Saturday, April 17, 2010

America’s Report Card on Education

America’s Report Card on Education

There’s good news and bad news about the state of public education in the United States. While the greatest gains have been made in Math and Science education from 1995 to 2003, most Americans still only give public schools a below-average grade. Take a graphic look at America’s Report Card on Education to see how public education in the U.S. stacks up against the rest of the world.

America's Report Card on Education

Biggest Celebrity Real Estate Losers

Biggest Celebrity Losers in Real Estate

The Biggest Celebrity Losers
Even celebrity home prices have hit rock bottom.
Suzanne Somers

1. Suzanne Somers

Was: $35 million
Now: $12.9 million

Along with hubbie Alan Hamel, Somers has been working on this huge, 65-acre desert compound outside Palm Springs since 1977. "Les Baux de Palm Springs" mixes the charm of the French countryside with Hollywood touches like Zebra skin rugs (lots of 'em) and massive chandeliers. Even after dropping the price by more than $22 million this property is still on the market, with the current price "available upon request". (Source)

Nicolas Cage

2. Nicolas Cage

Was: $35 million
Now: $17.5 million

Are there any mega-celebrities out there who live in simple, tasteful homes? Certainly not Nicolas Cage, whose old-Hollywood tudor in Bel Air reminds us of the sprawling Xanadu compound from "Citizen Kane". Actually, it's not so much the house as the crap it's filled with. Anyone want a life-sized Mickey Mouse? How about a boulder-sized amethyst geode? The good news is that the property is now being offered at a 50% discount. Anyone got seventeen-and-a-half million bucks lying around? UPDATE: Is this house about to be auctioned off on the courthouse steps? Has Cage defaulted on his mortgage? (Source)

Eddie Murphy

3. Eddie Murphy

Was: $30 million
Now: $14.99 million

Eddie Murphy's seven-bedroom Englewood, NJ mansion known as "Bubble Hill" may be only ten minutes outside of Manhattan, but that doesn't mean he's had an easy time finding a buyer. Bubble Hill has been on the market for at least 5 years. Pro: it's got a bowling alley and a recording studio. Cons: $200k a year in property taxes. UPDATE: Looks like this house keeps dropping! 12.75 million and falling fast. (Source)

Mel Gibson

4. Mel Gibson

Was: $39.5 million
Now: $29.5 million

Another celebrity gets divorced, another mega-Tudor hits the market! This Greenwich, CT mansion was designed by architect Charles Lewis Bowman and built in 1926. It's actually a very tasteful home (we're glaring at you, Nic Cage), if you can get over the fact that Mel Gibson has a reputation for being a huge prick. You know you're a jerk when you drop the price of your house by $10 million but still nobody wants to buy it. UPDATE: Looks like somebody finally bought this place, though the purchase price remains undisclosed. (Source)

Hugh Hefner

5. Hugh Hefner

Was: $27.995 million
Now: $18 million

Why did it take nearly 6 months and a ten million dollar price drop to sell this home? Are there not enough wealthy, single men out there who would pay almost anything for a pimp shack adjacent to the Playboy Mansion? Let me repeat that: you can literally stroll over to the Playboy Mansion in your silk pj's for a round of Texas Hold 'Em with the bunnies. We truly live in strange times. (Source)

50 Cent

6. 50 Cent

Was: $18.5 million
Now: $10.9 million

Mike Tyson. 50 Cent. You. What, you don't think you can fill shoes that big? 50 Cent reportedly spent $10 million on renovations alone fixing up this Farmington, CT mega-mansion that he purchased from Mike Tyson's ex-wife. I guess there aren't many people looking for 52 rooms... one real estate agent went on record saying he'd be surprised if this place sells for more than $5 million. Ouch. (Source)

Richard Gere

7. Richard Gere

Was: $17.995 million
Now: $11 million

It's no secret that Julian Schnabel's Palazzo Chupi units at 360 West 11th Street in Manhattan's West Village have sold poorly. (The units that have sold at all!) Only one big-name sucker took the plunge: Richard Gere. But the star of "Pretty Woman" and "Chicago" never even moved in before the apartment was re-listed at nearly $18 million. More than a year - and several price drops - later, the place finally sold for $11 million. (Source)

Burt Reynolds

8. Burt Reynolds

Was: $15 million
Now: $8.995 million

This old stallion may not regularly trim his famously thick body hair, but he certainly knows how to trim the asking price on his Hobe Sound, FL mansion. The listing has already dropped by about 40%, but without a buyer look for it to continue heading southward. This Mediterranean-style compound borders a wildlife refuge, so watch out for alligators if you take a tour. (Source)

Meg Ryan

9. Meg Ryan

Was: $19.5 million
Now: $14.2 million

Unlike Meg Ryan's reconstructed nose, her 1931 Spanish-style estate is practically flawless. A real movie star house, with ocean views and all that good stuff. Celebrity couples David & Victoria Beckham and Ben Affleck & Jennifer Garner reportedly took tours of the house, but no one was willing to fork over nearly $20 million. For $5 million less, though, it's hard to believe that this house is going to be on the market for very long. (Source)

Alex Rodriguez

10. Alex Rodriguez

Was: $14.9 million
Now: $10 million

A-Rod had to drop the price of his Trump Park Avenue apartment by $4 million before it sold, but even a price drop of nearly $5 million on his Coral Gables home hasn't lit a fire under buyers' checkbooks. Why sell? Looks like Rodriguez is trying to focus on baseball for once, rather than his well-known extracurricular activities. Or maybe the price of a hot dog and a beer at the new Yankee Stadium is just a little too steep? (Source)

Dylan McDermott

11. Dylan McDermott

Was: $11 million
Now: $6.9 million

By all accounts a beautiful residence, McDermott has had major trouble selling this Spanish hacienda-style home in Brentwood, even with a steep price cut. McDermott picked up the house back in 1999 from Melanie Griffith and Antonio Banderas, who bought it in 1997 from Michelle Pfeiffer and David E. Kelly (creator of "The Practice", in which McDermott had a starring role). I'm not saying I've got the cash, but I'd love to live in this house. (Source)

Elle Macpherson

12. Elle Macpherson

Was: $15.5 million
Now: $12.2 million

The falling price on this seven-story Notting Hill, London residence proves that even the UK is being hit hard by the housing crisis. The Victorian property was built in the 1850s and has six bedrooms. It was first listed in the summer of 2008. (Source)

Curt Schilling

13. Curt Schilling

Was: $8 million
Now: $5 million

This house has a history of selling for less than what its sports superstar owners would like to charge. When Drew Bledsoe owned this Medfield, MA home he tried to unload it for $9 million, but eventually had to settle for $4.5 from fellow Boston-area hero Curt Schilling. Schilling had been trying to get rid of it for $8 million, then dropped the price to $5 million. Update: the price has dropped again to $4.5 million. I guess that's really what this house is worth? (Source)

Dan Marino

14. Dan Marino

Was: $15.9 million
Now: $13.5 million

Marino never won a Super Bowl, and he isn't much of a real estate champion either. He's been trying to unload his Weston, FL compound for nearly four years, dropping the price and throwing in freebies like $1.5 million worth of designer furniture and a signed football. A signed football? Wow! That's worth, like... four hundred bucks. (Source)

Scarlett Johansson

15. Scarlett Johansson

Was: $7 million
Now: $5 million

Scarlett Johansson purchased her 1931 Spanish-style home in LA's Outpost Estates neighborhood in 2007 for $7 million bucks. Now it's been listed for just under $5 million... that's $2 million actual dollars that Scarlett is waving goodbye to. Ouch. (Source)

Kimora Lee Simmons

16. Kimora Lee Simmons

Was: $7.8 million
Now: $5.9 million

Kimora may be living "Life in the Fab Lane" as a reality TV star and CEO of Baby Phat, but her real estate woes are the stuff of legend. Along with ex-hubbie Russell Simmons, she's had to drop the price of her Saddle River, NJ home by $7 million. She also cut the price of her own Beverly Hills home by nearly $2 million, but the house has recently been de-listed for lack of an interested buyer. (Source)

Lance Armstrong

17. Lance Armstrong

Was: $12 million
Now: $10.5 million

Armstrong's 447-acre ranch in Dripping Springs, TX includes Deadman's Hole, a beautiful swimming hole that has a giant waterfall. The 7-time Tour de France winner celebrated the birth of his fourth child last year, so maybe he's thinking about keeping the toddler far away from unguarded bodies of water? (Source)

Britney Spears

18. Britney Spears

Was: $7.9 million
Now: $6.5 million

Does anyone really have the energy to listen to one more word about Britney Spears? I didn't think so. Let's just call her a (real estate) loser and be done with it. (Source)

J-Lo & Mark Anthony

19. J-Lo & Mark Anthony

Was: $8.5 million
Now: $7.5 million

Jennifer Lopez and Mark Anthony have sold their understated Bel Air home to a hedge fund manager for $1 million below the asking price. With as much money as they have, do you think they'll even notice? Of course, they were forced to throw in $1.3 million of furniture to close the deal, adding a bit of insult to injury. (Source)

Bruce Jenner & Kris Kardashian

20. Bruce Jenner & Kris Kardashian

Was: $3.4 million
Now: $3.0 million

"Keeping Up with the Kardashians" may be a hit reality TV show, but as we've seen before that hardly insulates you from falling real estate prices. This house was even featured on the first few seasons of the show, but finding a buyer required a 12% price cut. Then again, just like the power couple featured at #19, do you think anyone with the last name Kardashian is going to worry about $400,000? (Source)

Wednesday, April 7, 2010

Short Sales: Obama Offers More Help To 'Underwater' Homeowners

WASHINGTON — The government launched a new effort on Monday to speed up the time-consuming, often-frustrating process of selling your home if you owe more than it's worth.

The Obama administration will give $3,000 for moving expenses to homeowners who complete such a sale – known as a short sale – or agree to turn over the deed of the property to the lender. It's designed for homeowners who are in financial trouble but don't qualify for the administration's $75 billion mortgage modification program.

Owners will still lose their homes, but a short sale or deed in lieu of foreclosure doesn't hurt a borrower's credit score for as much time as a foreclosure. For lenders, a home usually fetches more money in a short sale than a foreclosure. And the bank avoids expensive legal bills, cleanup fees and maintenance costs that follow a foreclosure.

"It's very traumatic and embarrassing and frustrating to go through a foreclosure," said Laurie Maggiano, policy director of the Treasury Department's homeownership preservation office. With a short sale, she said, "your financial issues are your own problem and not neighborhood conversation."

Falling home prices and lost jobs have forced many sellers into this position. For example, in Orange County, Calif., short sales made up about 26 percent of the market in March, compared with 17 percent a year earlier, according to data complied by Altera Real Estate, a local brokerage. In the Minneapolis-St. Paul metro area, about 12 percent of all deals since October were short sales, up from about 8 percent a year earlier, according to the Minneapolis Area Association of Realtors.

The expanded incentives will help accelerate short sales, said Mark Zandi, chief economist at Moody's Analytics. He expects 350,000 homeowners nationwide to use the program through the end of 2012, more than double his earlier forecast.

A short sale appears to be the only way out for Brandee Chambers, 36, of Las Vegas. She got into trouble during the housing boom by taking out a risky loan against her home and using the money to buy two investment properties in Phoenix.

She later lost those two properties to foreclosure, and now she is trying to sell the home she lives in for $209,000, but the mortgage balance is $350,000.

Chambers, who owns two hair salons, says she would rather stay in her home, where she lives with her 14-year old son. But she had no luck getting help with her loan. She said she's resigned to scaling back her lifestyle and renting out an apartment.

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"I've had to accept a lot in the last year," she says.

For buyers, though, short sales can be a great opportunity.

Marco Cappelli, 49, a winemaker from Northern California, is planning to buy a short sale this month in the Sierra Nevada foothills. He and his wife are paying $214,000 for a property that had been listed at $270,000. They pair plan to fix it up, install a hot tub and rent it out to vacationers.

Along with the financial incentives, the new government program makes another key change. Mortgage companies will have to set their minimum bid before the house is listed for sale. If the offer is above that, the lender must accept it.

That's a big change from current practice. Lenders generally don't calculate how much money they are willing to accept on a short sale until they have an offer in hand, causing long delays before the sale is approved.

The new program "will give us a degree of efficiency that we have not had in the past," said Matt Vernon, Bank of America's executive in charge of short sales and foreclosed properties.

Under the new process, buyers who submit an offer to purchase a home in a short sale should get a response within two weeks, as opposed to months. If that happens as planned, it would be a big improvement. Real estate agents across the country have complained that lenders are often difficult to reach, sometimes only communicating by e-mail and infrequently at that.

"You're one of 400 properties on a screen," said Dave Bauer, a real estate agent in Danville, Calif.

Some real estate agents who specialize in short sales are optimistic. "It could be the first government program that actually helps Las Vegas," said Steve Hawks, a real estate agent there who specializes in short sales. Most borrowers in Las Vegas, he said, owe so much more on their mortgages than their properties are worth they can't qualify for a loan modification.

The Treasury Department outlined the plan last November, but doubled the original $1,500 in relocation money after realizing that many homeowners need more cash to move out. That's because landlords usually want large deposits from people whose credit records have gone sour after missing mortgage payments.

However, there are plenty of restrictions. To qualify, the home needs to be a borrower's primary residence. Homeowners either have to be behind on their mortgages or on the verge of becoming delinquent.

Currently, the program is not available for mortgages owned or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac, though the two government-controlled companies will soon follow suit, said the Treasury's Maggiano.

Thursday, April 1, 2010

This Makes it All Better

The Short Sale World Is Spinning

The Short Sale World is Spinning 2MP,
HAFA and Second Chance Can HAFA Work With 2MP?

First, the news on 2MP, Treasury’s second lien modification program that works in tandem with HAMP. As we mentioned here last week, Wells Fargo signed on to the program. In January, Bank of American was the first major servicer to formally agree to participate in the program. Today, Chase committed to the program, leaving only Citi, of the big four, yet to commit. One has to believe that Citi will announce very soon.

While the 2MP program has been specifically drafted to work with HAMP modifications, I have had conversations with representatives from Treasury who have indicated that coupling 2MP with HAFA is a logical next step. Treasury has yet to announce an official initiative to integrate 2MP and HAFA. To apply 2MP to HAFA will likely require a new ‘Directive’, as certain provisions of 2MP would seem to be incompatible with a high percentage of HAFA short sales.

We expect to see a shift to the direction of coupling HAFA and 2MP soon, and we will keep you posted. In the meantime, we can draw a few conclusions as to how 2MP might work with HAFA and offer a couple of suggestions to agents working with homeowners looking to do a short sale who may qualify for HAFA, and possibly 2MP:

1. Work with the homeowner on trying to keep the 2nd from getting charged off. Work with the servicer on the second to agree to some payment arrangement that keeps it out of charge off. Charged off seconds may be tougher to settle through 2MP, and we all know they are tougher to settle now. Note: in most cases 2nds become seriously at risk of being charged off at the 180 days delinquent mark.

2.Get educated on both the HAFA program and on 2MP. There will be a great deal of confusion as to how the programs will operate and which loans, and which homeowners are eligible. Even Treasury describes the programs as complex, so go to a trusted source and get thorough training on how the programs work.

A ‘Second Chance’ at Homeownership?

Interesting article in American Banker today. A proposed Lender’s ‘Second Chance’ plan is discussed – well I assume it is discussed since I don’t pay the rather heavy subscription fee to receive anything other than a teaser from American Banker – that would make potential borrowers eligible for mortgage loans two years after a foreclosure. My immediate reaction was to naïvely believe that the Mortgage Bankers Association was looking to do a good deed here. Then, I read the headline: “Can Rehabilitating Homeowners Buoy the Mortgage Market?” In other words, if we help those folks that have suffered through the pain of mortgage hell, we could probably ramp up sagging revenue. Sorry for the digression. The fact that the issue is being placed on the table is important. It has been my feeling for some time, in fact as early as 2006, that policy makers and the mortgage industry would have little choice but to find a way to get many of the borrowers who went through foreclosure back into a mortgage – likely sooner rather than later. Agents, stay engaged with all your clients – past, present and future. Look for ways to add value by providing information and industry updates that will have them thinking about homeownership. Whether they weathered the storm and may be ready to move up, suffered a setback and are ready to re-enter the market, or flourished and may be ready to look at buying a duplex, your client database should be a primary focus when you are business planning.

HAFA Update

White House "Beefs Up" the HAFA Plan and offers "Unemployment Assistance":

In an announcement today, the White House announced some big changes / improvements to the HAFA plan. The changes are vast and in some cases a huge improvement upon the earlier HAFA version. Key points include:

  • Principal Reductions for Underwater Mortgages
  • FHA Refinancing for Underwater Mortgages
  • Assistance for those who are Unemployed
  • HAFA Enhancements
    • Servicer incentives on short sales and deeds-in-lieu from $1,000 to $1,500
    • A doubled payout to 2nd lien holders from the previous 3% to a 6% cap
    • Servicer incentives for short sales or deeds-in-lieu have also doubled from $1,000 to $2,000
  • Servicers are required to "evaluate" Borrower's who have missed "at least" two payments and servicers are not allowed to initiate foreclosure proceedings until it is determined that borrower's are ineligible for HAMP.

One of the best explanations of these updates as well as great links to HAFA related material comes from Carrie Bay of DSNews. Click here for full story.

No Positive Equity until 2020?

This morning, DSNews.com reported that First American CoreLogic's recent study shows that some areas in the U.S. have properties that are in a present negative equity scenario that will not see positive equity until 2020. Many of us knew it would be a while, but 2020? Their stats are based on data extracted from research done in many areas across the U.S.

So what does this mean for us in the real estate industry? Well, firstly, that short sales will be around in some capacity for a long time. Agents that are on the fence about short sales will need to surrender and take the plunge...or face a probable business failure. Agents that have already built up their business by getting certified and helping homeowners sell their upside down properties in the pre-foreclosure state will have a head start.

What does this mean for defaulted or soon to be defaulted homeowners? The study mentioned states that "The latest numbers from First American CoreLogic show that more than 11.3 million, or 24 percent, of all residential properties with mortgages were underwater at the end of the fourth quarter of 2009". Wow! That's almost a quarter of the mortgages in the U.S.! Furthermore, "Among the new housing initiatives announced by the administration Friday was assistance for borrowers with negative equity. In order to deter these homeowners from strategically defaulting, the Treasury will begin requiring servicers to consider principal write-downs as part of their Home Affordable Modification Program (HAMP) evaluations for borrowers whose loan balance is more than 115 percent of the property’s current value. The plan also includes a Federal Housing Administration (FHA) refinancing program for negative equity mortgages."

Ok, so we are expecting defaulted homeowners to "strategically default" on their loans due to the fact that there is no light at the end of the tunnel...equity speaking. That could create a disasterous effect on the housing market, which is already poised for future foreclosure waves in mass volume. So what is the governments answer to this potential epidemic of massive "strategic defaults"...principal write-downs (reductions) via loan modification for borrowers whose LTV is more than 115%. There is a lot of chatter about these principle write-downs and it will be very interesting to see how this plays itself out. Bank of America unveiled a plan on upside down defaulting HELOC's (that are in junior position) called "Earned Principle Write-doowns". With this program, the borrower would have to make the new modified payment for 5 years before the loan principal would be permanently reduced.

PartnerFirst members, chime in here or in the discussion/open forum area about your thoughts on these matters.

Article Link: http://www.dsnews.com/articles/print-view/how-long-will-negative-equity-last-2010-03-29

The Wisdom of Lowering a Short Sale

Recently I had the privilege of interviewing Troy Huerta, an active agent who closed 200 short sales in 2009, during one of our Partner First educational webinars. (also one of our PSC Trainers) During our discussion he commented on how in many cases he and / or his team encourage the Selling agent to go back to the Buyer, lower the price slightly, and ask for some closing costs to be paid for by the lender. The logic was that

a. The Buyer was possibly going to be more loyal if he / she could purchase it at a lower price (starting off on the right foot),

b. The additional closing costs might increase the Buyers patience and loyalty (and excitement), and the big one...

c. Most of the time, the lender will ask for a bump in the price anyways, so why not build it in to the transaction (which is a major reason for short sale failure, Buyers not willing to wait, nor increase the price based on the lenders instructions)

Since that call I have been asked if I agree with this practice and what my sentiments were. Firstly, far be it from me to discount the business practice of a highly esteemed colleague who's success speaks for itself. And secondly, let's look at the foundational principles that are likely in question.

1. Is lowering the price slightly in the Sellers best interest?

As a listing agent, our fiduciary duty and legal obligation is to act in the best interest of our client, the Seller. If Troy's vast experience serves as our ruler, and most of the time the lender does come back with a slight increase / bump in price, and that is a major cause for short sale failure...then let's look at that point. If doing something that increases the chance of short sale success is in the seller's best interest, then why would that be in question. My gut feeling is that many agents feel it is not normal, and thus must be wrong. Wrong to whom? The lender? The lender who is still going to get every bit of the amount they demand (based on their BPO)? How could it be wrong to them? It is merely a strategy that helps all parties achieve their goal...short sale success!

2. Can the Lender / Servicer demand the highest amount be offered?

My answer is "no". They are not the Seller, they are merely servicing the loan for the investor with the goal of minimizing the loss severity. They are in a passive position prior to the offer submission. Now, would they prefer that the higher offer be sent right away? Possibly, but not in all cases. Many times, even in my experience, the lender / servicer (i.e. loss mitigation) is actively assisting our team in finding creative solutions to satisfy all lien holders. As long as they receive their bottom line, what difference does it make how we got there? Remember, we do not have a legal obligation to act in the best interest of the lender / servicer, but of our client. This is not to say anything should be done underhandedly. Everything should be on the HUD-1, and full disclosure should be made to your client. But the means of achieving the desired result may require strategies such as this.

Always ask yourself, is what I am proposing to do in my clients best interest. If it is not, don't do it. If it is, make sure there are no RESPA, DRE, State, local government violations and proceed cautiously and intelligently.

Navigating through these choppy waters is not for the casual agent. We can learn a lot from our colleagues.