The August 7th Note Investors Forum Meetup focus on:
TOPICS: Several New Case Studies
Where Does a New Note Investor Begin
Bring your questions, This will be an interactive meeting.
The August 7th Note Investors Forum Meetup focus on:
TOPICS: Several New Case Studies
Where Does a New Note Investor Begin
Bring your questions, This will be an interactive meeting.
Some of the markets in this select group of the most spending housing bubbles in America have turned the corner, according to the S&P CoreLogic Case-Shiller Home Price Index, released this morning for October, confirming other more immediate data. This includes the Seattle metro, the five-county San Francisco Bay Area, the San Diego metro, the Denver metro, and the Portland metro. In these metros, house prices have skidded the fastest, and in some cases for the first time, since the Housing Bust. In other markets, house prices have been flat for months. And in a few markets on this list, prices rose. More on those markets in a moment.
On a national basis, these dynamics get washed out. Single-family house prices in the US, according to the S&P CoreLogic Case-Shiller National Home Price Index, ticked up a smidgen on a month-to-month basis in October, and rose 5.5% compared to a year ago (not seasonally-adjusted). This year-over-year growth rate has been slowing from the 6%-plus range that reigned from September last year to July this year. The index is now 11.6% above the July 2006 peak of “Housing Bubble 1” (the first housing bubble in this millennium), which came to be called “bubble” and “unsustainable” only after it had begun to implode during “Housing Bust 1”:
The index is a measure of inflation — not of consumer price inflation but of house-price inflation, where the same house requires more dollars over the years to be purchased. In other words, the index shows to what extent the dollar is losing purchasing power with regards to buying the same house over time.
The Case-Shiller Home Price Index is a rolling three-month average; today’s release is for August, September, and October data. Based on “sales pairs,” it compares the sales price of a house in the current month to the prior transaction of the same house years earlier. The index incorporates other factors and formulas to arrive at each data point.
House prices are rising.
There is a shortage of housing.
There is a shortage of rentals.
There is a shortage of well priced notes & REO’s.
“Prices are growing more quickly in some places than in others, and in MSAs where recovery has been most robust (and even in surrounding metros), price growth is probably not the best metric to use for rental investors seeking a new property to buy and hold.
So………….which MSAs have the best rate of return on rental investments?
The following article was from CNBC.
They were blamed for the biggest financial disaster in a century. Subprime mortgages – home loans to borrowers with sketchy credit who put little to no skin in the game. Following the epic housing crash, they disappeared, due to strong, new regulation, and zero demand from investors who were badly burned. Barely a decade later, they’re coming back with a new name — nonprime — and, so far, some new standards.
California-based Carrington Mortgage Services, a midsized lender, just announced an expansion into the space, offering loans to borrowers, “with less-than-perfect credit.” Carrington will originate and service the loans, but it will also securitize them for sale to investors.
“We believe there is actually a market today in the secondary market for people who want to buy nonprime loans that have been properly underwritten,” said Rick Sharga, executive vice president of Carrington Mortgage Holdings. “We’re not going back to the bad old days of ninja lending, when people with no jobs, no income, and no assets were getting loans.”
Sharga said Carrington will manually underwrite each loan, assessing the individual risks. But it will allow its borrowers to have FICO credit scores as low as 500. The current average for agency-backed mortgages is in the mid-700s. Borrowers can take out loans of up to $1.5 million on single-family homes, townhomes and condominiums. They can also do cash-out refinances, where borrowers tap extra equity in their homes, up to $500,000. Recent credit events, like a foreclosure, bankruptcy or a history of late payments are acceptable.
All loans, however, will not be the same for all borrowers. If a borrower is higher risk, a higher down payment will be required, and the interest rate will likely be higher.
“What we’re talking about is underwriting that goes back to common sense sort of practices. If you have risk, you offset risk somewhere else,” added Sharga, while touting, “We probably are going to have the widest range of products for people with challenging credit in the marketplace.”
Carrington is not alone in the space. Angel Oak began offering and securitizing nonprime mortgages two years ago and has done six nonprime securitizations so far. It recently finalized its biggest securitization yet — $329 million, comprising 905 mortgages with an average amount of about $363,000. Just more than 80 percent of the loans are nonprime.
Investors in Angel Oak’s nonprime securitizations are, “a who’s who of Wall Street,” according to company representatives, citing hedge funds and insurance companies. Angel Oak’s securitizations now total $1.3 billion in mortgage debt.
Angel Oak, along with Caliber Home Loans, have been the main players in the space, securitizing relatively few loans. That is clearly about to change in a big way, as demand is rising.
As a real estate note professional, the buyer of performing and non-performing notes & REO, the following article confirms/addresses what has been shared from many venues.
The nation has a staggering shortage of 7.2 million affordable and available rental homes for extremely low-income (ELI) renter households, reports MFE sister brand Affordable Housing Finance. Deputy editor Donna Kimura examines a new study from the National Low Income Housing Coalition (NLIHC), The Gap: A Shortage of Affordable Homes, which finds that for every 100 of the lowest-income renters, or those earning 30% of their area median income, there are just 35 homes affordable and available to them.
“This leaves over 8 million of the lowest-income people [spending] more than half of their limited income on rent each month, leaving very little for healthy food, for savings, or to cover an unexpected financial emergency,” says Diane Yentel, NLIHC president and CEO. “The report highlights the urgent need for an increased national investment in more homes affordable to the lowest-income people.”
Yental also noted that federal housing programs serve about 5 million low-income households, but the needs of many more families go unmet. Only one out of every four eligible families receives the help they need. As a result of the housing shortage, low-income unassisted households are often severely cost burdened and pay more than half of their limited income on rent.
The severe shortage of rental homes affordable and available to the lowest-income households predates the Great Recession but has worsened in recent years, according to the study. In 2007, 40 affordable and available rental homes existed for every 100 ELI renter households and 67 existed for every 100 renter households with incomes at or below 50% of the area median income (AMI). A small surplus of affordable and available rental homes existed at 80% and 100% of the AMI in 2007. Since then, the supply of affordable and available rental homes (relative to demand) has declined even at these higher-income levels. Renter households at 100% of the AMI, however, still enjoy a surplus nationally and in most markets.
We discussed how my successful real estate career kept me so busy it crowded out spending time with my family. As a successful Phoenix REO agent between 2008 and 2014, the REO business dominated my life even more as demonstrated in 2010 when I closed 296 houses. By 2012, I realized the industry was changing. The inventory of houses was declining, which meant my potential to make money was declining.
Changing from being a prolific REO agent to note investing gradually changed my life for the better. I can now enjoy my Grandson and not be worried about being constantly accountable to the asset managers.
I went from being a business owner to a portfolio owner. Plus, I can do deals from anywhere. I’m loving every minute of time I get to spend hiking in the mountains around Phoenix –many times with my daughter and grandson.
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This interview focuses on a Partial Note sale completed in September, 2017. My IRA bought the note, then recouped almost all it’s original investment by selling the first 125 payments as a partial to a passive investor, but kept the next 154 payments. This property is near Detroit and my passive investor lives in Hawaii. I completed this deal from my Phoenix office
Best of all, The ROTH IRA’s profit is 100% tax-free!
the Note Investor of the Year Award.
The Conference was held at the Irvine, CA Marriott.
Dave Franecki has been in the Note investor space since 2013 and works in the Performing | Non-Performing| and REO space. Prior to delving into this niche asset class, Dave was an high producing REO agent in the Phoenix Metroplex selling over 900 houses during the real estate recession.
His real estate career began in 1978 in Cincinnati, OH.
MEETING TOPIC: We’ll walk thru the process of taking a non-performing note to an REO and give examples of how the workout is completed. Basically from purchase to the multiple options to maximize significant returns. We’ll show the passive approach and the more aggressive velocity approach for much higher ROI.
If you have an interest in significantly higher returns than Performing notes, you will want to attend Tuesday April 3rd 11:30am – 1:30pm!!
Look Forward to Seeing You!!!
RESERVE YOUR SPOT @ EVENTBRITE TICKETS
General Admission / Early Bird Discount price of $16.83
available until Noon April 2nd
*Buffet Lunch, Tax & Tip
Just want to show up? No Problem!!
Walkins Always Welcome–$20 @ the door, credit card or cash
includes meal, tax, tip
Networking and Note Training
Email Dave with special dietary needs or special menu needs
This story has been updated.
Richard Cordray, one of the few remaining Obama-era banking regulators, said on Wednesday that he plans to step down as head of the Consumer Financial Protection Bureau by the end of the month, clearing the way for President Trump to remake a watchdog agency loathed by Republicans and Wall Street.
Cordray’s turbulent six-year tenure at the 1,600-person agency was marked by aggressive efforts to rein in banks, payday lenders and debt collectors that often drew protests from the business community. His frequent clashes with conservatives turned Cordray, an otherwise ordinary Washington bureaucrat from Ohio, into a favorite of Democrats and consumer groups and a villain to Republicans and the financial industry. A federal judge once said that Cordray had “more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president.”
“It has been a joy of my life to have the opportunity to serve our country as the first director of the Consumer Bureau by working alongside all of you here,” Cordray said in a message to employees. “I trust that new leadership will see that value also and work to preserve it – perhaps in different ways than before, but desiring, as I have done, to serve in ways that benefit and strengthen our economy and our country.”
Republicans had become increasingly exasperated that Cordray, whose term does not end until next summer, had not stepped aside when Trump took office, and instead continued to press for aggressive rules disliked by the business community. Trump has on at least two occasions griped about Cordray in private and wondered what to do about his tenure, according to two financial industry executives who attended the meetings. Under the agency’s current structure, Trump could only fire Cordray for cause.
Cordray did not explain the timing of his decision, but it clears the way for him to potentially run for Ohio governor. It also comes just a month after the CFPB suffered a major rebuke from Republicans in Congress who took the unusual step of blocking an agency rule that would have allowed consumers to sue their banks for the first time. Cordray appealed to President Trump directly not to sign the legislation but was rebuffed.
With Cordray’s departure, the regulatory structure put in place by the Obama administration in the wake of the global financial crisis has been nearly entirely replaced. The head of the Securities and Exchange Commission has been replaced by a former Wall Street lawyer and the Senate is moving to approve Trump’s pick to lead the Office of the Comptroller of the Currency, another important banking regulator.
Trump is also remaking the Federal Reserve. He has nominated Republican Jerome H. Powell, a current governor on the Fed board, to replace Janet L. Yellen as chair of the Federal Reserve. His pick for vice chairman of supervision, Randal Quarles, a former private equity investor, is expected to be much friendlier to the banking industry than his predecessor in the role.
Rolling back regulations has been a cornerstone of the Trump administration, which argues that excessive rulemaking strangles economic growth. But Congress has struggled to deliver sweeping regulatory relief to the industry. Earlier this week, Sen. Mike Crapo, the Republican chairman of the Senate Banking Committee, announced a bipartisan deal to free dozens of large financial institutions from some of the most rigorous regulations put in place after the global financial crisis. But those changes are much more modest than what many in the banking industry have called for.
The most efficient way, industry officials say, to remake the rules is through appointing new regulators who can change an agency’s focus, tone and priorities. Cordray’s departure “will complete the Team Trump take over of the regulatory agencies. It should mean by summer there are Republicans running all of the banking agencies,” said Jaret Seiberg, an analyst with Cowen and Co.’s Washington Research Group.
The transformation coming for the CFPB could be significant. The agency was one of the central achievements of the Obama administration following the 2008 financial crisis. Created under 2010’s financial reform bill, known as Dodd Frank, it regulates the way banks and other financial companies interact with consumers, policing everything from payday loans to mortgages. It has extracted billions in fines from big banks, including $100 million from Wells Fargo last year for opening millions of sham accounts that customers didn’t ask for.
Cordray “held big banks accountable. He is a dedicated public servant and a tireless watchdog for American consumers–and he will be missed,” said Sen. Elizabeth Warren (D-Mass.), who helped established the bureau. “The new Director of the CFPB must be someone with a track record of protecting consumers and holding financial firms responsible when they cheat people. This is no place for another Trump-appointed industry hack.”
But the CFPB has been controversial among Republicans since its inception. Critics complain that CFPB has made it more difficult for people to get a mortgage loan and has overstepped its power to regulate some industries, including auto loans.
Within minutes of Cordray’s public announcement, one of the CFPB’s staunchest critics, Rep. Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee, cheered the move.
“We are long overdue for new leadership at the CFPB, a rogue agency that has done more to hurt consumers than help them,” said Hensarling, who has touted legislation that would strip the agency of many of its powers. “The extreme overregulation it imposes on our economy leads to higher costs and less access to financial products and services, particularly for Americans with lower and middle incomes.”
Republicans were particularly frustrated that the CFPB continued to issue new rules over the last year despite the Trump administration’s focus on loosening regulations to spur economic growth. Last month, for example, the agency finalized wide-ranging rules targeting the billions of dollars in fees collected by payday lenders offering high-cost, short-term loans. The rules would radically reshape the industry and even “restrict” the industry’s revenue by two-thirds, according to the CFPB.
Payday lenders and Republicans in Congress called the rules excessive. “We didn’t always see eye-to-eye with Director Cordray and in particular with his actions, which turned the Bureau into a highly partisan agency,” said Dennis Shaul, chief executive of the Community Financial Services Association of America, which represents the payday lending industry.
The group hopes Trump will appoint a replacement who “will listen to customers rather than special interests,” he said.
Under new Republican leadership, the agency is likely to focus less on writing new rules for the financial industry or extracting big fines, industry experts say. The CFPB has been working on rules concerning debt collectors and bank overdraft fees, for example, but those efforts are likely to stall under the new leadership, said industry officials.
“The CFPB will face substantive changes in the years ahead as policymakers recalibrate the regulatory environment,” said Isaac Boltansky, a Washington policy analyst for the investment firm Compass Point Research & Trading.
Cordray’s decision is likely to renew speculation that he will run for governor of Ohio, where he once served as attorney general. He would have to declare his candidacy by February.
Cordray has repeatedly declined to answer questions about his political ambitions, but his potential opponents have already begun to lash out against him. One website, www.cordray2018.com, initially appears to be pro-Cordray and features a “Cordray for Ohio” slogan at the top and a large picture of the Democrat. But then the site attacks him and calls the CFPB “one of America’s most corrupt government agencies.”
“If Director Cordray decides to run for Governor, which is highly anticipated, the people of Ohio should be wary of his crony behavior and reject his candidacy outright,” said Ken Blackwell, a former adviser to the Trump presidential transition team and former Ohio treasurer