People in the media are many times automatically given credibility on subject matter. The question is should you listen and follow their advice? This is a key question as it pertains to your mortgage if you are currently underwater on your house because mortgage debt is a big hammer if not mitigated properly.

 

The article and ongoing debate attempts to bridge commercial mortgage responsibility with residential and throw in the moral conflict.  It is obviously debated for showmanship by two very nice people who do not have a clue as to the current contract laws under which many of you signed up for your residential mortgage.  Everybody is doing it is does not make it credible or good advice. This is the kind of advice people follow and end up in bankruptcy. It gets better. Then the bankruptcy attorney takes your money and you go away feeling like you have a real solution.  This happens time after time until one discovers that there are major long term negative consequences and associations with your decision to take the path of bankruptcy. 

 

Given this scenario, what is the next question I used to ask my loan applicants since 1987 when I was in the mortgage business and could not provide them a loan based on their bankruptcy decision?  I would ask them in a frank manner where their bankruptcy attorney was now.  They would always say that they gave money and the attorney was out of the picture.

 

Humor me for a moment and then follow the link to this article. This is great.  I am going to put myself in the chair of the debate and change the subject matter just a bit to present an analogy to make my point further with the same credibility on the new subject as I see with the current debate participants.  Let’s talk about your heart condition or someone you know that has a heart condition. Here we go:

 

My name is George. Did you know I know a little bit about everything?  Your heart is bothering you.  Go get another one or buy one of those medical implants. Yeah, go throw one in. Why not everybody is doing it?  What are you waiting for?  Having you hear of all the success stories?  I hear they work great.  What else do you need me to weigh in on as an expert?   I am getting some great media coverage and I may not be there for your follow up questions as they relate to pertinent issues.  Did I tell you I love Yahoo and I am getting some great media exposure?

 

Have you ever heard of the 30/30 guarantee when buying a used car?  Thirty feet or thirty seconds whichever comes first.  This is what you are going to get with listening to the foolish advice in this article or any idiot that tells you to just throw in a new heart. There are consequences.  Just like a replacement heart you dam well better have a plan and know what the hell you are doing and what the laws are or you are screwed.  The question to the debate is going to be is it good business to Walk Away?

 

The Yahoo article heading and link just below it:

It’s Okay To Walk Away: Let’s End the “Morality” Double-Standard on Mortgage Defaults

http://finance.yahoo.com/tech-ticker/it%27s-okay-to-walk-away-let%27s-end-the-%22morality%22-double-standard-on-mortgage-defaults-535365.html?tickers=mac,vno,spg,xhb,vnq,tol,len&sec=topStories&pos=8&asset=&ccode=

 

What happens to you in a deficiency state when you walk away from the mortgage as advised in this debate and on many other media platforms?  Let me kindly run the movie for you.  It’s just like Ground Hog Day but without the laughs and pop corn.  I briefly commented on this article on Yahoo but here is an expanded version. 

 

You walk away form the mortgage. The article and debate implies…Hey it’s just like a commercial loan right. Look at all the companies walking away from these. This is the way we roll in America. Obama is in charge and you signed up for free money with no accountability right? Right on!  Forget about the contract law and let’s change the law.  Get on board and Walk Away…because everybody is doing it? 

 

Advice like this is termed “bread crumbs” by my team.  We save people from the mortgage crisis with successful well planned Short Sales.  You must have a comprehensive plan to address Credit, the property, asset preservation, and mitigation of any unpaid mortgage debt.  Does still sound like a bread crumb when compared to the Yahoo debate? 

 

To the point, hypothetically today you walk away form the mortgage/(s) and follow the media advice.  Soon thereafter, depending on your level of delinquency, acceleration begins. What the hell is acceleration?  It’s part of the lenders legal right of recovery mandated by state law to take back the property.  We are not at the point where the lender starts up the truck and runs over your family financially and you begin considering not sending your kids to college. That comes later and I will yell at you and insult you if this thought ever enters the equation.  Acceleration leads to full blown foreclosure whereby you begin getting letters and demands until you receive the actual foreclosure sale date. There will be a definitive time and date on the court house steps.  Of course you may ignore this because the “walk away” advice or other bread crumbs you gathered where so convincing.  I hope this is not the case for you.

 

Now let’s assume the lender forecloses on your property.  We are now moving to the point where they are going to press you financially and you will have a clear view of the contracts you signed and your personal liability. Anyone that signed the mortgage note in a deficiency state is personally liable.  If you own the property but have not signed the note you are ok. Don’t confuse ownership on the property deed with who signed the mortgage note.

 

All foreclosure processes are mandated by protocol established by the laws of the state where the property resides.  Once the foreclosure occurs the lender will begin the process that will allow them to present their deficiency to the judge or magistrate of the court.  This usually takes approximately thirty days.  The court will grant a deficiency judgment against you for a big number.  This judgment will then show up on your credit report following your social security number for 20 years in Virginia as an example. Again, this judgment will only be placed on people that have executed the mortgage note.  This is no different from losing a court case where you are the defendant and the judge rules for the plaintiff. Please do not think for a moment that you will have your day in court to plead poor little homeowner in front of the judge. You will not. The deficiency judgment will be granted in deficiency states based on the mortgage note.  You are personally liable in these states and its will be automatic.  Hello Virginia is for lovers and Maryland. 

 

Once the judgment is in place the lender has the discretion to come after you or sell the rights of this debt.  Somebody is going to look to recover the money.  It’s now an opportunity.  First the lender will seek to garnish your wages in many cases and come before your groceries.  Once you discover this you will freak out and realize the advice you followed was very bad.  This will push you to an attorney much like the sweet sounds of siren songs on the beach.  Get out your credit card Bankruptcy is sweet justice. Then you are in short a deadbeat for a very long time and I am done. Figure it out yet?

 

Don’t walk away from the mortgage.  We will help you with all the critical items mentioned as part of our plan above.  Why is credit so important?  You need a job, promotions, security clearances, large purchases like a car, a rental house to keep the rain off you.  Should you just hire a realtor?  They are in many cases qualified to sell your house but they are NOT qualified to represent you with financial negotiations?  If they were then their Brokers Errors & Omissions Insurance Policy would cover this.  It does not, just ask them. This issue is also covered in past blogs on our site at www.thenegotiatedsolution.com   A realtor can only help you sell the house. They are not responsible for you and they cannot give you legal, tax, credit or personal liability advice.  Many attorneys that do not have experience mitigating property issues in the current environment are in the same boat. They mean well and will bill you hourly but they should not be representing you.  We take care of the whole equation as expert negotiators with lending recovery experience, licensed attorneys, and a licensed real estate broker on our team. We are also qualified to provide Tax and Liability advice in house.  Beware and ask questions.

 

 

Avoid foreclosure with a plan and a properly executed Real Estate Short Sale from a competent team that can offer you a comprehensive solution with a stellar track record of success.  Don’t settle for a paper pusher or a realtor that says “No Problem, sit tight, we will take care of you”.  Anytime I have heard “No Problem” that means one is coming.

 

Come visit our site, blog, and free video to investigate your options.  The decision you make today will determine where you and your family are with this problem one to two years out.

 

Blogging from the front line of the housing crisis.

 

GHunter,

According to the Fast Money gang on CNBC from August 5^th, 2010 it appears that the Obama Camp may be stirring the pot with another round of Eternal Hope for some homeowners that are underwater on their mortgages.  If you watched the program it was debated and made blatantly clear that this is very bad policy for our country.  Never the less Obama is simply a politician and we all know what that equates to.

 

At the heart of the issue is FNMA & Freddie Mac.  The early discussions are for the administration to figure a way to allow the government sponsored mortgage investors to forgive up to 25% of a homeowner’s mortgage.  This is in complete defiance of present and existing contract law that ties our entire system at the core.  This is also in complete defiance of objections from Tim Geitner as the Head of The Treasury Department and Larry Summers.  Apparently Obama wants to work some inside deal on his own that is strictly political that will selectively help certain homeowners at the cost of roughly 200-300 billion plopped on to the deficit. 

 

What is this?  Is this policy or grand larceny against all Americans?  How is this different from the Summer of 2008 when the administration in power said that they were going to push loan modifications and that the lenders better forgive debt to make everyone happy and promote a welfare class of losers by reinforcing that the government will pay for their mistakes.  It’s like there are not losers and there is not responsibility associated with ones actions.  A third place trophy with three in the competition makes you a winner. In retrospect we must not forget Jamie Diamond of JP Morgan’s public response to this outcry.  “We are not going to do that”.  We are not going to forgive the debt…”Pack Sand”.   If you recall that was pretty much the end of the political grandstanding.  The politicians said “Oh”.  Its contract law dummies.  Other people and investors own the underlying mortgage instruments.  Hello! 

 

Now we are on failed Obama program number six and this new animal looks like the beginnings of a number seven. Didn’t I tell you to expect a number eleven?  When the first couple don’t work and recently 40% of participants are voluntarily dropping out of Obama’s latest program because it’s “Bunk” it’s time for our leader to come up with a new spin.  Do you see the ongoing theme here that I have been blogging about for almost two years?

 

This is all about the Prophecy of Hope.  The government needs to keep people wrapped tightly in good moral character so they don’t dump their problems on their lenders.  Do the right thing while we tax you.  Be a good conformist.  Here is another bone for you.  Even though a Short Sale will get you out of the mess with all the debt forgiven we would prefer to give you another bone and take some of you from 50% underwater to 25% underwater on your home.  Yes the smart ones will soon after figure out that they are still renters will full ownership responsibility but who cares.  The people are stupid to the politicians and they can be manipulated.  Nothing has changed.  Just wait when you see program number eleven.

 

What is your way out of a housing problem?  Do you owe significantly more to your lenders than your home is worth and are you facing an upcoming rate adjustment that is only going to make the affordability issue worse?  After you consider your situation you need to then ask yourself this question.  Do you want a fair and equitable opportunity or would you prefer to be lied to and led down the conformist path?  It’s a personal choice at the end of the day.  How about a Real Estate Short Sale done by a group of experts that will get you out from under the property with the majority of your credit, assets, and family well being intact?  The Short Sale is the only fair and formidable weapon to give you the opportunity to start over.  What you decide today for your family will determine where you are in one to two years out.  I am not a commissioner of hope but loan modifications, government programs, foreclosure, and/or bankruptcy are not the answers if you are looking for a real permanent solution.  I don’t understand how people can be constantly deceived and manipulated by the politicians and the lenders for their own benefit.  It’s a crooked world. 

 

Come see me today just to investigate a Short Sale over a Loan Modification and other potential paths at www.thenegotiatedsolution.com .  Stop a foreclosure dead in its tracks if it has gone this far.  Find a solution that will give you your future back.  Don’t you dare contemplate sacrificing your children’s college or your retirement to make your lender happy.

 

My message to you when I hear the warning signs of yet another Obama spin is to get on board with a real solution and let Obama blabber. He is going to do it anyway.   November will make his group accountable.  I can’t wait for that sideshow. 

 

Blogging from the Front Line of the Housing Crisis.

 

GHunter

On Wednesday June 29^th I had the pleasure of a short afternoon break where I turned on CNBC to catch up on the mystery of the markets and all the wonderful news the world has to deliver.  Low and behold what was the first thing I saw?  A man and a woman from Congress talking their talk on the box discussing the process of trying to work out the new financial reform bill.  The Congressman then defiantly stated that Fannie Mae had “NOTHING TO DO” with causing the housing and financial crisis.  Right about then smoke started to steam out of my head.  Can you believe this baloney?

 

For the record lets drill down on Fannie Mae and Freddie Mac with a mortgage insiders view so we can separate the political posturing by the lying idiots in Congress from the facts.  Both of these institutions were in fact publically traded companies.  They were considered Blue Chips with a 2 billion dollar credit line and a “quasi” government guarantee.  They had a government guarantee alright.  The government i.e. the master IDIOT Bernard Frank commanded that Fannie and Freddie make non prudent loans to people that couldn’t qualify for loans.  Barney boy went on the record on Fox News a few years back with this quote “we are going to roll the dice with Fannie Mae to expand home ownership in America”.  He sure did a good job.  Of course now he claims that no one should blame him for the housing crisis.  I agree completely.  We put everybody in homes with bogus mortgages they didn’t qualify for under the false pretense of integrity and goodwill provided by the blue chip stalwarts of Fannie and Freddie and now they are completely insolvent and we have a total bust.

 

Let’s drill down a bit more.  Fannie and Freddie both had DU & LP.  There were automated underwriting modules whereby the loan company would put in perspective borrower employment and income criteria to obtain a loan decision.  Nobody new who controlled the infamous “BLACK BOX” the programmed the variables of the great decision making module.  It was bigger than the scam “The Wizard of Oz” had going. No one dared to question the dispositions when the great automated underwriting modules spit out approvals.  No one except me and normal Americans that know to cross the four lane highway at the overpass.

 

If you had a job and good credit you were pretty much approved. How do you justify approvals based on credit and loan to value with a 67% debt to income ratio?  Don’t question the black box was the mantra.  It’s approved so you look the other way and fund the loan.  Who cared?  Nobody.  The question now is who was the secret programmer to the Black Box?  Was it the great Franklin Raines homeboy extraordinaire CEO of Fannie that lost 11 billion but still got a huge severance because he was a minority or was it Barney and Club? 

 

You make the call but all I see is lies and deceit.  Fannie did not cause the financial crisis in housing.  I completely agree.  It wasn’t the gun that killed the innocent victim.  It was the bullet that came out of the gun.  Fannie and Freddie were the silver bullet enablers that helped devastate the housing market.  They were not the only culprits but both of these agencies were the front runners for years that lead the secondary mortgage guidelines.  As the agencies got more aggressive so went the secondary players. 

 

Where are we now?  Millions of Americans that wanted a home are stuck in a down draft of deflation completely underwater on their homes.  Now the government and all the pundants want them to do the right thing.  My question to you given how crooked the system and the players are is what is the right thing?  Should you go broke or save your family with a Short Sale thereby putting the hot proverbial poker up the rear-end of the government and all the greedy investors that are stuck holding your underwater mortgage. HMMMMM…..  I say the latter.  If you are not given a level playing field in my opinion it’s live by the sword and die by the sword.  Don’t let the lies and pressure of moral character sabatosh your finances and overall well being. 

 

Come see me at www.thenegotiatedsolution.com for the solution. Don’t go broke in the process. If you are underwater on your home and angry that you are stuck in this mess it may be time to fight.  Don’t listen to the lies and the bogus government posturing supported by the failed programs.  Loan Modifications are lies and a means of the lenders shaking you down.  Stop & Avoid Foreclosure and get out of this mess with a Short Sale.  The lenders are preying upon the people in their efforts to try to maximize recovery. Nobody is looking after your interests.  You owe them all the money and they own you until they don’t.  When you are looking to save your family and general well being ask your lender and your Congressman for respect and help with your house that is severely underwater.  When you get the answer make the determination if you need an accountant of a team of hired guns?  Sleep well. 

 

Blogging from the front line of the housing crisis.

 

GHunter

Many people owe more on their homes than they are currently worth before estimated selling expenses.  The common theme is that maybe the market will radically recover and everything will be alright.  Sounds great to me but let’s look at a couple statistics and see if we can gain some more clarity on the situation.

 

The Federal Reserve has been buying MBS pools or otherwise termed Mortgage Backed Securities in the open market over the past year.  By the end of March the Fed will be on target to own 1.25 Trillion in MBS pools on their balance sheet.  This program is targeted to end with the Fed no longer making such purchases on March 31^st 2010.  According to PIMCO Alliance, The Monster Bond Manager of the decade, the Fed’s holding represent 25% of the total MBS market.  The objective of the Feds MBS program was to stabilize the market and pull the spreads in so rates would stay low and support the housing market.  This program has been successful but one must also understand that this has manipulated a market that was designed to be free floating.  The natural forces of supply and demand must reassert themselves.   With the absence of the Fed as a major buyer of MBS securities this will happen at some point and rates for home mortgages to the consumer will likely rise. 

 

An additional point to focus on will be not just the current lot of MBS securities on the Feds balance sheet but what will happen when the fed actually decides to dispose of them to natural buyers in the MBS market.  This will again point to supply and demand and rates will be reflected accordingly. The MBS program has been a successful program for the government that was administered by the Federal Reserve.

 

Let’s drill down on rates and how they affect your house price.  Supply is the amount of housing inventory in the market. This figure also includes the so called “shadow inventory” that I will touch on in a moment.  Demand encompasses prospective buyers of the inventory that can actually obtain financing or a means of buying the properties.  As the back drop in mortgage rates lose the artificial support from the Fed MBS program, the Federal tax incentives due to expire in April, and other housing programs, what happens?  Rates go up and less of the demand pool of perspective buyers can afford houses.  Let’s hold this thought for a minute to talk more about the inventory issue.

 

The inventory issue is also being artificially manipulated in the current environment.  It is estimated that currently there are 645,800 housing units nationwide at some point in the default process with lenders.  This figure has recently been rising up 4.6% since January and is expected to approach 733,000 units by April.  Lenders have been holding back the flow of these properties on the market so as not to over load and already fragile market.  At some point the flood gates will have to open.  Lenders will need to either recover these properties through Foreclosure or cooperate with Short Sales Solutions.  Statistically the figure of this so called “Shadow Inventory” represents 1 in 5 homes nationally.  Put a different way, of the 8 million people currently late on their mortgages or foreclosure, this represents 15% of all people with mortgages.  Ask yourself this question.  How many people own homes that are significantly underwater on a debt to equity basis that are not delinquent and reflected in the current statistics?  Now you see the direction of home prices with a bit more clarity.

 

Now I don’t know how accurate these statistics are but I do know that the trend does not support a vibrant housing market that will suddenly reverse and put the masses of people significantly underwater on their homes back to even.  Having said this, where is your home value going.  The answer is definitively “DOWN”.

 

Let’s look at the government radar screen and see how well they play the game.  The government’s job is to promote stability and preach that all is well.  Remember the movie “Animal House” when the town was being wrecked by the frat boys and the one dressed as a policeman said “be calm, all is well”.  Excuse the humor but that is where I see the governments roll at this time. 

 

The Obama Administration needs to pump the people with hope and the prophecy of better times ahead.  They are doing a great job.  There is talk of a sixth government program to once again promote Short Sale cooperation among lenders.  This is something I am going to blog on separately that was noted in the Washington Post last week.  My question to you is why didn’t the first five programs work?  They were all failure to a large degree but that is ok.  They were failures for you but they were big winners for your government.  All the government has to do is drag out the problem on the linear time line so the markets can recover.  Whatever it takes to stretch this crisis out over the next several years thereby allowing the banks to mitigate their losses the people controlling the levers win.  Who loses?

 

The people that lose are the ones that owe the debt to the lenders and have not taken up a solution to their own problem.  You need to be wary of the Loan Modification process.  Lenders are targeting people in this process.  It’s a great means of legal recovery for the lenders.  They are taking people to the cleaners.  It’s also great for the government because it drags out the problem so all the people in trouble don’t impact the fragile real estate market all at once. 

 

With all of this in mind let me give you a real life sample of reality.  Example:  Yes you recently spoke with me as a customer and you told me about your lovely townhouse in Vienna Virginia.  You owe 800K to the lenders but the home is only worth 700K.  In addition your failed loan modification has you still paying $6,000 per month to the lender but yet your neighbor is renting the unit literally next door for $2,850 per month.  Who is stuck here?  This customer was actually a repeat customer where we successfully negotiated three separate investment property Short Sales since the first quarter of 2008.  Over 1 million dollars was forgiven with no further recourse and that was terrific but the customer never thought they would be in this position with their primary residence.  Additionally the customer thought things would get better.  Where are you today?  The advice in 2009 was for this customer to Short Sale the townhouse and move across the street and rent.  This is what they again face today.  It’s clearly a personal choice and we don’t ever want to talk someone out of their house.  However, $6,000 in monthly payments is killing this family so a choice now has to be made or they will be foreclosed on in 2010

 

If you question what I am saying please don’t take my word for it.  Do some research into all the failed government programs since the summer of 2007.  Also ask yourself why we are going on program number six.  What are you going to be thinking when we are trumping up how great program number eleven is going to be?  This is hard love to say the least.  Your house value is going to continue to decline and the government is artificially supporting the real estate market so BEWARE.

 

What you should be doing right now is assessing your personal situation and weighing your options.  Go to our site at www.thenegotiatedsolution.com and sign up for our free video to investigate the Real Estate Short Sale.  If you are looking for help we are here to serve. We are not “Paper Pushers”.  We are two Warlocks driven by Passion and a small Band of Brothers working to help the family unit get the most out of a Short Sale and keep it Fair.  We are Aggressive and at times Reckless, but we have an awesome team that represents you.  Address your problem sooner rather than later.  Doing nothing is not a solution.  When in doubt rage against the machine!

 

Blogging from the front line of the housing crisis.

 

GHunter

What a great question.  Recently a lender pushed a distressed homeowner a bit too far and it appears the negotiations strayed off course.  At first glance it appears a homeowner was having problems with his lender and related problems with the taxing authority that was also jeopardizing his business.  It also appears that the lender was using the taxing authority issue to further leverage their position.  At the end of the day the homeowner couldn’t take anymore, so after he failed trying to constructively work through the issues regarding his home with his lender, he destructively solved the issue quite contently with a bulldozer.  The headline should have been “Homeowner Round 3 delivers astounding TKO to lender”

 

Here are the links:

 

http://www.myfoxla.com/dpps/news/dpgoh-man-bulldozes-home-to-send-bank-message-fc-20100222_6196364

 

video:

http://www.youtube.com/watch?v=R2_5y79gOaM&feature=player_embedded

<http://www.youtube.com/watch?v=R2_5y79gOaM&feature=player_embedded>

 

 

Wow!  What would Thomas Jefferson have made of this?  Wasn’t he one of our founding fathers that help write our Constitution?  After all, our country is built on freedom and the freewill of men.  This is a great moment if you are in tune with what is really going on between lenders and homeowners in the midst of this housing crisis.  Lenders in many cases are preying on homeowners and pushing them to limits that can cause them to break.  I don’t want to get into all the negatives we have seen but I do want to shout out to the lenders the message of this incident.

 

It’s all about “Respect”.  If you come into the equation and forget the primary premise of your business model you put yourself at extreme risk.  What is immediately factored into a lenders business model?  The model assumes that the business will be conducted in a fair and equitable manner.  The model incorporates risk but does not provide allowances for extreme risk that is provoked.  This is what we have here with the homeowner taking matters into his own hands and leveling the house.

 

The homeowner tried constructively to negotiate and even provide a solution for the property in the form of a short sale with a real buyer for his home.  The lender took the position that they held all the cards and demanded that the homeowner conform to their demands.  The lender clearly pushed the homeowner too far.  When the homeowner threatened to level the house that should have been a clear indication that they needed to adjust their tactics and regroup. This could have been avoided without question.  The lender was ignorant and they forgot about respect.

 

Trust me from experience on this one.  If you’re a lender and you lend $100 with the expectation of gaining 5-6 dollars in interest each year on your principle, with a couple discount points up front and a targeted net interest margin, you have not factored in the bulldozer effect.  There are enough errors and normal losses running a lending operation that the last thing you want is to push a borrower to rent a bulldozer and make good on such a threat.

 

If you’re a lender reading this we have to be fair and ask another question.  Are the homeowners solely to blame for the housing crisis?  If you think it was just the fault of the homeowners you weren’t seeing what I was seeing first hand.  Let’s face it, the lenders and the Pigs on Wall Street made a killing as real estate ran up.  They helped create a monster that with the aid of the current deflation is trapping homeowners significantly underwater with oceans of legacy debt from a cycle that ran out of control. Now the lenders want to recover as much money as they can on the way down.  They clearly do not care about the homeowners in many instances.  They just want to maximize recovery.  They have forgotten about the customer relationship and respect.  Do you want further proof of this?  The government just announced a significant extension to yet another housing program. The government is artificially supporting the housing market. The longer we can drag out the problem the easier it will be for the lenders to recover and for the overall economy to also bounce back.  The thing that is most unfortunate is that in the interim the lenders are preying on distressed homeowners with a multitude of practices.  The government has saved the free markets and the financial system.  The lenders have recapitalized with TARP and private capital.  It’s now game on for maximum recovery. Do you think Obama is worried about the homeowners or more about where he is going to get his next cheese burger and fries?

 

This is why the lender pushed the homeowner in the bulldozer example when they rejected his 170K contract to solve his housing problem.  They got greedy and took the position that he must conform to their wishes.  This action, although not openly condoned by the masses, places this homeowner in the hero category for many that suffer in despair with failed loan modifications etc.

 

What are the lenders saying to prevent such action?  They say things, and I quote, like this: “I hear that they are criminally prosecuting people that do such things”.  Now I thought that the guy that bulldozed his house was a bit extreme but that is not what got me irritated.  The quote from the lender is what pissed me off.  I have a client issue with a lender that occurred recently and it came down to an unfair incident and the question of what a particular client may be capable of if we don’t constructively work through the issues.  A key representative at the lender made that exact quote.  To me this is cowardly.  This is a way to intimidate conformance when you as the lender have forgotten how to respect the borrowers and mitigate through a recovery cycle in real estate.  Why not just scare the people so we can take their money, kick them out, blame them for the housing crisis, and get the collateral back in pristine condition. 

 

Sorry fellows but that is not the way it works.  Here is how I see it with the bulldozer or the sledge hammer or flooding the house etc.  As long as you do not light the house on fire or do anything that would endanger the welfare of others, in my opinion, there is no criminality.  It’s all civil baby. That means lender you better treat the borrowers with respect and avoid such extreme outcomes or you are going to be spending legal dollars with your henchmen and hit the wall with zero recovery when they laugh their way to the protection of bankruptcy.

 

Am I as an ex-lender being fair to the poor lenders?  Your listening to a guy who created and then ran a forty state wholesale mortgage division.  It wasn’t about delivering the loans to Wall Street and getting paid with no strings attached.  We had all kinds of problems.  I remember one where a guy openly admitted to mortgage fraud when we confronted him through our servicing department.  He knew he was at risk depending on how our bank wanted to pursue the issue.  He arranged a family member to buy the property and our servicing department told him to get lost.  He found his way back to me with a solution that mitigated the majority of the loss we were forecasting so I gave it the green light.  I didn’t want to be the boss man and disrespect a guy who was trying to do the right thing.  It’s all about cooperation and respect.  In the end the lender loses much less and we move on as a business.  I just don’t understand where respect got lost in the equation, but it has.

 

How would I have handled the bulldozer situation after negotiations had failed?  First for the record, I do want to say that I love Caterpillar.  I personally would have rented a much bigger Kitty Cat and had a news crew on the schedule.  I would have also not told the lender.  If I were to a point where they were taking my house, putting my belongings on the curb, and tying up my livelihood with my business, I would have gone out of my way to be more polite.  I would have gone to the local Hallmark store and gotten a nice card for the bank president.  I would have then taken a picture of the house after I flattened it with the mighty American made Caterpillar and then scripted the following note for personal delivery:

 

Dear Mr. Bank President,

 

I have tried to do my best to constructively solve the situation that I am currently immersed in and I have failed.  I wish I could have done more to solve this problem in a mutually beneficial manner and conform to your wishes, but respectfully your persistence and demands were more than I was able to handle.  I am now also faced with losing my livelihood.  As a last request I am asking for a little compassion in the form of a small advance.  I need enough money to buy a couple gallons of Elmers Glue.  Since you wouldn’t work with me and I am losing my business too I thought it would be a good idea if I focused my ambition on a new trade.  I would like to use this situation and the time you have graciously granted me as a positive opportunity to become a puzzle master.  I have enclosed a picture of my house that I just bulldozed so you can encourage me.  After you made it clear you were large, in charge, and completely inflexible with the negotiations I decided I had no other choice but to conform to your demands.  Between now and the time you foreclose on the property I am going to work diligently on putting each splinter of the house back together with the glue.  I want you to know that I am a novice at this puzzle master stuff but I thought it would make your day.  Enjoy the picture.  Sincerely, Your Loyal Customer.

 

With all the housing issues up in the air, who is keeping an eye on the homeowner to see if they are being treated fairly?  Nobody, the government will slap the lenders on the hand just like they did with the failed 75 billion dollar loan modification program. Three percent of the homeowners or 30,000 out of a projected one million applicants got a short term to intermediate term loan modification fix.  Oh well, they got a slap on the hand in the media and it’s on to another program we are going to come up with.  Burry it and pump out the false hope has been the strategy.  What should you do?  Educate yourself for free at www.thenegotiatedsolution.com on a Real Estate Short Sale Solution.  It’s free and if nothing else you need to know your options and understand what is going on so you don’t get caught up with the crooks or beat down by the lenders.  Good luck and if all else fails please humor me and remember to rent the biggest bulldozer.

 

GHunter

 

Blogging from the front line of the housing crisis.

Do you want to hear from an expert in the field that your lender loves you? You believe it so I am going to reinforce it by telling you that they certainly do.  They love you more than you can imagine and they want to keep loving you until you run out of money.  Let’s go for a ride on a Loan Modification so I can illustrate the love and kindness from your lender and others in the market that would love you help you on the train for some money.  No money and the train ride ends unpleasantly.

 

First I want to state a couple embarrassing public statistics regarding Loan Modifications and failed government programs.  The statistics that came out in recent weeks for the governments 75 Billion Save The World Program were laughable.  One Million people were supposed to be eligible for loan modifications.  We are talking about a government subsidized program.  It turns out that only 30,000 people received short term solutions.  Keep in mind that the statistics since 2007 show that a very high percentage of completed loan modifications fail and the people end back up in default.  The notion of “here is a couple hundo off your payment and you should like it and deal with it” is a tough sell when you have to still make the high payment and you’re a couple hundred thousand under on your property value relative you’re your mortgage debt. 

 

What is a Loan Modification to your lender?  I am going to give it to you straight right in your ear whether you want to listen or not.  This is your problem and if you don’t listen you will more than likely end up where a client of mine did in the example below.  A Loan Modification is an opportunity for your lender to capitalize on your moral character.  We all want to do the right thing…right?  Sure we do as long as we are being treated fairly.  Moral character will bury you.  Your lender is going to pledge to you that you are eligible for a Loan Modification and ask you to send in all your financial information.  Keep in mind they love you so they want to do only what is best for you at all times.  What happens once they get all your paystubs, bank statements, etc?  Now is when they peer into your personal finances an attempt to get your money.  Absurd right?  I am the traitor now right!  How could I suggest such a thing from your lender?  Oh My…save it the truth sucks. They pump you up with false hope and prophecy of your ultimate eligibility.  Eligibility for what?  Oh, you mean the payment that you can now afford and the potential for forgiven debt and keeping the house.  Wrong!  You will end up with a couple hundred bucks off the payment with all the expenses and curtailment added to the back of your mortgage note.  In the process over several months with much frustration many of you will go broke and capitulate your savings and safe money to you lender on the basis of wanting to do the right thing.  Then you will wake up and realize you have been had with an ultimatum of pay or foreclosure.  Eventually you will find a Short Sale is the only fair remedy to your problem.  Let’s not jump the gun.  Let’s see what a recent new client had to say about their personal loan modification experience.

 

A family was referred to my team from a recent happy customer where we completed a Real Estate Short Sale.  These new clients had just been through and experience that I would classify as “Feudal”. The spend ten months trying to get a loan modification with the help of an attorney.  An attorney…Wow!  How cool would it be to be an attorney? That must be a person with extreme intelligence and the utmost care and consideration for all people in distress.  Well I will let you decide.  This attorney took $3,800 from this family and failed miserably and was eventually never heard from.  The clients ended up after ten months getting their own loan modification that consisted of an unaffordable couple “hundo” off of a 4K monthly payment.  It gets better.  The attorney that took their money didn’t even give them an objective time line to switch gears if things weren’t progressing according to plan with their loan modification.  How about if in 90-120 days it is not working out then we need to investigate a Short Sale.  How about some advice on preservation of assets and exercising the caution not to dissipate all your assets and saving to your lender in the interim of the process.  The attorney provided no guidance but he did cash their check.  He was stellar when it came to the check cashing exercise. 

 

Where are these people now?  Great question.  They are clients of mine fully engaged in a Real Estate Short Sale.  The bad news is that they have had a recent reality check.  The attorney fleeced them and their lender pumped them up to a point that they capitulated all their saving and retirement to the cause.  Yes “the cause”. They got on the Choo Choo and now it came to a sudden stop and they have to get off.  I am actually not sure if the train even stopped but I do know when they showed up for help they definitely had to get off the train.

 

We all want to do the right thing as long as it is fair.  It obviously is not fair and your lender has you in their sights.  You are being targeted for the funds that can be recovered.  Legally without a better solution you do owe the money so the lender can do anything to you including outright lie if that helps with recovery.  They are not being supervised and you owe them money.  What happens when you cannot comply with the paltry loan modification and you are living paycheck to paycheck?  That is when the lender lowers the boom on you as they did with these clients.  They tell you that you either make the modified payment now or they will foreclose on you within 10 days.  Shocker isn’t it?  If you don’t want to believe this or hear such a story from me then that is fine.  I suggest you go for the Loan Modification and then call me with your sad story to sign up for the Short Sale.  It’s a personal choice.  If you come to me early before you have gotten taken, i.e., before you are broke, then you will not be broke.  These clients have three children.  While I am clearly disgusted by what is going on the only thing I can do with my team is steer you to the fair solution with a Short Sale.   Wake up America.  Sometimes when kids are involved I come real close to yelling at my clients when I hear such stories.  Everyday is like a broken record with the Loan Modification stories.

 

I want to give you another example from a phone call from yesterday that I received from an existing client.  He had read that Bank of America was going to come out with a new Loan Modification initiative that he believed would make him eligible for 30% debt forgiveness of the existing principle on his two loans and the perfect payment.  I gave him a nice “HELLO” on the phone.  You mean Bank of America that was recently criticized by the government for being one of the worst lenders involved in their failed 75 Billion dollar subsidized program is going to be the front runner with Loan Modifications that entail 25-30% of principle debt forgiveness for YOU? 

 

That would mean that the US Treasury Department is going to have to require that all financial institutions to write down their loan portfolios another 30% and plan on conveniently doing it next year again just to satisfy the people.  The mortgage debt is bound by contract law with the investors that own the actual mortgage paper behind the large servicers. The visions of grandeur with holy debt forgiveness are never going to happen.  How about all the other great programs from the government and the threat to change the bankruptcy laws to coerce the lenders into helping with loan modifications from 08 & 09?  Failed!  They don’t work for the masses. Get smart or go broke, your choice.

 

Let me elaborate more on the motivations of the banks and large lenders as I see it.

When are people going to understand the Band-Aid concept?  The concept of a Band-Aid is to delay the process or otherwise drag it out. Literally put a Band-Aid on it.   If a lender like BAC can drag out the problem and recovers more money through the loan modification process I described above in conjunction with billions in new earnings to offset current additions to loan loss reserves then they win.  Look at it this way.  If all the defaults are realized today and they hypothetically equate to 12 billion but the bank only reserved 10 billion then Wall Street doesn’t bless this and the stock goes down.  Ouch!  We wouldn’t want that to happen.  Given the bank has already recapitalized and for the most part has already reserved against the majority of its real estate losses, wouldn’t it be more financially sound to take the mortgagors down for as much money as possible while delaying the process.  That means that in the public eye the can reserve 10 billion per quarter for loan loss reserves and come in with a controlled loan loss contribution at or below that figure while the work their lawful recovery efforts on you.  Now that is how to run a business and Wall Street likes that very much. 

 

That’s were we are folks.  Its capitalism and if you owe one of these goliaths money you better get a real plan before they take advantage of you.  The bulls eye is on your head and the Choo Choo Train doesn’t rest.  Maybe this blog will set you straight and you can solve your problem with a Short Sale and still be in good financial shape.  This is why I am writing to all those that will listen.  Go to my home page at www.thenegotiatedsolution.com and sign up for our FREE two hour video “The Negotiated Solution” and learn about the Short Sale.   

 

I hear sad stories every week from good people that got hurt really badly by either doing nothing or believing in the loan modification process.  It doesn’t have to be you!  I guarantee your time will not be wasted investigating a Short Sale. The Short Sale Solution done property where it entails Credit Strategy, Asset Preservation, Property Disposal, and Mitigation of the unpaid Residual Mortgage Debt is the only way to keep it fair and get the most out of the solution.   

 

Blogging from the front line of the Real Estate Crisis.

 

GHunter

The epic battle of good vs. evil rages on as it always has.  Good always prevails in the long run but evil wins many battles and causes significant grief and suffering along the way.  As the end of 2009 approaches it has clearly been a tough year on our country and our people.  The financial crisis has inflicted significant damage that will take considerable time to heal.  2010 brings great hope for those that do not immerse themselves in panic and surrender to defeat.  For you to understand this hope you must listen to the markets and pay close attention to macro forces at work.  The Generals with significant power and influence are not always dressed in a uniform in charge of a great army as we are accustomed.

 

The media headlines just reported a failed terrorist attempt to blow up another plane.  Hugo Chavez in the South once again is making waves with threats against companies.  We are fighting two wars and as we enter the ninth year in Afghanistan all of thoughts are along the lines of another Vietnam and when the hell we are going to get out of this Hell Hole. Our military is doing great job but it is hard and we are losing young lives.  I have clients that have lost children in this war.  With all this crap and the media hyping the body count and what appears to be a standstill it is hard to find hope but hope is clearly present.

 

There is no question America is a killing machine when you line the enemy up in uniform and declare game on.  We all understand that the two current wars are very different and the cost in conjunction with our financial crisis has cost us dearly.  Where is the third front that I offer to you as Great Hope for 2010?  Who has recently taken the reins of General? 

 

We all know that America is dependent on foreign oil for its security and survival but do you know that the technology in Natural Gas in just the past three years alone has made America the Saudi Arabia of Natural Gas with a current 100 year supply domestically.  Many people don’t really understand the consequences and opportunity of this recent development. 

 

Rex Tillerson the CEO of Exxon Mobil has just given the command for America to open the third front and mobilize for war with the purchase of XTO Energy.  This may not be evident today but the forces of capitalism with its unweilding power of creative destruction have been hereby commanded to mobilize and prepare for battle. This battle will not have the elements of lethal force like that of the mechanized infantry division Sadam’s troops fired on at night at the end of the Iraqi war in 2003.  When the sun rose the battle field looked like Armageddon and Congress tried to court martial the commander in charge for overkill.  America is soft because we are stuck with a bunch of pansies and fat losers in Congress.  Theses are the same losers that allowed the lack of regulation and excessive leverage to wipe out the common equity of Fannie Mae & Freddie Mac and almost destroy our financial system.  They would rather legislate the war and send our troops into battle with inferior rules of engagement like the ones currently in Afghanistan… “Don’t shoot until you’re shot at”. To me this is worrisome but friends of mine tell me that this is the way we wage war and this has always been the way.  

 

The Generals of Capitalism do not have to play by the same rules of engagement. The new front in the war that will soon be opening against terrorism and in full support of our independence will also not be run by Congress.  It will be run by the Generals of the free market emboldened by the power of technology, innovation, and investment.  Some may think it’s early but they are wrong because the technology is in place.  What is going to happen and how is this a third front?

 

In my view this is a third front and potentially the one that will be the most effective against oil rich terrorist sponsoring nations.  If you follow Boone Pickens he will help you do the math.  Recently he stated that if we just focused on converting our 6.5 million heavy diesel truck and heavy vehicles to natural gas over the short to intermediate term (5-10 years) we could reduce our dependence on foreign oil up to 15%.  Now that doesn’t seem that significant, and ten years is a very long time ,but if you put this in conjunction with new nuclear, wind, and solar power initiatives you can visualize a pretty big dent in foreign oil demand. 

 

The significance of such potential reduction in foreign oil demand has the potential to literally cut the legs out from beneath the terrorist funding sources. Take a country like Saudi Arabia.  They don’t have an economy that innovates.  They don’t have the human capital that a truly free democracy like our country spawns.  When the oil revenues wane due to a 10%-15% hit to the top line demand it will quickly become an Econ 101 supply demand equation.  The major funding sources of hatred and terrorism will become top heavy and wither.  Look what happened last year when oil briefly dipped into the 30’s.  There was a lot of nut holding going on I can assure you. 

 

This will truly be a third front in the epic battle of good vs. evil.  No blood has to be spilled here to achieve the ultimate goal of quashing terrorism and a significant move closer to energy independence and stability.  Just think what the positive effects of this mobilization will have on our economy.  The Generals will be all the major heads of the oil and gas companies and the capital for investment will rest upon the same foundation that caused our financial crisis… Wall Street.  Capitalism’s creative destruction can also be good and we must respect Wall Street as part of our arsenal.  Let’s hope congress doesn’t screw it up by preventing the proliferation of the newest technology that got us to this point.  Its time for the military to continue it plight but now it’s also time for the raw capitalist engine of freedom, democracy to enter the fight in their support. 

 

Rex Tillerson of Exxon Mobil has officially has set the mandate that Natural Gas will be a key component of our plight.  Watch the rank and file of the energy business get on board.  This is going to be an undertow that will not go unnoticed. Regardless of our troubles today we will rise to the challenge.  The third front may very well prove to be remarkable and the most devastating to our collective enemies world wide.  Don’t bet against capitalism.  In spite of our troubles and the housing crisis I offer all those that take a moment to read and ponder Great Hope for 2010.  All Hail Rex!

 

Stop & Avoid Foreclosure, investigate a Real Estate Short Sale Solution at www.thenegotiatedsolution.com

 

Blogging from the front line of the housing crisis.

 

GHunter

Everyone has heard about the newest Obama backed program to help homeowners.  I am not questioning this program or its message.  I think this program has practical application to serve many distressed homeowners in contrast to past programs from 2007 that were almost complete failures.  The judgment that dictates success vs. failure is gauged by the programs ability to help people stay in there homes with an intermediate to long term solution.  I want to focus on the new message with a serious warning to unsuspecting homeowners.

 

The object to keep everyone in their homes that wish to stay is a good one but we need to drill down on the methods of the lenders that are separate from the voice of our government.  This is the key.  Caveat Emptor or buyer beware also applies to the unsuspecting homeowner.  Read on and decide for yourself who is on your side. 

 

When you call your lender with a mortgage problem, a question when you are minorly delinquent, etc. you will many times hear this new message:

 

The government and the lender want you to know that many people are being prayed upon with loan modifications and the likes.  Anyone requesting money up front or giving you guidance not to make your mortgage payment is suspect and looked upon as a fraudster. 

 

In other words, steer clear of these groups and individuals, because we are your lender and your friend.  We obviously have your best interest at heart.  You are our customer.  Ok, sounds great doesn’t it.  In the real world there certainly are crooks that will take your money and do nothing for you.  Keep in mind not everyone is a crook and that you may need professional help with a Loan Modification of Short Sale to avoid much more serious consequences.  At this point I am going to completely refrain from voicing my opinion on the subject of this message as being “Truth or Deceit”.  I am going to give you a real life example so you can come to your own conclusion.

 

Last week a guy came buy my house to do some work on my pool.  I was ordering a safety cover out of concern for my family and neighborhood kids.  I expressed my strong desire to ensure that the pool was a safe place. I don’t want anyone to drown on my watch.  This guys name was Dave.  Dave said he completely understood.  Somehow the conversation went to his family.  He said he had seven kids.  We laughed.  I asked him if he was Catholic.  He said no but he had it all figured out.  Apparently every time he would bring up the subject with his wife about going back to work she would end up pregnant with another.  We laughed again.  He acknowledged he was truly blessed with a family.  Then out of nowhere he made a profound statement.  He said,  “I have a great family but no money” .  We started talking and it ended up he was completely broke and living hand to mouth with a monthly subsidy from his brother.  He went from laugher to a stressed out soul and he was dying to tell me his story.  I was drinking my coffee and I had time to kill early in the morning.  Here is his story:

 

He had a property he lost to foreclosure over a year ago.  It was an investment property.  He lost this property to save his new primary residence where he and his family lived.  Around the same time he lost this property he applied to his lender for a Loan Modification.  They told him he was eligible. Keep in mind this was about a year and a few months ago.  As part of the eligibility he obviously had to jump through some lender paperwork and compliance hoops.  We have all heard of those.  He ended up going through a forbearance period.  In the end he did obtain a Loan Modification.  An approximate $3.000 monthly mortgage payment was reduced by a net of $60 per month.  Congrats, right?  Wrong.  In the process the lender played this family’s good moral character to the poor house.  Over the term all of their savings and retirement accounts were slowly and voluntarily sucked into the lenders grasp.  The $60 solution was hardly a solution at all. This guy has been getting a $900 per month subsidy from his brother every month over the past year just to survive.  He is now totally broke with nothing but a paycheck.  He literally has nothing.  Is this in your judgment part of the plan by the lenders to get their money back or really part of the solution and our government’s intentions for the public? 

 

Frankly this is the scam that the lenders are pulling on people nationwide.  Don’t seek help from someone that will represent you and level the playing field to keep it fair.  This is our mission statement.  Your lender wants to keep it fair for you.  After they are done with you and you are flat broke what do you think happens?  The story continues:

 

I told him the only thing he could do at this point was to call and try to seek a remedy from the newest Obama plan.  He told me that he was ashamed to have to take money form his bother every month.  He put his head down almost to sob.  This is the part of this crisis that I hate.  The human toll is terrible.  I told him he should be grateful to have such a brother and that if his brother had money he surely couldn’t take it with him.  That made him feel better.  I gave him my personal contact information and told him to follow up with me after he contact his lender.  He called me two days later with the results. His lender said he made $48 too little to qualify for any of the plans and that his investor was a private lender.  They then went on to inform him that they only offer one Loan Modification per loan over the life of the loan.  It is blatantly obviously to everyone reading this blog that a reduction of $60 per month for a family of seven children after you have taken all their verifiable savings over the course is a disgrace.  Then they apparently exposed the evidence of deceit in a final blow.  They told Dave that at this juncture that if he did not make his payments they were going to foreclosure on him and he would have to vacate his home. That was it.  Unfortunately this is verifiably happening to many unsuspecting people.

 

Now, as an expert in the field with twenty years of extensive lending experience, I am going to give it to you straight whether you want to hear it or not.  Here is how the game is played.  If the lender can string the process out and get all of your money in the process it actually doesn’t hurt them, rather it helps them.  These loans are already the majority reserved for losses on their books.  All the write offers were taken in the past year during the crisis.  The lenders were required to reserve and increase capital to satisfy the government and the markets.  Now they are in the recovery mode and you may owe them money.  They don’t have rights to your retirement accounts and every nickel you have unless you capitulate it to them. 

 

The moral here is don’t trust your lender nor your government.  The government has saved the free markets and the financial system.  As I have said before, you are on your own.  No one has to end up destitute and in despair as Dave has in this example.  This does not have to happen and it doesn’t happen to any of our clients. Nobody that I represent or give advice to will go down this path.  I am passionate about this statement as my next blog is going to illustrate with three very recent examples of what I call Grand Slam Home Runs with Short Sales.  I am going to give you play by play examples of three people in very difficult situations that walked away from $630K, 390K and $285K respectively while not going broke and at the same time providing a real solution to their lenders.  All of the advice and time I spent with Dave was free and much of what we offer is free.  All you have to do is get motivated to help yourself.  Start today.  Investigate a Real Estate Short Sale at www.thenegotiatedsolution.com .  Sign up for the 2 hour video.  The cost is nothing but your time.  We designed this program to separate our team from the crooks and fraudsters on the basis of quality and credibility.  No money, no credit cards input, only your time and desire to help yourself. We help the people level the playing field, keep it fair, and win! Caveat Emptor to the homeowner!

 

GHunter, Blogging from the front line of the housing crisis.

The Housing Market is a lumbering giant with the capacity to lift 10,000 pounds but unfortunately today the giant is carrying a load of 10,001 pounds.  The Giant has a strong will to survive and even prosper but the weight of the load is just too heavy to bare.  What am I referring to?  Deflation spurred on by very high unemployment and the excessive supply of housing.  Once the Deflationary Dragon gets out of the cage he doesn’t go back in easily. I am not an economist but I do know that deflation has delivered a crushing blow to just about everybody and everything over the past year.  The pain has been historic.  I do believe Ben Bernanke with his expertise of the Great Depression is the best team lead to address the Dragon’s ultimate demise but for now it is going to take a lot of time.

 

Today the markets rallied because the Case-Shiller Housing Index came out and showed two consecutive monthly improvements.  Everybody went wild as though the housing crisis is over.  This scares me but also makes me feel good because my stocks keep going up.  Can somebody come over and look in my viewfinder for a day.  Some days I feel like a life boat captain on the Titanic. 

 

The housing crisis is nowhere near over and deflation is still ravaging the prices.  Robert Shiller even came out and warned everyone that even though his name was on the index that it wouldn’t take much for the housing market to make another break to the downside.  You can find Robert Shiller on CNBC from time to time.  You have to love this guy.  He has the street cred and he tells you the truth whether you want to hear it or not.  The best part is that he will tell you that a 1000 pound bolder is going to drop right on your head without raising his voice or getting overly excited.  Of course nobody listens and then he says play the tapes and don’t say I didn’t tell you so.  We are here again so plan on housing prices continuing to decline.

 

The only way we are going to find our way out of this situation is to be realistic.  To make my point I would like to revisit the housing run up in the late 80’s the sputtered in 1989.  It took 5.5 years for the markets to stop going down and finally flatten out.  It was 94 and a half before it was over.  Now the speculative run this time around was enormous as compared to the run in the late 80’s.  This time it almost completely wiped out our financial system.  How long do you think it is going to take for market stability?  It is going to take time and we are going to need some inflation to counter the deflation in my opinion.  The one gentleman I admire but definitely would not want to be with the task of walking this tight rope is Ben Bernanke.  I hope he fixes it before we all have to learn Chinese.

 

Let’s reflect on a recent Barron’s article from two weeks ago.   A major Walls Street firm having researched the supply and demand trends in all the major market came to the following conclusion.  The approximate 14+ million people that were defined as immediately affected were approximately 24% underwater on their homes.  The research expectation was that the same people in two years would be approximately 48% underwater on their homes.  I don’t know how in-depth their research was but on the surface it really makes sense.  We are talking about approximately one third of the 40 million people that bought in the last stage of the housing run up.  Many of these people are facing default and need to find a solution.  The pressure on the housing prices is nothing more than deflation pressing down on the whole market.  The best means of a solution for the most affected people would be a Real Estate Short Sale.  This is the only way they will be able to get out from under this enormous debt burden without going completely broke.  It’s a personal choice, broke and too lazy to research a short sale, or a winner that got out from under a lot of debt and provided their lender a solution.

 

Another point that I like to make to clients to put the housing market in perspective is to take a stock like General Electric and use it as an example.  We all know that markets trade on emotion.  The stock market is much more liquid than the housing market so emotions can be reflected much more quickly.  In contrast a persons personal pain on a home can be put off and we can experience denial if we so chose for a period of time.  About a year ago General Electric stock was around 32 after coming down from approx. the 42 level.  GE was a triple A rated company and an American financial and industrial conglomerate.  What was not to like about GE?  Everything!  We all expected GE to come down to a level of fair value.  We each had a level in our heads and we thought the mighty GE was safe.  Wrong!  It came all the way down to 6 and we all prayed for mercy.  My point here is the markets go way above fair value on human emotion and fear and they go way below in the same manner when they reverse.  This happened with GE that now resides at around 14.  I am asking you what is going to happen with the housing market.  There are already homes that can be bought at a level perceived to be below the cost of construction.  Where does it go from here? 

 

In the words of the late Sir John Templeton in 2005 as the real estate speculation craze raged on, he said “wait until it drops 90% and then buy buy buy”.  Everybody thought he was a fool.  He was certainly no fool in hindsight.   

 

The Deflationary Dragon is still raking havoc.  If you need a roof over your head I say it’s ok to buy a house you like.  Affordability is very attractive.  However, if you are stuck in a situation with denial to the left and foreclosure to the right I am telling you to carve out a path right up the middle and solve your problem with a Short Sale. 

 

We are still offering anyone in the 50 states access to our Free Trial. Take two hours to investigate the Short Sale at www.thenegotiatedsolution.com as a means of avoiding outright default and Foreclosure. We offer a Full Service that will handle the entire process from selling the property to the closing.   Its not easy but it’s the best free market option you have where you can win. We have many happy clients. 

 

Blogging from the front line of the housing crisis.

 

Ghunter

The recent Obama Administration mortgage program to help homeowners refinance was initially established for homeowners that were no more than 105% of debt to current market value.  To all of us in the industry this was frankly laughable.  It was common knowledge that the deflationary spiral down in real estate nationwide has left many people 40-50% upside down with their properties relative to equity.  The program recently just received a nice modification whereby it will allow homeowners to refinance up to 125% of debt over current market value.  The administration also recently endorsed the Real Estate Short Sale as another free market means of solving a mortgage problem by adding small financial incentives for borrowers and lenders to participate. What does this mean for you?

 

This means that the policies are becoming realistic and we can put the news media hype and requests for urgent governmental initiatives as a means of calming the public aside.  Now is a time for a long drawn out healing process that will include significant deleveraging.  This is the only way people are going to be able to get their arms around their debt and get there personal financial house in order.

 

The change to the mortgage assistance program is primarily for FNMA & Freddie Mac existing mortgages and it does have qualification provisions.  Certainly you must have a job and you must clearly be in a position to afford the repayment of the new loan.  The government wants to facilitate the lowering of the national private citizens’ debt service but it does not want to assume a massive new wave of default liability.

 

Having said this, where does 125% of debt to market value peg the needle in the mind of most people?  In my opinion, this change along with the incentive for short sales are two of the most realistic and truly valuable moves to help distressed homeowners since the crisis began.  My reasoning is that these initiatives are realistic and grounded based on human psychology. 

 

If you are gainfully employed and your family is settled in a home and your children are enrolled in the local schools, do you really want to bail on a home and dump the problem on your lender if the government will help you lower your monthly mortgage cost significantly thereby making it affordable to stay put?  Realistically the answer is for you to stay put and lower your rates from the 6-8% range to somewhere between 4.5-5.5% range.  When you work through the numbers the benefits far outweigh the personal hell you must face if you were to choose to leave the property. This positions the Obama program move toward a stabilizing factor then the previous unrealistic false hope before the change.  This now makes the program a constructive option for those within the program parameters were as before the change the program was unavailable to the majority of those in need.

 

The short sale incentives also point the distressed people in the right direction.  The government does not want the burden of backing homeowners that are in excess or 125% of value.  Why?  Clearly in the minds of all us when we see a bridge to recovery that is so far that we cannot see to the other side we look to take evasion and often panic actions to get out of a bad decision.  This means default, foreclosure, or the more constructive short sale solution for you and your lender.  The 125% threshold is a good fit for the administrations program to constructively address today’s problem where people in the 150% debt to equity area need to accept responsibility for their own solution.  This is the area where the market simply needs to clear itself through the process of foreclosure or short sale.  The government can help but can not afford to indirectly assume responsibility for everyone problems.  At the end of the day you own your own mortgage problem. The lender did not lend you the money with the contingency that the economy would be good and your house would never deflate in value.

 

At the end of the day it is very interesting to see all the hype from the government programs beginning with the Barney Frank program that was initially announced in April of 2008.  There was so much hype and false hope to calm the markets while the government quietly worked toward its primary motive to save the free markets from the abyss.  The free markets have been saved and the healing process is upon us.  It is going to take some real time.  I say real because we are accustomed to V shaped recoveries.  I think this one is going to take a couple more years until things get back to normal. The real positive is that the programs and initiatives are becoming realistic as they focus on human nature and realistic incentives to help people fix their own problems.  No more bailout headlines and that is good for everyone.

 

Lastly, I would like to comment on an article in Barrons today that outlined the success and failure of Loan Modifications.  Pick up a copy of Barrons if you are remotely considering a Loan Modification.  Look a the re-default rates and think through the cost you will have to bear to achieve an affordable Loan Modification from your existing lender. I would use the comparison of opting to get on an airplane to flyer from Alaska to New York for a cost of 10-20K in forbearance and payments and you only have a 20% chance of reaching your destination.  That means you spend the money and go through the personal hell over many months and your plane crashes in the mountains.  Good luck if you are convinced your lender loves you enough to give you a loan modification.  You have much better odds with the changes to the new government refinance program or the short sale solution.

 

The Real Estate Short Sale is once again the reigning champion of the free market solution.  It is almost impossible to fight the free market solution to find a better alternative. For those of you wanting to learn more about the Short Sale as a means of avoiding foreclosure we welcome you to join our Free Trial at www.thenegotiatedsolution.com.  It is free and will only cost you two hours of your time.  You have probably spent months worrying and losing sleep not to mention the assets you have dissipated in the interim.  Its time to learn about the short sale and its benefits.

 

Blogging from the front line of the housing crisis.  GHunter