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Category: Lending (page 51 of 56)

December 24, 2007

Florida First, Certainly California, Next Nevada,and Absolutely Arizona

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Lenders don’t love us no’ mo’. Want a vacation crib in Miami? How about an investment property in Orlando? Show up with 40%, no seller carry-backs allowed, thankyouverymuch.

This e-mail came in this morning from IndyMac Bank :

Florida Guideline Restrictions

Transactions securing properties located in the state of Florida are subject to the following restrictions/limitations:


For all Loan Programs:

  • All loans are restricted to Full Documentation


  • Primary Residence transactions:


    • – The maximum LTV and CLTV otherwise available for the transaction type must be reduced by 5%.
    – The Borrower’s current primary residence must be sold and closed prior to,
    or concurrently with Indymac’s funding.
    – If the to-be-secured property is a single family residence, condominium or planned unit development, it must be located within an established project. An established project is one in which 90% of the total project units have been sold, and the subject property has been previously occupied / owned by someone other than the developer.

  • Second Home and Investment Property transactions are limited to a maximum 60% LTV / CLTV.

Remember I said, back on April 1, 2007 that IndyMac was conservative? Every other lender followed suit. Today it’s Florida; the other three states will be next. This is why my outlook for housing in 2008 is bleak.

Do not despair, though. While this will virtually halt activity it will “right-price” (that’s my new phrase) the market…QUICKLY. Expect Florida prices to drop like a ball off a table, in February, when the rest of the lenders pucker.

…and then there will be buyers. Oh, there will be buyers.

PS: If I sound giddy it’s because the “muddy waters keep getting clearer” and I can see the bottom.

December 24, 2007

Gifts of the Real Estate Magi, circa 2007

by

Realtor, Staging Consultant

Author website

Thank you, Russell, for the gold you so generously share.

Was Brian the mortgage industry’s Clarence this year?

I think the difference between frankincense and myrrh is appropriate to this metaphor: Compilation and organization of the holy oil of Real Estate Weblogging came to us by way of the prickly shrub.

Merry Christmas to all!

See you next year…

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December 14, 2007

Moody’s Says NO “U” For Phoenix – We’re Getting a “V”

by

Mega-Producing Realtor

Author website

Want to buy some predictions for $4,000.00. Actually, $3,995 to be exact. And the predictions are too. The ones I’ve examined are also unfounded, stupid and won’t be true. But as you can see here, you get two copies for your 4k. Then for only $500 more per copy you can get up to ten (10) additional copies. That’s really reasonable. It makes your average cost per copy a low low $749.58 (10 X 500 + 3995 = 8995). Who can’t afford that?

Of course the data is pretty much useless but that won’t stop it from being spewed all across the planet.aftershock_banner_payment_form  Most print and electronic media are just determined to endlessly establish that they have no real knowledge of anything they are writing or talking about – they just print and rebroadcast “news releases” that are really little more than poorly disguised PR to sell some book or seminar.

Here is a sample forecast for Phoenix:

In September 2007, in spite of all the problems in our real estate market listed above, Moody’s predicts the Phoenix real estate market will bottom out in 2Q/2008 and react like a “V” with a quick increase of 7.7% in the first year because 1.) we have so many people moving into Arizona and 2.) Phoenix leads the nation in job growth. Other areas of the country are not as fortunate as we and they will see a protracted “U” shaped real estate market recovery because those areas have a net outflow of residents and lots of job losses.

Good news. Prices will be actually going up next year. Isn’t that great? I’m excited. Now I can tell all my customers to just wait until the 3rd quarter and sell then. Yea!!

This is the same Moody’s who was giving the sub-prime backed crap paper the equivalent of a “triple A” rating. Oh yea, that Moody’s. It is astounding that no economist (read that as NONE) predicted the run up in prices until after the run up was occurring. Then they could chat about it at great length. This would be sort of like the weatherman waiting until Read more

December 12, 2007

They Were Wrong About The Bubble And They’re Wrong About This, Too

by

Mortgage Planner

Author website

In 2002, Business Week talked about “Real Estate’s Bubble Cities“.

Barron’s said it’s a better time to be “a seller rather than a buyer”.

But, 2002 wasn’t the bursting of a bubble. Prices didn’t start to fall until three years had passed from those piece’s respective publication dates. And when they did, prices fell for reasons not even named in the articles.

Being right isn’t what earns a person credibility — it’s about being right at the right time and for the right reasons.

December 12, 2007

We’re All Sub-Prime Borrowers (Who Consume Oil)

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Residential lending is in a pretty tough spot. Mounting losses, from former white-picket fence owners, are putting a dent in the country club sets’ wallets. The problem is not unlike the one we faced 20 years ago; bankers turned into riverboat gamblers.

That’s all changed. Today, sobriety is the buzzword in residential lending as the conduit lenders act as if borrowers were trying to pry the money for a home loan out of their children’s piggy bank. If it weren’t so serious it would be comical.

The bankers think that every American is a sub-prime borrower. Until they can reach a consensus on an economic model, Wall Street securitizers will drive this culture of paranoia into the hearts of the newest of mortgage company employees.

Who will save us from this madness? The oil merchants, of course. It’s in their best interest to jump start the little economic engines we call “our neighbors”. If the old lending model was based upon undervalued real estate, the new one will be based upon the nature of the little pink house owners, to buy pimped-out Sherman tanks for their driveways. As long as the American consumer can continue to expand his consumption of gasoline, the oil merchants will finance our homes.

Mark my words, the oil barons will be the new round of fresh residential lending capital. It makes perfect business sense. If your key account is slowing down the orders, give them a little credit to get the through the tough times. That’s EXACTLY what the sheiks will do and they’ll make a killing doing it.

The average American is NOT a sub-prime borrower. Hell, even the sub-prime borrowers aren’t really sub-prime borrowers. Americans really are honorable and most believe in a brighter future. As long as we continue to put men on the moon, develop new communication technologies, and cure otherwise incurable diseases, Americans are the best long-term bet in the world. Debt is an affirmation of that belief. Our biggest vendors believe in us because without us, Read more

December 8, 2007

Happy Homeowners Act of 2008

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I’m thinking of getting into politics. I’ve been watching testimonies, from both sides of the aisle, about the credit crunch and impending doom of mass foreclosures. I figured out the problem:

The housing prices were too damned high.

Now, my stance, to this point, has been pretty clear; let the market act as markets do, with commensurate consequences to each and every market participant. Lenders and borrowers lose. Lenders lose money, and borrowers lose the freedom to buy another home, with the use of a mortgage, for a period of 4-6 years. (remember that statement)

As I’ve said, I’m thinking of getting into politics so that straight talk and libertarian approach is somewhat unacceptable in the vote-seeking game. I think I need to find a solution that will put me in a picture, alongside Hillary, Arlen, Barney, and Hank. My solution may also fire a shot across the bow of our economic enemy, China; that’s just a bonus for the cold warriors among us.

The Happy Homeowners Act of 2008 understands that foreclosures are far reaching in their devastating effect. They leave homes vacant in neighborhoods, they attack the esteem and morale of the borrowing family, and what is often left unsaid, they whack the investors’ principal. Talking heads have said that the homeowners just want to live in peace and harmony, in their slice of the American Pie. So… here’s my proposal:

Mark to the Market or yell “do over”. We’re all in this together, right?

1- Homeowners overpaid for their homes. Those homes are worth some 20% less than what they paid for them. The investors will take a loss of 20% (or more) should they proceed with foreclosure…so…just take the loss today. Reset the loans to a loan amount the borrower really can afford.

2- Investors will lose money but can recoup some of those costs from the market participants that profited. Real estate brokerages, mortgage brokerages, originating lenders, servicers, Wall Street securitizers, appraisers, home inspectors, stagers, and everyone who made a dime off the transactions during the “excessive period” Read more

December 6, 2007

Compassionate Conservative or Banana Republican?

by

Suburban Phoenix Real Estate Broker

Author website

I have a tremendous admiration for George W. Bush, the President of the United States. My reasons are legion, and the rest of America will have to wait for historians to explain to them just what a great man they have so completely scorned in their well-scored chorus. But Phil Boas of the Arizona Republic gave us all sufficient reason to revere this president in just a few words:

American presidents for three decades have kicked the can of global terror down the road for some other poor sucker to deal with. George W. Bush did not. And that’s why, even when it’s utterly unfashionable to say so, I still greatly admire his leadership and courage. Thank you, President Bush.

Even so… The man is a politician, a currier of favor and a courier of tyranny. “No child left behind” will assure that no poor child will ever again get ahead. The Patriot Act should give nightmares to any patriot who can envision yet another President Clinton. Government never grows so large as it does under the cultivation of allegedly anti-government Republicans. And now… Full-blown Banana Republican bail-outs, as a reward for financial error.

From Cafe Hayek:

Today’s Washington Post brings a nice example:

“President Bush will announce this afternoon an agreement with major mortgage firms to freeze interest rates for five years for financially troubled homeowners — a plan advocates say will help forestall a major foreclosure crisis but some conservatives say amounts to a bailout of people who made bad financial decisions.”

Bush, the so-called conservative who supposedly believes in the "ownership" society where people take responsibility for their own actions and act responsibly because they bear the costs and reap the benefits, is going to bail out people who acted irresponsibly. I love the end of the WaPo quote—"some conservatives say." The implication is that other conservatives and liberals disagree. But isn’t it a bail out of people who made bad financial decisions? Would anyone disagree?

I like this part, too:

“But it appears no tax dollars will be used to subsidize the freeze on interest rates. That cost would be borne primarily by lenders and Read more

December 2, 2007

Lenders Lend — Are You a Believer Yet? — Altered Circumstances Changes Behavior

by

Real Estate Investments Broker

Author website

What constitutes real knowledge? By real, I mean knowledge that is truth, not logically provable by means of rational debate.

If that sounds ambiguous, let me focus the picture a bit.

After the 1927 real estate collapse, the infant Federal Reserve Board decided the best course of action was two-fold in nature. Constrict the money supply, and raise interest rates.

They arrived at that strategy, one which in hindsight would seem to have caused (or at least exacerbated), instead of avoided the Depression, by means of rational debate, logically put forward. We can assume they thought it was clearly the right thing to do. Put plainly — they weren’t trying to cause the Depression.

They were tragically incorrect. Their logic was akin to ‘proving’ the world is flat, which was rationally believed — and logically, God forbid, scientifically proved — for centuries.

How might history have been altered, had the Feds flooded the banking system with cash while simultaneously slashing interest rates? Again, logic tells us they’d have more likely than not, avoided the Depression.

In reality though — we don’t, rather we can’t know that. We can convince ourselves by virtue of the last 80+ years of experience since then — but in the end, we just don’t know for sure.

The Wall Street Journal is now reporting the Treasury Department is in the late stages of negotiations with major lenders to avert next year’s tsunami of interest rate adjustments on over 2 million sub-prime loans.

I’ve been telling anyone who’d listen, for over a year now, lenders were simply not gonna foreclose on hundreds of thousands of homes. The thought itself is ludicrous. The Wall Street gang(sters), better known as either Bears, or one-way @$%^&#’s, are gonna be beside themselves when this is announced. So many of them are invested in bad news — in the most literal sense. They need the economy to tank, at least a little. They’ve shorted everything but their four martini lunches. 🙂 For many of them, good economic news is now bad.

Many other Wall Streeters will be elated by this news. The Bulls Read more

November 27, 2007

Countrywide Bankruptcy Likely? Not While the Feds Are Bailing Them Out

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I’m a Countrywide watcher. It’s size and reach in mortgage loan origination is worthy of any mortgage originator’s respect and admiration. I had a lot of confidence in Countrywide as it marched to becoming America’s largest originator of home loans. I liked ’em so much that I had a piece of the joint, in my IRA, until April 1, 2007.

It was no April Fool’s Day joke when I announced that they were in trouble because of the Pay Option ARM product. For the Series 7 types, I went from long to cash within 24 hours of writing that post, then short ( not in my IRA) 24 hours later. I was nervously wondering when Wall Street would catch on to the problems and decimate the stock; I felt it would be worth less than ten bucks a share. Alas, I chickened out and closed the short position to raise cash during the liquidity crunch of 2007; I figured that profit would pay my daughter’s tuition when the market slowed.

Wall Street still thinks Countrywide is a twenty dollar stock, even as it trades below nine bucks a share. Are they being fooled, like the Enron debacle, or do they know something that we don’t? While Wall Street fiddles the Mozilo tune, pundits think CFC could file any day now. I don’t think a Countrywide bankruptcy is likely. I thought it made sense for the Feds to bail out Countrywide; two days later they opened the discount window.

How are the Feds bailing out Countrywide today?

1- Certainly, as Countrywide has moved it’s fundings to its federally-chartered bank, any Fed market activity benefits them.

2- I said that they way out of the mess was for Countrywide to originate new loans in less risky programs. CFC has rolled out a major reverse mortgage program and is compensating brokers to refer those loans to them. While some people believe its actions violate the spirit of HUD laws, there are no HUD guidelines specifically forbidding this practice. Reverse mortgages are three times Read more

November 23, 2007

California Sub-Prime Bailout: Rewarding the Feckless

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Governor Schwarzenneger brokered a bailout for California sub-prime borrowers with four major servicers:

Countrywide, GMAC, Litton and HomeEq – which collectively service more than one quarter of subprime loans to people with poor credit – agreed to maintain the initial, lower interest rate for some subprime borrowers whose rates are scheduled to jump significantly higher. To qualify, borrowers must occupy their homes, have made their payments on time and prove they cannot afford payments with the higher interest rate.

You had to see it coming. California is a mess right now with foreclosures. An argument could be made that sub-prime borrowers weren’t charged enough for the risk lenders took on them. Did the Governor, in fact, reward the feckless few who blindly bought into an inflated market? Does the measure penalize the responsible who waited for realistic prices and saved their sheckles for a down payment?

Two stipulations of the bailout are:

(a)- the borrower must be making timely payments, and

(b) the borrower must demonstrate an inability to service the higher payment.

While sub-prime loans are traditionally earmarked for the credit challenged, lenders extended these loans to good credit borrowers. Those borrowers bought a home that they couldn’t afford, with no money down. This program may very well reward people who lied to get a “smokin’ deal” and who now cry foul when that subsidized deal is taken away. The only exit strategy these borrowers had was to refinance out of the loan. That strategy was predicated upon a continual rise in property values. I know this; I work in the eye of the hurricane.

So, does Gena Reide. She’s a real estate broker in Sacramento, a community that has been hit hard by the meteoric rise in prices and subsequent drop back down to reality. Her ebullient report about this measure suggests that it is an idea that is long overdue.

Many have said that the homeowners in foreclosure should take responsibility and not receive any bail-out help Federally. It’s time that everyone realize that this doesn’t just effect those homeowners losing their homes, it effects Read more

November 14, 2007

Cribfinder and Facebook: Showcasing Listings

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I’m a newbie to the world of Facebook but an old salt at social networking sites. I’ve been on LinkedIn since 2004, MySpace since 2005, and Active Rain since 2006. Facebook is my network du l’an for 2007.

It all started with my need to meet people in the San Diego area. I moved here as a mortgage sales executive in 2003 to be RIF’d after a merger in early 2005. Faced with the prospect of earning a living for my family, I turned to my first love; originating loans. In many respects, I’m only a third year originator.

My goal: to build a phat Rolodex, and fast.

I turned to the budding social networks to meet REALTORs and key referring influencers. I think Jeff Corbett got me on Facebook. I see a few of you there now. Facebook is a unique social utility because it lets independent software developers offer applications. One of those applications is a listing bot called Cribfinders. From the Cribfinders home page on Facebook:

Did you know?
* Your properties appear on your profile after adding them to CribFinder
* Updates appear on your newsfeed when you add or comment on photos (even your own!)
* You can track how many times your properties are viewed
* You can add your profile to our (searchable) realtor database
* You can add as many properties as you want
* You can get links to your “Cribs” and display them OFF of facebook

I added that application on my Facebook page and started searching around, I came upon this listing and clicked through to the REALTOR. He and I led parallel lives (both lived in Phoenix and moved to San Diego). I called him and spoke to him for 10-15 minutes and we have a connection. I have always maintained that the loan originator with the most friends wins the game so I like to make friends.
I noticed one hound using that application and wondered if others will. Comments about Cribfinders?

November 14, 2007

Irony Can Be So Ironic (Massachusetts Edition)

by

Mortgage Planner

Author website

Massachusetts was one of the first states to put anti-predatory lending laws on its books, ratifying in November 2004. The law includes provisions for borrower counseling, prepayment penalties, and financing of fees.

Presumably, somebody thought the law had a positive impact on homeowners because, recently, Massachusetts Congressman Barney Frank authored HR 3915, The Mortgage Reform and Anti-Predatory Lending Act of 2007. Currently in debate, HR 3915 is the first national anti-predatory lending program proposed by Congress.

And then comes the heavy dose of irony.

Today, RealtyTrac released its foreclosure data from Q3 2007. Check out five of the six cities leading the nation in year-over-year foreclosure growth:

  1. Bethesda/Frederick/Gaithersburg, MD (1,640%)
  2. Cambridge/Newton/Framingham, MA (1,552%)
  3. Boston/Quincy, MA (1,274%)
  4. Springfield, MA (1,169%)
  5. Essex, MA (993%)
  6. Worcester, MA (895%)

It appears that three years after its anti-predatory lending laws went into effect, Massachusetts homes are foreclosing faster than in any other state in the country.

Irony can be so ironic.

November 13, 2007

HR 3915: Why Federally-Chartered Banks Get The Pass

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Big banks have a HUGE advantage over mortgage brokerage firms; they have the money. Federally-chartered banks also are regulated differently than mortgage brokers; they are overseen by the Office of Thrift Supervision, a successor regulator to the Federal Home Loan Bank Board. Federally-chartered banks also subscribe to FDIC insurance which imposes another layer of oversight to them. In the interest of simplification, the OTS regulates banking activity while the FDIC monitors the bank’s investments.

Big banks have a lot to lose if they have a rogue originator among their ranks. That’s not to say it doesn’t happen; rogue originators infest every business model, including the big banks. What is apparent, however, is that the big banks have greater systems in place to supervise the actions of their employees than do mortgage brokerage and correspondent lending firms. They also have more stake in the origination process- the authority to borrow and lend money with the legislated blanket of a government guarantee (FDIC insurance).

Banks have exploited this unfair advantage, too. They systematically engaged in a scheme to inflate profits by using mortgage brokers and correspondent lenders to do the dirty work for them. Internal policies at the big banks limit how much “overage” (the bank term for yield spread premium) a bank-employed originator can charge under the guise of “responsible lending”. Their wholesale business channels were able to “bribe” the brokers to originate higher rate product with the temptation of obscene yield spread premiums. They removed themselves from the “dirty retail” work to claim plausible deniability when the shit hit the fan. Today, we have a feces-covered fan. The mortgage brokers have dirty, smelly hands and the big bankers are emerging from the washroom looking like a smartly starched altar boy.

Big banks are always going to have an unfair advantage with regulators because they know the golden rule of finance. A watered-down version of HR 3915 will eventually become law. The political pressures of an election year make it virtually impossible for ambitious politicians to ignore a chance to enable Read more

November 10, 2007

HR 3915: Open Letter to Senator Dodd from a Veteran Mortgage Originator

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

The Hon. Senator Christopher Dodd
Chairman- US Senate Committee on Banking, Housing, and Urban Affairs
534 Dirksen Senate Office Building
Washington, D.C. 20510

Dear Chairman Dodd:

Soon, HR 3915 will be endorsed by the House of Representatives and most likely referred to the Senate. The committee you chair, will have an opportunity to read, discuss, debate, and amend this bill before recommending it to the general Senate for vote. I am a 20 year veteran of consumer financial services with the last 14 years in mortgage lending. I have helped over 700 families finance their homes and closed some 1700 loan transactions. I humbly submit my expert opinion to you for consideration.

The Libertarian in me begs you to do absolutely nothing; it’s the borrowers’ cavalier attitude towards financial planning that caused this mess. While my statement is true, it is but a component of the underlying malaise in the residential real estate industry; we adopted an even more cavalier approach to loan approvals and that irresponsibility is being felt by the investors who trusted us to perform adequate due diligence. Failure is a costly but cogent instructor; to discourage failure on both the borrower and investing lender sides of the equation might be more costly in the long run.

I oppose individual originator licensing in its proposed form. It doesn’t demonstrate true expertise and might induce a false sense of security to the consumer. This very act may very well damage the consumer by perpetuating the adolescent approach to financial planning the average American exhibits. It transfers the responsibility of prudent money management from the consumer to the license issuing body; sadly, those bodies are not up to the task.

I am a pragmatist so I know that my remarks about licensing, while philosophically pure, are impractical from a political view. Inasmuch, I recommend that the licensing requirements be strengthened to include any and all participants in the origination process: originators, processors, and underwriters. I further recommend that the license be national in scope so it is more consistent with the standardization mortgage securitizations induced. Read more

November 6, 2007

HR 3915: Anti-Consumer Bank Protection Act of 2007

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

HR 3915, the Anti-Consumer mortgage bill has passed the House Financial Services Committee. This was expected. The committee is chaired by the bill’s sponsor, Barney Frank. This bill seeks to destroy the consumer protections, guaranteed by free markets, through: a legislated oligopoly, a reduction is loan choices, and a contraction of loan pricing options, all dressed up as consumer protection.

This isn’t cause for concern…yet. Today’s House FSA approval was akin to a Politburo approval of Khrushchev’s recommendation of the Communist slate of officials – with Khrushchev presiding.

The horse trading with this bill starts tomorrow. The bill will be read to the House “Committee of the Whole” where time will be allotted for debate and amendments will be considered. ( C-SPAN junkies, this is where time is allotted to the “Gentlewoman from California” wherein she rambles about baby seals for two minutes and offers her support for the mortgage bill. Then, the “Gentleman from Arizona” talks about the second amendment for two minutes and concludes with his dissent for the mortgage bill. )

Mandatory licensing of originators will most likely be recommended although nobody will really understand why it’s necessary. Republicans and Democrats alike favor licensing- the former for its ability to fleece money from people without the appearance of a tax and the latter because it asserts some level of governmental control.

The “fiduciary duty” rule will be attached, also. Nobody knows what that means but it sounds SO DAMNED GOOD to the little people back in the home state.

Yield Spread Premium will not go away but be limited to 1%. Prepayment penalties will be abolished. A lobbyist will buy a legislator lunch, explain in fourth grade math about how it helps the consumer, who, in turn, will explain the concept to the Committee of the Whole, in third grade math. That amendment will be made and everyone will champion the cause of the consumer and smoke another cigar.

The Committee of the Whole will read the bill for a third time, with my predicted amendments, and the House will overwhelmingly pass the bill for referral to the Senate.

The Distinguished Senate Leader will announce Read more

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