Back to people for a minute, we’re talking a 1.9% increase in average home prices. And everyone admits this was a result of heavy investor purchases. Now if you’re still living in the past you think this is keeping prices down (you know, because the discounts on distressed properties aren’t real) but it’s time to snap out of it. The new lower values are an unfortunate reality.

The truth is investor buying power is helping our economy. You and I are making a difference to the entire industry. We can’t necessarily help every single distressed homeowner out there (though I’m trying my best with every short sale) but we can help everyone in the long run.

- Keep investing strong

- Keep finding killer deals and making a play

- Pay fair value and deal squarely

It’s all in your attitude. I always say “Be a servant” and I mean it. I don’t just say it – I live it. You can help yourself and help others at the same time. We’re working towards the same goal and the latest upswing in prices means our efforts are paying off. So get in the game, get invested, and start earning.

- Mortgage

- Car loan

- Credit cards

The answer overwhelmingly for Americans has been for the last 4 years car payments first, then credit cards, then mortgage.

It’s a sad truth but let’s think about it for a second. If you don’t have a car you may not be able to get to your job. If you don’t have a credit card you may not be able to put food on your table. If you lose your home . . . well, there’s no denying it’s an unbelievably bleak prospect and filled with heartache, but there are options. Short sales, for one. Plus loads of rentals and other arrangements.

I don’t envy anyone that has to make such a choice. But it’s true across the country and is a grim reminder of how the country is hurting. But I’m a little comforted knowing that me, my students, my associates, and extended RE investors, are making a difference. We’re helping get people squared away, be able to prioritize, and make good choices that help them invest wisely.

We’re helping, bit by bit, to dig ourselves out of this hole. Every month brings good news to some people, and we’re hoping the trend continues and extends to everyone who needs help. Spring is a great time to throw open the windows, dig yourself out of the snow, and breath some new air. Give it a try!

BofA is taking 1,000 customers who have

- exhausted all loan mod options,

- are seriously in danger of default,

- and are way underwater

and has offered them an interesting idea. Instead of paying a mortgage to the bank, they can pay rent instead. Sounds wacky, but it’s true. They’re being really cautious about the program and trying it on a select few (the program is not open to application). But assuming the payments drop considerably (hard to believe, but just maybe) this could mean a big weight off some (former) homeowners shoulders. It’s a tough burden to bear and some people might feel better knowing they’re not completely responsible for the home.

Knowing BofA they haven’t considered what being a rental property owner is going to mean, but hopefully they’ll work out the kinks. And don’t get me wrong – I’m completely supportive of Short Sales as the ideal solution for 99% of the people. But there are folks out there who are not ready to leave “their” homes and need an alternative. And since most of us have ZERO confidence in government programs and bogus loan mods that just push off the inevitable I’m always open to a fresh idea or a new approach.

So let’s see how the fortunes of this program play out. Maybe it’ll help some folks, or maybe it’s just a chance for the banks to fudge their books a bit more. Either way it’ll be interesting to watch.

Leave a comment right now and let me know what you think. How will this work out for folks and what’s BofA really up to.

Actually, that’s not the shocking one. Here it is:

4.4 million underwater borrowers have both first and second mortgages.

That’s not just shocking, it’s downright scary.

Now the current government “thinking” regarding helping them get sorted out is principal reductions. And the banks are not putting up a terrible fight about this despite what you’d think. And for good reason. Can you guess what it is??

They’re not losing the money!

Crazy as it may seem but that’s basically the truth. A report has just come out that the deal the big servicers struck means they get to write down first loans along with second ones equally. And most first loans are funded by investors while second loans are covered by the banks. So the losses are split, not like in the old days when banks took the hit first.

So even though the banks cut corners everywhere, even though they’re getting massive payouts from the government, and even though their not even bearing half the losses, they’re still whining!

I tell you, if the banks don’t stop complaining I’m going to have lots to say about it. Or I’ll apply for a job with them. You know what they say, if you can’t beat ‘em, join ‘em.

How’s that for a super incredible opening line?? What, it didn’t grip you instantly? Well, let me try another one:

So what if the banks wrongfully kicked you out of your home – HUD doesn’t care!

Admit it, that one was a bit more scandalous. So here’s the middle-of-the-road story.

The HUD Secretary was questioned by the Senate about how many people had their homes stolen by banks and mortgage servicers. His answer, “Very Few.” Um, yeah, I don’t think I’ll swallow that, thanks. He did manage to admit that the entire system has very “significant and pervasive” errors that have serious impacts on real people. But if you didn’t actually have your home foreclosed on he’s comfortable with that.

So what’s the point of discussing things we already know. Well, the usual reason is to pass the blame to someone else. But the blame has gone around the block so many times it’s finally about to land on someone with a big wallet. The Borrower Payment Fund is going to begin making payments to people who were “inconvenienced” by lender misconduct. The payout should be around $2,000 which they might end up delivering to your cardboard box in the alley.

Or they could just charge you a fee to pick it up. Neither option would surprise me at this point.

But let’s not get carried away yet. I’m sure there are going to be lots more discussions, like what color the checks should be, what watermark (if any) they should have, and who should get to decide the humiliation you need to go through to actually get something.

I think they’re taking suggestions now.

A realty company has just announced the findings of their study. Basically they have proven scientifically that everyone benefits from a Short Sale. Not just that – they’ve managed to put a number on it.

24%

Yep, a Short Sale brings returns that are 24% greater than a foreclosure. And that means if a bank is stubborn enough to go through with a foreclosure they are losing, on average, $43,000 more than if they’d done a short sale.

Not only that, but all the usual costs add up and hurt many people, the homeowner not least of all. And yet, though this is obvious to everyone, banks are consistently going through with (usually illegal) foreclosures.

The reason why is obvious, I guess – they’re lining their pockets in other ways and hurting the economy is just an added bonus in their minds. Such a shame really since me, my associates, my colleagues, we’re all out there making Short Sales the go-to option for distressed homeowners. But there will always be people who want to stand in our way.

Luckily, we’ve got you. Dedicated Short Sale enthusiasts who spread the good word and make a fortune doing it. So keep it up, keep strong, and know that there’s money to be made which helps everyone.

I’m sure the auditors out West are all scrambling to make sure this doesn’t make the entire industry look bad. And I’m sure the major lenders are already preparing solid defenses like, “Whoops” or “Um, what’s a foreclosure?”

But the bottom line is this is just too typical. Big lenders and mortgage servicers have been in such a rush to “right the system” that foreclosures were just the most convenient option. Well, not legal, but convenient. And that was good enough for them.

I usually feel bad for people in California, but for very different reasons than the real estate market. But in this case, well, they should have seen it coming. The rest of us did.

I mean, it’s safe to say that any idea the President, or any other politician in Washington has, will be met with opposition. And since everyone can agree that there’s a truckload of dirty deals behind each big lender there’s definitely something to find. So the question is what are the two sides of the story. (Actually, I’m going to show you the 4 sides of the story!)

1a) Why NOT to look into the past: It will be expensive, will slow the recovery, and expands unwanted government influence in the free market.

2a) Why YES to look into the past: The fragile recovery could be derailed by any new scandals so it’s better to preempt a massive shock to the housing system.

Okay, that’s all well and good, but here are the real reasons.

1b) Really why NOT to look into the past: Lots of Washington politicos managed to avoid responsibility for the financial crisis. But as more secrets come out we’re going to find many of them were deeply involved in letting these lenders get away with their crimes.

2b) Really why YES to look into the past: Some politicians are gaining ground as the big sheriff in town setting the system right. If they lose that image during a crucial election year they don’t really have much to stand for.

It’s a sad battle we’re going to witness as this is fought in Washington. But bottom line for you and me, we don’t trust big lenders, we know the value of the housing market, and we know how to make the real recovery happen. So make your voice heard in Washington, but don’t let it be the other way around.

They’re hoping this will stabilize prices and stem the tide of foreclosure activity. So despite a home being neglected during possible abandonment it will still be possible to make quick work of them with this hurdle removed. Obviously they’re also hoping to curb dishonest property flipping which can catch unwary buyers, but it’ll be a test of the program to see if the guidelines are strict enough.

Some of the limitations include:

- if the sale price is 20% higher than the acquisition cost then a whole slew of new conditions must be met

- it’s limited to forward mortgages

- it doesn’t apply to the Home Equity Conversion Mortgage for purchase program

While it may be a small drop in the overall housing bucket the program has approved 42,000 mortgages since the beginning of 2010 which otherwise would have been rejected. It does not mean that those properties didn’t enter foreclosure at some later point, but the turnover in the market and its ability to deal with the foreclosure inventory should be some positive news for investors.

So don’t fret – try to find the deals that are staring you in the face. Don’t forget your dreams, don’t let lame excuses scare you off, and DO get up off the couch this year!

You see, Florida had this need foreclosure mediation program. I say “had” because as you’ll see the program has been laid to rest. Basically, its goal was to get lenders and borrowers to a mediation and their differences (“you owe us money” vs. “I don’t have money”) could be worked out. And there’s plenty of opportunity for this program to flex its muscles – 24,749 foreclosure filings just in November.

So where has this program gone? It’s been retired due to lack of success in resolving disputes. It turns out there really is no good way to get someone already in foreclosure to work with the lender. And there’s equally no good way to get a stubborn bank to sit down and speak to a borrower like an actual person.

I’m not surprised at this. For a mediation to work both sides need to be able to look at an issue from, well, from both sides. And with a bank there’s only one side – namely, the bottom line. And with an underwater or behind homeowner there’s only one side – making it through another month.

So now that yet another valiant effort has been made to deal with foreclosures it’s time for the government to wake up to reality. Or more likely it’s time for them to try yet another scheme that will cost a ton and fall flat on its face.

As for me, I’m waiting it all out. Actually, I’m not waiting at all. I’ve been giving some killer training seminars teaching how to make a mint in this housing market, how to kill a short sale, and how to find the opportunities for riches all around you. Try looking at things from my side some time.