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The Obama administration’s flagship foreclosure aid program, HAMP (Home Affordable Modification Program), and HUD’s Neighborhood Stabilization Program (NSP) are both in congressional sites as the House Financial Services committee approved both the HAMP Termination Act (HR 839) and the NSP Termination Act (HR 861) yesterday[1]. The committee believes that ending these programs could save around $30 billion dollars of taxpayer money. Chairman of the committee, Spencer Bacchus (R-AL), hopes that the $30 billion can be used instead in the private sector to create jobs.

Not surprisingly, not everyone on Capitol Hill is pleased with the acts. Maxine Waters (D-CA), who has vocally blasted just about everyone on both sides of the aisle this month, announced that she is “very disappointed in my colleagues on the opposite side of the aisle [and] their mania to achieve fiscal austerity at all costs”[2]. Waters was instrumental in getting the Emergency Homeowners Relief Program – also on the chopping block – included in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Of course, all of these negotiations could very well come to nothing, as yesterday the White House repeated that it will veto congressional government funding measures if the “undermine critical priorities or national security through funding levels or restrictions”[3]. The president has said repeatedly over the past few weeks that the termination of HAMP undermines his priorities and long-term economic growth.

Do you think HAMP, NSP and the like should go or stay?

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Let us know how you would solve these issues below.

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[1] http://www.dsnews.com/articles/house-committee-advances-bills-to-end-two-more-foreclosure-aid-programs-2011-03-09

[2] http://www.loansafe.org/congresswoman-waters-blasts-republicans-for-voting-to-dismantle-programs-that-help-homeowners-avoid-foreclosure

[3] http://voices.washingtonpost.com/2chambers/2011/03/obama_repeats_veto_threat_agai.html

Yesterday federal prosecutors announced indictments for a dozen Arizona individuals involved in cash-back mortgage schemes that “contributed to the meltdown of the state’s real estate market.” Among those charged were a couple running a Tempe-based international Christian ministry, the Clint Rogers Ministry[1]. Clint and Angela Rogers are accused of diverting more than $2.5 million to themselves and co-conspirators by falsifying loan applications to allow them to buy homes at “artificially inflated prices” after buying the homes at lower values through an intermediary.

The couple face 13 counts of conspiracy, money laundering and wire fraud, and are accused of using their ministry simply as a vehicle to accept the money.

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Let us know what you think should be done about this kind of fraud in the space below.

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[1] http://www.businessweek.com/ap/financialnews/D9LS0U8G1.htm

According to a report released by CoreLogic yesterday, 23.1 percent of residential properties with a mortgage were underwater at the end of 2010. That is up slightly from 22.5 percent earlier in the year, and represents a 300,000-home increase in just three months[1]. These numbers do not surprise many analysts, but they do worry them since underwater homes are a “drag” on the market because they prevent homeowners from exiting those homes via traditional routes like selling and they also stifle the “trade-up” market in real estate, which consists of homeowners buying better, more expensive homes and selling their old ones.

Mark Fleming, CoreLogic’s chief economist, says that these high levels of negative equity will keep housing and mortgage finance markets sluggish even if the rest of the economy begins to recover. Perhaps of equal concern is that 2.4 million borrowers have “near-negative” equity, meaning that they have less than 5 percent equity in their homes. This could quickly turn negative if CoreLogic predictions that home prices will fall another 5 to 10 percent in the coming year.

In light of this news, many in the Obama administration are protesting Republican proposals to cut HAMP (Home Affordable Modification Program) as part of the budget adjustment even more vehemently. In fact, the White House has threatened to veto attempts to do so, saying that the program is a “cost-effective approach to assisting underwater borrowers”[2]. However, the program, which was intended to help as many as 4 million homeowners, has thus far only helped a few hundred thousand and wasted massive amounts of taxpayer money, say HAMP critics.

For many real estate investors, these types of numbers mean more involvement in the real estate market thanks to creative financing and other alternative methods for buying property. Do you think that this is the way out of this mess?

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Let us know what you think should be done about the underwater housing situation below.

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[1] http://blogs.wsj.com/developments/2011/03/08/report-more-borrowers-underwater/

[2] http://online.wsj.com/article/BT-CO-20110308-714971.html

As Bank of America struggles – successfully, according to its executives – to once again become a “growth company,” one way that it is limiting its losses is by selling off commercial real estate[1]. The lender, which has been hit hard by litigation associated with its acquisition of Countrywide and by the robo-signer scandal hopes to decrease the chance of write-downs on commercial loans by selling off those assets now. Given that commercial property prices have fallen 40 percent since their 2007 peak and the bank’s core portfolio fell 28 percent in 2010 alone, this seems like a wise decision in order to limit loss. However, BofA is not exiting the commercial real estate business completely, says its head of commercial banking division David Darnell, but will remain active and involved in a “very disciplined way.” Chief executive officer Brian Moynihan hopes that this move will help the lender continue to expand without acquisitions like those of Countrywide and Merrill Lynch & Company, which led to litigation and serious losses in real estate and mortgage securities.

The lender said in an official statement that although “credit quality for commercial real estate is showing sign of stabilization,” it expects that “elevated unemployment and ongoing pressure on vacancy and rental rates will continue to affect primarily the non-homebuilder portfolio”[2]. By shedding some of its “excess weight” in commercial loans, BofA may be able to reduce its “legacy assets” left behind by other CEOs and limit losses on the books. Do you think that BofA’s actions are a sign that commercial real estate is not done heading down, or does this make you want to buy?

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Let us know what you think of BofA’s continuing troubles below.

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[1] http://www.businessweek.com/news/2011-03-08/bofa-selling-commercial-real-estate-assets-risk-chief-says.html

[2]http://www.streetinsider.com/Corporate+News/Bank+of+America+%28BAC%29+Slashing+its+Commercial+Real+Estate+Assets/6353289.html

One of the best things about tax lien investing is that it is one of the most secure forms of real estate investing. In fact, some “gurus” actually go so far as to call tax lien investing “guaranteed” investing. This is because a tax lien usually takes precedence over any other lien on a property, meaning that you are first in line to either get paid for your note or foreclose on the property. However, there are a few scenarios in which your “top dog” status may be challenged.

One such scenario occurs in states that reserve top lien status for their own liens. This is the case, for example, in Arizona. In Arizona, tax liens are considered to be “prior and superior to all other liens and encumbrances upon the property except liens and encumbrances held by the state.” This is not that big a deal as long as you are aware of the rule. Basically, if you purchase a tax lien on a property that is also encumbered by a state-owned lien, you are not first in line. You should check ahead of time to make sure that either:

1. There is not a state-owned lien on the property, or

2. There is enough value in the property to allow for collection of the state-owned lien and your lien. (In today’s real estate market, this second option can be risky since property values are very uncertain in many markets.)

Of course, every state has its own unique guidelines for how tax liens are dealt with. It is your responsibility as a tax lien or tax deed investor to make sure that you are prepared with all of the relevant information on state-specific guidelines before you bid on or purchase a tax lien or deed.

Thank you for reading REJournalOnline’s Tax Deeds Investment Newsletter.

Please leave your comments or questions below.

According to California realtors, a little under half of all short sales fail to close thanks to slow response times on the part of lenders[1]. Despite state regulations governing how quickly banks are required to respond to short sale inquiries, some real estate agents report that it routinely takes one or two months to get an answer from a lender – even though “the process has improved dramatically in the past year” according to Dustin Hobbs, spokesman for California’s Mortgage Banker Association[2]. Hobbs points out that while lenders may be required to provide a response within a short period of time, ultimately, they have to get permission from the entity or entities that actually own the loan. This means “a lot more phone calls, a lot of paperwork, a lot more decisions that have to be made” in the midst of handling foreclosures and other distressed properties. “I don’t doubt there’s a backlog of requests,” said Hobbs.

Unfortunately, this backlog is leading to more foreclosures, say agents. Because it takes so long to get a response on short sales, by the time that the response comes even if it is positive the buyer may be gone. Agents blame this on the banks, saying that “time is of the essence” in real estate contracts and things must speed up. Lenders and even some brokers, however, admit that real estate agents can actually complicate short sales significantly if they are inexperienced or, in an effort to make sure the deal closes, allow clients to enter several short sale purchase agreements at once and then back out of the ones that do not close soon enough, thereby skewing the actual failure numbers. There are also still bookkeeping problems for banks associated with short sales, in that if they foreclose on a home they have some time to report the loss that they may take on the property. Short sale losses must be reported immediately.

The California Association of Realtors has requested that government agencies compel banks to “complete all short sales following HAFA guidelines and to comply with the program’s time frames.” Since most lenders have completed their repayment of TARP funds, this is optional at this time.

Do you think that lenders should still be forced to participate in HAFA?

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Let us know what you think of California’s short sale situation below.

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[1] http://www.latimes.com/business/la-fi-short-sales-20110307,0,6800709.story

[2] http://www.ocregister.com/articles/estate-291142-sell-lenders.html

While it might be hard to see how the commercial market could move so quickly from a total standstill to having too much action and capital, that is just what many experts are predicting could happen during the “long healing process” in the commercial industry[1]. That’s right: now that things are starting to look better with transaction volumes heading up and great deals being done right and left by careful investors who have waited for just this time to move into the market, analysts believe that copycats could start moving in over the next few years and gumming up the system with “too abundant” capital.

But is that really such a bad thing? The commercial real estate market relies on investor confidence just as other real estate markets do. And renewed confidence in t he market is currently causing the commercial mortgage-backed securities (CMBS) market to double in value while lenders and investing firms are acting quickly to get involved in all related arenas. “The best bargains come in a bad market,” say analysts, pointing out that soon that bad market could start to change its face and become a good one with investors still struggling to get in.

It seems that what this really means is that if you want to get in on the ground floor of the growing commercial real estate industry once more, then the time to act is now. According to the National Real Estate Investor, the commercial real estate sector is in the “early stage of the next real estate up cycle [and]…will attract significantly more investor interest and new capital in 2011”[2]. Of course, you should always analyze your specific deals for yourself before you jump in head over heels, but does this sound like bad news to you or do you think this means that it is time to invest?

Thank you for reading REJournalOnline’s Commercial Real Estate Letter!

Let us know what you think about today’s market conditions in the commercial sector below.

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[1] http://www.nuwireinvestor.com/articles/in-real-estate-and-investment-best-bargains-come-in-bad-56991.aspx

[2] http://nreionline.com/news/real_estate_bets_2011_0307/

On Thursday of last week, lenders involved in negotiations with the Obama administration to reach a settlement that would hopefully end the robo-signer controversy and begin to restore faith in the lending industry received the administration’s proposal for resolving the robo-signer fiasco. Rumors have swirled about the contents of this proposal, with critics claiming that the lenders are going to have to pay too much to people who were wrongfully foreclosed and lenders insisting that mandatory principal reductions would ultimately just lead to fraud and closed banks. However, pretty much everyone expected that there would be some solid number for a monetary penalty that banks would have to pay for their misconduct. Oddly enough, there is nothing like that in this initial document[1].

This may be a response to allegations – apparently reasonably accurate – by the comptroller of the currency, John Walsh, that most of the foreclosures conducted by banks were legal – even if not adequately documented or verified – and that only “a small number of foreclosure sales should not have proceeded” of the myriad processes now in question due to the robo-signer fiasco. However, the decision to make the settlement proposal largely a “code of conduct” for banks moving forward has many people, including a “Capitol Hill staffer” who spoke to the Huffington Post on condition of anonymity, suspicious that “the settlement was conceived as a benefit for financial markets, giving investors and banks certainty about their total liability from wrongful foreclosure rather than thousands of individual court cases”[2]. If this is the case, then you would think that lenders would be pleased to have ultimately gotten a settlement in hand.

However, lenders complain that the fees and regulations in their proposed code of conduct are nothing more than a “naked shakedown.” Futhermore, they believe that some proposed mandatory principal reduction regulations do nothing more than open them up to fraud and, and lenders like Ally Financial admitted that “any of these potential actions could have a material adverse impact on us”[3]. It seems reasonable that lenders should pay for this vast moral and professional oversight, but unless we are ready to operate without the lending industry as we currently know it, then maybe the penalties cannot be as severe as many might consider “fair.” Do you think that this settlement does enough for the injured parties? Too much? How should the country’s lending industry be handled going forward?

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Let us know what you think of the administration’s proposed settlement with the banks below.

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[1] http://www.dsnews.com/articles/banks-receive-proposal-that-could-make-write-downs-mandatory-2011-03-04

[2] http://www.huffingtonpost.com/2011/03/04/lawmakers-demand-big-mone_n_831693.html

[3] http://empowerednews.net/foreclosure-investigation-result-draws-closer-as-attorneys-general-draft-settlement/186364/

Banks that restructured commercial real estate loans to make them appear more attractive are now facing an SEC investigation[1]. Lenders around the country have been using “creative” methods to try and keep their commercial loan portfolios from turning toxic, but now the SEC is questioning “extend and pretend” and other debt restructuring strategies which may involve modifying the terms of existing commercial loans or breaking a commercial loan into pieces. These practices are legal, but the SEC fears that they may be being abused in order to reduce requirements on the volumes of reserves a bank has to set aside.

According to a report by Trepp, LLC, a data firm specializing in commercial data, non-performing commercial real estate loans make up 72 percent of the $320 million in non-performing loans reported by banks in February[2]. They are also being credited with the failure of 12 banks last month. In comparison, residential real estate loans comprised 20 percent of the non-performing loans in February. It should be noted that the Mortgage Bankers Association (MBA) reports that commercial and multifamily loans did have the lowest delinquencies “across the board” in 2010.

Do you think this is a bad sign for commercial real estate in 2011? What do you make of this in light of the positive press coverage and appearance of a slow but steady rebound in the commercial industry?

Thank you for reading REJournalOnline’s Commercial Real Estate Letter!

Let us know what you think below.

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[1] http://www.zacks.com/research/get_news.php?id=062l7984

[2] http://www.dsnews.com/articles/home-loans-now-less-of-toxic-threat-than-commercial-real-estate-2011-03-03

While many tax lien investors buy tax liens in order to eventually gain control of the property through the foreclosure process, there are others who just want the lien redeemed so that they can collect the fees and interest on it. If you are a member of the latter group, then it is likely very important to you to invest in tax liens that have a high likelihood of being redeemed. While you never have a guarantee that a tax lien will be redeemed, two types of properties do have extremely high probabilities that this will happen.

Owner-occupied homes are a good bet if you want your tax lien redeemed. This is because the owner of the property is actually living in the property. His or her life is linked to that piece of land and the buildings on it. As a result, the owner has a highly vested and emotional interest in redeeming that lien if at all possible so that they can remain in their home. Of course, sometimes in today’s economy owners do lose their properties to tax liens and tax foreclosures because they simply cannot pay the bills. You can hedge your bets further by taking a good look at the property before you bid. If it appears to be neglected with a lot of maintenance issues then you may have a distressed homeowner situation on your hands if you invest in that tax lien.

Mortgaged properties will nearly always be redeemed as well. A mortgage lender will not want to lose the money that they lent on the home and their option to foreclose simply because the property taxes are not paid. Most mortgage lenders will opt to pay the taxes themselves to keep their lien at the “front of the line.” Of course, again, today’s economy has made this slightly less of a certainty. If a home is deeply underwater or located in an area where the lender has no hope of ever recouping their losses on the house via foreclosure and sale of that house, then they may opt not to redeem the lien.

While there are always uncertainties in tax lien investing – and any type of investing for that matter – you can hedge your bets by doing your research on properties ahead of time and making sure that the situation that the property is in matches a scenario that is likely to give you your desired outcome.