20dollar

Barney Frank's Bad Housing Loans

'All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices. A manual issued by the Federal Reserve Bank of Boston advised mortgage lenders to disregard financial common sense. "Lack of credit history should not be seen as a negative factor," the Fed's guidelines instructed. Lenders were directed to accept welfare payments and unemployment benefits as "valid income sources" to qualify for a mortgage. Failure to comply could mean a lawsuit.'

I witnessed this crap first hand.

From about 2003 to 2006, I had tenants (low income, mostly black) that could not even pay their rent giving me notice to vacate. Mind you these people had credit scores in the 500's. Meaning they did not pay most of their bills. Yet they were being approved for 100 plus percent financing? Astounding!

What did they (the government, in their infinite wisdom) think would happen? That somehow, because these people were now "home owners", they would magically change their behavior and actually pay their bills on time? (or even at all??)

History has proven how foolish this policy was...

Homebuyer Nirvana: Low Prices, Low Rates

Interest rates are low on Governement products only (Fannie, Freddie, FHA). The rest of the lending market across all fronts-small business, commercial, residential is in a funk like I have never seen before.

On a good day I might be able to get 60% Loan to Value on a residential rental at 7.75% full recourse. Forget about trying to pull cash out with a refi, again unless the LTV is ridiculously low. (non government products)

Then there is the appraisal issue. Appraisors are so conservitive (scared) right now, most appraisals are coming in very low. Not to mention most of the comps are distressed sales. (even with government products)

Despite all of these challenges, I am still buying right now. There are deals that make sense even with these onerous terms. Of course you have to be selective and NEVER buy assuming the property will appreciate. If it does, it is gravy. ALWAYS buy for long term cash flow...and there are plenty of properties to choose from right now that did not make sense just 2 years ago.

When lending does finally loosen, the economy will be back on track. Appreciation/Inflation will once again reign.

Plan Orange for Mortgages: Immolate the Crisis

Pitchingpennies,

I have been there done that. How do you think I have managed to become so successful?

I have been in the situation of being upside down on real estate and chose to sell, loose money and move on. It not only was morally the right thing to do, but it ensured there were no dings on my credit to show lenders in the future that I am an excellent credit risk-no matter what happens to the secured asset.

I do beleive there is a moral obligation to pay your debts as you agreed to-whether or not it is your son/daughter etc. And whether or not the secured asset looses value. There never have been any guarantees that Real Estate always increases in value. Oh, but if it does not, it's OK to let the bank take the loss (ya know they have a bunch of money any way) and you are on the hook for nothing?!?! That is simply wrong.

I treat any business partner/lender as if they were my son or daughter. Apparantly you and the majority of America doesn't. Hence the reason we are in the mess we are in now.

Now if there were truly usurious terms that were not fully disclosed, I would probably pursue legal action against that lender. Although I have not had that problem yet, and I have had many, many loans, lines of credit etc. A large percentage of the borrowers now defaulting were not subjected to usurious terms.

There needs to be an enforcable full recourse clause in the contract. That way people may think twice about defaulting because they actually might have to pay it back. They sure don't seem to think it is morally wrong!



On Jul 05 07:23 PM pitchingpennies wrote:

> 20 Dollar,
>
> Obviously you're a real estate hotshot and still believe the asset
> class is a winner. I also note that some of your previous comments
> note that the Banks were taking away your credit lines. Biz is always
> great when you are liquid, although you must be somewhat les liquid
> from these actrions by your Bankers. Good to hear your local bankers
> (small b) are still around to support your efforts. I hope you have
> a big stack in reserve, congtratulations on your success of 25 years.
>
>
> You do however need to realize that a note secured by real estate
> is a contract. There is nothing moral or immoral about it. The terms
> may be unconscionable or not, but there are options and remedies
> written into the document. Both parties have options. As to your,
> and others, rants about "irresposible homeowners" you really need
> to get off your moralistic high-horse. Markets and situations change,
> which has been more than obvious over the last several years. Both
> parties, Lenders and Homeowners, entered into to these contracts
> to benefit themselves economically, so your moral obligation argument
> does not hold water. Now, if you were personally lending to your
> son, I might agree with your feeling of betrayal.
>
> Nonetheless, I wish for you that your real estate appreciates, your
> access to credit remains plentiful, and that your stack never gets
> too short to experience a less than blissful night's sleep.

Plan Orange for Mortgages: Immolate the Crisis

How about plan Green?
This plan actually would give only the responsible borrowers a write down to 80% of the current value of their real estate. Whether or not they have a mortgage.
There are alot more of us than the irresponsible types that chose to overleverage or simply not make payments because they are "upside down". I guarantee this would jump start the econmy immediately, and would soon enough weed out the people that didn't deserve to be home owners in the first place!
How about we add to this full recourse. meaning there would actually be consequences if you choose to walk away from your mortgage!

U.S. Banks Halt New Mortgage Lending

True, if it is not Fannie, Freddie or FHA, banks are extremely conservative with their lending.

I am a Real Estate investor of 25 years. I am perfect in every way on paper (800+ FICO, plenty of documentable income, a lot of liquid cash in the bank, and a very strong net worth). On a good day I am lucky to get 65% LTV (non Fannie, Freddie, FHA) on a non owner occupied property. (banks really don't like these as they are perceived to be risky)

I used to have personal relationships with 9 different banks. Because they knew me, they were able to lend to me on reasonable terms. Now, out of the 9 that I have done business with for over 20 years, there are only two that will work with me. (or at least quote terms that are not laughable) That's how bad things really are.

Wells Fargo out the blue took away a large credit line recently. Their reason? "For my protection as a customer" You have got to be kidding me!

I called them and got the run around. They informed me I could re apply! Again, mind you I am perfect in every way and have never ever been late on a payment to anybody EVER IN MY LIFE!

Then the same crap just happened with Inter Bank. They took away a substantial line of credit from me for no reason. Got the same run around from them!

So against my better judgement I have maxed out my additional credit lines with the big banks-Chase, Bank of America, US Bank before they take them away as well (I will say right now they are cheap-they are all indexed with prime). I have not done this with the smaller local lenders that know me however. I have been assured by the president in both cases, they would NEVER pull a stunt like that on me-but I'm not holding my breath.

This why the economy is in the tank!

Creating Debt to Reduce Debt Doesn't Work

The only solution the government has now is to print more money and inflate our way out of this(which they are already doing). Giving the illusion that housing prices have rebounded (not accounting for inflation of course). But the masses won't know any better and will be duped into beleiving every thing is OK as they anxiously await to see who the next American Idol will be.

Commercial Real Estate Is Plunging

I am getting excited just thinking about the good deals to come in commercial real estate!

The cycle has begun and it will soon be time to buy. (if you have cash and/or a good banking relationship because attractive financing will be difficult to obtain)

Not only will vacant buildings be cheap, but long term "A credit tenant" buildings will also be cheap as the owners will be unable to refinance their debt at today's conservative terms. This will usher in a tsunami of forclosures, putting even more downward pressure on prices.

I see cap rates (on long term A credit tenant buildings) coming up to the double digits in the very near future.

Brave Home Buyers and Other Consumers

I appreciate all of the people like you(who made the comments) who continue to be negative. It will just prolong this BUYING OPPORTUNITY OF A LIFETIME FOR ME!

I have been a real estate investor for over 25 years. Let me tell you-there has never been a better time to buy. So, despite all the naysayers and gloom and doomers, I am buying! And, mark my words, we will see hyper inflation soon, making real estate one of the best hedges.

Now Is the Time to Consider Investing in Multi-Family Housing

I have owned Multi Family for over 20 years. Singles, duplexes, Fourplexes, on up to large Apartment buildings. I have made money on every single one of these properties. Some of them caused me way more greif/headaches than others.

Hear is what I have learned. Bottom line. Stick with quality property/location at the right price and you will have quality tenants (again for the right price) and building will practtically run itself. What I like to call Auto pilot.

I will say I sold most of it and traded into Commercial Property. Once you get a taste of a good commercial property, it is very difficult to get excited about Multi Family. However, I have just recently bought a few duplexes in great areas for the right price(I mean REALLY RIGHT or I wouldn't have bought them)

So, is it a good time to buy Multi Family? It depends. In my area, (Northern CA) the deals are on singles, duplexes, and fouplexs-not on the larger complexes YET! I do believe that is about to change...

Low Housing Start Numbers: Good News for Real Estate

Properties priced over FHA limits simply are not selling or are selling at HUGE discounts. Private (non government insured money) is very very difficult to get.

Oh and don't forget about "non-owner occupied properties". I am lucky to get 65% LTV on my rentals right now (again private money). It makes it tough for me to pay top dollar with leveage that low. Not to mention my liquidity is squeezed.

So unless something is screaming "buy me" right now, I am not buying. I will mention however, I have purchased a few as of late. They were not only screaming, they were shreiking "BUY ME!!!". So I did. 65% LTV on properties I can buy for 40 cents on the dollar works for me.(especially when they cash flow like crazy).


So I guess it's not all bad if you have a some cash to play with right now...

New Cars, Mortgages and Race

Sorry, I don't buy it.

It is a fact that minority credit scores are lower than others.

Lenders were mandated to make loans in minority neighborhoods or they would loose access to funding or have their charter dropped. Because of this easy money, the bubble was hyperinflated in the poor neighborhoods. With so many marginal credit buyers the crash was even more intense. Leading to the "snowball" effect-a viscious downward spiral.

Lets not forget about copper theives, vandalism and City "code compliance". Once these properties get trashed, (which they almost always do when they go vacant in a poor minority neighborhood) the city comes in and basically says you have to bring the old house up to brand new code in 6 months or they will bulldoze it. Rendering the house virtually worthless-further depressing the surrounding comps.

There are parts of Mpls St. Paul where homes were selling upwards of 300,000 that can now be bought for 5,000-10,000. Compliments of the copper theives, vandalls and city policies.

I guess I am rambling a bit. But what I am trying to say is that there is much more to it than just race.

Wall Street Breakfast: Must-Know News

I had eggs and bacon for breakfast this morning, but not on Wall Street. It was on main street.

Usually there's a wait but today I was one of 3 people in the entire restaurant.

Thanks for making my wait for breakfast virtually nonexistent Wall Street!!!

Is This (Finally) the Bottom? Part III

I agree that we are at or near the bottom. I have been a real estate investor for over 25 years. I have recently purchased 3 investment properties, all of which make sense. ( Cash flow )

It is at this point that real estate finds equilibream. If anything, we may be over correcting. ( Prices falling too low ) So with prices where they are today, i will be buying quality properties that pay for themselves. I believe there is a 99.9% chance that these properties will appreciate dramatically in a reletively short period of time.

There has never been a better time to buy!!!

Quick Clarification on 'Mortgage Slaves'

How come nobody ever talks about the moral obligation to fulfill the promise they made to repay their debt. It is kind of like a marriage when you sign those documents-for better or worse and in sickness and in health. That seems to go right out the window when they're "upside down".

It seems to me the real problem here is that most people have lost all concept of what is right and wrong. I would compare it to the attitude of people thinking it is OK to screw the insurance company(because they have soooo much money!) Now that attitude has crept into Real Estate. But only when people are (perceiving to be) losing money. When we had hyper appriciation rates you sure didn't here those people screaming about predatory lending!

Wake up America. It is time to take responsibilty for your self, quit blaming every one else, and actually have a little integrity

Re-defaults

It is because most of these borrowers can't manage their money in the first place! Let them forclose and go back to being marginal renters as were before the easy credit.