HAFA SHORTSALESHAFA encourages short sales to avoid foreclosureShort sales give distressed homeowners an exit that doesn't lead through credit-damaging foreclosure and saves bank's money compared with taking and selling houses with failed mortgages. That should make them a preferred option. But short sales take longer, often two months longer, and can be nearly impossible if other lenders have liens on the house. So at the urging of the National Association of Realtors, the U.S. Treasury Department came up with a new program to encourage short sales. Home Affordable Foreclosures Alternatives, or HAFA, went into effect April 5, although banks and real estate agents will need time to take full advantage of its provisions. HAFA encourages short sales chiefly by, (a) holding parties to deadlines for various parts of the process (b) providing financial incentives, including $3,000 to help the homeowner relocate; $1,500 for servicers to cover their extra costs; and as much as $2,000 for mortgage security investors who allow as much as $6,000 of sale proceeds to go to other lien holders (c) allowing the current mortgage holders to get pre-approved short-sale terms before listing the property for sale (d) requiring that homeowners be fully released from future liability for the first mortgage debt. Under HAFA, banks must decide within 10 business days whether to approve or deny a requested short sale under the program. Banks already have an inventory of 1.1 million foreclosed houses, recent estimates by LPS Applied Analytics of Jacksonville, Fla., show. Many more will be heading for a short sale or foreclosure. The Mortgage Bankers Association said more than 9 percent of homeowners were behind at least one payment on their mortgages in the fourth quarter. LPS figures 4.8 million are delinquent or already in the start of the foreclosure process. The HAFA program can't reach many of those houses. Lenders participating in the federal government's effort to encourage mortgage relief for distressed homeowners -- Home Affordable Modification Program -- are required to participate in HAFA as well. Strength in Recovery? Not Yet.U.S. companies are plowing money back into their businesses at a rate that demonstrates growing confidence in the economy's recovery, but still leaves questions about its strength. The Commerce Department reported Friday that private investment in equipment and software, everything from machine tools to word-processing programs, rose at a robust annualized rate of 13.4% in the first quarter of 2010, adjusted for inflation. Business investment overall, including money spent on warehouses and office buildings, grew at an inflation-adjusted annualized rate of 4.1%, dragged down by the persistent slump in commercial real estate. The increased spending on equipment and software encouraged hopes that businesses will help lead the economic recovery, generating enough investment and jobs to sustain a recent resurgence in consumer spending. So far, though, it is falling well short of the pace needed to drive the kind of sharp, "V-shaped" recovery that has followed deep recessions in the past. Together with rising exports, the business investment "is enough to generate a sustainable recovery, but not enough to generate a V," said Nigel Gault, chief U.S. economist at consultancy IHS Global Insight. In the first four quarters after the harsh recession of 1981-82, inflation-adjusted investment in equipment and software rocketed back at an average annualized rate of 21%, helping to drive nearly 8% growth in the broader economy. Most business surveys show optimism rising and many companies planning to boost capital expenditures further in coming months. But disparities remain. Business investment still has a long way to go to reach normal levels. In the first quarter of 2010, net private investment--including capital spending on everything from houses to assembly lines, minus depreciation--stood at 1.6% of economic output, well below the 20-year average of 5.4%. Meanwhile, the smaller firms that tend to account for an outsize share of job growth are facing serious obstacles, as banks shy away from providing credit.Diana Olick - Bye Bye Home Buyer Tax Credit"It was the last day of the home buyer tax credit...for the second time. Of course given all the hype on the home builder web sites, you'd think this was the last day of the housing market as we know it. And was it working? Well, hard to say. One guy we spoke to in suburban Maryland just couldn't get the seller to budge quickly enough. Another in New York City was rushing to get a developer to sign by midnight but there seemed to be some issues. I emailed a Realtor I know out in Burbank, CA, David Fogg, and he responded: "The real story is the intense difficulty qualified people are having in obtaining financing, as well as the appraisal regulations which are hurting many home sales." So does the housing market implode at midnight? I seriously doubt it, seeing as the tax credit extension already hasn't had nearly the effect the first credit did last fall. In the run-up to the previous deadline, we saw annualized sales volume rise to nearly 6.5 million units. Volumes then tanked to 5m units by January and were only up to 5.3m by March. I doubt we're going to get back to 6.5m by April. All this says is that demand was pulled forward, and there just aren't that many buyers left who are buying solely because of the credit. Most experts I talk to, including the Realtors' own economist, believe we may see another dip in sales and prices before we are really on the road to recovery. Remember, Spring is historically the busiest market, and we'd probably have seen some bump, tax credit or not. And it's not like the government is gone from housing entirely, given that the $75 billion mortgage bailout is stemming some of the foreclosure crisis, and Fannie Mae is still offering 3.5% back when you buy one of their foreclosed properties. Housing today is dependent on financing and confidence, and both of those are hanging by a thread. Frankly I'm glad to see the tax credit go, because maybe now we can see the housing market's true colors, without excuses." DSNews.com - Fannie Mae takes a second look at REO Property SalesFannie Mae is tightening up its initiative to facilitate the sale of REOs to owner-occupants and entities using public funds, such as local housing and community development agencies. Fannie Mae says these buyers bring permanency and stability to tenuous markets where swollen inventories of foreclosures have taken their toll, and the GSE is making some changes to ensure owner-occupants and public entities have "first look" at its REO homes. Fannie Mae initially rolled out its First Look initiative last fall. Under the program, the GSE only considers offers from those seeking to purchase a home as their primary residence and public entities during the first 15 days that a property is listed. Julia Dugger, Fannie Mae's senior manager of marketing communications, explained that the execution of the First Look program has been "tricky," primarily because individual homebuyers and public entities usually can't view multiple listing services (MLS), and consequently don't know when the property they're interested in was actually listed or when the 15-day First Look window ends. To address this snag, Fannie Mae is making some changes to the program. Going forward, First Look will be tracked based on days listed on the GSE's REO marketing site HomePath.com. Public entities, too, are taking advantage of the no-investor marketplace provided by First Look, particularly those agencies that have been awarded federal funding through HUD's Neighborhood Stabilization Program (NSP) to purchase, rehabilitate, and resell foreclosed and abandoned properties. Beginning today, Fannie Mae is extending the First Look marketing period for its REO homes in Nevada from 15 days to 30 days. Dugger says the GSE may explore lengthening the timeframe in other areas as well.Goldman CEO acknowledges company 'role' in finance crisis Goldman Sachs' CEO Lloyd Blankfein said in an interview to CNN, broadcast Sunday that his company bears some blame for the real estate bubble that led to the global financial meltdown. "We made a contribution to the bubble," adding that executives at the company now "beat ourselves up" for the error, although he said there was a lot of blame to go around. "How did we make a contribution? We're a lender. We lent money to companies, we lent, we financed real estate ventures that had too much leverage, we made a contribution to leverage," Blankfein said. "State and local governments took on debts and deficits, the federal government took on big deficits. All made a contribution to the over-leverage -- and consumers over-leveraged themselves," he said. But did we play a role in that? Absolutely we did," he said. He added: "Did we think we were doing that at the time? No. In hindsight? Yes. Goldman has been roundly berated for having emerged a highly profitable winner in the wake of the financial crisis, while many of its investors took major losses. Blankfein's concession came just days after a contentious congressional hearing last week at which he and other current and former Goldman employees denied any wrongdoing after a Senate probe alleged fraud that the firm bet heavily against the housing market in 2007 without telling investors who were buying its mortgage-backed securities. Goldman faces a vexing dilemma, legal experts say, as the Justice Department conducts a criminal investigation into whether the financial services giant duped buyers of its securities. Goldman could lose its vaunted reputation for integrity if it admits to wrongdoing as part of a deal to avoid criminal prosecution. The value of Goldman's stock has fallen $21 billion -- a fifth of its market value -- since the Securities and Exchanges Commission (SEC) alleged that the firm created and sold a mortgage-backed security in 2007 without telling investors that it had been partly shaped by a hedge fund manager who bet that it would fail. Friday, Goldman's stock fell 9% to $145.20.Now on to our real estate investing education section ...Bank Foreclosures vs Tax Foreclosures - Which is Better?Tax foreclosures were once all the rage but with media attention on short sales and REO properties, they have recently fallen out of favor. Of course, among savvy real estate buyers and investors, nothing is "off the table" so it's only fair to spend a bit of time examining the pros and cons associated with each.Tax Foreclosures are Not Tax Deed SalesIt's important to differentiate between tax foreclosures, tax deed sales and other forms of government sponsored property sales. Tax foreclosures are typically the result of unpaid tax or other liens placed on the property (for example, unpaid income taxes). Tax deed sales are often the result of a homeowner failing to pay the local property taxes on a given parcel; after a period of time the taxes are paid by someone else (often an investor) with a guaranteed rate of return ranging from 5 to as high as 18 percent upon redemption. At some point and time in the future, if the original owner does not redeem the property and repay the prior property taxes plus interest, the property may eventually go up for auction. Pros & ConsAlthough tax foreclosure sales may sound simple enough, in reality they are often plagued by problems. For example, unlike short sales or REO properties, the buyer often assumes all prior liability for past due taxes when purchasing the property. Additional liens (including other forms of taxes, HOA fees, etc...) may add thousands to the purchase price of the property. Because the tax lien takes precedent over all other liens, a substantial sum may be required to obtain clear title and clear liens against the property. Remember, there is often a mortgage in addition to the back taxes owed.Tax foreclosures can also be highly competitive; auctions often take place quarterly or once per month with extensive advertising used to attract maximum bidding. Pre-approval is necessary since closing typically takes place within 10 to 30 days after the auction. Bidders may conform to the dictates of the taxing authority rather than negotiate a closing based upon their own individual situation. Of course, the use of leverage, timing and other financial issues may significantly impact the individual rate of return for any type of real estate investment. Be sure to take all considerations into account before moving forward with a tax foreclosure sale.Although both REO and tax foreclosed homes are typically sold in "as is" condition, the bank representative and others typically attempt to provide a thorough review of the property. Tax foreclosures should be extensively scrutinized prior to the sale in order to gain as much information as possible; it's not unheard of for investors to believe they got a "great deal" and were the lowest bidder only to find out there were zoning irregularities, EPA restrictions or other major issues associated with the property.
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