Archive for the 'Just "My" Opinion' Category
Is it Time to Reform Fannie Mae and Freddie Mac?
July 28th, 2010 categories: Just "My" Opinion
Fannie Mae was created in response to the Great Depression when the economy made it difficult for homeowners to meet mortgage terms. Fannie Mae purchased and securitized FHA and VA mortgages to inject liquidity into the mortgage market.
The problem we are faced with today is not that different from the Great Depression with one exception and that is the amount of debt both Fannie Mae and Freddie Mac own.
Together, Fannie Mae and Freddie Mac own more than $5 trillion U.S. mortgages which is almost half of the total $12 U.S. mortgages.
The amount of debt Fannie Mae and Freddie Mac own is not sustainable for the Federal Government, the U.S. economy, or individual tax payers.
That is why the Financial Regulation Bill did not discuss reforming Fannie Mae and Freddie Mac at this time.
In the near future, we will need to address reforming Fannie Mae and Freddie Mac. But how do we do this.
In my opinion, we need to have a healthy secondary mortgage market. One that is assuming limited risk to investors.
We need money to flow from Banks to homeowners, from Investors to Banks back to homeowners again.
I think this can be done without the government involved.
We just need better oversight and confidence in our rating system so investors can purchase mortgage backed securities based on the merit of the mortgage itself not in the bubble of the housing market.
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FRIENDS AND NEIGHBORS
July 26th, 2010 categories: Just "My" Opinion
Last night I watched Friends and Neighbors with Ann Curry of MSNBC Dateline. I was saddened by how many people in SE Ohio are homeless and barely surviving.
The number of people loosing their homes is staggering and the numbers keep growing everyday.
I say we need to come up with a different plan a different strategy that thinks outside the box.
I say nobody should be homeless when there vacant homes in foreclosure needing families to live in them.
I think the banks should not only let people move into these foreclosed homes but they should also pay them to live there.
These people need jobs and there are plenty of odd jobs to go around when dealing with foreclosed homes. Pay these people to mow the lawn, take out the garbage, fix up the homes, and preserve the asset for the bank.
Lets solve this problem together.
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There Will Be More Strategic Defaults in the Future
July 19th, 2010 categories: Ask the "Specialist", Just "My" Opinion
I predict strategic defaults are going to be the next wave of foreclosures.
It was reported that the financial markets will not recover for another 3 to 7 years.
As I see it Real Estate is the last to recover. I predict it will take 7 to 10 years before Housing will recover.
Why would anyone want to hold onto real estate for that long and continue to take a loss each year?
The argument of “what is the right and ethical thing to do” is no longer a valid argument.
I say the proper thing for people to do is ask themselves “should I continue to throw good money after bad money” or ” should I just pull out and take the loss now” ?
These Economic decisions are beginning to out way ethical or moral decisions and this is why I say we are going to see more strategic defaults.
Many people bought second homes, investment properties and these so called investments are now liabilities instead of assets.
Soon people will learn that true wealth is not measured by what one owns rather how one lives and saves.
A home can be a necessity or an asset when it is paid off in full or it can be a liability and long term debt.
“The Richest Man in Babylon” did not become the wealthest man in his day by spending more than he earned.
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In The End Everyone Looses when Short Sales are Denied.
July 19th, 2010 categories: Ask the "Specialist", Just "My" Opinion
One of my short sales was denied by the bank. The reason was not because I did not have an offer because I did.
But let me start this story from the beginning not the end.
It was July of 2009 that I met with the seller. She purchased 3 condos with an Option Arm loan and paid $170,000 for each unit. The last unit sold in the building was $29,000 and this was a 2 bedroom/1 bath foreclosure sale just like my sellers unit.
I had the unit listed for sale at $50,000 and the “Highest and Best” offer was $35,000 cash offer. The unit was listed for 340 days and was seen by 337,000 people on Realtor.com. This really was my best offer.
Chase Bank was the servicer of the Loan while BOA was the investor. In the end Chase bank would not submit our Cash offer to the Lender because they said it was too late and the file was too old.
Poor Excuse. In the end everyone looses.
- The Bank looses because any offer in the future will be less than what they received today.
- The Seller looses because they end up with a foreclosure on their record.
- The Buyer looses because he does not end up buying something they want.
- The Tenant looses because he has been paying rent and now is being forced to move even though he did nothing wrong.
I am starting to think both Chase and BOA are doing nothing but C-T-A (Covering their Asses) when it comes to the current real estate market.
We need to change that soon.
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Where are all the Foreclosures? Only the Shadow Knows ….
June 14th, 2010 categories: Ask the "Specialist", Just "My" Opinion
How many foreclosures are out there? As far as I can tell “Only the Shadow Knows”.
The new buzz is there is a large shadow inventory of foreclosures yet to hit the housing market.
Keeping this inventory of homes off market helps to stabalize prices of homes in the short term.
Imagine all these homes coming on the market at one time. There would not be enough buyers to absorb the number of homes for sale and this would cause home prices to tumble.
But lets say we hold onto the homes and keep them off market.
The result would be a steady flow of homes for sale and a more steady market and this would be good for the real estate market.
Why because the ratio between home buyers and homes for sale is an important number. This is called the Absorbtion Rate.
If there are more homes for sale than buyers this is called a buyers market. In a buyers market home prices will be lower.
If there are more buyers than homes this is called a sellers market. In a sellers market home prices will be higher.
So the logical thing for banks to do right now is to keep homes off the market until there are fewer homes than buyers. By keeping homes off the market banks feel the homes will be worth more.
In math we were taught the theory of ”two negatives equal a positive”.
I am not sure this is the right position for the bank because we are talking about money here and the value of money does not remain stable over time.
We can see that now in the stock market and in the Euro Zone, and Greece. What was worth a dollar today may not be worth that in the future. So if the bank holds on to a bad asset too long it might be actually worth less. This is a gamble the banks are taking.
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Up or Down Goldman Sachs Wins
April 28th, 2010 categories: Just "My" Opinion, National News/Local News
During the last couple of days I have been hearing the testomony from top executives at Goldman Sachs.
It appears from their testimony that it does not matter whether the market is up or down they will always find a way to profit.
According to Lloyd Blankfein , Chief Exectutive at Goldman, betting against mortgage backed securities that the firm was selling to clients was not a conflict of interest, or unethical.
According to Blankfein and other at Goldman, betting against mortgage back securites was just good business sense for the firm since the firm was hedging against lossess on sub-prime mortgages when they were on the other side of the transaction.
To them Short Selling a Security is just a normal activity for Goldman Sachs and their customers know this and trust them.
Yet would you trust a company when their interests come first before their customers?
It may take months before we see the affects of any financial reform legislation as a result of Golman Sachs behavior.
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TWO DIFFERENT STORIES… HARD TO FIGURE OUT
April 16th, 2010 categories: Just "My" Opinion, National News/Local News
In the Tribune business section on Thursday were 2 articles with 2 different stories and its hard to figure out or who to believe.
The first article was on the front page of the business section ” Illinois Housing Defaults Double” the other was on page 4 of the same section “$3.3 billion profit at JPMorgan tops estimates”.
So here is my question, is JPMorgan making such huge profits? I think the answer can be found in the article on the first page and that would be the homeowner.
Almost 15,000 Illinois homeowners lost their homes to foreclosure this year in the first 3 months. This is twice as many homes that went back to lenders during the same period in 2009.
Clearly there is a disconnect between what is being reported and the realities of the housing market as it relates to homeowners in Illinois.
According to Jamie Diamond, Chase Bank CEO, the US economy is clearly showing signs of improvement.
Well Jamie maybe it is showing signs at your bank with profits up from $2.1 billion in 2009 to $3.3 billion in 2010 but don’t tell that to homeowners who are loosing their homes to foreclosure in Illinois because I do not think they can appreciate what you are saying.
Maybe thats why this news is on the 4th page of the Business section instead of page 1.
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Is the Glass “HAFA” full or “HAFA” empty?
February 26th, 2010 categories: Just "My" Opinion, Short Sales
Will Hafa be a success or failure?
The National Association of Realtors has new numbers on existing home sales for the month of January and they are not good.
The First Time Home Buyer program is due to expire April 30, 2010. How many more months will it last. If home sales are down with the stimulus what will happen when the stimulus is no longer available to new home buyers.
FHA guidelines are changing and many people looking to buy are not going to qualify for FHA loans.
Unemployment continues to be the number 1 problem. If people do not find jobs more mortgage defaults are learching around the corner
Pre-foreclosure (Short Sales) and Bank owned (REO’s) represent 34-39% of all home sales. Yet buyers, agents that I talk to are all frustrated because pending sales are taking too long.
Short Sales can take anywhere from 6 months to a year to close.
On April 5, 2010 HAFA will go into effect. The question is “How many lenders will participate in the program?” Will it streamline the process of Short Sales and Deed in Lieu or just be another beurocracy created by government.
We will have to wait and see if the glass is “HAFA” full or “HAFA” empty.
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HAFA Program Explained …
January 19th, 2010 categories: Ask the "Specialist", Just "My" Opinion, Short Sales
The HAFA program is a logical addition to the HAMP program.
My friend Jafer Hasnain of Lifeline Assets has written an article on the HAFA program and I am glad to share his article here on my website.
Thank you Jafer…
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It May Look Like Steak but Taste Like Beef Jerky.. The ‘Deed For Lease Program”
November 9th, 2009 categories: Just "My" Opinion
Fannie Mae announced a new program on Thursday that may look like steak to some but taste like beef jerky. The program is called ‘The Deed for Lease Program.
‘The Deed for Lease Program”is a temporary solution to the foreclosure problem. The program is for homeowners who DO NOT qualify for a loan modification program but DO NOT want to move from their home.
In this program the borrower voluntarily transfers the deed back to the lender and the lender rents back the home to the borrower at Fair Market Value or no more than 31% of the borrowers gross monthly income.
Doe this sound familiar. It should because the 31% is also used as the criteria for the Home Affordable Modification program (HAMP) program. If Borrowers did not qualify for a home modification program why would anyone think the lender would now rent the same home to some who has defaulted on their mortgage and would not be considered a good candidate for a new loan.
There seems to be a flaw in logic to this plan. It may look like steak, smell like steak, but it taste like beef jerky…
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