Where’s the Credit?

by Mike Larson

I used to love those Wendy’s commercials in the 1980s. You know, the ones that mocked the burger patties at competing restaurants with the catchphrase “Where’s the beef?”Today, I can’t help but ask a similar question about the U.S. economy. Namely: “Where’s the credit?”Despite all the money pumping at the Federal Reserve …Despite the almost-$800 billion economic stimulus package …Despite all the bailouts, backstops, and handouts for bankers, brokers, home builders, mortgage lenders, and so on … credit just isn’t growing. And that virtually guarantees my double-dip recession scenario will play out.Mortgage Debt … Credit Card Debt … Corporate Debt — It’s all shrinking!The most glaring and obvious example of credit shrinkage is the mortgage market.Just take something like the Mortgage Bankers Association’s purchase loan application index: It topped out at 529.30 in June 2005. This week, it registered 168.90. That’s a stunning 68 percent decline in this key gauge of mortgage demand.But it’s not just mortgages …The Fed tracks demand for consumer credit — auto loans, credit cards, and so on. It shrunk $9.1 billion in May after collapsing $14.9 billion in April. Consumer credit has now declined a whopping 18 out of the past 20 months — by a cumulative $167 billion! Consumers are cutting back their spending. Wait … what about all those “great” earnings reports from the U.S. banking sector? Surely, the banks are making gobs of loans and reaping handsome rewards, right?Actually, no …In fact, they’re boosting earnings by releasing credit reserves and cutting back on loss provisioning. I think that’s nuts heading into a double-dip recession. But then again, I’m not a banker whose bonus depends on his earnings topping targets.Take Wells Fargo (WFC). Average total loans there were $772.5 billion in the second quarter, down more than 7 percent from $833.9 billion a year earlier.Then there’s JPMorgan (JPM). Average loans were running at $146.3 billion in the second quarter, down 16 percent from the same period a year earlier.At Bank of America (BAC), we did get a bit of growth. But I’m talking peanuts! Average loans and leases were $967 billion in the quarter, up a measly 0.09 percent from $966.1 billion a year earlier.What about the regional and super-regional banks? Same story …Dallas-based Comerica (CMA) reported total loans of $40.7 billion, down from $47.6 billion in the same quarter of 2009.Salt Lake City-based Zions Bancorporation (ZION)? $38.2 billion versus $41.4 billion.Buffalo-based M&T Bank (MTB)? $50.2 billion versus $51.9 billion.I could go on, but I think you get the picture.So …Why Aren’t We Seeing Any Credit Growth? I’ll Tell You …Economists and pundits can’t seem to agree why we aren’t seeing any credit growth.Some blame stingy banks for tightening lending standards too much. Others claim the recent financial reform bill is making banks too uncertain and cautious.Still others think monetary policy is to blame.They want the Fed to cut the interest rate it pays on the excess reserves banks park in its vaults from 0.25 percent to 0 percent. That would supposedly inspire banks to make more loans rather than just store idle money at the Fed. No matter how much cash Washington passes out, it can’t create an economic recovery. But there’s a very simple answer few people — especially Washington politicians — want to give.There just isn’t any demand out there!Consumers are wisely deleveraging after going on the wildest borrowing binge in world history. Businesses aren’t borrowing because they don’t need to add factories and hire workers when end user demand for their products remains weak.That’s why all the money pumping and all the government stimulus isn’t boosting credit or creating a sustainable economic recovery.This is precisely what we saw happen in Japan after that country’s twin bubbles in stocks and real estate popped.The Bank of Japan slashed rates to near 0 percent. The government passed stimulus package after stimulus package. Yet the economy muddled along with weak growth and periodic recessions for several years as it worked off the hangover from the bubble days.Could we be in store for something similar? I sure think so. And that’s why I’m bearish on stocks and the economy here.Until next time,Mike

The Devastating Impact of the BP Oil Spill on the Real Estate Industry July 19th, 2010 by AdminCategories: Insurance, Real Estate, Relocation, foreclosures, homes for sale, rentalsComments: 5 Comments » THEODORE, Ala. – An oiled gannet is cleaned at the Theodore Oiled Wildlife Rehabilitation Center. Photo by Petty Officer 3rd Class Colin White. By Serena Norr and Joann PanThe numbers are startling: 60,000 plus barrels of oil a day [The NY Times], thousands of fishermen without work [CNN] and an expected 30 percent decline in home values [Housing Watch]. By now, we have all heard about the devastating events that took place on April 20, 2010 – an oil rig exploded off of the Gulf of Mexico spreading crude oil and toxins [including the poisonous Corexit [The NY Times] along the shoreline. Deemed, the “worst oil spill in U.S. history” [National Geographic], the consequences of this unfortunate event have caused an environmental upheaval – affecting our water, marshes, animals and some believe, our health.Being in the moving industry, we are also greatly concerned with how the spill is affecting the real estate industry – specifically commercial and residential properties, new developments and vacation homes. Some of the affects of the oil spill are already apparent: restaurant owners fear not having fresh fish will put them out of business [McClathchy], hotels are fighting to stay open [The NY Times] and once thriving tourist areas have become ghost towns [CBS News]. A survey conducted by Greater New Orleans, Inc, entitled “Potential Economic Impact of BP Oil Spill” indicated that “50 percent of businesses said they are expected to be hurt by the spill – citing direct interruption of their business due to the spill or false perceptions of the oil spill; while 53 percent of businesses stated they will need outside assistance to regain their losses.” Part of this assistance will come from an independent compensation fund established by the U.S. government — who will toll out $20 billion to compensate those who were greatly affected [CNN]. Although, this is a sizeable amount, there has been no indication as to whether this will cover personal property loss.Not only an issue for the present, we wonder how the spill will affect the real estate industry in a few years. Will people be excited to build and vacation in the Gulf? Will commercial properties thrive again? Will BP award sufficient money to cover these devastating losses – ranging from fishing, tourism, ecological preservation to real estate? As we follow the headlines, we can only think of the worst in order to prepare best as we learn more about this awful spill in our two-part BP real estate series. PENSACOLA, Fla. - A Coast Guard inspects oil that has washed onto the beach. Photo by Tech. Sgt. Emily F. Alley. How the BP Oil Spill is Affecting the Coastal State of FloridaWe are quickly approaching the two-month mark of the Transocean Ltd. Deepwater Horizon Oil Spill where (at press time), we learned that BP engineers have been able to stop oil gushing from the well [LA Times Blog]. Although, a welcome relief from the disparaging news we have heard since April; there is still a lot of work to be done.  More than 93.5 million to 184.3 million gallons of oil have escaped the bruised well into the Gulf of Mexico [LA Times Blog] making its way down to the coastlines of our southern-most states.So far, the oil has made its way to the coastlines of our southern-most states –  estimated to be 130 miles long and 70 miles wide. Florida’s Governor Charlie Crist has already declared a state of emergency as the oil reaches the Panhandle. The oil slick covers 69 miles of Florida, 328 miles in Louisiana, 108 in Mississippi and 67 in Alabama, according to The Governor of Florida’s Website. Tar balls have been recovered on Pensacola Beach and the Perdido Key. PENSACOLA, Fla. - Workers cleaning oil. Photo by Tech. Sgt. Emily F. Alley. The BP Oil Spill will definitely bring long-term effects to Florida that at this time unforeseeable. The Palm Beach Post of Florida estimates that Florida will have a loss of 195,000 jobs and nearly $11 billion in revenue losses. These numbers were estimated by a University of Central Florida economist who believes the southern state will suffer from lack of jobs — especially Pensacola fishermen — and from decreased tourism to the nearby Orlando theme parks and the Palm Beach luxury hotels. [The Palm Beach Post] However, the local media outlet does expect reimbursements from BP itself for the canceled reservations over this current summer season, the loss of fishing, clean-up fees, and for other local effects from the nearby explosion of the rig.The St. Joe Company (NYSE: JOE) is one of the biggest landowners in Florida and has also had one of the toughest times in the midst of the oil spill. With approximately 580,000 acres of land, mostly in Northwest Florida, St. Joe has made a great business based on tourism and owning eight luxury resorts near the Panhandle. According torealestatechannel.com, St. Joe has refunded money for approximately 151 coastal homes and for a 60-room inn because of the oil. Many local companies are giving out refunds because of people afraid of the effects of the oil spill. St. Joe and other organizations are tackling the BP Oil Spill by asking for reimbursements of business lost and interrupted.Another case of loss in the situation in Florida is that of Naples beachfront homeowner Cynthia Joannou, who is suing BP for causing environment issues for homeowners who own property along the coast and who will deal with long-term issues, according to m.naplesnews.com. Joannou claims that homebuyers are shying away from moving to Florida strictly because of the cumbersome oil spill. These losses will amount up to $4.3 billion along the entire 600-mile coast line from Louisiana’s bayous to Clearwater, Florida in property estimates, according to Bloomberg. A local realtor in the same article said that this environmental travesty is “the knockout punch the Great Recession didn’t deliver.”Loss of Jobs, Homes and What is to Come in LouisianaMore than 65 miles of Louisiana’s shoreline—including its beaches and wetlands—are now covered in oil, according to Louisiana’s Governor Bobby Jindal, as stated on The Boston Globe. What once was a vibrant fishing community, thriving vacation spot and an area beginning whose real estate market was revitalizing is once again back in the national spotlight – only five years since Hurricane Katrina. NEW ORLEANS – Rescue of a loggerhead sea turtle. Photo by Seaman Grace Baldwin. As a result of the BP Oil Spill, it is expected that Louisiana’s real estate market will drop from five percent to 15 percent in the next 12 months. Home builders – who are still rebuilding – from the devastating effects of Hurricane Katrina have delayed or stalled numerous projects along the Gulf. According to real estate agent Carolyn Angelette, 100 of her clients have canceled their vacation rentals in Grand Isle, Louisiana, as stated on the blog, The Coming Depression. Other reports in Bay County have indicated that housing developments have simply stopped. Tom Ledman, president of the Home Builder’s Association of Panama City-Bay County stated there are no signs as to when construction will start up again [News Herald].Louisiana’s job market is also estimated to be affected by the oil spill. Based on the “Economic Impact of the Moratorium and Oil Spill” study, it is estimated that 22,000 people will loss their jobs as a result of the oil spill with an overall loss of $8 to $15 million dollars per month – indicated by the surveys worst case scenario model. Jobs such as the fishing industry are also believed to take the biggest hit – bringing $500 million dollars in revenue to Louisiana, followed by processors and then the tourism industry, according to the survey conducted by the Greater New Orleans, Inc. The survey states that encouraging eco tourism, a positive vibe and not selling your home are critical during this disparaging time. JEFFERSON PARISH, La. Bay Jimmy is one of the more impacted zones remaining in the area. Photo by Petty Officer 3rd Class Zac Crawford. The issue at hand within the property market has plummeted across the southern coast of the United States. Hotels and home owners are having trouble keeping up with mortgage payments. Many media outlets have reported a total exposure of $136.4 billion to commercial real-estate owners and developers in affected states Alabama, Florida, Louisiana and Mississippi.Follow us in a few weeks, as we weigh-in on how the oil spill has affected the real estate market in Alabama and Mississippi.Sources and Additional Reading: CBS News CNN Greater New Orleans, Inc. Gulf Live Housing Watch The Los Angeles Times- Blog National Geographic The New York Times The Palm Beach Post All photos from Deepwater Horizon’s flickr page- http://www.flickr.com/photos/deepwaterhorizonresponse/

Many people ask me what does Flood zone X mean? Well, check out the list below and see the different designations for flood zones. It could be good to know, especially with hurricanes on the way…..

FEMA FLOOD ZONE DESIGNATIONS & EXPLANATIONS

Annual Probability of Flooding of 1% or greater
A	Subject to 100-year flood. Base flood elevation undetermined.
AE or A1-A30	Both AE and A1-A30 represent areas subject to 100-year flood with base flood elevation determined.
AH	Subject to 100-year shallow flooding (usually areas of poundings) with average depth of 1-3 feet. Base flood elevation determined.
AO	Subject to 100-year shallow flooding (usually sheet flow on sloping terrain) with average depth of 1-3 feet. Base flood elevation undetermined.
A99	Subject to 100-year flood, with federal flood protection system (levee/dam) under construction. Base flood elevation undetermined.
V	Subject to 100-year flood and additional velocity hazard (wave action). Base flood elevation undetermined.
VE or V1-V30	Both VE and V1-V30 represent areas subject to 100-year flood and additional velocity hazard (wave action). Base flood elevation determined.
In SFHA	Areas in a “Special Flood Hazard Area” (or 100-year flood plain). Subject to 1% annual chance flooding. No distinctions have been made between the different flood hazard zones that may be included within the SFHA.
Flood Prone Area	An area designated as a “Flood Prone Area” on a map prepared by USGS and the Federal Insurance Administration. This area has been delineated based on available information on past floods. This is an area inundated by 1% annual chance flooding for which no base flood elevations have been determined.
Annual Probability of Flooding of 0.2% to 1%
B or X500	Both B and X500 represent areas between the limits of the 100-year and 500-year flood; or certain areas subject to 100-year flood with average depths less than 1 foot or where the contributing drainage area is less than 1 square mile; or areas protected by levees from the 100-year flood.
Annual Probability of Flooding of Less than 0.2%
C or X	Both C and X represent areas outside the 500-year flood plain with less than 0.2% annual probability of flooding.
Annual Probability of Flooding of Less than 1%
No SFHA	Areas outside a “Special Flood Hazard Area” (or 100-year flood plain). Can include areas inundated by 0.2% annual chance flooding; areas inundated by 1% annual chance flooding with average depths of less than 1 foot or with drainage areas less than 1 square mile; areas protected by levees from 1% annual chance flooding; or areas outside the 1% and 0.2% annual chance floodplains.
Undetermined
D	Unstudied areas. Flood hazards are undetermined.

If you are looking for a specific type of property feel free to search my site. Some of the listings are my own personal listings. Others are Land O’ Lots office listings. But you can also access all the MLS listings in Brevard County from the buttons on my site.  www.LandOLots.com

Similar properties are listed for sale on a regular basis. If you wish, I can set up an automatic notification service. With this service, you will receive an e-mail describing any newly listed property within 24 hours of its hitting the market. This is an excellent way to stay on top of the changing market and to find those real bargains as soon as they are available.

Please be assured, I will not bother you, SPAM you, or call you like a pushy salesman. The e-mails you will receive are automatic notifications from the computer. If you wish to take advantage of this valuable service, simply let me know what type of listings you are looking for and I’ll set you up to keep you up-to-date on the new listings that meet your search criteria.

And of course, if you want me to show you properties, just call me and we’ll set up an appointment. I can show property anywhere in Brevard County, including Palm Bay, Melbourne, West Melbourne, Melbourne Beach, Indialantic, Satellite Beach, Indian Harbour Beach, Deer Run, Grant Valkaria, Suntree, Viera, or anywhere on the Space Coast. I can show you vacant land, short sales, foreclosures, pre-foreclosures, or just plain great deals. Call me at 321 961 2871.

I am working on a sort of hybrid: MLS listing / auction. The idea is just like at a normal auction, the bids come in and go higher and higher. But in this case, the listing price will drop every day until the property sells. Everyone knows this up front. The seller wants to sell. Let’s say the property is listed at $100,000, and set to drop in asking price $500 per day until it sells. Obviously, the property would eventually be $0 and would be free. We know it would sell before that. At the other end of the spectrum, we have offers coming in. Let’s say our first offer is $20,000. Now these numbers are far from each other. But as the MLS/Auction goes on, we may have bids up to $50,000 while the listing price is down to $70,000. At some point this property will sell.

If you are interested in trying this method out on one of your properties, just give me a call and let me know. It does create a sense of urgency in that buyers know that other people are watching the “slow motion auction”. At any given time the seller may take the highest bid and the property will be off the market. At the same time, buyers will be interested since they know they are dealing with a reasonable and motivated seller. They can jump in with their bid at any price and at any time during the process.

I have one of these MLS auctions going “live” right now on a 2.5 acre home site. I will post to my blog about how the process works. If you have any thoughts, comments or feedback, feel free to email me or call me: tom@landolotsrealty.com  +1 (321) 961-2871.

- Tom

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Tom Taranto is a Real Estate Broker/Investor who works with: Short Sales, Homes, Land and Investments.

His extensive background in the local real estate market gives him a unique insight into current and future market conditions. His sellers can be sure that their property will be marketed with cutting edge technology both domestically and internationally. His buyers can be sure that they will receive a clear, honest and accurate representation of what they are buying.

In Palm Bay, Melbourne, Melbourne Beach, Merritt Island, Indialantic, Malabar, Grant Valkaria and throughout Brevard County Florida, your choice is clear. Tom Taranto is “Your Real Estate Expert”

Senate OKs new tax credit closing deadline

Backers of amendment cite backlog of 180K homebuyers

By Inman News, Wednesday, June 16, 2010.

Inman News

CLARIFICATION: While the Senate has amended HR 4213, the “American Jobs and Closing Tax Loopholes Act of 2010,” to extend the closing deadline for the tax credit, it has not held a vote on the amended bill itself. Senate Democrats have reportedly trimmed $60 billion in spending from the bill in hopes of passing it this week. The House and Senate must resolve differences between previous versions of the bill passed in both chambers before it can become law.

The Senate has amended a bill to give homebuyers who were under contract on a home purchase by April 30 an additional three months to close the deal and claim the federal homebuyer tax credit.

Extending the deadline for closing from June 30 to Sept. 30 would allow lenders more time to clear a backlog of 180,000 homebuyers nationwide, said amendment sponsor Sen. Harry Reid, D-Nev.

The amendment to HR 4213, the “American Jobs and Closing Tax Loopholes Act of 2010″ — which primarily extends unemployment insurance benefits — was approved in a 60-37 vote Wednesday. The vote on the amendment was mostly along party lines, with only four Republicans in favor and one Democrat opposed. The Senate has not yet voted on the amended bill itself.

“While I am disappointed that more Republicans did not support this common-sense measure to strengthen the economy and reduce the deficit, I am committed to ensuring that more Nevadans and Americans can become homeowners and that this amendment becomes law,” Reid said in a statement.

The House passed an earlier version of the bill in December, which the Senate amended and approved in March. The House and Senate must resolve differences between versions of the bill before it becomes law.

The National Association of Realtors supports the amendment, saying Realtors have reported that as many as one-third of qualified applicants have been told by lenders that their loans will not close before June 30 because of the sheer volume of loan applications in the pipeline.

The amendment does not extend the deadline for homebuyers to qualify for the tax credit, NAR said in urging lawmakers to approve it, but simply extends the deadline for closing transactions already in contract.

“Since these applications were already in the pipeline and figured into the program’s cost, the extension of the closing deadline should not incur any further government costs,” NAR President Vicki Cox Golder said in a statement.

There has been some speculation that some homebuyers will attempt to submit fraudulent claims for the tax credit by backdating documents showing they were under contract by April 30, and that extending the deadline for closing would expose the government to more fraudulent claims.

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I have been doing a lot of short sales lately. In many ways, this helps the sellers to get on with their lives. There are many reasons why they may have ended up in need of doing a short sale. But I can testify that they are not bad people. They are not out to cheat the bank or to rip off society. It’s often people who simply cannot pay the mortgage and cannot get a loan modification from the lender. They do not know what to do, and they need some help. I help people with Short Sales in Brevard County, including Indialantic, Malabar, Grant Valkaria, Melbourne, Palm Bay, Deer Run and many other areas. Read this interesting article below that I found about just how letting the house go to foreclosure can affect your credit score. If there is any way I can help you - let me know!

Please note that I am not an attorney and will not give legal advice, and I am not a CPA, and will not provide tax advice. Please consult your attorney and CPA for this type of advice. - Tom

Newsletter Article - May 2010

How Foreclosure Affects Your Credit Score

By Nina Silberstein

If you’re one of the millions who have lost a home to foreclosure, don´t lose heart. There’s still hope for your credit, and you may even be able to buy another home. First, find out exactly what your credit score is saying about you, and what you can do to minimize the damage.

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The bad news
According to Andrew Housser, co-CEO of Bills.com, a free consumer portal of personal finance information, it’s true that foreclosure can have a grim effect on your credit score. “A foreclosure will cause a credit score to drop sharply, typically by 200 to 300 points,” he says. “That would drop a score of 700 – considered a ‘good’ score – to as low as 400 – considered pretty terrible.” The minimum FICO score is 340.Most lenders rely on credit bureau data, although they do not all use FICO scores. Some use their own scoring models, but those tend to have the same inputs, which include payment history, debt, new credit, and others. “Lower credit scores can result in being denied credit, such as credit cards and car loans, and facing much higher rates for loans and even other items, such as insurance, that rely on credit scores,” notes Housser.

The good news
But that’s not the end of the story. Though a foreclosure can remain on your credit report for seven years, it won’t ruin your credit score for life, adds Housser. “If you keep all of your other credit obligations in good standing, your FICO score can begin to rebound in as little as two years. The important thing to keep in mind is that a foreclosure is a single negative item. If you keep it isolated, it will be much less damaging to your FICO score than if you had a foreclosure in addition to defaulting on other credit obligations.”

Alan M. White, assistant professor at Valparaiso University School of Law in Indiana, would agree. “The impact of foreclosure on your score diminishes over time, depending on whether you have other active, on-time accounts,” he explains. “Even FHA [Federal Housing Administration] will allow a new mortgage to be approved if a past foreclosure was more than five years old,” he explains.

Alternatives to foreclosure
Of course, it’s preferable to avoid foreclosure altogether. Here are some ways to accomplish that goal. (Keep in mind, however, that many of these options require you to resume normal mortgage payments at some point. If you can’t afford to resume payments, it may not be worth the effort required to stop or reverse the foreclosure process.)

• Lender negotiation: If there is a reasonable expectation that you will be able to resume making regular mortgage payments within a relatively short time frame, the lender may be willing to work with you to establish a payment plan to bring the loan current. “Especially in today’s market, this is a greater possibility,” says Housser. “Many individuals are having trouble due to an unexpected job loss, medical expenses, divorce or other personal trauma. If the situation has some resolution so that the regular payments may be able to be met again, it is worth it to call the lender.”
• Forbearance agreement: For a temporary hardship, the lender might grant you a forbearance agreement to lower – or eliminate – payments for a limited time.
• Loan modification: This entails a permanent change to the loan, such as lowering the payment and extending the loan’s term or incorporating any delinquencies into future payments. “Lenders are more willing to discuss this now than they were before,” adds Housser.
• Deed-in-lieu of foreclosure: In this case, the lender takes ownership of the home, but that will not eliminate the negative impact of a payment delinquency or foreclosure that has already begun. “Bankruptcy remains on a credit report for 10 years, but it can offer a way to become current in payments, which will improve the credit score,” White notes.
• Refinancing: It may be possible to refinance a mortgage for a lower interest rate and/or monthly payment. But if you have already had late payments on a mortgage, the interest rate offered may be too high to lower your monthly payment. Housser recommends using online rate comparison sites and calculators to determine the “real costs of refinancing.”
• Short sale: In a short sale, the lender accepts less than the mortgage debt when the property value has declined. “A short sale will prevent foreclosure,” says White. “However, if it takes place after foreclosure was initiated, the foreclosure and the related delinquency in payments will be reflected on the credit report.” The only way to protect the credit score fully is to maintain monthly payments until the house is sold.
• Chapter 13 bankruptcy: If the loan default is past the point of being resolved with the lender, you may file for chapter 13 bankruptcy protection. This protection requires you to resume making regular mortgage payments but allows the arrearage (being overdue in payment) to be repaid over the course of the chapter 13 plan.

All things considered, a foreclosure won’t ruin your credit rating forever. It will lower your credit score and remain on your credit report until you’re able to re-establish good credit, however, which takes time and careful planning. Consider your home purchase wisely.