$270,000.00 12867 Carriage Heights Way Poway, CA 92064 Beds: 3 Rooms: 6 Full Baths: 2 Sq. Ft.: 1395 Garage: 0 Built: 0   This is a new listing that I thought you might be interested in. Visit this listing online to see more photos of the property, Google Earth satellite images, and much more.   If you have any questions about this property or require more information, please feel free to call. Richard Frattalone Cabrillo Mortgage and Realty Services 8585656388 www.richfrattalone.com     Visit this listing here

According to the Mortgage Bankers Association (MBA), its seasonally adjusted index of mortgage applications – which includes both purchase and refinance loans – rose 0.5% for the week ended March 5. The rate on 30-year fixed-rate mortgages, excluding fees, rose 0.06% from the previous week to an average of 5.01%. Analysts expect mortgage rates to rise as the Federal Reserve stops buying mortgage securities end March. "The Fed will likely take a step back to see if the private sector steps up and starts purchasing the bonds," said Bill Emerson, CEO of Quicken Loans. "If they do not, mortgage rates could move significantly higher." Home prices may not rise significantly any time soon given the inventory overhang in the market. Emerson said the housing “inventory will pressure prices, so, many people are sidelined right now, waiting for prices to fall further." The MBA’s seasonally adjusted index of refinancing applications decreased 1.5% last week. The refinance share o
f mortgage activity dropped 67.2% from 69.1% the previous week. The fixed 15-year mortgage rate averaged 4.32%, up from 4.27% the previous week.

Foreclosures rise 6%

According to data released by RealtyTrac, foreclosures increased 6% from the year-ago level in February; this is the smallest annual increase in 4 years. Over 308,000 households with loans received a foreclosure filing in February; this was a drop of over 2% from January. Analysts say the drop in foreclosure rate does not necessarily mean that homeowners are seeing any better times. “This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity,” said James J. Saccacio, RealtyTrac Chief Executive Officer. Nevada saw the highest foreclosure rate in February with 1 in 102 households receiving a filing. Nevada was followed by Arizona, Florida, California and Michigan. Can we expect to see a further drop in foreclosure in the coming months? "It's premature to declare
victory just yet," said Rick Sharga, a senior vice president for RealtyTrac.

Borrowers unable to refinance at lower rates

Credit Suisse, an investment bank, says about 37% of all borrowers with 30-year fixed rate mortgages pay 6% or higher on their mortgage. The mortgage rates are currently at 5%. If only the borrowers can refinance their mortgage, they would save 0.50% to 0.75% on their mortgage cost. Given the outstanding loan amount of $1.2 trillion on mortgages with rates of 6% or more, the potential savings run into billions of dollars. "Traditionally, these borrowers would be aggressively refinancing," said Mahesh Swaminathan, senior mortgage strategist at Credit Suisse. But given the negative home equity (over 25% of mortgage holders are currently “underwater”) prevailing in the housing market, tightening of lending norms by banks, unemployment and declining incomes, homeowners are unable to take advantage of the fall in mortgage rates. Some analysts say hike in loan fees imposed by Fannie Mae and Freddie Mac after delinquencies rose has also deterred homeowners from going for refinan
cing. Alan Boyce, a mortgage-securities-market expert, says loan fees are partly "responsible for why there's been no refi boom."

Unemployment hits a record high in some states

The Labor Department says the jobless rate hit a record high in five states —California (12.5%), South Carolina (12.6%), Florida (11.9%), Georgia (10.4%) and North Carolina (11.1%) – in January. All told, 30 states and the District of Columbia saw a rise in jobless rate in January over the previous month. Nine states reported a decrease and 11 states had no change in unemployment. In January, fewer states showed an increase in unemployment rate compared to December, when 43 states showed an increase in jobless rates. "It shows that the labor market is virtually frozen," said Nick Colas, chief market strategist at the ConvergEx Group. Colas said that "there has not been any dramatic change in these past six weeks." The states with the highest jobless rate were Michigan (14.3%), Nevada (13%), Rhode Island (12.7%), South Carolina (12.6%) and California (12.5%). North Dakota had the lowest jobless rate at 4.2%, followed by Nebraska (4.6%) and South Dakota (4.8%). States which
  have a high industrial activity seem to be benefiting from a rebound in overseas demand. The “most stable economies are those more exposed to manufacturing,” said Steven Cochrane, director of regional economics at Moody’s Economy.com. “This is a recovery that’s really kind of concentrated.”

TARP watchdog finds fault with GMAC bailout

The Congressional Oversight Panel for the Troubled Asset Relief Program has questioned the Bush administration’s decision to rescue GMAC, the auto and home lender, in December 2008. The panel said GMAC received significant bailout money from the government though it was “a company that apparently posed no systemic risk to the financial system, that did not seem to be too big to fail, too interconnected to fail, or indeed, of any systemic significance.” The government now owns about 56.3% stake in GMAC and analysts estimate that the company may never repay $6.3 billion the company received as part of the bailout package. The panel also said that the Treasury Department treated GMAC with lot more lenience than it did General Motors and Chrysler. The panel said that “half-hearted attempts at saving an institution from insolvency that lack coordination among regulators” might be more costly than a full bailout or bankruptcy. The Treasury has defended its decision to res
cue GMAC, saying it was "the least costly and least disruptive of all the options available.

Now on to our real estate investing educational section...

Fiscal Survival of the Fittest

Survival of the fittest applies to economics as well as biology - in fact, some would argue the concept is better applied to the financial arena than any other area of study. Unfortunately, it's a fact few Americans want to face head on...it goes against the steady diet of "American ingenuity" and the (false) belief that any child born in the good old USA can grow up to be anything they want. While there are exceptions to every rule, survival of the fittest is an economic trend currently undergoing the equivalent of an ice-age extinction as one era gives rise to an entirely new one. Research by consulting firm McKinsey found a few unsettling statistics that demonstrate the depth of the problem:

Over 70 percent of currently employed Americans work in jobs for which there is low or declining demand. This includes both blue collar and white collar. Competition for jobs that cannot be shipped overseas (healthcare for example) has created high competition which is driving down wages and promoting part-time, per diem and other "job sharing" situations.
Mainstream stores are doing double-takes as consumers shift spending habits. Not only are brick and mortar stores under heavy competition from online retailers like Amazon but the bleak economy is finally taking a toll. Violating one of the core marketing principles 'never undercut your own product', heavy weight's ranging from Proctor & Gamble to Macy's are rolling out discount versions of their more expensive popular items. Cost of Tide got you down? Don't worry, you can now buy Tide Basic...a discount version. Research shows 1/2 of Americans have already reduced spending and 1/3 plan to do so permanently with 18 percent of consumer switching from name brands to generics in the past two years alone.

So, how are Americans spending their money both today and into the near future?

1. Nearly 34 percent of the average household income goes toward housing. Expect this trend to continue as people downsize into affordable housing options.
2. Just over 19 percent goes toward entertainment and/or miscellaneous items...however, as a discretionary item this is subject to volatility.
3. Roughly 17 percent goes toward transportation - a number experts expect to hold steady as people opt for more affordable options.
4. Just under 13 percent goes toward food; a necessity to be sure but one that is subject to "replacement" purchases as people opt for hamburger instead of steak during tough times.
5. Approximately 11 percent on retirement and personal insurance.
6. Nearly 6 percent on healthcare.

Even a precursory look at where Americans spend their money tells the average investor where to spend theirs...housing, entertainment, transportation, food, financial products and healthcare. Those are the big six that run the American economy. Now stop and consider which are available to the average "little guy" investor...stocks and bonds for healthcare, insurance and finance have been decimated in recent years. The auto industry?
Please! Now that's it's been nationalized you can count on the same efficiency that brought you the driver license office to run the auto industry. Food is notoriously volatile and forget direct intervention unless you have an unusual level of gardening know how. No, the answer remains the same today as it did 100 years ago...real estate. It's not easily outsourced, it's not subject to the market manipulations of stocks and bonds nor is it entirely dependent upon your ability to work yourself into an early grave. It simply requires a willingness to adapt to the new economic environment like all other species that learn to thrive or barely survive.

According to data compiled by ZipRealty, inventory of homes -- single-family homes, condominiums and town houses listed on local multiple-listing services -- in 27 major metropolitan areas rose 4.2% in February from a month earlier. The inventory in February dropped 19% year-over-year. The figures compiled by ZipRealty may not present the exact level of supply since half of foreclosed homes are not included on multiple-listing services at any given time on account of such homes awaiting repairs or being subject to litigation. Ivy Zelman, chief executive of Zelman & Associates, a research firm, says the average increase in home inventory in February has been 3.4%, over the past 27 years. Analysts say the housing inventory could be much higher than what is reported, and a large supply of unsold homes could hit market recovery. David Moon, president of Moon Capital Management, says the housing inventory data does not account for “properties on which the loans are seriously del
inquent and those that already are in the foreclosure process but not for sale. Banks often have houses in their real estate owned portfolios that aren't yet on the market.”

Will foreign investment help commercial real estate?

"A wave of commercial real estate loan failures could threaten America's already-weakened financial system ... and... trigger economic damage that could touch the lives of nearly every American," according to a recent Congressional Oversight Panel report. As troubled loans running into billions of dollars come due in the next few years, the industry is facing the prospect of a huge wave of defaults. A recently proposed legislation seeks to attract foreign investment to the commercial real estate sector to provide the much needed liquidity for the sector. In January, Joseph Crowley, a Democratic congressman, introduced the Real Estate Revitalization Act of 2010 which seeks to eliminate certain taxes that were part of the Foreign Investment Real Estate Property Tax of 1980 (FIRPTA). FIRPTA requires foreign investors to pay as high as a 55% tax on capital gains from the sale of U.S. real estate or shares in real estate investment trusts. Supporters of the bill say that by repeal
ing the tax, the country would attract significant foreign investment. "We're talking about bringing in foreign investment to be on equal footing if they invest in real estate versus non real estate," says Jeffrey DeBoer, chief executive of the Real Estate Roundtable, a real estate think tank. Many property owners are now facing debt calls on account of property prices having fallen about 40% from their peak, and the commercial mortgage-backed securities market has dried up. Real estate loans to the extent of $1.4 trillion will come due between 2010 and 2014, and about 50% of those loans are currently "underwater." If the bill is passed, Real Estate Investment Trusts could benefit significantly.

Bair says consumers did not understand subprime mortgages

Sheila Bair, the chairman of the Federal Deposit Insurance Corp. (FDIC) has said there is “ample evidence that consumers did not understand the consequences of the subprime and nontraditional mortgages that were sold to them.” In a speech to the National Association of Business Economics, Bair has called for greater consumer protection in financial services and said the information flow among the different market participants should significantly improve. “Economists understand a great deal about the effects of asymmetric information, and how it can prevent markets from existing in the first place or from operating efficiently,” Bair said. “In this light, I think there is a strong case to be made that basic consumer protections help markets function better by reducing information gaps between lenders and borrowers.” Commenting on failures of large financial firms, Bair said the typical resolution should not be a bailout using public money, but should be a mechanis
m which would ensure that shareholders and creditors take the losses.

Small business optimism slips

According to a survey conducted by the National Federation of Independent Business (NFIB), its index measuring sentiment among small business owners dropped 1.3 points to a reading of 88.0 in February, from January. Incidentally, a value of 90 in the index indicates an expectation of positive growth. The index has remained at 90 for 17 straight months, and below 90 in all but 4 months since January 2008. The survey said small business owners cited weak sales as their biggest concern. The poor outlook on demand is driving small business owners to liquidate inventories and go slow on ordering new stocks. "Something is preventing owners from ‘pulling the trigger,’ said William Dunkelberg, chief economist for NFIB."Very few owners felt that growth opportunities were solid enough to warrant expansion.'' Only about 9% of the respondents said they were hampered by lack of credit. “Credit access is not a major factor holding up economic growth, at least the kind of growth we wa
nt,'' said Dunkelberg.

Hiring outlook worsens

According to a quarterly survey by Manpower, a consultancy, employers in the U.S. are less willing to hire workers in the coming 3 months than they were 3 months ago. Some 17 million Americans are currently unemployed and the survey results do not indicate any optimism on employment. The survey is based on interviews with 18,000 managers responsible for hiring workers and measures the difference between those who say they will add to their workforce and those who plan cuts. About 73% reported no change in their hiring outlook, matching last quarter's record. "There is some demand, so (employers) won't let people go, but not enough confidence to do hiring," Manpower Chief Executive Jeff Joerres said. According to Joerres, the U.S. economy is caught in a vicious cycle – companies will not add capacity and hire workers until demand improves, while consumers will not buy until unemployment falls and incomes improve. Joerres argued for continued government stimulus until the eco
nomic situation improves. "A snail's pace recovery is (equivalent to) falling back," Joerres said. "A very slow recovery is dangerous."

Now on to our real estate investing educational section...

Complete the Picture - Addressing Negative Equity Issues

It's no surprise that negative equity has become a major issue in the current housing market; experts report nearly one of every four mortgages being higher than the current value of the underlying real estate. Unfortunately, that doesn't tell the entire story. Short sale investors, real estate agents and homeowners alike need to understand the full impact of negative equity in order to make the best decisions regarding the current plan of action for any property.

Problem #1 - Under-Reporting of Negative Equity

Although the media is filled with statistics regarding the number of under-water homes, it still manages to under-report the full impact of the problem. This is due to several reasons; first of all, the numbers used to compile these averages are based upon the overall decline in value for a given area rather than a specific home. Many financial distressed homeowners have failed to maintain adequate maintenance or allowed taxes, insurance and other lien payments to lapse.  The actual amount of negative equity for any given property is often far in excess of the official estimates.

Problem #2 - Counting Transaction Costs

In addition to the one out of every four homeowners that are currently upside down on their mortgage, there are literally millions more that are "borderline"; basically their current mortgage more or less equals the value of their home....at least on paper. Unfortunately, that status can quickly turn negative if they decide to actually sell.  Sales commissions to real estate agents and brokers easily average seven percent while local taxes or closing costs frequently add another two to three percent. A ten percent premium above and beyond the current mortgage/market value is well within the average range quickly transforming a "break even" property into a negative equity position.

Problem #3 - Taxes, Taxes, Taxes

Investor owned properties often face even greater costs including depreciation recapture and Capital Gains taxes. Combined, the total tax hit combined with items like depreciation recapture can transform a borderline property into a negative equity situation. Add in transaction costs such as real estate agent commissions and closing costs and the average investor owned property often needs to price a property 20% to 35% above the asking price just to break even.

Problem #4 - Second Loans & Other Liens

As if the situation wasn't bad enough, a recent study conducted on behalf of BofA found a significant increase in the percentage of underwater loans when the primary mortgage as well as secondary loans and liens were compared against the full value of the property. In fact, only 45% of Prime borrowers were found to have any remaining equity in their homes.

Bottom Line - Walk the current homeowner through the actual numbers required in order to determine if a property is in a negative equity position or not; don't simply rely upon the paper estimates to determine the value of a property. In addition to the one out of four mortgages that are clearly in excess of the current value of the home, millions of other Americans face a "hidden" negative equity position when attempting to sell a home rather than hold for the long term.

Federal and mortgage industry officials are increasingly looking for ways to get distressed borrowers to leave their homes voluntarily, without going through the expensive foreclosure process or a messy eviction. Citigroup, for instance, plans to announce a pilot program on Thursday that would allow delinquent borrowers who don't qualify for or decline mortgage relief the opportunity to stay in their homes without making payments for up to six months before turning over the keys, in return for keeping the property in good condition. Other initiatives have also emerged for borrowers likely to lose their homes. Fannie Mae and Freddie Mac, the mortgage financing companies, developed programs allowing former homeowners to become renters after a foreclosure or other proceedings. As part of its federal foreclosure prevention program, known as Making Home Affordable, the Treasury Department announced late last year that lenders would be eligible for $1,000 in exchange for allowing
borrowers to sell their home in a short sale. In such deals, the borrower sells the home for less than the outstanding mortgage, and the lender forgives the difference. Moody's Economy.com has forecast that the number of short sales and transactions in which borrowers surrender their deed in lieu of foreclosure will increase more than 50 percent, to about 490,000, this year. That is just a fraction of the 1.9 million homeowners Moody's has forecast will lose their homes to foreclosure this year, up from 1.7 million last year.

Retail sales up

The Commerce Department said total retail sales edged up 0.5% to $355.8 billion last month, compared with December's revised decline of 0.1%. Economists surveyed by Briefing.com had anticipated that January sales would grow 0.3%. Sales excluding autos and auto parts rose 0.6% last month. A consensus of economists had projected ex-auto sales to rise 0.5% in January. The year-to-year increase was more impressive. January retail sales jumped 4.7%, compared to the same month in 2009. Sales were boosted by electronics and appliance stores, where sales rose 1.2 percent after declining 3.5 percent in December. Sporting goods, hobby and books sales rose 1 percent last month, adding to December's 1.9 percent increase. Sales at general merchandise stores rose 1.5 percent in January, the biggest gain since February 2009. Core retail sales, which exclude autos, gasoline and building materials, rose 0.8 percent after falling 0.3 percent in December. The jump in sales sent the dollar hig
her, extending gains against the Japanese yen. Retail sales are being closely watched for signs of whether consumers are healthy enough to sustain the economy's recovery once government stimulus and the boost from restocking by businesses wanes.

DSNews.com - Homebuilders buy troubled loan portfolios

Lennar Corporation, one of America’s largest homebuilders, said that it has purchased two loan portfolios from the FDIC with a combined unpaid balance of $3.05 billion. Lennar paid $243 million for the portfolios, which include 5,500 distressed residential and commercial real estate loans from 22 failed bank receiverships. But the Miami-based builder says it’s no stranger to working with troubled mortgages. “Acquiring and working out distressed real estate loans was a large and extremely profitable part of our business during the last major real estate down cycle in the early 1990s,” said Stuart Miller, president and CEO of Lennar Corporation. “We are pleased to return to this business and honored to partner with the FDIC to manage, work through and add value to these portfolios of real estate loans.” Miller says the company has been preparing to invest in the distressed loan space for the last two years and has been closely watching the market to identify “t
he opportune point of entry.” Tulsa-based BOK Financial Corp. also bought servicing rights to a $4.1 billion portfolio of 34,400 mortgage loans made by Albuquerque-based Charter Bank. The acquisition boosts BOK’s $7.4 billion mortgage servicing portfolio by 46%.

Investor's Business Daily - Stimulus a failure

Early last year, President Obama's advisers made it clear: By the end of 2010, there would be 3.5 million new jobs created if the stimulus bill then being crafted in Congress was passed. Unemployment would peak at 8%. The reality was a tad different. No net new jobs — zero — were created. Indeed, the White House had to make up jobs "created or saved" through numbers-fudging and statistical legerdemain to show any new jobs at all. The sad fact is, private U.S. businesses cut 4.7 million jobs — 392,000 a month — in 2009. All told, we've lost 8.4 million jobs since the recession began in December 2007. Now we're told this year will see a job recovery, with payrolls adding an average 95,000 per month. Yet the unemployment rate will be around 10% — higher than the current 9.7%. Some in the media seem surprised by this. But as we explained a week ago, since 1990 the U.S. work force has expanded by 113,000 workers each month — mainly from young people and immigrants
entering for the first time.

Monthly job growth below 100,000 isn't enough. It's the economic equivalent of paddling a boat five miles an hour upstream against a current going 10 miles an hour the other way. No matter how hard you paddle, you still end up downstream. Also as noted, the new Council of Economic Advisers report amounts to an admission that past "stimulus" efforts have failed. Yet, even now, Congress is crafting a new $85 billion "jobs" bill. Instead of creating jobs, this bill will do what the last did: create a sluggish economy and long-term dependency on government. We're not saying every element of it is bad. But it's built around a special tax credit for businesses that hire workers or give them a raise. Even those who would benefit from it are skeptical. "There's certainly nothing wrong with giving a tax break to a business that's hired a new worker, especially in these tough times," Bill Rys, tax counsel for the National Federation of Independent Business, told the Associated Pres
s. "But in terms of being an incentive to hire a lot of workers, we're skeptical."

Now on to our real estate investing educational section...

Understanding Audits

Just the mere mention of an IRS "audit" strikes fear in the heart of most Americans; in fact, many would be short sale investors are so overwhelmed by the prospect they completely avoid the topic altogether. Unfortunately, what you don't (want to) know can still hurt you when it comes to taxes; after all, ignorance of the law is no excuse and you must still sign-off on all tax forms prior to the final submission. Understanding a little about audits can go a long way toward preventing problems in the first place.

1. The very first thing to understand about audits is that they are not as common as most people imagine....in fact, audit rates have steadily declined over the past decades. In 1963 over 5.5 percent of all Americans were audited. In 2008 only .80 of Americans were audited - less than 1 percent of taxpayers annually. Audit rates for landlords do not appear to be any higher than that of the average population according to "How to Beat the IRS at Its Own Game" by Amir Aczel and approximate that of most small business owners. Real estate dealers and investors also appear to garner roughly equivalent audit rates.

2. Automated Under-reporter Program. Although not widely known, the IRS compiles and compares payment data submitted by banks, financial institutions and property managers, repair co's etc.. against rental receipts and mortgage interest payments claimed by landlords. When the amounts don't match, it automatically triggers further investigation.

3. Avoid round numbers. Yes, they are easier but it raises a red flag that the amount in question could be "made up" rather than real.

4. State and federal returns should match. Sounds simple but it's a common mistake likely to trigger additional scrutiny at one end or the other.

5. Don't file early. Why give IRS additional time to decide whether or not to audit your return? Remember, they have three years to make up their mind...more than sufficient time!

6. Stay within market averages! The IRS makes good use of average market rates for each area and you should too. Avoid renting or selling to friends and family where it could be construed as a gift, barter or other irregularity in need of additional "attention" (ie, an audit).

7. Keep those receipts. Without a doubt, good record keeping is the first defense against an audit. When in doubt, make a note and include it with your tax return.
Bottom line: Don't cheat on taxes but also don't become so fearful of an audit that you miss available tax write-offs and deductions. Stay within the legal limits and use aggressive tax strategies to reduce taxes and maximize profits.

Fannie and Freddie failing

Freddie Mac and Fannie Mae were among the first big financial institutions to receive massive federal bailouts after the financial crisis hit in 2008. Government officials have been racing to fix bailed-out car makers and banks and are pushing to reshape the financial-services industry. But Fannie and Freddie remain troubled wards of the state, with no blueprints for the future and no clear exit strategy for the government.  Nearly a year and a half after the outbreak of the global economic crisis, many of the problems that contributed to it haven't yet been tamed. The U.S. has no system in place to tackle a failure of its largest financial institutions. Derivatives contracts of the kind that crippled American International Group Inc. still trade in the shadows, and investors remain heavily reliant on the same credit-ratings firms that gave AAA ratings to lousy mortgage securities. Fannie and Freddie, for their part, remain at the core of a housing-finance system that inflate
d a dangerous housing bubble.

After prices collapsed, sending shock waves around the world, the federal government put America's housing-finance system on life support and it has yet to decide how that troubled system should be rebuilt.  On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion. The government is "running Fannie and Freddie as an instrument of national economic policy, not as a business," says Daniel Mudd, who was forced out as Fannie Mae's chief executive in September 2008 when the government took control.  Other housing experts contend that prolonged government intervention will make it more difficult and costly to eventually wean the companies off government support. "The more aggressively we continue kicking the can down the road, the larger th
e losses become and the harder it becomes" to address the companies' future, says Joshua Rosner, managing director at investment-research firm Graham Fisher & Co.  As mortgage delinquencies rise, Fannie and Freddie are required to set aside more capital to cover anticipated losses. Each quarter, if their revenues are insufficient to meet those financial needs, the Treasury has to kick in more money.  With delinquencies still rising, the outlook is grim. At Freddie, 3.87% of single-family mortgages were at least 90 days past due at the end of December, up from 1.72% a year earlier. Fannie is worse: 5.29% were 90 days past due in November, up from 2.13% a year earlier.

Olick - Obama shifting from HAMP to HAFA (short sales)?

Diana Olick picked up on something Seth Wheeler, Senior Advisor to the Treasury Department, said last week.  According to Olick:  "In discussing the Obama Administration's Home Affordable Modification Program (HAMP), which is arguably less successful than anyone intended, Wheeler made a comment leading some to believe that the Administration may be shifting focus from modifications to another program which simply gets troubled borrowers out of their homes as quickly and cleanly as possible.  Wheeler told ASF members and guests, 'Short sales, deeds in lieu are other ways to prevent foreclosures to help achieve stability [in housing].  Modifications are only for a certain subset of distressed homeowners.'"  Olick points to the widely acknowledged failure of HAMP and suggests that Wheeler's mention of the Home Affordable Foreclosure Alternatives program (HAFA) is indicative of a shift in emphasis for the Obama administration. 

HAFA specifically targets short sales and deeds in lieu of foreclosure. According to the directive: Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days of the date the borrower: Does not qualify for a Trial Period Plan; Does not successfully complete a Trial Period Plan; Is delinquent on a HAMP modification by missing at least two consecutive payments; or requests a short sale or DIL.  According to Olick:  "My guess is that last one is the most popular.  The HAFA program offers incentives in this program "upon successful completion of the short sale" or Deed in Lieu. They include borrower relocation assistance of $1500, a servicer incentive of $1000 to cover administrative and processing costs and investor reimbursement of $1000 for subordinate lien releases. That's when the investor allows up to $3000 in short sale proceeds to go to subordinate lien holders.  'It is my belief that the success of HAFA will be vastly greater than HAMP,' sa
ys Mark Hanson, a mortgage consultant in California.  'Going forward, figuring out exactly what this means for foreclosures, REO, house sales, housing inventory, values, bank balance sheets, second mortgages, RMBS prices, the builders, the mortgage insurers, and sentiment is where the focus will be.'"

Tax rate balloons

Companies in at least 35 states will have to fork over more in unemployment insurance taxes this year, according to the National Association of State Workforce Agencies.   The median increase will be 27.5%. And employers in places such as Hawaii and Florida could see levies skyrocket more than ten-fold.  Many of these hikes happened automatically as prolonged joblessness triggered state laws governing their unemployment insurance systems. But at least seven states voted to raise their taxable wage bases, the level of income subject to unemployment tax. And another 10 are looking at upping the wage bases or tax rates.  In addition, employers pay federal unemployment taxes. If states don't repay their federal loans, businesses could see their this federal tax go up as well in coming years, said Rich Hobbie, executive director of the National Association of State Workforce Agencies.  Higher taxes dampen employers' ability to hire new workers, crimping any nascent economic recove
ry. Companies pay taxes on each employee on the payroll.  "There's no doubt it discourages hiring," said Douglas Holmes, president of UWC-Strategic Services on Unemployment and Workers' Compensation, an employers' trade group. "In fact, it leads to increased unemployment."  Texas, Hawaii, and Florida are the hardest hit.

Consumer credit falls

According to the Federal Reserve, total consumer borrowing fell a seasonally adjusted $1.8 billion, an annual rate of 0.8%, to $2.456 trillion in December 2009.  Economists predicted a decline in total borrowing of $10 billion in December, according to a consensus survey from Briefing.com. November saw a downwardly revised 10.6% decrease, or $21.8 billion, in total consumer borrowing.  Sean Maher, associate economist at Moody's Economy.com said he expected November to be revised upward, but instead it was even more negative -- so December's more upbeat data "doesn't mean we're out of the woods."  For all of 2009, consumer debt dropped by 4% to $2.46 trillion from $2.56 trillion in 2008.  Revolving credit, which includes credit card debt, fell in December by $8.5 billion, or an 11.7% annual rate, to $866 billion. 

But nonrevolving credit, which includes car and student loans, bucked the trend. It rose by $6.8 billion, or a 5.2% annual rate, to $1.59 trillion.  The data's recent volatility and large revisions make it difficult to make predictions, Maher noted, but he expects revolving credit will fall substantially in the coming months but will start to taper off around June.  "Consumers are still finding it tough to get credit, but there are some signs we've reached a bottom," Maher said. The credit crunch should begin easing now, he said, "with breakeven around the middle of the year -- and we're looking for a pretty quick rebound by the second half of 2010."

DSNews.com - Home ownership at lowest point in a decade

Home ownership in the United States hit a 10-year low during the fourth quarter of 2009. According to data released by the Census Bureau last week, the homeownership rate fell to 67.2% at the end of last year.  That’s down from 67.6 percent the previous quarter and 67.5 percent one year earlier. It represents the lowest percentage of Americans who owned a home since the second quarter of 2000. Homeownership has been on a steady downward slope since 2006, when it became evident that more and more borrowers were put into loans they couldn’t afford and housing woes began to eat away at the government’s long-time push to make the American Dream a reality for anyone that wanted it.

Regionally, homeownership rates are highest in the Midwest (71.3 percent) and in the South (69.1 percent) where housing is considered relatively affordable. They are lowest in the West (62.3 percent) and the Northeast (63.9 percent) where home prices are on the higher end of the spectrum.  Relative to a year ago, the biggest decline, though, was in the South (down 0.7 points) and in the West (down 0.4 points), where you can find the foreclosure hotspots of Florida, California, Arizona, and Nevada.  The Census Bureau also reported that the percentage of vacant homes in the U.S. rose from 2.6 percent in the third quarter of last year to 2.7 percent in the fourth. All told, there were 2.09 million homes sitting empty and available for sale at the end of last year, up from 1.99 million three months earlier, the agency said. As Bloomberg explained, this number includes both listed properties and those that banks have repossessed and have not yet listed.

Now on to our real estate investing educational section...

Sooner or later every short sale investor encounters a sale in danger of dying. Fortunately, with a few simple steps it's possible to dramatically reduce the risk of spoiling a sale.

1. Get Smart. Prequalify and prepare from first contact. Everyone has an "A" list and a "B" list when it comes to prospective buyers but it's still necessary to put things into proper perspective before spending a lot of time and effort on dead-ends. Remember, the internet helps to eliminate and reject prospects through the use of well placed questions and comments.  For example, asking a simple question such as "Is there another home you wished you had bought?" can explain a lot; price range, comfort zone and readiness just for starters.

2.  Value-Driven. Tough economic times have led most buyers to become more price conscious than ever; it's no longer enough to simply show a few over-priced homes to prep for an attractive in-house alternative...instead, be prepared to demonstrate real value with low risk. Buyers want to know they won't lose money in the long run by buying a given house or property.

3. Don't Shut Doors on any Deal. Some buyers are just the opposite - they have money and when presented with the right opportunity - are willing to go substantially above and beyond their traditional budget. Don't automatically exclude higher priced properties for those that have the means to make ends meet at a larger than life level. In this situation, recognize the price is not the prime motivator but rather the "right"  property. Determine what constitutes a desirable deal then make it happen.

4.  Time Right. Timing is everything but it takes time to learn how to distinguish valid help from harassment when working with prospective clients. Too soon and you can quickly cool even the hottest prospect...too long of a delay and you risk having others step in to fill your shoes.

5. Preferred Status. Everyone likes to feel special and as a short sale professional it is your duty to given individualized attention to every prospect....of course, some clients are just a bit more special than others especially when it comes to sealing the deal. Find a few ways to express that little extra something when working with your "A" list clients; meet at a local coffee shop then foot the bill (don't worry - it's a legitimate write-off) or schedule exclusive "preview" showings to the most promising prospective buyers before the big announcement. Remember, it's the thought that counts not necessarily the size of the status symbol.

6. Teach sellers to think like buyers and vice versa. Yes, it's easier said than done but it's all in the wording. By teaching sellers to act like buyers and buyers to act like sellers you assure they will present and demand more reasonable offers. Think of it as a small investment that pays big dividends at closing time.

7. Have a contingency plan in place. Every good investor identifies the "out" long before buying into the given investment - it's no different with short sales. Know when and how you plan to exit the property then have a contingency in place should something go amiss. It's one additional layer of protection that allows short sale investors to sleep easy by knowing they have plenty of outlets for every property.

See you at the top!

Good News...Congress is under the gun from homebuilders and Realtors to extend the $8,000 first-time home buyers' tax credit beyond its Nov. 30 expiration and even expand the credit to existing homeowners — a move that could happen before the week's end. Proponents say the tax credit has helped breathe life into the comatose housing sector and that its extension is critical. "Failure to act now could derail the fragile housing recovery even before it has time to take root, " said Jerry Howard, president and chief executive of the National Association of Home Builders, in a recent statement.About 1.4 million households used the credit between February (when the program was launched) and September. And from 350,000 to 400,000 of those transactions involved purchases that would not have been made without the credit, says Lawrence Yun, chief economist with the National Association of Realtors (NAR). The latest housing data has also been positive: sales of existing homes shot up 9.2% in September to a seasonally adjusted rate of 5.57 million units — the highest level since July 2007, according to NAR. At the same time, inventory levels declined 15% from the same month a year earlier. Congress is mulling plans to extend the $8,000 first-time home buyers' tax credit to April 30 (which covers home purchases closed by June 30) and to allow individuals with incomes of up to $125,000 (or $250,000 for couples) to apply for the credit, up from the previous threshold of $75,000. Also, a proposal is on the table to offer a new credit — $6,500 — to move-up buyers who have lived in their home for at least five years. The Senate is near a vote on its version, which includes an extension and expansion of the credit, and the House could quickly accept the Senate version once it is passed. But analysts wonder if the $11 billion price tag for the credit's next phase is worth it. Some say many of the people using the tax credit would have purchased a home anyway.

Bonds are down but off their morning lows in a curious reaction to some fairly positive economic data.  The ISM survey was definitely the highlight of the morning and the report definitely showed more strength in the manufacturing sector than expected.  The headline number came in well above expectations and a look at the details of the report showed higher prices paid and the first positive employment reading in a very long time.  Construction spending also beat estimates as did pending home sales.  The “normal” reaction to data like this would be for stocks to climb and bonds to fall.  Stocks are doing their part with all of the major indices showing gains but bonds have not seen the selling that one would expect. 
 
We have a busy week ahead.  The FOMC begins their 2 day meeting tomorrow with the release of their policy statement on Wednesday.  ISM Services is also due up Wednesday and the employment report will be released on Friday.