Friday, November 11, 2011
Views-Reviews and Real Estate News: shame on the GOP candidates
Views-Reviews and Real Estate News: shame on the GOP candidates: shame on the GOP candidates "Shame on the Republican candidates for president. Shame on them for showing up at debate specifically targetin...
shame on the GOP candidates
shame on the GOP candidates
"Shame on the Republican candidates for president. Shame on them for showing up at debate specifically targeting the US economy with not one credible, rational, even reputable notion of what to do about the nation's housing mess. It baffles the mind that this sector of the economy, responsible for about 18 percent of the nation's gross domestic product, is in freefall, and yet eight potential new leaders of this nation not only don't understand the problem but don't have a clue what to do about it. My favorite, and I write this with as much sarcasm as a computer keyboard will afford, is the argument that the Dodd-Frank financial reform bill is to blame for housing's current despair. Foreclosures, falling home prices, negative equity, nil consumer confidence, record low home building...yep, gotta be Dodd-Frank. 'If the Republican House next week would repeal Dodd-Frank and allow us to put pressure on the Senate to repeal Dodd-Frank, you would see the housing market start to improve overnight,' Speaker Newt Gingrich told the crowd in Michigan last night. His reasoning is that, 'It kills small banks, it kills small business.'
Increased regulation has certainly made the life of a banker today tougher, but the fact that there was zero regulation ten years ago allowed and encouraged reckless behavior on Wall Street. It created the supremely negligent subprime mortgage
trading bonanza that brought down big banks, little banks and homeowners alike...and threatened to take down the entire US economy. Were we to do nothing to change that? And Mr. Gingrich, if I may, how would repealing Dodd-Frank suddenly help the 4 million borrowers behind on their mortgages today and the 2.2 million in the foreclosure process today keep their homes? How would it put a bottom on home prices? Do you honestly believe that it would suddenly open the mortgage markets wide, allow banks to somehow fix all the troubled loans on their books and fuel a gigantic lending spree that would ignite home buying and selling again like the good old days? Is that even what we want? Let me just finish with Mr. Gingrich's last note, 'The banks are actually profiting more by foreclosing than encouraging short sales.' That's just flat out wrong.
To begin with what bank has ever profited from a foreclosure OR a short sale? Industry sources tell me that a short sale nets the bank on average 20 percent more than a foreclosure. Short sales speed up the time frame for disposal of the property as well, as foreclosures can take years to process. During that time, foreclosed borrowers can destroy the property, flushing cement down the toilet and stealing everything in the home that is and isn't nailed down. In a short sale, the homeowner lives in the home until the deal is done, and because they are not getting a huge hit to their credit and being kicked out by a sheriff's deputy, they generally don't destroy the house. In a short sale, the bank knows exactly what it's getting, unlike in a foreclosure when the bank has to take back the house in some unknown condition, market it and re-sell it at an unknown distressed price. 'Nuff said.
My second favorite argument is that it's all Fannie and Freddie's fault, and if we take them down, housing comes back in a flash. 'For these geniuses to give 10 of their top executives bonuses at $12 million and then have the guts to come to the American people and say, 'Give us another $13 billion to bail us out just for the quarter,' that's lunacy,' Rep. Michelle Bachmann argued on CNBC last night. 'We need to put them back into bankruptcy and get them out of business. They're destroying the housing market.' No question, Fannie Mae and Freddie Mac are bleeding money, costing the taxpayers billions already and potentially billions more in the near future. Something needs to be done to change that, but 'bankrupting' Fannie and Freddie would take down the US economy as we know it, and it boggles the mind that a person running for president wouldn't understand that. She in fact noted that Fannie and Freddie support the bulk of the mortgage market. That's true. Without them there would be no lending. Does she think the private market would just come running back in and give the nation's beleaguered borrowers 3.99 percent 30-year fixed across the board? Only Herman Cain seemed to get that. He argued that we need to fix unemployment first with his various proposals. 'Okay. After I did those three things that I outlined, then deal with Fannie Mae and Freddie Mac. You don't start solving a problem right in the middle of it. So we've got to do that first,' he reasoned.
Fixing unemployment was the only housing plan the candidates could offer. When CNBC's Maria Bartiromo asked Governor Mitt Romney, 'Not one of your 59 points in your economic plan mentions or addresses housing. Can you tell us why?' He responded, 'Yes, because it's not a housing plan. It's a jobs plan.' I don't love that answer, but at least I can respect it. 'Our friends in Washington today, they say, 'Oh, if we've got a problem in housing, let's let government play a bigger role.' That's the wrong way to go. Let markets work. Help people get back to work. Let them buy homes. You'll see home prices come back up if we allow this market to work,' argued Romney. There are plenty of analysts who agree that the market needs to work itself out, as painful as that may be to average Americans, many of whom are in line to lose their homes. Until the foreclosure mess runs its course, and all those homes are filled with borrowers who can afford them, home prices will not recover, plain and simple, goes the argument. I'm not saying here that the Obama Administration has done anything particular stellar to stimulate a housing recovery. A small refinance program for underwater borrowers isn't the cure-all, and forcing banks to write down mortgage principal is not politically nor technically feasible. But without some plan, this crisis could go on for a decade, like it did in Japan, as President Clinton noted recently in an interview. I'm not saying I have the answer, the great plan to fix our nation's housing crisis. But I'm not running for president."
"Shame on the Republican candidates for president. Shame on them for showing up at debate specifically targeting the US economy with not one credible, rational, even reputable notion of what to do about the nation's housing mess. It baffles the mind that this sector of the economy, responsible for about 18 percent of the nation's gross domestic product, is in freefall, and yet eight potential new leaders of this nation not only don't understand the problem but don't have a clue what to do about it. My favorite, and I write this with as much sarcasm as a computer keyboard will afford, is the argument that the Dodd-Frank financial reform bill is to blame for housing's current despair. Foreclosures, falling home prices, negative equity, nil consumer confidence, record low home building...yep, gotta be Dodd-Frank. 'If the Republican House next week would repeal Dodd-Frank and allow us to put pressure on the Senate to repeal Dodd-Frank, you would see the housing market start to improve overnight,' Speaker Newt Gingrich told the crowd in Michigan last night. His reasoning is that, 'It kills small banks, it kills small business.'
Increased regulation has certainly made the life of a banker today tougher, but the fact that there was zero regulation ten years ago allowed and encouraged reckless behavior on Wall Street. It created the supremely negligent subprime mortgage
trading bonanza that brought down big banks, little banks and homeowners alike...and threatened to take down the entire US economy. Were we to do nothing to change that? And Mr. Gingrich, if I may, how would repealing Dodd-Frank suddenly help the 4 million borrowers behind on their mortgages today and the 2.2 million in the foreclosure process today keep their homes? How would it put a bottom on home prices? Do you honestly believe that it would suddenly open the mortgage markets wide, allow banks to somehow fix all the troubled loans on their books and fuel a gigantic lending spree that would ignite home buying and selling again like the good old days? Is that even what we want? Let me just finish with Mr. Gingrich's last note, 'The banks are actually profiting more by foreclosing than encouraging short sales.' That's just flat out wrong.
To begin with what bank has ever profited from a foreclosure OR a short sale? Industry sources tell me that a short sale nets the bank on average 20 percent more than a foreclosure. Short sales speed up the time frame for disposal of the property as well, as foreclosures can take years to process. During that time, foreclosed borrowers can destroy the property, flushing cement down the toilet and stealing everything in the home that is and isn't nailed down. In a short sale, the homeowner lives in the home until the deal is done, and because they are not getting a huge hit to their credit and being kicked out by a sheriff's deputy, they generally don't destroy the house. In a short sale, the bank knows exactly what it's getting, unlike in a foreclosure when the bank has to take back the house in some unknown condition, market it and re-sell it at an unknown distressed price. 'Nuff said.
My second favorite argument is that it's all Fannie and Freddie's fault, and if we take them down, housing comes back in a flash. 'For these geniuses to give 10 of their top executives bonuses at $12 million and then have the guts to come to the American people and say, 'Give us another $13 billion to bail us out just for the quarter,' that's lunacy,' Rep. Michelle Bachmann argued on CNBC last night. 'We need to put them back into bankruptcy and get them out of business. They're destroying the housing market.' No question, Fannie Mae and Freddie Mac are bleeding money, costing the taxpayers billions already and potentially billions more in the near future. Something needs to be done to change that, but 'bankrupting' Fannie and Freddie would take down the US economy as we know it, and it boggles the mind that a person running for president wouldn't understand that. She in fact noted that Fannie and Freddie support the bulk of the mortgage market. That's true. Without them there would be no lending. Does she think the private market would just come running back in and give the nation's beleaguered borrowers 3.99 percent 30-year fixed across the board? Only Herman Cain seemed to get that. He argued that we need to fix unemployment first with his various proposals. 'Okay. After I did those three things that I outlined, then deal with Fannie Mae and Freddie Mac. You don't start solving a problem right in the middle of it. So we've got to do that first,' he reasoned.
Fixing unemployment was the only housing plan the candidates could offer. When CNBC's Maria Bartiromo asked Governor Mitt Romney, 'Not one of your 59 points in your economic plan mentions or addresses housing. Can you tell us why?' He responded, 'Yes, because it's not a housing plan. It's a jobs plan.' I don't love that answer, but at least I can respect it. 'Our friends in Washington today, they say, 'Oh, if we've got a problem in housing, let's let government play a bigger role.' That's the wrong way to go. Let markets work. Help people get back to work. Let them buy homes. You'll see home prices come back up if we allow this market to work,' argued Romney. There are plenty of analysts who agree that the market needs to work itself out, as painful as that may be to average Americans, many of whom are in line to lose their homes. Until the foreclosure mess runs its course, and all those homes are filled with borrowers who can afford them, home prices will not recover, plain and simple, goes the argument. I'm not saying here that the Obama Administration has done anything particular stellar to stimulate a housing recovery. A small refinance program for underwater borrowers isn't the cure-all, and forcing banks to write down mortgage principal is not politically nor technically feasible. But without some plan, this crisis could go on for a decade, like it did in Japan, as President Clinton noted recently in an interview. I'm not saying I have the answer, the great plan to fix our nation's housing crisis. But I'm not running for president."
Monday, November 7, 2011
New foreclosure plan
Big investors are showing interest in an evolving Obama administration plan to sell off foreclosed homes, although the government will have to make the offer sweet enough to coax private funds. The White House is assessing how best to encourage private companies and investors to snap up foreclosed properties held by the government and convert them into rentals. Officials want private partners to take over as much as $30 billion in single-family properties that are currently on the books of government-run Fannie Mae, Freddie Mac and the Federal Housing Administration। Several money managers with large fixed income funds are interested, according to sources, and a request for ideas on how to construct a program received nearly 4,000 responses. The foreclosure conversion program would come as the next step to complement other government supports for housing, including an expanded refinance program announced on Monday.
The main question for prospective investors, which include broker-dealers and firms already overseeing similar rental programs, is the type of financing the government will make available—an issue officials are still struggling with. "In order to get a better bid, there has to be some incentive involved to get qualified investors involved," said Ron D'Vari, co-founder and chief executive of NewOak Capital. "The reality is not a lack of interest, but so far it looks like a lack of financing." Incentives could include low interest rates, tax benefits or some type of rental assistance, said D'Vari, a portfolio adviser who has been involved in mini-bulk auctions of real estate-owned properties, or REOs, in California. REO properties are those acquired by a lender, whether a bank or the government, after an unsuccessful auction attempt. Fannie Mae, Freddie Mac and the FHA own about 250,000 properties, close to a third of the country's REO pool.
The main question for prospective investors, which include broker-dealers and firms already overseeing similar rental programs, is the type of financing the government will make available—an issue officials are still struggling with. "In order to get a better bid, there has to be some incentive involved to get qualified investors involved," said Ron D'Vari, co-founder and chief executive of NewOak Capital. "The reality is not a lack of interest, but so far it looks like a lack of financing." Incentives could include low interest rates, tax benefits or some type of rental assistance, said D'Vari, a portfolio adviser who has been involved in mini-bulk auctions of real estate-owned properties, or REOs, in California. REO properties are those acquired by a lender, whether a bank or the government, after an unsuccessful auction attempt. Fannie Mae, Freddie Mac and the FHA own about 250,000 properties, close to a third of the country's REO pool.
One key challenge would be finding big enough blocks of properties in specific geographic areas that could be sold at one time. Analysts say this is what it would take to make the program attractive to large institutional investors. The transaction and liability costs property managers will face as they try to bring deserted units back up to code also pose a hurdle. The government also needs to determine how it will protect taxpayers, and it might explore ways to pair up with investors and allow Fannie Mae, Freddie Mac and FHA to keep some type of an ownership stake in the rental properties. A public-private partnership, somewhat along the lines of a program the Treasury tried to use to soak up toxic bank assets during the financial crisis, would allow the government to gain from the sales. Fannie Mae, Freddie Mac and the FHA have already undertaken some small efforts to reduce the backlog of foreclosed homes. They have donated a few vacant properties for demolition and have held some small auctions. Having already received $141 billion in taxpayer support since being seized by the government in 2008, Fannie Mae and Freddie are under enormous pressure to make sure they maximize the returns from the properties they hold. "This has got to be thought out. Fannie and Freddie would need to assess if they are getting the return they need from a rental," said Ken H. Johnson, a real estate professor at Florida International University. Johnson said one way to get over the hurdle would be for the two agencies to be given an explicit mission of market stabilization.
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