REO Madness – Everything you Always wanted to know about REO but were afraid to ask

Southern California investors here is something you might like to know.  Tony Alvarez “The REO Mentor” is putting on a two day seminar here in Los Angeles this weekend, February 26th & 27th.  And, as if that wasn’t good enough news already, you should know it’s very, incredibly inexpensive – he must have lost a bet.  Last time I checked it was still only $297.  Yes, that’s Two Hundred Ninety Seven dollars and no cents. Here is a link to the IRCA-LA web site registration page.

Tony has quite a story which you can read on his website and blog.  He’s a nice guy, easily approachable and willing to answer any REO questions you may have.  Once you meet him it’s easy to understand how he easily makes friends and has used this to build his business relationships.

And here’s something else you can get right now for FREE. That’s right, no cost to you and no affiliate comp to me either (bummer).  What’s that?  Tony’s new book, just released and available in print via Amazon or you can go to his web site, sign up/opt in, and DOWNLOAD the EBOOK for absolutely FREE.  When I first saw his ebook he just gave the intro and index away as a free teaser.  Now until I believe the end of this week you can get it for zilch, nada, nothin, free.  You can thank me later.  Actually you can thank me buy partnering and doing some business together, now that’s win-win!

Here’s the image on his website.  Come on, it’s free already, go get it.  It will soon back to $25.  There’s lots of other free items and info on Tony’s site as well.

FREE Download: Expires 2/25/2011

Breaking into the REO Business

How I Went From Bankruptcy to $7.2 Million in 7 Years

While Making Friends

Go to either or either should get you to the same place.

To your/our success!!

Larry InDeed


Sound Bites from MBA: Some Borrowers Will Be ‘Toast’

Feb 8, 2011

SAN DIEGO — While there is no doubt that the lending climate for commercial real estate has improved dramatically over the past year, the industry still faces headwinds: tepid job growth, lagging real estate fundamentals in many property sectors, the uncertain effects of financial regulation reform, and a growing sense that inflation is lurking just around the corner. What follows are some sound bites from Day 1 of the Mortgage Bankers Association’s Commercial Real Estate Finance and Multifamily Housing Convention & Expo.

— Jack Cohen, CEO of Cohen Financial, speaking in the “CMBS Outlook” session about how the commercial real estate market can’t completely heal until winners and losers emerge.

“My belief is that that the reset button can’t be hit until this industry takes its losses. The problem that exists is that the institutions are more capable to take their losses, both intellectually and economically. They’re creating revenues, they’re creating reserves, they’re writing stuff off.

“But the guy who has a $5 million shopping center and a $4 million loan, and who has $1 million in it and is going to lose $3 million or $4 million — that guy is toast.

“But it has to happen. This business is about risk. You are supposed to make a lot of money and lose a bunch of money. Guys who lose leave the game. Guys who win keep coming. So, people are going to have to take some losses. Until they do, we’re not done.”

— Brian Olasov, managing director with law firm McKenna Long & Aldridge, delivers a pointed question on loan delinquencies during the “CMBS Outlook” session.

“CMBS loan delinquencies are about 9%, with banks about half that amount. The delinquency rates for the American Council of Life Insurers as well as Fannie Mae and Freddie Mac are about one-tenth of the bank rate.

“Is there a structural inferiority in underwriting in CMBS, or is it a selection bias in the nature of the projects? Or is it that CMBS might be the most honest in terms of accounting for its problems?”

Dennis Schuh, managing director, J.P. Morgan Securities LLC, addressing the question of why the loan delinquency rates are much higher for CMBS loans than agency, bank or life company loans?

“There is absolute transparency around CMBS. With every loan you know what the cash flow is, you know what the value is, you know where the property is located and who are the top three tenants. Nobody knows what’s on the banks’ balance sheets. Nobody knows what’s in the life insurers’ portfolios. Oftentimes, a bank will make a self-help loan and just roll it over again.

“There are a couple of big loans skewing those delinquency numbers a little. (For example, Tishman Speyer and BlackRock Realty defaulted on a $3 billion loan on Stuyvesant Town and Peter Cooper Village, two apartment complexes in Manhattan.) CMBS always was a slightly higher-leverage market than the portfolio lending business, and I think as a result we are seeing slightly higher delinquencies.”

— Richard Schlenger, director, Citigroup Global Markets Inc., explains how risk retention (CMBS originators could be required to retain 5% of the loan) as contemplated under the Dodd-Frank bill could result in unintended consequences

“If we end up having to do it, it’s just going to end up costing the borrowers more because I don’t think we would exit the business. But there is an additional cost to it. We’re not really worried too much about it today. We see it as a big issue, but it’s still to be determined. When is it going to occur, and what is it going to look like? Meanwhile, we’re stilling cranking out loans and we still want to sell them.”

— John Courson, president and CEO of the Mortgage Bankers Association, addresses the impact of financial regulation reform on commercial real estate finance in his opening address to members.

“The Dodd-Frank legislation is really only the skeleton. Now we’re into the meat grinder of rule making where we really have to put meat on those bones. There are almost 300 rules that will be produced out of that legislation, and 100 of them are focused directly on our industry. We’ve sent over 100 letters already to regulators advocating your position.”

— Compiled by NREI Editor Matt Valley


Green shoots in CA Real Estate? Lennar B

Green shoots in CA Real Estate? Lennar Bets on Ex-Officer Housing `Party’ as Calif. Rebounds.

California plans $2 Billion program to help distressed homeowners

The Keep Your Home California program could help more than 100,000 struggling homeowners, including about 25,000 borrowers with underwater mortgages.

It “could” but we all know it won’t.

All that comes to my mind when I read this headline is why?

This is just a waste of time and more money thrown at the banks and politico’s who’ll run these programs that in the end won’t result in any meaningful change or progress.  How hard is it to figure out the BANKS DON’T CARE.  It’s just a line on a spreadsheet.  There is no concern for the individuals caught up in this nightmare.  The bankers are only concerned with their bottom line.  Wait Larry I hear you saying, the banks are run by people like you and me, they can’t be all that cold and heartless.  Well I can’t speak to their hearts and I’m sure there are some really good people working for these institutions but therein lies the key – they are working and want to keep working, getting a paycheck and paying their own mortgages.  The real power brokers in the financial institutions are the ones who call the shots and they aren’t affected by this crisis the way Joe Six Pack and the majority of American’s are.  The large banks don’t give a hoot.  They know they screwed up however they are still going to get paid and they just want to put it behind them and the sooner the better.  Why are we throwing more money at their feet.  The only logical conclusion I can come to is for political posturing and election cycle “look what I did for you” sound bites.

I have a better solution how California can use the money and actually help homeowners and the local/state economy.  Take the money and assist the homeowner in short selling their home.  To the distressed homeowners who have incomes or enough cash flow to make a mortgage payment the government can offer a nice new low interest loan with a much lower principal amount.  To those who unfortunately can’t make a monthly payment they’ll be rescued from debtory hell for the rest of their lives by getting the upside down mortgage off their backs and the gov can also continue to pitch in a few grand to help them relocate like they’ve been doing with the HAFA program.  Seems pretty simple and straightforward to me which is probably why the government won’t do it.  It makes sense and actually will accomplish something meaningful in peoples lives.  Sorry to sound so cynical but how can you not be when you live in California and have the government we’ve lowered ourselves into.

You’re right, I know the answer to my question “why” above.  It’s all about politics and not about helping people and the economy.  The banks will continue to stall, resist and complain.  They will get more of OUR MONEY, that’s right, you and me the taxpayers’ hard earned cashola going right into their pockets and the politicians will get nice big donations from the bankers come election time and they’ll have some nice stories to tell us about how they tried to help us but just couldn’t overpower the evil banks into capitulating.  Doesn’t that just piss you off?

Here’s the story as reported in the Los Angeles Times:

By Alejandro Lazo, Los Angeles Times

February 10, 2011

More than 100,000 struggling homeowners could get help from a $2-billion program that California is launching, including about 25,000 borrowers who owe more than their properties are worth and could see their mortgages shrink.
The Keep Your Home California program, which uses federal funds reserved for the 2008 rescue of the financial system, has the potential to make a sizable dent in California’s foreclosure crisis and help the general housing market. State officials hope to fend off foreclosure for about 95,000 borrowers and provide moving assistance to about 6,500 people who do lose their homes.

Consumer advocates have criticized other attempts at foreclosure prevention as falling short, particularly the Obama administration’s $75-billion program to help troubled borrowers. They were heartened by the scope of California’s effort but concerned it would be hampered if the state can’t get major banks on board.

Out of the five major mortgage servicers — Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Ally Financial and Citigroup Inc. — only Ally has formally signed on to a key part of the plan: reducing mortgage principal on homes that are “underwater,” or worth less than the size of the mortgage. A Bank of America spokesman said the bank intends to participate but hasn’t yet reached a formal agreement with the California Housing Finance Agency, which designed the program.

Said Paul Leonard, California director for the Center for Responsible Lending, “Two billion dollars in total for the state to provide assistance to help borrowers avoid foreclosure is a substantial amount of money, and we hope that it will have some significant impacts in achieving its goals.

“Cal HFA went out of its way to meet the needs of the financial industry in terms of providing a generous incentive to get them to participate, and even after taking their extensive input into the design, the banks are still not stepping up to participate in what is really a critical element of the program.”

Preeti Vissa, community reinvestment director for the Greenlining Institute, called lender involvement “pretty dismal.”

“The key to this program is how much the banks are willing to participate and be flexible toward homeowners’ needs,” Vissa said.

The size of the Golden State’s foreclosure problem was underscored by data slated to be released Thursday, showing 15,893 California homes seized by big banks last month, the third-worst performance in the nation.

January’s tally was a 32% increase from the previous month, though still down 7% from January 2010, according to RealtyTrac of Irvine. Nationwide, lenders took back 78,133 properties in January, up 12% from the previous month but down 11% from January 2010.

“We are not out of the woods by a long shot,” said Rick Sharga, RealtyTrac senior vice president. “Economic factors are what are driving most foreclosures right now, and so the state’s economy being what it is, it doesn’t appear that there is going to be a near-term correction either.”

The state’s new program, which officials plan on detailing in Sacramento on Thursday, aims to address the two central issues facing California’s beleaguered housing market: the state’s stubborn joblessness problem and the massive number of underwater homeowners.

By keeping some cheap foreclosed properties from reaching the market, the program could give a boost to home values in general.

“If they can actually stave off foreclosures and the people stay in the homes, then that is a great thing for the market,” said Stan Humphries, chief economist at “It would be great because the continuing flow of foreclosures on the marketplace exerts downward pressure on home prices, and it also creates more supply of inventory on the marketplace, so foreclosures are really a double whammy.”

The biggest of the plan’s four parts allocates $875 million as temporary financial help to people who have seen their paychecks cut or have lost their jobs, providing as much as $3,000 a month for six months to cover home payments and associated costs. The second-largest chunk of money, $790 million, is slated for a principal reduction program that would write down the value of an estimated 25,135 underwater mortgages.

Another piece would use $129 million to provide as much as $15,000 apiece to help homeowners get current on their mortgages, and another would take $32 million to provide moving assistance for people who can’t afford to remain in their homes.

The program is aimed at helping low- and moderate-income people who own only one property. To qualify in Los Angeles County, for instance, a family couldn’t earn more than $75,600 a year. The maximum benefit for any household participating in the program is $50,000. Homeowners who refinanced their homes to take cash out of their properties won’t be allowed to participate.

The principal-reduction component would pay lenders $1 for every dollar of mortgage debt forgiven. Many experts have said reducing principal on such underwater loans would go far toward reducing foreclosures because home values have fallen so steeply that homeowners are tempted to walk away from their obligations.

But banks have been reluctant to significantly reduce principal on loans other than on certain kinds of risky mortgages that are now seen as having been highly imprudent.

“You hear a lot of people calling for it, but there are not a lot of people in the mortgage industry who favor it,” said Guy Cecala, publisher of Inside Mortgage Finance. “There are a lot of issues around who deserves principal forgiveness.”

The nation’s largest mortgage investors, Fannie Mae and Freddie Mac, also aren’t taking part in the principal-reduction program. That’s not surprising, Cecala said, because the two are in government conservatorship and billions of taxpayer dollars already have been spent rescuing them.

Diane Richardson, director of legislation for the state’s housing finance agency, said she expects other lenders to join the principal-reduction program.

“We are continuing to have conversations with other lenders about coming on board,” she said. “So if somebody sees their lender, and it doesn’t show them participating, they shouldn’t assume that they won’t be.” Money will be reallocated to other parts of the program if it isn’t spent on principal reduction.

Even as the state struggles to get big lenders to sign on, the program has prompted complaints that it’s a giveaway to the banks. Critics have said that property values have fallen so steeply that much troubled mortgage debt is not worth what the banks would be paid. Foreclosures on the homes are so costly that the banks will come out ahead financially by writing down loan balances to keep borrowers in the homes, they contend.

Obama aims for sharp drop in government-backed mortgages

Published: Friday, 4 Feb 2011

WASHINGTON – The Obama administration has plans to reduce the role of government backed mortgages, including Fannie Mae and Freddie Mac to less than 50 percent of the market from a dominant role today, CNBC reported on Friday.

Treasury spokesman Steven Adamske said he could not confirm that figure, though he said the administration does consider the government’s current role in housing to be too high.

“We are looking at how to transition from a government having too big a footprint in the marketplace to one that has the private sector playing the dominant role” in the mortgage market, Adamske said in response to a question about the CNBC report.

Copyright 2011 Reuters.



Bank can foreclose despite lost mortgage

Bank can foreclose despite lost mortgage note, judge rules
Monday, February 7, 2011
The Record

A Bergen County judge has ruled that a lender can foreclose on a mortgage even if the lender doesn’t have the mortgage note because a previous lender lost it.

Bogota homeowner Janett Alvarado challenged Bank of America’s right to foreclose on her home, arguing that it did not possess the note for the $292,000 mortgage.

Bank of America acknowledged that the note was lost by the original lender, now-defunct Washington Mutual. Washington Mutual transferred the loan obligation to LaSalle Bank, which was later merged with Bank of America.

“The pivotal issue is … whether any person other than the person who lost the note can enforce a lost note,” wrote Superior Court Judge Mary F. Thurber in her recent ruling. “This court is persuaded that Bank of America, as successor to LaSalle National Bank … has the right to enforce the obligation represented by the lost note.”

To decide otherwise, Thurber wrote, would result in a “windfall” to the homeowner. “That result would not be equitable,” she wrote, pointing out that Alvarado admitted she had not paid her mortgage since 2008. Thurber also noted that Washington Mutual had signed an affidavit of lost note in July 2006.

In a statement, Bank of America said it “is pleased with the court’s ruling to permit this matter to move toward resolution.”

Alvarado’s lawyer, Joshua Denbeaux of Westwood, said he plans to appeal the ruling.

“If they don’t possess the note, the bank doesn’t have standing to foreclose,” he said. “New Jersey law says the only person who can enforce it is the person who lost it.” That would be Washington Mutual, which no longer exists.

Foreclosures hit a record 65,000 in New Jersey last year, triple the number of 2006. As the tide of foreclosures has risen nationwide, lawyers defending distressed homeowners have fought back by challenging the legal paperwork. Several big lenders, including Bank of America, suspended their foreclosure activity last fall, acknowledging irregularities including “robo-signing” — when employees signed affidavits without verifying their accuracy.

Responding to the reports of robo-signing, New Jersey Chief Justice Stuart Rabner recently ordered lenders to show that their foreclosure procedures were in order, or face a state-imposed freeze of foreclosure activity. The lenders are due in court in Trenton on March 1 in that case.

Mortgage Bankers Association Short Pays own Building, buyer Flips For a Profit

Another slap in the face of the Mortgage Bankers Association.  Back in February 2010 I noted an article in the Wall Street Journal reporting that the Mortgage Bankers Association was selling their new building for a big loss.

Mortgage Bankers Association Sells Headquarters at Big Loss

Well, you guessed it, the buyers of the building have now resold or Flipped it for a nice profit.  This is proof that life is more bizarre than television.  To refresh your memory this was a glaring testimony to the hippocracy of the Mortgage Bankers Association and its President John Corson who just a few months earlier had done his best to guilt trip mortgage owners to keep paying on their mortgages even if they were grossly underwater as this was the right thing to do:

In an interview late last year (2009), Mr. Courson said he believed mortgage borrowers should keep paying their loans even if that no longer seemed to be in their economic interest. He said paying off a mortgage isn’t only a matter of personal interest. Defaults hurt neighborhoods by lowering property values, Mr. Courson said. “What about the message they will send to their family and their kids and their friends?” he asked.

Obviously a clear case of do as I say not as I do.  It disgusts me at the media bites and taking advantage of less knowledgeable home mortgage holders who don’t know or take the time to get educated about the industry.  To intentionally cast dispersions and guilt on their personal integrity, sense of responsibility, personal morals and accountability when you have none yourself is infuriating.  Consumers who are upside down on their mortgages, especially way upside down must educate themselves and make decisions based on reality.   In reality business and corporations approach real estate as it should be viewed – a business decision (“economic interest”).  If the numbers don’t make sense business’ make no qualms of breaking a mortgage in the best interests of its profitability and if publicly held its shareholders.  This is a common practice and often gives them leverage to renegotiate their terms vs. walking away altogether.  I do not advocate playing the victim or not taking any personal responsibility for ones circumstances but you have to make sound decisions based on ALL the FACTS.  Yes there is plenty of blame to go around for this whole banking melt-down however the banks and financial services firms created this themselves.  Consumers played willing victims by taking out the mortgages and re-re-refi’s being tossed around like candy at a parade to anyone who showed up, but no one had a crystal ball to see into the future and what would result.  There absolutely needs to be better regulation and more transparency in the financial industry.  Everyone must educate themselves and not be deceived or taken advantage of (again).  Of course not every consumer was innocent but I suspect the majority didn’t jump into crazy risky loans intentionally expecting to default.  Consumers, like the professional bankers, lenders, underwriters, insurers actually wanted the same thing – the security of their own home and to make a profit be it by leveraging to pay off debts and/or buy additional properties hoping for appreciation and potential rental cash flow.  The American Dream.

OK, I’m getting off my soap box for now.  The moral of the tale is to get educated.  Surround yourself with advisors who can tell you how things really are without all the emotions and know your options.  Talk to the bank, talk to the attorneys, investigate the pro’s and con’s of loan modification, short sales, deed-in-lieu, bankruptcy, etc.  Then once you are armed with knowledge you can ACT in your best interests. As corporations have responsibilities to their shareholders, consumers have an equal if not greater responsibility to their families.  Should one stay in an upside down mortgage for potentially the major term of the loan with little or no equity, paying the mortgages to the bankers so they can enjoy their life and potentially forefit opportunities for your own family such as vacations, college and subjecting your kids to support you because you don’t have anything saved for retirement.  We know what the Mortgage Bankers would, ah did do (not what they’d say).   Guess they make mistakes too.  Read on and see if you can spot the irony had the MBA followed their own advice.

Here’s the rest of the story (sorry Paul Harvey).  Sweet testimony to entrepreneurship and real estate investing.

From the New York Times
FEBRUARY 4, 2011, 10:36 AM

Mortgage Group’s Old Building Flipped For a Profit

When the Mortgage Bankers Association bought a state-of-the-art office building five blocks from the White House in 2007, the industry trade group thought it was a wise investment.

It was — just not for the Mortgage Bankers Association.

Last year, the trade group sold the building at a huge loss. On Thursday, the new owner flipped the property for a hefty profit.

The mortgage group never envisioned such a debacle.

“We came to the inescapable conclusion last year that owning our own building was the smartest long-term investment for the association and it is only right that the national association for the commercial and residential real estate finance industry owns its property,” Jonathan L. Kempner, the former chief executive of the mortgage group, said in 2008 after moving into the 170,000-square-foot building.

Then the real estate market crashed, causing thousands of property owners to sell buildings for less than their mortgage – including the trade group for mortgage lenders. The group, according to news reports, had briefly fallen on difficult times after struggling to find tenants for its building and losing some 600 dues-paying members in the wake of the mortgage meltdown.

At the height of the mortgage bubble in 2007, the mortgage group bought the newly constructed glass tower for $79 million, with the help of $75 million in financing arranged by PNC Bank. Less than three years later, the Mortgage Bankers Association sold the building for $41 million.

It’s more than doubled in value since then. The real estate data firm CoStar, which last year bought the trade group’s building at 1331 L Street, flipped the property on Thursday for $101 million, generating a $60 million profit. CoStar sold the property to GLL Real Estate Partners, a German property-fund manager.

CoStar, which occupies the majority of the office space in the building, is staying put. Unwilling to abandon the 10-story building’s panoramic skyline views or the allure of its Italian marble-floored lobby, CoStar negotiated a long-term lease with GLL.

“The opportunistic acquisition of this building for our headquarters office was part of our larger strategy to create value through our occupancy of the building,” Andrew C. Florance, CoStar’s founder and chief executive, said in a statement. “This sale will enable us to unlock the value of this formerly distressed property and provide an attractive return on our investment.”

The deal is scheduled to close later this month.

As for the mortgage group, they are now among the ranks of the nation’s renters. The group relocated to 1717 Rhode Island Avenue, just a few blocks from its former home.

The move was necessary, the group’s new chief executive, John Courson said, because staying in the building would have been “economically imprudent.”

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