Archive for August, 2011

UAD Update

National Association of Appraisers

  1. Below is a complete copy of an email from Bob Murphy at Fannie Mae. It is provided as an urgent matter. The mistake probably was based on the FHA announcement.
  2. Fannie/Freddie have recently updated their UAD instructions, primarily to add in most sections that the appraiser may/should add comments/clarifications when necessary. The report doesn’t change except for the standardization. The UAD does not substitute for text comments in either the comments section or addenda.

The email states the following:

We are reaching out to you to help us reinforce the GSE’s September 1, effective date for Uniform Appraisal Dataset (UAD) forms.

Yesterday, several news outlets published articles incorrectly reporting that the UAD effective date was pushed back to January 2012.  The GSEs (Freddie Mac and Fannie Mae) have NOT changed their UAD effective date of September 1, 2011. The January 1, 2012, effective date is the adoption date for FHA, which recently announced it will adopt the UAD and two of the UAD compliant appraisal reporting forms.   More information on FHA’s adoption of the UAD is available in their Mortgagee Letter 2011-30.
If you should receive any inquiries regarding the press coverage, we would appreciate your help in sharing the following key message:

  • The GSEs have not changed their UAD effective date.  September 1, 2011 remains the effective date for appraisal reports to be completed in compliance with the UAD for conventional mortgages sold to the GSEs.  
  • The January 2012 date is the effective date for the use of the UAD for FHA.  More information on FHA’s adoption of the UAD is available in their Mortgagee Letter 2011-30.

Additionally, we are posting reminders on our Websites about the September 1 effective date – and wanted to ask you to help us and do the same (if you have not already).  A suggestion is below.
"Reminder:  September Uniform Appraisal Dataset Effective Date is Approaching -  Fannie Mae and Freddie Mac are requiring UAD forms for all appraisal report forms with effective dates of September 1, 2011 or later."

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Buzz Buzz Home

While compiling this list we learned that some people are really devoted to emulating their favorite fictional characters. Like, really really devoted! After all, how much do you have to love Lord of the Rings to commit to living in a hobbit house? We’re guessing an awful lot considering those low ceilings would surely make things difficult. Let’s have a look at these real life imitations of houses you just might have grown up watching on TV!

Pink overload! This could only be the Barbie house. Let’s move on and give Barbie and Ken their privacy.

Coming straight out of Gotham City, we’re convinced that this HAS to be Batman’s house. Whoops, we mean Bruce Wayne.

Looking like it came from the town of Bedrock in the Flintstone, this rock house is actually located in Portugal and is quite popular with the tourists. 

We’re not Hello Kitty experts, so we’re not sure how close this gets to looking like Hello Kitty’s real house. Did Hello Kitty even have a house? We’re confused, but it could just be a side effect from all the pink.

We’d be too tempted to hop on and fight the Red Baron with this one, so we’d keep our distance from the Snoopy house (okay, information kiosk, but it still counts!)

Anyone born after 1980 should be ashamed if they didn’t recognize this as the Simpsons house. Hardcore Simpsons fans should be ashamed that they didn’t notice that the address on the house is incorrect. The Simpsons lived at 742 Evergreen Terrace, not 712!

Given that The Hobbit film is coming out next year, we’re guessing that whoever lives in this house will be getting a lot more attention soon.

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Reverse Mortgage Daily

The deadline for implementing new Uniform Appraisal Dataset (UAD) requirements has been pushed back to January 1, according to Mortgagee Letter 2011-30, released on Monday. As specified in the mortgagee letter, the new UAD requirements will go into effect for all case numbers assigned on or after January 1, 2012 and for all appraisals performed on HUD real estate owned (REO) and Pre-Foreclosure Sale (PFS) properties with an effective date on or after January 1, 2012.

The requirements under the Federal Housing Administration aim to streamline the appraisal process and make appraisals more uniform. Appraisal management companies are working to teach and train appraisers to use the UAD, which essentially revolutionizes the way appraisals are documented by setting standards throughout the appraisal process.

The UAD is one component of a larger effort toward improving the appraisal process; additionally, a Uniform Uniform Collateral Data Portal (UCDP) will enable lenders to submit appraisal report forms electronically. The mortgagee letter specifies that mortgagees may use either format in advance of the January 1 implementation date.

Previously, the implementation date for the UAD was September 1. AMCs have told RMD that they are shifting their processes in advance of the deadline.

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Whether the Federal Reserve likes it or not, its unprecedented monetary polices over the last few years have conditioned the financial markets to expect a helping hand when the going gets tough.

That’s why all eyes will be on Ben Bernanke, the central bank’s chairman, when he speaks Friday at the Fed’s annual symposium in Jackson Hole, Wyoming.

With the stock market mired in a month-long slump and both the U.S. and euro zone economies in danger of sliding into recession, investors are bracing for a possible repeat of last year’s performance, when Bernanke hinted the Fed would act if conditions deteriorated.

Two months later, the central bank began pumping $600 billion into the financial system through direct purchases of Treasury debt, a second round of stimulus that markets dubbed "QE2."

While the jury’s still out on how effective these purchases have been, few are ready to rule out QE3 entirely.

Wyoming may conjure up images of the American Wild West, but markets aren’t expecting Bernanke to ride into the mountain resort with guns blazing — at least not yet.

While the economy has taken a turn for the worse — growth ground to a halt in the second quarter and nearly flat-lined in the first — there’s a sense that the Fed will want to wait a bit longer to assess the impact of its past stimulus.

Other Fed policymakers have sought to downplay expectations of an imminent QE3 announcement. St. Louis Fed President James Bullard was quoted in Japan’s Nikkei newspaper saying that while the Fed could buy more bonds if the economy weakened, the time was not right for such a move.

"Going into Bernanke’s speech at Jackson Hole, people are positioned for a significant shift in policy. (But) we think financial market conditions have to deteriorate even further for more QE3," said Simon Derrick, head of currency research at Bank of New York Mellon.

Nonetheless, traders are still expecting Bernanke to signal in some shape or form that he hasn’t run out of bullets and could start shooting again if need be.

"Based on our conversations with clients, we believe investors would be very surprised if the speech did not include a discussion of asset purchases," strategists at Goldman Sachs wrote in a note to clients.

They said this could involve the Fed reinvesting proceeds from maturing assets into 10- and 30-year Treasuries to hold long-term interest rates low.

"I think we’ll see (QE3) because America needs growth, but I don’t think we’ll necessarily get it on Friday," said Neil Dwane, chief investment officer for Europe at RCM.

Current market moves reflect this. While still down about 15 percent from late July, the S&P 500 rallied smartly Tuesday and the dollar has struggled against major currencies.

More stock market gains could be in store if Bernanke gives a strong hint of future action. After Bernanke’s speech last August, the S&P 500 began a rally that took it up nearly 25 percent by May 2011.

Pulling the trigger now would have the element of surprise going for it and might spark the most aggressive market moves.

There’s been some talk in bond market circles that the 10-year yield’s dip below 2 percent reflected a pricing in of QE3, though those moves probably had more to do with recent dismal jobs, manufacturing and growth data.

Still, there are impediments to launching QE3.

For one thing, Bernanke already caught investors off guard earlier this month and slowed a market rout when the Fed pledged to keep interest rates near zero until at least 2013.

Steven Bell, director of GLC Ltd, a global macro hedge fund in London with $1 billion in assets, also noted that higher inflation may make the Fed cautious. "We have core inflation going up," he said. "It may be low but it’s still going up."

Political opposition is also on the rise. Texas Governor Rick Perry, a candidate for president, even said he would consider it "treasonous" if Bernanke "prints more money between now and the election" in 2012.

That populist anger stems partly from the fact that Fed policies have done little to increase hiring or spark a housing market recovery.

"The history is $600 billion (in bond purchases) hasn’t really made any difference to the U.S. economy," Dwane said. "It’s still where it was when he was talking about it last August: nearly in recession."

If QE3 fails to boost growth or stokes inflation, markets may wish the Fed had done nothing.

"Investors are becoming more cynical," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Central bankers and governments seem to playing the role of the Dutch boy trying to plug holes in the dike."

A humdrum speech that neither announces plans for QE3 or even hints at the Fed’s willingness to act is probably the most unlikely scenario, as far as markets are concerned.

If Bernanke did go that way, it could signal that the hawks were gaining the upper hand. Three Fed policymakers voted against extending the zero interest rate pledge to 2013 and have argued that the Fed cannot do much more to boost growth.

Fred Dickson, market strategist at D.A. Davidson & Co, noted that policy remains very loose even without QE3. In addition to holding rates near zero, the Fed has said it will reinvest the proceeds of maturing assets on its "extraordinarily large" $2.8 trillion balance sheet.

"So they have a stealth QE3 policy in place already," he said.

No mention of future easing would likely hurt stocks but should spark a short-term dollar rally. Treasuries would likely fall as expectations of more Fed support faded.

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Former Ginnie Mae presidents Robert Couch and Joseph Murin said the future structure of Fannie Mae and Freddie Mac should be based on the agency they used to lead, according to a letter they sent to Republican lawmakers last week.

In the letter sent to Sen. Richard Shelby (R-Ala.), and Reps. Spencer Bachus (R-Ala.) and Scott Garrett (R-N.J.), the former Ginnie chiefs expressed concern over the health of the secondary mortgage market and its weight on the economic recovery.

"Any effort to replace Fannie Mae and Freddie Mac with a new framework must be designed to provide a steady flow of mortgage finance to consumers in all economic cycles while protecting taxpayers from undue risk," Couch and Murin wrote. "We believe the Ginnie Mae guarantee program provides an effective model to achieve these objectives."

Outside of fringe and sometimes duplicitous reforms, Congress has yet to take up meaningful legislation to revamp the future housing finance system. Even though the Obama administration submitted three options for winding down Fannie and Freddie in February, news reports surfaced last week that some within the administration may be opting to maintain a large government role.

The Treasury Department maintains its commitment to the original options.

Regardless, it grows increasingly unlikely that Congress will pass GSE reform before 2013, leaving plenty of time for proposed plans.

Couch and Murin said an ideal solution would be remove the federal government altogether but the current financial market could not fill the void and support long-held features of the housing finance system such as the 30-year, fixed-rate mortgage.

"Until financial markets settle down, federal credit backing is required," they write. "In the meantime, based upon our experience, we believe that it is possible to design a guarantee that sustains the long-term mortgage market while protecting taxpayers from undue risk."

All this they said can be borrowed from Ginnie Mae, which guarantees the timely payment on securities backed by Federal Housing Administration and Department of Veterans Affairs loans.

They suggested placing a guarantee only on securities backed by the safest loans. They said shareholders and credits in the private replacements of Fannie and Freddie should be wiped out before the guarantee is triggered.

The guarantee pricing would also be increased to protect against a possible 20% to 25% drop in home prices as opposed to what Fannie and Freddie charged, which covered a 10% decline.

In many areas, the housing downturn cut prices in half since 2007.

Couch and Murin suggested also including a "recoupment" provision requiring other firms to step in and repay taxpayers should catastrophe strike.

"Without properly protected private investors, we would not have a reliable market for long-term financing of mortgages," Couch and Murin write. "As the Ginnie Mae example continues to show, a limited federal guarantee would ensure a steady flow of mortgage finance and can be designed and priced to shield taxpayers from undue risk."

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After a hitting a three year low earlier in 2011, the Federal Housing Administration delinquency rate jumped more than a full percentage point in the second quarter, according to analysis from investment bank Keefe, Bruyette & Woods.

The Mortgage Bankers Association reported delinquency rates on all outstanding mortgages ticked up 12 basis points in the second quarter to 8.44%. KBW analysts said resurging FHA delinquencies drove the increase as its larger book of business began to season.

"We believe that an increase in delinquencies in the FHA program was the biggest contributor to the pickup in overall national delinquencies in the second quarter," KBW said.

From the start of 2009 to the end 2010 the amount of loans, current or delinquent, in the FHA servicing portfolio increased from 3.8 million to nearly 5.7 million as the frozen mortgage market depended upon it, Fannie Mae and Freddie Mac to finance and guaranty 95% of the market.

At the same time, delinquencies began to fade. The percentage of past-due loans declined from a high of 14.5% in the third quarter of 2009 to a low of 10.6% in the first quarter of 2011, still 60 bps above the low in the first quarter in 2007.

"While this could partially reflect an improving book of business, we believe that much of it reflected the sharp growth in new loans," KBW said.

But in the second quarter, the delinquency rate jumped to 11.7%. Seasonally adjusted, the increase was 59 bps to 12.62%.

Mirroring the MBA report, the FHA second-quarter delinquencies increased the most in the early stages of default, according to KBW. For instance, 30-day delinquencies increased 87 bps to 5.27% in the second quarter, while those in 90-day delinquency dropped 5 bps to 4.55%. Seriously delinquent loans, those in 90-plus day delinquency or foreclosure dropped 13 bps to 7.65%.

"FHA delinquency rates fell in 2010 as the FHA loans outstanding grew very sharply. We believe that the moderation in FHA loan growth will likely result in further increases in delinquencies on this portfolio which will likely push up the national averages," KBW analysts said. "However, this credit risk resides with the government since these loans are guaranteed by FHA."

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UAD/UCDP Seminar

Coester Appraisal Group’s educational slideshow regarding the upcoming requirements for the Uniform Collateral Data Portal/Uniform Appraisal Dataset.

Appraisal Scoop

Reading appraisal reports after September 1, 2011 is going to look a bit different due to the Uniform Appraisal Dataset (UAD). Basically, both Fannie Mae & Freddie Mac have been working together to make changes to the way particular appraisal forms are filled out by appraisers throughout the country.

The UAD only applies to the following Fannie Mae forms: 1004, 2055, 1073 and 1075. These forms are the full appraisal (1004), exterior-only appraisal (2055), full condo appraisal (1073) and exterior condo appraisal (1075). The multi-unit forms are not affected by the UAD and keep in mind that FHA has not adopted the UAD as of yet either.

In my opinion most of the changes are fairly minor, but I’ve listed some of the bigger changes below that you’ll definitely want to know about:

1) Bathrooms: Instead of saying 2.5 bathrooms, which means 2 1/2 bathrooms, the appraiser will now say 2.1 bathrooms. The figure to the left of the decimal signifies full bathrooms and the number to the right signifies the amount of half bathrooms. For example, 2.2 bathrooms would equal two full baths and two half baths, and 4.5 bathrooms would indicate four full bathrooms and 5 half bathrooms.

2) Condition Rating: Instead of using “average”, “fair” or “good”, appraisers will now use a specific rating system of C1-C6. The definitions for condition are now standardized, so the appraiser will basically choose whatever definition fits best for a given house, with C1 being best and C6 being worst.

3) Quality Rating: Instead of appraisers saying things like “good quality”, “average” or “good upgrades” for Quality of Construction, they’ll now use a standardized definition and rate the property with a Q1-Q6.

4) Architectural Design: Appraisers can no longer simply say “Single Story” or “2-Story” for design, but rather must be specific and say things like Colonial, Highwater Bungalow, Contemporary, Victorian, Farmhouse, Ranch, Cottage, etc…

5) View: Appraisers will provide at least one specific view for the subject property and then rate the view as either “N” (neutral), “B” (beneficial) or “A” (adverse).

6) Miscellaneous Changes: There are just over 60 fields affected in the appraisal forms due to the UAD (out of 200-ish fields). Mostly everything is minor and has to do with the way data is formatted, but some of the items mentioned above are definitely big changes for the appraisal industry. See Fannie Mae’s UAD information or UAD Help (an appraisal school).

What do you think of the changes? Good? Bad? Do you have any questions?

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Yahoo! Real Estate

Million-dollar-and-up homes are the fastest-growing segment of the U.S. foreclosure market, with banks seizing some 335% more such properties last year than they did in 2007.

"We’re seeing evidence in our data that the high-end market is starting to get hit more," said Daren Blomquist of foreclosure watcher "I think high-end homeowners have a little more ‘padding’ to get through tough times if they experience a job loss or other trouble. But as the tough times continue, more and more of these homeowners are succumbing to foreclosure."

True, RealtyTrac’s latest figures show that homes with $1 million or higher mortgages represented just 2.3% of houses in foreclosure during the first 10 months of last year. But that’s nearly twice as many such houses as in 2007.

Blomquist suspects more rich people are falling into foreclosure because they had mortgages they could easily afford in good times, but can no longer cover in today’s tough economy.

"No matter how wealthy you are, there’s always that potential that you’ll lose your job," he said. "Even if you have a very high income, you’re always susceptible to not being able to make your mortgage payments."

The good news: Well-heeled house hunters may find they can pick up million-dollar-and-up foreclosures on the cheap. The latest available RealtyTrac figures show foreclosed homes sold for 27% less on average than nonforeclosed properties did during 2011’s first quarter.

Here are the five highest-priced U.S. foreclosures listed for sale on

The Villa Mar Vista Estate, Laguna Beach, CA
For sale: $19.95 million
Bedrooms: Four
Bathrooms: Seven
Square footage: 11,333
Built in: 2010

The estate has a heliport and a view of the nearby Pacific Ocean.
Photo: Engeland Volkers

This newly built estate’s listing describes the property as "a sublime junction of privacy, acreage, generous interiors, tasteful design, plentiful outdoor spaces and vast coastal vistas."

Located about an hour south of Los Angeles in tony Laguna Beach, the Contemporary-style home features four bedroom suites, six full bathrooms and one half-bath, an in-home theater, an infinity-edge pool, a spa, a 20-car garage and private heliport.

Craftsman windows and French doors look out over the property’s gardens and terraces and out to the Pacific Ocean, which is less than a half-mile away. You’re also just a few blocks from the Aliso Creek Golf Course.

The Razor, La Jolla, CA
For sale: $25 million
Bedrooms: Four
Bathrooms: Eight
Square footage: 11,000
Built in: 2007

The oceanside residence has been the site of commercial shoots.
Photo: Hurwitz James Co

You’ll have to act fast if you want to buy the Razor residence, because it’s going up for auction Sept. 28 if it hasn’t sold by then. Bidding will start at $16 million — cash only, please.

Located on bluffs some 15 miles north of San Diego, the Razor (named after a bluff at the nearby Torrey Pines State Natural Reserve state park) overlooks the Pacific Ocean from just a few hundred feet away.

The 11,000-square-foot Contemporary-style home features four bedrooms, six full bathrooms, two half-baths, two fireplaces, a heated pool, a dog run, an eight-car garage and a two-space carport.

Architectural Digest profiled the house in 2008, while Calvin Klein used it as the backdrop for a TV spot for its new high-end Calvin Klein Collection. Visa also shot a commercial there for its top-of-the-line Visa Black Card.

The house is near the University of California at San Diego, the Salk Institute for Biological Studies, the Del Mar thoroughbred race track and the Torrey Pines Golf Course, site of the 2008 U.S. Open.

"This home is truly one of a kind," listing broker Bob Hurwitz says. "With today’s building restrictions, nothing like it could ever possibly be built again in this location."

East Mockingbird Lane, Paradise Valley, AZ
For sale: $17.995 million
Bedrooms: Seven
Bathrooms: Ten
Square footage: 17,015
Built in: 2009

Among the amenities are a robot Elvis and 21-car garage.
Photo: John Hall & Associates

This estate features a main house with five bedrooms, three family rooms, two libraries, a billiard room, a wine room, a piano room and a hidden "panic room." There’s also a mahogany in-home theater with a Dolby sound system and 13 seats that move in sync with the screen action. (A talking, singing Elvis Presley robot greets you at the theater’s glass entrance booth.)

Other amenities include a two-bedroom guest house, two swimming pools, an on-site solar-power station and a $1.2 million security system. There’s climate-controlled garage space for 21 cars — including a four-car "show garage" outfitted with restored genuine gas pumps from the 1920s and ’30s.

Located just outside Phoenix and Scottsdale, Ariz., the estate is a mile or so from the Phoenix Mountains Preserve, the Camelback Golf Club and the McCormick Ranch Golf Course.

The Wyndham Estate, Newport, RI
For sale: $7.9 million
Bedrooms: Seven
Bathrooms: Eight
Square footage: 12,500
Built in: 1891

The Baronial-style mansion looks out toward Martha’s Vineyard.
Photo: Gustave White Sotheby’s International Realty

Located less than a mile from Newport Harbor on the Atlantic Ocean, the Wyndham Estate combines classic 19th century looks with 21st century updates.

The Baronial-style mansion features seven bedrooms, eight bathrooms, four fireplaces, a ballroom, a music room and a rooftop deck and whirlpool with ocean views out to Martha’s Vineyard some 20 miles away. The manicured grounds also host a man-made pond, waterfall and garage space for nine cars.

The Newport Country Club, New York Yacht Club and Ocean Drive State Park are nearby.

Biltmore Estates Drive, Phoenix, AZ
For sale: $6.95 million
Bedrooms: Nine
Bathrooms: Eleven
Square footage: 17,799
Built in: 2002

Country clubs and a golf course lie near the estate.
Photo: Russ Lyon Sotheby’s International

Located in Phoenix next to the Arizona Biltmore Golf Course, this 1-acre estate features nine bedrooms, 11 bathrooms, five fireplaces, an in-home theater, library, wine cavern and al fresco patios, balconies and outdoor dining/dancing terraces. The rear courtyard hosts a massive heated pool and an adjacent spa.

In addition to the Arizona Biltmore Golf Course, nearby attractions include the Phoenix Mountains Preserve and Paradise Valley and Arizona country clubs some two miles away.

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The lack of income-generating investments these days may force aging Baby Boomers to either put off retirement or adopt riskier strategies to generate higher yields.

Traditional financial planning calls for older workers to move their money into so-called safer investments like bond funds that throw off annual income that they can live on without capital appreciation.

But right now the two-year Treasury[US2YT=XX 0.202 -0.001 (0%) ] yields less than 0.2 percent, while the 10-year Treasury[US10YT=XX 2.162 -0.056 (0%) ] will currently provide an annual yield of a little more than 2 percent. The average annual rate on a three-year bank CD is 0.91 percent, according to

Equities may seem just too risky to baby boomers after a decade of two bear markets, a ‘Flash Crash’ and then the unprecedented volatility this month. The S&P 500 has had zero capital appreciation over the last 10 years and just 75 percent of the benchmark’s members pay a dividend, down from 90 percent in the 1980s, according to Bank of America/Merrill Lynch.

“People will be working cradle to grave as this low return environment is expected to be around for awhile,” said Stephen Weiss of Short Hills Capital.

Many blame fellow baby boomer Ben Bernanke, the Federal Reserve chief, for the current state of investment choices. The Fed last week pledged to keep short-term rates near zero until mid-2013.

Bernanke’s intention with this low-yield pledge is to smoke other investors out of short, safe investments. But the opposite is happening, investors of all ages just continue to crowd into these assets on the fear of a global recession, lowering the returns for everybody.

Considering the demographics, this low yield environment couldn’t be coming at a worst time. The percentage of the U.S. population over 65 is expected to double to more than 20 percent between now and 2034, according to the U.S. Census Bureau. For financial planners, the old rule of thumb used to be that a client should put their age in bonds. So those turning 65 years old should be 65 percent invested in bonds.

But Bank of America Merrill Lynch is turning this model on its head a bit. The firm’s quantitative strategist presented this demographic data as a positive for the equity market and for the boomers that stick with the stock market. The combination of cash-rich balance sheets and demand from these retirees will drive more and more companies to pay a dividend, hike payouts and repurchase shares and subsequently, cause their shares to appreciate as well.

“With corporate cash balances at near record levels, cash deployment may be one of the most bullish themes around for equities,” said Savita Subramanian, the firm’s quantitative strategist, in a note Tuesday.

Subramanian points out that this is already happening. More companies are hiking payouts and repurchasing shares this year. By his count, the companies in the S&P 500 following this strategy have returned 5.6 percent or greater this year, outperforming by far the overall index.

If the low rates have pushed investors into anything, it’s been gold [GCCV1 1792.20 7.20 (+0.4%) ], an investment that has long been shunned by financial planners because of its volatile nature and the fact that it provides zero income. For better or worse, this low-return environment may drive investors into more exotic investments.

“You can expect a lot more money to pour into the MLP space as investors look for alternative yield,” said Joshua Brown, money manager and author of ‘The Reformed Broker’ blog.

MLPs, or Master Limited Partnerships, distributes the bulk of its cash flow to shareholders. The partnerships tend to be linked to natural resources like an oil pipeline or real estate.

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