Paul McFadden Mortgage Loan Officer Bellevue Washington Home Loans

Hello all: Good morning on an absolutely beautiful day! I was reading a blog about private money today and wanted to chime in. I have to admit when I used to think about private money, all I saw was how much it cost. True, private money can cost almost twice as much or more than conventional money. At The Legacy Group we charge 12% with 2 points usually. This is actually less than what a lot of other lenders charge (sometimes as much as 15% or higher with several points).

The benefit to private money is you may be able to close a deal quickly. Case in point: One of my co-workers bought a house for $350,000 in a highly sought after neighborhood. The appraisal came in at over $500,000. Our capital arm can get the short term financing and then the buyer can refinance into a lower rate. For either an owner-occupant or a flipper, this is a great deal. Another instance allowed one of our clients to buy a business with the equity he had in his house. The bank he was working with said no and he was in danger of losing the deal. The Legacy Group provided short term money which our client proceeded to refinance into a longer term note.

At The Legacy Group we encourage people to contact us if they have a short term need or sense an opportunity. You can also invest in our company and earn a 12% annualized rate of return. Contact Brent Ely at Brent.Ely@Legacyg.com if you're interested. I hope this clears up any confusion about private money. It can be an alternative solution. Have a great day!

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Hello all: I picked up our local paper this morning, The Seattle Times and the lead story was about the failure of Washington Mutual Savings Bank. To date, this has been the biggest bank failure in our history.

It's hard to believe it's been a year since this happened. It also added to the meltdown worldwide of our financial system and the loss of trillions of dollars of our assets, most of it tied up in our retirement. The failure of Washington Mutual and subsequent purchase by Chase was preceded by the implosion of Lehman Brothers, the bailing out of AIG and the forced shotgun marriage of Bank of America and Merrill Lynch.

What do you remember? For me, the slowdown started in August 2007 with the failure of American Home Mortgage. At the time they were the 10th largest wholesale lender in the country. After this, every lender immediately started tightening the screws and it wasn't soon thereafter that Countrywide was bought by Bank of America as it was failing also.

Here we are in September 2009 feeling a little better about the direction we're headed in. I think we all know that it's still a little tenuous. And I don't think any of us wants to go back to where we were. Ultimately time will tell. In Wa. Mu.'s case, bad decisions were made and they paid a heavy price. Have a great day today!

Good morning! I was given a great new book "The Go-Giver" by a fellow Rainer after he mentioned it in his blog. Thanks for sending it to me.

What's remarkable about the "Go-Giver" is the paradoxical idea that a person should give first and keep on giving with no expectation of getting anything back. I'm the first to admit I've always liked "win-win" deals. According to the "Go-Giver", even this isn't right as there is an expectation of getting something back.

I know I'm on the right track as I build my business. In fact, I enter into any relationship these days with no expectation. If I can help my fellow man/woman I do so without any expectation of return. In the "Go-Giver", a young man meets an older mentor who proceeds to teach him how to give. This was something the young man hadn't learned yet.

If you haven't picked up the "Go-Giver" yet, I strongly encourage you to do so. I think I'm going to order several copies and dispense them to people in my sphere. This idea of giving first is not new. And it's been bandied about by several people including Ivan Misner of BNI, etc, etc. The interesting thing is how often I (and perhaps you) forget the golden rule. I'll repeat that here if you've forgotten it; "Do unto others as you would have them do unto you".

I strongly encourage you to give. Report to me how you are becoming a "Go-Giver". Thanks for reading!

Hello all: I found this article courtesy of LeAnn McCain, our assistant secondary market manager. Don't be alarmed. But I think it's important to be aware of how far we still may need to go before a full-time economic recovery is on our hands. Until then, it may be in fits and starts. Read on. It's very interesting.

One year after America's brush with economic catastrophe, there's plenty of looking back at the bubbles that caused financial chaos.

But what's next?

There are surely dangerous economic bubbles forming as we speak. As Alan Greenspan warned this week, "They [financial crises] are all different, but they have one fundamental source," he said. "That is the unquenchable capability of human beings when confronted with long periods of prosperity to presume that it will continue."

The trick, of course, is spotting them. By definition, most people don't spot a bubble before they form and burst.

Here's 10 for which you should be on alert:

1. China bubble: Despite the weak global economy, the Chinese stock market has soared like crazy this year. But many believe the rally has been driven purely by government-supplied liquidity, rather than fundamentals. The fear is that companies are flush with cash, but have little "real" to do with the cash, so they're parking it in the stock market casino. The Chinese real estate market appears to be on a similar trajectory.

2. Green bubble: Green has been everywhere. With observers saying the "Age of Cleantech and Biotech" will be the next major economic revolution, and Washington pouring billions of dollars into alternative energy projects, you'd think a bubble would have already formed. But, as we noted this spring, it did not, at least from an investment perspective.

Still, as the economic recovery takes shape, alternative energy could see excess investment on hopes of big future returns. There's plenty of hype left, and if investors regain the cash to get in the game, could green become the next internet or housing bubble?

3. Gold bubble: Gold prices just keep going up. They've risen for seven straight years, recently breaking $1,000 per ounce.

Is it a bubble? Right now, it doesn't look too bad. Gold is good in both inflationary and deflationary periods, as it holds wealth tangibly. And, as the Telegraph notes, there's real demand, especially from China.

But with some predicting a doubling of prices to $2,000 an ounce, too many people could jump in and spike the real value of the precious metal. The "rise forever" mentality usually means trouble.

4. Federal Reserve bubble: Is the Fed saving the financial system or creating another dangerous credit bubble by snapping up mortgage-backed securities?

At first glance, the Fed's effort to clean up mortgage-backed securities is a winner. But, as Heidi Moore wrote for Slate's The Big Money, the Fed is actually creating a bubble similar to the one it's trying to do damage control on. By eagerly trying to save banks and stabilize the housing market, Washington is taking on too much: $1.25 trillion of mortgaged-backed securities, including both the original toxic assets and products of foreclosures to come. So who would bail the Fed out? You.

Click here to view the 10 bubbles in the make slide show.

5. Trash stock bubble: There's a rush to trash going on. Stocks like Fannie Mae (FNM), Freddie Mac (FRE), AIG (AIG) and even GM made big runs in August -- trading in trash financials made up nearly one-third of NYSE's August volume.

So why are people buying junk? Charlie Gasparino says shares of junk financials -- companies like Fannie, Freddie, AIG, Citi and Bank of America -- are being pushed up by a short squeeze. The Wall Street Journal suspects its high frequency traders. And others say its retail speculation and day traders getting their way while Wall Street went on vacation.

6. Education bubble: More people are going back to college and taking on huge debt to do it, despite questions about what the degree is really worth.

Last year, the amount borrowed by students and received by schools grew some 25% over the previous year, to $75.1 billion. That's a huge amount, especially with weak, low-paying job prospects for graduates in this economy.

As we've noted, all this student loan debt is crazy. Despite the desire to see more subsidization of college, we suspect there will be a collapse in student loan debt availability and desire to take on new debt.

Short of telling kids not to go to college, something's going to give.

The pop may be starting already. As Bloomberg reports, as many as one-third of all private colleges surveyed said they expected enrollment to drop in the next academic year. And almost 40 percent of those colleges said some of their students dropped out due to personal economic reasons and a quarter said full-time attendees switched to part time. Half said families had to cut back their expected contributions as the value of college savings plans dropped 21 percent last year.

7. Subprime bubble, 2.0: What are banks doing with all those subprime mortgages? They're repackaging with a higher rating -- "re-securitization of real estate mortgage investment conduits" -- and selling them.

As we've noted, it's a plan nearly identical to the complicated investment packages of the financial crisis a year ago. That being said, the problem was not strictly securitization, but the underlying housing bubble. So the return of complicated products isn't necessarily the end of the world.

8. Life insurance securitization bubble: In its search for new profits, Wall Street is planning on securitizing "life settlements" -- policies that the sick and elderly can sell for cash while they're alive -- much like it did subprime mortgages. The New York Times warns that we could be looking at subprime all over again.

Maybe. As we've noted, it wasn't securitization that caused the financial meltdown. It was the bursting of the housing bubble. Yes, there was a feedback loop, whereby securitization allowed more money to flow towards housing, but it seems unlikely that "life settlements" would get big enough to infect all portions of the financial world.

9. Commercial real estate bubble: This bubble is already hissing, if not popping outright.

While the economy is improving and some home sales are slowly coming back, the commercial real estate market could get far worse.

As The New York Times reports, "Even though industry lobbyists were able to persuade Congress to extend a loan program aimed at prodding the stalled securitization market back to life, several analysts said it was unlikely to head off a spate of defaults, foreclosures and bankruptcies that could surpass the devastating real estate crash of the early 1990s."

As UPI notes, commercial mortgage defaults could reach 4.1 percent by the end of the year, up from 2.25 percent in the first quarter, and Real Capital Analytics estimates commercial property loans worth $83 billion have been involved in default, foreclosure or bankruptcy in 2009.

Badly hit will likely be malls. "The next financial tsunami to hit will be the widespread failure of shopping center mortgages," says Peter Monroe, co-chair of REOMAC, a not for profit trade association to CNBC. "Half a trillion dollars of commercial loans financed on historically low rates, are due for refinancing in the next three years," says Monroe. "The negative impact of these shopping center mortgages is enormous."

10. Emerging market bubble: It's not just China. Risk-tolerant investors are bidding up emerging market shares to valuations not seen in 9 years. With an average PE of 20x, they're not in bubble territory just yet, but watch for things to get out of hand.

As always, I appreciate you comments. What do you think? Have a great day!

Good morning! I wanted to let you locals know that I along with Rebecca Haas of Re/Max Metro Realty are going to start teaching real estate classes again on Saturday September 26. They will be held again at Renton Technical College. For times and related information, please go to the www.rtc.edu website. Also, please forward this along. Rebecca and I believe in education and hope to provide this series for years to come.

The first class will be "How to Get a Loan Today". Other subsequent real estate classes include "Short Sales and Foreclosures-Demystify the Process", " Real Estate for Women", and "Real Estate Investment Analysis". I hope you or a friend can attend. Feel free to contact me here if you need more information. Thanks for reading!