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STATE OF THE
W. Eddie SpeedFounder, NoteSchool
President, Colonial Funding GroupManager, Panacea Fund
INDUSTRY
©NoteSchool 2013
Bank Lending Dept
Loss Mitigation Dept
vs. TodayYesterday
Switched Buildings
Reason: Borrowing Power Triples (2000-2006)
2000
2006
STOCK MARKETYOUR MONEY
(ANXIOUS MONEY)
Where is it going?
XMarket Crash 2008
Anxious Money
• Millionaires now place a higher priority on growth than wealth preservation — a marked reversal from last year
• Over $6 Trillion in cash• 16% of them plan to invest that cash in the next
couple of months• 40% plan to invest it over the next two years
Source: May 27th 2013 USA Today, US Trust Survey
Those with $100,000 in Disposable Income
Source: May 27 2013 USA Today, American Express, Harrison Group
$6 TrillionCash Savings
$12 Trillion Cash Savings
NOW
2014
Cash Accounts Way Up$9.8 Trillion in Cash Accounts
(May 2012)
Sources: Fed Reserve 2012, 2013, Investment Company Institute ©NoteSchool 2013
$10.5 Trillion in Cash Accounts
(May 2013)
10 X’s
$9.9 TRILLION is Enough 1 Dollar Bills to Stretch
EARTH
SUN
©NoteSchool 2012
© NoteSchool 2012
2010 2011 20124.19 MHomes Sold
34% CASHApprox. 1.4M
4.26 MHomes Sold
38% CASHApprox. 1.6M
4.30 MHomes Sold
30% CASHApprox. 1.29M
In 3 years….
4.29 Million Homes!
HOUSING PRICES UPState of the Industry
©NoteSchool 2013
Home Price Increase
Last 12 months
13Months of Consecutive Growth10.5 %
©NoteSchool 2013
Sources: CoreLogic HPI Report 3 2013
12 Month Housing Price Index Change
©NoteSchool 2013Source: CoreLogic HPI Report March 2013
HOUSING INVENTORY DOWNState of the Industry
©NoteSchool 2013
REO Inventory
36.4%CA
LIFO
RNIA
63.5%
NEV
ADA
FLO
RIDA
62.5%
ARIZ
ON
A
38.1%
NAT
ION
18%©NoteSchool 2013
FHA REO Inventory
47%
©NoteSchool 2013
As of Sept 2012 (latest available)
Source: DS News, Office of Inspector General FHFA and HUD
HUD Fannie and Freddie
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
REO'sShadow Inventory
Shadow Inventory is defined in this study as properties 90 days or more delinquents but not yet in foreclosure
Housing Inventory Jan 2004
Housing Inventory Aug 2008
Housing Inventory Aug 2012
Housing Inventory Jan 2013
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5Housing Inventory in Millions
Sources: NAR, HouseTracker, Calculated Risk
HEDGE FUNDSThe Impact of
Sources Reuters and ZeroHedge, Bloomberg 2013
Where is all the Inventory?Blackstone 29,000 SFH 13 Metro Areas
Carrington 25,000 SFH
Colony America 9,931 SFH
Silver Bay 5,000 SFH
Tricon Capital 4,000 SFH CA, FL, AZ
Amer Res Prop 3,600 SFH AZ, IL, CA, IN, NC, GA, FL
PLUSAnother $8 Billion raised this year
to buy SFH foreclosures and REO’s
Making a Move into Tax Liens
Insiders estimate hedge funds now control 40% of the tax-lien market, from under 5% five years ago, with regional banks, and individual investors making up the difference.
By Lynnley Browning Fortune Magazine May1 2013
Tax Lien Market Today
Hedge FundsBanks & Investors
Tax Lien Market 2008
Hedge FundsBanks & Investors
Real Property Investors Paying More!
Sources: National Assoc of Realtors© NoteSchool 2013
• Short sales sold at a 13% discount• Foreclosures sold at
a 21% discount
According to National Association of Realtors, in August 2012:
Valu
e $
100,
000
Cost of Property
Short Sale Investor Paid
$87,000Profit ??
©NoteSchool 2013
Valu
e $
100,
000
Foreclosure Investor Paid
$79,000
Cost of Property
Profit ??
©NoteSchool 2013
NON PERFORMING NOTE INVENTORY
State of the Industry
©NoteSchool 2013
Non Performing 1st Mortgages
of ALL Loans are 90 Days Delinquent
3.5% of ALL Loans
are Delinquent
10.9%
1980-2006 the 90 Day Delinquent Rate was 0.78%
©NoteSchool 2013
MAJOR SHIFT FROM REO TO SELLING NOTES
State of the Industry
REO’s NOTES
©NoteSchool 2013
Non-Performing Notes
Modify Deed in Lieu Foreclosure
40% 40% 20%
©NoteSchool 2013
Rental Prices up
4.8% in Last 12 months
2.1
Million More SFH Renters
than in 2006
©NoteSchool 2013
10.63% of All Mortgages are DelinquentSource: LPS Mortgage
500,000 REOs Bank Foreclosed Properties
Where’s the Real Opportunity?
10 MILLIONDELINQUENT MORTGAGES
©NoteSchool 2013
5 Years
Only 4½ Million Sold
2008 2013
What’s the average value of house securing payment of a Delinquent Note ?
Average Property Value is
$40,000 to $60,000
Rent $500 to $850
©NoteSchool 2013
What does a Delinquent Note Cost ?Mortgage Note
Average Cost of
$9,000 to $14,000
©NoteSchool 2013
Valu
e $
60,0
00
Note Investor Paid $9,000
Cost of Delinquent Note
Profit ??
©NoteSchool 2013
What Percentage of a Loan’s Balance do Loans Cost?
$350K - $650K
$125K - $350K
Under $125K
$650K +
Best BuyMost Buyer’s
10 – 25 cents
30 - 70 cents
40 – 65 cents
50 – 70 cents
Price Points
©NoteSchool 2013
HELPFUL OBSERVATIONSNoteSchool
Trends and Opportunities
• Tens of Thousands of Short Sale & REO Specialist Agents
Trends and Opportunities
• Hundreds of Thousands of New Anxious Money Investors (many with IRA’s and other retirement accounts)
What $30 Billion Looks Like
This is $1 billion in $100 dollar bills
Specialty Self Directed accounts have about $30 Billion sitting in cash
X 30!
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