Hi Tony, Please help me reconcile these two statements: 1. You once said that you never cancel escrow on an REO agent. 2. You also said that you run “an offer mill” making 15 offers per day or so.
How can both be true? What if your offer on an REO property is accepted and then you inspect the property and discover that it’s going to require a lot more work and money than you thought? Do you lower the offer? Isn’t that what you called a “terrorist offer?” Or do you cancel altogether? And if so isn’t that the same as cancelling out of an escrow? You just disappointed an REO agent.
Or do you inspect every single REO property before you make an offer so that scenario never occurs. That means you and Sabrina are inspecting at least 15 properties per day.
Nice of you to write. Let’s take your questions apart piece by piece.
1 – I don’t run “offer mills.” My goal is to send out 15 offers a day. However, we personally only write a minimum of five and those are LOIs on an 8 1/2 X 11, pre-designed template where we basically just enter the property and agent information. However, we only make offers for two reasons:
One, on properties that I’m interested in buying. These are made through the listing, or a buyer’s agent within the listing agent’s office or through a buyer’s agent outside the listing agent’s office.
Two, on properties where I am interested in meeting the listing agent such as a pending listing where I use an LOI (Letter of Intent/Interest) type offer. This is what I call a “calling card offer.” It’s just my way of introducing myself using a point of interest for the listing agent.
2 – I have never canceled a deal once I have a seller accepted offer and have opened escrow.
3 – Presently, in our market, properties that we pro-actively select to submit offers on fall into one of two categories: REOs or Short Sales. The REOs are typically inspected by Sabrina and/or myself and the agent representing us, prior to submitting our offer.
The short sale offers are submitted with one contingency – “Subject to Interior Inspection.” We seldom inspect short sales unless we are concerned about the present condition or the upgrades. This is typical and accepted when dealing with short sales where the final price has not yet been approved by the lender. Keep in mind, short sales for us are the equivalent of gambling, that’s why we call them “Slot Machine Offers.”
-On a short sale where the selling price has already been pre-approved by a lender and we are interested in purchasing at the approved price, we would be inspecting the property prior to opening escrow.
4 – In the past, when I have been out of town, and before the existence of the Flip video camera, I would have to rely on Sabrina or an agent to inspect a severely damaged property, something that has always made me somewhat uncomfortable. There have been times where they have underestimated the repair costs. One that comes to mind, is actually a recent purchase of a property where they missed that a part of the foundation was made of brick. This is a very costly repair.
However, it would be more costly if I cancelled that escrow as the level of damage it might cause my business may be unrepairable. In all honesty, many times it’s not so much the damage it will cause my reputation as a professional buyer, but the fact that having that level of commitment assures me of the loyalty of top brokers, indefinitely.
In any event, this is the way I’ve chosen to do business and I believe it’s largely responsible for the success that I’ve experienced. Keep in mind that I suggest that as new buyers, you keep your contingencies for inspecting, financing and everything else in place to protect yourselves from your own errors or poor judgement. Take your time, inspect properties carefully, really understand what you’re doing and the cost of those repairs as well as the added value that they will bring to the property. A declining market is not a forgiving atmosphere.
The bottom line is this, we don’t make offers on properties without prior visual inspections! Nor would I recommend that anyone entertain that idea, it just isn’t prudent since the condition of the property is such a crucial part of your equation. If the picture that I conveyed of our system of making offers was a disorganized or disorderly conglomeration of disjointed actions – nothing could be further from the truth!
I don’t make frivolous offers. I don’t waste an agent’s time by making uneducated guesses. Every action we take in our office is well thought out and pre-calculated with a specific reason in mind.
Unfortunately, my ability to communicate may not be as good as the systems in my office. Please forgive me for any confusion that I may have caused.
I use a little hard money, but not very savy about it.
To buy and hold seems like you need to leave a lot of skin in the game. 20% on either conventional or hard money. Hard money at 60-65 of todays market value on longer terms . If I buy at a 20% discount … I still need about 20% down
With the average multi unit in the Hood of SD will cash flow 1000k a month with 100 percent financing @ 9 % and 200k-250 purchase price. Since that does seem possible, thats a 40k hit without repairs. I can only do so many of these deals…..I want to do a lot…..
How do I finance or purchase other wise with keeping some skin!???
P.S I ordered your REO 101 package yesterday…Im sure there will be some good stuff in there!
First, thanks for the ordering course.
Now, on the stuff I buy to keep – my goal is always to refi and get 100% of my money out of the property and still have at least $100 of monthly “real net profit” (that means after ALL the expenses- PITI- vacancy & credit loss, maintenance & 10% management.) So I try to buy at 50% to 60 % of ARV (after repair value or fix-up value) This is does not happen everyday, but those type of buys must make up at least 50% of my purchases. Now keep in mind that those are fixers where I’m forecasting spending 10% to 20% of the ARV on buying & repair costs as well as 10% to 20% on holding and selling costs. Keep in mind that since I don’t read minds or crystal balls, I don’t know when the market will change so…
When I buy, the property must jump through 2 hurdles: buy & sell and buy & hold.
Many times I’m purchasing properties where the repairs or other costs are less than my worst case scenario and that is typically reflected in a higher purchase price or percentage of purchase price to ARV, such as paying 70% of ARV.
OK, keeping in mind that the real estate market can change at any one moment, you must plan your attack with several acquisition strategies to assure your desired outcome. You MUST have more than just one method of catching the prey, especially if your long-term goal is to “hold it,” until it gets fat and juicy, while eating the eggs it produces periodically, and that is as good an analogy as possible – the chicken!
Even if you are flush with cash, if you believe and are banking on benefiting from appreciation, financing will be both your salvation and your weakness. Part of your daily tasks should equally include both the pursuit of leverage and new inventory, for you cannot continue to grow without both.
Do not limit your thinking nor listen to your well-informed logical thought process when it comes to your acquisitions of both of these needed components because the secret to acquire both to fill your coffers will come from consistent, relentless and unrelenting pursuit of both simultaneously, regardless of your own thinking (past, present or future continued imagined results). Almost daily you will have to wipe your opinionated-mind clean of your own “bull shit” thoughts and perceived conclusions and re-fix your focus on your deliberate chosen actions.
Financing is available from one of several sources
1- your cash stores
2- conventional lenders (FNMA up to 10, but really 4 to 5 properties)
3- local commercial banks – 5 to 10 (but really limited only by your finances and relationships)
4- hard money- same as #3
5- true investors, as in older real estate people that have been in and understand the business and now just want to get checks instead of managing properties (they are everywhere) – search in real estate offices; start with agents and their clients, referrals. Also, ads in a large newspaper like the LA Times- although these folks are typically looking for short term type investments; it’s all about returns.
6- Other retirees looking for better returns than the bank can provide- there are thousands- try to stay local when looking for these folks. People that prepare tax returns such as CPA’s or enrolled agents are a great source for people that earn good wages and need to find investments to give them either tax shelter or additional income to off-set their increasing tax liability.
7- Other investors like yourself looking to partner up with someone who has any of the components they perceive (or have actually identified) as missing from their own tool box needed to do this business. Local investor clubs are a very good source for these folks.
8- Check out the Homepath financing available to investors on FNMA Homepath approved properties. You can get up to 10 and the financing is superior to anything on the market. You may be paying a higher price for the properties, but when you add in the financing component it may make mucho sense. I personally am trying to buy 10. They identify several approved lenders to work with on their site. Make sure to confirm they have closed prior deals and are presently active doing these type loans with FNMA.
These are just a few tips to sort of jar your own mind and get you to start thinking in a different direction instead of just hard money for long-term financing.
I have decided to focus on rehabbing. My big stumbling point now is that I am unsure on how to estimate rehab costs, and the best ways to find contractors. What would you suggest I do in the meantime till your class starts, as I really want to get started as soon as possible?
The “best” way to do anything is usually different for all of us. Since everything I do is local, meaning I do all of my investing within a small geographical area, my business model is front loaded. That is, I typically invest a larger amount of time at the beginning to find experienced, reliable professionals who have proven themselves in my market. By this I mean, they have already been tested by someone else. This applies when trying to add ANYONE to my team including real estate agents, brokers, attorneys, insurance brokers, termite inspectors, property inspectors, appraisers, lenders and all types of contractors and handy men.
Now let me attempt to answer your questions more specifically…
1 – “Finding” a worthwhile contractor: If you want to find a worthwhile contractor, speak to real estate agents that have been utilizing the services of such contractors for many years. They will typically know who the good ones are as well as the bad ones. Keep in mind, these brokers should be REO brokers who are accustomed to using Fannie Mae approved vendors. In some cases, these contractors may be more expensive than a typical handy man. However, they may be better equipped to provide you with quick and accurate repair estimates than a typical handy man. These vendors may also be found on the actual Fannie Mae website.
Also, Home Depot as well as Lowes both have a department called the “Pros Desk,” here is where all your area contractors with credit lines repeatedly pay for their material purchases in order to have their purchases reviewed to lock in their discounts (10-20% off retail prices). The folks that man the counter are very familiar with the contractors and handy men who are presently active in your market place. Make friends with these home improvement store employees and they can easily direct you to contractors who may be worth using.
A third resource for contractors would be other local investors you might befriend. To find them, simply attend a local investors club meeting and make your request known to everyone there. Either individually or ask to speak to the group before the meeting.
You can also write a short note to other investors in your area requesting a referral for a local handyman or contractor that they use for repairs on their rental properties. You can easily obtain the contact information for these investors by requesting your local title company to pull the list of absentee property owners in your market which is public information and available to everyone or you can look it up yourself on the internet, assuming you have access to county records data. You might even add a financial incentive like taking them to lunch. After all, it may be a great opportunity to meet someone who can sell you their property at a discount or finance your deals if they have too much cash sitting around doing nothing or partner up with you and finance your whole operation or any other idea your creative mind can think of on how to benefit from meeting and building business relationships with these local investors while talking to them about finding a contractor or handy man. Just so you know I have used this technique myself over the years and it paid off very well.
With respect to “finding,” choosing, or hiring a worthwhile contractor or handyman it is imperative that you seek a referral from someone who has already used them successfully several times. One less reliable method is to drive your local neighborhoods and look for houses that are presently being rehabbed and speak to the contractors doing the work. However, I cannot caution you enough about hiring someone straight out of the phone book, newspaper or advertising from flyers or local recyclers or a referral from someone who has only used the contractor once… this is setting yourself up for a HUGE disappointment!
2 – Estimating repair costs: Again, there’s NO substitution for experience! The best way of accurately estimating the repair costs of a fixer upper property is to already have done it hundreds of times. Remember it’s not only accurately estimating repair costs of what you can identify but it’s having the experience of where to look for evidence of problems that are not clearly and easily visible. These are the explosions that will eat up your profit by becoming the “extras” that your contractor will be more than HAPPY to rectify!
Since you obviously do not have this wealth of knowledge as I have already mentioned – find a reliable contractor with a verifiable track record and have him do this for you. Most contractors will provide this service at no cost to you in hopes of getting the job to repair the property. However, some may charge you a minimal fee and then credit it back to you as part of the contract for the job should you decide to hire them.
Another option is to hire an actual property inspector. Again, they must be someone who has proven themselves and comes referred to you by other professionals you respect in your specific market area. These folks will charge for their labor and their cost can range from $100 to several hundred dollars for a complete inspection. I suggest that whatever method you choose to use, I HIGHLY recommend that you are ALWAYS present during the inspections at least, at the beginning of your real estate career. Come equipped with a video camera and digital recorder and be prepared to interview the property inspector or contractor as they walk the property documenting the needed repairs as thoroughly as you would interrogate a terrorist incarcerated in Guantanamo minus the water boarding! Consider the cost of these inspections as part of your initial real estate education. You’re paying for it, so make it count!
Documenting on video and audio your before and after inspections of your properties will become extremely valuable over time in many different ways from capturing an accurate record of all your decisions helping you write up detailed work lists for your contractors and in settling any disputes when your contractor accidentally forgets some of the items he initially agreed to repair. You will also be able to use this information when soliciting financing from private investors. It is an excellent tool in demonstrating your performance.
Over time, you can develop a system which breaks down your cost of repairs by a specific metric, such as a dollar per square foot cost. This method can be applied to each specific improvement such as paint, stucco, plumbing, carpentry, electrical, air conditioning and heating, windows, doors, flooring, landscaping, etc. Iit can also be broken down into more detail like interior/exterior repairs and improvements or as a general overall price per square foot of the entire rehab. After a while, you will be able to walk through a property and quickly calculate what the overall total cost of repairs will be within a 10-20% margin of error.
Your objective should be to get to the point where you’re able to accurately estimate your rehab cost even though, for the most part, your contractor will be the one actually repairing the estimates.
Remember you will be the one who does the initial inspection before you make the offer so you must sharpen your skills so that ultimately, you rely on YOUR ability to identify a worthwhile project.
I hope I have answered your questions to your satisfaction.
Your friend always,
Thanks for your answer, but this is also were I get confused. To rehab a building for a novice like me, who do you call? A general contractor or a home inspector? or both? I am confused.
1-To answer your question directly- to rehab a property you should use a professional who does rehab work, such as a licensed and insured contractor (preferably one that has been referred to you by someone you trust that has used that same contractor several times successfully).
2- For an initial inspection to assess and estimate the actual repairs (IF YOU CAN’T OR DON’T KNOW HOW TO DO THIS YOURSELF) hire a reputable property inspector local to your community, who is experienced with inspecting properties in disrepair (most home inspectors typically inspect properties for only the items that are easily visible) or a licensed contractor that is willing to do this for you economically, typically because he is hoping to get hired to complete the rehab.
“Home inspector” inspects property for a fee.
Contractors do rehab and construction and sometimes also inspect properties for the purpose of estimating the repairs that they are hopefully going to get hired to complete; get it?
NOTE- In both cases REMEMBER to hire someone that comes referred to you by someone you trust that has used that professional in the past on several occasions successfully.
Your friend always,
Your presentation at SDCIA on Tuesday was great! Thank you for sharing your insight.
I have a question. I am currently in the process of building my real estate investment biz (I am using your free starter kit to help me). My plan is to form an entity, (my atty recommnds C corp) and start acquiring 4 to 8 unit apartment buildings to build residual positive cash flow. My next phase will be to invest in Fix and Flips.
My question is; In what area should I start acquiring apartment buildings?
I currently have my eye on San Diego, Las Vegas, Pheonix, Orlando and Tampa based on research that suggests that these are strong rental markets.
Would you advise against any of these areas and are there other areas that should also consider?
Thank you in advance for your input.
Hi GT, and thank you for your question.
The fast answer is… I don’t have a clue. The obvious reason is presently I’m not investing in multi-residential income properties in those markets. Therefore, I simply have no need to know. Any “opinion” I would share would be just that, an “opinion” — hardly worth your time to hear.
Presently I’m focused on buying 1 to 4 residential properties and whenever possible I prefer them to ALL be detached single family dwellings with their own small private yard areas.
Also, since we handle our own property management, I am presently only buying within an hour drive from my office (located in the Antelope Valley), so my opinion of any of your preliminary markets is really not valid.
However, if you started completing the Free Starter Kit, then you already know the first thing you must deal with is Choosing a Target Market (and knowing it better than anyone else.)
The choosing of a specific place (or geographical location) to start buying apartments (or anything for that matter) is very strategic and unfortunately ALWAYS entirely up to YOU to decide. The reason for this should be obvious — it’s simply YOUR money, credit, time and effort.
You have to go through the process (learning curve) of HOW TO identify a location that is going to feed you the type of property, tenants and cash flow at the prices you think you will need to be profitable.
As far as my or anybody’s “opinion” as to whether one state or city is better or worse than another… well, honestly I would have to go through exactly the same steps I suggest that you take in the Free Started Kit to arrive at the same conclusion, so why repeat the effort?
Seek information and advice from investors who already own the same type of property you are interested in, and other real estate professionals (i.e. appraisers, insurance agents, etc. — not just the brokers and agents who specialize in that type of property who stand to get paid when you buy and not when you don’t — although honestly, they are an important part of your initial investigation.) The key is that you consult MANY individuals who have first hand experience of that market not just opinions they’ve read or heard from somebody else.)
In the past, I have purchased apartments of all sizes, shapes, types and locations in many Target Markets. I have used both a buy, fix & flip to other long-term hold investors model, and a buy, fix & hold long-term model as well.
Since I do not know your level of experience in the business I will caution you about a few things (if I may…)
1. Try to stick with properties as close to where you are physically at the beginning as this will help you to manage your tenants and/or your managers more effectively and with minimal stress and expense. (NO ONE WILL EVER MAKE DECISIONS IN YOUR BEST INTEREST AS WELL AS YOU WILL.)
2. Do all your research about the area and such, but remember you do not have to know EVERYTHING before starting to make offers. Use your contingencies effectively to both buy yourself appropriate time to fully investigate the properties, and to also withdraw from the deal should you discover it’s not what you want.
3. If you will need financing, make it an integral part of your initial research to personally visit with lenders LOCAL to the Target Market you choose. Prior to placing offers, make sure you have ALL the elements of accomplishing your goal firmly in hand.
4. Remember, properties for sale are everywhere, but a “Great Deal” is seldom found just by looking. More times than not, it’s created by your efforts, your understanding of your Target Market, as well as, the elements of doing whatever you decide to do as an investor (and the depth and breadth of your relationships within the business community you select as your Target Market.)
5. Should you decide to invest out of state, please do your due diligence slowly, carefully and deliberately. Be clearly aware of all the Pros and Cons (especially the CONS!)
On the other hand, if you are an experienced investor and are already aware of the specific things I’ve mentioned above, I can tell you this – I would personally stay clear of the Vegas market since I have done research and find it very transient. I personally like the Orlando market (and Florida in general) if you can deal with the gun toting citizens (tenants), senior drivers and the occasional hurricane.
We hope we have been of good service.
Thank you for your question.
Your friend always,
What is the best way for me to learn shorts? There are many in my area—some on mkt for LOTS of days.
I would like to flip them to an investor but am clueless how that all would work—margins, time of assignment—bird dog it. Totally clueless.
The short answer is… by doing them.
The long answer is for the most part, Short Sales, are simple if you plan on holding them as long-term rentals and complicated if you want to do anything else (i.e. wholesaling them to other investors.) This is actually a very loaded question because there are too many directions you could go with Short Sales. (Too many moving parts!) Some may end up being profitable in the short run, but problematic in the long run. The problematic part is that if you are hoping to tie up Short Sales without initially closing the purchase escrow and then wholesaling them to other investors (again without closing the initial purchase escrow) you may find yourself being interviewed by an FBI agent about the fact they may consider your actions to be a fraudulent transaction where you are intending to defraud a federally insured lender. Some investors ignore this issue and deal with Short Sales as if they were an REO, and wholesale them without question. Some believe that if they disclose that they are purchasing the property with the intent of re-selling it with a profit that this is sufficient and absolves them from future legal consequences. Keep in mind that we are not talking about what’s fair or about your actual intent, we are simply discussing the possibility of your actions being interpreted by the Feds as fraud. Now, I’m sure there are many investors involved in flipping (wholesaling) as well as retailing Short Sales that have not (to date) experienced any problems whatsoever, however, I took the time to call the FBI and personally interview two agents. After spending two hours with them, the bottom line was when I posed the question, “if I purchase a Short Sale and re-sell it immediately to another investor for a profit, could that be construed as fraud?” Their response, was “absolutely, yes.” So therefore, as I previously mentioned, I only buy Short Sales to hold as rentals for at least 12 months before re-selling them to anyone. Although you may find on the internet plenty of information/advice/suggestions from “investors” on how to flip or wholesale Short Sales, I strongly caution you to do your own due diligence so that you are aware of the potential risk you might be taking which could come back to you bite you years after you’ve spent your Short Sale profit. Keep in mind we pursue Short Sales on a daily basis and buy them often. Many can be negotiated profitably without much trouble. The easiest way to learn and understand what’s involved in the complete process of a Short Sale (from beginning to end) is easily and accurately learned by taking a class offered by a local title company which are typically offered almost every month to Real Estate Agents and anyone else who wants to attend, typically for free or for a nominal fee.
We hope we have been of good service.
Thank you for your question.
I’m talking to my JV partner and I think it’s a good idea to do annual property inspections. He thinks it will cost too much money and the tenant will give a list of things they want fixed during the inspection. Do you have someone do regular inspections on your property? If so, how often?
This is a touchy area indeed. But, a system we have had in place for many years and we follow a very specific routine with a detailed list of items we inspect, interior and exterior, from the FIRST walkthrough inspection with the tenant BEFORE they move in on the first day of the tenancy. We tell all of our applicants that they will be signing a lease or monthly rental agreement that includes a quarterly (NOT yearly) ”Health & Safety” inspection. This means a representative from our company will be inspecting the interior and exterior of the house every 3 months. THIS TAKES TIME AND COST MONEY, SO WHAT? Now, why? Two reasons:
1- PREVENTION- If they are such good actors that they get under our screening radar, and they are actually problematic tenants such as – sell drugs, rob banks, are hookers, grow pot, have uninsurable dogs,( Pit Bulls, Rots, etc.) or they are just plain pigs, they will never agree to these inspections and move on; that will save US from a future costly eviction.
On the other hand, “Normal” tenants are typically very happy to hear that we will be staying on top of items under the category of “health & safety”
2- PREVENTION -Should you ever find yourself being threatened with a lawsuit or actually being sued for some item such as a fire due to smoke detectors that did not function properly because of battery removal by the tenant because it kept going off every time she burns dinner, or some tenants kid cutting their jugular while climbing through a broken pane of glass on a window they broke because they forgot the key to the house. It will be pretty tough to prove that you as the landlord are responsible due to deferred maintenance seeing as you have an established system that goes beyond anything any property management company has ever done to prevent problems.
Of Course we video record every inspection which includes recording the whole conversation with the tenant and the list of questions about any problems or required repairs (NOTICE I WROTE REPAIRS NOT IMPROVEMENTS) as well as have the tenant sign a sheet which indicates no problems were found during the inspection and they are happy with the condition of the property, or you both agree that the window was in perfect order when they moved in(as evidenced by the VIDEO and signed inspection sheet from the initial move in inspection) and they are responsible for the cost to repair the problem. Or the problem is a slow drains, or plugged up toilet due to the lovey child putting his plastic toys or bar of soap in the toilet (which would be on the tenant) or constant problems with sewer line backing up due to tree roots consistently blocking the main sewer line in which case it’s on YOU, the landlord, to repair before you spend 50% of your yearly rental income on Rotor- Rooter.
Inspections or the threat thereof is all about PREVENTION! As a matter of fact- GOOD property management is ALL about developing systems to PREVENT the expected and the UNEXPECTED possible potential nightmares. It’s about developing and implementing systems that help you identify minor issues BEFORE they can become HUGE disasters.
You don’t even have to keep them quarterly- once you confirm that the tenant is not problematic then BACK OFF! Just drop by every 6 months or yearly if you like- BUT you have gotten them to agree to quarterly which usually means THEY are probably pretty good people with not much to hide.
I like doing the inspections anyway because it also builds rapport with your tenants; they appreciate a landlord /management company that cares about taking care of maintenance items that make their lives difficult. So you increase retention.
The comment we hear most is either “we love you people because you’re always there for us” or “we hate you people because we can never get a hold of you when we have a problem,” which tenant do you think actually stays longer?
If you are more concerned about saving pennies on doing repairs that NEED to be done or items you anticipate tenants requesting, you have never been stung by the wasteful costs of litigation and you are headed in the wrong direction as a property owner. Dealing with tenants is an art form more than a science. When your decisions are based on fear of tenant requests, you’re out of control; YOU have to be in control of that conversation. BTW-Make sure you have GOOD insurance and READ the fine print on your policy- many will NOT cover if you can be proven to have contributed to the deficiency that caused the end problem /liability by the slightest neglect; some even require fire extinguishers in at least the garage.
Anyway, I think you get my point. Whether you decide to utilize yearly, monthly, quarterly or whatever inspections, it’s more about WHY you’re doing them. The end reason is what will help you design a detailed & complete system based on the outcome you desire or problem or situation you want to prevent. Inspections without a SOLID focused reason and subsequent systems are just a waste of time and money. Inspections based on well thought-out preventative reasoning, dictate their own process, make the costs negligible and are irrefutably INVALUABLE!
There are only two ways to manage real estate: With well thought out proven systems or by the seat of your pants; both are equally effective at delivering you to a predetermined end result.
If you want to learn more about how we have managed our stuff for the past 30 years, including surviving dealing with over 100 Section-8 tenants, two fires, a shooting resulting in a fatality on the front lawn of one of our rentals, a young child’s death while sleeping, dog bites, burglaries and a host of other problems- without filing insurance claims or litigation - watch for the property management class I will be teaching in 2014 and make sure your ass is in one of those seats.
Hope I’ve been of service!
REAL ESTATE: Forecast for 2014
“The Norris Group held its sixth annual, “I Survived Real Estate,” fundraising event recently, and in true form, showcased an impressive group of panelists who revealed that the real estate industry in 2014 could take the shape of a Time magazine cover.”
Mortgage delinquency rate dives lower: MBA
“The delinquency rate for mortgages on one-to-four unit residential properties fell 55 basis points from the second quarter of 2013, and 99 basis points from a year prior, the latest Mortgage Bankers Association National Delinquency Survey said.”
Low earnings dent PennyMac, Redwood Trust stocks on HW 30
“Less-than-satisfactory earnings from PennyMac Mortgage Investment Trust (PMT) and Redwood Trust (RWT) helped cause both the investment firms to tank on the HW 30 Wednesday.”
PennyMac earnings tumble amid tight origination environment
“PennyMac Mortgage Investment Trust (PMT) posted a significant drop in net income of $39.7 million for the third quarter, down 27% from the previous quarter.”
Lower acquisitions and loan adjustments squeeze Redwood profit
“Redwood Trust (RWT) posted significantly weaker net income of $22 million in the third quarter, down from $66 million in the second quarter and also down from $40 million last year.”
Deutsche Bank says REO-to-Rental securitization proves market evolution
“Capitalism solves all money problems great and small. Problem is, as recent years show, the financial ideology also causes those same economic problems. But where there is hope, is in the ability of financial firms to keep evolving.”
Infograph: More purchase originations mean more mortgage fraud
“Market participants are fully aware of the beating refinance volumes are currently taking as the majority of mega banks continue to cut jobs by the thousands.”
Freddie Mac 3Q net income hits $30.5 billion
“Freddie Mac’s net income in the third-quarter hit $30.5 billion, including the $23.9 billion impact of releasing the valuation allowance on deferred tax assets, the government entity announced.”
Fannie Mae net income soars to $8.7 billion in 3Q
“Fannie Mae posted a third quarter net income of $8.7 billion, compared with a net income of $1.8 billion for the third quarter of 2012, making it the company’s seventh consecutive quarterly profit, the company announced in a press release.”
Freddie Mac repayment to Treasury finally puts taxpayers on top
“Mortgage giant Freddie Mac will make a $30.4 billion dividend payment to the Treasury by the end of the year, meaning the enterprise will pay round $9 million more in dividends to the government than the $71.3 billion investment received upon entering conservatorship, according to third-quarter earnings.”
Why Fannie and Freddie Are Paying Back Uncle Sam
“A few years ago, the conventional wisdom in Washington said that Fannie Mae and Freddie Mac wouldn’t ever be able make taxpayers whole for the 2008 bailouts of the mortgage-finance giants.”
Want to keep your job? Rent, don’t buy!
“Encouraging young people to buy a home may be storing up trouble for the future in the shape of higher unemployment, according to a new study.”
As 2014 Approaches, How Should You Adjust?
“Real estate agents hoping to spruce up their marketing should focus on visuals — whether video or static images — to engage consumers.”
Getting a Mortgage is About to Get Harder
“Mortgage reform is kicking in on Jan. 10, bringing significant changes to home loan financing.”
CMBS Seen Soaring Next Year in Real Estate Lending Growth
“Commercial-property lenders are expected to loosen restrictions imposed after the 2008 credit crisis, with a jump in financing projected for next year, a survey by PricewaterhouseCoopers LLP and the Urban Land Institute shows.”
Home prices show smallest gain since January
“September home prices showed the smallest monthly increase since January, according to real estate data firm CoreLogic.”
Freddie Mac Prices Transaction to Share Residential Mortgage Credit Risk With Private Investors
“MCLEAN, VA–(Marketwired – Nov 5, 2013) – Freddie Mac (OTCQB: FMCC) today priced a $630 million offering of the Freddie Mac Structured Agency Credit Risk (STACR®) debt notes. This offering represents the company’s second STACR offering in which private sources, and not taxpayers, predominately take the credit risk.”
Freddie Mac Receives CMBS Master and Special Servicer Ratings From Fitch
“MCLEAN, VA–(Marketwired – Nov 5, 2013) – Fitch Ratings today gave Freddie Mac (OTCQB: FMCC) Multifamily an initial commercial mortgage-backed securities (CMBS) master servicer rating of CMS2 and affirmed the existing special servicer rating of CSS2-. The CMS2 rating is the highest initial rating ever assigned by Fitch for a master servicer.”
Does Q3 Uptick in Homeownership Reveal Good News or False Hope?
“The Census Bureau’s announcement Tuesday that the national homeownership rate ticked up slightly in the third quarter of this year has some analysts wondering if this is a turning point for homeownership and others labeling slow household formation as a persistent hindrance to a full housing market recovery.”
September Bucks Forebodings of Decelerating Price Gains
“With recent predictions forecasting a falloff in home price increases over the next year, gains nevertheless continued at a strong pace in September, CoreLogic reported Tuesday in its monthly Home Price Index (HPI) report.”
Housing Market Recovery Rate Indicates Less Volatility than Ever
“Renewed profitability in the real estate market lacks the troublesome “irrational exuberance” that caused problems in the past, according to Wade Micoley, president and CEO of WM Enterprises, Inc., and the online auction house Micoley.com.”
Fannie Mae’s Portfolio Continues to Shrink
“Fannie Mae has released its September book of business, revealing further declines as new business acquisitions came to their lowest level in more than a year.
The mortgage behemoth’s book of business totaled $3.163 trillion as of the end of September, shrinking at a compound annual rate of 1.3 percent.”
FHFA Prohibits Servicer Reimbursement
“The Federal Housing Finance Agency (FHFA) announced Tuesday that it has directed the GSEs to prohibit servicers from being reimbursed for expenses associated with captive reinsurance arrangements. The announcement follows a notice that FHFA published in the Federal Register last March regarding its views on these lender-placed insurance practices and accepting public input. The notice also cited concerns that the practices expose Fannie Mae and Freddie Mac to potential losses as well as litigation and reputation risks.”
Rich investors sitting on a pile of cash
“Some of the richest people around the world think the stock market will continue to go up. So why are they sitting on a big pile of cash?”
Most Metro Areas Show Strong Annual Home-Price Growth
“WASHINGTON (Nov. 6, 2013) – The majority of metropolitan areas in the third quarter experienced robust year-over-year price gains, with the national median price showing the strongest annual growth in nearly eight years, according to the latest quarterly report by the National Association of Realtors®.”
Exclusive: EU to levy record fines on Libor banks: source
“(Reuters) – EU antitrust regulators will levy a record fine of at least 1.5 billion euros on six financial institutions, including Barclays (BARC.L) and Royal Bank of Scotland (RBS.L), for rigging the yen Libor interest rate benchmark, a banking industry source said on Wednesday.”
MBA’s Cosgrove Testifies on Housing Finance Reform
“WASHINGTON, D.C. (November 5, 2013) – Bill Cosgrove, CEO of Union Home Mortgage Corp. and Chairman-Elect of the Mortgage Bankers Association (MBA), testified today before the U.S. Senate Committee on Banking, Housing and Urban Affairs at a hearing titled, ‘Housing Finance Reform: Protecting Small Lenders Access to the Secondary Market.’”
Ally Profit Drops as Lender Absorbs Cost of Mortgage Accord (3)
“Ally Financial Inc. (ALLY:US), the auto finance firm majority-owned by U.S. taxpayers, said third-quarter profit fell 76 percent as the company settled U.S. claims for soured mortgages and stopped making new home loans.”
Bernanke Giving Homebuyers Second Chance With Pledge: Mortgages
“This was supposed to be the year that Herb Harrison found a newer, bigger home to replace his current house in Framingham, Massachusetts. Then, in May, mortgage rates began to rise and he put his hunt on hold.”
Fannie, Freddie Ordered to End Reimbursements for Force-Placed Insurance
“The Federal Housing Finance Agency told Fannie Mae and Freddie Mac to end reimbursements to mortgage servicers for expenses related to captive reinsurance arrangements.”
As US Economy Plods and Pay Lags, Companies Profit
” Look at the U.S. economy and you’ll notice an unusual disconnect.
The economy is being slowed by a tight job market, scant pay raises and weak business investment. Yet corporate profits are reaching record highs and fueling record stock prices.”
US planned layoffs rise in October: Challenger report
“The number of planned layoffs at U.S. firms rose 13.5 percent in October on cuts in the pharmaceutical and financial sectors, a report on Wednesday showed.”
Regions Discloses HUD Subpoena Related to Mortgages
“Regions Financial Corp. (RF), Alabama’s biggest bank, received a subpoena from the U.S. Department of Housing and Urban Development tied to the origination of mortgages backed by the Federal Housing Administration.”
Two heavyweight Fed papers argue for stronger policy action
“Nov 5 (Reuters) – Two of the Federal Reserve’s top staff economists make the case in new research papers for more aggressive action by the U.S. central bank to drive down unemployment by promising to hold interest rates lower for longer.”
BofA CEO: Housing Market ‘Fairly Stable’
“Bank of America Corp.BAC +0.22% Chief Executive Brian Moynihan said the U.S. housing market is “fairly stable” at a Wall Street Journal event in New York Wednesday.”
CORONA: Realtors’ home, a decoy for Nigerian rental scam
“Rental scams are mounting in the Inland region, as Heather Stevenson, a real estate broker and team leader for Prudential California Realty, can attest.”
How Federal Reserve and banking policy is accelerating income disparity: Financial obligations ratio soars for renters while declining for homeowners. Problem is, we have less homeowners.
“Current housing policy has been a major windfall for large institutions and investors. Banks enjoyed a continuous stream of good years as rates slowly dragged down and people became serial refinancers. Good way for banks to earn fees courtesy of the Fed’s QE maneuvering. However the results have been negative for the large number of working and middle class Americans. Many of you have encountered investors bidding prices up on properties here in your own backyard but this trend is nationwide. In some areas the bidding has been more aggressive (i.e., San Francisco) but overall, the nation has seen a big jump in home values. However new data continues to highlight how this current policy is really benefitting a small group of Americans. While rental vacancy rates reach decade lows, homeownership rates are also reaching multi-decade lows. Not hard to do when a large portion of the market is coming from the investor crowd.”
Banks offering mortgages with only 5% down payments
“Good news for homebuyers who don’t have a lot of cash on hand: Banks are offering loans with down payments of just 5%.”
Why the jobs picture is brighter than you think
“FORTUNE — As the U.S. unemployment rate falls, skepticism grows about any real improvements in the job market.”
Bahrain’s Investcorp buys $250 mln worth of U.S. real estate assets
“Nov 5 (Reuters) – Bahrain-based Investcorp said on Tuesday that it has acquired a group of offices and retail properties in the United States for $250 million.”
UPDATE 1-U.S. homeownership rate holds near 18-year lows
“Nov 5 (Reuters) – Homeownership in the United States held near 18-year lows in the third quarter, suggesting the housing market was still struggling to overcome challenges brought on by the recession.”
Deals of the day- Mergers and acquisitions
“Nov 5 (Reuters) – The following bids, mergers, acquisitions and disposals were reported by 1100 GMT on Tuesday.”
Eminent Domain Battle Shifts to Another California City
“Sorohan, Mike–Nov. 5, 2013
Popping up like a Hydra, the latest battle over use of eminent domain to seize underwater mortgages has shifted to Pomona, Calif., a city of 150,000 residents outside Los Angeles.”
Few Banks Easing Mortgage Standards in Response to Higher Rates, Fed Says
“Most U.S. banks have maintained their existing lending standards on residential loans in recent months despite rising interest rates and softer demand for mortgages, a Federal Reserve survey found.”
Mortgage originations could fall 32 percent next year
“Mortgage originations in the U.S. could fall 32 percent next year from 2013 levels, according to the Mortgage Bankers Association.”
How Bank-Defeated ‘Plain-Vanilla’ Requirements Live On
“Before there was much talk about “qualified mortgages,” “living wills” and the “Volcker Rule,” the two words that perhaps scared bankers the most were ‘plain vanilla.’”
Fed in no rush to cut bond buys, top policymakers say
“(Reuters) – The Federal Reserve should scale back its asset purchases only when the U.S. economy shows clearer signs of improvement and even then it should act slowly, one senior central banker said on Monday, while two others stressed there is no need to rush.”
Morgan Stanley Says AIG May Sue Over Mortgage-Linked Investments
“Morgan Stanley (MS), the sixth-largest U.S. bank by assets, said it may be sued by American International Group Inc. (AIG) over mortgage-backed securities that the insurer purchased before the financial crisis.”
National vacancy rate edges up 8.3% in 3Q
“National vacancy rates in the third quarter 2013 hit 8.3% for rental housing and 1.9% for homeowner housing, the Department of Commerce’s Census Bureau announced.”
Ally’s Net Income Declines 76% as Mortgage Costs Linger
“Ally Financial Inc. (ALLY), the auto finance firm majority-owned by U.S. taxpayers, said third-quarter profit fell 76 percent as the company settled U.S. claims for soured mortgages and stopped making new home loans.”
Will We Face A Mortgage Shortage In 2014?
“People assume that mortgages will always be available but what if that’s wrong? Could there be a mortgage shortage in the near future, a time when financing shelves are bare?”
Pennsylvania Housing Affordable
“Editor’s Note: In the October 2013 issue of the Foreclosure News Report, we asked Brian A. Hudson, the Executive Director and CEO of the Pennsylvania Housing Finance Agency, to pen a “My Take” column and bring us up to speed on what the state is doing to foster affordable housing. Here’s a short excerpt from Hudson’s column.”
Analysts Say Double-Digit Appreciation Will Come to an End by 2014
“National home prices were up 10.1 percent year-over-year in the second quarter, but price appreciation is expected to fall out of the double-digits, reaching 5.4 percent by the beginning of next year, according to the CoreLogic Case-Shiller Home Price Indexes.”
Despite Bankruptcy, Detroit’s Housing Market Thrives
“The city that previously made national headlines for its failing economy and bankruptcy filing is now in the spotlight for its rapidly rebounding housing market. Detroit topped two lists of highest-performing housing markets in the past week—one from Realtor.com and one from Clear Capital.”
Activity from Homebuyers Picks Up in Aftermath of Shutdown
“Homebuyers shook off their fears and returned to the market in force following the re-opening of the government in October, according to data presented by Redfin’s Research Center.”
Free FICO credit scores coming to millions
“FICO scores are used by nearly every major lender to assess the creditworthiness of credit card and loan applicants. But these scores are mostly invisible to consumers, unless you go to FICO’s website and sign up for a subscription of $14.95 per month — a service you need to cancel within 10 days if you don’t want to be charged anything.”
Home Buyers and Sellers Survey Shows Lingering Impact of Tight Credit
“Although the housing market has shown a healthy recovery over the past two years, unnecessarily restrictive mortgage lending standards are preventing some financially qualified buyers from reaching their dreams, especially singles and first-time buyers, according to an annual study released today.”
Realtors® Report Americans Prefer to Live in Mixed-Use, Walkable Communities
“WASHINGTON (November 1, 2013) – Choosing a community is one of the most important factors for consumers as they consider a buying home, and research by the National Association of Realtors® has consistently revealed that Americans prefer walkable, mixed-use neighborhoods and shorter commutes. According to NAR’s 2013 Community Preference Survey, 60 percent of respondents favor a neighborhood with a mix of houses and stores and other businesses that are easy to walk to, rather than neighborhoods that require more driving between home, work and recreation.”
U.S. to put SAC hedge fund out of business over insider trading
“(Reuters) – Billionaire investor Steven A. Cohen’s days as a hedge fund manager may be finished with an agreement by his SAC Capital Advisors to plead guilty to criminal charges of insider trading and pay a record $1.8 billion in fines and forfeitures.”
Is the ‘End of the Suburbs’ Near?
“In her new book, “The End of the Suburbs: Where the American Dream is Moving,” Leigh Gallagher, an editor at Fortune magazine, argues that powerful economic, social and demographic forces are converging to render suburban living unsustainable.”
International Architects and Designers in New York
“New York City has long been a promised land for architects and designers from all over the world. What better stage on which to showcase a groundbreaking design than NYC’s hallowed skyline? The trend of international creatives contributing to New York’s unique aesthetic has been booming of late.”
Report: New Wave of Delinquencies from ARM Resets Unlikely
“Concerns of a new wave of problem loans caused by unsustainable rate resets on adjustable-rate mortgages (ARMs) are largely unfounded, according to Lender Processing Services (LPS).”
What Does Fannie Mae’s New LTV Threshold Accomplish?
“As of November 1, Fannie Mae is no longer purchasing loans without minimum down payments of at least 5 percent. Industry experts with the Urban Institute’s Housing Finance Policy Center argue this move is arbitrary and likely to provide little benefit to the GSE or to taxpayers.”
Georgia Real Estate Investor Nabbed for Fraud
“A Georgia real estate investor and his company pled guilty last week for conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia, the Department of Justice announced.”
Half of Consumers Fear Another Housing Bubble Is Forming
“While many indicators suggest the housing market is on the road to recovery, some fear another bubble is already forming. Country Financial, a financial services company based in Bloomington, Illinois, found in a recent survey that 48 percent of Americans say the market could reach “bubble” status within the next two years.”
Maxine Waters places housing reform on chopping block
“After several critical years in the wake of the housing meltdown, the market recovery is continue to take shape.”
Two Harbors enters flow sales agreement for MSR portfolio
“Real estate investment trust Two Harbors Investment Corp.’s (TWO) wholly owned subsidiary, Matrix Financial Services Corporation, announced it entered into an agreement with PHH Mortgage Corporation for the purchase and sale of mortgage servicing rights.”
FHA policy transparency fuels Ginnie Mae modernization
“The ongoing push by the Federal Housing Administration toward additional transparency and data disclosure took another positive step toward the modernization of Ginnie Mae.”
Monday Morning Cup of Coffee: ING Alt-A liquidation will relieve lack of supply
“Monday Morning Cup of Coffee is a look at news across the HousingWire news desk with larger coverage to come on bigger issues.”
Single-family rental securitization market boasts near trillion-dollar potential
“The REO-to-rental securitization deal that Blackstone (BX) subsidiary Invitation Homes brought to market is just the tip of the iceberg, with KBW analysts forecasting a nearly trillion dollar market when calculating the lingering possibilities that exist for single-family rental securitization deals.”
Las Vegas September home sales buoyed by move-up buyers
“Despite the Las Vegas area posting a slowdown in sales last month when compared to August, overall activity was still slightly higher when compared to year ago levels, as relatively strong move-up buyers buoyed sales, the most recent DataQuick report reveals.”
Future secondary market remains a challenge
“Government authorities are examining the secondary mortgage market to determine all the elements needed to make it run successfully.”
Bank of America wins dismissal of lawsuit on AIG disclosures
“(Reuters) – Bank of America Corp has won the dismissal of an unusual lawsuit in which shareholders accused it of concealing a $10 billion fraud case brought by American International Group Inc.”
Bank of America could face $6.8 billion fine if it settles FHFA case on J.P. Morgan’s terms
“It’s been a few days since a big bank announced a multi-billion-dollar settlement over dubious mortgage practices. But don’t get comfortable: This saga will keep churning for a long time.”
Dutch Gamble on U.S. Housing Debt After Patience Wins
“The Dutch government’s decision to hold onto U.S. mortgage debt acquired during the 2009 bailout of ING Groep NV has paid off so far as prices of the securities soared, more than doubling in some cases from lows that year.”
Financial firms cutting thousands of jobs
“Financial firms are cutting tens of thousands of jobs because of a slowdown in the mortgage business, the sluggish economy, the growth of online banking and new regulations.”
If It Looks Like a Bank, Regulate It Like a Bank
“Five years after a crisis that almost took down the world economy, regulators are still groping for a way to address one of the global financial system’s most obvious weaknesses: the trillions of dollars in banking activity that happens outside traditional banks.”
Dallas Fed’s Fisher Doesn’t Rule Out Backing Taper by March
“Federal Reserve Bank of Dallas President Richard Fisher, who has criticized the central bank’s bond buying program, said he wouldn’t rule out backing a tapering of purchases by March depending on economic conditions.”
Is the housing boom running out of gas? Pending home sales face largest monthly drop since home buying-tax credit expired in 2010. Median price nationwide drops.
“There are now signs that the unrelenting housing price boom is slowing down. Pending home sales faced their largest monthly drop since the home-buyer tax credit expired back in 2010. If you notice a pattern, any time the government even remotely hints at pulling back the housing market suddenly reverses. The Fed’s hint of a taper ending sent mortgage rates soaring. Of course the taper never materialized and the Fed even became more aggressive in QE. The government shutdown did impact housing from data we are seeing. Existing homes sales pulled out a weak performance and the drop in pending sales, a leading indicator are showing signs of a slowing housing market. In this boom and bust market with no middle ground, are we now to expect a “normal” healthy market after this recent boom?”
HUD ANNOUNCES SETTLEMENT WITH BANK OF AMERICA RESOLVING ALLEGATIONS OF LENDING DISCRIMINATION AGAINST WOMEN ON MATERNITY LEAVE
“WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) announced today that Bank of America will pay $45,000 as part of Conciliation Agreements resolving allegations the lender discriminated against pregnant women seeking mortgage loans. HUD had alleged that the Bank of America refused to refinance the mortgages of two couples in California and Texas, because the women were on maternity leave.”
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