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2011: A Year of Economic Wild Cards Japanese Earthquake & Tsunami Sovereign Debt Crisis in EuroZone Oil Price Spikes Arab Spring Debt Limit Ceiling & Downgrade of US Debt Political Change on Capitol Hill Stock Market Volatility
Economy Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. Ronald Reagan American President
Our rate today is more than 5 times what it was then.
No one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year. The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars. The top five destinations are (1) Texas, (2) Arizona, (3) Colorado, (4) Nevada and Utah tied; and (5) Virginia and North Carolina tied. Joseph Vranich Business Relocation Coach
Crisis of Confidence: Small Business Optimism Down National Federation of Independent Business
Consumer Confidence SlippingLowest Since April ‘09 August 2011: 44.5 INDEX, 100=1985 Housing Next
Housing The housing market will get worse before it gets better. James Wilson American Politician (1742 – 1798)
Wall Street Journal 9/21/11 “Home Forecast Calls For PAIN.” Prices to stumble through 2015
California vs. U.S. Sales California Association of REALTORS®
California Sales of Existing Homes and Median Price Housing Cycle Comparisons 1970- 2011 -44% UNITS/MEDIAN PRICE $ -25% -61% California Association of REALTORS®
California vs. U.S. Median Price California Association of REALTORS®
Housing Affordability: Records Highs California Vs. U.S. % OF HOUSEHOLDS THAT CAN BUY California Association of REALTORS®
Excessive borrowing against home equity is the untold part of the foreclosure story.
“House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis” by Mian and Sufi: American Economic Review :
39% of new defaults from 2006 to 2008 attributable to home equity borrowing
California Foreclosure FilingsAugust 2011 NTS: 24,260, -16.9% YTD • NOD: 32,338, -21.5% YTD 6 Month Average: NTSs: 23,806 NODs: 23,625 California Association of REALTORS®
1 in 3 Sellers Sold Because They Were in Distress California Association of REALTORS®
Sellers with a Net Cash Loss Long Run Average = 11.2% What was the net cash gain or net loss to the seller as a result of this sale? California Association of REALTORS®
Net Cash to Sellers Q. What was the net cash gain or net loss to the seller as a result of this sale? California Association of REALTORS®
Proportion of Sellers Planning to Repurchase Q. Is the seller planning on purchasing another home? California Association of REALTORS®
Reasons Sellers Not Planning to Buy Another Home
California Housing Market Outlook Forecast Date: September 2011 California Association of REALTORS®
Compelling AffordabilityMonthly Mortgage to buy a Median Priced Home
CA New Housing Permits Average 1988-09: 138,000 2009: 36,200 2010: 39,000 SOURCE: CBIA. Forecast: C.A. R. California Association of REALTORS®
Direction of Home Prices: Sellers Skeptical; Buyers Hopeful California Association of REALTORS®
It’s Time To Buy Again “Forget stocks. Don't bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.” SOURCE: “Real estate: It’s time to buy again” Fortune Magazine’s 3/28/11 article written by Shawn Tully
Politics If you want to understand your government, don't begin by reading the Constitution. Instead, read selected portions of the Washington telephone directory containing listings for all the organizations with titles beginning with the word National. George Will Journalist & Author
“Just because you don’t take an interest in politics doesn’t mean politics won’t take an interest in you.” Pericles: 500 B.C. If you don’t have a seat at the table… You’ll probably be on the menu. Wunderlich Codicil: 2000 A.D.
The Realtor®Party WE… Are a Special Interest Group. The Realtor® Party
The Realtor®Party NAR: The largest grassroots Political Action Group in this country. "These groups are powers in Washington. The National Association of Realtors gave more money than any other group to candidates in the last election ($4+ million). Its 1.1 million members can do a lot of lobbying." CAR: The most effective business advocacy group in Sacramento.
The Realtor®Party Red State? Blue State? Under all is the land… Realtor® Preamble
2011 NAR Legislative and Regulatory Policy Agenda As the largest professional trade association in the United States, the NATIONAL ASSOCIATION OF REALTORS® represents more than 1.1 million residential and commercial REALTORS® involved in all facets of the industry as brokers, salespeople, property managers, appraisers and counselors. NAR advocates policy initiatives that will result in the continued creation of a fundamentally sound and dynamic U.S. real estate market fostering vibrant communities in which to live and work. TAXATION
Mortgage Interest Deduction: NAR opposes any changes that would limit or undermine current law.
Call for Action to Preserve, Protect and Defend the Mortgage Interest Deduction
Capital Gains Exemption: NAR opposes any changes to the capital gains exemptiononthe sale of a home.
Estate Tax Reform:NAR supports repeal of the estate tax but opposes the portion of the repeal that requires the use of so-called “carryover basis.” If the estate tax were to be revised, NAR supports the lowest possible rate (but in no event a rate higher than the maximum individual tax rates) and a substantial exclusion.
Depreciation — Tenant Improvements:NAR supports efforts to establish a permanent rule that more accurately reflects the depreciable lives of buildings and to conform amortization periods for tenant improvements more closely to the term of the lease.
REAL ESTATE FINANCE
Government-Sponsored Enterprises: NAR is recommending that Fannie Mae and Freddie Mac be converted into government-chartered, non-shareholder owned authorities that are subject to tighter regulations on product, revenue generation and usage, and retained portfolio practices in a way that ensures they accomplish their mission and protect the taxpayer.
Mortgage Loan Limits:The mortgage loan limits for the GSEs (Freddie Mac and Fannie Mae) and for FHA are critical to providing liquidity in today's housing market. Especially as the private market has yet to return, these programs are vital to our housing recovery. The current GSE limits range from $417,000 to $729,750, depending on local area median home price. The FHA limits range from $271,050 to $729, 750, also based on 125% of local area median home price. Both of these limits are set to expire on September 30, 2011 and will reset to 115% of local area median up to $625,500. Call to Action to Make FHA, Fannie & Freddie Loan Limits Permanent
Federal Housing Administration Programs:NAR is a strong supporter of the single- and multi-family programs administered by the Federal Housing Administration (FHA).
NAR Credit Policy/QRM:NAR has forged the broad-based Coalition for Sensible Housing Policy, which includes 44 organizations focused on drawing attention to the proposed regulation’s onerous 20 percent down payment requirement. The coalition asked for and recently received an extension of the comment period until August 1, 2011. NAR and its coalition partners have also gathered the support of 44 U.S. Senators, who recently wrote to regulators expressing their intent on QRM and opposing the imposition of a sizable down payment; 282 House members signed a similar letter.
Call to Action on the Qualified Residential Mortgage
Short Sales:NAR continues to push the lending industry to expedite short sales.
Real Estate Settlement Procedures Act (RESPA):NAR supports HUD’s new RESPA rule in general. NAR supports transparency in the home buying process and clear disclosures to consumers of loan terms and the fees charged by settlement service providers. NAR supports better guidance from HUD but specifically rejects HUD’s contention that the marketing of home warranties is a mere referral.
ENERGY AND THE ENVIRONMENT
National Flood Insurance Program: NAR is recommending renewing and strengthening the long-term viability of the federal flood insurance program including comprehensive coverage for non-primary residences (e.g., rental properties and second homes) and reforms to provide “full risk” premiums for most repetitive loss structures in many states. NAR also supports funding to update and improve the accuracy of flood maps, which are the cornerstone of NFIP and are used to determine which properties require flood insurance.
Take Action and Tell Congress to Reauthorize the National Flood Insurance Program
Natural Disaster Policy: NAR supports a federal program that promotes the availability and affordability of property insurance nationwide and coordinates the mitigation of property against natural disasters, as well as post-disaster assistance.
NAR Supports: Improving energy efficiency through voluntary incentives in lieu of individual building mandates. Commercially reasonable approaches that advance market and smart-growth principles of protecting private property rights and maintaining real estate affordability and availability. Additionally, NAR supports educating property owners and consumers about the benefits of energy efficiency.
NAR Opposes: Requirements that impose undue economic burdens on property owners or managers; triggering such provisions at the time when real property is sold; and expanded application of existing laws/regulations that are not suited to address climate change.
YOU… Are a Special Interest Group. Strategic Alliances
Fraud California is the hands-down leader in real estate fraud, leading the nation with 6 of the top 7 fraud markets in the country. U.S. Treasury Financial Crimes Enforcement Network (FinCEN)
Top 20 metros for mortgage fraud 1. San Jose-Sunnyvale-Santa Clara, Calif. 2. San Francisco-Oakland-Fremont, Calif. 3. Los Angeles-Long Beach-Santa Ana, Calif. 4. Riverside-San Bernardino-Ontario, Calif. 5. Sacramento-Arden-Arcade-Roseville, Calif. 6. Miami-Fort Lauderdale-Pompano Beach, Fla. 7. San Diego-Carlsbad-San Marcos, Calif. 8. Las Vegas-Paradise, Nev. 9. Atlanta-Sandy Springs-Marietta, Ga. 10. Salt Lake City, Utah 11. Chicago-Naperville-Joliet, Ill. 12. Washington, D.C.-Arlington-Alexandria, Va.-Md.-W.Va. 13. Tampa-St. Petersburg-Clearwater, Fla. 14. New York-Northern N.J.-Long Island, N.Y.-N.J.-Pa. 15. Orlando-Kissimmee, Fla. 16. St. Louis, Mo.-Ill. 17. Seattle-Tacoma-Bellevue, Wash. 18. Phoenix-Mesa-Scottsdale, Ariz. 19. Richmond, Va. 20. Denver-Aurora-Broomfield, Colo.
What is Fraud? Fraudcan be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage“. The snake oil peddler and confidence man of Old West fame are alive & well today. In the broadest sense, a Fraudis an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by jurisdiction. Fraudis a crime, and also a civil law violation. Short Sales Fraud is a term loosely used to describe fraud, deceit or trickery in a short sale transaction. It is currently among the most pervasive and fast-growing practices of real estate fraud replacing mortgage fraud, reverse mortgage fraud & loan modification fraud.
As of 2010, the FBI devotes over 350 of its 13,000 agents to mortgage fraud.
On the state level, the Department of Real Estate (DRE) has reportedly revoked, suspended, or accepted the surrender of 886 real estate licenses from July 2009 to June 2010, which is a 60 percent jump over the preceding three years.
As of August 2010, the DRE reportedly had about 5,400 open investigations, including more than 100 scams involving short sales. Since 2006, the DRE has issued about 600 desist and refrain orders to unlicensed people.
Our new District Attorney has indicated a definite interest in taking a much more proactive role than his predecessor.
Our new Attorney General is continuing the perseverance of her predecessor in pursuing financial and real estate fraud.
What is it? As background, a short sale is a sales transaction where:
the sales price is less than the seller’s existing mortgage loan balance, other liens, and costs; and
the existing creditors agree to a payoff of less than what’s owed.
Short sales help homeowners to avoid the stress and stigma of foreclosure. Short sales also help mortgage lenders by avoiding the costs of foreclosure, including the burden of maintaining and reselling properties acquired through the foreclosure process. Like other types of scams, short sale fraud can take many forms. At one end of the spectrum, a short sale scam can be part of large, well-organized fraud ring, and at the other end, it can be one isolated incident. Examples of short sale fraud include, but are not limited to, the following:
A “short sale flop” or an “AB-BC transaction” usually involves a resale of a property either simultaneously or soon after a short sale. First, for the AB transaction, Seller A sells the property to Buyer B, subject to the approval of Seller A’s short sale lender. Second, for the BC transaction, Buyer B resells that same property to Buyer C, typically for more money.
With full disclosure, among other things, a short sale flip is not necessarily illegal. However, in practice, scam artists often use various illegal and improper tactics to close these types of transactions. These schemes typically involve attempting to dupe Seller A’s short sale lender into believing a property is worth less than it is, and yet, simultaneously selling the property for a higher price and pocketing the difference. The scammers use the time waiting for the short sale approval to look for a new Buyer C to buy from Buyer B at the higher price.
At times, Seller A, Buyer B, and Buyer C, among others, are aware of the property flip but the scammers convince them that the plan is legal, or give them money for their cooperation. Buyer B, in particular, could be, among other things, a trust, a limited liability company (LLC), or a straw buyer, who could be in cahoots or a victim of identity theft.
Source: CAR Legal
Your most obvious Red Flags Up-front fees/improper payments Unlicensed Negotiators Transfer through Trust Transfer deed to 3rd party LLC’s No disclosure to lender Concurrent escrow Same agent representing both * Disclaimer:
Wholesale, Rampant FraudImpacts the Economy A few million here, a few billion there, Bernie Madoff Robo-signing Countrywide Sub-Prime An industry out of work