Here we are again.  The CEO of Bank of America is on the box today talking about his company’s earnings power and the scale of the franchise a couple years out.  The Fast Money Crew on CNBC loved it. What a power house so let’s all go out and load up on Bank of America stock.  Their guest, Barry Rhitzholtz of Fusion IQ, had a much more sobering and what I would classify as a realistic view. Before I get to Barry’s view let me provide a bit of context on Bank of America from personal experience and past blogs.

Bank of America had a previous CEO that was bellowing a $3.00 figure in annual earnings power per share and “we are the world” just a few years ago until he was forced out.. I mean forced to retire.  Maybe he just decided to retire or maybe he had to retire after the securities fraud based on the improper disclosure with the Merrill Lynch deal.  So we did a secondary offering in the twenties, brought in some money, and the stock shortly thereafter went to $3.  Well that must have just been a result of the financial crisis or securities fraud.  That CEO got bounced and now we have a new one.  The new one is talking about $2.20 in earnings power per share. Well, I only graduated from ODU but I still feel like my pocket is 80 cents light.  Why not just say $10 per share in earnings power “We Hope” but we really don’t have a clue what the risk is or what the hell is going to happen with all the homes on our books that are underwater.  A footnote should also be added to say “please nobody ask me about our purchase of Countrywide”.  Bank of America simply is not credible from my side of the pond.

Let’s also not forget the most recent sweet heart deal the fifty state attorney generals are going to give the banks in return for their legal extortion.   The big banks once again broke the law and foreclosed on many people illegally.  I apologize!  You are not allowed to use the word “illegal” in the same sentence in America anymore when you are talking about the big banks.  As I have blogged in the past they are above the law.  They do what they want and there is no accountability other than another fine.  Save the system even if you have to slaughter the homeowners.  Homeowner beware, the loan modification process is a great recovery tool for the lenders. 

Now, I am disgusted by the mere mention of Bank of America.  I have worked with them helping homeowners with Real Estate Short Sales for the past three years.  What I have witness is obscene.  That is one screwed up crooked organization with nothing but predatory profit motive at its core.  I have also been a corporate banking customer for over three years and they are fee happy here as well.  I don’t believe a dam thing anyone at Bank of America has to say.  Now let me reiterate Barry’s view on the banks.

He stated that all of the banking CEO’s just before and during the financial crisis did not have a clue as to the risk or their books or what was really occurring in the markets.  Currently according to Barry, the banks are barely solvent and I completely agree. They are being artificially supported by cheap money engineered by the Fed and floated on the hope machine or otherwise termed hot air balloon from the Obama organization. The government programs pump money into them as they begrudgingly work out problem loans.  The real issue with the banking industry as a whole is the current state of the real estate market.  There are millions of homes underwater with debt.  These people are going to smarten up one by one and look for a way out.  Let’s also not forget the birth cohort called “the baby boomers” is moving into retirement and won’t be there to gobble up the excess housing supply.  Nobody is looking at the macro picture it seems.

Although Barry Rhitzholtz was spot on he simply was too nice in his delivery.  I am going to paraphrase what he was trying to communicate as follows:  Don’t believe a dam thing the banks have to say.  They are crooked and have cheated you in the past.  The government needs them so they are being kept propped up.  They are puppets.  I would like to thank Barry for being candid in his view even though unpopular with the cast on TV.

The real estate market is going to be in a decline for some time to come.  Here is a link from just this morning:

Underwater mortgages rise as home prices fall – Yahoo! Finance

http://finance.yahoo.com/news/Underwater-mortgages-rise-as-apf-1329138840.html?x=0

If you are underwater on a property think of it like an investment.  Reduce exposure and live to make another investment.  Don’t go broke with the moral character baloney. If you think the government really cares about you think again. They care about the system.  If you think your lender cares about you then you are a fool.  If you think I am out of line then apply for a loan modification and let me know how life is.  Accept that you have made a bad investment and find a permanent solution.  Come visit our site at www.thenegotiatedsolution.com for a free video introduction to Real Estate Short Sales and the land of forgiven mortgage debt.  I am proud to be part of this creation.  This represents integrity and a real solution for distressed homeowners. 

When Bank of America speaks it makes me want to tell all homeowners that are underwater nationwide that it may be time to act.  Let’s help the CEO understand the risk in the system and the responsibility his company has.  We are tired of being misled by an organization, and group of banks for that matter, that act above the law.   2011 is prime time for a permanent solution. Think 1099C, forgiven mortgage debt, stop and avoid foreclosure. All of this can be accomplished with a Real Estate Short Sale.  Please take a moment and let me will lead you out of the desert and to your own personal “oasis” as it pertains to the mess in real estate.

Blogging from the front line of the housing crisis.

GHunter

I simply do not understand given the level of personal accomplishment, commitment and often intellect that it takes to get into politics in Washington, why they are so collectively slow and dumb in addressing the most threatening problems.   This is not a political rant that I am about to embark on.  We have a jobless recovery.  What sea change can we pull the levers on today that will move the needle and truly begin to add jobs?

How would you like to goose the consumer, make our country much safer, and put the terrorist on their backs by virtue of their wallets without having to kill them all?  Sidebar, I am not advocating not to kill them. That works for me too. However, did you know that Aubrey McClendon, CEO of Chesapeake Energy drives a car that was converted to natural gas?  He pays 75 cents per gallon.  That pisses me off.  Why can’t I do that in Virginia? Simple, there is no mandate from Obama or any of those other bright scholars we have elected to lead.

I don’t know what the figures of annual outflows are to the Saudi’s and all those other lovely people but it’s around 350 billion plus annually.  We have new technology that has elevated our country to a very secure position with over 100 years of natural gas. Did you know that the same technology has spawned a huge recovery effort on our soil in the last year drilling for oil?  We are the second largest producer of oil.  We can fix our problems if we decide to do so.

We have the resources to put a real “Game Changer” in play.  Reverse the money flow and mandate the conversion of vehicles to clean burning natural gas.  Don’t take it from me. Check out The Boone Pickens Plan.  He has an awesome plan that begins with converting the 6.5 million heavy trucks to natural gas.

The government is going to pay me as a tax credit for having insulation blown in my attic in 2010.  My house is now much more efficient and my wife loves that the house is much warmer. Ok, that’s terrific, but I am still annoyed at the fact that we are not addressing the big picture.  I have heard estimates that each large truck, like a bus or trash hauler can be converted to natural gas for about 6K per vehicle.  Uncle same is going to throw me $1500 for a portion of the money I spent on insulation why not issue a presidential order for the same dollars as an incentive to get vehicle natural gas conversions going.  It would truly be a step in the right direction.  Based on Pickens estimates converting the 6.5 million heavy haulers that run routes in America today would save us having to import 2.5 million barrels of crude from the Sheik per day.  That is the sharp end of the sword I am talking about. Everybody is tired about the job numbers and hearing about the housing crisis. Let’s fix it and stop hoping it gets better. 

Oil is going up and if you don’t own oil stocks you are going to get very annoyed.  I filled my car for $3.09 recently and the same station today with 3.45 for regular.  I hope oil spikes to $150 and get everybody’s attention.  It’s not going to hurt me but that is not the point.  Historically it takes two major issues to really get the attention in Washington.  In my opinion, the best thing for our country and our national security would be a massive oil spike.  It’s coming!

This will push the mandate for natural gas.  America will begin to reverse the flow of funds to the Middle East and we will create jobs and secure our future.  How does this help with the housing crisis?  If the real rate of unemployment is 17-18% due to people dropping out of the work force we need to create real jobs through new industry and technology.  If people have work then they can buy homes and lending to people becomes much less risky on a macro level for all the big banks.

In the meantime, please don’t lose focus on the front line of the housing crisis. We have too much debt.  Millions of people are upside down in homes and scared. We are helping homeowners get out from under these properties with Short Sales and sticking the debt to the lenders.  That’s right, forgiven mortgage debt!  They hate it when they have to treat the homeowner fairly.  It’s a recovery game. Somebody has to look out for the little guy.  What’s wrong with getting rid of debt and keeping it fair?  Learn more at  www.thenegotiatedsolution.com

It’s not going to be any different when the last Saudi tanker comes over and we call them up and say “no thanks” we don’t need it, send it back.  We aren’t even going to bomb you.  We don’t need your oil anymore so we will leave you to your own devices. 

If you love this country and you want real positive change direct a friend stuck in an underwater home to seek expert help and hope for a massive oil spike.  Let’s get rid of the excess debt in the system and address real change on the energy front.  I think both will be upon us soon and it will push the mandate for change so our country can once again take the lead by a wide margin and prosper.  I believe we can fix our problems but we need leadership to set the wheels of capitalism in motion. Once this happens there is no stopping it. Ronnie said, “Peace through Strength”, may this continue.

Blogging from the front line of the housing crisis. GHunter

I am referencing the Saturday Washington Post article titled, “What Might be Hurting Home Values” on page one of the Real Estate Section.

 

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/26/AR2009032604074.html

 

After an alert call from a realtor today asking if I was aware of the article and its ramifications to the market I was forced to find it and read it.  I always find humor in what the press reports.  The article pin points BPO’s or otherwise referred to as Broker Price Opinions as an alleged cause for declining home values.  The humor for me comes from the last paragraph where it states that the use of BPO’s by lenders are costing the Real Estate Appraisers lost revenue and that National Appraisal Groups, including the Appraisal Institute, are “UP IN ARMS”. 

 

Ok, let’s have some fun and learn from an insider as we go so we can stamp out the misinformation that is rampant in the press.  I would first like to note that the reporter never defines what a BPO actually is and why they even exist.  I am going to do that for you so nobody sheds any unnecessary tears on behalf of the poor humble appraisers.

 

What is a BPO or Brokers Price Opinion?  This is simply a report that provides property valuation support for lenders based on the 3-6 most recent relative comparable sales and listing trends in the general proximity to the property.  Some reports are more detailed than others.  Many will even provide guidance on 30 day, 60 day, or 90 day pricing suggestions for a given property.  The BPO is also a quick way to assess value on a property whereby the lender is considering issuing a loan or for an existing property in REO inventory.

 

Why do we have BPO’s and how did there prevalence really come about?  BPO’s are used by lenders in many instances prior to funding loans because frankly the lenders do not trust the paper the appraisal reports are written on.  The lenders need an independent third party method of validation so they know the appraisal report has validity.  This is part of a qualified quality control plan that lenders may choose to utilize.  BPO’s are also conversely used in Bank REO properties to assess the collateral on the books.  The lenders don’t want to hear more lies form the appraisers. They want value quickly that can be supported with credible market data and this can be achieved efficiently & accurately for a very low cost with a BPO.

 

The appraisers with their lobby and licensing are now crying that they are “UP IN ARMS”.  They are losing revenue and suffering as we all are in the greatest housing crisis since 1932.  Should we feel sorry for them and make BPO’s illegal?  Hold that thought.  What did the lenders normally do when their underwriting department discovered a fraudulent appraisal or an over zealous appraiser that clearly had their own agenda when it came to assessing value for the purpose of a loan?  This is a key question before we render the decision to pass laws to protect the appraisers or justly force them to feel the double edged sword of the housing crisis.  The answer is that underwriting departments simply took that appraiser off the eligibility list and refused to accept appraisal reports from that person in the future.  There was no accountability.  The states and the licensing department rarely did anything to appraisers.  It was the lender and the loan underwriting department’s job to verify the integrity of the appraisers work as a supporting vendor.  I think the fact that appraisers have to have a license is laughable.  Without enforcement of guidelines and ethics we can chalk all those allegations of fault up to appraiser discretion.  Everybody knows appraisers have 8-10% discretion when spoofing, I mean assigning, a value. 

 

Now that that game has run its course the appraisers as yelping because the housing crisis, where we all share blame, is unleashing pain from the back side of the sword.  The front side was very devastating as the speculative spiral up in values eventually devastated Wall Street market makers and effectively our entire banking system.  Appraisers played a roll as did realtors, lenders, homeowners, etc.  Everybody is to blame and we are in the wash out period where we all must repent and pay for the excesses.  I say let the appraisers bleed.  If they are worth their salt they will rise to the top and earn business or reinvent themselves.  If not they will die a failed capitalist.

 

Heavy stuff, I know.  I have personally witnessed a lot of garbage and deceit from appraisers on properties across forty states that I have no compassion for them.  Appraisers share their portion of the blame game for the housing crisis.  I have seen hundreds of inflated and flat out bogus appraisals that came from licensed so called reputable appraisers through my wholesale division.  The lenders must have a fast and efficient means of valuing their collateral and providing for 3^rd party integrity checks as needed with BPO’s.  The allegation that BPO’s are depressing values is nonsense and unsupported.  The primary driver of the gap down in property values and the continued declines is related to demand and the evisceration of available credit.  There is an abundance of housing inventory and the demand for this inventory has been restricted by the type and availability of credit.  Anyone that took an Econ 101 course in college knows that this means lower prices until demand and supply finds an equilibrium point.

 

If you find yourself at wits end with your lender turn to “The Negotiated Solution” and investigate a Real Estate Short Sale.

 

Blogging from the front lines of the housing crisis.

 

GHunter.

Check out the article on the front page of Saturday’s Washington Post business section. Here is the link:  http://www.washingtonpost.com/wp-dyn/content/article/2009/01/09/AR2009010901867.html  

 

Basically, it condones walking away from your house and your mortgage.  Nice article if this is what you want to hear.  Over the intermediate to long term, society never rewards people for not being responsible to their financial obligations. It sounds to me like an attorney prophesying false hope.  The fact of the matter is that a foreclosure will ruin your credit and prevent you from being eligible for a new mortgage for six years.  If you think for a minute that all lenders do not discriminate against you site unseen based on your credit profile and scores you are naive. If you are too lazy or stupid to look into better options than just walking away from your mortgage than you deserve what you get in the end.  I love the part where the professor forecasts that so many people will have foreclosures that it won’t really matter after long.  This is ridiculous.  Hypothetically, for the sake of argument, let’s assume 12 million people get foreclosed upon by their lenders.  There are 320 plus million people in our country.  Are you telling me that some scholar is trying to convince you that the lenders will have trouble staying in business by lending to the other 308 million Americans. 

 

The article is well written and sounds very soothing to the distressed homeowner.  Homeowners in distress need to investigate a short sale.  Don’t waste your time on a loan modification, they are a joke.  A short sale is the only free market vehicle that will allow you the opportunity to save the majority of your credit, have debt forgiven without fear of a deficiency judgment, and actually help your lender with a solution (thus, why they cooperate).  Responsible people that help their lenders will be rewarded and the others will be labeled deadbeats.  

 

Lastly, to discourage the ignorant people that are scared from following the message in this article, a lender can easily get a deficiency judgement for a low cost and put it on your credit.  The real cost to a lender is collecting on the judgment.  If you think you will ever recover without having to resort to bankruptcy you will not want the judgment on your credit.  It will follow you for many years and you will regret it. 

 

What about the professors and attorneys doling out bad advice?  Are they going to be there for you if their advice proves to be wrong?  The answer is no, you are responsible for your own welfare. You need to investigate if a Real Estate Short Sale is a constructive means of avoiding foreclosure.  We welcome you to visit our site at www.thenegotiatedsolution.com  .Here you will find credible information without the false hope.  Don’t take our word for it.  Validate to see if we are for real or just another nickel dime snake oil sales group.  The world is full of experts and attorneys that simply do not know what they are doing.  Be careful and do you homework and don’t believe everything you hear on the news or read in the papers.

 

GHunter