December 05, 2007John T. Reed on the Mortgage Meltdown - Sort ofI was curious what my favorite real estate guy, John T. Reed would have to say about the meltdown in the subprime mortgage market. Nothing, as it turns out, at least yet. Something he wrote about old time "nothing down" huckster Robert Allen reminds me of the last few years of real estate investing. Author of best-selling books Nothing Down, Creating Wealth, and The Challenge. One-time seminar guru and founder of many Robert Allen Nothing Down clubs around the U.S. Allen’s advice is generally terrible. Although I did like a chapter he wrote on property-wanted ads. Otherwise, he is little more than a financial publicity stunt man. It's 2007 and there is a national wave of guys like Robert Allen who bought overpriced real estate with liar loans, and a bunch of irresponsible mortgage brokers who let them. December 06, 2007Not Just Up the Famous Brown Creek without a Rowing Implement“We are in a chicken wire boat on Lake Diarrhea with lead oars.” Those guys were raking in the dough while it lasted (I'm assuming AE is "account executive"): "For those ex employees on this thread that were probably in the 1st round of cuts months ago and are bitter about option one keeping the "best of the best" the details about the severance are that the AE´s will continue with their guarentee and benefits through march at 10k per month and then get a lump sum payment of 10k per year of service. The average AE is getting over 100k in the next 90-120 days. That's a heck of a lot of severance pay for a division that's going under. I hope taxpayers aren't going to be bailing out H&R Block's bad subprime loans while they're handing out those kinds of lovely parting gifts to laid-off mortgage brokers. December 12, 2007Henry Paulson's Plan to Avert a Mortgage CollapseThere's been a lot of talk about the Bush administration's plan to forestall problems with adjustable rate mortgage resetting. Some blog posts have hinted that Bush planned to use taxpayer money to bail out homeowners or mortgage lenders, but there's been no definite work on that, or much information on the plan until now. It turns out taxpayer money is not involved in the plan. From The New Yorker: The Paulson plan is meant to buy borrowers—and, arguably, the economy—some time, by postponing the interest-rate resets for five years. January 02, 2008Mortgage Meltdown ExplainedBBC - The US sub-prime crisis in graphics: The US sub-prime mortgage crisis has lead to plunging property prices, a slowdown in the US economy, and billions in losses by banks. It stems from a fundamental change in the way mortgages are funded. January 07, 2008Word of the Day: NINJA LoansFrom BlownMortgage.com: But the biggest problem facing subprime borrowers is that lenders now require you to qualify for the financing. Long gone are the NINJA (No Income, No Job or Assets – No Problem!) loans. To get a Fannie/Freddie fixed rate loan you have to have a 620+ FICO score, document your income, assets, do a full appraisal and standard GSE underwriting. Previous WOTD - HOV Positive January 10, 20082007 U.S. Home Foreclosures by State and CountyPredictably, the foreclosure rates in California and Florida are considerable, along with Arizona and certain metropolitan areas such as Detroit, Atlanta, Denver, Dallas, and Houston. What surprises me is all of the foreclosures in Tennessee. The Tennessee foreclosure rates aren't as intense as in those states and cities above, but the foreclosure phenomenon seems to be spread throughout the entire state such that Tennessee looks like it was colored in with a bucket of orange paint. From The Atlantic: Not least, the crisis is harming the neighbors of people in foreclosure, even those who aren’t having trouble making loan payments. According to one academic study, every foreclosure reduces the value of all other houses within an eighth of a mile by about 1 percent, as the sight of vacant property scares off potential buyers. Combine that with a market already in decline, and neighborhoods that begin to have troubles can go off the cliff. On the street pictured, three houses not in foreclosure have been languishing on the market for 72, 97, and 149 days; asking prices along the cul-de-sac vary widely, but average about $40,000 less than the comparable prices in the first two quarters of the year. January 11, 2008TLC, Home of "Flip That House" Debuts "Please Buy My House"Viewers meet three families frantic to escape the real estate trap. Watch as they try one desperate move after another to move their property into the 'sold' column. The stakes are high -- who will succeed? February 06, 2008Tamara on the Housing Crisis"Isn't trying to get people who couldn't frickin' afford it into home ownership one of the reasons we wound up in our current pickle? Look, people, while owning your own home may be part of the American Dream, it's not part of the Bill of Rights, okay?" February 07, 2008Housing Prices Decline: Actors, Musicians Hardest HitForbes - Celebrity Real Estate Losers: Former Guns N' Roses guitarist Slash (also known as Saul Hudson) feels he overpaid for his Spanish-style Hollywood Hills home, which has a pool, a separate gym and stunning views. He bought the house in January 2006 for $6.2 million. He sold it last December for $5.7 million. Slash is suing his former real estate agent, claiming the house was neither as big nor as private as the agent claimed. The case is ongoing in California Superior Court. Won't someone think of the celebrities? June 20, 2008Mortgage Fraud ArrestsAssociated Press - Hundreds swept up in mortgage fraud arrests: Across the country, reports of mortgage fraud have soared over the past year as the subprime mortgage market collapsed and defaults and foreclosures soared. Compare this with what real estate adviser John T. Reed has been saying for years: On one, which was apparently typical, the documents seem to show that Allen lied to the first-mortgage lender—Bank of America—about whether there was any secondary financing (there was—a seller mortgage) and about his intention to occupy the San Francisco condo as his principal residence (He lived in Provo, UT at the time and never occupied the SF unit). At that time, June, 1981, when home mortgage interest rates were at 18%, Bank of America would only make loans to owner occupants and prohibited all secondary financing. I have their loan policy for the date in question in the book, too. My wife was a loan officer for Bank of America at the time. [Note to bogus gurus: do not brag about deals that you do not want me to look into—especially in the San Francisco area. John T. Reed]. Lots of people cheated on mortgage applications in the last decade, and now that things have gone pear-shaped some of them should be worried about receiving a warrant. June 24, 2008John T. Reed Critiques "Flip That House"Real estate investor and author John T. Reed has an interesting review of the "Flip That House" TV show: Choice of improvements At the end of each episode of "Flip That House" a real estate agent appears and confidently tells the flippers how much their house is worth. One of Reed's readers tracked down the property tax records for one of the houses featured on the show. Result? Instead of being worth $240,000 as the real estate agent claimed the house was listed on the new owners property tax records as being worth $210,000. That just about equaled what the flipper had in the house, not counting transaction costs, interest, insurance, or their time. July 23, 2008"Fannie Mae supplies the critical financial weed and beer to keep our national economic party going"Over at Iowahawk Dave Burge explains the mortgage crisis in words any moron can understand. America Must Not Allow Me to Fail: Clearly, in order to avoid a national economic catastrophe, Congress must act now to keep Fannie Mae afloat. But this only addresses part of a greater threat arising from looming financial instability in what I like to call the "Dave Sector." As some of you know, in the last few months I have fallen victim to the subprime mortgage crisis and FEMA's crappy Iowa flood prize packages. Without an immediate infusion of federal cash, Dave will be bunking with Fannie and Freddie at the bankruptcy rehab clinic, and the consequences are almost too terrible to contemplate. For background on how Dave found himself an innocent victim in the current financial mess read Please Don't Destroy My American Dream: In August, Linda from the mortgage company called and said that Visa had denied my credit card payment for the mortgage, so I told her to switch it over to my Discover. Then she called back and starts whining that it was denied too. I explained to her that I really couldn't put it on my MasterCard because I maxed that out to convert the basement into a dojo for a new-style martial arts school I'm developing, and that Sensei Dave would have her money after he signs up a few students. I also explained to her that for a older plus-size gal, she totally had it "goin' on," and that maybe we should get together at TGI Fridays for Happy Hour to discuss it, my treat, because my AmEx card was still good. August 13, 2008Zillow: Many homeowners upside-down on their mortgagesBloomberg - One Third of New Owners Owe More Than House Is Worth: The highest percentages of homeowners with negative equity were located in California. In four of the state's metropolitan areas -- Stockton, Modesto, Merced and Vallejo-Fairfield -- the number of homeowners whose mortgage debts exceeded the values of their properties topped 90 percent, Zillow said. In five more California areas -- the Inland Empire (Riverside-San Bernardino), Bakersfield, Yuba City, El Centro and Madera -- the percentages were more than 80 percent. Dang. That's a bad situation to be in. Even if you owe exactly what your house is worth you're really upside down once you consider the standard 6% realtor's fee and closing costs. That's assuming you can even sell in a soft market. If you're actually upside-down on your mortgage you're pretty much stuck in the house waiting for the market to rebound. If you lose your job and have to move to another location you'll lose your house and all the equity unless you have a big cash reserve to settle the mortgage. I won't go into Housing Panic-style histrionics, but this portends a tough road in some areas and particularly in California. |
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