Monday, May 9, 2011
Thursday, April 21, 2011
Southern Belle Giving the mortgage companies hell in court-No Foreclosure here!!
Depending on your point of view, the story of Patsy Campbell is hilarious or frightening. This 71-year-old Florida retiree has kept lenders and lawyers at bay for 25 years while she got her case thrown out of court time and again for the smallest legal missteps. Is she a little David throwing pebbles at Goliath or is she exploiting the legal system to avoid paying what she legitimately owes?
By all appearances, Patsy Campbell seems like something out of a folk tale. Her home is shaded by large trees and protected by a locked gate and her pit bull Dodger. Her boarded-up windows, run-down pool, and rusty sedan remind a person of a modern-day Southern Norma Desmond from Sunset Boulevard, and like Norma Desmond, Patsy Campbell has proved that she is not a person to be trifled with.
The story of the mortgage from hell begins in 1978 when Paul Campbell used a $68,000 mortgage from First Federal Savings and Loan of Martin County to buy a house, and two years later, he married Patsy. Their wedded bliss was sadly short as Paul died later that same year from emphysema. For four years, Patsy made mortgage payments, but in 1985, she got sick and fell behind on her bills.
In the late 80’s and early 90’s, things got a little more complicated. Patsy’s mortgage was sold several times over to various failing lenders from First Federal to First Fidelity Savings and Loan to American Pioneer Savings Bank. The mortgage changed ownership seven more times before getting to Commercial Services of Perry who is currently trying to collect from Campbell. Considering other lenders’ track records, however, Commercial Services of Perry should not underestimate Campbell.
On paper, Patsy Campbell is an easy win in court. She is an elderly former insurance saleswoman with no legal training or background who has chosen to represent herself in court. Despite it all, she has found every loophole, missed technicality, and overdue deadline. If they forgot to dot their i’s or cross their t’s, she caught it. She claims that so many mistakes were made in transferring her mortgage from one lender to another that her debt is void and she doesn’t owe the lenders anything. She told Wall Street Journal’s Robbie Whelan that, “If they had a case, they would have already won it, years ago.”
Readers, we want to know what you think. Is Patsy Campbell a nuisance and a “burden on the courts” as the lender’s lawyer has claimed, or is she just using every legal loophole (as the banks and lenders have done in the past) to get what she wants? Comment below and tell us what you think!
Monday, April 11, 2011
Chicago Brokerage Tries Groupon for Real Estate Promotion
Posted by Carole VanSickle on Friday, April 8th 2011
Groupon, the popular social coupon network that offers discounts on everything from salsa lessons to information technology consulting is branching into real estate with its latest offer, $1000 cash at closing to homebuyers who purchase a $25 Groupon[1]. The brokerage has limited the number of vouchers available to 50, and the coupons can be used for traditional home purchases or on distressed properties, and primary owners and investors are eligible for the discount. Furthermore, the transaction must be at least $150,000 to qualify for the deal.
The brokerage that has launched the Groupon deal defines itself as an “emerging company” that has “focused on its web presence and search engine optimization.” President Yuval Degani believes that this advertising move will help his company acquire “new…customers for life.”"
Groupon, the popular social coupon network that offers discounts on everything from salsa lessons to information technology consulting is branching into real estate with its latest offer, $1000 cash at closing to homebuyers who purchase a $25 Groupon[1]. The brokerage has limited the number of vouchers available to 50, and the coupons can be used for traditional home purchases or on distressed properties, and primary owners and investors are eligible for the discount. Furthermore, the transaction must be at least $150,000 to qualify for the deal.
The brokerage that has launched the Groupon deal defines itself as an “emerging company” that has “focused on its web presence and search engine optimization.” President Yuval Degani believes that this advertising move will help his company acquire “new…customers for life.”"
Wednesday, April 6, 2011
Credit Score-Boosting Secret Legally & Legitimately Improves UGLY Credit!
Bryan Ellis Real Estate Letter - Credit Score-Boosting Secret Legally & Legitimately Improves UGLY Credit!: "My #1 rated credit score-boosting secret is the AUTHORIZED USER score-boosting strategy (aka “piggy-backing”). “Authorized User” (AU) is the practice of adding a person who has credit challenges as an “authorized user” to the account of a person who has a strong credit history. The theoretical (and usually practical) result is that the positive credit history of the account owner is then additionally reported to the credit files of the credit-challenged authorized user, bringing improvements in the authorized user’s credit rating."
Monday, April 4, 2011
Foreclosure Backlog Stands at Thirty Times Monthly Foreclosure Sales Volume
The shadow market is coming out of the shadows, and the numbers are staggering. According to a report released yesterday by LPS (Lender Processing Services), “foreclosure inventory levels [stand] at 30 times monthly foreclosure sales volume.” As a result of this massive backlog, real estate analysts expect more downward pressure on U.S. home values as most of these homes are likely to reenter the market as REO properties rather than being sold in another more profitable manner[1]. The statistics on the foreclosure backlog are also staggering, with LPS reporting that the average U.S. loan currently in foreclosure has been delinquent for 537 days, and 30 percent of loans in foreclosure have not made payments in more than two years.
Thanks to slower processing times on foreclosures, it is unlikely that this backlog will disperse any time soon. In fact, although total U.S. loan delinquency has fallen nearly two percentage points over last year and foreclosure starts are down 14 percent from last year, the actual foreclosure rate is up as banks struggle to keep their books in order and intact[2]. With the “non-current inventory” logging in at nearly 7 million, the backlog is likely here to stay.
Many analysts have been predicting that 2011 will be the beginning of a recovery for many sectors of the real estate market, though most agree that the residential market has a long way to go. With this foreclosure backlog, however, do you think that home prices are likely to start a recovery by 2012?
http://realestate.bryanellis.com/4210/foreclosure-backlog-stands-at-thirty-times-monthly-foreclosure-sales-volume/
Sunday, April 3, 2011
Real-Estate Investing: the Best and Worst Markets - WSJ.com
Stay updated on the best and worst markets right here at Below Market deals!! And the the WSJ says.....
Wednesday, March 23, 2011
Friday, March 4, 2011
JPMorgan Chase Made Nearly a Billion Dollars from Madoff-Chase is too Gangsta for TV!
 |
cnbc.com |
A new study of Bernie Madoff's Ponzi scheme concludes that JPMorgan Chase made over $900 million in pretax profits from the Madoff scam.
The academic paper by Dr. Linus Wilson, a finance professor at University of Louisiana at Lafayette, makes use of newly released data and different methods of calculation than previous studies.
Wilson's paper looks at total Madoff- linked account balances at JPMorgan Chase [JPM 45.25 
-0.83 (-1.8%) 
] from 1986 to 2008, a longer period than earlier studies, which may have underestimated JPMorgan's profits.
-0.83 (-1.8%) ] from 1986 to 2008, a longer period than earlier studies, which may have underestimated JPMorgan's profits.The total figure Wilson arrives at is $907 million.
That figure assumes JPMorgan's reinvestment of Madoff client money, and the generation of a similar rate to that of other funds invested by the bank during a similar time period.
But even without any reinvestment at all, Wilson finds that JPMorgan's pre-tax profits from Madoff money would have amounted to an estimated $398 million.
In addition to the magnitude of their alleged gains, Wilson reaches another conclusion that is likely to give JPMorgan agita.
Namely, he concludes based on prior academic research, that enough 'red flags' existed to make a reasonable observer suspicious—which presumably includes JPMorgan Chase.
Wilson lists two facts as being particularly problematic. First, that Madoff's custody over his client accounts resulted in no third party verification of trades (which, as it turns out, Madoff seems to have never made). And second, the very size and regularity of Madoff's returns should have raised suspicion in itself.
Wilson's complete journal article—provocatively titled 'Madoff’s Dirty Money'—can be found here.
Thursday, March 3, 2011
Obama hit the brakes on selling those old Government bldgs...WHY?
Obama Administration Scraps Sale of Government Buildings
The current administration has been forced to “scrap” plans announced last summer to sell off thousands of government buildings because plan was simply “unworkable”[1]. Now, a new commission has been tasked with finding replacement savings in the amount of $15 billion, the number that the administration believed it would save by selling off the buildings, 14,000 of which are currently vacant and 55,000 of which are “underused.” Thanks to poor conditions, bad locations and sluggish real estate markets, the sales of the buildings were not only difficult to accomplish, but less advantageous than the planning commission had originally hoped. Thus, the decision to abort the plan.
The administration is not giving up on its hopes to sell of buildings entirely, however. In fact, a new commission is now in the works – although no one yet has been asked to serve on the board – to identify ways to revamp the plan and shed the excess real estate – and upkeep costs – that the government no longer needs[2]. Local governments would, in many cases, be glad to see government-owned buildings back in private hands since they often sit vacant. However, there is a “cumbersome review process” before the buildings can be sold and “most of the excess properties are likely old, poorly located World War II-era sites,” reported the Washington Post.
Many people have criticized the government’s plan to sell off “excess” buildings that it could, theoretically, be using instead of spending billions in rental dollars on other facilities. Do you think that selling off these properties is a good idea? Tell me what you think...
Thursday, February 17, 2011
Mortgage servicing crackdown expected!!
Mortgage servicing crackdown expected
U.S. banking regulators are close to finalizing new national guidelines that will impact mortgage servicing shops after an interagency investigation revealed "significant weaknesses in mortgage servicing related to foreclosure oversight and operations," said John Walsh, the Acting Comptroller of the Currency, in prepared statements to be delivered before a Senate Banking panel today. "In general, the examinations found critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party law firms and vendors," Walsh said.
"These deficiencies have resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse affect on the functioning of the mortgage markets and the U.S. economy as a whole." Walsh said even though the process of outlining new guidelines for servicers is at its early stage, regulators intend to address some of the pressing issues they discovered while investigating the servicing process — namely a lack of national standards for the foreclosure process and borrower confusion over whom to contact in foreclosure cases due to uncertain protocols.
Walsh's report on the investigation of loan servicing firms comes on the heels of a major announcement from the Mortgage Electronic Registration System, or MERS. MERS, which is an electronic registry of mortgage records, informed members late Wednesday that they are now prohibited from foreclosing on residential loans using the MERS name. MERS has long been the target of foreclosure defense attorneys and consumer advocates for creating a foreclosure process that fails to create transparent oversight and protocols.
Walsh said as part of their comprehensive examination of servicing shops, regulators examined Lender Processing Services Inc. (LPS), MERSCORP, the parent company of MERS, and MERS itself. After reviewing the servicing shops and examining bank self assessments, as well as 2,800 foreclosure cases, Walsh said investigators concluded that there were "significant weaknesses in mortgage servicing related to foreclosure oversight and operations." He said regulators have yet to finalize their proposed guidelines, but that will be the next step in the process.
U.S. banking regulators are close to finalizing new national guidelines that will impact mortgage servicing shops after an interagency investigation revealed "significant weaknesses in mortgage servicing related to foreclosure oversight and operations," said John Walsh, the Acting Comptroller of the Currency, in prepared statements to be delivered before a Senate Banking panel today. "In general, the examinations found critical deficiencies and shortcomings in foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party law firms and vendors," Walsh said.
"These deficiencies have resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse affect on the functioning of the mortgage markets and the U.S. economy as a whole." Walsh said even though the process of outlining new guidelines for servicers is at its early stage, regulators intend to address some of the pressing issues they discovered while investigating the servicing process — namely a lack of national standards for the foreclosure process and borrower confusion over whom to contact in foreclosure cases due to uncertain protocols.
Walsh's report on the investigation of loan servicing firms comes on the heels of a major announcement from the Mortgage Electronic Registration System, or MERS. MERS, which is an electronic registry of mortgage records, informed members late Wednesday that they are now prohibited from foreclosing on residential loans using the MERS name. MERS has long been the target of foreclosure defense attorneys and consumer advocates for creating a foreclosure process that fails to create transparent oversight and protocols.
Walsh said as part of their comprehensive examination of servicing shops, regulators examined Lender Processing Services Inc. (LPS), MERSCORP, the parent company of MERS, and MERS itself. After reviewing the servicing shops and examining bank self assessments, as well as 2,800 foreclosure cases, Walsh said investigators concluded that there were "significant weaknesses in mortgage servicing related to foreclosure oversight and operations." He said regulators have yet to finalize their proposed guidelines, but that will be the next step in the process.
Monday, January 24, 2011
Bank of America Struggling...and other hot tips!
Bank of America not out of the woods yet!
Underlying Bank of America's (BOA) heap of one-time gains and charges in the last quarter was a sizable decrease in revenue and, in many consumer businesses, loan balances. Though BOA has made concrete progress in spinning off unwanted lines of business, cutting Fannie Mae and Freddie Mac liabilities, and reducing boom-time lending losses, its fourth-quarter results suggest that it is still in the thick of addressing legacy troubles. "It was not a great quarter," said analyst Michael Mayo of Credit Agricole Securities. "If you have two or three quarters like this in a row, then you raise some big issues. … The cleanup is not done, but it is progressing." Revenue dropped 11% year over year, with management citing limited short-term opportunities to make up for the fee income lost to new regulatory restrictions. Brian Moynihan, BOA's chief executive, conceded that the 13,000 extra employees it has working through the mortgage mess at its Countrywide unit aren't going anywhe
re soon, and Bank of America expects its net interest income, now at 2.7%, to fall in the first half.
Though the company made progress in the fourth quarter in tackling government mortgage put-back risks, it also appeared to be bracing for continued fights. Its litigation reserves — a "disproportionate" percentage of it tied to Countrywide — rose to $1.5 billion from $500 million. When asked to forecast this figure, Moynihan said, "it's hard to think about a run-rate for litigation expenses." Year over year, BOA's progress appears more concrete. Over the course of 2010 the company divested 20 business lines that sold for $19 billion. Its Tier 1 capital ratio rose 1.5%, to 8.6%. For the fourth quarter BOA reported $5.1 billion in credit-loss provisions — half what it set aside in the year-earlier quarter. And its net charge-off rate dropped nearly a full percentage point, to 2.87%. Quarter to quarter, however, the improvement was much less dramatic.
Though some of the difference is likely attributable to seasonal issues, B of A lowered its credit-loss provisions only slightly, from $5.4 billion to $5.1 billion. And total non-performing loans showed similarly modest quarter-over-quarter declines, from $34.6 billion to $32.7 billion. Loan growth was weaker than at some rivals. The company's overall average loan book grew 0.7%, to $940.6 billion, from the previous quarter. In commercial and industrial lending, average balances increased by 2% from the third quarter, a sign of "stability," BOA said.
Gas prices on the way up?
The American Petroleum Institute, an oil industry group, made no specific price forecast for 2011 but didn't seem to see a drop anytime soon. "Unless we see increases in supply, it's hard not to see a tighter market," John Felmy, the institute's chief economist, said in a conference call with reporters. Felmy said worldwide oil demand in 2010 hit a record of more than 87 million barrels a day, driven largely by strong growth in India, China and the Middle East. Supply, meanwhile, was constricted by the drilling moratorium in the Gulf of Mexico following the BP disaster, slow production growth in non-OPEC countries, and OPEC production controls.
The government's Energy Information Agency estimates that the drilling moratorium in the Gulf will curtail oil production by about 120,000 barrels a day in 2011. The moratorium has been lifted, but new permits have been slow in coming. OPEC holds just under 5 million barrels a day in production capacity that it is leaving in the ground. Gasoline price have risen 12 cents a gallon, or 4%, in just the last month, according to the motorist group AAA. The nationwide average stands around $3.12 a gallon, less than a dollar below the record high.
Lenders to destroy documents?
Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents. The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost. A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose. In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts." The former subprime lender shut down in February 2007.
In a Jan. 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain. In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island. AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007.
The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive. In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files. The issue of document destruction is sensitive because in recent months evidence has turned up that vast numbers of original loan documents by major lenders were never transferred as required when the mortgages were securitized and sold to investors. Lawyers for homeowners have strongly objected to AHM's document destruction, contending that vital evidence borrowers need to defend themselves in foreclosure cases will be lost.
NABE - hiring to improve
The National Association for Business Economics (NABE) said the hiring outlook for the next six months is at a 12-year high. "The number of firms expressing positive hiring plans is at a level not seen in over a decade -- a sign of improving labor-market dynamics," Shawn DuBravac of the Consumer Electronics Association said in a statement. Forty-two percent of companies surveyed said they expect to hire more workers in the next six months, a 13% increase over the same time last year. Meanwhile, 51% expect no change in hiring, while only 7% expect a decrease. GDP projections are also at moderate to high levels, with 62% of respondents planning for real GDP growth of 2% to 3% in 2011, and one in five expecting GDP growth in the 3% to 4% range. In total, 82% of respondents expect GDP growth in excess of 2%, a sharp increase over the 54% who expressed the same level of optimism last year. Respondents were also asked to assess the impact of the sweeping package of tax cuts pa
ssed by Congress late last year.
A slight majority of companies surveyed said they expect sales to improve as a result of the package, while 45% said they anticipate the law will have no effect. Companies are expecting less of a boost in the areas of employment and investment spending, with 68% of firms saying the tax deal will have no effect on hiring, while 37% said it would have a positive effect. Only 1% said hiring would be negatively effected.
CNBC's Olick - beware shadow office space
"Last summer I did some reporting on shadow office space, which is leased space, like individual offices, cubicles or entire floors, that was vacated during the recession. This shadow space was adding as much as 7 percent to office vacancy rates in Los Angeles and over 6 percent in Chicago, according to CoStar Group. Now that the office market appears to be taking a turn for the better, that shadow space will start to fill up, and in most places it will have to fill well before the company looks to take on additional space. Today Grubb & Ellis, a commercial real estate services and investment company, put some numbers to the scenario. "Grubb & Ellis expects that shadow space vacated during the recession will accommodate about one-third of all net new demand in 2011 and about one-fourth in 2012; this activity will not be reflected in the published statistics,' writes Bob Bach, chief economist, in his 'U.S. Office Market First Look: 2010-Q4.' Bach goes on to say that the 'st
ill-tepid rate of hiring,' combined with this shadow space, will keep the office market 'struggling to keep up with prior recovery cycles.' Office buildings gained 2.5 million square feet of occupied space in Q4 of 2010, the first increase since the end of 2007, according to Reis, Inc., a commercial real estate analysis firm, but the 17.6 percent vacancy rate still represents a 17-year high.
That doesn't seem overly concerning to investors in the office market. Pricewaterhouse Coopers surveyed 200 real estate executives, including investors, lenders and brokers, and found more than 70 percent believe the commercial real estate recovery is real. 32 percent say they are looking to invest in the office sector this year, second only to 45 percent who say they would opt for the apartment sector. Yes, 28 percent of office property mortgage loans will mature in 4Q '11, or about $6.8 billion, according to Fitch, in a still healing liquidity situation. But Fitch also reports that the pace of commercial loan modifications is quickening. 'Loan modifications continue to dominate as a resolution method,' writes Managing Director Stephanie Petosa. 'Servicers will resolve loans with increase velocity as liquidity returns to the CMBS market.' As more jobs are created and fewer are lost, the office sector is heading toward recovery. Investors should be careful, however, to tak
e shadow space into account when looking at specific properties and consider distressed properties, as office loan default rates remain high."
Now for our real estate education section...
Bird Dog Bidding Strategies
Congratulations! If you are reading this then chances are you seriously contemplating trying out a real estate auction. Auctions present a great way to find bargains but buying via auction also requires serious negotiation skills for novice investors. One of the more common questions presented by novice bird dogs is how to recognize and develop a competitive bidding strategy. It's actually a great question because learning how to recognize and capitalize upon different bidding strategies is the first step in increasing your awareness of the transactions and methods being used by others. Just remember, it's often possible to use different bidding methods for various situations so stay flexible and keep your eyes open for opportunity!
Unsold Selection - Unsure about where to start? Why not begin with a minimum of hassles by bidding on unsold selections. Normally a property will generates at least a few bidders but every once in awhile, there is literally no interest. The lack of interest may be due to very high prior mortgage or assumable lien but it could also be due to relatively minor problems like a small HOA fee or easily cleared title concern. The key is to do your homework well in advance and understand the true cost of correcting a defect. The ability to bid ultra-low without any competition is a clear incentive to pursue this option when the underlying problem (or perceived problem) has a cost-effective solution.
• Pros: Minimal bidding wars, ultra-low cost, often missed by novice investors or those unable to address small mishaps.
• Cons: Requires strong understanding of defects as well as knowledge of fees required to correct problems.
ROI - Another commonly used bidding strategy is based upon the anticipated return on investment. For example, the 1% rule was traditionally considered a very solid investment in terms of long term "buy and hold" strategy although it is not uncommon to realize 1.5 or even 2 percent on some auction properties.
• Pros: Solid correlation between profit and cost. Clear margins with sufficient room for growth. Tends to be conservative in nature making it a relatively lower risk investment. Heavily contingent upon cash flow.
• Cons: Fails to taken appreciation into account. Prone to under-estimate long term profit potential of marginal properties or those that require more "up front" work.
Square Footage - Many investors still prefer to purchase based upon average square foot cost. There is ample support for this bidding method; it is simple to quantify and compare the cost to the replacement and/or insurance basis as well as potential commercial or retail value. This works especially well for business based real estate needs but should not be ignored by the residential investor.
• Pros: Easily translates into insurance replacement cost, property tax appraisal and even secondary mortgage.
• Cons: Highly subjective especially for upper end properties.
Market Value - Of course, one of the most popular bidding techniques is to simply take the market value minus costs and profit to determine the bid amount.
• Pros: Highly flexible and able to acquire property in any condition at any location based exclusively on the prospective resale value.
• Cons: Market volatility can change rapidly leaving sparse margins for those that do not add sufficient padding to profit estimates.
Bottom Line - Before bidding...know your exit strategy or the proposed exit strategy of your investor. The exit strategy - and corresponding "safety measure" - will dictate the maximum bid amount. When in doubt, leave a little extra margin to make sure you and your investor are covered in case of an unanticipated expense or other cost; especially when first starting out. As you gain experience in estimating costs and correction fees, it will be possible to refine the bidding price to a much more specific level.
See you at the top!
Underlying Bank of America's (BOA) heap of one-time gains and charges in the last quarter was a sizable decrease in revenue and, in many consumer businesses, loan balances. Though BOA has made concrete progress in spinning off unwanted lines of business, cutting Fannie Mae and Freddie Mac liabilities, and reducing boom-time lending losses, its fourth-quarter results suggest that it is still in the thick of addressing legacy troubles. "It was not a great quarter," said analyst Michael Mayo of Credit Agricole Securities. "If you have two or three quarters like this in a row, then you raise some big issues. … The cleanup is not done, but it is progressing." Revenue dropped 11% year over year, with management citing limited short-term opportunities to make up for the fee income lost to new regulatory restrictions. Brian Moynihan, BOA's chief executive, conceded that the 13,000 extra employees it has working through the mortgage mess at its Countrywide unit aren't going anywhe
re soon, and Bank of America expects its net interest income, now at 2.7%, to fall in the first half.
Though the company made progress in the fourth quarter in tackling government mortgage put-back risks, it also appeared to be bracing for continued fights. Its litigation reserves — a "disproportionate" percentage of it tied to Countrywide — rose to $1.5 billion from $500 million. When asked to forecast this figure, Moynihan said, "it's hard to think about a run-rate for litigation expenses." Year over year, BOA's progress appears more concrete. Over the course of 2010 the company divested 20 business lines that sold for $19 billion. Its Tier 1 capital ratio rose 1.5%, to 8.6%. For the fourth quarter BOA reported $5.1 billion in credit-loss provisions — half what it set aside in the year-earlier quarter. And its net charge-off rate dropped nearly a full percentage point, to 2.87%. Quarter to quarter, however, the improvement was much less dramatic.
Though some of the difference is likely attributable to seasonal issues, B of A lowered its credit-loss provisions only slightly, from $5.4 billion to $5.1 billion. And total non-performing loans showed similarly modest quarter-over-quarter declines, from $34.6 billion to $32.7 billion. Loan growth was weaker than at some rivals. The company's overall average loan book grew 0.7%, to $940.6 billion, from the previous quarter. In commercial and industrial lending, average balances increased by 2% from the third quarter, a sign of "stability," BOA said.
Gas prices on the way up?
The American Petroleum Institute, an oil industry group, made no specific price forecast for 2011 but didn't seem to see a drop anytime soon. "Unless we see increases in supply, it's hard not to see a tighter market," John Felmy, the institute's chief economist, said in a conference call with reporters. Felmy said worldwide oil demand in 2010 hit a record of more than 87 million barrels a day, driven largely by strong growth in India, China and the Middle East. Supply, meanwhile, was constricted by the drilling moratorium in the Gulf of Mexico following the BP disaster, slow production growth in non-OPEC countries, and OPEC production controls.
The government's Energy Information Agency estimates that the drilling moratorium in the Gulf will curtail oil production by about 120,000 barrels a day in 2011. The moratorium has been lifted, but new permits have been slow in coming. OPEC holds just under 5 million barrels a day in production capacity that it is leaving in the ground. Gasoline price have risen 12 cents a gallon, or 4%, in just the last month, according to the motorist group AAA. The nationwide average stands around $3.12 a gallon, less than a dollar below the record high.
Lenders to destroy documents?
Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents. The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost. A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose. In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts." The former subprime lender shut down in February 2007.
In a Jan. 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain. In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island. AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007.
The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive. In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files. The issue of document destruction is sensitive because in recent months evidence has turned up that vast numbers of original loan documents by major lenders were never transferred as required when the mortgages were securitized and sold to investors. Lawyers for homeowners have strongly objected to AHM's document destruction, contending that vital evidence borrowers need to defend themselves in foreclosure cases will be lost.
NABE - hiring to improve
The National Association for Business Economics (NABE) said the hiring outlook for the next six months is at a 12-year high. "The number of firms expressing positive hiring plans is at a level not seen in over a decade -- a sign of improving labor-market dynamics," Shawn DuBravac of the Consumer Electronics Association said in a statement. Forty-two percent of companies surveyed said they expect to hire more workers in the next six months, a 13% increase over the same time last year. Meanwhile, 51% expect no change in hiring, while only 7% expect a decrease. GDP projections are also at moderate to high levels, with 62% of respondents planning for real GDP growth of 2% to 3% in 2011, and one in five expecting GDP growth in the 3% to 4% range. In total, 82% of respondents expect GDP growth in excess of 2%, a sharp increase over the 54% who expressed the same level of optimism last year. Respondents were also asked to assess the impact of the sweeping package of tax cuts pa
ssed by Congress late last year.
A slight majority of companies surveyed said they expect sales to improve as a result of the package, while 45% said they anticipate the law will have no effect. Companies are expecting less of a boost in the areas of employment and investment spending, with 68% of firms saying the tax deal will have no effect on hiring, while 37% said it would have a positive effect. Only 1% said hiring would be negatively effected.
CNBC's Olick - beware shadow office space
"Last summer I did some reporting on shadow office space, which is leased space, like individual offices, cubicles or entire floors, that was vacated during the recession. This shadow space was adding as much as 7 percent to office vacancy rates in Los Angeles and over 6 percent in Chicago, according to CoStar Group. Now that the office market appears to be taking a turn for the better, that shadow space will start to fill up, and in most places it will have to fill well before the company looks to take on additional space. Today Grubb & Ellis, a commercial real estate services and investment company, put some numbers to the scenario. "Grubb & Ellis expects that shadow space vacated during the recession will accommodate about one-third of all net new demand in 2011 and about one-fourth in 2012; this activity will not be reflected in the published statistics,' writes Bob Bach, chief economist, in his 'U.S. Office Market First Look: 2010-Q4.' Bach goes on to say that the 'st
ill-tepid rate of hiring,' combined with this shadow space, will keep the office market 'struggling to keep up with prior recovery cycles.' Office buildings gained 2.5 million square feet of occupied space in Q4 of 2010, the first increase since the end of 2007, according to Reis, Inc., a commercial real estate analysis firm, but the 17.6 percent vacancy rate still represents a 17-year high.
That doesn't seem overly concerning to investors in the office market. Pricewaterhouse Coopers surveyed 200 real estate executives, including investors, lenders and brokers, and found more than 70 percent believe the commercial real estate recovery is real. 32 percent say they are looking to invest in the office sector this year, second only to 45 percent who say they would opt for the apartment sector. Yes, 28 percent of office property mortgage loans will mature in 4Q '11, or about $6.8 billion, according to Fitch, in a still healing liquidity situation. But Fitch also reports that the pace of commercial loan modifications is quickening. 'Loan modifications continue to dominate as a resolution method,' writes Managing Director Stephanie Petosa. 'Servicers will resolve loans with increase velocity as liquidity returns to the CMBS market.' As more jobs are created and fewer are lost, the office sector is heading toward recovery. Investors should be careful, however, to tak
e shadow space into account when looking at specific properties and consider distressed properties, as office loan default rates remain high."
Now for our real estate education section...
Bird Dog Bidding Strategies
Congratulations! If you are reading this then chances are you seriously contemplating trying out a real estate auction. Auctions present a great way to find bargains but buying via auction also requires serious negotiation skills for novice investors. One of the more common questions presented by novice bird dogs is how to recognize and develop a competitive bidding strategy. It's actually a great question because learning how to recognize and capitalize upon different bidding strategies is the first step in increasing your awareness of the transactions and methods being used by others. Just remember, it's often possible to use different bidding methods for various situations so stay flexible and keep your eyes open for opportunity!
Unsold Selection - Unsure about where to start? Why not begin with a minimum of hassles by bidding on unsold selections. Normally a property will generates at least a few bidders but every once in awhile, there is literally no interest. The lack of interest may be due to very high prior mortgage or assumable lien but it could also be due to relatively minor problems like a small HOA fee or easily cleared title concern. The key is to do your homework well in advance and understand the true cost of correcting a defect. The ability to bid ultra-low without any competition is a clear incentive to pursue this option when the underlying problem (or perceived problem) has a cost-effective solution.
• Pros: Minimal bidding wars, ultra-low cost, often missed by novice investors or those unable to address small mishaps.
• Cons: Requires strong understanding of defects as well as knowledge of fees required to correct problems.
ROI - Another commonly used bidding strategy is based upon the anticipated return on investment. For example, the 1% rule was traditionally considered a very solid investment in terms of long term "buy and hold" strategy although it is not uncommon to realize 1.5 or even 2 percent on some auction properties.
• Pros: Solid correlation between profit and cost. Clear margins with sufficient room for growth. Tends to be conservative in nature making it a relatively lower risk investment. Heavily contingent upon cash flow.
• Cons: Fails to taken appreciation into account. Prone to under-estimate long term profit potential of marginal properties or those that require more "up front" work.
Square Footage - Many investors still prefer to purchase based upon average square foot cost. There is ample support for this bidding method; it is simple to quantify and compare the cost to the replacement and/or insurance basis as well as potential commercial or retail value. This works especially well for business based real estate needs but should not be ignored by the residential investor.
• Pros: Easily translates into insurance replacement cost, property tax appraisal and even secondary mortgage.
• Cons: Highly subjective especially for upper end properties.
Market Value - Of course, one of the most popular bidding techniques is to simply take the market value minus costs and profit to determine the bid amount.
• Pros: Highly flexible and able to acquire property in any condition at any location based exclusively on the prospective resale value.
• Cons: Market volatility can change rapidly leaving sparse margins for those that do not add sufficient padding to profit estimates.
Bottom Line - Before bidding...know your exit strategy or the proposed exit strategy of your investor. The exit strategy - and corresponding "safety measure" - will dictate the maximum bid amount. When in doubt, leave a little extra margin to make sure you and your investor are covered in case of an unanticipated expense or other cost; especially when first starting out. As you gain experience in estimating costs and correction fees, it will be possible to refine the bidding price to a much more specific level.
See you at the top!
Subscribe to:
Posts (Atom)