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JULY’S REAL ESTATE NAVIGATORS MEETING “FORTUNES IN SELLER FINANCING - FLIPPING NOTES WITH NO MONEY, NO CREDIT, & NO SPECIAL LICENSES”
JULY 13TH, 6 P.M. @ THE PENSACOLA MUSEUM OF ART
We have a very special treat for you at this month’s Real Estate Navigators meeting. Woody and I have secured national trainer and founder of the Noteschool, Eddie Speed. With over 30,000 notes brokered totaling over $500 million dollars, Eddie is one of the nation’s leading experts on Real estate notes.
(Check out Eddie’s Video Here —> http://noteschool.com/watchvideo.html)
This is a business that requires NO money, NO credit, and NO special licenses, so there is truly no reason why you can’t make a great income in the cash flow/owner financing business! If you were at last month’s meeting, you heard that one of our very own members, John Manzanet, is making a great deal of money flipping notes IN THIS MARKET, and there’s plenty more money to be made!!!
At this special 1-night event, Eddie will share:
à How the Note Business Works
à How Real Estate Investors Can Capitalize on the Phenomenal Growth In Seller Financing
à How Realtors Can Create Seller-Financed Notes for Clients to Overcome Financing Shortfalls & Speed Transactions
The savvy real estate investor can capitalize on the mortgage implosion through the profitable business of seller financing-despite the SAFE Act. Many wrongly assume that the SAFE Act prohibits all transactions involving seller financing. In fact, there is a lucrative market awaiting you.
(Click Here for a Special Message from Eddie to the Navigator Group—>http://audiopostcard-007.com/Y.asp?11114609X1166)
Don’t miss out on this exciting event!!! Each person in attendance will receive a FREE report on buying and selling real estate notes!!
(Navigators meets on the 2nd floor of the Pensacola Museum of Art, located at 407 South Jefferson in downtown Pensacola. Need a map?http://budurl.com/artmuseumpcola
Multiple Streams of Income, Part 1
“The Trouble with the Rat Race is that Even if You Win, You’re Still a Rat.” ~Lily Tomlin
I absolutely love this quote from Lily Tomlin, because it couldn’t be more true. How many people do you know that have spent their lives climbing the corporate ladder, only to find out it’s leaning up against the wrong wall, one that really doesn’t satisfy their inner desires and personal passions?
Who do we consider the “winners” of the rat race? Doctors, lawyers, and maybe a handful of other professions come to mind. But when you really take a close look at their lives, the 9 to 5….erhhh, more like 9 to 9 grind that they go through every day, is it really all that glamorous? They’re really just a more successful version of a wage slave, with a little bit nicer car.
As creative small business people and savvy entrepreneurs, we need to commit to creating multiple streams of income in our lives. In today’s tough economic times, it’s very risky to have all of your proverbial “eggs” in one basket, relying on just one revenue stream. Creating multiple sources of income helps creates a safety net, especially when they are diversified across different types of products or services.
One example of this would be to have an investment in small grocery store or farmers market, while at the same being heavily active in real estate of the stock market. While the latter may suffer in the midst of a recession, the former is considered a “staple” and is less likely to be affected by the rise and fall of financial markets. By implementing business strategies that produce multiple revenue streams, you can rely on one source of income if another one is diminished for a period of time due to unforeseen circumstances.
After you have developed numerous income streams, it’s time to turn your focus towards making those streams as passive as possible. You should examine every aspect of your business and find out which tasks or activities can be delegated and/or outsourced. The more time you are able to free up in your day, the more time you have for creating additional revenue streams. The goals is to eventually have all of your income streams completely passive, so that your money comes in whether you’re at work or on some island in the Caribbean. That’s when you have officially graduated out of the rate race and are back in the game of truly enjoying life.
For a great way to visualize yourself getting out of the dreaded rate race, play the game Cash Flow 101 by Robert Kiyosaki. He also makes a great kid’s version to start your children off early thinking the right way about money. I would also highly recommend Timothy Ferris’ book entitled, “The 4-Hour Work Week”. It’s the entrepreneur’s outsourcing handbook, and an absolute must read for small business owners.
**Make sure you come back for part 2 of this series, as I will be examining Warren Buffet’s money rules, as well as the resurgence of the Entrepreneur. To your success!**
DSNews.com - Foreclosures Cancelled in California
The number of foreclosure sales that were cancelled in California hit an all-time record in June, according to a report released Tuesday by Foreclosure radar, a locally based company that tracks every foreclosure in the state and provides daily auction updates. The company characterized foreclosure activity in the Golden State as “mixed” last month, with filings of new foreclosure notices on the rise and foreclosure sales down. That assessment follows two straight months in which ForeclosureRadar reported declines across-the-board at every stage of the foreclosure process.
In total, 10,506 foreclosures were cancelled in California last month before reaching the auction sale phase, according to ForeclosureRadar’s market data. The figure represents a 27 percent increase from May and is 153 percent higher than in June 2009. ForeclosureRadar explained that the increase was primarily driven by just one lender, JP Morgan Chase and its acquisition of Washington Mutual loans. Notices of Default filed against delinquent homeowners – the first step in the foreclosure process – edged up nearly 7 percent from May to June, ForeclosureRadar reported, but were down more than 45 percent compared to June 2009. Notice of Trustee Sale filings, which serve as the homeowner’s final notice before the home is auctioned, increased on both a monthly and annual basis in June. Compared to the previous month, filings were up nearly 22 percent, and were nearly 12 percent above year-ago levels. During the month of June, ForeclosureRadar tracked a total of 25,790 new Notices of Default and 34,261 Notices of Trustee Sale.
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Matt’s Commentary: The cancellation of foreclosure sales is happening throughout the United States, including right here in Pensacola, as banks are doing everything they can to try and modify mortgages, renegotiate terms, and keep individuals in their homes. Banks have never been in the real estate business, and have no interest in owning properties, so this stepped up intensity should come as no surprise.
As real estate investors, this should simply be further proof that we are providing a great service, not just to distressed homeowners, but to the banks as well. By encouraging those in foreclosure to get their homes on the open market, negotiating the terms of a short sale, and finding an end buyer, we continue to create win/win/win situations for ALL parties involved. I just completed another short sale this week that put $15k in my pocket, forgave a homeowner of nearly $140k in debt (with no deficiency judgment), and kept the bank from adding one more foreclosure to their books. Not a bad ending if you ask me…
DSNews.com - Mortgage firms close
During the first half of 2010, the number of mortgage-related firms to close or fail jumped by more than a quarter from the same time last year, according to industry data released week. The increase was driven by financial institution failures as the number of non-bank lenders to close has dwindled. Based on information tracked by the online industry resource Mortgage.com, the period between January 1 and June 30 of this year saw 109 mortgage-related failures and closings. The figure represents a 27% increase from the 86 closings reported during the first half of 2009.
Bank and credit union failures have both doubled when compared to the first six months of last year, with the number of banks to go under tallying 86 over the last two quarters and credit union collapses at 11. Non-bank closings, on the other hand, fell by more than two-thirds during the same period to 12. An analysis by MortgageDaily.com of bank failures and regulatory orders suggests this year’s bank failures will end up between 175 and 200. FDIC Chairman Sheila Barr has indicated that bank closings will likely pick up pace and peak during the latter half of this year.
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Matt’s Commentary: As we talked about at the meeting on Tuesday night, the increase in mortgage firm closings will leave a gap in mortgage financing for those with slightly lower credit scores. Combined with the report that now 25%+ of all borrowers now have a sub-600 credit score, there will be a tremendous need in the future for some type of alternative financing for those who want to purchase a home. This is exactly where a seller financing system like Eddie Speed’s can come in handy, as investors will need to become savvy on how to find and/or create financing for those who are not being served by the current lending industry.
DSNews.com - Delinquencies inch up in May
The seasonal improvement period for delinquencies and foreclosure inventories has come to a halt, according to an industry report released last Thursday by Lender Processing Services (LPS). The Florida-based analytics firm’s monthly Mortgage Monitor report found that the total U.S. delinquency rate jumped to 9.2 percent in May, inching up 2.3 percent from April and 7.9 percent higher than the same month last year. Herb Blecher, VP of LPS Applied Analytics, said the slight increase on the delinquency side was expected as this is the period when rates start to pick up. He said delinquencies will likely continue to increase all the way through the end of the year. The foreclosure inventory rate remained stable from the month prior at 3.18 percent, but it was 13.5 percent higher than May of 2010. Blecher explained that while some stability has been achieved in the foreclosure inventory rate, a further decline over the coming months is unlikely.
The national noncurrent loan rate, which reflects both foreclosures and delinquencies, came in at 12.38 percent. Not including REO properties, nearly 6.3 million loans were noncurrent in May. When REO properties were included, the total jumped to nearly 7.4 million. On a state-by-state basis, Florida and Nevada continued to hold the most noncurrent loans in May, with rates of 22.4 percent and 21.8 percent respectively. On the other end of the spectrum, the lowest noncurrent loan rates were seen in North Dakota, at 4.1 percent and South Dakota, at 5 percent.
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Matt’s Commentary: The lowest hanging fruit for investors continues to be working with homeowners that are delinquent on their mortgages, and that’s especially the case here in Florida. A very minimal marketing effort will reap huge returns in the form of motivated seller leads and short sale deals.
My investment company currently has dozens of short sale deals in the pipeline and we continue to add 3-5 more each and every week. What are you doing to take advantage of the best buying opportunity in the history of our great country? The fruit is ripe, plentiful, and now more than ever…hanging low.
Diana Olick - Fannie Mae: Walk Away and You Will Pay
“Dare I say it? “What took you so long??” An announcement from government-owned mortgage giant Fannie Mae warns: “Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.” I have to ask: Why only seven years? Up the ante! Look, I understand that a lot of folks are sitting on overwhelming bundles of negative equity in the form of four walls. A very credible argument can be made that a bad investment should not be a jail term. However, a lot of the housing crash was based on a fundamental change in attitudes toward home ownership, i.e. that a home is an investment before a dwelling.
The pendulum needs to shift back, not all the way, but more toward the traditional use of home: A place to live, not an A.T.M. “Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments,” notes the press release. I’m wondering why they haven’t been doing that all along? My guess is they simply don’t have the legal resources available to handle such a huge job…which brings me to my final thought: If the mortgage walk-away issue is big enough for Fannie Mae to get this tough, then why have Administration officials been telling me over and over that “it’s just not that big an issue.” Seriously, I’ve done several interviews over the past year, bringing it up over and over, and they just seem to want to sweep it under the rug. I guess the rug is getting a bit too bumpy.”
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Matt’s Commentary: Now that Fannie Mae is taking a harder stance against those who simply walk away from their mortgage obligations, the opportunity for short sale investors will be even more plentiful. When word hits the streets that Fannie Mae is pursuing deficiency judgments in court, and coming after people if they just walk away, more and more homeowners will be looking for solutions to try and avoid foreclosure.
In just the past week I have received 2 short sale approvals in which the banks completely waived the rights to pursue a deficiency judgment on the borrower. Do you think those distressed sellers were happy? They were ecstatic….and couldn’t stop thanking me! It’s time to take advantage of the opportunity that is before us, while at the same time helping homeowners save their future financial well-being.
“The Opportunity of a Lifetime Must be Seized During the Lifetime of the Opportunity” ~Leonard Ravenhill, 20th Century Revivalist
DSNews.com - 1.7 Million GSE Loans at Least 60 Days Past Due
The number of loans held by Fannie Mae and Freddie Mac that were 60-plus-days delinquent stood at 1.7 million at the end of the first quarter of 2010, the two companies’ conservator said in a report to Congress this week. While the volume of past dues may seem like an extraordinary negative weight on a servicing community already stretched thin, the Federal Housing Finance Agency (FHFA) says the number of GSE loans in the 60-plus-days delinquency bucket actually decreased by 1.3 percent, or 23,800 loans, in Q1. It marked the first decline in two years. According to the agency’s report to Congress foreclosure prevention activity increased 75 percent in the first quarter of 2010 compared to the previous three months. Approximately 239,000 foreclosure aversion actions were taken, driven by increases in all forms of home retention activity, short sales, and deeds-in-lieu.
FHFA reported that Fannie and Freddie’s cumulative refinance volume under the administration’s Home Affordable Refinance Program (HARP) increased 53 percent during the first quarter to nearly 291,584. Just as home retention efforts and short sales increased, the number of non-performing loans liquidated through foreclosure also grew. FHFA’s data shows that the GSEs’ foreclosure starts increased to 246,000 during the first three months of this year. That compares to 243,000 foreclosures initiated in the previous quarter. Completed foreclosure sales and third-party sales increased 26 percent to nearly 97,900
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Matt’s Commentary: Though the number of accounts that are 60 days past due has come down, it’s still an incredibly high number. These figures may seem like doom and gloom for those in the “glass half empty” crowd, especially in light of high unemployment, but I’m one to always look for the silver lining.
As an opportunistic real estate investor, I see tremendous profit potential in these numbers, as most owners will not be able to find a lasting solution to stay in the home. By providing our short sale services, we can make a substantial income by negotiating with the banks on behalf of the homeowner, while at the same time helping these distressed sellers avoid “Credit Score Hiroshima” by allowing a foreclosure to land on their credit.
CNBC’s Diana Olick - Oil and Real Estate: Fannie Mae to the Rescue
“There is no question that while oil has barely brushed the beaches here in Pensacola, the place is awash in fear. But then a ray of hope…from none other than the government-controlled mortgage behemoth Fannie Mae, which is in so much hot water itself that it actually had to delist from the stock market yesterday. “Servicers may immediately suspend or reduce mortgage payments for borrowers whose properties or income are negatively impacted by the Gulf oil spill,” goes the press release.
“We want to give homeowners every opportunity to weather this unprecedented disaster, including relief from their mortgage payment if that will help them get back on their feet and stay in their homes,” said Michael J. Williams, President and CEO. “Our policy is in place to support those who are experiencing a disaster-related hardship through no fault of their own and are acting in good faith to meet their mortgage obligation.”
This is part of the company’s (or should I say agency’s) “Special Relief Measures” policy. Borrowers can get up to 90 days of relief while the servicer “determines the nature and extent of the impact the disaster is having on the condition of the property or on the borrower’s financial condition.” And what then? “At the conclusion of that assessment, servicers have additional flexibilities to evaluate the appropriate loss mitigation alternative based on a case-by-case determination, including an additional three months of forbearance, a loan modification or other customized solution.”
Sounds great, if this were, like, 1997, and the housing market was otherwise fine and dandy. So many Floridians are already in the midst of trying to get loan modifications and forbearance plans, that I’m just not so sure how you separate it all around here. But then I think about the government, which has been trying to pull itself out of the housing market, and is now just dipping itself right back in. I wonder just how this announcement is going to affect underwater borrowers in Florida, even those who don’t live near water. The very process of deciding who is really a victim of oil and who is just a victim of the ongoing housing crisis? Just the mechanics of it! I’m sure far greater minds than mine in the upper levels of our government have already thought of that.”
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Matt’s Commentary: Though Fannie Mae’s waiver or deferment of payments won’t cure all of our real estate woes, it’s certainly a step in the right direction. Condo owners are looking down a double barreled shot gun when faced with the reality that, not only can they not sell their condo because of the drop in value, but now thanks to the oil spill they can’t even rent it to offset the exorbitant expenses that come with owning beach property.
We may not know what the future holds in relation to the oil, but it’s good to know that Fannie Mae is stepping up to the plate to provide some relief in the face of this massive disaster. Now, has anyone heard from BP?
Diana Olick - Big Banks Move to Short Sales, but Will It Help Housing?
“Earlier this week a top executive at Bank of America told an REO conference in Dallas that the lender would be focusing more on short sales than ever before. At first hearing this, I assumed it was because of the government’s Home Affordable Foreclosure Alternative Program, which provides cash incentives to servicers and borrowers for short sales and also streamlines the process, but of course there’s way more to it than that. Said Bank of America exec, Matt Vernon, whose official title is National REO, Short Sale and Deed in Lieu Executive (his childhood dream title I’m sure), granted me an interview this morning, and was pretty clear as to why B of A is pushing these alternatives. The big difference, he says, is that BofA, as well as some other big banks, are changing the model from reactive to proactive. In other words, instead of waiting for a borrower or real estate agent to approach the bank with an offer for a short sale, they are using a “cooperative approach, with homeowner, Realtor and servicer on behalf of investor, working to move that property through the process. All three of the interested parties holding everything together,” Vernon explains. ”
Olick continues: “So the servicer sets a minimum value for a short sale and then the borrower and Realtor go out and find a buyer. When they do, the process then moves far more quickly because it’s already approved. Of course there’s always the financial incentive as well. With so many borrowers either falling out of or not qualifying for the modifications, a huge flood of properties are moving to REO (bank owned). A report from Clayton Holdings finds short sales cut risk severity by 13 percent more than REO sales. And in some states where the foreclosure process is more lengthy, short sale loss severities can be as much as 26 percent lower than REO loss severities. “I would say that’s generally accurate in what we see,” agrees Vernon. “It really comes down to time. The quicker you can facilitate the property moving.” The good news is, that will cut down on foreclosures. The bad news is that short sales, like it or not, are comps. They sell for less, and consequently bring down the values of properties around them.”
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Matt’s Commentary: Though it’s certainly good news to hear that larger banks are starting to look more seriously at short sales, I wouldn’t change your marketing to target distressed homeowners with mortgages serviced by Bank of America. There may be money in it solely as a real estate agent, but don’t count on flipping very many deals.
The big switch to Equator and a new 1-800 customer service center certainly make B of A much easier to work with. However, their valuations still almost always come in too high, making it nearly impossible to flip and almost as hard to sell retail. Just in the last month I’ve had 3 deals with B of A in which their bottom line net was higher than the list price. Just not worth it…
DSNews.com - Loss Severity on Short Sales 13% Lower than REO: Report
Over the past year, the mortgage risk analysis firm Clayton Holdings says it has witnessed an overall increase in short sale activity. Because of the growing emphasis on keeping borrowers out of foreclosure, servicers are becoming more inclined to employ alternative loss mitigation strategies. And Clayton says the added benefit to servicers is that loss severities for properties sold through short sale are 13 percent lower than loss severities for REO sales. The analysts at Clayton Holdings examined performance indicators across nine servicers’ internal proprietary short sale programs, from October 2009 to March 2010. In addition, the data showed that short sales cost bondholders about half the amount in fees and advances as REO sales, saving roughly $16,000 per sale.
Clayton says servicers with the lowest loss severities for short sales employ a variety of strategies including outsourcing, utilizing dedicated short sale teams, working directly with local broker networks, and setting list prices based on historical and geographical REO net proceeds.
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Matt’s Commentary: This article once again emphasizes the fact that investors are continuing to help the overall economy by convincing sellers to pursue a short sale rather than just walking away from the home. Bank’s biggest complaints against short sale flippers (now affectionately known as “floppers”) are that they don’t disclose the fact that there is a higher offer, thus causing a greater loss to the bank than necessary. However, that is not exactly accurate.
The bank is making an additional 13% and an average of $16,000 more when they short sale a property as opposed to taking it back as an REO, and I believe those numbers are fairly conservative. If I buy a house and sell it for $10,000 more on the same day (or within a few days) the bank feels as if they should have had that additional money, but they are operating on the assumption that this property was going to be a short sale anyway. However, most motivated sellers that I convince to do a short sale are typically ready to walk away until I convince them that this is a better scenario. Therefore, my convincing the buyer to avoid foreclosure has in reality SAVED the bank $6,000 ($16,000 average saved by avoiding foreclosure less my $10k profit).
Banks should not be discouraging this type of investment activity, but rather embracing it. The quicker we rid the economy of these non-performing assets, and get paying homeowners into these properties, the better off everyone will be. WAKE UP PEOPLE!!!
Diana Olick – End Mortgage-Interest Deduction: Cato’s Calabria
“Abolishing the mortgage-interest deduction, enjoyed by some 75 million homeowners, is a way to “end the subsidization of too much debt,” which was at the crux of the financial meltdown, a Cato Institute official told CNBC. It’s also a way to really tick off a lot of people. Americans who own homes, unlike those in other countries, have been enjoying this deduction for a century or so. “When you look at other countries, like Canada, that don’t have the mortgage-interest deduction, they have similar, if not higher mortgage rates,” said Mark Calabria, Cato’s director of financial regulation studies. “All it does is run up house prices [here in the US], which to me makes housing less affordable, not more,” he added. “It also increases the volatility of prices.” Congress is considering eliminating the deduction as a way to raise revenue and close the budget gap. This move would add an estimated $120 billion to the Treasury coffers.
Calabria conceded the deduction could be kept in place for those who have, for instance, at least 30 percent of equity in their homes, but not those who have less. Not surprisingly, those in the real estate industry favor keeping the deduction in place. It means more business for them and higher commissions for agents. According to Lawrence Yun of the National Association of Realtors, “This will result in a massive distribution of wealth in America. It’s a bad policy.” And, he added, it sends the wrong message to the American public: “Fifteen US Presidents have been able to handle the budget situation without touching the mortgage-interest deduction. If the new political class decides to touch it that shows a level of weakness that they can not handle a grown-up budget.”
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Matt’s Commentary: Well, so much for that promise to not raise taxes on 95% of Americans. It looks like this administration may do the exact opposite, raising taxes on nearly all Americans to pay for their excessive spending. Housing has always played a key role in leading our country out of its many recessions. However, adding additional taxes to homeowners and crippling an already wobbly housing market could have devastating effects on this economic recovery.
Make your voices heard, and let your elected officials know that you are strongly against the elimination of the mortgage interest tax deduction, value-added tax, taxes on small business, or any other taxes that are being piled on all hard working Americans. Who knew this is what change and hope looked like?