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Oct
06
Posted by Jim Warner
I thought I’d share an interesting little primer I received from Michelle Swanson @ Canyon Park Mortgage in my inbox today. My friend james Lupori over at Kenmore Undressed has posted a 60 minutes excerp with some similiar information. Mostly, I think we are all just trying to understand things a little more. Thanks for the help guys.
Michelle Swanson Shared…
The Chinese have a proverb: “May you live in interesting times.” And we are living through interesting times indeed.Whatever the political posturing regarding the rescue plan, a plan needed to be passed. Credit markets are frozen and banks are going bust every day. This is not totally because of “toxic” mortgages. This has a lot to do with FASB 157, also known as “mark to market”.
Each day, lenders must mark their assets to the marketplace. It’s like you having to appraise your home everyday and, if your neighbor was under duress because she got very ill, divorced, lost her job and was forced to sell her home quickly, she may have sold it super cheap. Now, does that mean your house is worth that super cheap price, too? Clearly not. Why? Because you are not under duress. You have the time to sell your home and get a more normal price, which more accurately reflects true market conditions. But “mark to market” does not allow for this, which creates a vicious cycle.
Why is this so bad? Because, as lenders mark down their assets the amount that they have previously loaned becomes much riskier in relation to their assets. For example, say a bank has $1 million in assets and say they have $15 million in loans outstanding. Their ratio is an acceptable 15 to 1. But should they take a paper write down of $500 thousand due to “mark to market” requirements, their ratio suddenly changes to 30 to 1. This is because their assets are now only $500 thousand after taking the paper loss, while their loans outstanding are still $15 million. And at 30 to 1 this bank is viewed as a risky investment. So the stock price starts to get hit, it becomes harder to borrow, and most importantly harder to make money. The bank is then forced to sell some of its loans to reduce its ratio…at cheap prices. And this makes the vicious cycle continue.
And a quick look at the holdings of these loans show that 95% are problem free. Additionally, the Credit Default Swaps (CDS) that are used with the pools of mortgages are relatively safe. But this requires a bit of understanding. You see, when a pool of mortgage loans is put together it isn’t just A paper or B paper etc. it’s everything. It’s got some A paper, B paper, C paper…and even what looks like toilet paper. An “A” investor buys the whole pool but because they are an “A” investor their safety is greater because they can avoid the first 20% (an example) of defaults. So they own the whole pool but are sheltered from the first batch of defaults, and for this they get the lowest rate of return. As you can figure from here the more risk investors want to take, the higher the return. So the investments are relatively safe, but the accounting rules currently place undue pressure on the banking institutions.
Now add to all this, the opportunistic “shorting” done on the financial stocks, much of it illegal because those shorts did not legitimately borrow shares (called naked shorting), and you exacerbate this whole problem. Thank goodness for the recent temporary ban on shorting in the financial sector. As for the plan, the government is the only one who can step in to do this. And they have to do this. And they will do this. The nauseating political posturing from both sides is just part of the process.
This is not easy to understand for the general public. In fact most politicians don’t get this either. That’s why it is a difficult yet critical bill for them to vote on.
Once this is done, it will take some time but the markets will stabilize. As for the real estate and mortgage industries, it will take a bit of time but we will make it through this. Rates will remain attractive and the influx of credit availability will help the housing market gradually improve. This ultimately will be the medicine needed to improve the situation overall.
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Sep
22
Posted by Jim Warner
I’m no expert but it sure looks to me from the body language being exhibited by Fed chief Ben Bernanke that he isn’t exactly on board with this whole bailout thing. I know he is considered a soft spoken and perhaps even shy fella, but quite frankly I think there’s something up that he wants no part of. Hmmm.
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Sep
20
Posted by Jim Warner
Thank You Uncle Sam, originally uploaded by Jim Warner, Realtor.
Look, there is an upside to all this bail out hoopla! You can go out and buy a house because the banks have money again.
I’d say that if you have been thinking about doing something, now is the time while the money is still cheap and home prices are still low.
Chances are that neither will be the case in about six months. If you buy now, when prices go back up you’ll have the equity to pay for the tax bill you’re going to get for bailing out the banks and freeing up the money. Let’s just call it your little middle class piece of the pie. So let’s get busy doing the happy dance!
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Sep
20
Posted by Jim Warner
Pennies from heaven, originally uploaded by Jim Warner, Realtor.
$4,000 - that’s the first tally of the bill each and every American is going to receive for the ten year long brain fart that we now lovingly refer to as the Sub Prime Meltdown. It will go higher, it always does and the so called leadership that brought you this mess is extemely adept at metering bad news in such a way as to make even really bad news seem more palatable. You will have a chance to vote your future in November. Do your duty and pay attention to what is being said and who you think you can depend on to make some changes. Then get out and vote. We have once again passed along the expense of our mistakes to our children. I’m not sure they have a future that I would look forward to if we keep passing on the bill.
We can do better as a nation and we should expect more of ourselves. Take responsibility for what comes next. Get out, get informed and Vote.
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Sep
18
Posted by Jim Warner
Bailout, originally uploaded by Jim Warner, Realtor.
And now for today’s good news… All those shareholders who were afraid they might lose their investment in the banking stocks that have paid them so handsomely over the past ten years of irresponsible lending, can rest easy knowing that the leadership that was supposed to be overseeing the banking industry just decided that the people who just lost their home and their job will now be obliged to cover the loss through higher taxes needed to cover a government bailout. Just a little parting gift from the same leadership that got you into this mess as they and their friends get ready to administer the money being used to float this boat. There’s a reason why the candidates for the Presidency spend a billion dollars trying to get control of the White House and it is not because it’s a dream job. The real prize continues to be the keys to the Treasury and who gets to hold them.
As Barry Goldwater once said… “A government big enough to give you all you want is big enough to take it all away.”
Ronald Reagan later said… “government exists to protect us from each other, where government has gone beyond it’s limits is when it moves to protect us from ourselves.”
And of course… the ten most feared words in the english language are ‘I am from the government and I’m here to help.’ RR
The only way I see being able to pay for this fiasco is to eliminate the Home Mortgage Interest Deduction… You heard it here first!
Thoughts and cartoon courtesy of Steve Manning at rendezvouswithdestiny.blogspot.com
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Sep
17
Posted by Jim Warner
Local Realtor Herb Holcombe Passed away suddenly this week. Herb’s passing hits particularly close to home within the Keller Williams Realty Family as he had been one of the first local agents to join the national franchise in the Bellevue office in 1999. Herb was an always smiling sketch of a character with a mischievous twinkle in his eye. Always a little harried and on his way to somewhere, just a little behind schedule, he was a pioneer of the local nothing down and creative finance movement in home ownership. Herb and his team helped many people acquire their first home when other agents wouldn’t take the time to help them work out credit or finance issues. Herb was a master at finding a way to get a deal done when others could not. Most recently a member of the Keller Williams Realty Bothell office he will be missed by family, friends and many fellow agents in the greater Seattle area.
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Sep
02
Posted by Jim Warner
There is a special place just north of Seattle in the little burg of Lynnwood, Washington, a small non descript drive thru with a colorful exterior and even more colorful crew serving up the goods. When you visit Dave’s Burgers in Lynnwood you are more likely as not going to run into owner Valerie Ralston and her great big smile serving up one of her signature bacon double cheeseburgers. There are dozens of Burger Joints around but there is just something about Dave’s that can actually evoke a craving at times. Toss in a ‘Frosty Beverage’ as Valerie likes to say and some piping hot, hand cut fries and life seems pretty darn good and complete. Valerie has been a big Edmonds School District Booster for many years. Dave’s is an advertiser on all the high school Gold Cards - Many people buy the cards just to get the Dave’s Burgers special offer - and she’s always quick to respond if there’s a special need in the community. When she’s not serving up the burgers, Valerie runs a full service catering business and tries to keep up with her two sons. Be sure and go by Dave’s when you get a chance and say hi to Valerie and the Gang. Tell her you saw her on Jim Warner’s Blog.
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Aug
24
Posted by Jim Warner
Pickett Street, originally uploaded by Jim Warner, Realtor.
I have spent a lot of time out and about reading real estate blogs lately. One in particular that I like is the Pickett Street website and blog. Pickett Street Properties is made up of three excellent Realtors with Keller Williams Realty in Bothell - Dennis Pearce, Jesse Moore and Lisa Bender - together they manage to put out a solid piece of work and some quality posts. They recently announced their new map based property search through Diverse Solutions - it is an awesome tool, easy to use and you can save your preferences for automatic updates. There was a particularly timely post by Dennis Pearce regarding his thoughts on where the market is and where it might be headed. I appreciate professionals that take pride in their work and as a Buyer or Seller these days it should be one of the things you look for in selecting your next agent, go see for yourself at Pickett Street. If you get a chance to leave a comment or message be sure and tell ‘em you heard about them from fellow Realtor, Jim Warner over at Lynnwood Undressed.
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Aug
24
Posted by Jim Warner
Keeler’s Corner, originally uploaded by bunkyroo.
The old Keeler’s corner store and Gas Station in Lynnwood, Washington
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Aug
24
Posted by Jim Warner
A cross roads store, bar, “juke joint,” and gas station in the cotton plantation area, Melrose, La. (LOC), originally uploaded by The Library of Congress.
Back in the day, as people came and went in their busy lives, they would certainly venture past the local crossroads store on their way to anywhere. In order to be relevant on a continuing basis the storekeepers felt they needed to carry every conceivable item crammed in to any space left unfilled. Of course in they end they had to prioritize and make sure they provided the essentials, the things people in the community needed to have or they would risk becoming irrelevant. The irony was that whether or not one actually needed anything, you would generally make a stop either outbound or on your way home, to find out what the latest news in the community might be and pick something up anyway. These corner stores have long since faded into history in many parts of the country, replaced by the ubiquitous 7-11or Wal-mart. Stores that still try to carry everything, except the personality and heartbeat of a community. As the internet has proliferated and information washes over us like one tsunami after another, we see small communities being reformed in every conceivable area of common interest on the web. People want to go where the information they get is not only current, but relevant. These small communities are thriving once again. Blogs are the new country store. Treat your customers well and make sure in your attempt to stock your shelves with what you think they want, in order to remain relevant you have to carry what the community needs.
