We have a great opportunity coming up for investors...Tuesday 10/14 from 6-8 pm we are hosting a seminar for real estate investors in Pierce County. Based on the best selling book The Millionaire Real Estate Investor by Gary Keller, we teach participants the proven models for strategic investing such as:
The Net Worth Model Seminar participants will create their own individual investment plans and gain a concrete understanding of how real estate investing fits into their plans and their financial realities. Clients who are ready to view properties will receive complimentary consultations and reserved spots on our Top 10 Best Buy Tour as well.
Call me at 253.376.4717 or email info@ingniteinvesting.com for more information or to register.
It appears as if a good part of the old Countrywide Home Loans mess, acquired by Bank of America when they purchased the sub-prime loan giant earlier this year, may be headed to a somewhat happy ending.
Countrywide was one of the most active companies offering low-down payment, low-initial-interest-rate home loans to thousands of home borrowers who have now gone into default.
Under a court settlement announced today, affected borrowers in Washington, as well as in the states of California, Iowa, Ohio, Texas, Arizona, Illinois, and Connecticut, will receive modifications of their original home loans to make payments more affordable. These first-ever mandatory modifications, it is hoped, will stop the foreclosures against thousands of distressed borrowers.
Washington and the other states contended that Countrywide deliberately steered unqualified clients into confusing and risky loan programs without proof they could actually keep up with the payments. Many considered the lender one of the most aggressive, offering thousands of home borrowers loans without proper financial documentation.
Some loans had interest-only repayment schedules initially. Others offered an initial "teaser rate". When payments against principal soon became due, borrowers were overwhelmed by the far-higher monthly payments, and many defaulted.
Bank of America, in settling the lawsuit by the states involved in the litigation, has promised mortgage workouts at rates as low as 2.5% for those holding risky loans, and cash compensation to hundreds of others who have already lost their homes to foreclosure. The risky Countrywide Mortgages will be re-worked so the borrower's monthly payment will not exceed 32% of the borrowing family's monthly household income.
As we all know, many of the mortgaged homes have decreased in value since the homeowner's loan was closed, due to the weakened housing market here in Chicago and in other parts of the country. Some of the Countrywide loans will be adjusted to reflect these new, reduced market values. The main focus of the settlement program, however, would be to reduce required monthly house payments, rather than adjusting the amount of the loan.
The settlement would apply to borrowers who took out Countrywide loans on or before December 31, 2007. Bank of America has also agreed to halt foreclosure sales and not begin new foreclosure proceedings against its customers likely to qualify for loan modification.
Eligible borrowers will receive a letter from the Washington State Attorney General's Office and Bank of America in December 2008. Borrowers seeking relief under the settlement before then should contact Bank of America at 1-800-669-6607.
Breaking down the credit crisis...
Courtesy of Kyle Rohrbaugh and Eric Engelland
The Chinese have a proverb: "May you live in interesting times." And we are living through interesting times indeed.
Whatever the political posturing regarding the current rescue plan, a plan needs to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of "toxic" mortgages. This has a lot to do with FASB 157, also known as "mark to market". Each day lenders must mark their assets to the marketplace.
It's like you having to appraise your home everyday and if your neighbor was under duress because they got very ill, divorced, lost their job and was forced to sell their home quickly they may have sold it super cheap. Now, does that mean your house is worth that super cheap price? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But "mark to market" does not allow for this, which creates a vicious cycle.
Why is this so bad? Because as lenders mark down their assets, the amount that they have loaned previously becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to "mark to market" requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are $15 million. And at 30 to 1 this bank is viewed as a risky investment.
So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio...at cheap prices. And this makes the vicious cycle continue. And a quick look at the holdings of these loans shows that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe.
But this requires a bit of understanding. You see, when a pool of mortgage loans is put together, it isn't just A paper or B paper etc....it's everything. It's got some A paper, B paper, C paper...and even what looks like toilet paper. An "A" investor buys the whole pool but because they are an "A" investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.
Now add to all this, the opportunistic "shorting" done on the financial stocks, much of is illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector.
As for the plan the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posturing from both sides is just part of the process. This is not easy to understand for the general public. In fact most politicians don't get this either. That's why it is a difficult yet critical bill for them to vote on. Once this is done it will take some time but the markets will stabilize.
As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall.
As always - please keep in touch, especially during these volatile times. We are here to help you in any way that we can.
To your success,
Kyle Rohrbaugh & Eric Engelland
253.858.2640
reg@metrocitiesmtg.com
Despite the gloom of the national media, high inventory coupled with historically low interest rates make this is a great time to expand your real estate portfolio in the Northwest!!!
Real estate can offer you and your family a predictable
and legitimate method for wealth building
If you have been re-evaluating your wealth building strategies, come to our Real Estate Investor Workshop, where you will discover:
- Sound criteria for identifying great real estate investment opportunities
- Myths about money that hold people back from taking action
- How to develop the mindset of a Millionaire Real Estate Investor
- Proven models to help you build your investment portfolio
Date: Tuesday, October 14th 2008
Time: 6 pm - 8 pm
Location: Keller Williams Realty Tacoma
5825 Tacoma Mall Blvd Suite 103
Cost: $50.00 includes all seminar materials and a copy of The Millionaire Real Estate Investor, a principle-based guide to building wealth through real estate investing.
We at Keller Williams Realty are committed to helping you
identify your financial goals and attain them intelligently!
For more information or to RSVP, please call
Theresa Bastian at 253-376-4717 or email info@bastianbus.com
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Operating Partner, Keller Williams Tacoma, WA Realtor, e-PRO, Certified Distressed Property Expert
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