yr fixed rate averaging 4.87%, down from 4.95%. The 15yr FRM averaged 4.15%, down from 4.22%. the 5YR ARM averaged 3.72%, down from 3.8%,and the 1yr ARM averaged 3.23%, down from 3.4%.

Rates have been volatile for the last few days. On Wednesday the 10-yr worsened by about .375 and closed with a yield of 3.46%. ADP numbers, Jobless Claims, Productivity numbers, the announcement of next week’s 3, 10, and 30-yr auctions, MBS prices worsened Wednesday and again yesterday (losing roughly .5 in price).

The markets are focused on the same things that are garnering headline news: higher oil prices, the ongoing turmoil in the Middle East and Africa, and comparisons between Charlie Sheen’s and Moammar Gadhafi’s rants. The favorable economic news helped stocks yesterday, and after yesterday’s closing 10-yr yield of 3.57%, one might expect a little bounce with the unemployment data but with oil still moving up, and now over $103 per barrel, things are dicey.

Today we learned that Nonfarm Payrolls for February were up 192,000, about as expected, and there were back-month revisions of over 50,000. Private payrolls were up 222,000, and the headline unemployment rate dropped to 8.9%. The fixed-income markets didn’t really do much on the news, with the 10-yr sitting around 3.56% and mortgage prices not moving much from Thursday’s close.

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TEN SECRETS TO SAVING

Here are some tips you can share to your buyers to help them with saving.

Cheap is chic, frugality is in fashion, and Americans have sworn off their spending addiction. In a replay of 2010, their top resolution for 2011 is to save more money. Americans fell off the wagon. This year, consumers aim to save an average of $2,600, a far cry from their average goal of $14,000 in 2010. The reason: many of them didn’t meet their ambitious savings target.

1. Take money off the top of your salary for retirement or some other goal.
2. Start now. Don’t wait till you make more money. The more you make, the more you spend. Start small.
3. Check out the How much will my savings be worth?  calculator to see how even $100 per paycheck will add up over time.
4. Write down your goals, which makes them more real. Be specific. “Saving for the future” is admirable but vague. Pledging to save $2,000 for a vacation to Cancun is likely to get you there.
5. Set up an account for each goal – education, vacation, car, computer – or for large, recurring expenses, such as insurance premiums.Deposit your paycheck into your savings account and transfer money as you need it (don’t exceed the number of transfers you are permitted per month).
6. Subtract your credit purchases from checking right away so that you’re not surprised when you get the bill.
7. Toss spare change into a glass jar on your desk or dresser and watch your money grow. I once ran into a fellow who told me that he makes a habit of squirreling away spare change and found money (like a quarter you may pick up while standing in line somewhere). His stash adds up to about $1,000 per year.
8. Give yourself an instant reward. Each time you brown-bag your lunch instead of eating out, toss the savings into your cash jar.
9. After you pay off a loan or a bill, keep writing the check and send it to a savings or investment account.
10. Head start. Getting into the savings habit is a matter of mind over money. But it helps to have some cash, too. Fortunately, most of us will get a head start this year with the 2% cut in the payroll tax – which could mean as much as $2,136, depending on your income. Check out this article that shows you how to save $50 a day on everything from mutual fund fees to your next glass of wine. That adds up to $18,250 per year.

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 OVERLOOKED TAX DEDUCTIONS FOR REAL ESTATE PROFESSIONALS

Every year, thousands of real estate professionals pay more tax than they need to because they fail to take all the deductions to which they are legally entitled. The Internal Revenue Service will never complain if you don’t claim all the deductions you can. It’s up to you and your tax preparer to figure out what you can deduct, keep proper records, and claim deductions on your return. Every dollar in deductions you fail to take can cost you 40-50 cents in extra taxes — money the IRS is happy to keep.

Two of the most often overlooked deductible expenses arise from doing business from your home.

Home-office deduction

Probably the No. 1 deduction real estate pros miss is the home-office deduction. Many erroneously believe they don’t or can’t qualify for this deduction. Untrue. Almost any real estate agent or broker who works as an independent contractor can qualify for the home-office deduction.

You can qualify for this deduction if you have a home office that you use exclusively and regularly for administrative or management activities for your real estate business, and you have no other fixed location where you regularly perform such activities.

Administrative and management activities can include, but are not limited to:

• keeping books and records
• setting up appointments
• paying bills
• maintaining client databases or contact lists
• reviewing real estate publications; or
• engaging in real estate continuing-education activities

Office expenses in the home

Many real estate pros believe that they can’t deduct any expenses they incur while working at home unless they qualify for the home-office deduction. This is a myth that has cost many real estate pros valuable deductions.

Even if you don’t qualify for or take the home-office deduction, you can still take tax deductions for expenses you incur while doing business at home. These are expenses that arise from the fact that you are doing business, not from the use of the home itself.  These include:

Telephone Expenses (You can’t deduct the basic cost of a single telephone line into your home, but you can deduct the cost of long-distance business calls and special phone services that you use for your business (such as call waiting or a message center). You can also deduct the entire cost of a second phone line that you use just for business, including a mobile phone.)

Business Equipment and furniture (The cost of office furniture, copiers, fax machines, and other personal property you use for your business and keep at home is deductible, whether or not you qualify for the home-office deduction. If you purchase these items specifically for your real estate business, you can expense them (deduct them in one year) under Internal Revenue Code Section 179, or depreciate them over several years.)

Supplies (Supplies for your real estate business are currently deductible as an operating expense if they have a useful life of less than one year. Otherwise, you must depreciate them or expense them under Section 179.)

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HONESTY IS THE BEST POLICY

For years, many buyers weren’t honest about their income and some loan officers didn’t care. The loans were bundled by Wall Street and sold to investors who were told anything but the truth about their value. For years, some real estate professionals prodded appraisers to move that appraisal up “just a bit” and most sellers thanked them for it. The housing bubble was created on a bed of dishonesty. I’m not saying that any group was malicious in their intent. Everyone probably believed that it would all work out in the end. But, it didn’t. Instead, we were faced with the largest housing collapse since the Great Depression.

A market built on so many half-truths couldn’t continue to grow. Its foundation was rotten. Governmental regulation has forced most parties to rethink the way the housing industry can survive. A person given a mortgage must now prove they have the capability to repay it. An appraiser is held to a higher standard as they determine values. Has the pendulum swung too far? Perhaps. But, something needed to be done.

That brings us to today. Let’s make sure that we demand honesty from real estate professionals in everything we ask them to do. Buyers must insist that the loan officer determines the amount of mortgage they can actually afford. Sellers must make sure they are given an honest estimate of their home’s value in today’s market when listing. Remember to reward the person who has the courage to tell you what you need to know not the one who is telling you what you want to hear.

Honesty is the only thing that will bring back the housing market.

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WATCH YOUR WORDS IN LISTING ADS

The wording you choose in the ad for your listings is important if you want it to grab the right buyer attention.

A study by the University of Guelph in Ontario analyzed the wording of more than 20,000 Canadian home listings and found that a listing’s phrasing can influence a home’s sale price as well as the length of time it took for the home to sell.

For example, when the listing’s ad incorporated words like “beautiful” – rather than “move-in condition” – the sale price was influenced by 5 percent or more, as much as $15,000 on a $300,000 house.

Other words that reflected “curb appeal” or the attractiveness of the home, such as good neighborhood or excellent upkeep, also were found to help the property sell faster than homes that were described as “value” and “price,” the study found.

“There’s usually something that can be said in a positive way which will force a buyer reading an ad to see opportunities,” says Catherine Lindstadt, a licensed associate broker at Prudential Douglas Elliman Real Estate. “It’s important to help a seller elaborate on their home’s assets with details and to give the buyer a visual.”

Instead of saying “spacious,” she prefers key words such as “open floor plan,” “vaulted,” or “high ceilings.”

A University of Texas at San Antonio study found in analyzing agents’ comments left on the Multiple Listing Service that comments that state facts about a home also are associated with increased selling prices.

“Buyers are attracted to amenities that can be verified–new roof, new carpeting, updated kitchen, beautiful landscaping, golf course community, lakefront, waterfront, gated community,” says Marie Montchal, a licensed associate broker and senior vice president of relocation and ancillary services at Daniel Gale Sotheby’s International Realty Relocation Center.

But beware of the word “new,” she says. “I know that ‘new kitchen,’ ‘new bath,’ ‘new roof’ and ‘new windows’ is inviting, but I have a guideline of two to three years, or ‘newer’ if it’s older than that,” she says.

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Good Thursday Morning Team, 

I found the perfect blog to share with you this morning. As we all know there is no “I” in TEAM, and this blog reflects all aspects of a working team, and what it takes to continue great working relationships. With this said, my team and I are very appreciative of the working relationships we’ve developed with everyone we work with. We’re ready to work for you! So if you’ve got questions, concerns, or need a pre-approval, open house flyer, or want to find out if and how RPM can overcome other lender hurdles call me! Speaking of Open House Flyer – let me know if you’re in need of a co-branded open house flyer for this upcoming weekend. Have a great Thursday, and again, call me, lets talk about how to maintain success not only the new month of March but for 2011 as a whole.

“The first and best victory is to conquer self.” – by Plato

 

It Takes A TEAM

Today, people say: “It takes a village to raise a child”. The realities of today’s life (two family incomes and such) have extended a family to lean on others (neighbors, relatives, teachers, etc.) to protect and teach our young people about culture, history and acceptable behaviors. Teams, because of their ability to provide specialized solutions to problems, have often proved to be more efficient deliverers of information.

In real estate today (maybe more than ever), it also takes a team. As with a basketball team, each member needs certain skill sets and proper coaching on how to weave the different skills into a cohesive unit to achieve the desired outcome. The evolution of how things work has created a necessity of excellent communication between all the players. The needs of buyers and sellers have developed an even broader need for new members of a great team.

A great working relationship between an agent and a loan officer is an obvious connection. Changing mortgage guidelines, appraisal challenges and qualification standards requires everyone working together. But, there are so many others whose expertise may be needed to properly advise today’s clients.

An accountant

One of the reasons people buy a home is that they hear of the tax advantages. What really are they? How will the purchase affect my monthly cash flow? Should we adjust our exemptions with our employer? What about home repairs and depreciation? What about parents who gift money to their kids…is there a smart way to do it?

And for sellers, especially people who may not be buying a new home, what are the consequences of their sale? Capital Gains Tax? Can/should they consider “gifting” proceeds to relatives? Long term health care? Life Insurance? That leads to…

A financial planner

How does buying or selling real estate impact cash flow and long term savings and planning?

Attorneys

Divorce attorneys, estate attorneys, elder care attorneys and even bankruptcy attorneys have a role in many transactions these days. Choices made without their counsel can have very damaging repercussions.

Home Inspectors, Termite Companies and Home Improvement Contractors

These professionals protect customers from nightmares, or explain the costs associated with preventing or curing problems.

Making a decision to buy or sell a home has far reaching effects. To think your real estate agent or loan officer is an expert in everything is not prudent. However, aligning yourself with a professional who surrounds themselves with other professionals is extremely wise. Make sure the people you work with have a network of related experts that you can tap into. You need to be represented by a TEAM!

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Initial claims unexpectedly decreased by 20,000 to 368,000, the lowest level since May 2008, and stronger than the expected rise of 9,000. Continuing claims declined by 59,000 to 3.774 million. For three of the last four weeks, claims have remained under 400,000, widely considered the point in which the economy is gaining more jobs than it’s shedding. New claims figures have been volatile in recent weeks due to unusually severe winter weather in January, however a Labor Department economist said there were no unusual factors in the latest week’s data.

ISM’s nonmanufacturing purchasing managers’ index edged up to 59.7 in February from 59.4 in January, stronger than the expected 59.0. The business activity/production index increased to 66.9 from 64.6 in January, new-orders slowed to a still-high 64.4 last month from 64.9, and the employment index rose to 55.6 from 54.5. Non-manufacturers are paying more for inputs, especially energy products. The ISM’s prices index increased to 73.3 in February from 72.1.

Nonfarm business productivity rose at a 2.6% annual rate in 4Q2010, the same rate as previously estimated, and stronger than the expected 2.2%. Unit labor costs fell at a 0.6% annual rate, lower than the forecast a 0.4% drop. This is favorable news for the bond market as rising productivity and tight wages help keep inflation down, even though not always welcome by workers.

Treasury 10-Year Notes Touch One-Week Low as Employment Data Signal Growth. The 10-year note is down 20/32 with the yield increasing 0.07 percentage points to 3.54%, the highest since Feb. 22. Although MBS prices are lower by 10/32 on 4.5% 30yr coupons, their yields are tightening to USTs. The Fed is scheduled to buy $6 – $8 billion of UST’s maturing between 2018 to 2021 today as part of QE2.

Bernanke Says Stronger Recovery Would Reduce State Woes relating to the possibility of widespread state and municipal bond defaults due to lower tax receipts and cash-strapped local governments. Bernanke said risk “remain elevated, they have been looking somewhat better recently, presumably reflecting expectations of continuing improvement in the finances of states and localities.” “Because the pace of near-term economic growth expected by most forecasters is relatively modest given the depth of the downturn, some time will likely be required before state and local fiscal conditions return to something approximating normal,” Bernanke said that while it’s “possible” U.S. states could pose a risk to the financial system, the Fed won’t purchase state debt. “While states are facing very tough financial conditions, at least as long as the recovery continues, they are seeing higher tax revenues and that will at least be helpful to some of them,”

Trichet Says ECB May Raise Rates, Show ‘Strong Vigilance’ European Central Bank President Jean-Claude Trichet said the ECB may raise interest rates next month to fight accelerating inflation pressures.

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HOME PRICES: THE DOUBLE-DIP IS NEAR

On Tuesday, we found out that home prices were near their post-bust lows. Two days later the government reported that January saw a double-digit dip in the number of new homes sold.

Then Robert Shiller, the Yale economist and co-founder of the S&P/Case-Shiller home price indexes, dropped this bomb: “There’s a substantial risk of home prices falling another 15%, 20% or 25%,” he said.

Baker looks at the ratio between local home prices and annual rents to judge whether markets are overvalued. If the median-priced home sells for more than 15 times the median annual rent, there’s a good chance prices may come down.

On a national level, Shiller and other economists compare home price changes with income growth over the years. Before the bust, home prices had been outpacing earnings since the late 1990s.

Just to get that back to a normal ratio — which we last saw in 1998 — home prices would have to drop another 15%, according to Anthony Sanders, a director of Real Estate Entrepreneurship at George Mason University.

“Even after the bubble burst, the ratio of income to home prices is still way too high,” he said.

Naturally, many disagree with these assessments. Karl Case, who co-founded the home price index with doom-sayer Shiller, believes that the market will “bounce along the bottom all year.” If that’s the case, buyers who take the plunge now shouldn’t expect big profits if they sell in the next few years, but they shouldn’t have to take a major hit either.

Besides, a home purchase is more than a potential investment, especially for families planning to stay put for a while. The big plus for them is the pleasure of living in their own homes.

Despite the gloom, many Americans remain confident about home buying. A survey released Monday by Fannie Mae revealed that 65% of people believe it’s a good time to purchase, with 78% expecting prices will rise or remain the same over the next 12 months.

And buyers may take heart from some positive recent indicators, such as an up tick in the sales of existing homes in January; a drop in vacant rental homes; and more investors snapping up properties.

There’s also been an upswing in the number of high-end homes — those costing more than $750,000 — being sold, according to Yun.

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 MORE HOME OWNERS FORECLOSE BY CHOICE

A growing number of home owners whose homes have dropped drastically in value are deciding to stop paying their mortgage and walk away from the property, even though they can afford to keep making the payments–a move known as strategic default.

The exact number of strategic defaults is unknown. A study conducted by the Federal Reserve Board showed that half of home owners who walked away from their home owed twice what their house was worth.

From celebrities to prominent business people to the average home owner, strategic default is a growing option more home owners are taking. For example, Morgan Stanley walked away last year from a $1.5 billion mortgage on five buildings in San Francisco despite record-breaking profits in 2009.

For some, strategic default has spurred a debate over ethics.

“Most people considering strategic default come to me and want my permission,” says Ronald Kaniuk, a foreclosure defense lawyer. “People who cannot pay their mortgage are apologetic. For people who can afford their mortgage or can just barely afford their mortgage and see it as a losing investment, they want absolution.”

But the stigma attached to strategic defaults is influenced by how many other people are doing it, says Luigi Zingales, an economist and professor at the University of Chicago’s Booth School of Business.

“Once you think it’s socially acceptable, it becomes easier to do,” Zingales says. But Zingales cautions home owners that strategic defaults hamper neighbors’ property values and can affect the home owner’s credit scores. Plus it can become a question of ethics–they are breaking a commitment they made to pay back the mortgage.

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4 WAYS TO GET A HOME IN SHOW-SELLING SHAPE

Make your home stand out in a crowded real estate marketplace. Housing experts offer some tips for sprucing up a home to get it ready to sell.

1. Create curb appeal. Here are some easy, big impact ideas: Paint the front door, pick a new color for the exterior trim, fix any old shutters, and make sure the path from the driveway is clear to the front door. Also, remove any overgrown plants and replace them with low-growing shrubs and perennials.

2. Fix the flaws. Fix everything, they say, including broken joints, cracks in walls or the foundation, and recaulk the bathroom tub, if needed. “If the little things are not done, people will think, what else is not done?” says Steve White, the owner of Handyman Connection in Elmsford, N.Y.

3. Paint. “Paint is the greatest single thing you can do and it’s the most cost effective,” says David Sanders of Sanders Properties in Nyack, N.Y. “Use light, cheery colors. People don’t want to walk into a dark, dreary room.”

4. Add some new bling. Interior designer Nancy August from Piermont, N.Y. says just swapping out the home’s hardware for new can quickly freshen up a home. For example, new hinges, doorknobs, drawer pulls, and light switches and fixtures can quickly transform a dated room, particularly in a dated bathroom.

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 OFFICIALS DISAGREE ON PUNISHMENT FOR MORTGAGE MESS

Even as state attorneys general and regulators in Washington approach the end of their investigation into abuses by the nation’s biggest mortgage companies, deep disputes are emerging over how much to punish the banks as well as exactly who should benefit from a settlement.

The newly created Consumer Financial Protection Bureau is pushing for $20 billion or more in penalties, backed up by the attorneys general and the Federal Deposit Insurance Corporation.

But other regulators, including the Office of the Comptroller of the Currency, which oversees national banks, and the Federal Reserve, do not favor such a large fine, contending a small number of people were the victims of flawed foreclosure procedures.

As the negotiations grind on, there are signs that the banks still have not come to grips with the problems plaguing the foreclosure process. These problems burst into view last fall with accounts of so-called robo-signers processing thousands of foreclosures at a time without the required legal safeguards. The resulting furor prompted the attorneys general and other government officials to step in. Some banks suspended foreclosures to review their processes before resuming.

The acting comptroller of the currency, John Walsh, testified last week that while there were widespread problems with documentation and oversight of law firms and other crucial links in the foreclosure chain, only a “small number of foreclosure sales should not have proceeded.”

Despite skepticism on the part of the comptroller’s office, other regulators would like a broader plan to help pay for modifications of mortgages that are delinquent or in default, even if homeowners cannot point to a specific example of wrongdoing on the part of servicers. In other cases, the money might be used to help mortgage holders whose loan principal exceeds the home’s current value.

What’s more, the Obama administration, as well as the F.D.I.C., sees any broad settlement with the servicers as an opportunity to do more than just fix the foreclosure process. They want to stabilize the housing market, where prices are continuing to decline, and try to help bolster the economic recovery, which is facing newer threats like higher oil prices.

Some two million American homes are in foreclosure, a third of which are vacant. Another two million households are behind on their payments and facing the prospect of foreclosure this year. To make matters worse, roughly a fifth of the nation’s home loans exceed the value of the underlying house, raising the risk that homeowners will simply walk away, further weakening the housing market.

Right now, the Obama administration argues, the housing market is facing the worst of both worlds – a big back-up in foreclosures as procedures are reworked, and a similarly long wait to get a mortgage modification in which the principal or the interest rate of the loan is lowered, easing monthly payments.

Click Here For The Entire Article

 

Timothy Geithner: Wind down Fannie Mae and Freddie Mac. Treasury Secretary Timothy Geithner told Congress yesterday that they must proceed with housing finance reform legislation,  including winding down of Fannie Mae and Freddie Mac,  within the next two years or else risk another financial crisis.   “The administration is committed to a system in which the private market – subject to strong oversight and strong consumer and investor protections – is the primary source of mortgage credit,” Geithner said in his prepared opening statement. “We believe the government’s primary role should be limited to several key responsibilities: consumer protection and robust oversight; targeted assistance for low- and moderate-income homeowners and renters; and a targeted capacity to support market stability and crisis response.”
 
Values are going up! At least farmland values – they have doubled, on average, in the last 10 years! Given all the thousands of banks that lend on farm land. The FDIC will host a half-day symposium to discuss farmland value issues, titled “Don’t Bet the Farm: Assessing the Boom in U.S. Farmland Prices,” on March 10th in Virginia. The worry is, of course, about a farmland bubble.

While we are chatting about the FDIC, commercial banks and savings institutions insured by it reported an aggregate profit of $21.7 billion in the fourth quarter of 2010, a $23.5 billion improvement from the $1.8 billion net loss the industry reported in the fourth quarter of 2009. It is the sixth consecutive quarter that earnings registered a year-over-year increase, and had four straight quarters of positive earnings.” Apparently 62% of all institutions reported improvements in their quarterly net income from a year ago. Note that as has been the case in each of the past five quarters, reductions in provisions for loan losses were responsible for most of the year-over-year improvement in earnings. You can see the numbers for yourself at FDICShiningStars

Here is a list you don’t want to be on: the FDIC’s orders of administrative enforcement actions taken against banks and individuals in January. The FDIC processed a total of 61 matters in January, with 24 consent orders, 4 removal and prohibition orders, 20 civil money penalties, 2 prompt corrective actions, 8 orders terminating consent orders and orders to cease and desist, and 3 orders terminating supervisory prompt corrective action directive. Visit the FDIC’s Web page at InTroublewiththeFDIC 

 Whether it is too much hassle to obtain a loan, or no one likes rates, buying with cash on the courthouse steps, or the expected rate of return on real estate is better than the 0% at the bank, about 31% of California home sales were paid for with cash in January. DataQuick points out that it beats December’s number of 28.9% and 27.8% share a year ago. That helps liquidity, but doesn’t directly help those in the mortgage biz.

The FHFA has a number of choices regarding HARP. “We see the following four broad choices for FHFA regarding HARP: Let the program expire, extend the program as is until the HAMP expiration date (December, 2012) with some minor operational adjustments, extend the program for a short period (6 months) and require lenders to demonstrate that they have taken action to improve the effectiveness of the program before they extend it for longer (another 1 year), or extend and expand the program as recommended by MBA.” Merrill evaluated each of the options and looked at the key drivers for each of these choices. “We think that the simple extension is the most likely scenario but from the policy perspective, we think that FHFA should use this opportunity to push for increased focus by lenders to improve effectiveness.”

Yesterday, Ben Bernanke said that he doesn’t see unemployment return to “normal” for years. He also sees “temporary inflation gain from commodity prices,” and that the “housing sector remains exceptionally weak.” “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.” His comments did not shake up the markets too much, nor did the economic news that came out. Construction Spending dropped .7%, and the ISM Manufacturing number came out at “61.4%” which was as expected and up for 19 months in a row. But unrest is still very real – gold is up near record highs, and oil prices continue upward – and that sent stocks down while fixed-income prices moved back to unchanged during the day. The 10-yr closed out at 3.41% and MBS prices finished Tuesday at Monday’s levels.
 
This morning we had the MBA index show a decrease of 6.5% , with refi’s down 6.5% and purchases down 6.1%. The refinance share of mortgage activity stands at about 65%, and the ARM share of apps sits at 5.5%.
 
Today is a new day, although once again Chairman Bernanke will head to Capitol Hill to repeat his Semiannual Monetary Policy Report, this time to the House Financial Services Committee beginning at 9AM CST. The February ADP number was released, showing private payrolls were up 217,000. Last month, as has happened many times since ADP numbers started coming out, the numbers had little predictive ability for the official employment numbers that come out two days later. But the ADP numbers show that small business employment has increased every month for the last year, which does point to a trend. Later we’ll have the Fed’s Beige Book with economic anecdotes from around the 12 Districts in preparation for the March 15 FOMC meeting. The 10-yr’s yield is about 3.44% and MBS prices are down about .125.

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FOR BUYERS: THE FINANCIAL OPPORTUNITY OF A LIFETIME?

We often point out that a buyer should be more concerned about the COST of a home rather than the PRICE. Price obviously is a component of cost. However, unless you buy all-cash, you must also be concerned about the financing of the purchase. The price and the financing together determine the cost of a home. Today, we want to look at only the financing piece.

An opportunity exists today because of recent government involvement; an opportunity that may never again be available in our lifetimes. There has been much discussion about what role the federal government should have in supporting homeownership. We will leave our opinions on the debate for another time. However, we want to alert you to two advantages available to a purchaser today that may disappear in the future:

Historically low interest rates
The ability to lock in these rates for thirty years
 

Interest Rates
Because of the financial crisis, the government stepped in and instituted a series of programs which pushed mortgage interest rates to historic lows. If we look at 30 year mortgage interest rates before and after government intervention we see the impact these programs had.

According to Freddie Mac, from 2006 to the start of the financial crisis (the fall of 2008), the average rate was 6.29%. Since then, the average rate has been 4.92%.

A purchaser can still get a 30 year-fixed-rate-mortgage at approximately 5%. However, interest rates this low may soon disappear. The government has questioned its role in supporting homeownership. In the administration’s REFORMING AMERICA’S HOUSING FINANCE MARKET: A REPORT TO CONGRESS  they are very strong in voicing their thoughts on this issue:

             …our plan also

dramatically transforms the role of government in the housing market. In the past, the government’s financial and tax policies encouraged housing purchases and real estate investment over other sectors of our economy, and ultimately left taxpayers responsible for much of the risk incurred by a poorly supervised housing finance market.

Going forward, the government’s primary role should be limited to robust oversight and consumer protection, targeted assistance for low- and moderate-income homeowners and renters, and carefully designed support for market stability and crisis response…

Under our plan, private markets…will be the primary source of mortgage credit and bear the burden for losses.

What are the probable results of this decision?

The Royal Bank of Scotland:

“The (government) currently provides 95% of housing finance in the U.S.; any reductions of their involvement in supporting mortgages mean

interest rates will have to go up to induce private lending.”

AnnaMaria Andriotis, writer for SmartMoney:

“In the proposals were changes that will mean more expensive mortgages, with higher fees and,  probably, higher interest rates, larger down payments and, in the near term, fewer lenders to choose from.”

The day of a 5% rate seem to be coming to an end.

Locking in a rate for thirty years

We must also realize that having the ability to lock-in a rate for 30 years may soon be a thing of the past.

There are a growing number of people who think that our mortgage industry should imitate those of other industrial countries around the world. If we do start limiting government support for the mortgage process, the 30-year-fixed-rate mortgage may disappear. Other countries, like Canada, only allow a purchaser to lock in a rate for a five year term. After that, the borrower must renegotiate a new mortgage at current rates. Could that happen here? Mark Zandi, Chief Economist of Moody’s Economics.com addressing the administration’s recent report:
“A private system would likely mean the end of the 30-year fixed-rate mortgage as a mainstay of U.S. housing finance. A privatized U.S. market would come to resemble overseas markets, primarily offering adjustable-rate mortgages. Based on the experience overseas, the fixed-rate share in the U.S. would decline to an average of between 10% and 20% of the mortgage market compared with a historical average of closer to 75%.”

Bottom Line

The COST of a home is dramatically impacted by the mortgage component. Today, we can get a 5% mortgage and lock it in at 5% for the next thirty years!! Both of these opportunities may disappear in the future. You should take this into consideration if you’re looking to purchase a home.

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CONSUMER GROUP DEFENDS LOW DOWN PAYMENTS
Full underwriting and reasonable debt-to-income ratios are a better way to “get back to basics” in mortgage lending than requiring homeowners to make down payments of 10 to 20 percent, the Center for Responsible Lending argues in a policy brief.

The Obama administration’s proposal to shrink Fannie Mae and Freddie Mac’s role in mortgage markets calls for higher down payment minimums heading toward 10 percent. Lawmakers are drawing up their own plans that could be even more drastic.

While the Federal Housing Administration’s 3.5 percent minimum down payment requirements remain in effect for now, underwriting standards have been tightened and premiums raised in an effort to reduce FHA’s market share. Some lawmakers advocate raising FHA down payment minimums to 5 percent.

Mandating larger down payments would harm the economy, housing markets and middle class families, Center for Responsible Lending lobbyist Susanna Montezemolo argues in a policy brief.

Low down payments have been a “significant and safe part of the mortgage finance system for decades,” Montezemolo says, with more than 27 million mortgages taken out between 1990 and 2009 with down payments of less than 20 percent.

That number — which excludes FHA and VA loans — represents nearly a quarter of loans purchased by Fannie Mae and Freddie Mac during that period, and 13 percent of all mortgage originations.

Those loans generally performed well, producing limited losses for lenders, investors and taxpayers, while expanding the middle class, Montezemolo maintains. It was risky loan terms and weak underwriting standards that drove record defaults in subprime lending, she argues.

If homebuyers are required to put 10 to 20 percent down when they take out a mortgage, that will shrink the pool of eligible homebuyers a lot, with only marginal improvements in loan performance, Montezemolo writes.

Crunching the numbers, she figures it will take a family that saves $3,000 a year 14 years to save up enough for a 20 percent down payment on a $172,100 home. That’s a savings rate of 7.5 percent a year for an average middle class family with about $50,000 in annaul income — well above the current 5.8 percent savings rate for U.S. households.

Homeownership “remains a key driver of personal and national economic prosperity, and will be fostered by responsible low down payment loans,” Montezemolo concludes. She suggests mortgage loan performance will improve under new origination standards in the Dodd-“Frank Wall Street Reform and Consumer Protection Act, without having to raise down payment requirements.

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 HUD RAMPS UP GRANTS TO FAIR HOUSING GROUPS

Federal housing regulators are boosting grant funding by 48 percent to fair housing groups and nonprofit agencies that educate the public about housing and lending discrimination laws and help catch violators.

The U.S. Department of Housing and Urban Development today awarded $40.8 million to 108 fair housing organizations and nonprofit agencies in 36 states and the District of Columbia through HUD’s Fair Housing Initiatives Program, up from $27.6 million last year.

The grants are used to investigate allegations of housing discrimination, educate the public and the housing industry about their rights and responsibilities under the Fair Housing Act, and to promote equal housing opportunities.

Most of the money — $28 million — is earmarked for private enforcement initiatives, in which fair housing organizations investigate alleged housing discrimination. This year’s award includes $10 million to fund activities that address lending discrimination, including mortgage rescue scams, HUD said.

Another $6.8 million in awards are to be used to educate the public and housing providers about fair housing laws, and $6 million was set aside for groups serving rural and immigrant populations lacking existing fair housing organizations.

HUD published a list of groups receiving grant funding on its website, including the National Community Reinvestment Coalition, the National Fair Housing Alliance, and San Francisco Consumer Action.

“All you see in your world is the outcome of your idea about it.” — Neale Donald Walsch: Spiritual author

NEWS & HEADLINES

Recently the National Information Center released consolidated financial statements for bank holding companies for the 4th quarter. Large banks have been the primary buyers of mortgage-backed securities, and this study looked at the top 50 bank holding companies. In the 3rd quarter they added over $48 billion of agency MBS, and in the 4th quarter added another $38 billion. Most of this was in Fannie/Freddie product; Ginnie Mae pass-through holdings fell by about $1 billion. Most analysts believe that banks should be a leading force in supporting the agency mortgage basis going into 2011. Compare this to banking data released from the FDIC for the fourth quarter, which reported an increase of $42.7 billion in MBS holdings, and $87.4 billion for the year. The demand for agency mortgage-backed securities continues strong, whereas the supply is expected to lessen.

More recent news (the latest H.8 report) shows that large domestic bank holdings of agency MBS have declined by $15.5bn but agency MBS holdings of small banks have increased by $11.5bn since the beginning of the year. This is a continuation of the trend seen from 2010 – in general, smaller banks are providing a relatively stronger demand for agency MBS recently. For instance, agency MBS holdings of large banks rose by 5.3% while those of small banks rose by 18% since the beginning of 2010.

If you’re familiar with crossing a bridge, like the Golden Gate, there is a toll. Economists are very good about figuring out what happens when one raises the toll from $5 to $10. Revenue does not double, since the increase will cause a drop in commuters, and a large drop in drivers can cause profitability problems for the bridge district. This is a simplistic example, but one that may pertain to a small part of what HUD’s FHA is dealing with, in that its mortgage insurance premiums have increased while volumes have fallen. The premiums are expected to help the Mutual Mortgage Insurance Fund to the tune of $3 billion a year, although (due to many factors) HUD estimates that FHA originations will total $218 billion during fiscal 2012. Volume in the current fiscal year is projected to come in at $289 billion, while fiscal-year 2010 ended at $319 billion.

Friday the commentary mentioned the FDIC’s meeting this week “to discuss principles for low- and moderate-income (LMI) mortgage lending, and supporting financial education,” but also, “There are many people in the business who argue that the government’s insistence on lowering lending standards in the past, in order to increase home ownership, especially to those who weren’t credit worthy in the past, accounted for a good chunk of the credit issues that we’re dealing with now.”

The markets were pretty quiet yesterday, with MBS trading volumes running at about average and prices closing roughly unchanged as did the 10-yr (3.41%). The highlight today will be Chairman Bernanke’s semiannual Monetary Policy Report before the Senate Banking Committee beginning at 10AM EST. In addition, Treasury Secretary Geithner testifies before the House Financial Services Committee on “Mortgage Finance Reform: An Examination of the Obama Administration’s Report to Congress” – also starting at 10:00, and Construction Spending. Early indications point to a decent stock market, mortgage prices worse by about .250, and a 10-yr yield sitting around 3.48%.

Construction spending decreased 0.7% in January  to a seasonally adjusted annual rate of $791.8 billion, which is 5.9% below the January 2010. Private construction was 1.2% lower than Dec, and residential construction was up 5.3%.

ISM Manufacturing Index at 61.4% in February  , expanding 19 consecutive months in a row, and the highest PMI reading since May 2004. New Orders, Production and Employment Growing; Supplier Deliveries Slower; Inventories Contracting 

 

Treasuries Decline As Report Manufacturing Expanded.  Treasuries fell Tuesday morning ahead of Bernanke’s testimony and strong manufacturing report, weaker construction report, and on speculation central bank efforts to spur growth will boost the economy in 2011.

Text of Semiannual Monetary Policy Report to the Congress by Chairman Ben S. Bernanke Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate.

Inflation Queries Ahead for Bernanke .“ The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation,” Bernanke said in prepared remarks to the Senate Banking Committee.

Bernanke Tempers Republican Criticism With Deficit-Plan Calls 

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IF YOUR GOAL IS TO BUY LOW, BUY NOW!

There is a very famous saying which asserts “Sell High, Buy Low”. It is obviously great advice no matter what the investment. Below is a graph showing the cycle of investments. It shows the points of maximum risk and maximum opportunity when purchasing. We want to sell high (point of maximum risk) and buy low (point of maximum opportunity).

The challenge is how to determine when we have hit bottom if you are a purchaser. The only time you can guarantee a bottom is after you pass it.

However, there is more and more evidence that the COST of a home has in fact hit bottom. Notice we have used the word COST. Unless you are an all cash buyer, you must take into consideration the expense of financing a property to determine the true cost of purchasing the home. Interest rates have increased over the last quarter; and the rise in rates has counteracted any fall in prices.

Let’s look at an example:

Let’s say you were going to take out a $200,000 30-year-fixed-rate mortgage in November of 2010. At that time, interest rates were 4.17% (as per Freddie Mac). Your principle and interest payment would have come to $974.54. According to the most recent report from Case Shiller house prices fell 3.9% in the 4th quarter of 2010. The most recent report from the Federal Housing Finance Agency shows a 0.8% fall in prices. Let’s use the larger percentage decrease: 3.9%.

For the sake of keeping the math simple, we will now say you can get the same house with a $192,000 mortgage (4% discount from November price). Interest rates are now 4.95% (as per Freddie Mac).

Your principle and interest payment would now be $1,067.54.

By waiting to pay less for the PRICE of the house, the COST increased $93 a month. That adds up to $1,116 a year and over $33,000 over the life of the loan.

We realize that there are other things to consider (ex. the mortgage tax deduction, etc.). This example is just a simple way to show that there is a difference between COST and PRICE.

Bottom Line

If you want to buy low, buy now. It appears COST has hit its lowest point.

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Buffett Says Buying Home Was Third-Best Investment He Made

Feb. 28 (Bloomberg) — Billionaire Warren Buffett said buying a home was the third-best investment he ever made, after the rings he bought for his first wife, Susan Thompson, and, after her death, his second wife, Astrid Menks.

“For the $31,500 I paid for our house, my family and I gained 52 years of terrific memories with more to come,” Buffett wrote to shareholders of his Berkshire Hathaway Inc., in a letter released Feb. 26.

Buffett, the world’s third-richest man, still lives in the house he bought in Omaha, Nebraska, more than five decades ago. He said home ownership makes sense for most people, especially after a slide in prices and record-low interest rates.

The U.S. home ownership rate has fallen to the lowest level in a decade amid record foreclosures and a plunge in property values after a five-year boom. The S&P/Case-Shiller Index of prices in 20 cities is down 31 percent from its July 2006 peak.

“A housing recovery will probably begin within a year or so,” Buffett, 80, wrote in the letter. “In any event, it is certain to occur at some point.”

“A house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender — often protected by a government guarantee — facilitates his fantasy,” Buffett wrote. “Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”

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WHY 2011 MAY BE THE END OF THE HOUSING CRASH

Bernanke ’s calls for an immediate plan to control U.S. debt are winning praise from some of the same Republican lawmakers who rebuked him for the central bank’s record monetary stimulus.

There might finally be some good news this year about the nation’s dismal housing market. Or, at least, the bad news could stop.

Either way, it will be welcome relief for current homeowners as well as for potential real-estate investors. Reasons to be optimistic have been sadly lacking since the housing bubble burst in 2006.

For sure, last week we learned the widely watched S&P/Case-Shiller home-price index fell 1% in December, its fifth straight decline. The index tracks 20 major markets

First, let’s recap the economic signs a bottom is close.

Houses Are a Good Deal

Housing is the most affordable it has been in decades, according to analysts at Moody’s Analytics. They don’t just look at house prices. They also look at incomes.

Nationally, the cost of a house is the equivalent of about 19 months of total pay for an average family, the lowest level in 35 years. Prices usually average close to two years’ pay, although that varies nationally.

Investors Stepping Up

Here’s another sign the market is nearing a bottom: Investors have started to buy up houses and condos, in some instances paying entirely in cash. That’s a far cry from the heady bubble days when borrowed money seemed the key to riches. The bubble-era speculators who got burned tended to buy at the peak and borrowed heavily to do so. When the crash came, they quickly saw their wealth erased.

It’s a sign that these investors are betting on a rebound. Investors buying at current prices are looking for deals, or so-called bottom fishing. They typically like to pay entirely in cash (or with a relatively small loan) to speed up transactions. That can be vital for an investor wishing to lock in a deal fast.

Plan to Stay Put

Buy and hold. While the good news is that the worst of the housing crash might be over, the bad news is that the fast gains of the glory days of 2005 and 2006 won’t be back any time soon. So to cover the costs of buying and selling, and what could be a prolonged recovery, plan to own for more than 10 years, explains Jack Ablin, chief investment officer at Chicago-based Harris Bank.

Home Buying Without a House

There are other ways to benefit from a real-estate rebound than directly buying a house. Such investments include stocks, mutual funds or exchange-traded funds. Unlike homes, which typically cost tens of thousands of dollars, these financial investments can be made in smaller amounts and typically are easy to sell.

Rather than pick individual stocks, he says, it probably makes sense for small investors to pick broader investments that hold many different stocks. In particular, he points to the SPDR S&P Homebuilders ETF (XHB), which tracks a basket of home-builder stocks.

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ANDROID PHONES – TOP FREE REAL ESTATE APPS

 

 

The following is a list of the most popular free mobile app downloads for Android-based devices, based on a search of the phrase “real estate” at the Android Market website. The rankings, text summaries and user ratings were sampled Feb. 24.

Zillow Real Estate (Shop homes for sale, for rent, and more on Zillow’s database of all U.S. homes …)

Homes.com (Search nearby homes for sale or rent using the Homes.com real estate search …)

REAL ESTATE 114 (View apartment price trends and floor plans using the location-based services; find out recommended houses for sale …)

REALTOR.com Real Estate Search (Find the perfect home. Search more than 4 million homes for sale. Let your fingers do the searching with Area Highlighter …)

Real Estate by Smarter Agent (Combines three powerful real estate searches in one easy-to-use app …)

Real Estate Droid (Search homes for sale or rent, new homes or foreclosures, rooms for rent or sublets. Get live, updating real estate info about your current location …)

ZipRealty (Search active multiple listing service-listed homes in 5,000-plus cities across the U.S. … )

HotPads (Search for apartments, houses for rent, real estate, vacation rentals and hotels Take your housing search on the road with the HotPads map-based housing search. Use GPS …)

Real Life White Papers (Hard, difficult to handle real estate content … but nice to know real estate knowledge … interesting cartoons …)



“If you do not conquer self, you will be conquered by self.” – by Napoleon Hill

 

Interest rates are… doing ok. Friday trading volume was a little lower than the recent average, and the 10-yr note’s yield closed around 3.42%. Although the trend in rates seems to be higher, it was a good week as the 10-yr’s price improved by about 1.25 and MBS prices improved nearly a point (.125-.250 on the day). In fact, on Friday stocks improved, the dollar rallied, and Treasuries improved – all on one day!

This week we have a full platter of economic news. Today we’ve already had Personal Income and Personal Consumption/Spending (+1.0% and .2%, respectively); later we have the Chicago PMI and Pending Home Sales. Tomorrow is Construction Spending and February’s ISM Manufacturing Index. Wednesday is the ADP number and the Fed’s Beige Book, Thursday is Jobless Claims and some productivity and ISM numbers. And then on Friday we’ll see the latest unemployment data points, with Nonfarm Payrolls expected up about 180k and the Unemployment Rate to move to 9.1% from 9.0%. One can still expect markets to be subject to events in Africa and the Middle East – the situation is still very volatile. Tomorrow and Wednesday Ben Bernanke will give his semi-annual monetary policy report to the Senate Banking Committee and the House Financial Services Committee. The 10-yr is currently unchanged at 3.42%, and MBS prices are also about unchanged.

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Fate of Foreclosure Programs Heads to a Vote

Republicans on the House Financial Services Committee said they will push for a vote next Thursday on bills that would end four government programs that are aimed at helping prevent foreclosures.

Among the programs on the chopping block include the Home Affordable Modification program, which was created to help struggling home owners reduce mortgage payments by offering lower interest rates and longer repayment times. The Treasury Department recently acknowledged that HAMP will fall short of meeting its original goal of preventing 3 to 4 million foreclosures; it’s expected to complete 700,000 to 800,000 loan modifications.

Other smaller programs at risk are aimed at refinancing loans, helping unemployed home owners, and aiding state and local governments in buying foreclosed properties in order to sell or rent them.

Committee chairman Rep. Spencer Bachus, R-Ala., says the foreclosure prevention programs haven’t had much impact and, in some cases, actually are doing more harm than good in helping struggling home owners.

The Obama administration argues that killing the programs will hurt home owners.

“The administration remains committed to reaching eligible home owners to give them every opportunity to avoid foreclosure and will continue working to make our programs as effective as possible,” said an Obama administration spokesperson.

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Fewer people sign contracts to buy homes in Jan.

WASHINGTON (AP) — Fewer Americans signed contracts to buy homes in January, the latest evidence that the housing market is struggling to rise above depressed levels.

The National Association of Realtors says its index of sales agreements for previously occupied homes fell 2.8 percent last month to a reading of 88.9, the second straight monthly decline.

The reading was higher than the 75.9 reading from June, the low point since the housing bust. But it’s below 100, which is considered a healthy level. The last time it reached that point was in April, the final month people could qualify for a home-buying tax credit.

Sales of previously owned homes fell last year to the lowest level in 13 years. Economists say it will be years before the housing market fully recovers. High unemployment, strict lending standards, and a record number of foreclosures are deterring potential buyers, who fear home prices haven’t reached the bottom.

Contract signings of previously owned homes are usually a good indicator of where the housing market is heading. That’s because there’s usually a one- to two-month lag between a sales contract and a completed deal.

Steven Wood, chief economist for Insight Economics, said the tax credits have pulled home sales on a “rollercoaster ride over the past two years” and that sales have not yet found a steady level.

The Realtors group had reported a modest 2 percent increase in December, which would have marked the fifth such uptick in the previous six months. But the trade association, which began tracking contract signings of homes in 2001, revised its figures to show that signings fell in December from November by nearly 3.2 percent.

Jennifer Lee, senior economist for BMO Capital Markets, said the dismal contract numbers in January is “clearly bad news” for the nation’s housing industry.

“And we can’t blame weather as three of the four regions saw a decline,” she said.

Prices and sales of previously occupied homes have painted a grim picture of that portion of the housing market, which historically accounts for roughly 85 percent of home sales.

Housing prices in all but one of the 20 cities tracked by the Standard & Poor’s/Case Shiller index fell in December from November. Eleven of the markets — stretching from Seattle to Miami — hit their lowest point since the housing bubble burst in 2006 and 2007.

Sales of previously occupied homes rose slightly last month. But the seasonally adjusted annual pace of 5.36 million is still far below the 6 million homes a year needed to maintain a healthy market.

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Become a Real Estate Expert in the Public Eye

There’s no better time for real estate pros to position themselves as industry experts. As we recover from twin crises in housing and the general economy, people are anxious to get back into the market as buyers, sellers, and investors. And the media is paying very close attention to housing and commercial sales.

If you combine your market expertise with solid public relations techniques, the news media and the public will seek out your opinion – and, in turn, you will get more leads from the free publicity. You can share your insights through a mix of online commentary, news releases, guest columns, media appearances, social media, and participation in trade groups. This mix will increase your contacts, boost your reputation as an expert in real estate, and convince buyers and sellers that they want to work with you.

Here are five ways to reach a bigger audience and build more business.

Focus Your Expertise

Chances are you’re already fluent in several specific areas of real estate. You may know a little bit about everything, but stressing overall knowledge doesn’t let you stand out from the crowd.

Instead, consider your unique interests and experience. For instance, everyone’s concerned about energy efficiency these days; maybe you have a stronger interest than most in green home trends. Or perhaps you’re attracted to historic homes, or to modern design.

Look at your business and calculate where most of your transactions come from. Is it suburban homes, downtown condos and apartments, retail or industrial space, vacation properties, or something else? What’s the mix of your clients, and where do you have the most success? Are your buyers mostly looking for first homes, or are they established families upgrading their lifestyle? What are the lifestyles of the geographic areas you serve? The appeal and features of location are, of course, part of the dream people are looking to buy, and you should have the “insider” information about the unique and even overlooked benefits of specific locales.

In essence, what is it about real estate that attracts you and gets your juices going? Do a strong and precise evaluation of what you know best, what you wish to know more about, and what will get traction in your area. Then focus on those issues that come out at or near the top of the list.

Blog What You Know

Think of the blog as the 21st century newsletter. It’s a written conversation with the public and potential clients about your thoughts on real estate and what they should know as a seller or buyer. Don’t make it sound like an ad: Your blogs should be conversational in tone and informational in content. The more a reader of your blog learns about real estate, the more readily they will give you a call.

Your blogs should be as specific as practical about the areas of expertise you’ve chosen. A blog on how to buy a new home is too general to stand out in an Internet search. A blog on what to look for when buying historic homes in the Midwest will bring in readers who are really interested in just those types of homes, while identifying you as an expert guide. The more you write on the specifics of your market, the more you attract people with the motivation to enter that market.

Also, be consistent. Writing once a week is a good target, but you don’t have to write long. Breaking up topics into a series of two or three blog posts helps bring people back to your site. Continue this way, and your archive becomes a ready resource for new clients.

On the technical side, use a blog service such as WordPress and Movable Type that automate the formatting, layout, archiving, and indexing of your blogs so you don’t have to be a Web wizard to publish online or be found by search engines. You should focus on the content of your blog, not the technological minutiae.

Get Active in Trade Groups

Serving at a high level for a national trade group such as the NATIONAL ASSOCIATION OF REALTORS® brings instant credibility. But there’s a just few positions like that for approximately 1.1 million members.

Still, associations at the local, state, and national level are often practically begging members to be on committees and boards. And don’t think of strictly real estate trade groups, either. If your interest is in environmental building standards, historical preservation, downtown redevelopment, or another area of real estate, you may have many groups in which you could become active. Active involvement in even one group gives news media an identifying phrase to attach to your name that adds to your credibility and brings you ready fodder for news releases and blogs.

Know Your Local Media

Get to know the business editors and reporters of print, broadcast, and online media in your markets. Get to know the features editors, too. What you’re selling is lifestyle, and that’s the features editors’ business. Read or listen to their stories to find out the specific interests and coverage priorities of each of these journalists. Find out their deadlines and how they want news releases delivered. Make sure any news release you send is about real news. Ask why someone outside your real estate office would care about the story. If you can’t find the answer, it’s not news.

Follow these approaches to get noticed by the local press:

Respond to the news. Journalists are always looking to localize state and national stories. If a story affects your market, send a short and timely release with your comments about the local impact. Editors eat that stuff up, providing it isn’t fluff. Any release should be straightforward, in a news article style, with any opinions kept in quotes.

Let the media know you’re writing a blog. Reporters constantly look for news tidbits for columns and story leads, and if your blog is a good source, they’ll pay attention and quote your blog. Online media will link to it.

Send tips to reporters about stories that aren’t about you and your business. If you send a tip about a great new architect in town, the story will be all about the architect, but you’ll be quoted as someone who knows and appreciates good building design. Your credibility in the eyes of journalists and potential clients will go up another notch.

Know Your Legislators and Local Officials

Don’t shun a government official because you don’t like his or her party. All politics is local, and legislators will listen to you on specific issues dealing with real estate. Position yourself as someone who can be called for public hearings, and when you are, send press a release on what you said.

Gaining a reputation as an expert in your field isn’t as much about knowing more than anyone else as it is about making people aware of what you know. It takes work, but the payoff is a reputation that brings more business through the door.

“Trying to change the outer is like seeing your unshaven face in the mirror and trying to shave the mirror.” — Joe Vitale: Bestselling author and co-star of The Secret movie

 

 4 WAYS TO BOOST YOUR REFERRALS

 To get more referrals coming your way, you need to get your sphere of influence spreading your word. Real estate coach Maya Bailey offers tips on how to motivate your sphere of influence to refer you.

1. Offer to help.  When you call your sphere, make sure you have something to offer them, such as by offering to be a referral source for them and connect them to people who could help them, anyone from painters, electricians to plumbers. At the end of the conversation, you could add something such as: “When you hear of anyone who’s interested in buying or selling a home, please call me with their name and number. If it’s okay with them, I will call them and make sure that their real estate needs are being taken care of.”

2. Offer something valuable. Each month provide them with a valuable item, such as a colorful postcard that lists upcoming events in the community. They likely will post it on their refrigerator so to stay top of mind, don’t forget to include your photo, phone number, and tag line, such as “relax and let me run the extra mile to fulfill your real estate needs.”

3. Don’t be afraid to call. Some real estate pros suggest calling your sphere once a month but trust your instincts about how often you should call. Regardless, make sure you have a reason to call, such as “did you receive the postcard? What event are you going to go to?”

4. Be excited. You’ll make them excited to refer you if they see how excited you are about what you do. Say something like: “I am so excited about my business. I get to meet such wonderful people and I’m really in an expansion phase of my business. If you want to help out, just send people my way if they have a real estate question or issue, and I will be happy to help them.”

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NEWS AND HEADLINES

The FDIC Advisory Committee on Economic Inclusion (ComE-IN) will meet on Wednesday “to discuss principles for low- and moderate-income (LMI) mortgage lending, and supporting financial education.Committee members will discuss responsible ways to restore LMI mortgage lending and sustainable homeownership in the wake of the mortgage and housing crisis… borrowers’ opportunities for homeownership have diminished as the availability of mortgage credit has contracted. The market disruptions have been particularly difficult for lower-income borrowers, who have been disproportionately affected.” The meeting will be open to the general public and the media in Washington DC, and on the web: FDIC

Fannie reported a loss of $2.1 billion in the fourth quarter, while Freddie checked in with a loss of “only” $113 million. Freddie’s loss for 2010 was $14 billion, versus 2009’s loss of over $21 billion. “Freddie Mac also said Donald J. Bisenius, executive vice president of the single-family credit guarantee business, received a “Wells notice,” which indicates the SEC is considering filing a civil lawsuit against him. Credit-loss provisions at Freddie were $3.1 billion, down from $7.1 billion a year earlier and $3.73 billion in the third quarter. Down the street, Fannie is asking for an additional $2.6 billion in federal aid. For the year Fannie lost $21.7 billion. Both company’s performance includes billions paid to the government in dividends.

News on MERS goes ’round and ’round. A California appeals court ruled that MERS has the right to foreclose on defaulted borrowers in California. “Under California law MERS may initiate a foreclosure as the nominee, or agent, of the note holder,” wrote the judge last week. Earlier this month, an Oregon bankruptcy court allowed a MERS “Wrongful Foreclosure Claim” to proceed, based in part on plaintiff’s allegation that not every transfer of the loan was recorded in the land records. This may in part be due to Oregon’s judicial foreclosure statute allowing for foreclosures where not every transfer has been recorded. In McCoy v. BNC Mortgage, the plaintiff received a mortgage loan secured by a deed of trust naming MERS as the “Beneficiary.” According to the allegations in plaintiff’s complaint, the beneficial interest in the loan was sold several times, and was eventually securitized into a mortgage-backed security. According to plaintiff, none of the transfers was recorded in the county land records. Plaintiff eventually defaulted on the loan and, after the substitute trustee issued a notice of default, filed a chapter 7 bankruptcy petition. It goes on from there, and the case can be seen at BuckleySandler’s MERS.

Higher oil prices… are they inflationary? Many would say “yes,” although from the Fed’s point of view, higher oil prices actually cause people to spend less on other items and instead put their money into the gas tank. Either way, the oil market is all over the press, and we are reminded of it every time we drive by a gas station – prices are easily back up to 2008 levels.  CLICK HERE TO READ MORE: U.S. CONSUMERS FEEL THE PINCH OF SURGING OIL PRICES

Yesterday, and today, the turmoil continued to impact the financial markets. We also had a better-than expected Jobless Claims number, and a disappointing Durable Good figure. MBS volumes were less than the recent averages, and MBS prices finished the day better by about .250 in price with the 10-yr around 3.44%.

Wednesday we had one housing price index, yesterday we had another. The FHFA House Price Index declined 0.3% in December versus a projected 0.1% dip. On top of that, New Home Sales in January declined a more than expected 12.6% to 284k from a downwardly revised 325k that was previously reported at 329k. In terms of supply, at this pace we have a 7.9-month supply. For news today we have the Q4 GDP number (old news) and final February Michigan Sentiment at 9:55. The second look at the 4th quarter GDP number moved it from +3.2% to +2.8%. After the number we find the 10-yr around 3.45% and MBS prices close to unchanged.

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7 TIPS TO MOTIVE YOUR SPHERE OF INFLUENCE TO REFER TO YOU

The following tips will show you how to motivate your sphere of influence to refer to you easily and effortlessly.

Tip 1: Have a script so you know what to say.

What you decide to say may vary from person to person. The way you talk to a close friend may be quite different from the way you talk to a distant acquaintance. It is very helpful to have something to offer when you call. One idea that many of my clients have found helpful is to call your sphere of influence and offer to be a referral source for them. In other words, let them know that you have plenty of connections to people who could help them. For example, you know many painters, electricians, plumbers, etc. and your sphere of influence should know that if they need any names and phone numbers they should call you and you will be happy to provide a referral source for them.

Tip 2: Think of yourself as being “the giver.”

Most of us love to be the giver. We know we will be well received and people will like us. We also know that “giving” leads to more business. Before you pick up the phone to call your sphere of influence ask yourself, “what can I give to them?” One way that you could be of service to them is to offer to be a cross referral partner. If they have their own business, ask them how their business is doing. Ask them how you could help them at their business. Ask them what kind of referrals they would like to receive. Let them know that you will do your best to send referrals to them. At the end of the conversation, you can say something like, “when you hear of anyone who’s interested in buying or selling a home, please call me with their name and number. If it’s okay with them, I will call them and make sure that their real estate needs are being taken care of.”

Tip 3: Send an “valuable item” each month.

What kind of valuable item should you send? It used to be that sending newsletters was a hot item. However, most people have gotten too busy to read a newsletter.

The item that works best is a colorful postcard that gives the events happening in their area. Your sphere of influence is likely to put that postcard on the refrigerator and refer to it often. Of course, next to the list of events happening in the area is your photo, your phone number, and your tag line such as “relax and let me run the extra mile to fulfill your real estate needs.”

You start to enter their stream of consciousness. They start to associate positive ideas with you:

-You are associated with happy events in their area,

-You are associated with brilliant bright, happy colors in the postcard,

-Your face smiles at them every time they go to the refrigerator.

Do you think they will be more likely to remember you the next time they have a real estate need or a real estate question?

Tip 4: Don’t be afraid to call them too often.

As long as you have a good reason to call, they will be happy to hear from you. Trust your own gut instinct about how often you should call. Many real estate gurus suggest calling people in your sphere of influence about once a month. You may choose that to do that with your “A list,” the people most likely to refer to you. Since you are sending an item of value each month, you can always ask them “did you receive the postcard?” You can follow that with, “so what event are you going to go to?”

Tip 5: Assume the positive.

Simply assume that they will be happy to hear from you. Why wouldn’t they be? They are receiving a wonderful colorful, informative postcard from you each month, then you are calling and offering them something, and you are conditioning them to want to hear from you. Assume that you have something valuable to offer, your friendship and your real estate expertise, and people want to hear from you.

Tip 6: Be excited about your business.

Remember, desperation does not sell, but excitement does. No matter what the current condition of your business, always say something like, “I am so excited about my business. I get to meet such wonderful people and I’m really in an expansion phase of my business. If you want to help out, just send people my way if they have a real estate question or issue, and I will be happy to help them.”

Tip 7: Use the law of attraction.

To successfully use the law of attraction, you need to be clear about what you want. Do you want your sphere of influence to send you several clients a month? If so, then set your intention, “I am now in the process of attracting several new clients from my sphere of influence each month.”

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10 REASONS PEOPLE DECIDE TO BUY A HOME

Renting is a very frustrating way of life. The money you pay every month disappears, leaving you with few benefits other than a roof over your head. Compared to owning a home, renting is a futile exercise that leaves you with nothing after your lease is up. It’s no surprise that people want to get out of the rent race, and here are 10 reasons why people decide to buy a home versus renting.

1. They Want to Build Equity

Homebuyers build equity as their property increases in value over time. This equity has many benefits, including the ability of a homebuyer to leverage equity in lines of credit to make repairs or additions to their home. Equity is a powerful thing and a natural consequence of home ownership. Renters never gain equity in their rental space, and at the end of their lease they are thrown out on the street with nothing to show for years of on time rental payments.

2. They Don’t Want to Throw Their Money Away

Without equity, what does paying your rent on time gain you every month? The truth is that paying rent guarantees a roof over your head for about 30 days and nothing more. In that sense, renting is like an extended stay hotel in that at the end of your rental period or lease you have nothing to show for the money you’ve paid. This makes renting a terrible investment when compared to home buying.

3. They Want More Space

It’s incredible how little you get for your rental payment each month. Most renters are lucky to have even a tiny balcony, let alone roomy closets o storage space. Many homes come with luxurious yards and spacious garages for storage. This makes buying a home an attractive option for those who prefer to stretch their legs.

4. They Want to Make Upgrades

Most leases forbid the renter from altering the rental space. For those do it yourselfers, this can mean a boring living experience. Home buyers are not only allowed to make upgrades, but doing so can be a great investment and raise the overall value of your home. From an investment perspective, this is a no brainer.

5. They Don’t Want to Pay Extra to Own Pets

For those pet lovers out there, renting can be a major financial undertaking Pet deposits can be very expensive, and some apartments add a monthly premium to rent just for having a pet, and separate deposits/premiums for each pet. These fees can add up fast! Homebuyers don’t have to deal with these sorts of fees, and they can also typically provide a better environment for their pets as well.

6. They Don’t Want to Be So Close to Noisy Neighbors

Have you ever lived on the second floor of a 3 story apartment complex? Wild partiers underneath blaring music at 4AM and home fitness gurus doing jumping jacks above you can make you realize just how annoying living so close to your neighbors can be. Homebuyers can sometimes deal with annoying neighbors as well, but at least they’re not rattling your chandelier when they stomp their feet down the hallway.

7. They Don’t Want to Deal With a Landlord

Sometimes dealing with a landlord can be tough. Some landlords are not very friendly or flexible, and won’t hesitate to throw you on the street if rent isn’t on time. Other landlords can be so distant that problems with rent or appliances don’t get resolved for months or even years. As a homeowner, there’s no landlord to deal with and you have the freedom and independence of conducting business on your own terms.

8. Their Hobbies Make Renting a Bad Idea

Drummers and musicians need a place to live, but do you want them living above you in a cramped apartment complex? For those renters who have hobbies or professions that are noisy or require space, renting just isn’t an option for them. Owning a home with plenty of space is their only way to go.

9. They Don’t Want to Deal With Deposits

Security deposits? These never seem to work out in the renters favor and come moving time it always seems like every little problem leads to forfeiture of the sometimes huge security deposits we have to pay just to sign the lease. Home buyers don’t have to deal with this as their home is more closely tied to their assets and their individual independence.

10. They Want to Live the American Dream

Owning a home is a big part of the American dream, and most people would say that the independence, autonomy, and sense of accomplishment that owning a home brings is an essential part of the American way of life. Does renting an apartment do the same?

Good Thursday Morning Team!

We’ve got some news to share as well as a 6 helpful tips regarding an e-mail overhaul that you might find useful for your business. More about the Obama Administration in the news today. Looks like we may have a beautiful Spring forecast ahead of us when it comes to home sales! I found a great blog that I wanted to share with all of you. As mentioned in my chatter yesterday morning we have seen a lot of activity within pre-approvals, contracts, and new client referrals. This positive news is being shared with you due to the services provided not only by myself, but my team. The blog below hits on exact points of how we continue to grow and maintain a “Winning Partnership”. I hope you find it relevant to what you’ve experienced with myself and my team so far. I’ll be in the office today, ready to take your calls, as mentioned WE ARE YOU REAL ESTATE PURCHASE HELP DESK. Prepared to take on difficult scenarios, fall out deals, appraisal issues, FHA questions, etc. Have a great day!

 

 

“If you do not conquer self, you will be conquered by self.” – by Napoleon Hill

 

The Wall Street Journal this morning notes, “The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America’s largest banks to pay for reductions in loan principal worth billions of dollars. Terms of the administration’s proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns won’t be borne by investors who purchased mortgage-backed securities, these people said. If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers.”

FHA recently raised their premiums once or twice – but is the horse already out of the barn? FHA Streamline Refi’s have become the darling of the buyback crowd. And blame pricing, interest rates in general, weather, whatever, but last month the seasonally adjusted annual rate for FHA loan applications fell to its lowest level in over 3 years – an estimated 1,450,900, according to the FHA Single-Family Outlook.

According to a story that I noticed in Bloomberg, the Federal Reserve revised a rule related to home mortgage loan escrow account requirements and sought comment on a second proposed regulation change. “The Fed increased the annual percentage rate threshold for requiring a mortgage lender to create an escrow account for property taxes and insurance for so-called first-lien, “jumbo” loans. The escrow rule will apply to first-lien jumbo loans if their annual percentage rate is at least 2.5 percentage points higher than the average prime offer rate.” The central bank is also proposing expanding the minimum period for mandatory escrow accounts for first-lien, higher- priced mortgages to five years from one year, the statement said. The timeframe could be longer “under certain circumstances, such as when the loan is delinquent or in default,” according to the Fed.

The Existing Home Sales number (which jumped 2.7% in January) included data that showed all-cash sales rose to 32% last month from 29% in December. In fact, all-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15%. NAR’s president said the median price is being dampened by “Unprecedented levels of all-cash purchases, primarily of distressed homes sold at deep discounts.” Speaking of which, “distressed” homes enjoyed a 37% market share in January – about the same as last year. The overall Existing Home Sales number was up for the third straight month, and sales rose in the Midwest, South and West, but declined in the Northeast. The national median existing home price was $158.8k, down 3.7% from January 2010.

Both stocks and bonds closed in worse shape Wednesday. Oil went above $100 per barrel, the Dow was down about 100, the 10-yr T-note was down about .250 (yielding 3.49%), and MBS prices were roughly unchanged from Tuesday’s close. Traders and investors, not the same animal, weighed a weak 5-yr note auction (which would push rates higher) against higher oil prices leading to an economic slowdown (which would push rates lower).

This morning we’ve already learned that Jobless Claims dropped by 22k, going from 413,000 down to 391,000. Continuing Claims also dropped. Durable Goods were +2.7% in January, versus a drop of .4% in December. Of course, this was prior to oil moving above $100 per barrel. Later we’ll have New Home Sales for January, along with a $29 billion 7-year note auction. So far the 10-yr is sitting around 3.45% and MBS prices are better by about .125.

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6 TIPS FOR A REAL ESTATE E-MAIL OVERHAUL

If you want to be taken seriously by clients and agents who are technologically sophisticated, it’s time to set up your business e-mail address on a website domain that you own.

The reason is simple. People who have AOL, Gmail, and Hotmail addresses generally do not have their own website or blog. Furthermore, if you rely on your company’s domain for your e-mail and you leave the company, your past clients will no longer have a way to contact you.

If you’re ready to upgrade your business e-mail address, here’s how to do it:

1. HOW TO CHOOSE A GREAT DOMAIN NAME

The first step is to identify the domain name that you want to use. While it’s smart to own your own name if it is available (i.e., Bernice@BerniceRoss.com), this is a poor choice for the main e-mail address for your real estate business. Because people are bombarded by hundreds of names each day, they have trouble remembering them.

In contrast, most people remember functions pretty well. This is the difference between remembering your name vs. “the nice lady who sells downtown high-rises.”

The people who run real estate search sites report that users generally search for real estate information by street address, city and ZIP code. Consequently, as you consider various domain names for your website or blog, it’s important to consider using these components in the name you select.

You will also want to use words such as “real estate,” “properties” and “homes” that indicate you are in the real estate business. Moreover, don’t settle for the dot-net or dot-org URLs. If you can’t get the dot-com name for your chosen keywords, find another combination of keywords that works with dot-com.

2. “ALL THE BEST NAMES ARE TAKEN!”

A challenge many people face today is that many of the most desirable names are already taken. For example, unless you have a lot of money, it would be almost impossible to obtain the domain name, “Austin real estate.”

As search has changed, the real opportunity is in what is known as the “long tail.” This refers to using a longer domain name that incorporates the various pieces outlined above. For example, “AustinHighRiseCondos78747.com” or “LiveInWestlakeTexas78732.com.” Each of these domain names matches how people normally search for property — by property type, location and ZIP code.

3. IT’S OK TO HAVE MORE THAN ONE

When selecting a domain name, you don’t have to be limited to having just one. If you specialize in more than one area, purchase a separate domain name for each one. Using the examples above, you might have “LiveInWestlake.com” as well as “WestlakeHomesForSale.com,” or “WestlakeTexasHomeInfo.com.”

Set up information on each area. Include facts about the lifestyle, videos, plenty of photos, as well as access to current listings and comparable sales. Each of these pages can reside on your main site. The secret here is to have a different URL that takes users directly to a specific page on your site. To the user, these pages look like home pages on separate sites even though they all reside on your main site.

To illustrate, you may have “LiveIn90024.com.” Within that site you could include, “WilshireCorridorCondos90024.com” as well as “LittleHolmbyEstates90024.com.” Each site would show very different examples of what it is like to live in that ZIP code and would be targeted to very different types of buyers.

Remember, however, that all of these sites would reside on your main site. This maximizes your Web traffic as well as enhancing your Web ranking on the various search engines.

4. CREATE MULTIPLE E-MAIL ADDRESSES

Once you have your own domain name, it’s pretty simple to set up an e-mail address. You can use “YourName@LittleHolmbyEstates90024.com” or YourName@LiveIn90024.com.

It’s important to make sure the name is relatively easy to remember. The great thing about owning your own domain is that even if someone gets your e-mail address wrong, if they remember the website URL you’ll still get the e-mail.

5. KEEP YOUR OLD ACCOUNTS

You may regularly use my Gmail and Hotmail accounts — primarily to register on sites where you know someone may spam also. Also, these systems are great backups if your host’s server goes down for maintenance, is hacked, or has some other type of issue that stops your e-mail service.

Gmail and Hotmail exist in the cloud, so you can use them virtually any place where you have an Internet connection.

6. HAVING YOUR OWN DOMAIN IS GREAT FOR TEAMS

One of the challenges a team leader faces is having people join and leave their team. If a team member leaves and you own the URL, they cannot take their e-mail address with them. As a result, when an agent leaves your team, all the e-mails coming to that address will continue to go to your site rather than to the agent who left.

If you don’t already own your own domain, there’s no better time than right now to get started. Prices are generally less than $10 per year. Best of all, your e-mail address separates you from the huge majority of agents who are still relying on their brokerage URLs or e-mail services from AOL, Google and Hotmail.

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PENDING CALIFORNIA REAL ESTATE SALES BODE WELL FOR SPRING

Pending home sales were up 13.6 percent in California from December to January, with distressed properties accounting for more than half of pending transactions, according to a new index compiled by the California Association of Realtors.

CAR’s pending home sales index surveys more than 70 Realtor associations and multiple listing services, and uses 2008 sales levels as a benchmark. An index reading of 100 is equal to the average level of sales contract activity in 2008.

The index climbed to 93.6 in January, up from 82.4 in December but down 2 percent from a year ago, CAR said, noting that pending sales typically rise after seasonal slowdowns in November and December.

“January’s pending sales should be reflected in higher existing sales activity in February and March and serve as a precursor to the spring home buying season,” CAR President Beth Peerce said in a statement.

Distressed properties — short sales and bank-owned (REO) properties — accounted for 54 percent of pending sales statewide, up from 50 percent in December but down from 56 percent a year ago.

Distressed properties accounted for 70 percent or more of all sales in Kern, Sacramento, Riverside, San Bernardino and Solano counties.

Looking at all sales of single-family homes that closed escrow in January, the median price was $278,900 — down 8.6 percent from a revised $305,020 in December and down 2 percent from a year ago.

But at $265,500, the median price for short sales closing escrow in January was 28 percent less than the $367,150 median price for “conventional” properties. The median price for REO properties, at $198,000, was 46 percent less.

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WHAT IT TAKES TO BE A MORTGAGE EXPERT

In the choppy seas of mortgage finance, you need someone who can navigate the ever changing product guidelines, interest rate environment, and understands your individual circumstance. These professional mortgage originators are worth their weight in gold. Most people enter the maze of mortgages every five years or so, and the industry has evolved so much that it is barely recognizable (and its evolution continues and is likely to appear vastly different five years from now).

The must-have qualities in a loan officer (LO) today are:

1. Superior Product Knowledge

Knowing all the nuances of the loan product menu is crucial for a loan officer. How will your ability to be approved, your rate and your fees be impacted by your FICO score, Loan-To-Value, or liquid reserves? Being well versed in loan products and being able to see your personal situation as an underwriter is normally a function of experience.

2. An Educated Opinion On Interest Rate Movements

No one is right all the time. However, I couldn’t imagine working with a loan officer who didn’t have an opinion on where rates are likely to move. Your originator should be in the advice business. They should be able to express their point of view in simple, logical terms. They should site financial data and reports (like inflation and employment data). They should understand the impact of geo-political events. Ultimately, it is your responsibility to decide when to lock in your rate, but don’t you deserve access to the best information possible to make your decision? Shouldn’t your LO provide it?

3. Understanding Of The Credit Score Model

Your approvability and eventual rate and fees are determined by your Credit Score. You need a LO who knows how to help you get the optimal score. How will paying down a debt affect your score? Should you payoff a collection account before, after or even at all? How about those borrowers with limited trade lines or errors in their credit file?

4. A Good Working Relationship With The Real Estate Agent

In today’s landscape, with frequent appraisal challenges and the structuring (and re-structuring) of deals, there needs to be excellent communication between the lender and the agent. Great loan officers have an understanding of the position, the responsibilities, and the psyche of the buyer, seller and the agent. The coordination of everyone toward a common goal is important.

5. Impeccable Listening Skills

It is not a stretch to say every loan is different. You must search for a loan officer who is attentive and engaged. LOs need to ask questions, sometimes very personal questions. They need to understand your financing objectives, your strategy about this real estate acquisition, your current and future income, credit and so on, in order to truly give you the best advice.

In the world today, too many loan officers are “order takers”. You need an advisor. You need an advocate who knows the programs; who has an educated opinion on rates; who can help you get the best credit score possible; who understands the team dynamic between the agent and the lender and who really listens to ensure that you get the best possible outcome.

“Everybody is like a magnet. You attract to yourself reflections of that which you are. If you’re friendly, then everybody else seems to be friendly too.” — Dr. David Hawkins: Physician, spiritual teacher, and lecturer

 

Homeowner and rental vacancy statistics, from the Current Population Survey via the Census Bureau, provide an interesting set of numbers indicative of the rent versus buy question. There are roughly 131 million housing units in the United States, with about 86% of them being occupied. Of those units, 57% are occupied by owners, 29% by renters, and 14% (about 18 million units!) are vacant.

Will they be filled with buyers? A top retail branch manager says, “We still have agents waiting for the great pumpkin.” Other managers had written to me last autumn saying, “If my agents can’t produce loans when rates are at 4%, I don’t know what makes them think they’re going to be doing any more when rates go back to 5 or 5.5%.” Well, here we are. We did see a jump in mortgage applications last week, up about 13% on an adjusted basis, with refinancing activity accounting for about 66% of total apps.

This leads to a discussion about overall trends in the mortgage biz. Last quarter Freddie Mac reported that 46% of refinance volume was “cash-in” where the principal mortgage balance is lowered as a result of homeowners paying-in additional money. Many households, like companies, are relatively liquid, and are deciding what to do with the money – and buying down debt during periods of low rates is a good option. (Companies face a slightly different set of options, including paying a dividend, buying another company, expanding existing facilities, etc.)

Yesterday we learned that the S&P/Case Shiller Home Price Indices, which track home prices throughout the U.S. on a two-month lag, declined 3.9% during the fourth quarter of 2010 on top of a 1.9 percent decline in Q3. Prices were 4.1% lower than one year earlier. “Despite improvements in the overall economy, housing continues to drift lower and weaker,” was a quote that I saw.

But the focus was on other items, namely a decent 2-yr Treasury auction and the violence and protests in Libya. MBS prices finished the day better by .375-.5 on roughly average volume, and 10-yr T-notes improved by about 1 point and moved down to a yield of 3.46%.

This morning we already had the usual MBA weekly Mortgage Application Survey (mentioned above) and later we’ll have Existing Home Sales for January along with the second leg of the Treasury’s latest auctions with $35 billion 5-year notes going off at 1PM EST. We find the 10-yr up to about 3.49% and MBS prices worse by about .125.

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FROM RPM MORTGAGE – REGARDING ADMINISTRATION’S PLAN ON US HOUSING REFORM

On February 11, 2011, the Obama Administration delivered a report to Congress detailing the Administration’s plan for reforming the U.S. housing finance market. The Administration’s plan is intended to wind down the housing GSEs Fannie Mae and Freddie Mac and shrink the government’s current footprint in housing finance.

The Administration’s report details the following plan:

1. Wind Down Fannie Mae and Freddie Mac and Help Bring Private Capital Back to the Market

· Phasing in Increased Pricing at Fannie Mae and Freddie Mac to Make Room for Private Capital, Level the Playing Field

· Reducing Conforming Loan Limits (Set to Reset on October 1, 2011) to Levels Set in HERA

· Phasing in 10 Percent Down Payment Requirement

· Winding Down Fannie Mae and Freddie Mac’s Investment Portfolios at an Annual Rate of No Less than 10 Percent Per Year

· Returning Federal Housing Administration (FHA) to its Traditional Role

2. Fix Fundamental Flaws in the Mortgage Market

· Helping Consumers Avoid Unfair Practices and Make Informed Decisions About Mortgages

· Increasing Accountability and Transparency in the Securitization Process

· Creating a More Stable Mortgage Market

· Servicing and Foreclosure Processes, Including Establishing National Standards for Mortgage Servicing, Reforming Servicing Compensation, and Focusing on Treatment of Lien Priority

· Forming a New Task Force on Coordinating and Consolidating Existing Housing Finance Agencies

3. Better Target the Government’s Support for Affordable Housing

· Reforming and Strengthening the FHA

· Rebalancing our Housing policy and Strengthening Support for Affordable Rental Housing

· Ensuring that Capital is Available to Credit-worthy Borrowers in All Communities, Including Rural Areas, Economically Distressed Regions, and Low-income Communities

· Supporting a Dedicated Funding Source for Targeted Access and Affordability Initiatives

4. Longer-Term Reform Choices

· Option 1: Privatized System of Housing Finance with the Government Insurance Role Limited to FHA, USDA and Department of Veterans’ Affairs’ Assistance for Narrowly Targeted Groups of Borrowers

· Option 2: Privatized System of Housing Finance with Assistance from FHA, USDA and Department of Veterans’ Affairs for Narrowly Targeted Groups of Borrowers and a Guarantee Mechanism to Scale Up During Times of Crisis

· Option 3: Privatized System of Housing Finance with FHA, USDA and Department of Veterans’ Affairs Assistance for Low- and Moderate-Income Borrowers and Catastrophic Reinsurance Behind Significant Private Capital

Key Takeaways

· There seems to be little chance of any reform legislation passing between the next 12-24 months

· Very little social policy discussion in the report

· Limited discussion on FHLB and FHA

· No tangible information included about second liens

· Positive to see that the Administration believes securitization is necessary to go forward

· Left room in the short term to curb GSE market share

· Higher loan limit will fall from 729 to 625

· 10% reduction in loan portfolios per year

· FHLB to be left in place – limited by smaller portfolios and greater oversight

· Mortgage prices will rise

· FHA 25 basis point increase

· Risk retention rule finalized this year and enacted in 2012

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MERS: A MESS We Should Know About

The greatest hurdle standing in the way of a complete housing recovery is the backlog of distressed properties that must be liquidated. The banks must release these properties to the market in a controlled fashion. If released too quickly, they will crush house values. If released too slowly, the recovery will be further delayed. However, the control of the flow may no longer be in the hands of the banks. The issue is rather complicated. It starts with the formation of Mortgage Electronic Registration Systems (MERS).

What is MERS?

According to a white paper by the National Association of Independent Land Title Association (NAILTA):

MERS is a creation of some of the most powerful forces in the real estate and mortgage banking industries. In the mid-1990’s mortgage bankers decided they no longer wanted to pay recording fees for assigning mortgages between institutions. This decision was driven by securitization – a process of pooling many mortgages into a trust and selling income from the trust to investors on Wall Street…To avoid paying county recording fees each time the mortgages were assigned, mortgage bankers and the title insurance industry formed a plan to create one shell company that would pretend to own all the mortgages in the country. By doing so, the mortgage bankers would never have to record assignments since the same company would always “own” all the mortgages. The company they created is now known as Mortgage Electronic Registration Systems, Inc. or MERS.

Why will this create a challenge with foreclosures?

We go back to the NAILTA report:

If MERS is just an agent or nominee, there are state land title recording acts that prevent shell companies, nominees or other forms of agents from holding title to real estate. Thus, however MERS “holds” a mortgage, the construction is, at best, problematic. Again, if it cannot hold title as a nominee, MERS and its lender assignees cannot enforce the mortgage.

A system designed to simplify a process might have instead complicated it further. Now the courts are uncertain as to whether or not they will recognize MERS as having the right to foreclose on said mortgages. Some have allowed it; some have not.

Can the courts actually prevent MERS from foreclosing on mortgages?

DSNews reported on one such case:

A New York judge has ruled that Mortgage Electronic Registration Systems, Inc. (MERS) does not have the right to transfer mortgages on behalf of its members, meaning it does not have the right to file foreclosures on behalf of lenders.

The company has recently been under fire for the practice, but the company defended its actions saying that borrowers are required to sign documents stating that MERS can assume rights and responsibilities on behalf of creditors…

But Judge Robert Grossman ruled MERS does not have the authority to act on behalf of its members, and the actions of the company are actually illegal, no matter what papers MERS requires members sign. In his statement, Judge Grossman said:

“The court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its members/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States.”

How many mortgages are we talking about?

MERS currently is involved in almost half the mortgages in America. Can the courts stop foreclosures on all these mortgages? Judge Grossman addressed this exact point:

“The court must resolve the instant matter by applying the laws as they exist today. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”

How has MERS reacted to this ruling?

MERS, in an announcement on their website dated 2/16/2011, alerted their clients to not foreclose in their name for the next 90 days:

MERS is providing the following guidance to all Members to strengthen business practices, and minimize reputation, legal and compliance risk to MERS and its Members. In recent months legal challenges have arisen regarding alleged inadequacies and improprieties in the foreclosure process including allegations of insufficient or incorrect supporting documentation and challenges to the legal capacity of parties’ right to foreclose. MERS is committed to reevaluate and strengthen its systems and procedures to protect against these types of legal challenges…

MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’ name…

We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee.

This definitely will again slow down the banks’ ability to bring foreclosures to market. That will be good news for home prices in the short term. It will also delay the recovery of the housing market.

Bottom Line

It seems there will be further delays on many foreclosures. That gives sellers a window of opportunity to sell their home before many of these discounted, distressed properties come to market as competition.

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Build a better browser for your real estate business

There has been a huge shift from the desktop to the browser over the last few years. Real estate agents spend a tremendous amount of time working in the browser space, utilizing multiple listing service, e-mail, social media and other Web apps.

Here is a fun break down on some of the coolest browser extensions and add-ons that could be useful to the real estate industry.

Showcasing three add-ons from the top four browsers: Internet Explorer, Firefox, Chrome and Safari.

Whether you are a Mac or PC user, there are plenty of add-ons for your browser of choice. Internet Explorer offers three types of add-ons:

1. Accelerator: allows a user to utilize an online service when selecting text on a Web page. For example, highlighting a property address on a details page could launch a service such as Google Maps to access the location and directions.

2. Toolbar: a third-party app that is added to your browser’s graphical user interface (GUI) as a plug-in.

3. Web Slice: introduced in Internet Explorer 8, Web Slice is a feed technology that allows users to “keep up with updated sites directly from the favorites bar,” according to an online description. Internet Explorer is the only browser to support a Web slice natively.

Let’s take a look at some add-ons and extensions.

Firefox

WiseStamp: I love this add-on and have been using it for quite some time. The WiseStamp app allows you to enhance and customize your e-mail signature by including your social media profiles. You can also include dynamic content, such as news headlines or tweets, which is an excellent way to engage clients. The signatures are clean and lightweight.

TinyURL Generator and Bit.ly: Looking to generate short, clean URLs for Twitter, chatting or QR (quick response) codes for “just listed” cards? Both TinyURL Generator and Bit.ly offer Firefox add-ons to help avoid URL clutter.

Delicious: It’s been quite the saga for the popular social bookmarking service. Back in December, when rumors surfaced that Yahoo was planning on “sunsetting” the site, many users — including myself — began scrambling for alternative services. Despite the announcement that the service would not be shut down, many migrated to applications such as Diigo and Google Bookmarks. Until then, I never realized just how important bookmarking was to my workflow. Although the future of Delicious is still unknown, it is an essential add-on.

Browse all Firefox add-ons.

Chrome

TabJump: Chrome certainly offers some fantastic extensions, and TabJump just might be my favorite. “TabJump highlights frequently used tabs and related tabs so you can easily jump between them,” according to an online description. The best feature, hands down, is the ability to relaunch closed tabs.

Turn Off the Lights: I ranked video fourth in my “Top 10 tech trends of 2010,” and it may rank higher in 2011. With so many cool video services available on the Web, “Turn Off the Lights” is a nifty little tool that fades the entire Web page to dark to enhance the viewing experience.

Evernote: This add-on “makes it easy to remember and find all of the great stuff you see online. Save full pages, including text, links and images with a single click,” according to an online description. Evernote works extremely well and syncs from your browser to multiple devices, including smart phones and tablets.

Browse Chrome extensions.

Internet Explorer

Google Maps (Accelerator): Mapping is an essential tool in real estate and Google Maps is a valuable Accelerator add-on. Just select an address on a Web page and click the Accelerator icon to launch Google Maps. It’s a super quick way to obtain a location or driving directions.

Find on LinkedIn (Accelerator): In “Use LinkedIn for offline networking,”,” Inman News columnist Gahlord Dewald wrote, “LinkedIn sometimes feels like the forgotten stepchild of social media,” and noted how LinkedIn can be a powerful business tool. Find on LinkedIn is an extremely handy Accelerator tool. Just highlight a person’s name and click the Accelerator icon. You can quickly find the person on LinkedIn. IE users should definitely give this one a try.

StumbleUpon (Toolbar): StumbleUpon is a “discovery engine” that helps people find and share websites. It utilizes a rating system for content. I’m typically not a huge fan of Toolbars, but with over 8 million users, StumbleUpon is a resourceful add-on. Enter real estate-related keywords as a topic to StumbleUpon.

Browse Internet Explorer add-ons.

Safari

Twitter: The Twitter extension for Safari is an official release that integrates a ton of features, including search, trends and related tweets. The integration is seamless and, once authenticated, you can even tweet the page that you are viewing with a short URL included.

Bing: The Bing Safari extension functions similarly as the Google Maps Accelerator for Internet Explorer. It’s super easy to use: just highlight text on a Web page and get instant maps, translations, flight status, and more.

Amazon Wish List: The Amazon Wish List extension is quick and easy to use. Just “add any item from any website to your wish list with one simple click,” as the description states. I just recently installed the extension for Safari, and it works pretty well.

Browse the Safari Extensions Gallery.

Many add-ons and extensions support multiple platforms and browsers. Feel free to experiment with a few. I have discovered a few gems that you may not be able to live without. Have Fun!

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Real Estate: Like a Phoenix Rising from the Ashes

The real estate market has experienced difficulty over the last five years. From 2000-2006, house values climbed to unsustainable heights. Since then, we have seen much of this appreciation disappear. Now many look at the housing market as dead and lying in the ashes of its previous glory. However, there is growing evidence that, just like the Phoenix, there is a new market currently rising from those ashes.

Buyer activity is increasing

The first sign of an improving market is buyers again beginning to shop for a home for themselves and their family. That is taking place right now.

Pete Flint, CEO of Trulia said in a recent press release:

“We’re seeing a national resurgence of buyer and seller activity on Trulia.com. In January alone, we experienced an unprecedented level of site traffic including 11 million unique visitors – which is more than 70 percent year-over-year growth… (We) are now experiencing 100,000 property views per minute.”

The latest Credit Suisse Monthly Survey of Real Estate Agents reports:

Our Monthly Survey of Real Estate Agents pointed to another month of improved traffic – the third straight month, and the highest level for our traffic index since April 2010, the last month of the homebuyer tax credit. The improved economy and stronger consumer confidence has translated into an increase in homebuyer traffic.

But have they actually started purchasing?

The best news is that buyers are not just looking. The latest National Association of Realtors’ (NAR) Pending Sales Report, which quantifies the number of homes going into contract, shows continued improvement:

Pending home sales improved further in December, marking the fifth gain in the past six months.

Bottom Line

Buyers are back out looking at homes and the number that are actually purchasing is steadily increasing. It appears the housing market is on the verge of a rebirth. The Phoenix is beginning to flap its wings.