Banks, Banking, and real estate

There are now 81 failed banks so far this year, with another 400+ on the danger list. Some estimates place the probable troubled banks likely to go into receivership in the four digit range.
Frightening times. Meanwhile unemployment marches upward, and the national debt is revised upward a trillion at a time, without considering the possibility of a health care bill that proposes to cost well over a trillion more. Sanity is in short supply in Washington where it appears that the average IQ never exceeds room temperature. The health care reform proposed is likely not to happen because of the obvious resistance of the citizenry, although most of us believe some reform is necessary. Tearing down your home because of a leak in the roof would not be prudent, nor is it prudent to tear down the current health care system to address the problems. Tort reform would reduce costs by the billions, strengthening the investigative oversight of Medicare/Medicaid would save billions more in fraud elimination, and allowing the crossing of state lines by insurers would improve competition. Taxing of benefits as income would provide some revenue. These measures are for the most part not being mentioned or considered because implementation would possibly interrupt the income stream from lobby groups.
On a happier note. Although real estate values continue to decline and lenders are generally tougher to deal with, a sharp broker, (that would be us), can offer some attractive financing for residential purchase or refinance, commercial loans at favorable rates for most types of properties, and agricultural loans for vineyards. hobby farms, farms, ranches, and orchards, also at great rates. To cite the old cliche, when the going gets tough, the tough get going. There is some credibility in the argument that a recession is a great opportunity to start a business, or some enterprise. Property is cheap, labor is plentiful, money is inexpensive.
As usual
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Are You Stimulated Yet?

Most of us are becoming numbed by the repeated news that the debt is escalating by the trillions, one government move after the other, and the seeming indifference of legislators and the executive to this uncontained profligacy. The pervading sentiment is fear, and rightly so. One bad move after another has the taxpayer owning banks with negative assets, car companies, and now pretty soon if the health bill passes, another insurance company styled after medicare. No one in government currently has run so much as a candy store yet they want to continue to expand their control, the impending bankruptcy of Social Security, Medicare/Medicaid, Fannie Mae, Freddie Mac not dissuading them in the least, nor the losses at the Post Office in the billions nor the huge losses at FHA and Ginnie Mae.
Since 2000 there have been 131 bank failures requiring FDIC intervention, and to get a sense of the momentum of the problem, 28 of those happened between 2000 and 2007, 26 happened in 2008, and 77 so far this year with over a third of a year yet to go. Over 300 banks are listed as "troubled" so more to come no doubt. One of the 77 was Colonial, noted in a previous blog, about the fourth largest failure so far just behind IndieMac and Washington Mutual.
Foreclosures persist as a downward influence on housing prices and is not likely to end any time soon, and unemployment figures are discouraging and continuing to worsen. The ability to purchase a home is constrained by very stringent lending policies, although strong credit is a great driver and allows us to find amicable lenders for most applicants. Refinancing is difficult because of the sharp reduction in asset value. For those with a stock portfolio we can provide security based loans in the range of 2.5% to 4.5% fixed rate. Just one more way to convert an asset to a different form and perhaps free up capital for some other purpose.
The fear most of us feel is from the lack of confidence we have in government's ability to make wise or prudent decisions. Most of what we see is ego driven behavior without any concern for long term consequences, and that's frightening. The greatest country in the world is being brought to its knees by greed and ineptitude and its time for that to end. Town Hall meetings are a beginning, but the ballot box beckons.
As Usual
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The Financial Dominoes Continue to Fall

Just last week a mortgage originator, Taylor Bean & Whitaker, based in Florida but with nationwide offices, was shut down by Federal folks for some funny accounting practices. Today, Colonial Bancgroup, apparently with some ties to Taylor Bean and also the nations largest warehouse mortgage lender was seized by regulators.
Link http://www.forbes.com/2009/08/14/colonial-bancgroup-bbt-business-wall-street-fdic.html
Why does this matter to anyone? It will result in a further tightening of already very difficult mortgage originations. Fannie & Freddie account for something like 90% of residential mortgages but the applicants not fitting neatly into their box just lost a substantial funding resource. The upshot of this will be a further chilling effect on sales and refinances for a very large group of people.
When Taylor Bean was closed my email box started to fill with offers from other originators offering to help me just in case I had some loans in the Taylor Bean pipeline. When the sub-prime collapse took 100's of mortgage originators out of the market the email box was filled with offers to help place sub-prime clients in the the FHA system. Now the FHA system has overextended in these bad mortgages. This will probably come to be known as sub-prime #2. Greed has a way of distorting the learning curve.
Just as the beating wings of a butterfly in Brazil may contribute to the breeze wafting over your patio, every incident in the financial marketplace has an impact on your well-being.
As usual,
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Securty Based Lending

An opportunity for people with large stock portfolios to convert their equity to cash for any purpose, at below market interest rates, generally 2.5% to 4.5%. Superior to margin loans these loans provide up to 80% of valuation. 7-10 business days to funding, no credit checking or reporting, fixed interest for 3-5-7-10 year terms, these loans provide a vehicle for a sharp investor to free up cash to take advantage of buying opportunities in the current real estate market. $100,000 minimum with no maximum. If you wish to explore this opportunity, call. 530-824-8284.
Foreclosures continue to plague the market, but the real psychological impact on home sales comes from the inverted equity positions of home owners. Over 30% of Californians are reported to owe more on their mortgages than the value of the home. Deutsche Bank is predicting that nationally 58% of mortgage holders will be in a negative equity position. Couple that with the estimate that over 12% of mortgage holders are at least 30 days late and the picture is bleak indeed. Foreclosure Radar describes this as "trapped in a prison of debt". Can't sell, can't refinance.
Lenders are NOT making it easy to get a loan for purchase or refinance. Good people are being kicked to the curb for not fitting "inside the box" and lenders are unwilling or unable to consider exceptions. Fortunately their are still some portfolio lenders who will make sane underwriting decisions, and if you have been disadvantaged by a Fannie/Freddie decline you should call us.
Retail sales are down, and no wonder. Three billion dollars of tax dollars given to the auto industry by way of the Cash For Clunkers program has burdened a large number of people with car payments at a time when discretionary money was already in short supply. Congress can not learn the laws of unintended consequences. Nor can they absorb the fact that neither they nor bureaucrats are capable of running any type of business enterprise. For those who are wearing rose colored glasses its time for a reality check. We are increasing our debt at warp speed, and no end in sight apparently. Job creation is entirely restricted to government work, a non productive part of the economy and a further drain on resources. The administration is under the control of people who have never run so much as a candy store, and they flounder around compounding the error of thinking transferring wealth from productive people to unproductive people will somehow buy our way out of this mess.
Not going to happen.
As usual
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Underwriting for a career choice

Part of the dramatic impact of the government dithering about trying to correct the market disruption caused by government encouragement of bad lending, is the over-correction of regulations to prevent a recurrence. Since late 2006 over 350 mortgage lenders have gone out of business. That's a lot of employees, many of them skilled, most still unemployed in their former occupations. In the remaining lenders the folks known as underwriters are now reduced to clerks. Lenders are so frightened of making a mistake they have almost entirely abandoned the underwriting process. They still call it underwriting, but what it really is, is making sure that loan applications conform exactly to the conditions stipulated by machine programs generated by Fannie and Freddie. No decisions at all. Couple that with the new appraisal guidelines which obviate hiring an appraiser with known ability in deference to a government requirement that they be appointed by "lot" by some independent agency and the whole business of approving loans becomes almost entirely removed from intelligent weighing of risks and disadvantages many, many deserving applicants. If two years from now you meet someone with two years experience as a mortgage underwriter with a major prime lender, they will have the skill set equivalent of someone taking inventory in a big box retailer.
At a time when glut of homes on the market is huge and growing, due to an increase in foreclosure activity, and prices are in many cases beginning to look favorable to some buyers, wouldn't it be nice if it were possible to get loans for these folks? It would be nice. The mortgage market is tight. There are programs for the low end applicants with government supported or subsidized options, but for the deserving people who have demonstrated some prudence in their behavior, loans are tough.
Every move the government has made has been a mistake. Every intervention in private business has been a disaster. Tax dollars have been used to buy GM for the UAW and hosed the bondholders who had a contractual right abrogated. Cash for clunkers is using tax dollars as a gift to some a subsidy to others and a debt for all the rest of us. The health care "crisis" which exists only in the heads of politicians seeking to buy a constituency is destined to cost over a trillion dollars to insure ? If I understand correctly there are approximately 46 million uninsured. Many are illegal aliens, many choose not to buy insurance. For the remainder, we could afford to buy each of them their own hospital for a trillion dollars.
As this is written Obama is in Indiana to give over 2 billion dollars in grants for the purpose of building electric motors and batteries for "green" cars which no one wants to buy. Again buying a constituency. Obama doesn't have two billion dollars, neither does the government and it isn't his job to take it from us and give it to someone else.
The fiscally responsible crowds showing up at Town Hall meetings are being vilified by the White House as a bunch of nuts. What they really are is a bunch of scared and disillusioned patriots. The nuts the White House remembers are from the Acorn family and were showing up for entirely different purposes, mostly selfish.
As usual
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