Archive for the 'Just "My" Opinion' Category
Is The Glass Half Empty or Half Full?
September 30th, 2009 categories: Just "My" Opinion
When it comes to predicting the state of the economy and the real estate market its like looking at a glass of water.
Is it half full or half empty?
Neither.
We are no where near a recovery nor are we at the bottom.
STOCK MARKET:
In the short run the stock market will get better before housing .
People who have lost a lot of personal wealth are anxious to make up some of that loss.
With low interest rates on CD’s, Treasuries, The Stock market appears to be half full.
REAL ESTATE
Real Estate is another story. Real estate in general lags behind other markets and with unemployment data at 10% nationally I think the Real Estate Market glass is half empty.
I predict we will see more foreclosures as more people are going to be unable to modify their loans or pay their mortgage while unemployed.
I think home prices will continue to decline because of the increase in foreclosures.
I think there will be fewer home buyers due to tighter credit, or if the First time Home buyer credit is not renewed or if FHA runs out of money.
According to the Home Builders Association there will be fewer new homes being built due to lack of credit and financing.
I would love to hear your comments….
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If I Had X-Ray Vision Like Superman “What Would I See?”
July 22nd, 2009 categories: Just "My" Opinion
If I had X-Ray Vision Like Superman “What would I see behind closed Doors?”
Loss Mitigators playing with Paper Airplanes?
How many times have you had re-fax a file because the Loss Mitigator says they never received it?
Bankers trying to manipulate figures on the final HUD-1 Statement?
Or Investors just playing a game of Risk ? 
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Unemployment in IL is the Number 1 Problem …
July 8th, 2009 categories: Just "My" Opinion, Local Markets
Every day I get asked the following question ” How is the Real Estate Market?” and then the follow up question is “When do you think it is going to get better?”
These are the two most difficult questions to answer because I do not have a crystal ball and I am not able to predict when the market will get better.
All I can say is the number 1 problem we face in Illinois appears to be the rise in unemployment through out our State.
According to the most recent May figures, the unemployment rate is now 10.1 percent. According to the Department of Employment Security there are now 671,400 unemployed people in Illiniois.
The State of Illinois has lost more jobs that it is creating. In fact 290,800 more people have lost their jobs since the beginning of the recession.
According to a recent Chicago Crains article dated April 9, 2009, Illinois companies plan to cut 2, 486 jobs.
Android Industries, LLC, an engine manufacturer, plans to cut 273 jobs.
AHS Food Company, a soybean processing company, plans to cut 246 jobs.
HSBC Finance Corporation, plans to cut 214 Illinois jobs
Northfield Laboratories announced 69 jobs are being cut.
RR Donnelly, announced 118 jobs are being cut
Motorolla announced 74 jobs are being cut in Libertyville.
As more people loose their jobs there will be a a rippling affect in the Illinois housing market.
People who loose their jobs will be unable to pay their mortgage on their homes and will not be able to refinance their mortgage or modify their loans with their lender.
I predict more home foreclosures and a longer recovery to the Housing Market in Illinois.
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Does Anybody Want a Free Glass of Lemonade?
June 18th, 2009 categories: Just "My" Opinion
As I reviewed the Home Affordable Modification Program (HAMP) in more detail I thought of another analogy to help people understand the concept “Mortgage Forebearance”.
As a child my first business enterprise was a “Lemonade Stand” in front of my house.
I stood outside selling lemonade to people as they parked their cars and went to the beach near my house.
My stand look something very similar to the picture you see in this blog.
If you look real close to the picture you will see children standing in line with money and the very last boy in line is standing there without anything.
He appears to be looking for something. Maybe he thinks money will fall from the sky. I don’t know about you but I think he plans on asking for a free drink in the form of I.O.U.
Well a ” Mortgage Forebearance is also a form of an I.O. U. 
instead of Lemondade it’s your home.
Well back to my analogy. If I were the operator of this lemonade stand and I gave this boy a free glass of lemonade in the form of an I.O.U. what are the chances that I would collect my money after the glass is empty? Not very good. As a entrepreneur I expect those losses.
Now back to the homeowner who has to agree to a “Mortgage Forebearance” Let’s say this homeowner agrees to sign this I.O.U. with the bank and wants to sell his home in 5 years and the value of the home is less than the amount he has agreed to pay back to the bank in the form of the I.O.U. what is the banks chance of collecting on this I.O.U.
I think it is pretty much like the boy in the lemonade stand.
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Banks Should Stay Out of The Real Estate Business…
June 16th, 2009 categories: Just "My" Opinion
I have been a realtor for over 10 years it is my opinion that Banks Should Stay out of the Real Estate Business and do what they do best LEND MONEY.
I recently had an experience doing a short sale where I had 7 offers and I could not get the bank to accept the highest and best offer we had which was over list price.
If you have been in this business long enough you know “Your first offer is usually your best offer” so why does the bank think their property is worth more.
I know for a fact that as soon as they put the property back on the market there will be a price reduction and they will get less for the property.
So again I say to them “Do you want to be in the Real Estate Business or Lending Business?”
Remember another cliche” Time is of the Essence” or in the Finance business ” Time Value of Money”. Money received today is worth more than money received in the future…
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Banks Need A Clean Load of Laundry
May 20th, 2009 categories: Just "My" Opinion
When I thought about writing an article that would try to describe how we got ourselves into this financial mess I thought about the analogy of going off to college with a clean load of laundry.
Imagine the real estate market 30 years ago.
Back then, if you wanted to buy a home you would go to the community bank or savings and loan and ask them to give you a loan. You would give them all of your personal financial information. They would qualify you for a loan based on the value of the home, the purchase price, how much you have in savings, how much you earn on your job.
Giving you a loan was pretty clean and neat. The bank would hold on the mortgage and receive monthly payments from you until the loan was paid off.
Our banks grow up and go off to college and look what happens. The once neat pile of laundry turns into room full of dirty laundry.
Banks started to realize that they could not do more loans if they did not hold onto your mortgage for the full 30 years. So based on your credit, the value of the asset, they bundled the loan with other loans like your to investors.
This is called repackaging cash flow producing financial assets into Securities.
The banks soon found out there were many people interested in buying mortgage backed securities than there were loans. So here is what they did. They started to mix the loans together AAA rated loans with Subprime loans. The pile of mortgages kind of looks like our dirty laundry pile above and here is the problem we have today.
We need to sort out all of the laundry. We need to put whites with whites, color with colors, those that need to be washed as seperates and so forth. The rest we take to the dry cleaner.
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You can Put Lipstick on a Pig but…
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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What’s Wrong with Obama’s Plan
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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Let’s Make A Deal or Sympathy for the Devil
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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