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

If you pay attention to CNBC you may begin to get the impression that the government is going to begin subsidizing mortgages and even sending out checks to get people out of trouble.  It sounds great for many people in this time of crisis but remember we haven’t seen the details.  The Devil is always in the details.

 

The first thought that comes to mind is the shear number of people that are underwater on their mortgages. The second thought is what will happen if the government incentivizes failure and gives money to people through subsidies or other debt forgiveness plans.  What will the people do that are not in trouble but still fighting to make a mortgage payment that may not be ideal?  They probably will default and look for the free handout. 

 

It’s a very difficult decision in determining who and how to help without making the housing problem in our economy worst.  The key is to stabilize housing.  I thought the tax credit for purchasing an existing home went a long way toward helping only to find out it was cut back and now only available for new first time home buyers.

 

Instead of waiting for another failed government program have you considered your current options?  I had a client last week tell me he was waiting on what the government was going to do before determining if he was going to face the responsibility for his problem with an investor property. 

 

If you have Mortgage Troubles here are your options to avoid foreclosure:

 

1)      Loan Modification:  A modification with your existing lender is a move that can be considered if you want to stay in your home.  Modifications don’t have a high success rate because people’s expectations are not realistic.  You lender may cut your payment down by a couple hundred dollars per month but don’t expect them to forgive any of the debt.  All of the reduction in payments will be added to the back of your mortgage for you to make up in the future.  A modification is nice for a select few but it won’t help you if you don’t have a job and can’t make any payments.  It also may require you to be delinquent before any consideration by your lender.  Whatever the new payment is associated with a successful modification, you will have to make it to avoid foreclosure regardless if you owe more than the current value of your home.  Don’t expect a market rate of interest for your new payment.  If you do you are setting yourself up for a major disappointment.  The lender really doesn’t care.  You owe them the money and that is pretty much the end of any discussion.

 

2)      Hybrid Refinance:  A Hybrid Refinance is a more constructive means of seeking a long term affordable solution if you are underwater on your home but would genuinely like to stay in your home.  This vehicle carves out a chuck of your existing indebtedness from your lender with a new loan and seeks to mitigate and/or restructure any residual debt.  The end result is an affordable long term solution. The new market rate first trust loan is usually 85-95% of your homes current market value.  You do not have to be delinquent to qualify for a Hybrid.  Not everyone is qualified for this solution.  You must be gainfully employed and you must also qualify for the new loan based on income and credit.   Again, this is an innovative solution that helps a select group of people that are underwater on their homes.  If you have bad credit, insufficient income, or no job you are simply not eligible for the Hybrid.

 

3)      Real Estate Short Sale:  The Short Sale is not the option that will allow you to stay in your home.  The Short Sale is a workout with your lender that enables you to sell the home for less the indebtedness.  This is the only vehicle that will provide the opportunity for forgiven mortgage debt.  This should be considered if you simply cannot afford or qualify for the loan modification or hybrid refinance.  Many people owe hundreds of thousands of dollars over what their properties are currently worth. Others have too much exposure with second homes and investment properties where the values have literally cratered.  In these scenarios you need a real plan.  I hear people all the time suggest that they will hold out until the market comes back, only to call back a couple months later with a sob story of how their tenants lost their job and can’t pay the rent.  Denial is not healthy.  We cannot influence the market so we have to follow it. The current price trend in the national real estate market is down. 

 

Realistically these are the only three options you have to stop and/or avoid foreclosure if you are currently at an affordability crossroad.  It is imperative to think clearly and address the problem.  All three options are available at www.thenegotiatedsolution.com

 

As I said in an earlier blog, the government is going to save the free markets.  I will be shocked it they subsidize mortgages even for people that are termed destitute.  Foreclosure and bankruptcy are free market remedies that allow orderly termination and renewal.  Having said that, if there is any subsidy given it will only be for the very needy and it will only be a Band-Aid to help stabilize the markets.  Once the economy regains its legs all bets will be off. Our government can not afford to borrow to pay for peoples misfortunes.

 

I am suggesting to all those that are concerned and have affordability issues to examine the three options I have outlined above.  If you owe significantly more than your property is worth a short sale could be your wisest move.  You will need to do some sole searching and put aside the denial and moral character to benefit.  It is truly the lesser of two evils.  The debt will burry you and it will hurt your family.  Think of the short sale as an act of prevention.  It is a very constructive solution for you and your lender.  Don’t attempt it without a complete understanding or the credit side, tax implications, and personal liability associated with the mortgage note.  I do not advise that you consult only a realtor. 

 

On the subject of a realtor, we have a new client in Florida that is unhappy with their realtor and current delayed short sale solution.  Selling a property and signing a note for the unpaid mortgage debt is what your solution may entail with improper council.  Other mistakes include emptying out your retirement accounts to satisfy your lender.  On Friday I had another client sign up for the program and regretfully admit that they liquidated 200K from an IRA to pay people off for a business that went bankrupt.  Now they are in trouble with their home.  I asked why and where did they get such advice.  These are common mistakes and tragedies that can be avoided with a plan and credible advice. 

 

Please humor me for a moment.  In the jungle the Hyena will take the spoils with complete disregard if it were not for the watchful eye of the Ferocious Lion.  Regardless of what option you chose to pursue above, your family and financial well being are at risk.  Are you prepared for the role of the Lion?  Is your lender the Hyena?  Do you have the knowledge you need to make the right decision and see it through to a solution?   We talk to a lot of people facing the mortgage/housing crisis.  I would like everyone to know that the homeowner is consistently more harmful to themselves than you could ever imagine. 

 

The blog is free at blog.thenegotiatedsolution.com and the program is on special for February for only $99.95.  You make the call.  Good luck!  Blogging from the front line of the housing crisis.

 

GHunter

As the government postures and the markets react there has been some constructive discussions from influential parties toward a solution. The primary goal is to keep as many people in their homes with an affordable solution as possible regardless of whether they have equity in the home. This will slow down the default rate and the foreclosure machine. How are we going to get there? The standard Loan Modification does not appear to work.

The 4.0% solution will provide 30 year fixed rate loans to people that are determined to be eligible to keep them in their homes. The rational for this move is that the US Government is already guaranteeing the 5.2 trillion in debt for Fannie and Freddie with our government paper. The long term government paper is yielding less than 4.0% so this does not appear to be a bad idea. The key is to find an affordable solution for people to stay in their homes and also create an incentive for them to stay as well.

Most people are creatures of habit and would like to stay in their homes. However, when you are facing $200,000 in mortgage debt over what the home can be sold for, and also and impending 40-50% payment adjustment, it is very difficult to create an affordable solution and an incentive for the homeowner to stay in the home with the current lender.

The 4.0% solution is much like our Hybrid Refinance except obviously a 30 year fixed rate would be government subsidized and it would completely take the existing lender out of the equation.

I think this is a great idea where loss sharing could be established between the government entity and the existing lender. The government does not have to force the hand of the lender upfront to write down the principle. The subsidy portion of the solution could also be laddered across the general population of eligible distressed homeowners. Not everyone will need a 4.0% subsidized loan for 30 years. Ladder the terms much like a bond ladder. Some homeowners would receive a 4.0% for 3 years, or 5 or even 7 years before a maximum of 1.0% annual adjustments to the market rate at origination of the loan has been met. Correlate the subsidy to the needs of the homeowners. Some homeowners will not be eligible. The adjustments would eventually eliminate the government subsidy. Some of the debt may have to linger with no payments if the homeowner cannot afford it even at the 4.0%. Regardless, it’s a good deal for the homeowner and the lender.

This program would make it affordable for many distressed homeowners but certainly not all of those affected. The government’s loss participation with the existing lender would minimize the public perception that it is a bailout. This also has a free market friendly appearance. And lastly and of equal importance, the homeowner has the incentive to stay in the home because over time they will only adjust up to a 30 year fixed rate of approximately 6-6.5%. Sounds like a long term solution to me. Who is going to make the call to Uncle Sam?

Any attempts to persuade lenders to forgive existing debt while allowing the homeowners to stay in the home have not worked. This is a fact on a macro level that was validated by Shiela Blair of the FDIC recently on CNBC. The less upheaval to the distressed homeowner will in most cases equate to a lower the loss ratio to all parties.

We don’t have to jump to debt forgiveness. That would be a handout and the markets don’t like handouts. The 4.0% Solution is only an idea for those that would like to stay in their homes. If you are flexible to leave your home, and would like to learn about the “Mac Daddy” of all free market solutions, then you must educate yourself with the Short Sale Solution. Rid yourself of affordability issues and avoid foreclosure with the Real Estate Short Sale.

The Real Estate Short Sale is the only free market solution that levels the playing field and provides you relief with the opportunity to get, the majority and in many cases, all of the residual mortgage debt forgiven. If you need to delay or stop foreclosure, the Short Sale, can not be beat on merit. However, please don’t take my word for it without research.

Our best clients for Real Estate Short Sales are the ones that have been beaten by their lenders with false hopes of extravagant Loan Modifications only to find out that the lender is an ambivalent dictator. The homeowner becomes indifferent and then this merely becomes a business transaction. That is exactly where our course “The Negotiated Solution” will take you without the need to get the 60-120 day beat down from your lender. Check it out. It comes with a money back guarantee.

There are many ideas to stabilize the housing crisis. I say we use them all selectively as we fit them to the needs of the distressed homeowners. Let’s draw out the time frame of the problem so the economy and the real estate market are not overwhelmed by it. In the end, when signs of fundamental stability return to the housing market, you will see all of our other problems and fears in the financial markets quickly dissipate. Housing is the key and we are over thinking it and allowing it to consume us. Blogging from the front line of the housing mess.

GHunter