Posts Tagged ‘refinance’

The latest “good idea” to come out of DC regarding solving the housing crisis and credit crisis would be to allow a government fund to buy troubled mortgages from the banks.  Funding would be done jointly from Uncle Sam and Vulture/Hedge Funds.  Thus, rewarding those entities for taking the risk and effort to recover value and make fortunes on the backs of the troubled homeowners!!!!

No one is a bigger capitalist and supporter of the free markets than me, but the perversity of the ideas coming out of DC and celebrated by those still with cash is absurd.

A Wall Street Journal article this week indicated that these funds would by the mortgages at $0.05 to $0.20 on the dollar of “face value” thus putting a market value and theoretically some liquidity into a market that has had a dearth of players (folks willing to buy or sell at a mutually agreed upon price).  The thought is that by adding government dollars and some guarantees against loss to these vultures and speculators, that things would then get better for all!

This is inane!  Once again, the most aggressive investors/institutions will be treated as rolyalty and “protected” by those suffering under situations created to make money from them!

The best idea still and one that I have discussed in the past and will continue to support is the following:

Allow the borrowers to buy back their outstianding mortgages and outstanding credits at the same rate as Uncle Sam is proposing they be sold to Vultures.  Provide government financing and guarantees to allow the refinancing of the principal and accrued interest at “pennies on the dollar” to those suffering, with deferrals on payments until income levels have rebounded to facilitate repayment of the reduced amounts.

Why should the Government entice vultures to buy on the distress of the public, and then profit on their further distress?  Why not have the Government be the instrument for settlement of the sources of distress?  Why not have the individual families receive the benefit from their own recovery?  Reduce the levels of sources of profit to 3rd parties and institutions?  Foster a benevolent solution, rather than dumping the paper in the hands of vultures and collection agencies to further harass those facing hardship and eviction?

Enough raping of the populace by the Wall Street Titans and Banking Giants!!!  We have see that quarterly profits and earnings for shareholders rewarded by temporarily higher stock prices is a recipe for disaster!

A change is needed. A reason for hope!  Let us hope the new administration sees the light and makes positive things happen for our society!

Also check out http://alphainventions.com/ a great website for all new posts!

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Citi yesterday agreed to “cramdowns” for resetting mortgage amounts and rates for troubled borrowers.

Politicians all across America declared that this was a breakthrough, etc.

One would not think it at all surprising though, given the $45 billion pumped into Citi by our great Uncle, and our Uncle’s willingness to absorb more than $300 billion of future Citi losses.

Socialism clearly has some benefits. With a tight leash (like Citi is on), the master can dictate many things.

Today’s Wall Street Journal had a small article buried within the paper which once again demonstrated how screwed up our American Government/Financial Systems are.

See http://online.wsj.com/article/SB123094029211850265.html

Fannie Mae announced on Monday that it is raising its fees to lenders for guaranteeing or buying certain mortgages. The article notes that the fees will increase to 3.25% of the loan amounts after April 1st, from the current 1.25%.

At a time when our Federal government is spending billions to buy up mortgage paper with the effect of lowering market rates for conforming mortgages, the two agencies now under conservatorship have the gaul to raise the fees. This has the same impact of adding 2 points to a mortgage or stepping the rates back up.

The Federal Housing Agency spokesperson has stated that they will review the public’s objections to the rate increase.

Crazy, but believable…………… Help us Barney Frank!!!!

Two Wall Street Journal columns jump from their website today.
After Dow’s Collapse, Guarded Hope

After the U.S. stock market’s third-worst year in more than a century, many investors are hoping for a turnaround in 2009. But considering the pain that has continued for more than a year, they are reluctant to bet on it.

Stimulus Versus Recession

The U.S. is preparing massive efforts to battle the twin threats of deep recession and deflation in 2009. The results will affect the investment climate for years to come.

These two observations are right on target, but the impact and implications so grand, that the folks at the WSJ should be shouting from the building tops in Manhattan, Greenwich, The Hamptons, and DC.

First, it should not be understated but the International Monetary Fund had estimated financial security losses in the range of $1.4 trillion as of this past October. To date, US institutions have only written off less than $800 billion! The IMF estimates were before the $50 billion evaporation of Madoff assets and the severe financial market declines of late October and November.

Additionally, there have been several estimates in the area of $2 trillion for the total losses to be expected by the inability of the “two pillars” of homeowners/credit users and small businesses to obtain any lifelines quickly and without “strings” of steel to further sink them. The lifelines are not appearing on Uncle Sam’s drawing boards at the moment, which means that we should not count on them in the near future. Uh, oh!!

Current LIBOR based mortgage rates are in the area of 2.25% currently for up to $2 million!!! The rates are less than the average yield of a local CD for a few months. Fixed rate conforming mortgages are at less than 5% for 30 years. We can expect mortgage rates to further decline as the Fed continues to intervene in the market for Fannie and Freddie securities. (They have billions of $ in their pockets to manipulate the market and lower the rates further.) Unfortunately, other than the variable LIBOR loans, jumbo fixed mortgages are still in the range of 8% or so. Because the government is ignoring this sector of the market, there has been only increases in the rates as the riskiness of the credits have increased.

Banks are demanding more collateral, rather than less. In a time of declining asset values, with collateral worth less, fewer and fewer are able to meet the stricter lending requirements. Where is Super Paulson and our Hero Bernacke when we need them???????? Will HOPE and CHANGE help? Or should we turn to God as our only salvation?

Today’s WSJ made the analogy of an individual escaping from a very painful marriage. The journalist stated that this individual would be very likely to resist remarrying. The journalist paralleled the experience to a stock investor during 2008 and their fear of buying stocks in 2009. I thought this very appropriate.

In a world of great interconnection, with great uncertainties, the need for faith and confidence in systems and governments, unified and coordinated efforts are crucial. Given all we have seen from our government over the past year and years, can we have confidence? Should we have hope?

Given the way America has been raped and brutalized by Wall Street, can we have faith in the Heroes of Capitalism to save us?

Please share your thoughts and ideas………

Check out the referenced article of 30 Money Sites to check out in 2009:

Highly recommended and lots of good information.

Thanks Thursday Bram!!!

According to a press release, “The Federation of Small Businesses is . . . calling on the Government, the banks, local councils and consumers to play their part during the year by providing support to small businesses in fighting regulation, accessing finance and maintaining cash flow to buck the increasing trend of business closures.”

The Federation for Small Businesses needs to do more than just issue a press release.

The government has financed the banks, protected Wall Street and back stopped the auto industry, but government and our political and financial leaders have ignored the needs and potential catastrophic impact of the small business failure.

Limiting interest rates is just one limited step. Encouraging banks to lend, promoting a major SBA program similar to “HOPE for Homes”, encouraging lenders to extend credit rather than reduce amounts available, are but a few of the many steps they could take.

The FSB is to be commended, but at the same time must call upon the communities across the US to mobilize and lobby Uncle Sam to work to protect our small businesses, their employees, and the core of the American Economy.

As a small business owner suffering from a reduction in income levels due to the recession, I am very familiar with the shortage of credit for small businesses. It impacts the small businesses directly, as credit cards and other signature loans are their liquidity lifeblood. Also, customers and clients rely on credit to purchase services and products and with credit levels being reduced and credit needs not being fulfilled, consumption and purchase levels are down significantly.

Much comes back to the Federal Government and their missteps regarding the TARP and providing capital to our banks. One would think that the government bailout would have helped the small businesses indirectly, but then again, nothing has been as “one would have thought” over the past 6 months.

Today’s Wall Street Journal cites the anticipation of looming “mortgage cram-downs”, as a result of the failure of government’s steps to cease the increase in foreclosures.

The article notes that there are 7.5 million homes underwater currently and that foreclosures are expected to exceed 8.1 million over the next four years!!!! It also notes that Congress was hoping to help 400,000 homeowners through its latest program, “Hope for Homeowners”, but only 357 have applied for the program to date.

Sounds like one of the pillars we discussed yesterday on this blog is still not being secured!!! Unless action is taken, we will see the Red Plague sweep the homeowners and consumers downriver, like the banks and Wall Street firms were washed away this past year.

Unfortunately, the free market and refinancing will not solve the liquidity crunch paralyzing the homeowner/consumer pillar and the small business pillar.

Some insight and real hope are desperately needed. And fast!

If the world is literally flooded with dollars, why is it near impossible to refinance a home or refinance and restructure outstanding consumer credit?

Merrill Lynch is offering a Libor based adjustable rate mortgage for up to $2,000,000 for the current rate of 2.375% with NO POINTS!!!! How many are applying? Very few.

Why? Loan to Value requirements have dropped by on average 20% while appraised home values have tumbled as well. Additionally, if the home is located in a state where the values are declining, then the penalty box of “declining market” is applied and the LTV limits are reduced further.

Credit card companies continue to reduce available credit. Analysts expect that the US will see credit line reductions of $2 trillion dollars in 2009. They also expect credit card rates to continue to sky rocket rather than decline in parallel with the Libor, prime and the Fed funds rate.

Hence, headlines may be deceptive.

With the further expected declines in employment levels and compensation, as well as further tightening of credit and increases in cost of consumer credit, there likely is significantly more pain to come for the consumer-class and homeowner-class ignored to this point buy the bailout plans and liquidity programs of the wealthy rulers in DC and their Wall Street financiers.

Happy Holidays!!!

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With the Dow up more than 500 points, after breaking through 8000 on the low at about mid day, we are seeing what will likely be the rythym we will experience over the next six to none months.

There should be much optimism regarding future legislation in the first quarter of the coming year, but at the same time, great fear as to the risks facing the US and global economy.  Thus, there is great opportunity for profit given the volatility and the ability to trade quickly.

For long term investors, there is great hope that the systems will be stronger after this chaos and that growth willbe more consistent moving forward.  Bond yields should be more normalized and defaults after 6-9 months should decline.

Be careful in the short term.  The rallies make for great trading opportunities.

We are seeing credit card rates sky rocket for those who are paying and have credit cards with a balance.  What is happening to those who are not paying?  Please leave a comment, as this is important to monitor and track!

New credit card issuance is at a screaching halt.  If you are seeing new credit issuance, please let me know.

Current mortgage rates here in Florida are as low as 3%, yes 3%, with 1% points, tied to the 30 day LIBOR plus a margin.  Thus money is cheap, if you can get it.  Loan to values on mortgages on these rates is 50% for a cash out refinance and 60% for a $ for $ rate refi.  Thus, if this kind of mortgage would serve you, let me know, but for 90% of those looking to refi or buy a home, the rate is great but the LTV is too low!

I understand that the SBA is beginning to issue loans for those stressed by the economic challenges.  Let me know if you have had success!

Speak with you tomorrow!

God Bless!