Archive for March, 2009
March 29th, 2009 categories: Just "My" Opinion
You can put “Lipstick on a Pig” but it will still be a “Pig”. This is what the government is doing with the toxic assets. They have now changed the name from “Toxic Assets” to the term “Legacy Assets”.
What is a Legacy Asset? Well according to Wiki, “Legacy Assets are those assets which are less productive (outdated) and in some cases least productive overtime, they are just on the brink of being a liability overtime.”
What does Toxic Mean? Well according to Wiki, “Toxic means capable of serious injury and even death from poison.”
It really doesn’t matter which word you use when describing these bad loans. The way I see it is they will continue to be a liability to our economic and financial recovery and may even cause serious injury or death to the current way we function as a society.
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March 27th, 2009 categories: Short Sales
As a Realtor in business for over 10 years I have never experienced a real estate market like today. It really is like a roller coaster. For those of you unfamiliar with Short Sales and Foreclosures, I want to take time out to give you definitions of both.
Short Sales Defined: The term “Short Sale” is used in the real estate business to describe a situation where there is more debt owed against a property than the property is worth. In other words, the owner cannot sell the property unless the creditor (“Third Party”) agrees to accept payment that is less or (“Short”) of the amount actually owed to those Third Parties. These third parties are usually banks, mortgage issuers, or investors.
Foreclosure: The term “Foreclosure” is the legal process by which the owner’s rights to the property have been terminated because of default on their mortgage and the lender has taken back the property after the sherriff sale auction.
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March 26th, 2009 categories: Just "My" Opinion
1. Fannie Mae and Freddie Mac loans: Homeowners who have loans with Fannie Mae or Freddie Mac are allowed to modify their loans provided the remaining balance on the mortgage does not exceed more than 5% of the current “Market Value”. I think many homeowners will not be able to modify their loans under this program because home values are declining at a faster rate than the cap rate of 5%.
2. Voluntary Lender Program : The plan wants to give ” $1,000.00 cash” incentives to lenders who modify loans. A lender must be willing to reduce the current mortgage to 31% of the homeowners gross income. For example, a person who makes $50,000 per year has a monthly gross income of $4,1,66.67 . According to this plan, 31 % of the monthly gross should be a persons mortgage. In this example the mortgage payment should not exceed $1,291.67 per month. The maximum mortgage a person would qualify for based on this scenario is $241,616.31 (based on 5% Interest, 30 year Amortization) .It is unclear if this monthly amount includes Principal, Interest, Taxes, Insurance. If taxes and Insurance are not factored in then the maximum mortgage would be less. Now let’s assume this same person has an existing mortgage balance of $300,000 and has a subprime rate of 7% . The monthly payment on this loan is $1,984.33 . The difference in payment between $1,984.33-$1,291.67= $692.66 per month or $8, 311.92 loss in 1 year to the lender. The new plan will only reimburse the lender $1,000.00 so the net loss to the lender in 1 year is now $7,311.92 . Does this sound like a good plan for the lender? I do not think so, and therefore I do not see this volunteer program working very well.
3. Plan calls to change the Bankruptcy Code: The third part of the plan will allow a judge in bankruptcy court to help modify the loans with lenders. The bankrutcy judge would be allowed to force the lender to lower the principal balance owed on the debt in order to make the monthly mortgage payments more affordable for the homeowner. I think the courts will overburdened with people attempting to modify their loans and this plan will not be successful.
While Obama tries to help homeowners from loosing their homes to foreclosures he admits many will not be helped with his plan. Those not being helped are people who are unemployed, those who have second homes, or those people who took advantage of the system to begin with and according to Obama will not be bailed out.
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March 24th, 2009 categories: Just "My" Opinion
As I listen to Treasury Secretary Geitner and President Obama talk about the New Plan for the toxic assets I am reminded of Bob Barker of Let’s Make a Deal. It appears the New Plan involves a partnership with the government and the Private Sector. The Government would buy up $700 billion dollars worth of toxic assets while assumming the majority of the risk (93%) versus (7%) risk to the Private Sector. Sounds too good of a deal to pass up if I were an investor.
But wait I am reminded of another toon in the back of my head regarding this plan and it is..
Mick Jagger singing “Sympathy to the Devil” .Even the first lines in the song are kind of chilling, “Please allow me to introduce myself I’m a man of Wealth and Taste.
It seems the Government is about to enter into a relationship with the “Devil” himself to solve the toxic asset problem with the banks. As I see it we need to stabilize the housing market and find investors for these toxic loans but does it have to be with the Devils on Wallstreet ? It seems to me that it was Wallstreet that got us into this mess. Its time they started to be part of the solution but as I see it they are the only ones going to make a profit in this new plan.
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March 13th, 2009 categories: Market Data
Information is provided by Record Information Services which has been in business for 15 years and provides marketing data for the following counties in Northern Il: Cook, Dekalb, Dupage, Kane, Kendall, Lake, Mchenry, Will and Winnebago Counties.
|Total Sheriff Sales
|# South Suburbs
|# West Suburbs
The Cook County Sherriff Sale Calendar was very busy March 12 and 13th. All area’s within Cook County are being affected but the South Side of Chicago and South Suburban Cook County accounted for almost 76% of total homes up for auction in the two days.
A total of 65 different communities have homes up for auction It seems that it does not matter if you are rich or poor because every community knows someone loosing their home to foreclosure. As is evident in the statistics.
The highest judgement amount was $3,359,234.40 and the lowest was $55,303.00
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March 13th, 2009 categories: Local Markets
Leading economists from the University of Illinois Regional Economics Applications Laboratory (REAL) have published a report “Housing Price Forecasts: Illinois and Chicago MSA, February 2009”
According to these economic experts, our local economy is struggling. In 2008 , Illinois lost 100,000 jobs and unemployment is now 7.9%. During the month of December (36,000) jobs were lost. All sectors of the economy were affected from construction, trade, transportation and utilities, manufacturing, and professional and business services. It is predicted that any stimulus package will only help to retain jobs lost and will not create new jobs.
The Housing Market:
The National Association of Realtors (NAR) reports Illinois inventory of homes for sale to be 9.5 months and 11.5 months in Chicago. It is clear that the increase in the number of foreclosures has been a major contributor to the number of homes coming on the market for sale. The number of foreclosures is not likely to abate soon even with new initiative proposed by the Obama administration.
Housing sales in Illinois are also declining. Forecasts for the next three months indicate a 20-28% decline in sales for the state and Chicago respectively. These forecast figures do not look good for the Spring Market.
In addition to fewer homes being sold, experts also are showing declines in Median home prices. The Median price $150,584 in the state is 19% lower than April 2008 levels. In Chciago price the Median home price of $169,135 is 30% lower than last year levels.
A turnaround in the housing market is unlikely over the next 12 months. The number of foreclosures will continue to affect inventory levels, home prices through out the state and city of Chicago.
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