The real estate industry is going nuts. We all see the news, read the horror stories and witness giants such as CITI and Countrywide scramble while their stock prices tumble and tumble and tumble...
Rust Belt city mayors recently met to discuss the mortgage mess. With all of the media hype, government officials are calling for changes. They are calling for help. The question is... will help arrive?
I hope not. Here is why. The mortgage mess is due to a few factors.
1. Lack of Consumer Education. Borrowers were told two things:
-Your credit will improve. This is true IF you embrace responsible spending.
-Your home will appreciate. Long term, this is always true. Short term, there are no guarantees. This is especially true for borrowers who didn't treat their home as an investment.
2. Greed.
-Wall Street was getting rich. Can you imagine 1% of hundreds of billions of dollars? -Brokers. While Wall Street was getting fatter than fat, individual mortgage brokers seized the opportunity to gouge clients on their loans.
-While 1% of hundreds of billions is hard to imagine, a $10,000 profit on a single closing hits a little closer to home.
3. Government -A president who wants to increase home ownership (Great principle, but the means to this end has proven errant).
-Greenspan. The jury is still out, BUT interest rate cuts made unaffordable homes, very affordable (for the time being).
Looking for solutions? Check out the next post.
Showing posts with label Blame Game. Show all posts
Showing posts with label Blame Game. Show all posts
Nov 28, 2007
Solutions....
Heads up... This post doesn't present a warm and fuzzy outlook filled with easy solutions. Most problems aren't solved the easy way.
First of all, let's start with solutions that are flat out wrong.
1 - Wall Street. Just take a peek at Citi & Countrywide stock prices. Tell me how bad any investor wants back in.
2 - Expanded Underwriting.
1. The reason this entire mess exists is a lack of underwriting standards. Essentially, people who do not qualify for loans received them.
Wall Street learned its lesson. It's done.
So should the government jump in and take on all of these bad loans? NO WAY!
I completely agree with the government expanding FHA standards to some extent. For example, people who were never late on their mortgage prior to the rate adjusting deserve to refinance. However, everyone does not deserve to get bailed out!
So what is the answer?
TIME! There is a ton of inventory on the market. There are too many builders. There are too many borrowers who simply can not afford their home. There is a lot of downward pressure on the housing market. We are not in a short term market. It's a buy and hold market.
My advice to you.
Get off of craigslist. Start working with a qualified Realtor. Make them show you some comparable sales. You can get a great deal. Buy the cheapest house in the best neighborhood and reap the rewards!
First of all, let's start with solutions that are flat out wrong.
1 - Wall Street. Just take a peek at Citi & Countrywide stock prices. Tell me how bad any investor wants back in.
2 - Expanded Underwriting.
1. The reason this entire mess exists is a lack of underwriting standards. Essentially, people who do not qualify for loans received them.
Wall Street learned its lesson. It's done.
So should the government jump in and take on all of these bad loans? NO WAY!
I completely agree with the government expanding FHA standards to some extent. For example, people who were never late on their mortgage prior to the rate adjusting deserve to refinance. However, everyone does not deserve to get bailed out!
So what is the answer?
TIME! There is a ton of inventory on the market. There are too many builders. There are too many borrowers who simply can not afford their home. There is a lot of downward pressure on the housing market. We are not in a short term market. It's a buy and hold market.
My advice to you.
Get off of craigslist. Start working with a qualified Realtor. Make them show you some comparable sales. You can get a great deal. Buy the cheapest house in the best neighborhood and reap the rewards!
Aug 29, 2007
Real Estate's Fault Line
There is plenty of blame to pass around concerning who is at fault for the real estate bust that is making headlines almost every day in major publications, nightly news and coffee shop chit chat.
I’m going to boldly be a complete pansy and just spread the blame around to everyone.
· Consumers: Know the terms of your loan! Can you afford the monthly payments? Is your loan going to adjust? If so, when? What is the margin? What is the cap? Know your worst case scenario!
· Mortgage Brokers: Keep your buyer’s interests and welfare the number one priority! Very simple. Ask some questions. Educate buyers on loan products. Be a resource!
· Wall Street: Don’t demand loans that aren’t proven performers!!
Whoa! How on earth does Wall Street fit into the mix? Here is how the loan process works.
1. Loan officers take loan applications and send them in to mortgage companies/banks which underwrite (review) the file & fund the loan. At this point, the consumer has closed on their home and the loan process is completed, right?
2. Not even close! Most banks are not portfolio lenders. In other words, most banks bundle millions/billions of dollars in loans sell them as mortgage-backed securities.
3. At this time, the new owner of the mortgage can use the securities as collateral to issue bonds for financing other deals! Homeowners pay the interest that covers interest.
4. These securities are rated by risk groups (tranches) for investors. Riskier loans pay more.
Now you can really see where the demand for risky loans came from. A LOT of people made a ton of money. Mortgage brokers, banks and Wall Street Investors.
The problem occurred when homeowners were unable to make payments for various reasons. Suddenly, the money needed to pay bond interest is not there! At this point Wall Street starts slamming doors closed. Mortgage companies have no one to sell their loans to and lack the capital to hold onto billions upon billions of dollars in mortgages. Doors close! Companies disappear over night.
People who were eligible for loans 9 months ago can’t even come close to qualifying today. What does this mean for Denver??
We have a huge inventory of homes on the market right now. We have fewer eligible buyers. The worst is not over in the housing market! We’re looking at a couple more years of slow real estate.
Time Magazine recently did a nice article on Denver real estate. Check it out.
http://www.time.com/time/magazine/article/0,9171,1653635,00.html
I’m going to boldly be a complete pansy and just spread the blame around to everyone.
· Consumers: Know the terms of your loan! Can you afford the monthly payments? Is your loan going to adjust? If so, when? What is the margin? What is the cap? Know your worst case scenario!
· Mortgage Brokers: Keep your buyer’s interests and welfare the number one priority! Very simple. Ask some questions. Educate buyers on loan products. Be a resource!
· Wall Street: Don’t demand loans that aren’t proven performers!!
Whoa! How on earth does Wall Street fit into the mix? Here is how the loan process works.
1. Loan officers take loan applications and send them in to mortgage companies/banks which underwrite (review) the file & fund the loan. At this point, the consumer has closed on their home and the loan process is completed, right?
2. Not even close! Most banks are not portfolio lenders. In other words, most banks bundle millions/billions of dollars in loans sell them as mortgage-backed securities.
3. At this time, the new owner of the mortgage can use the securities as collateral to issue bonds for financing other deals! Homeowners pay the interest that covers interest.
4. These securities are rated by risk groups (tranches) for investors. Riskier loans pay more.
Now you can really see where the demand for risky loans came from. A LOT of people made a ton of money. Mortgage brokers, banks and Wall Street Investors.
The problem occurred when homeowners were unable to make payments for various reasons. Suddenly, the money needed to pay bond interest is not there! At this point Wall Street starts slamming doors closed. Mortgage companies have no one to sell their loans to and lack the capital to hold onto billions upon billions of dollars in mortgages. Doors close! Companies disappear over night.
People who were eligible for loans 9 months ago can’t even come close to qualifying today. What does this mean for Denver??
We have a huge inventory of homes on the market right now. We have fewer eligible buyers. The worst is not over in the housing market! We’re looking at a couple more years of slow real estate.
Time Magazine recently did a nice article on Denver real estate. Check it out.
http://www.time.com/time/magazine/article/0,9171,1653635,00.html
Jul 11, 2007
What a Mess!
http://realestate.msn.com/buying/Article_busweek.aspx?cp-documentid=5084782>1=10233
I didn't finish reading this article but it talks about people who are leaving foreclosures in horrible condition that may include human and animal feces, pets without food or drink, flooding, mold, etc....
People facing foreclosure don't care any more, but are foreclosures causing people to trash their homes? Since its the mortgage industry's fault that there are record numbers of foreclosures, one can logically assume that the mortgage industry is responsible for suffering pets and destroyed properties.
I don't think so.
These are probably the same people who have trashed every apartment or house they have ever lived in. Lax lending standards allowed them to buy a home they probably shouldn't have and now everyone is paying the price. This time, its the bank and new owner. In the past, it was landlords who were stuck with all of these bills.
Don't blame foreclosures. Blame the people who lack the character or common decency to take care of their animals and property. You don't have to be rich to give your pet away. You don't have to be rich to take care of your property.
I didn't finish reading this article but it talks about people who are leaving foreclosures in horrible condition that may include human and animal feces, pets without food or drink, flooding, mold, etc....
People facing foreclosure don't care any more, but are foreclosures causing people to trash their homes? Since its the mortgage industry's fault that there are record numbers of foreclosures, one can logically assume that the mortgage industry is responsible for suffering pets and destroyed properties.
I don't think so.
These are probably the same people who have trashed every apartment or house they have ever lived in. Lax lending standards allowed them to buy a home they probably shouldn't have and now everyone is paying the price. This time, its the bank and new owner. In the past, it was landlords who were stuck with all of these bills.
Don't blame foreclosures. Blame the people who lack the character or common decency to take care of their animals and property. You don't have to be rich to give your pet away. You don't have to be rich to take care of your property.
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