Have you ever considered the connection between the real estate market and trust deed investing?  With declining prices in the housing market not only is it a good time to buy and invest in real estate but also to diversify your portfolio.  This might sound contradictory but this article “The Week in Housing: Lower Rates, Negative Equity, and Homeowners Confidence” by Ryan Hinricher, proves otherwise. This article includes a recent survey given by Genworth Financial, which reports that Americans have confidence in the affordability of housing prices. The results of the survey consisted of the following:

• 62% felt that now is a good time to buy a home.

• 82% of those feeling now was a good time to buy a home said there was a good supply of property and home prices were low.

Since there is such high homeowner confidence why is there not more purchasing activity? Perhaps it is because of high unemployment rates. Unemployment could be the reason why most people are not considering purchasing at this current time. The article claims that  “While the survey shows that optimism exists due to low interest rates, available inventory, and low costs, people are still stressed about the economy and their own finances.”

Even though economic woes are perfectly understandable, if you are in position where you can afford to expand your portfolio it would be worth your while to consider trust deed investments. This is an opportune time to take advantage of historically low housing prices. Sterling Pacific is currently making loans to real estate investors who are purchasing at this time. If you are considering investing please visit Sterling Pacific’s website at http://sterlpac.com/borrowers.

For more information about the article go to BiggerPockets blog.
http://www.biggerpockets.com/renewsblog/2011/06/13/housing-rates-negative-equity-61211/

In the article “The Cost of Bank Failures Keeps Rising” from  Wall Street Journal it explains how this year the FDIC is readjusting bank failure costs. Overall, bank failures have been declining, however, the FDIC deposit is increasing. The FDIC missed projections for 2010 and plans for 2011 are being adjusted accordingly. In the article it mentions, “The FDIC’s biggest misses came on three Puerto Rico bank failures. The FDIC increased the cost of those failures by $1.61 billion. The FDIC lowered the projected cost of First regional Bank by $280.3 million, the most any estimate was lowered. In percentage terms, Los Padres Bank failure saw the greatest increase in the FDIC estimate, jumping nearly 1,300%.”

To read more visit Wall Street Journal.

As far as interest rates are concerned they are declining, but it is predicted to be only short term. Currently, the purchase of U.S. Treasuries is on the rise. This in turned has led the 30 year fixed and 15 year fixed mortgage rates to fall.

With more information on interest rates along with home values and prices visit BiggerPockets.

Back in 2005 and 2006, few people really accepted the notion that our rising national average home prices constituted an unsustainable bubble. Fewer still understood that the sub-prime lending that was driving speculation and the real estate boom had the potential to create a calamitous crash in the credit markets. But, even among the handful of people who understood what was really happening, there was no way to capitalize on that knowledge — until a few renegades came up with a way to short the mortgage-backed securities market.

Curiously, the instrument they used — a form of insurance on mortgage-backed bonds, the now-infamous credit default swap — was considered all-but-unnecessary by the key players in the market. The insurance would only pay off if housing prices fell — an outcome no one on Wall Street felt a need to plan for. So, initially, the challenge for the would-be hedgers was to find a market maker for the insurance the wanted to buy.

Michael Lewis’s tale of three sets of contrarian investors who saw what no one else saw (and had the courage to act on it) is a fascinating, fast-paced read. Each approached the situation from a different angle: one a refugee from the equities world, betting against the street partly in reaction to the corruption he saw; another a group of three business-world dropouts who found their niche in researching value opportunities and stumbled upon massive mortgage market misinformation; and the third an information-addicted doctor whose insightful analyses made his fund participants rich, but they almost turned on him before his dire (and correct) predictions about the CDO market could pay off.

The Big Short provides a fresh angle on the financial crisis, covering aspects of the market’s structure that haven’t been fully explored in the business press. The savvy and gutsy investors who took it upon themselves to learn what was driving the mortgage-backed securities explosion and understand its vulnerabilities didn’t just make themselves and their co-investors piles of money — they illustrated the important role short-sellers can play in identifying underlying market problems. Highly recommended.

Hearing the mainstream investment media describe diversification, you’d be tempted to believe that mixing stocks with bonds and maybe some international securities would be enough to accomplish it.  But, as we now know all too well, all public securities can move together in a downturn — meaning that “diversification” within the confines of Wall Street isn’t really meaningful.

Institutional investors — i.e., managers of university endowments, pension funds, and other large scale portfolios — have long understood that real diversification means investing beyond the public markets.  Through hedge funds and other sources, these investors have protected their principal and improve their ability to maintain fund growth.  Now, as USA Today reports, individual investors are beginning to tap into alternatives — helped by fund managers like Adam Patti of IndexIQ.

Patti describes his drive to expand access to alternatives as “democratizing alternatives” — a phrase we like, since we’ve been talking about democratizing access to the private real estate loan investments we offer for some time now.

Bottom line: whether you hear it from us or hear it from Patti, the message is crucial for individual investors: real diversification means investing part of your portfolio outside Wall Street.  Institutions (and individuals in the know) have long had access to investments like trust deeds (mortgage notes), rental property and other real estate, private equities and private funds.  Expanding awareness and access to these investments to all individual investors is an important move forward.

Smaller, locally focused regional banks may have weathered the real estate downturn better as a group than larger banks. Still, many small- and medium-sized banks are suffering as a result of real estate loan portfolio problems, a significant number being seized and closed by the FDIC — and, that is impacting small businesses who rely on local banks for essential lines of credit.

From The Wall Street Journal:

Tightening the Credit Screws

We had a great turnout for our webinar, Mortgage Pool Investing:  the Simplest, Safest Way to Begin Investing in Trust Deeds.

Did you attend?  If not, you can view (and listen to) it here:

or, for higher quality viewing, check out a full-screen (Flash) version at our site:

Sterling Pacific webinar: Mortgage Pool Investing

Last fall we shared with you a clever and insightful game from American Public Media that allowed you to try your hand at balancing the federal budget.  Now the folks at Next 10 are offering an even bigger challenge: balancing California’s busted budget.

Think you’re up to the challenge?  Our troubled state can use your help!  Give it a shot by clicking on the image below:

We recently had the opportunity to attend Equity Trust Company’s “Equity University” event here in Northern California.  If you’re interested in learning more about how to invest your IRA into alternative investments (like trust deeds — aka private real estate notes, real estate, tax liens and other instruments that aren’t exchange-traded), this seminar provides an excellent introduction.

Designed with newbies in mind, the seminar starts with a clear overview of IRS law (what you can/can’t invest in), an explanation of what self-direction is all about,  and some examples of how tax liens and private real estate notes have worked for other investors.  Attendees are invited to provide questions for discussion that will guide the day’s content.  Best of all, the full-day seminar is very affordable in comparison to other IRA investing courses.

To learn more (and see a schedule of upcoming events around the country), visit Equity Trust Company’s site.

I just returned from the first-ever conference of the American Association of Private Lenders in Las Vegas last month.  This new group aims to become the premier organization of private lenders across the nation. The goal of the three-day conference was to bring together the leading private lenders across the nation for educational networking, tool building and best practice sharing.

We’re excited about the mission of this new organization.  With conventional credit unprecedentedly tight, private lenders (sometimes called hard money lenders) can fill an important role in reviving the real estate economy.  However, it’s important that we establish high standards for ethical and professional operations.  The AAPL offers a great opportunity for the best lenders in the business to work together to create these key benchmarks and set the right image for our industry.

While attending the conference, I got updates on pending and potential legislation affecting our business.  I was able to share Sterling Pacific’s best practices with my colleagues around the country and discuss some of the changing trends in the private lending marketplace.  I also had the opportunity to meet several new vendors that Sterling Pacific Financial will be working with and learned more about the existing tools we are using from several vendors as well. Companies like Robodocs and ABS offer services that will go a long way towards helping our businesses streamline and manage themselves professionally — key steps for growing our companies and our industry.

It was quite interesting for me to learn while there are significant differences in the way businesses like Sterling Pacific Financial operate across the nation, at the end of the day, the similarities greatly out number those differences.  The challenges and opportunities are there and I was able to have some interesting conversations with colleagues and discuss challenges we’ve seen and loan opportunities we are evaluating. We were also able to compare those opportunities to the ones folks are looking at all over the country.

While at the conference, I was asked to speak on a two topics:  an overview of our marketing efforts, which I enjoyed quite a bit, and a panel on servicing loan portfolios (whether they should be done in house, outsourced or some combination thereof).  I also particularly enjoyed hearing from one of the panelists, Tom Anderson, founder of Pensco Trust, one of the self directed IRA custodians that Sterling Pacific Financial works with.

As the AAPL continues to gain strength over the coming years, I look forward to reporting back on some of the efforts underway.  I expect it will help protect and strengthen our position in the marketplace, both at the state level and federal level, helping us grow with best practices.  We also need a collective voice to protect us from some of the poorly considered, threatening legislation that is on the table; a strong association effort can help rework these draft laws into legislation that accomplishes its goals of protecting borrowers and investors without unintended consequences that hurt the marketplace.

Ultimately, the AAPL can help accomplish the goals we are all looking for: a stronger marketplace, a better educated group of colleagues with the best practices shared across the industry, and better results for lenders, their borrowers, and their investors.

Whether you are a private real estate lender, a real estate developer looking for a loan, or an investor looking to invest in trust deeds (private real estate notes), I encourage you to check out the website of the American Association of Private Lenders at www.aaplonline.com, it should be a wonderful resource going forward!

Considering investing in real estate notes (also known as trust deeds)?  Mortgage pools — which act like mutual funds of real estate loans — can offer a simpler way to get started earning higher yields with secured notes.  And, there are other advantages, too, like immediate diversification, lower initial investment requirements and more liquidity.  (Many of these advantages are especially relevant for self-directed IRAs and other retirement accounts.)

You can learn more about mortgage pools in a free webinar next month (April 13, noon Pacific).  Co-sponsored by Sterling Pacific Financial and uDirect IRA Services, this one-hour webinar features both a comprehensive overview of mortgage pools (what they are, how they work, how they can benefit your portfolio, how to get started) and an introduction to self-directing your IRA.  Presented by Josh Fischer, managing director of Sterling Pacific and Kaaren Hall, president of uDirect.

To learn more, or to sign up to join us, click here.