PRESIDENT BUSH ANNOUNCED STEPS TO HELP FAMILIES KEEP THEIR HOMES AND REFORM THE MORTGAGE FINANCE INDUSTRY

Fact Sheet: New Steps to Help Homeowners Avoid Foreclosure

President Bush Announces Steps To Help American Families Keep Their Homes And Reform The Mortgage Finance System

Today, President Bush Announced Steps At The Federal Level To Help Homeowners In Need Of Assistance Avoid Foreclosure. These steps will help homeowners having difficulty paying their mortgages and ensure that the problems now disrupting the housing industry do not happen again. The fundamentals of America’s economy are strong – economic growth is healthy, wages are rising, and unemployment is low. The markets are in a period of transition as participants are re-assessing and re-pricing risk. One area that has shown particular strain is the mortgage market, particularly the subprime sector.

The President Announced The Following Steps To Help American Families Keep Their Homes

1. The President Calls On Congress To Pass Federal Housing Administration (FHA) Modernization Legislation. The President’s FHA modernization proposal would lower downpayment requirements, allow FHA to insure bigger loans, and give FHA more pricing flexibility. These reforms would empower FHA to reach more families that need help – first-time homebuyers, minorities, and those with low-to-moderate incomes – and offer more options to homeowners looking to refinance their existing mortgage.

The Administration Will Also Launch A New FHA Initiative Called “FHA-Secure.” The President has asked Secretary Jackson to pursue important administrative changes to give FHA the flexibility to help more families stay in their homes during this time of transition in the mortgage market. The FHA-Secure program will help people who have good credit but who have not made all of their payments on time because of rising mortgage payments. For the first time, FHA will be able to offer many of these homeowners an option to refinance their existing mortgage so they can make their payments and keep their homes. FHA will also charge mortgage insurance premiums based on the individual risk of each loan, using traditional underwriting standards, so it can expand access and help even more families.

Since 1934, FHA Has Helped Close To 35 Million People Buy A Home And Stay In Their Home. FHA is a government agency that provides mortgage insurance to borrowers through a network of private sector lenders. It also offers options to homeowners looking to refinance their existing loan. The President’s FHA modernization bill was first sent to the Hill in April 2006, and it passed the House last Congress with over 400 votes. The President has once again asked Congress to send him a clean FHA modernization bill as soon as possible so he can sign it into law.

2. The President Calls On Congress To Change A Key Housing Provision Of The Federal Tax Code So It Does Not Punish Families Who Are Forced To Sell Their Homes For Less Than Their Mortgage Is Worth. Current tax law counts cancelled mortgage debt on primary residences as taxable income. For example, if the value of a home declines and $20,000 of the homeowner’s loan is forgiven, the tax code treats that $20,000 as taxable income. The President proposes temporary relief to ensure that cancelled mortgage debt on a primary residence is not counted as income.

The President Is Working With Congress In A Bipartisan Fashion To Make This Important Change. Senator Debbie Stabenow (D-MI), along with Senator George Voinovich (R-OH) and others, has introduced a bipartisan bill that would protect homeowners from having to pay taxes on cancelled mortgage debt. In the House, Representatives Rob Andrews (D-NJ) and Ron Lewis (R-KY), along with several of their colleagues, have introduced similar legislation. The President looks forward to working with Congress to reach agreement on a bill, so we can deliver this vital tax relief to American homeowners.

3. The President Announced That The Administration Will Launch A New Foreclosure Avoidance Initiative To Help Struggling Homeowners Find A Way To Refinance. Housing and Urban Development Secretary Alphonso Jackson and Treasury Secretary Henry Paulson will reach out to a wide variety of groups that offer foreclosure counseling and refinancing for American homeowners. These groups include community organizations like NeighborWorks, mortgage lenders and loan servicers, FHA, and Government-Sponsored Enterprises like Fannie Mae and Freddie Mac. The goal of this initiative is to expand mortgage financing options, identify homeowners before they face hardships, help them understand their financing options, and allow them to find a mortgage product that works for them.

The President Supports Actions To Protect Homeowners And Prevent These Problems From Happening Again

Federal Banking Regulators Are Improving Disclosure Requirements To Ensure That Lenders Provide Homeowners With Complete, Accurate, And Understandable Information About Their Mortgages. Many borrowers did not receive clear and complete disclosure regarding the terms and conditions of their mortgages. To help protect homeowners in the future, Federal banking regulators recently issued new disclosure guidelines for lenders, and they continue to consider new rules. Homeowners must have complete, accurate, and understandable information – including on the potential increases in their monthly payments.

Federal Banking Regulators Are Working To Strengthen Mortgage Lending Standards. Questionable underwriting standards enabled mortgage lenders to place some borrowers in sophisticated products they could not afford. The Federal banking regulators recently set forth new guidelines to address lending standards, and they will continue to examine new rules. Lenders have an obligation to ensure that their standards accurately measure whether borrowers can afford their mortgage.

The Administration Is Working On New Rules To Help Consumers Shop For The Best Loan Terms. This fall, HUD will propose reforms to the Real Estate Settlement Procedures Act (RESPA) that would promote comparative shopping by consumers for the best loan terms, provide clearer disclosures, limit settlement cost increases, and require fee disclosure.

The Administration Supports State-Based Efforts To Create A Comprehensive Mortgage Broker Registration System. The President has also asked Secretary Paulson to examine the broad issues surrounding mortgage brokers and originators.

The Administration Is Committed To Pursuing Fraud And Wrongdoing In The Mortgage Industry. Some lenders deceived their customers – and pushed them into taking out loans they knew these home buyers could not afford. Federal agencies, such as HUD, the Department of Justice, the Federal Trade Commission, and others, are aggressively pursuing wrongdoers and predatory lenders to ensure they are punished. This will send the message that these practices will not be tolerated.

The President Will Create A Presidential Council On Financial Literacy Composed Of Leading Private Sector Individuals Who Can Help Promote Financial Literacy. This Council will work closely with the Treasury Department, HUD, and the Department of Education to make sure that we are raising awareness of these complicated issues.

The President Supports The Efforts Of Public and Private Sector Groups That Are Promoting Financial Literacy And Providing Foreclosure Counseling. For example, the President’s Budget proposes $120 million for NeighborWorks, which provides foreclosure workshops and counseling to borrowers. The President’s FY 2008 Budget request includes $50 million for HUD’s housing counseling program.

The President Has Asked Secretary Paulson To Lead The President’s Working Group On Financial Markets In Examining Some Of The Broader Market Issues Underlying The Recent Mortgage Problems. The President’s Working Group on Financial Markets is led by Treasury Secretary Paulson and is composed of Federal Reserve Chairman Bernanke, Securities and Exchange Commission Chairman Cox, and Commodity Futures Trading Commission Acting Chairman Lukken. The group will examine:

The role of credit rating agencies and how their ratings are used in lending procedures, and

How securitization, the repackaging and selling of assets, has changed the mortgage industry and related business practices.

The transaction below may be an indication that cap rates on some commercial real estate may be rising.  For many months as interest rates have slowly risen on commercial real estate transactions the cap rates have not moved up accordingly.  This “cap rate compression” has been the source of much discussion and some have predicted that the cap rates would eventually rise to reflect higher borrowing rates. 

End of an Era?

Aug 1, 2007 12:00 PM

Developers Diversified Realty Corp. in late June announced the sale of 63 properties to Phillips Edison & Co. in a $603 million deal that was noteworthy for more than just its size.

In recent years, such a portfolio — with a total of 5.7 million square feet of properties — would have been gobbled up in a market with a seemingly insatiable demand for retail real estate. But Developers Diversified executives say they were surprised that only a handful of offers emerged for the portfolio. “I think the rate movement really woke people up and forced them to realize that there should be a spread between A-quality properties and those that are lower quality,� says Joe Padanilam, senior vice president of acquisitions with the company. The portfolio traded at a cap rate of 7.25 percent, 50 basis points above the national average. A year ago, Padanilam believes the portfolio might have been below 7 percent.

Many brokers say that investors across the country are starting to back off class-B and class-C properties even while action on class-A properties is heating up. “On the institutional sales side, people are getting more discerning about what they want,� says Philip D. Voorhees, senior vice president of retail investments with the international brokerage firm CB Richard Ellis, Inc.

The deal is the largest to date for Cincinnati, Ohio-based Phillips Edison, a company that has built a portfolio of 23.4 million square feet. Phillips Edison plans to apply its value-add redevelopment strategy to the centers, says Michael Phillips, the company’s president. The portfolio fits within the firm’s $275 million PECO Opportunity Fund III, which was created to target secondary markets in close proximity to primary metro markets.

Article from the August issue of Retail Traffic

INVESTORS AND FINANCING IN THESE TROUBLED TIMES

In light of the difficult times in the financing market, I thought it would be helpful to provide some information that I think could be of great assistance to investors. Here is some great information in bullet point format. No editorial info. Just good stuff

1.    Credit scores above 720 are critical for 95% funding and interest rates that allow for purchases that can make sense. Get your credit repaired!
2.    In conjunction with the 720 credit score you will be required to provide full docs. Have or obtain a business and be able to provide financial. There are ways to do this if you have been doing business for a couple of years. As an investor, learn this critical strategy and use it.
3.    Mortgage brokers are being forced now to conform to Fannie and Freddie’s guidelines. There is basically nobody to buy their paper now except for them. Fannie and Freddie are introducing new packages to help out with the sub-prime borrowers. If your broker doesn’t know about these products then find one who does or get your broker to look into them.
4.    Higher fees and rates are the norm now. Be sensitive to what you are going to have to pay for the money. Shop around for the best overall package for you.
5.    620 credit scores can get conforming loans (Freddie and Fannie) with full documentation but rates are high and you will need 10% down and reserves that can be verified.
6.    Your Debt to income ratio should not exceed 50%. Work on keeping this down.
7.    Keep 3 to 6 months liquidity. Banks are requiring this on most loans now.
8.    Look into business credit. Lenders need to keep loaning money out. Business credit is a big push right now.

Probably the most effective information I can pass along is:

FIND THE RIGHT MORTGAGE BROKER! PUT THEM ON YOUR TEAM! USE THEIR EXPERTISE FOR YOUR BENEFIT!

Here’s A Great Tip on REO’S

I recently received a call from a personal friend. He knows that I invest in real estate. He also is aware that I have some connections that he was looking for. Now the reason for his call is the most important part. He was looking for a connection that would be interested in and would have the ability to purchase a large portfolio of REO properties. He told me that the purchase would provide properties for $.40 to $.50 on the dollar. The only catch was that they had to pay $10,000,000,000 for the portfolio and they had to provide proof that they could purchase it within 5 days. Yes you saw the correct number of zeros that is 10 billion dollars (thats right BILLION with a B).

Well, I don’t have connections like that but it did get my mind racing and trying to figure out how to get a piece of that action. So I started to do some research on who could make a purchase like that and how could I find them. By the way someone did provide proof a ability to make the purchase and I am waiting to see if it goes through. I am still researching how to find these portfolio buyers because they will definitely want to be selling some chunks of that portfolio to others and it will eventually get down to my personal level.

So you are probably wanting me to give you the place you can go to purchase one or two of these right. Well that isn’t what we do here. But if you will think this through and do some research, you can find these people and make some deals of your own by purchasing some REO’S from them.

Just so that you know, These buyers are selling their portfolio’s out in blocks of 1 to 10 Million and those are all over the place. Perhaps you fit into this purchase profile.

If that doesn’t suit you then try finding those smaller portfolio’s and a cash investor who doesn’t know about these deals. Put them together and get your money bringing the connections together. Perhaps you could get a couple hand picked properties out of the deal.

This is going to be happening for the next few years. Don’t miss out on the opportunity because you weren’t willing to dig a little and find these people.

The following article discusses the importance of professional property management and its contributions to the success of a commercial project.  We agree with most of the points the author makes about property management for commercial properties but note that there are some excellent property managers who do not have the CPM designation.  We are not familiar with the author’s web site and other activities and the inclusion of this article is in no way an endorsement of the author, his web site or his other activities.

The Commercial Real Estate Investor Team Member that makes YOU the Most Money- The Property Manager

By Monte Lee-Wen

The right Property Manager can dramatically boost your profits and is key to your success. The wrong one can make you wish you never bought a property in the first place. Property Management Companies play a BIG part of any commercial real estate investor’s business plan.

So, how do you find the right Property Manager and what should a Property Management Company focus on to make YOU the most money?

Rental property can be an extremely profitable investment when managed correctly.
The best management comes from an experienced professional Property Manager. Find the best local Property Manager before you start buying, meet them in person and interview them. Once you make a choice establish good rapport and make sure they have a good reporting system and use industry standard management software. Please don’t manage your own properties. You are almost certainly not good at it and Property Management is NOT the best use of your time as the head of your Investment Business.

Experience is one of the defining qualities of a Certified Property Manager. (CPM)
Candidates for the designation CPM must have a minimum of five years of effective full-time decision making activity in real estate management before earning the designation. Ongoing training is also an important piece of the right management balancing act that makes sure your manager keeps up with both the urgent daily tasks AND your long term business plan for the property.

Great Property Managers greatly reduce your risks at the same time they increase your profits.
They keep your tenants happy, focus on increasing rents and decreasing vacancies. They take care of maintenance issues promptly without you needing to get involved in repairs. They stay up to date on the latest changes in Landlord-Tenant and Fair Housing laws so you always operate in compliance with the rules.

Your Property Management Company cost is not an area where you want to shave the budget.
You get what you pay for so make sure your dollars are spent wisely. Look for Property Management companies that contain the following key traits and your profits will grow, while you simultaneously reduce monthly and annual expenses, and maintain or grow your tenant lists.

A great Property Management Company stays focused on three main areas to maximize return on investment.
1. The Investor - by increasing profits
2. Your Customers or Tenants - by providing a positive experience that results in their continued tenancy
3. Other Professional Associates - their support network that insures operating policy and procedure are adhered to.
You can not serve the needs of one of these groups at the expense of another. Ultimately, the right Property Management Company is adept at balancing all divisions and relationships that contribute to successful management and Return On Investment from a property.

Property Management success should be a shared experience within the company.
By this I mean every employee should exhibit a good attitude whether they are new to the business or have years of experience. Every employee in the management company should be willing to grow and learn. Periodic training through coaching or education should be available to maintain and upgrade service delivery. All these efforts transfer to increased customer satisfaction and tenant retention.

The right management company will also be networking with the immediate community.
Chambers of Commerce membership and various community organizations and should be able to provide a minimum of five references to you from properties they manage. They should have a track record and strong management portfolio, and have experience working with multiple investors on a single property. They should be strong communicators and be willing to work with you and your investment strategy. If your management company treats the property like they own it directly, and are spending investors money like it belongs to them they become a valued resource that contributes to both the tenant experience and the investor’s bottom line.

Property managers have to understand how to increase returns within an owner’s specified time frame, and know how to add value by enhancing income and cutting expenses. They will conduct due diligence for you and provide you with reports as well as know how to take over a property after acquisition. The right property manager is also a financial manager and will understand how to analyze financial statements and utilize yield management technology that provides monthly updated rent rolls, income expense reports as well as annual operating budgets and income forecasts.

Choose a Property Management Company with proven abilities, integrity, reliability, industry knowledge, and management expertise needed to enhance the value of your commercial real estate assets.   Investors own property for one reason - as a financial investment. The RIGHT Property Manager is the one team member that can improve your investment by positioning your property to achieve its highest and best use and make you the most money.

Monte Lee-Wen is an author, mentor, CEO and the Founder of Investor Tours University. His website is http://www.investortours.com

Residential Lending Update.

Every Real Estate investor has heard about the Sub-Prime mortgage debacle. I have postings on this blog discussing it. There are all kinds of articles written about it and reporters are constantly keeping this news before us. Here is some of the information that your may not be getting from the information out there available to the general public.

Loans for investors to finance properties at 100% are all but non-existent. Interest rates for investors are moving up sharply and 90% financing or better is available at elevated interest rates approaching hard money loan interest rates (up to 14%). Financing deals with a combination of low credit scores, high loan to value ratios and non-owner occupied is virtually an impossibility given the posture of the market today.

To get institutional lending, most borrowers are going to have to put at least 10% down and be able to show at least 6 months of reserves in the bank. Stated loans are now only available for those borrowers who are actually self employed. Stated loans (very well accepted a few short months ago) are now called “liar Loans� and are being eliminated.

Most investors are being greatly influenced by these lending practice changes and many are unable to continue or are being forced to drastically curtail their investment activities.

More opportunity for strong borrowers is indeed a benefit if you fit into that category. However, money is more expensive which makes it harder to benefit with almost any strategy.

My opinion is that as prices come down, which they will, there will be better and better opportunities for those who have good credit. That said, timing is a huge issue (at least for me). Time your purchases when the market and credit is starting to improve rather than making the purchase and waiting for years to benefit from the market turn and the ability for buyers to obtain financing.