Mortgage Defaults Hit FHA
Mortgage delinquencies have spread through the entire spectrum of mortgage loans. Delinquencies and defaults have even taken a toll on the Federal Housing Administration. The FHA has legally required reserves of 2% of the loans that it insures. It has now fallen short of that amount. In order to combat this shortfall, the FHA Has announced that they will tighten credit requirements for borrowers as well as increase the standards they require from the lenders who provide these loans to borrowers. It is said that the FHA does not plan to raise any fees or premiums charged to borrowers and that their reserves should be able to stabilize and recover with these more stringent requirements of both borrowers and lenders.
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info.
http://activerain.com/blogs/equityinmotion
http://www.trulia.com/blog/michael_marroquin/
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http://sandiegorealtyinvestment.blogspot.com/
Tuesday, October 6, 2009
Friday, October 2, 2009
WHAT IT TAKES TO GET A DEAL IN THE CURRENT MARKET
WHAT IT TAKES TO GET A DEAL IN THE CURRENT MARKET
As the real estate market continues to change, the art of the deal changes with it. What kind of market are we in now? Buyers market? Sellers Market? Of course your thinking "it can't be a seller's market right?" Well, as usual, It's not that simple. It's a bit of both. I would call the current state of the San Diego real estate market a buyer's market overall with some qualities of a seller's. As the market levels off and stabilizes there is a big mix of desperation from sellers and enthusiasm from buyers. This has created many bidding wars on almost every newly listed property that is listed lower than the previously sold price (especially on Properties in the lower price of the spectrum).
With seasoned investment pro's lurking in abundance, cash in hand, it has become quite difficult for the average home seeker or first time buyer to snag a deal. So what does it take to get the same deal the pro's do? Preparation followed by action. Buyers must be ready to pounce on a property that meets their criteria immediately. Definition of immediately: right now, not tomorrow or even tonight, right now! It has become very common for bank owed properties to have multiple offers the same day, even within hours!
How do you prepare?
First, you must be pre-approved with a specific loan program with a loan officer or mortgage broker you trust. There is no time to take care of that when you are ready to submit an offer.
Second: You must be intimate with the neighborhoods, communities and floor plans that you are searching for so your Realtor can keep a close eye on exactly what you are looking for. This will enable you to be able to make an instant decision on submitting an offer when the time is right.
Third: You must be mentally prepared. I know that may sound funny, but it is important to be 100% certain that you are looking for the property you really want so that when you act on it you do not hesitate and you are completely ready. If married, you must be 100% certain that you and your spouse are on the same page with the property criteria that you are looking for in order to avoid any last minute hesitations or second thoughts.
Finally: Act immediately. If you have fully prepared yourself using the steps above with the help of your Realtor and Mortgage Broker you should be prepared to act immediately. There are dozens of other people looking at exactly the same properties as you. Not to mention countless investment professionals and investment firms ready to make cash offers. This does not mean you should get caught up in a bidding war by any means. Remember that the early bird gets the worm . . . most of the time.
Are you prepared to get a deal in this market?
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info. Call or email to set up a free consultation.
http://activerain.com/blogs/equityinmotion
http://activerain.com/equityinmotion
http://www.trulia.com/blog/michael_marroquin/
http://equityinmotionblog.wordpress.com/
As the real estate market continues to change, the art of the deal changes with it. What kind of market are we in now? Buyers market? Sellers Market? Of course your thinking "it can't be a seller's market right?" Well, as usual, It's not that simple. It's a bit of both. I would call the current state of the San Diego real estate market a buyer's market overall with some qualities of a seller's. As the market levels off and stabilizes there is a big mix of desperation from sellers and enthusiasm from buyers. This has created many bidding wars on almost every newly listed property that is listed lower than the previously sold price (especially on Properties in the lower price of the spectrum).
With seasoned investment pro's lurking in abundance, cash in hand, it has become quite difficult for the average home seeker or first time buyer to snag a deal. So what does it take to get the same deal the pro's do? Preparation followed by action. Buyers must be ready to pounce on a property that meets their criteria immediately. Definition of immediately: right now, not tomorrow or even tonight, right now! It has become very common for bank owed properties to have multiple offers the same day, even within hours!
How do you prepare?
First, you must be pre-approved with a specific loan program with a loan officer or mortgage broker you trust. There is no time to take care of that when you are ready to submit an offer.
Second: You must be intimate with the neighborhoods, communities and floor plans that you are searching for so your Realtor can keep a close eye on exactly what you are looking for. This will enable you to be able to make an instant decision on submitting an offer when the time is right.
Third: You must be mentally prepared. I know that may sound funny, but it is important to be 100% certain that you are looking for the property you really want so that when you act on it you do not hesitate and you are completely ready. If married, you must be 100% certain that you and your spouse are on the same page with the property criteria that you are looking for in order to avoid any last minute hesitations or second thoughts.
Finally: Act immediately. If you have fully prepared yourself using the steps above with the help of your Realtor and Mortgage Broker you should be prepared to act immediately. There are dozens of other people looking at exactly the same properties as you. Not to mention countless investment professionals and investment firms ready to make cash offers. This does not mean you should get caught up in a bidding war by any means. Remember that the early bird gets the worm . . . most of the time.
Are you prepared to get a deal in this market?
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info. Call or email to set up a free consultation.
http://activerain.com/blogs/equityinmotion
http://activerain.com/equityinmotion
http://www.trulia.com/blog/michael_marroquin/
http://equityinmotionblog.wordpress.com/
Wednesday, August 12, 2009
The Truth Behind Bank Negotiating Struggles
Through the changes that have occurred in the economy and Real Estate environment over the last few years, Short Sales and Loan Modifications have become a big issue ... and quite a struggle. There sometimes seems to be little or no logic behind the decisions of bank officials and their guidelines. There are countless unfortunate situations where a bank may not approve a short sale at $300,000, yet they will instead allow the property to foreclose. After which the same property that had someone willing to buy it for $300,000 ends up selling for $250,000 after foreclosure. An additional $50,000 loss in this example. There are many other similar examples happening every day such as loan modifications being made with only a very slight change in interest rate, only temporary, or denied altogether only to let the property end up back in the hands of the bank to sell. It sometimes may seem like the banks are trying to destroy themselves. These situations continue to frustrate homeowners, sellers, buyers, would be homeowners, and of course Real Estate agents and brokers.
What is behind all this madness? Why do the largest institutions in the country seem so illogical and ridiculous? Are they really that bad at business to not realize how to cut their losses when given the chance? The answer to all of these questions is: It's not that simple (although perhaps in some cases the answer is just Yes). If it were only that simple that a bank could make a decision all on its own to change the terms of the original mortgage note that was given, or to give an approval on a short sale that would net them more than they would receive if they foreclosed on the house. If only our financial system and products were that simple. If only. Our financial system has become so overwhelmed with "creativity" that nothing is simple anymore. There are a few main reasons behind the madness that may shed some light.
Reason #1: Very few single entities or single owners own a single loan or mortgage by itself.
Why? CDO's. Collateralized debt obligations (CDOs) are a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets. CDOs are assigned different risk classes, or tranches, whereby "senior" tranches are considered the safest securities. Interest and principal payments are made in order of seniority, so that junior tranches offer higher coupon payments (and interest rates) or lower prices to compensate for additional default risk. -- From Wikipedia
In many cases, there is no single person or company to turn to for a decision to accept or approve a modification of any terms of the original agreement. Loans are given by one company sold to another then bundled together with hundreds of other loans of different types and sold like a giant layered cheesecake mutual fund to many different investors (other firms, hedge funds, China -there's a whole other story, etc.) and serviced by some other firm. By the time a loan is made and it completes its journey through wall street re-packaging and ends up at adulthood with all of the other loans in the giant layered cheesecake no one knows who owns what slice of the cake or how much it's worth.
Reason#2: "Not my Job" -- Anonymous wise man who has been sued before.
Because of reason #1, there are different companies that are given the job of servicing the loans. It is their job as the servicer to collect payments. That is their job. Not to negotiate deals for something that they do not own. Granted, most servicers do have set guidelines in their contracts that will allow them to make certain changes under certain circumstances. The bottom line is, it's just not their job.
Reason #3" Legality.
Let's face it, we live in a legal world and a litigious society. When loans are made, sold, packaged and re-sold, they are sold as a product with explicit terms. If these terms are later changed after the product has been sold, is it still the same product? No of course not. If you bought Ferrari and a week later a mechanic showed up at your house and replaced the engine with a Briggs and Stratton, I assure you that you would be upset. You call up the dealer that sold you the Ferrari that now only goes downhill and listen as he explained that "well, those Ferrari engines have become quite fickle and decided not to work anymore, but they will work if we just make a few minor changes and modify them into Briggs and Stratton. Hey how about that, we saved your car!" Obviously you are not amused and you call your attorney. Loans are no different. They are sold as a product based on the terms of the note. Institutions must do their job to service these loans as they agreed when they sold them or they will be in breach of contract. Obviously the product (CDO) was a flawed creation and is no longer a working or functioning product.
Furthermore, it is the fiduciary duty and responsibility of the corporate officers of these institutions to do what is best for the shareholders of the corporation. It is not their duty to do what is best for the consumer. Only the shareholders. If they did otherwise, they would be acting in bad faith to the people who are entrusting them with their investments. This is why government intervention in the private sector is definitely a gray area to be in. Not to mention a conflict of interests between the institutions and the consumers that owe them money.
So next time you wonder why you can't get a deal done although it seems perfectly reasonable, and the person on the other end of the phone seems completely unreasonable and illogical, just remember, it's not their job.
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info.
What is behind all this madness? Why do the largest institutions in the country seem so illogical and ridiculous? Are they really that bad at business to not realize how to cut their losses when given the chance? The answer to all of these questions is: It's not that simple (although perhaps in some cases the answer is just Yes). If it were only that simple that a bank could make a decision all on its own to change the terms of the original mortgage note that was given, or to give an approval on a short sale that would net them more than they would receive if they foreclosed on the house. If only our financial system and products were that simple. If only. Our financial system has become so overwhelmed with "creativity" that nothing is simple anymore. There are a few main reasons behind the madness that may shed some light.
Reason #1: Very few single entities or single owners own a single loan or mortgage by itself.
Why? CDO's. Collateralized debt obligations (CDOs) are a type of structured asset-backed security (ABS) whose value and payments are derived from a portfolio of fixed-income underlying assets. CDOs are assigned different risk classes, or tranches, whereby "senior" tranches are considered the safest securities. Interest and principal payments are made in order of seniority, so that junior tranches offer higher coupon payments (and interest rates) or lower prices to compensate for additional default risk. -- From Wikipedia
In many cases, there is no single person or company to turn to for a decision to accept or approve a modification of any terms of the original agreement. Loans are given by one company sold to another then bundled together with hundreds of other loans of different types and sold like a giant layered cheesecake mutual fund to many different investors (other firms, hedge funds, China -there's a whole other story, etc.) and serviced by some other firm. By the time a loan is made and it completes its journey through wall street re-packaging and ends up at adulthood with all of the other loans in the giant layered cheesecake no one knows who owns what slice of the cake or how much it's worth.
Reason#2: "Not my Job" -- Anonymous wise man who has been sued before.
Because of reason #1, there are different companies that are given the job of servicing the loans. It is their job as the servicer to collect payments. That is their job. Not to negotiate deals for something that they do not own. Granted, most servicers do have set guidelines in their contracts that will allow them to make certain changes under certain circumstances. The bottom line is, it's just not their job.
Reason #3" Legality.
Let's face it, we live in a legal world and a litigious society. When loans are made, sold, packaged and re-sold, they are sold as a product with explicit terms. If these terms are later changed after the product has been sold, is it still the same product? No of course not. If you bought Ferrari and a week later a mechanic showed up at your house and replaced the engine with a Briggs and Stratton, I assure you that you would be upset. You call up the dealer that sold you the Ferrari that now only goes downhill and listen as he explained that "well, those Ferrari engines have become quite fickle and decided not to work anymore, but they will work if we just make a few minor changes and modify them into Briggs and Stratton. Hey how about that, we saved your car!" Obviously you are not amused and you call your attorney. Loans are no different. They are sold as a product based on the terms of the note. Institutions must do their job to service these loans as they agreed when they sold them or they will be in breach of contract. Obviously the product (CDO) was a flawed creation and is no longer a working or functioning product.
Furthermore, it is the fiduciary duty and responsibility of the corporate officers of these institutions to do what is best for the shareholders of the corporation. It is not their duty to do what is best for the consumer. Only the shareholders. If they did otherwise, they would be acting in bad faith to the people who are entrusting them with their investments. This is why government intervention in the private sector is definitely a gray area to be in. Not to mention a conflict of interests between the institutions and the consumers that owe them money.
So next time you wonder why you can't get a deal done although it seems perfectly reasonable, and the person on the other end of the phone seems completely unreasonable and illogical, just remember, it's not their job.
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info.
Tuesday, June 30, 2009
Tarp Funds Bailout ... What Did It REALLY Do?
Tarp Funds Bailout ... What Did It REALLY Do?
The Government bailout of distressed banks via the TARP Funds (Troubled Asset Relief Fund) has been a very controversial issue since enacted. There are basically two groups of people regarding this issue: those for the TARP funds and those against. Let's examine these two groups and their thinking.
Group For TARP funds bailout: They believe this is necessary to prevent a recession or a deepened recession. They do not see it as government interference with free market. They do not see it as against the constitution. They believe this will give banks the liquidity and capital to free up credit so lending can be easier again and this can spur more borrowing and spending.
Group Against TARP funds bailout: This group believes that the U.S. is already in a recession and any government intervention will only delay, prolong and make for a deeper recession or perhaps depression. Many in this group see the government interference with free market capitalism against the constitution (not to mention quasi socialistic policy). This group of thinking also doubts that this injection/investment/spending (whatever term you prefer) in U.S. financial institutions will provide for easier credit for consumers. This group (well, at least I can speak for myself) agrees that without the bailout the economy would have suffered a far worse state, however this state is inevitable and will only be worsened by attempts to interfere with the free market.
Furthermore, what I don't think many people realize (even those that are for the TARP funds bailout), is that the failure of the large financial institutions that have been bailed out and/or merged with another firm would have caused a run on the banks and perhaps a collapse of the U.S. financial system as a whole. I know that sounds scary, but it is what it is.
What has happened so far:
Well, no matter which side of the issue you support we can only know which side is correct as it plays out. So far, credit has not loosened for consumers. Credit qualification has become more difficult. As far as real estate is concerned, the following changes have been noticed: Banks are less inclined to do loan modifications, they are approving less short sales as well as making them more difficult to approve. Banks are sitting on more real estate inventory. Why? Banks are now in a better financial position and are not as pressured to sell non-performing assets and cut loan modification deals as they were before. As for interest rates, they have dramatically increased . . . but we haven't seen anything yet.
Thursday, May 28, 2009
What In The World Are Interest Rates Doing?
What In The World Are Interest Rates Doing?
In the past two and a half days we have seen interest rates on the 30 year fixed go from 4.875% to 6.0%! What the heck just happened you ask? The last three days of interest rate hikes were nearly entirely due to a decrease in demand for treasure securities shown by the lackluster treasury auction.
Why would treasury demand decrease? For those who keep in touch with me, I'm sure you've already heard my rambling about China, the trade deficit and the U.S. Treasuries relationship. But here I go again anyway. As our trade deficit has exploded over the past decade from less than -$10 billion/month to over -$60 billion/month, China has been buying a significant amount of U.S. treasury securities to compensate for that. The more exporting they do to the U.S., the more treasuries they buy. The less they export to the U.S., the less treasuries they buy. Since the end of 2008 to now, the U.S. has stopped consuming as much as before due to the recession in the economy. In turn, China has stopped exporting as much, in fact about half as much. The U.S. trade deficit just went from over -$60 billion/month to less than -$30 billion/month. Literally cut in half! Is this a good thing for the economy? Yes, this is just what we need to bring the economy back to a stable operating level. Is this good for mortgage interest rates? NO! This is terrible for interest rates. Mortgage interest rates are directly influenced by treasury yields. As demand weakens for U.S. treasuries, yields will continue to go up. Bonds 101: Bond prices and interest rates have an inverse relationship. As bond prices increase, rate decreases and vice versa.
When will rates go down back to where they were? When demand for treasuries increases again or there is some external force to influence rates down again. In my Pessimistic, lonely little humble opinion, we likely just saw mortgage interest rate lows for quite some time two days ago.
In the past two and a half days we have seen interest rates on the 30 year fixed go from 4.875% to 6.0%! What the heck just happened you ask? The last three days of interest rate hikes were nearly entirely due to a decrease in demand for treasure securities shown by the lackluster treasury auction.
Why would treasury demand decrease? For those who keep in touch with me, I'm sure you've already heard my rambling about China, the trade deficit and the U.S. Treasuries relationship. But here I go again anyway. As our trade deficit has exploded over the past decade from less than -$10 billion/month to over -$60 billion/month, China has been buying a significant amount of U.S. treasury securities to compensate for that. The more exporting they do to the U.S., the more treasuries they buy. The less they export to the U.S., the less treasuries they buy. Since the end of 2008 to now, the U.S. has stopped consuming as much as before due to the recession in the economy. In turn, China has stopped exporting as much, in fact about half as much. The U.S. trade deficit just went from over -$60 billion/month to less than -$30 billion/month. Literally cut in half! Is this a good thing for the economy? Yes, this is just what we need to bring the economy back to a stable operating level. Is this good for mortgage interest rates? NO! This is terrible for interest rates. Mortgage interest rates are directly influenced by treasury yields. As demand weakens for U.S. treasuries, yields will continue to go up. Bonds 101: Bond prices and interest rates have an inverse relationship. As bond prices increase, rate decreases and vice versa.
When will rates go down back to where they were? When demand for treasuries increases again or there is some external force to influence rates down again. In my Pessimistic, lonely little humble opinion, we likely just saw mortgage interest rate lows for quite some time two days ago.
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info.
Monday, March 30, 2009
Where Are Interest Rates Headed?
Where Are Interest Rates Headed?
It was just a couple of months ago when the Fed was talking about subsidizing interest rates to 4 - 4.5%. There hasn't been a mention of any such activity since. Instead, the Fed Chairman, Ben Bernanke, announced that the Fed would be purchasing U.S. Treasuries in large quantity in an effort to push interest rates even lower.
This bold move seems to be a wiser option than simply subsidizing interest rates on mortgages directly. This move aims to directly influence interest rates while also helping keep up demand for Treasuries and aiding the support of the dollar. Side effects? Well, if you subscribe to the crowd who believe there is a current bubble developing in bond prices this could definitely expand the bubble.
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info.
It was just a couple of months ago when the Fed was talking about subsidizing interest rates to 4 - 4.5%. There hasn't been a mention of any such activity since. Instead, the Fed Chairman, Ben Bernanke, announced that the Fed would be purchasing U.S. Treasuries in large quantity in an effort to push interest rates even lower.
This bold move seems to be a wiser option than simply subsidizing interest rates on mortgages directly. This move aims to directly influence interest rates while also helping keep up demand for Treasuries and aiding the support of the dollar. Side effects? Well, if you subscribe to the crowd who believe there is a current bubble developing in bond prices this could definitely expand the bubble.
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info.
Tuesday, March 10, 2009
Obama Proposal to Reduce Mortgage Interest Deducibility
Obama Proposal to Reduce Mortgage Interest Deducibility
The Obama Administration has recommended, as part of its budget proposal, that the amount families earning more than $250,000 year can deduct for mortgage interest be reduced. We must ask ourselves what are the consequences of doing this? Logic would tell us that those with the deepest pockets would not be inclined to purchase real estate if the tax deduction was reduced or removed. This may affect the value of all property and further hinder recover of real estate prices for a long period of time.
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info.
The Obama Administration has recommended, as part of its budget proposal, that the amount families earning more than $250,000 year can deduct for mortgage interest be reduced. We must ask ourselves what are the consequences of doing this? Logic would tell us that those with the deepest pockets would not be inclined to purchase real estate if the tax deduction was reduced or removed. This may affect the value of all property and further hinder recover of real estate prices for a long period of time.
visit: http://www.equityinmotion.net for local san diego and chula vista real estate and financing info.
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