Mortgage Chaos

News from all over, again . . . indymac, bear stearns, fannie, freddie, and the beat goes on and on and on

New Yorker editor David Remnick said the provocative cartoon was intended to satirize those [Obama's religion and other] rumors and those who traffic in them. In fact, the New Yorker is a publication that would be inclined to support Obama. New York Gov. David Peterson, the state's first black governor, condemned the cover as "one of the most malignant, vicious" magazine covers he's ever seen. The National Association for the Advancement of Colored People called it "tasteless, Islam-a-phobic, mean-spirited and racially offensive." The Obama campaign early on called the cartoon "tasteless" and "offensive" and even Republican presidential candidate John McCain referred to the cover as "inappropriate." Judge for yourself - I don't care for it at all.
Lehman Brothers' CEO Dick Fuld is seriously mulling a way to take itself private and out of the public eye
	Back in the news, Indicted former Bear Stearns hedge-fund manager Ralph Cioffi has hocked houses in New Jersey and Naples, Fla. to secure a $4 million bond, but saved the Southampton digs for the family. According to Assistant U.S. Attorney Patrick Sinclair the government is considering further criminal charges against two former Bear Stearns executives indicted last month related to the collapse of two hedge funds they oversaw.  In a court hearing in U.S. District Court in Brooklyn, Sinclair said "the government is indeed contemplating additional charges." Reuters for full story And, check this out!! According to the New York Post, Cioffi would like to start an independent hedge fund and may have some investors lined up . . . wonder if they'll still be there in 20 years . . . .
Fannie Mae and Freddie Mac . . . End of Illusions.  The Econonmist has a series of articles detailing the problems at Fannie Mae and Freddie Mac.  Now that we've jumped to trillions of dollars at their behest, surely the American Public will sit up and pay attention to what the federal reserve is doing to us by printing more and more money. Highly detailed, easy to understand . . . you should read every word. Hank Paulson, America’s treasury secretary, unveiled the emergency plan to save Fannie Mae and Freddie Mac, two mortgage giants that owe or guarantee $5.2 trillion.  He wants you to know how imortant it is so you won't mind paying for it . . . this isn't capitalization or free markets as we know them, this is nationalization and it will only create problems for the people who pay the bills.  That would be me and you . . .
The FBI had launched an investigation of IndyMac Bank for possible mortgage fraud shortly before the thrift was closed by regulators and placed into receivership, according to news reports. Fraud and they failed . . . they couldn't do anything right then could they?
Even though mortgage fraud for housing "doesn't seem quite as violent" as mortgage fraud for profit, it has its own consequences, according to a representative of the Florida Office of Financial Regulation's Bureau of Financial Investigations. Fraud for Housing is when a borrower commits fraud to get housing, as opposed to fraud for monetary gain. And that, my dears is life in my lane . . . I'm seriously thinking of Montana . . . horse, bedroll, rifle.  Sounds like the place to be to me!

INNOVATIVE FINANCING

In the days where one only hears about the credit crisis and lack of liquidity, people are stymied on where to turn to finance their latest projects. While the reality is there has been a huge change in residential financing (probably for the better, and probably forever!) commercial lending programs have not been affected as much, although lately commercial lenders are finding it harder to sell their paper because of lack of liquidity in the market in general.

As it is harder to get the money to get projects off the ground, we’ve tried to stay ahead of the curve and maintain as many options for our borrowers as possible. While there are still straightforward choices like SBA loans and commercial loans for expansion, purchases and refinances, and Church loans based on tithing, we’ve found there are other forms of financing that aren’t as complicated or time consuming and for the most part also aren’t as costly as traditional financing.

I’ve added stockloans from Hedgelender to my portfolio of products and capital advances against credit cards.

The beauty of both programs is they are not based on applications, financial statements, tax returns or credit criteria. And they both fund VERY quickly.

Stock Loans can be used for any number of things, and can be made through a myriad of choices. Here are some highlights:

• Finance your real estate with interest-only repayment while still retaining participation in your stock portfolio;

• Refinance your MARGIN LOAN to remove the possibility of a call;

• Expand Your Business with interest-only repayment while still retaining participation in your stock portfolio;

• Diversity Your Investments while retaining beneficial ownership of your portfolio;

• Roll your Employee Stock Options into cash while continuing to participate in your stock.

Ironically, these loans run to the millions and sometimes tens of millions, and take 1/10th the time to process and fund. And, they are strictly based on the worth of the stock and the amount of shares traded; the ONLY collateral is the stock and . . . credit is NOT a criteria. Neither is purpose, as long as it is legal!

Capital Advances against credit cards is NOT a loan program - but is a purchase of future sales.

Like the stock loan, there is NO long application, financial statement requirement OR tax return requirement; Funds immediately based on credit card sales; factors ALL credit cards receivables - Visa, Mastercard, American Express and Discover.

Clients are using the money for expansion and renovation; Marketing and Advertising; purchase of new locations; Increases to inventory; purchasing much needed equipment Repairs and upgrades; buying out an existing partner; recapture of investment capital; even to pay bills and taxes.

Finer explanations and details are listed on my website PallasFinancier.Com.

Brad Inman on the collapse of the secondary housing market

Brad Inman is founder and publisher of Inman News.

In the afternath of the news about fannie mae, freddie mac and the NEW IndyMac FEDERAL BANK, Brad Inman made ten predictions about the collapse of the secondary housing market.

"...Those that do lend will revert to back-to-basics underwriting: perfect credit, large down payments, proof of income, personal character and good family upbringing.

"...Housing industry lobbyists will make the mortgage liquidity problem their number one policy issue in the next two years. They will argue that the sky is falling and it is.

"...Like so many parts of our American culture, the accessibility to unlimited and poorly scrutinized debt helped turn Americans into a sloppy group of consumers, which spawned greedy Wall Streeters, out of control lenders and starry-eyed investors."

Read all ten, and the rest of his article at Imagine housing without a secondary market

Quick Notes from all over . . . indictments at Bear Stearns . . . a new kind of black widow (!) and loans for foreign nationals again (hooray!)

The U.S. Attorney's Office for the Eastern District of New York handed down indictments for Ralph Cioffi and Matthew Tannin formerly with Bear Stearns.  You may or may not recognize them as the brains (if you will forgive me) behind the Bear Stearns High Grade Structured Credit Strategies Fund (begun  in 2003) and the Bear Stearns High Grade Structured Credit Strategies Enhanced Fund (begun  in 2006), both of which failed miserably earlier this year.

From the US Attorney's Office (Eastern District of New York) Press Release   "... The indictment alleges that by March 2007, the defendants believed that the Funds were in grave condition and at risk of collapse.

However, rather than alerting the Funds’ investors and creditors to the bleak prospects of the Funds and facilitating an orderly wind-down, the defendants made misrepresentations to stave off withdrawal of investor funds and increased margin calls from creditors in the ultimately futile hope that the Funds’ prospects would improve and that the defendants’ incomes and reputations would remain intact. " (italics all mine)

"... The subsequent collapse of the Funds during the summer of 2007 resulted in losses to investors totaling more than $1 billion."

CIOFFI was also charged with insider trading, as I understand it, for moving TWO MILLION DOLLARS OF HIS OWN MONEY out of the fund and into another.

Probably one that didn't fail, doncha guess?

Attorneys for the men maintain their innocence . . . Well, would they get paid otherwise?

Read the Press Release in its entirety here

I understand the FBI is investigating 19 other companies who were originating and securitizing sub-prime loans for accounting fraud, insider trading, and the failure to disclose true valuations.

Lovely

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July 6 2008 Update to Bear Stearns indictments

Dan Slater writes in the Wall Street Journal LAW BLOG: Bear Fund Managers Get Good Draw, Sizing Up Judge Block

So, Justice Carries a Swift Sword?  We'll See - Curiously, a poster named "Anonymous", says the sub-prime mess  . . . has plenty of people who deserve fines and jail time . . . BUT these guys are not the scapegoats we need."

Well, gee, they thought up the hedge funds, created them, bought the mortgage backed securities, and then (!) CIOFFI was charged with insider trading for moving TWO MILLION DOLLARS OF HIS MONEY out of the fund . . . leaving institutional investors in the fund with no warning . . . when they knew the fund was in danger.

They may not be the scapegoats we NEED, but it certainly appears they need to be in front of a judge for the way they ran that fund!

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Billed as social networking with a bite  (pun intended I suppose) the Black Widow Network is designed to send real estate investment deals direct to your in-box . . .

Other websites designed to take advantage of REOs and the possibility of making money off them are

• BiggerPockets.Com
• PropertyShark.Com
• Krunching.Com

If you're looking for deals - try them out -

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I've finally located three lenders that will work with Foreign Nationals.  So I'm taking those applications again --

Requirements include:

• Assets Held in Foreign Accounts must be in English and I need copies of statements for two months.
• Seller concessions are held to a maximum of 3% and are ONLY acceptable on second homes.
• Single Family Dwellings, PUDS, Warrantable Low and High Rise Condos are the properties . . . that means NO CONDOTELS
• FULL DOCUMENTATION ON INCOME AND ASSETS
• 30 year fixed, no prepayment penalty
• 75% maximum LTV

That's all I've got for today . . .  pax et bonum

...

Jim Cramer talks about DB (my mini-cooper) || Now I’m Hedge Lender® Approved Agent

In Jim Cramer's Mad Money lightening round on Friday June 27 he said, "In the end, people aren't spending… they are on the Interstate and you just don't feel rich anymore when you're on the Interstate, unless you're driving a Mini Cooper."

Meet DB, my mini-cooper . . .

I don't feel rich on the Interstate, but I'm not bleeding money for gas anymore. I went from $95 a week for the truck I was driving to about $40 every other week. The savings almost equals the car payment AND it is a kick to drive!

I've just learned that I'm now an authorized agent for Hedge Lender. They have programs for Stock Loans and an amazing customer service approach. Highlights are

• Employee Stock Options Solution Using HedgeLoan®
• Margin Loan Rescue Solution Using HedgeLoan®
• Expanding Business Financing Solution Using HedgeLoan®
• Real Estate Purchasing Solution Using HedgeLoan®
• Diversify Investments Solution Using HedgeLoan®

HedgeLoan Stock Loans for Business Expansion Capital...

John Shareholder owns a farm with a 10% interest note that collateralized by all of his equipment and most of his other farm assets. He needs expansion capital and owns 100,000 shares of the stock XYZ worth $10 a share, but he expects good news this year that will boost the stock's price and doesn't want to liquidate.

Solution: With a HedgeLoan® @ 6.99% interest fixed, he can refinance the farm, get the capital to grow the business and remove the liens from all other assets. If his favorite stock goes up, he can participate in the upside, and if it goes down, he can exercise his right to default on the loan (with no reporting to credit bureaus) and the collateral stocks acting as full satisfaction of the HedgeLoan obligation.

PIPE Replacement Solution

A publicly trading company needs to raise $1,000,000 in capital but can't do asset-based lending and can't afford to wait for a PIPE to be completed.

Solution: Use a HedgeLoan® stock-secured loan to do an off-balance sheet financing with shareholders friendly to the issuer and gain flexibility and greater shareholder loyalty in the process.

Think of the benefits:

• it can help enhance the value of the collateral pledged for the HedgeLoan®;
• be structured so that borrower also receives warrants which could have considerable added value (terms negotiated with the issuer).
• no debt service - since the borrower's note will run concurrent with the stock loan, the debt service will be covered by interest paid to borrower on note (payment terms and dates can be structured to fall just prior to due date on HedgeLoan®.)

Quick funding – 2 weeks or less possible vs. many months with PIPE or secondary offerings. Many registration and legal costs associated with PIPE or secondary offerings are not required with a HedgeLoan® solution. Shares go (via warrants) to presumably friendly hands (current large shareholders) rather than to unknown parties.

Stay in and Out of the Market at the Same Time - with HedgeLoan® Stock Loans

I'll try to go over each of them in the next day or two – in the meantime, you can call me 770.333.4404 or send an email traci@tracigregory.com if you have questions.

You may read my full Disclaimer including definition of "approved agent" .

Construction To Perm Financing

To Paraphrase Montgomery Gentry of Country Music fame, CPs are

Gone like a freight-train, gone like yesterday
Gone like a soldier in the civil war, bang bang
Gone like a '59 Cadillac
Like all the good things that ain't never coming back
They're gone (gone) gone (gone) gone (gone) gone, gone

Well, they aren't completely gone . . . there are two lenders in the country who will do them.  Two!

The reasons aren't that complicated, the problem with doing a construction loan in a declining market is that when you get to the end of the construction period, your value may have decreased.

A year or two ago, you could have counted on appreciation, or at least seeing the project to completion having maintained value. With Fannie, Freddie and every lender left standing declaring various levels of decline in market value, and with the added expectation that it will continue for the unforeseeable future, no-one wants to risk a six month or one year project with no idea of where the value will fall when it is finished.

You and the bank could end up with a tremendous shortfall, and if you don't have the money to close, the bank has now built itself a spec house. Since most of them are practically real estate companies now, selling their foreclosures, they aren't going to go out and create a loan that has every indicator of going south.

So, postpone that dream house for a while, and look at all the new construction that is out there - and deeply discounted. It is a great time to buy a house, prices are depressed and interest rates are very low. It just isn't a good time to build a house.

I wish you the best in all you do.

2008 and the New Year didn't bring much cheer, did it?

I've gotten through Christmas, new baby, new year's, groundhog day, and lots of political rhetoric about the mortgage mess, and essentially my business remains in a state of near madness . . . I've read dozens of books about the economy, wall street, the mortage business, and I've stayed with my conclusion that the problems we're involved in now are the result of greed, or a lesser vice, that being the American urge to consume . . . at the bottom of the food chain: homeowners in problem mortgages, I think probably they just wanted to do the best they could for the families (don't we all?), and for the top: Wall Street Bankers who created the funds for "exotic mortgage products", they just wanted to make money.  It is what they do, and they did it well. 

As you probably know, we've gotten back to stern guidelines for owner occupied properties - FHA, the original sub-prime mortgage is making a comeback (and well it should!  520 credit scores and a 97% mortgage for 6.125, 30 years fixed!! Why would you go anyplace else with that score??)

Mega Jumbo ltvs are down, although those loans still get done. 

Conventional rates are lower than they've been in . . . three years?  05 saw rates like this, in the 5's.  And while we talk about 18% in 1981, I get the impression that people who were born in the 80's don't really believe it!

If you're in an ARM, now is the time to refinance, rates are so good, you probably should move now.  If you're in a loan that is in default, there are options for you - exercise them!  No one should be losing a house right now with so many options to save them.

Super Jumbo Seconds - Gone With the Wind

Most of my lenders are pulling second mortgages for super jumbos off the market by Tuesday, November 20. LTVS for stated income, verified assets will be at 65% max for most lenders on anything super jumbo or larger.  Some of my lenders will go to 70%, but on a $4 mil purchase, that makes the downpayment $1.2 million.  Gives one pause, doesn't it?

MARKET COMMENTARY from Vertice:
"Two-year Treasury notes headed for a fifth weekly gain, their longest rally in eight months, as falling stocks and the prospect of an interest-rate cut next month prompted investors to seek the safety of government debt. Yields held near the lowest in 2 1/2 years as Goldman Sachs Group Inc. said the slump in credit markets may reduce bank lending by as much as $2 trillion".

[Count the zeros: $2,000,000,000,000 - that's the estimated cost of the war in Iraq . . . give you any ideas? Say, End the war and spend whatever is left in this country??? It would take care of two serious problems for us, wouldn't it?]

"U.S. debt also rose before a Treasury Department report that economists surveyed by Bloomberg News expect to show foreigners purchased $71.5 billion more U.S. assets than they sold in September, from net sales of a record $69.3 billion in August."