Ed Tse

Exchange of View Points on RE and Note investment

Hello ET
what is the figure that you are looking at because I have a very interested party that closes fast and I trust this person.
WHAT IS YOUR PRICE WANTED FOR BOTH NOTES
I CAN DO THIS WITH THIS INVESTOR

Wed, March 24, 2010 7:34:24 PM


For tax consideration, I'll not give any discount on my note of $60,000 (It is definitely working on 15 year amortization schedule with 10% interest and due in February 2019. I prefer to keep this note if possible---there is no such urgnet need for me to sell both notes; just one note sale is good enough for my conservative mind if I buy a home in AZ.) If that's acceptable, I may accept $46,000 for my second note of $73,000 (It appears that the buyer may not get tax credit of $8,000 in time to exercise her option so that the note is going to be working on 30 year amortization with 11%, due in June 2019. But everything is possible since there are still 7 days for the buyer to pay and exercise her option.) So the posssible price for me to sell both is $106,000. Hope this can of help.

ET

---

Date: Fri, March 26, 2010 11:17 pm

Dear J. B.

It seems you understand my position. Allow me make it very clear, the note of $60,000 is created from a property that I'd lived more than 2 years. As you know, all the profitt is tax free per the current home sale law. So, any discount I give out is 100% loss to me.

The note of $73,000 is different. That's my investment property in which all the profit is subject to tax as capital gain. That means my discount is NOT 100% loss to me in terms of net gain after taxation. That's why I am willing to give 37% discount ($27,000) . You know what I expect for both notes ($ 106K); I am open to your reasonable "package" offer if you or your buyer agree to accept my above condition: full price for the $60,000 note.

Thank you for your hard working,

ET

---

Hello ET,

I understand your position, but I do not understand your numbers the Killeen Note which you have recieved two years of payment already has a current balance of 58660 ( no investor is going to pay 60000 for that, besides the investor is paying for the risk of the future. Mobile home are at the bottom of the housing chain they do not appreciate ( no matter how attached you have become to them ) The other note with 2016 square feet is this the NOTE THAT YOU WANT 60000 DOLLARS FOR am I correct on my assessment if that being the case then you would be will to sell the othe note at 25 - 30 % off the current balance owe or is it the other way around ( do I have the notes switched around on my assessment ) let me know if I am correct so that I make the next move.

Dear J. B.

You are great in catching up my position, even there are some confusion and misunderstandings.

Let clear some facts:

1) The note A with original principal amount of $60,000 is created in January 2009. This one comes with 2180 sqft living space and it is the one I hate to give out any discount.

2) The other note B with original amount of $73,000 with 2016 sqft is created in April 2009. This is the one I am willing to give 37% discount to compensate your buyer if there is a package deal accepted.

3) Since they are created in 2009, it is impossible for one of them to have a record of two years payment.

*****

Now, let talk about some myth, opinions or perceptions:

This is an area full of subjective idea. Everyone has his or her bias, preference or viewpoints. The following is purely my opinion.

It appears to me that you may have an excellent expertise in note or paper business; but you seems to me not really understand real estate investing.

To certain degree, I agree with you a mobile home is a depreciating asset as a note or car is. However, the same is true to a sticky home (site-built home.) Other things being equal, an older home has less value than a brand new one. If you check Los Angeles county assessor website, you can see much share, up to 85%, of the purchase price is allocated to the land value; while improvement hardly gets more than 30% of the value in the eyes of assessor.

The point appears to me that the value of a piece of real estate is basically coming from the land (that's why people say "location, location, location.")

Now let's go back to see what happens to a mobile home. A mobile home is located in a mobile home park without land is depreciating by the times as you said, no matter how it is affixed. But it is totally different if it has its own land. Why?

All the appreciating value goes to the land in which park owners get all the equity and appreciation in relation to its rent increase. The higher the lot rent, the less value a mobile home. It appears that your perception is based on your observation in California where most of mobile home are in a park without land and pay a hefty lot rent of thousands of dollars a month. If you can look farther at those beautiful mobile homes in AZ, NM or TX, you probably are going to have different view. That's why I don't buy a mobile home without land.

Last, all the numbers have to be making sense. I agree with you that the chance of selling my note A of $60,000 for more than $58,000 is slim if my note purchaser is a professional note investor who wants very high-yield return (in your proposal, it seems your investor is more greedier than other brokers' by roughly asking a rate higher than 45%). But on the other hand, it is also very possible to make someone very happy if he or she is not so greedy. Say, the ones who are putting their money in a bank saving or CD to earn 2% interest since they can have 5-7 times return in terms of interest. So it depends whom we are dealing with, right?

So, let's just say, my bottom line is: $106,000 for both notes no matter how you or your buyer want to allocate the fund to each one. At this moment, I am very firm on this and there is not much zone to negotiate unless I can't resist my girlfriend's demand of more cash reserve.

Both of us will be luckier if you can find a doctor, dentist or someone who is unable to do active investment, except a passive one. From the past few days communication, may I suggest you to cultivate your client base to find and explore the opportunity to serve average Joe. Don't confine yourself to those professional investors who are so greedy to ask 20-40% yearly return rate. An average Joe will be more content, very happy to buy my notes. In particular, please dig out a self-direct IRA account holder who will jump on this profitable opprotunity to put my notes into his or her account once he or she knows its existence and quality of tax-free and fast growing of assets. Not only you'd be more appreciated by them, but less stress and better performance can be expected in your business.

ET

As I recall, there was an article at AR 2 years ago, trying to provide an effective rescue program when claiming that all FED TARP or bailout plans are useless.

The article seemed and sounded to be joke-like. It literally claimed, in short: "the best way to solve this real estate bubble is, for our government, to create a bigger subprime rush by giving out a 2nd run of subprime 'no VOE, VOD, VOC' loans to everyone in order to continue keeping housing price flying up in the blue sky. In so doing, you are okay, I am okay, we are okay. Everyone makes money by investing in RE or flipping a property. Our economy is saved by a bigger consumer spending."

Nobody take it seriously back then, right?

Everyone could say that the formula is crazily "ridiculous" after the shockwave of subprime loan created modern banking disaster.

But now take a look with your deep breath to look at the email I just got this morning. Here is the identical project given and implemented into a fact by our government.

After all trial and error, the big banks are saved at expense of taxpayer; but lending is shrinking 9% and credit is tight to death. The realty seems "No person is good, to qualify a loan." After their friends, those big fat cats, ate big chunk of steak and have their bonus increased 17%, or 31% some said, for this year, our government people finally have some spare time to give their poor taxpayers a skinny bone. They want to do something fantastic or extra-ordinary to help the middle class before it is too late (which could lead to a taxpayer's revolt).

Get serious, it is no joke at all to follow the idea of the AR article, right? Maybe someday they will also realize my idea of "social pardon," is very"simple and practical" to make it their policy to help the American poor, I hope? (Note: refer to my article Let Every Joe the Plumber's Household Declare "Social Bankruptcy": $20,000 grant.)

The email has its title: "New Program: Buy A Home for Only 1% Down!" and a sub-title: "Plus: grant program giving 22% of Purchase price." It appears that a buyer get something for nothing. No, it is not only that, but he or she gets "paid" a handsome "free cash reward with no tax."

I'd like to say it is more generous than those stingy subprime loan bankers. Who says there is a war led by our government to against the middle class?

****** The email *****

Neighborhood Stabilization Program

Arizona - Feb 25, 2010 The great news is that there is a new FHA loan program that allows home buyers to purchase a new home with only a 1% down payment. The FHA loan requirements haven't changed - they still require a 3.5% down payment, but this new program allows people to use government money to pay for 2.5% of the 3.5% down payment requirement - effectively leaving only 1% that a new home buyer must put down.

The new program is called the Neighborhood Stabilization Program - and it even gets better than just having to put 1% down! There is a new grant program that will pay up to 22% of your new home purchase price and this amount DOES NOT NEED TO BE PAID BACK! This is in addition to the $8,000 tax credit program -- also these funds do not need to be paid back.

Here are just a few of the important details regarding the Neighborhood Stabilization Program:

• If you own a residence, you must be leasing your primary residence at least 12 months before applying for the program.
• You must use a participating lender -- email me for a list of approved lenders as there are only a few in the Valley.
• You must attend and complete an 8 hour Homebuyer Education Class provided by one of the ADOH participating homebuyer counseling agencies. (A list will be provided by your lender once you begin the process.)
• The property you purchase must be your primary residence.
• You must have a maximum debt to income ratio of 43% or less.
• You can use any type of financing with the NSP program - including paying cash. That means you can still get up to 22% of the purchase price even if you pay cash for the house.
• You must be approved and have your paperwork completed for the program prior to submitting an offer on a house.

Neighborhood Stabilization Eligible Property Types:

• Foreclosed properties only. A property is considered "foreclosed upon" at the point that the mortgage or tax foreclosure is complete.
• One unit detached single family homes, condos and townhomes.
• The property must be vacant at time of listing.

Neighborhood Stabilization Program Purchase Price Limits:

Neighborhood Stabilization Program Income Limits:

In order to qualify for the program, you must have a gross income (the total income before taxes, health care costs, social security, etc.) of no more than 120 percent of the average median income for the county they want to purchase a foreclosed house in.

Neighborhood Stabilization Program: Too Good To Be True?

1. Up to 22 percent of purchase price
2. All loans are forgivable after a period of time based on the amount of the loan. -- 5 years for assistance of $15,000 or less; 10 years for assistance of $15,001-$40,000 -- 15 years for assistance of more than $40,000
3. All loans are zero percent interest with no monthly payment.
4. The balance of the loan is forgiven at the completion of the term.

Please email or call me for more details concerning this exciting new program.

	What does Sarah Palin have to do with any of that?
Lane Bailey -

	I don't get it ...
Will Nesbitt -

Lane and/or Will: Sorry, I jumped so fast. Check out from your library the book "Predator State" written by the liberal James Galbraith. Also read Jude Wanniski's book "The way the world works: How economies fail and succeed." Maybe you will see how wrong James is about "conservative" or "Reagonomics" since he can not say GWB is a real conservative striving for a conservative cause but a ruling gangster performing a predator politics, not rested on "royalty to the country" or "conscience of the people's welfare", but to the greed of big rich CEO. As James put it, the bottom line is: there were no right conservative policy or forces like Jude in power during those 8 years under GWB administration. Why James blame it when there is no such a thing exists as conservative elements in our government policy, but a fake imitation; and while there is a whole bunch of predators in DC or New York no matter what the symble or labels they put on themselves (even Hiliary Clinton is just a phony liberal by James)? Regardless whatever James said, there is one fact or truth by Roy Smith that James can't deny it. We Americans have created more wealth in the past 30 years, after Reagan took over the power, than ever before. So there are some good questions for us to ask ourselves, such as: 1) Is the idea of "small government" or deregulation really contributing to create so huge wealth? And how it works compared to GWB-Obama's "big government spending"? If it does help, then it is a good philosophy. The mess we are facing now is something down the road, after or during prosperity was created, that we have to fix. 2) What went wrong while we are witnessing American poverty is deepening and so wide-spread when we created prosperity so huge that a hundred times more than the past; 3) Did we make our society more equal by our political, social, economic, or financial systems? How the bigwigs of corporation took over the majority of wealth using those institutional frameworks? 4) In addition to the current so-called "independent" (in realty, we know it can be anything but "independent") commission to decide those fat cats' perks or benefits which is deemed "corrupted", Do we need some kind of acceptable social decision on how those CEO should be more fairly rewarded? As James mentioned, this can not be just a economic consideration. I have been supporting Sarah since she surfaced up on national planet. Very recently it appears that she dislikes the term "retarded" against White house Chief staff. It surprised me as I watched the Californian famous lady "human right" attorney Red put the label "sex discriminators" on those businessmen who imprint Tiger Wood's mistresses faces on Golf balls (NOTE: I am 100% for "Made in USA." If I put its logo American flag on gulf balls to let people hit it or on shoes to have people stepped on, do you think you could accuse me of committing "treason?" Yes, MS. Red could do that in her shallow, liberal and subjective perspective.) Are we going to have mass censorship like China in the age of Cultural Revolution? What's the big deal for us to ask our society to change "salesman" into " salesperson"? So my basic position is what Sarah is going to restore the Right movement by declaring some clear-cut vital policy for our people to initially and easily understand what "a big government" went wrong and to strive for what is good to the country from our root. She has to stand up for the average citizen as President Reagan to against the model of "CEO rule of USA." Therefore, it is so urgent for her to tell people what the fundamental thoughts of her belief are. She has no time in dancing with those "symptoms," but to point out what the causes she is going to cure are. Looking at Sarah's play in trivia game like "retarded" name-fighting, (Yes, we use "you're retarded" when you are late for the class. What's wrong with that? Are we going to change it into "you are HANDICAPPED"?) I felt sorry for her. She is wasting her energy. Time is running out for those more important. Sarah, you do have the Charisma character as Ronald had for people to love. Don't spoil it. You have to go back to the right track of road, please.

The Indymac Slap in our Face. 02.08.10

This video gives a brief picture of what FDIC's lady Sheila Bair is doing.

However, the title is inaccurate. It is NOT Indymac, a victim of FDIC receivership! FDIC just robbed Indymac's investors, took over everything for nothing at the onset, and then transferred these assets to FDIC's friends loaded with taxpayer's money.

While those big fat cats are having a chunk of fish fillet by making hundreds of thousand dollars per case through abnormal FED TARP or something like FDIC loss sharing program, why they want to be bothered to do their normal lending business: making a loan to average Joe to earn thousands of dollar out of each application?

So 2 weeks ago, I said to Jerry, a son of my good friend who has 20% down payment, 800+ FICO score and a decent long time job, "don't blame your bank! As opposed to their no risk, easy money or profit from FED, your bank has a "decent or legitimate" risk concern about your job stability." (That is the reason they gave to Jerry for rejecting his loan request. His employer is a small business has provern track record of profit and survival in the past years; but may fail at this difficult time in eyes of the banker.)

You'd be better off to have HUD lined up as your friend too. And go for HUD 3% down payment program. (NOTE: Why Jerry has to have his conscience of responsibility to pay more down payment or has to care if it is a new hybrid of subprime loan as long as it is guaranteed by HUD.)

Next, how about AMC which has just popped up trying to provide a "buffer zone" to cut off so-called "Appraisal fraud"? Acting as an independent appraisal management company, did it provide a more realistic appraisal method so far? NO, absolutely not. What the result is? To cover up the symptoms, not to cure the cause.

Clearly it ripe off the average appraiser whose fee is dramatically reduced about half to $200 a case, let alone he has to pay membership fee to an AMC to get a chance to receive an order or assignment. (Gee! An appraiser has to pay about $300 fee to join an AMC in order to be chosen for doing an appraisal. And remember there are more than 30 AMC now. How much he has to pay if he wants to join all of them? Almost $10,000. That is a killing!) But a banker still pays $400 as usual, where the $200 went to? The middle man: AMC. Who are those 30+ AMC? Good question? A whole bunch of lawyers, right?

Then, next, can anyone tell us what is going on behind the scene of AIG SWAP insurance? If not, why so many sellers/bankers refuse to give out the information or disclosure about its insurance claim when the REO is about to be sold? Big hidden profits to those predators, they don't want us know.

Do you want to exercise your "TEA" party's right? Give me a break! Sarah Palin. What are you going to do about it, down there in Tennessee? Just take a deep breath and look up there in New York, Ben Bernanke refused to answer Bloomberg.com's request of transparency and dared to face a lawsuit.

Banking Solution to Financial Crisis is to Ignore Distress Inventory - California had 1,200 Foreclosure Filings Per Day in 2009 - The California Real Estate Foreclosure Machine. Countrywide Financial, WaMu, and Wells Fargo top Foreclosure List in Q4 of 2009.

Background:

Everyone is talking about "shadow REO inventory" when National Association of Realtors keeps telling people that, although REO sales dominate the market, the current inventory is very low and market is recovered or bottomed. Some reports even said further that in California, there is only 3-4 month inventory that is much much lower than the normal condition of 5-6 months. So there is a shortage for Californians.

Dr. HB,

Your article is very good article to the public. However, it is not good enough for me, some one who has been watching the situation very closely, to say "excellent."

First, I believe, the American modern financial system is more well-organized and more sophisticated in handling real estate bubble to enhance its profit than the De Beers or cartel in diamond industy to handle production and manipulation in face of the bankruptcy crisis when the Africa huge diamond mines were surprisedly found.

I have been working on distressed real estate market since 1991. The worst foreclosure happen in California was 1996 when the record showed about 64,000 cases in a quarter. Back then, housing dropped so quickly as a rocket. I bought a condo for $58,000 compared to $190,000 sold at the time as new construction built in 1991. Per your article, NOW is supposed to be more serious compared to the last decade. But now look around, where can we see the BIG discount I enjoyed last decade in the same city and its surrounding areas.

About a year ago, a 1 bedroom 1 bathroom condo was listed for about $180,000, and now the similar condo in the same complex was listed yesterday for $319,000. A year ago, a similar single house was listed generally for $250-289.000. Now they ask for $340,000-389,000. In this area, almost everything is going up dramatically. Where is the area located? Go Check "Diamond Bar" for the condo.
http://www.redfin.com/CA/Diamond-Bar/23518-Silver-Spring-Ln-91765/home/8049580

Yesterday MNBC put a video "Home Prices on Shaky Ground?"out. MNBC invited some experts like Truila's CEO Pete Flint expressing their opinions on the current real estate market. One thing they seem agreed upon is "low end real estate is stabilized." Yes, it seems very true from my observations on some Western cities. But look more deeply. It is not a true picture.

Why and how do I know that? I happened to present my offers to buy some those properties. I even had a chance to have my offer accepted and open an escrow. There are something bothered me so much. Could you be kind to look into some cases and tell me what is going on. For example, it seems some banks are not holding their REO inventory. Instead they sold those properties to some groups, maybe it is called "whole sale," for a dire cheap price. I witnessed so many cases like bankers are doing its "short sale" to easily take advantages from our FED or AIG.

When I look at how easy a banker has a break in this mess. I feel so pitty to a home owner who has no such a luxury to get the same relief and has very difficult time with his lender for a "short sale." For example, one REO was foreclosed for $240,000 (countrywide loan made in 2006) and it was sold to a "E" investment group through Chase for $17,000 in mid-2009. Are those bankers holding the bag and take a huge loss?

NO is my answer; but I don't want to speculate on the issue at this moment unless DHB can point out some lights for me.

All I can say is the whole system help banks and the only victim is American average taxpayer JOE.

p.s. To me, Wells Fargo is still a very honest banker who is doing more conventional way to get rid of its REO as opposed to other banking predators.