The Looming War on Mortgage Lending...

I am not sure how this is going to end, but if the past few months is any indication, it is going to end in a bad way.

Conservative lawmakers have been given a mandate to cut spending. That being said, it appears all budget items are on the table, including the privatization of Fannie Mae and Freddie Mac.

In order to make to make the shift from government controlled entities back to the private sector, the two GSE's will have to be made more attractive to Wall Street and investors. One way to do so is to eliminate the subsidies and insurance now provided by the government.

That sounds good on paper, but if an action such as this is acted upon, it could place a already cold real estate market into a deep freeze. The GSE's currently purchase loans from lenders and banks and then sell them off to investors globally. This allows the lenders to offer more loans to new borrowers, and so goes the mortgage lending cycle. If the GSE's are not there, and it is left to the marketplace to decide, there could be an interruption in the cycle. The end result could ultimately harm the borrower with higher interest rates, fees and tougher loan qualifications with nowhere else to turn.

Enter the real estate consortium of real estate agents, builders, banks, civil rights groups and other concerned citizens. The NAR, ABA, NAHB, NFHA and other civil rights and real estate trade organizations are planning to go to Washington and make sure their voices are heard and actions are taken contrary to the conservative law makers wishes.

This group has galvanized their separate but equal interests in the real estate industry into one potent machine aimed at accomplishing one goal - the continuation of government backed insurance on mortgage loans.

Why is this going to be a war ? Well, a lot of new conservatives have been hired by voters to curb government spending, and cutting the responsibility of backing mortgages is a way of cutting costs and saving money. But, the aforementioned real estate and civil rights organizations are a powerful lobbying corp, with deep pockets.

These two are heavy hitters - one with a mandate to give the taxpayers what they are looking for - savings; the other looking out for the public's interest by making sure housing continues to be affordable.

I am not real clear as to which side is right, because the devil is in the details. If one side wins, does that mean the other side deserves to lose ? I have a bad feeling no matter which side is victorious, it will not end well for taxpayers or borrowers in the future...

Why We Remain Financially At Risk...

You would think that after the TARP funds were distributed to all of the major banks, and then returned to tax payers shortly thereafter - that the U.S. would be somewhat solvent as far as lending institutions go...

Well, according to the economists at New York University's Stern School of Business - not so fast.

With the help of Nobel Prize winner Robert Engle, the university has developed it's own model on how to measure if a financial institution is systemically "risky".

There is a somewhat sophisticated mixture of financial benchmarks used in order to determine the risk level, but it basically shows that the largest lending institutions would possibly need the same infusion of cash and tax payer backed funds if the financial events of 2008 repeated itself any time in the near future.

But it is not fair to place all financial institutions in the same boat. Just like any other sector in business, some lenders just do things different than their competition. In this case, bigger can be better, if it's done correctly.

I do not know how the large institutions can become less risky, since risk is the game they play. But it appears that you can be in the risk game, and not be risky at all...

Want to know more ? Visit the site with the results, Vlab.Stern.edu and read the findings and other information concerning the riskiest financial institutions in the U.S today.

I would like to thank Bloomberg Businessweek magazine for presenting this article. It is the Feb.7th - Feb.13th 2011 edition of the weekly magazine. The article is located on Page 39, and is written by Craig Torres. Good information to know, Craig...Thank You

Stay The Course - Housing Market Continues to Need Government Intervention...

The Housing Market is not ready to float on it's own right now. As for the past two or three years, it still needs a life preserver in order to survive.

Without Fannie, Freddie or Ginnie, the housing market would come to a complete stop. The private market is not ready to take the reins from the GSE's. If Fannie and Freddie were released from government care, the housing market would become as slow as molasses runs during winter.

Prior to the new Congress being elected, there was political talk that suggested Fannie & Freddie should not be ran by the government, and should be returned as private companies. Now that the new members have been elected, and power has shifted in the House, it appears there are second thoughts about dissolving the relationship between the government and the GSE's. At least for the near future.

And that's a good thing...

According to the article written by The Atlantic online website (Daniel Indiviglio), the new majority in the House are reconsidering their mantra of government cutting ties with Fannie and Freddie.

And with good timing, because the housing market still has a way to go before it stops bleeding. Fannie and Freddie are currently propping up the market, providing much needed life support to a severely wounded sector of the U.S. economy.

If the government cuts ties with Fannie and Freddie anytime soon, the housing market will lose the much needed support, and will be DOA...

Let's hope Congress continues to realize this, and dedicates itself to stay the course to legislate a economic road to recovery - not a road to disaster...

The Re-Forestation of America - The Foreclosures for Forest Initiative...

It now looks as though there is a real plan to make the massive amounts of foreclosures to serve some common public good for the general population - Foreclosure properties for parks, recreation and re-forestation.

A Fortune Magazine article written by Nin-Hai Tseng reports there is a movement towards returning foreclosed properties back into usable green space for the public.

To me, this is extremely ironic. And is shows how incredibly inefficient things can be when the top priority is your financial statement.

Woodlands, forest, pastureland, farms, lakes, streams, what have you - have all been razed across the country simply to build tract homes, subdivisions and neighborhoods. I am almost certain the level of real estate development in the U.S. for the past decade out-paced development in any other decade, hands down.

Billions and billions of dollars have been spent developing land for new homes. And wasted. Within a five mile radius of my home, there are at least 10 incomplete subdivisions that all the land has been cleared, but there is not one house on the land. Just poles sticking out of the ground. Everything came to a screeching halt in late 2008 after the banks froze lending to developers. And the land just sits there. Empty.

Now the land is full of grasses and small shrubbery. All of the beautiful hardwoods, naturally occurring Dogwoods, and other native plants and shrubbery are gone. What a waste.

The Non-Profit organization Trust for Public Land has been helping state & local governments & private citizens transform their otherwise unusable land and properties into usable space, with a focus on conservation for decades. That's good to know, but it would have been nice if the areas had not been destroyed in the first place.

There is hope, however. TPL also has been known to take vacant, foreclosed properties in good shape and turn the properties into affordable housing. There are a lot of properties that have been completed but never occupied in my area as well. They are an eyesore, as the roads are not finished, the ac units are missing, and many windows or doors are boarded up.

Hopefully the Trust for Public Land, which is now beginning to work with banks and their foreclosed portfolios, and others like them, can help the U.S. transition into a state of stability in the housing market by transforming the foreclosed properties, land and homes into something meaningful and useful, one tract at a time...

Wall Street Wishes and Reform Dreams...

Every since the financial crisis began, I have been waiting to see what response would be rendered by Congress and the White House.

Reform is eminent ! I said to myself. The taxpayer and the individual should be given some kind of protection against the greed machine that is Wall Street.

I watched for years as my money in my mutual funds would creep up ever so slowly for years, and then once worth something - would lose half the value in three months. Enough I said. I took my money out and paid bills with it. Was I losing money because I had the wrong funds in my portfolio, or was it due to fees ? I used to think it was because my ignorance. Nope. Fees. Wall Street greed.

So, our government had a REAL chance of making a difference in how our financial institutions operate. I was looking for a return to the Glass-Steagall days, when the government actually governed.

Well, it looks like they blew it. Again. The two most important issues, banks to stop trading with their own money, and the requirement to move derivative operations to separate companies - appear to have been squashed.

Shahien Nasiripour with the Huffington Post reports that the nation's largest banks now appear to have MORE capital available for speculation under the new reform bill. I would say the House and Senate negotiators should have went home and got some sleep instead of voting in favor of the reform garbage compromises at 5:40 AM that for sure will lead us to another financial crisis in the future.

Wow. My question is - "who runs this country - the citizens or the businesses that hold their money ?"

I am afraid I know the answer, as I am sure you do as well, dear reader.

Now we just have to sit back and wait to see what the next financial disaster is going to look like...

Silent Death - The Gulf Oil Spill Effect No One is Talking About...

As I watched the major TV News Networks discuss the tragedy of the British Petroleum Oil Spill in the Gulf of Mexico, something dawned on me - The Residential Real Estate market in the Gulf States is toast for at least 10 to 15 years...

According to Wikipedia, there remains 26,000 gallons of crude in the sand and soil from the Exxon Valdez Oil Spill from 1989. That was more than 20 Years Ago !!

I have heard estimates in the news that the BP Oil Spill in the Gulf is more than 8 times larger than the Exxon Valdez spill, so is it going to take 8 times as long for the Gulf to recover to the level that Alaska is today? As large globs of oil wash ashore on the beaches along the Gulf Coast, and news spreads about the dangers of the dispersants used to clean up the oil - the question remains: Will people want to buy condos or vacation properties along the Gulf, knowing the dangers to themselves and their families ?

The commercial property owners along the Gulf Coast States have already begun assessing the effects of the spill on their businesses. Sure, in the immediate term, not many people will want to rent hotels or condos and vacation in the Gulf.

But how long will it be until people actually want to purchase vacation properties there? Current Gulf Coast property owners are concerned about loss of value, and are looking for compensation from insurers or BP. But that's a short term solution to the problem at hand. The long term, and unknown effect - will show it's ugly head when it's time to sell. Sellers could be hit with Short Sale like prices long after the rest of the country has recovered from the current real estate/economic crisis.

We could be looking at the Death of Gulf Coast Residential Real Estate for at least a decade or more...

Deepwater Horizon Oil Spill (BP Oil Spill)
from space by NASA's Terra Satellite

Strategic Default

Unfortunately, the public and homeowners are being bombarded with all kinds of conflicting information, as well as disinformation.

Along with the 60 Minutes segment on Strategic Default, Roger Lowenstein, a New York Times Magazine contributor, wrote an article for the magazine that was published on January 10, 2010 titled "Walk Away From Your Mortgage!".

I do not know how many subscribers the NY Times magazine has, but you can bet millions of people have read this article.

Until there is consensus throughout our society on what should be done and how to handle the current housing/foreclosure/financial crisis - mass confusion will continue at every level. Foreclosures have moved from a homeowner/bank problem to a social problem...

You can view the 60 Minutes segment on Strategic Default right here:


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