Friday, October 3, 2008

I Survived Real Estate 2008 part 7 #89

Part seven of “I Survived Real Estate 2008” picks up with the panel interview from the last session where Bruce talks about how Wall Street keeps calling to find out when bottom is so they can profit even though they are part of the reason we’re in this current situation.

Rick talks about large pools of money purchasing these loans at deep discounts and then fixing the principles of the people in the homes.

Bruce then responds by talking about HR3221 about how HUD can buy first trust deeds at a discount and how the new structure would allow them to alter the loan of the person in the property. Bruce worries about the ramifications of this program. It is limited in who can apply since it applies to adjustable mortgages only. The people who really get burned are those next door who qualified for a fixed loan and are making the payments. They did everything correctly but they don’t apply for the principle reduction. With California being a non recourse state, Bruce worries the dominos that might fall. Bruce then asks Philip Tirone if bailing from mortgages is becoming more acceptable.

Philip says clients don’t care about the moral issue of walking away; they are more concerned about the credit ramification. Philip talks about the raised loan limits and how everyone thought it would make a difference. They think things are going to help but when you get into the legislation, it doesn’t.

Bruce agrees with Christopher in that the median price has to become more reasonable. Christopher thinks another 6 months and everyone will qualify.

Tommy Williams brings up the very important point of moral hazard in letting something like a bailouts occur. Not holding consumers accountable sets up a larger problem for the future.

Bruce asks Christopher about Merrill Lynch taking .22 cents on the dollar for a $30 billion package of CDOs . He says they actually got 5% in cash and carried back a note and guaranteed the pile. Bruce asks whose money was actually lost. Christopher says it was the consumer investing in their company. Christopher says this buyout is another instrument and accounting mechanism. The financial system, Christopher says, is an absolute mess. All banks are having a difficult time. We’re having an issue with cash because of it.

Bruce asks Christopher about how FDIC can handle writing these sort of checks and if the government will just keep writing checks. Christopher says that they’ll have to be bailed out as well. Bruce asks if stagflation will be a problem. Christopher says he doesn’t think it will be an issue.

Bruce asks Rick Sharga about the difference between a bank owning a loan and the individual owner. Rick explains how the process works. Banks can accept the losses but the private investors can’t as easily take the hit. These loans are not as flexible as the securitized loans. Bruce talks about HR3221 and how the second must be wiped out first.

About 10% of the foreclosures list in Riverside being non-owner occupied but 70% out of the 90% that are owner occupied have simultaneous first and second at the time of purchase. Almost 100% of these properties are 100% financed.

Joel Singer brings up refinancing. The number of first payment defaults is huge because of bad credit and no skin in the game. The good news, he says, 2 out of 3 will stay in their home most likely. However, he is much more concerned about price drops then the mortgage resets. He thinks more people will walk if the prices get too low.

Bruce also brings up unemployment and how it will continue to go up. He says out migration will then probably force more to leave.

Bruce asks Annemaria if loan tightening happens during every cycle. Annemaria talk about how there’s a cycle and she thinks that this will never happen on this scale again. Lenders are in sheer panic because of what’s gone on and all the legislation now being presented. It’s a little late to implement since everyone has already got in. Bruce feels once we get into a safe market, the next person will dream up the next special mortgage.

Christopher says financial investors are always slipping in risk and hiding it. Incentives from Wall Street are bazaar and we need to not trust them so this doesn’t happen.

Bruce sees the foreclosures coming as being a huge problem and much worse then the 90s. In the 90s we had two times as many sales as we had foreclosures. This year, we’ll have two times as many foreclosures to sales.

Joel Singer says the 90s downturn was caused by unemployment. There were 7 years where prices were flat. Joel is curious to see if the market will clear faster because of the steep price drop. He thinks we have to make the market clear and he feels that it really already has. Joel is stunned at how many sales are currently being made and he doesn’t think it’s investor purchases. It’s cheaper to buy then rent in some places. Builders are having a hard time competing because homes are being bought below replacement costs.

Bruce talks about his Grand Junction, Colorado experience buying all of HUD’s condos. Bruce set all the costs at $8,000 a condo but no one would buy because the market was too scary. Emotions definitely play a role.

Rick says he talked to a man who handled the REO assets at a credit union and the man was wondering if RealtyTrac could supply him a list of who owned the first. Rick was surprised since he thought that would have been information that was gathered. The man said they did not have the information as little information was gathered on the first mortgage and little was taken on the homebuyer. More next week or see YouTube or Google video for the entire program. Next week is the final week of the audio.

The following partners and sponsors without whom the event would not have been possible:

Platinum Sponsors:
The San Diego Creative Investors Association (SDCIA):
Investors Workshops:
Frye Wiles:
White House Catering:
MVT Productions:
Pechanga Resort and Casino:
The Denver Nuggets: nuggets
The Chicago Bulls: bulls
The Cleveland Cavaliers: cavaliers

Gold Sponsors:
7 Steps to a 720 Credit Score and Philip X. Tirone -
Chicago Title -
Elite Auctions -
Foreclosure Trackers -
Investors Resource Center of America LA and Steve and Robyn Love -
Las Brisas Escrow -
National Club of Real Estate Investors and Sam Saddat -
Northern California Real Estate Investors Association (Norcalreia) and David Granzella -
North San Diego Real Estate Investors and Linda Wessels -
RealtyTrac -
RE Ventures and Michael Pines -
Real Estate Investors Club of Los Angeles and Phyllis Rockower -
Real Wealth Investor and Scott Whaley -
Saddleback Valley Communities -
Silverstar Finance and Janet French -
Sunset Hills Memorial Park and Mortuary -
The Mission Inn -
The Mortgage Equity Group - http:
The Naked Real Estate Investor Club - Rosie Nieto -
The Short Sale Processor and Nick Manfredi -
Virtual Real Estate Tour and Layla Tusko -
Wholesale Capital Corporation -

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