January 2009 Archives

The above graph will hopefully make you think about the wisdom of the government creating a new stimulus package and printing more money.  If you are so inclined, the official definition (coffeee required) can be found here, but for those of us who took basic economics in college I will simplify this to say the chart above represents the US money supply.  The last date shown is January 14, 2009.  The climb up begins in September 2008.

Does anybody remember what a really bad economy contains in addition to unemployment?  Yes..it is called inflation.  If history tells us the money supply has always taken a slow gradual slope, and in the last four months we have nearly quadrupled the scale of money being printed by the government (by the way..it appears to me the increases do scale pretty closely to government deficit funding)..then how much longer before our weakened currency starts to make it a lot more expensive to buy anything?

So, if the last stimulus package printed up $700 billion and the chart did its Mount Everest..what will it look like after Obama's new $825 billion package, loaded with pork, passes?  I guess we could compare it to a rocket launch.   And when conservative (ha) papers like the San Francisco Chronicle decide it is time to question the wisdom of the governemnt investing $200 million for grass seed on the National Mall, and $276 million to fix government computer systems (think about it...are these the same computers helping are wise leaders to make decisions?).  Maybe the $50 million for the National Endowment for the Arts or the hundreds of millions on contraceptives will make you get involved.  Finally, because I could go on and on about this, if you really believe that government will solve our problems..not your own initiative but Uncle Sam..you will be delighted to learn:   

Some of the biggest winners in the package are federal agencies, which would see a huge infusion of money. The Social Security Administration would get $400 million to replace its 30-year old computer system. The Agricultural Research Service would receive $209 million for deferred maintenance at its facilities. The General Services Administration would get $600 million to replace its older fleet of vehicles with new alternative-fuel cars and trucks.

I really think it is time we start to recognize what we are doing to the future and acknowledge that the leaders the majority have elected clearly have us on the path to socialism with total disregard for basic economic principles.  The Keynesians have never had it so good as they do now!  I am afraid our children will be the ones to pay the price for the party that is about to start.

Oh..and I wonder how many of the 55,000 who lost their jobs yesterday feel about these wonderful job creation opportunities?  What do you think?  Add a comment please. 

A little embarrassing and a lot of truth can be found in this blog post by David C. Curry titled "The REO Problem".  I think Mr. Curry has correctly idenitified many of the issues that buyers face when purchasing a REO property, and also the challenges facing a buyers agent.  At the same time, we find that many problems occur because the banks demand that these real estate transactions occur like any legitimate "many thousands of dollars" contracted transaction would normally occur. 

Not to make a dig at traditional agents trying to sell a REO property, but there seems to be a practice in non-REO sales where deadlines float.  The first thing I tell any agent wanting to sell our properties is that deadlines are deadlines and dates are not established as moving targets.  Still, it seems that everybody on the buyer's team seem to have the attitude that we can easily extend deadlines.  We can't..the banks have to and guess what they like to do?  Invoke the per-diem clauses for penalties.  Then the REO broker gets blamed because we did not influence our client to adjust their deadline.

Go try and influence Chase..see how you do with that...

We actually have posted a list of FAQ's for agents and buyers..http://www.buywilmothreo.com/.  We publish this on every MLS sheet and it is a tab on our website.  Still, I daily get 3-5 questions from agents that are easily answered from the site.

I agree..we all could use a little compassion in this business.  I preach it in ours.  But compassion does not replace responsibility.  Sometimes Buyers Agents are to busy focusing on selling and not the importance of the legal, fiduciary responsibility they have to their client. 

Both sides of the transaction can do better.  Mr. Curry writes a great piece identifying common issues but not suggesting that the Buyer's Agent could do better also.

In a sign that they intend to be the leader in creative solutions and alternatives to the foreclosure tsunami, Fannie Mae this week led the news with the announcement of a policy to allow tenants residing in foreclosed properties to remain until a sale can be consumated.  The National Real Estate Owned (REO) Rental Policy will allow qualified tenants (meaning they can pay the market rent) to stay in their homes throughout the foreclosure marketing process.  Fannie has also continue their suspension of foreclosure actions until Feb 1 in order to try and identify all of these potential properties.

From the Fannie Mae press release:

"This policy will allow qualified renters to remain in Fannie Mae-owned properties should they choose to do so, mitigate the disruption of personal lives that foreclosures can cause and help bring a measure of stability to communities impacted by high foreclosure rates," states Michael Williams, Fannie Mae's chief operating officer.

The new policy applies to renters occupying foreclosed properties at the time Fannie Mae acquires the property. Renters occupying any type of single-family property will be eligible, including residents of two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing.

Eligible renters will be offered a new month-to-month lease with Fannie Mae or financial assistance for their transition to new housing should they choose to vacate the property. The properties must meet state laws and local code requirements for a rental property.

While the company markets the properties for sale, Fannie Mae will manage the properties through a real estate broker or a property management company. The company will not require security deposits to be posted in connection with this program.

It will be interesting to see how many tenants are still occupying the foreclosed properties and are able to take advantage of this program.  Even if it is a very small percentage, the compassion being shown in offering this alternative is a huge improvement over the days we would tell the renting mother and her new born that the rent they had been paying was not being used by their landlord to pay the mortgage and in fact, they now had one week to find a new home.  The landlord scum who operated in this fashion (and it happened all over the country) should have more penalties than just a foreclosure on their record.  Kudos to Fannie for implementing a program that is not in their normal established operations, but does fit appropriately in their stated mission of providing stability to the U.S. housing markets.

Cramdowns..get ready to hear this word a lot over the next few weeks.  What was supposedly a very bad idea under all previous proposals has reared its ugly head with not only the support of PE Obama (not surprizing..remember we elected for change and change is socialism in this case), but also Citigroup has jumped on the bandwagon.  This development of course makes absolutely no sense unless you start to put two and two together.  Maybe the TARP funds have conditions?  The proposal Citigroup hated months ago now they back?  Huh?

Here is what the Wall Street Journal has to say..

Until recently, Citigroup had fiercely opposed proposals to give bankruptcy judges latitude to change the terms of mortgages. Its about-face comes after the federal government has pumped $45 billion into the company since last fall. The government is now keeping the company on a tight leash.

As written, the bill would allow judges to:

-Lower the principal amount and interest rate on mortgages

- Extend the length of repayment to lower monthly payments

- Replace variable interest rates with fixed rates

- Waive the bankruptcy counseling requirement for homeowners facing foreclosure to get homeowners in court faster

- Allow judges to waive prepayment penalties

- Maintain debtors' legal claims against predatory lenders while in bankruptcy

There is so much to say about this legislation and the horrible direction we are moving as a society.  I will be writing about this legislation regularly as I find it the most shocking event yet in our economic mess.  Simply stated..cramdowns will create a whole new level of risk that will affect the mortgage market.  The ability of a Judge to unilaterally wipe out some amount of a mortgage obligation will be factored into lending.  That is how markets work.  This new risk will make it much harder for the border line borrowers and also the government guarantee programs (FHA and VA) to exist as we know them. I have people much smarter than me explaining this in future articles. 

I guess the government will probably be making direct mortgage loans next when they realize the housing market is still not recovering.  Remember, recessions end when housing is growing.  It has happened throughout history.  Housing is the first foundation of growth and recovery.  Of course, we can't assume anybody really understands economics anymore. 

Because I am afraid that the news of the day may take me over the edge of being politically correct..today lets just be funny..shall we?  If this offends you well then I suggest you stick with NPR...

Another example of money being routed into th epublic sector in order to save the private sector. Want to bet that this is not a boondoggle waiting to happen?  (note definition: Boondoggle, in the sense of a term for a project that wastes time and money, first appeared during the Great Depression in the 1930s, referring to the millions of jobs given to unemployed men and women to try to get the economy moving again, as part of the New Deal. ...wilkipedia.org)

HUD: $28M TO HELP 3 FLORIDA CITIES

A federal agency is giving more than $28 million to three Florida communities that have been slammed by high foreclosures and dropping home values. The Department of Housing and Urban Development says the money can be used by state and local governments to buy and redevelop foreclosed properties that could be sources of blight in neighborhoods. HUD approved about $19 million for Hillsborough County, which includes the city of Tampa. The housing agency also approved about $7 million for Cape Coral and about $2 million for Fort Myers. Both are in southwest Florida. According to RealtyTrac, the Cape Coral-Fort Myers area was first in November foreclosure-related filings, with one in every 59 housing units receiving one.

© 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

I think Lehigh Acres is going to feel left out...see earlier posts...

In a rare move that actually makes sense to me, Fannie Mae is tightening their rules for lending on condominiums ONLY in Florida!  These moves will likely further hurt the resale market for condos in Florida, removing many investors out of the equation while in the long run, strengthening the Associations that own and mange these properties.

One of the big problems in Florida condo projects today is defaulted owners not paying their dues and the Association's running short on cash..leaving just enough for basic expenses and eating through reserves.  It is a well documented fact that owner/occupants, followed by second-home owners are much more likely to not default and to keep their dues current.  Lets face it, who wants to go use the pool or tennis courts knowing that the other residents are likely to hit you up or look at you with scorn for not paying your dues?

To better protect itself from future losses, Fannie said it will now require all loan applications for units in new and existing condo projects in Florida to go through an intensive review process by in-house underwriting teams to evaluate the building, its finances and local market conditions.  As part of these changes, investor minimum down payments will be 15% and second home owners to be 10%. 

These additional rules, from America's largest lender, will likely add to the time for approvals, and possible further hurt weak Associations.  It may even be in an Association's best interest to consider a assessment to strengthen their financials just to make it easier for the most responsible owners to be able to obtain financing.  But we are at a point where responsible lending makes sense.  The recovery of th ehousing market will lead America out of this recession and just the fact that Fannie realizes it needs to make money available to sell vacant cono buildings in Florida is a healthy first step.

Like so many things..my writing is an extreme simplification of the matter.  If you are interested in reviewing the Fannie Mae Announcement 08-34 for all the details...here is the link to the document.

In a rare move that actually makes sense to me, Fannie Mae is tightening their rules for lending on condominiums ONLY in Florida!  These moves will likely further hurt the resale market for condos in Florida, removing many investors out of the equation while in the long run, strengthening the Associations that own and mange these properties.

One of the big problems in Florida condo projects today is defaulted owners not paying their dues and the Association's running short on cash..leaving just enough for basic expenses and eating through reserves.  It is a well documented fact that owner/occupants, followed by second-home owners are much more likely to not default and to keep their dues current.  Lets face it, who wants to go use the pool or tennis courts knowing that the other residents are likely to hit you up or look at you with scorn for not paying your dues?

To better protect itself from future losses, Fannie said it will now require all loan applications for units in new and existing condo projects in Florida to go through an intensive review process by in-house underwriting teams to evaluate the building, its finances and local market conditions.  As part of these changes, investor minimum down payments will be 15% and second home owners to be 10%. 

These additional rules, from America's largest lender, will likely add to the time for approvals, and possible further hurt weak Associations.  It may even be in an Association's best interest to consider a assessment to strengthen their financials just to make it easier for the most responsible owners to be able to obtain financing.  But we are at a point where responsible lending makes sense.  The recovery of th ehousing market will lead America out of this recession and just the fact that Fannie realizes it needs to make money available to sell vacant cono buildings in Florida is a healthy first step.

Like so many things..my writing is an extreme simplification of the matter.  If you are interested in reviewing the Fannie Mae Announcement 08-34 for all the details...here is the link to the document.

Something about New Years makes it one of the most shallow of holidays..in my opinion.  Born of the need for new beginnings and a reason for change (hummm..this sounds vaguely familiar.  Like new President familiar.) I think of New Years as a chance to:

Make resolutions that few can remember in a month

Party silly and regret it the whole next day

Catch up on sleep

I use to really love New Years Day for the college football games and their closeout of the season importance.  Now, the games on New Years seem fairly insignificant (Cinncinati and V-Tech anyone?).  There is such a television sports viewing void that now we even have outdoor hockey from the NHL as an option. 

So..frankly New Years is a date on a calendar and one that does not even seem that much fun anymore.  Unless standing in Times Square in 15 degree temps for 14 hours floats your boat.

What is there to like about New Years?

A chance to commit to some personal reflection of your blessings and how to improve your relationships in the next twelve months.

Use the New Years period (the week before and week after) to really plan your finacial goals for the next twelve months.

Catch up on some sleep? Take a brisk walk? Eat healthy.

Learn a new technology...a skill that you can use in your business and have fun at the same time.

Instead of wondering how many days it takes to recover from a hangover..why not start a new tradition?  Use the holiday for your own self improvement..not just a resolution to start once it is all over.