Looks like the bailout is back to square one. The Fed will not get a blank check to purchase all those pesky toxic assets.
I’m sure there will be more attempts to obtain the money from the Congress.
What will happen??
Monday, September 29, 2008
A great CEO
Warning: This has nothing to do with Real Estate
I always read articles about how CEO pay is astronomically high and how they make off with all the money, at the same time all of the other people suffer.
In this article, that is not the case. Well these poor employees get their paycheck cut in half, the other half is being deferred until the end of the year, due to turmoil at the parent company.
The CEO made a personal choice to work with out pay! SOURCE
Now, that is a great leader!!
I always read articles about how CEO pay is astronomically high and how they make off with all the money, at the same time all of the other people suffer.
In this article, that is not the case. Well these poor employees get their paycheck cut in half, the other half is being deferred until the end of the year, due to turmoil at the parent company.
The CEO made a personal choice to work with out pay! SOURCE
Now, that is a great leader!!
Friday, September 26, 2008
The biggest bank failure EVER in the history of the US!!
Can you believe this?? Wow, one of the major banks in America, Washington Mutual, has now gone belly up. Along with this, a huge financial bailout is on the table, we're facing historical times in America.
The government is on the verge of passing a $700 billion dollar bill to help aide the financial institutions of America. Meanwhile unemployment is creeping up, our 401(k)s' are taking a noose dive and home values are in a freefall. Not good!!
What happens if we don’t pass the bill? I have read all of these things…
x.) No more payroll for a lot of companies
x.) More banks will fail
x.) No more mortgages
x.) No more credit cards
to be continued…..
The government is on the verge of passing a $700 billion dollar bill to help aide the financial institutions of America. Meanwhile unemployment is creeping up, our 401(k)s' are taking a noose dive and home values are in a freefall. Not good!!
What happens if we don’t pass the bill? I have read all of these things…
x.) No more payroll for a lot of companies
x.) More banks will fail
x.) No more mortgages
x.) No more credit cards
to be continued…..
Wednesday, September 24, 2008
Your equity is going down...
Home values across the nation are down again. This time it’s a new record!! The median national value fell by 9.5%
The pace of existing home sales decreased 2.2 percent to an annual pace of 4.91
million units while the median national home price declined a record 9.5 percent
to $203,100, the National Association of Realtors said on Wednesday. SOURCE
Dear Main Street,
This is great summary of what is happening on Wall Street and why mainstreet is now footing the bill for these bailouts.
Dear Main Street,
Are you trying to make sense of what's happening here on
Wall Street?Don't worry -- you aren't alone. A lot of people even here are
trying to figure that out. It isn't that complicated, but Wall Street is so full
of mumbo jumbo that it's easy to get confused -- or bored.Say "collateralized mortgage obligation" a dozen times and see if you can stay awake
Tuesday, September 23, 2008
The $700 billion dollar bailout??
I’m reading more updates every hour, so I will keep you posted as I know more, but here is what I have learned so far.
This bailout is for the government, or actually the FED, to have an open checkbook to purchase toxic assets. Purchasing these toxic assets will help the credit market bounce back and hopefully restores confidence in our markets. There is no data on how much they will pay for these assets.
This is all about bailouts for major companies, not common people of the United States. I’m strongly opposed to this bill unless they clarify what they are going to do with the money. I'm not for bailing Wall Street, but I'm for helping out mainstreet!!!
AIG Bailout
Let’s add another losing corporation to our books, this time AIG. Here is the wiki link.
The treasury gave AIG $85 billion for 80% stake of the company and it comes with an 11% interest rate on the terms of the loan.
The treasury gave AIG $85 billion for 80% stake of the company and it comes with an 11% interest rate on the terms of the loan.
The Fannie and Freddie bailout!
I have been hearing rumors about this for a long time and now it has finally become a reality. We the people of United States of America, now own the two biggest backers of mortgages in America, Fannie Mae and Freddie Mac.
This means that all of the tax payers will now be footing the bill to help keep these two companies afloat, during these wicked times.
I’m not sure how I feel about this event. I do believe in a free market, but at the same time I think we are at a major financial cross road. What happens if we don’t bail out these big companies? Huge job losses? The world withdraws all of their money out of our economy?
Truth is that no one really knows. All I can do is trust the people who are in place and hope that they have American’s best interest in mind, rather then the upper 1% of Americans.
What does this mean to the mortgage market?
Not much will affect the average consumer, besides that mortgages will still be available to the public, because if these two companies went out of business, mortgages would be really hard to come by for a long time. It might also help to stabilize rates, because now the treasury is backing the debt.
This means that all of the tax payers will now be footing the bill to help keep these two companies afloat, during these wicked times.
I’m not sure how I feel about this event. I do believe in a free market, but at the same time I think we are at a major financial cross road. What happens if we don’t bail out these big companies? Huge job losses? The world withdraws all of their money out of our economy?
Truth is that no one really knows. All I can do is trust the people who are in place and hope that they have American’s best interest in mind, rather then the upper 1% of Americans.
What does this mean to the mortgage market?
Not much will affect the average consumer, besides that mortgages will still be available to the public, because if these two companies went out of business, mortgages would be really hard to come by for a long time. It might also help to stabilize rates, because now the treasury is backing the debt.
Mortgage Rates
Mortgage Rates
Last week mortgage rates were all over the place. They went really low 5.5% then went back up to 5.875%.
As of today bankrate is reporting that the average rate is 5.87% on 30 year mortgage rates.
Look for rates to head a bit higher this week but they might go lower if the market likes the bailout plan.
Wednesday, September 10, 2008
The GREAT Freddie and Fannie take over!
Government Take OVER!
Fannie Mae and Freddie Mac (if you want more info on these companies click on the name and you will be directed to their wiki page) are now controlled by the US government. This is a huge step in the “Mortgage Meltdown of 2008”.
“Effectively, the federal government has now become the nation’s mortgage
lender”, Mark Zandi, Chief Economist at Moody’s economy.com
How did it get to this point?
Well for starters, the housing market has been in ruins this year. Last quarter, Fannie Mae lost over 14 billion dollars and they are continuing to lose money on a daily basis. Obviously, as with any company, you can only lose money for so long before you are forced to close the doors.
Basically, both of these companies went up in smoke and were bailed out by the Fed.
If they just shut their doors and file bankruptcy, our financial system would blow up in our face. Not only does it affect all homeowners but, a lot of investors would pull their money from the US stock market and all US government backed companies to flee to safety which would cause a meltdown that would be catastrophic.
What does this mean for homeowners?
First, LOWER MORTGAGE rates are on the horizon for homeowners. People who are looking at buying homes are going to enter a historic window of low rates and low home prices. In theory, this should help to stabilize home prices and help to take a large amount of the inventory off the books.
Second, more lending options should be on the table soon. All of the experts I have read on this topic all predict that Fannie and Freddie will now release more options for homeowners and prospective buyers.
What does it mean for us, the tax-payers?
We will be on the hook for all of the debt for these companies. Some of the numbers I have read estimate the cost to be $100 billion and up!!! Sounds like a lot of cash to help bailout stockholders but, is it?
I think that no price tag is too great to help save our housing market. If this helps to stabilize the market, we will see a huge profit off of this investment. I think if you looked at the budget you would be shocked to learn how much money America sends overseas to help other countries. Well, now it’s time to bailout America and help our own people.
Keep in mind, this takeover is not to bailout foreclosures and home investors; this is to bailout the average American homeowners. It will affect every single person who holds a mortgage now and in the future!
Tuesday, September 2, 2008
Tips on Greening your home
Tips on how to make your home greener!
If you have questions about Green mortgages, please contact The Satori Group
Interview with Barney Frank...
Interview with Barney Frank from the September edition of Money Magazine. SOURCE
Money Magazine senior writer Janice Revell recently caught up with Frank in Washington a few days before President Bush signed the bill into law in late July.
Question: How on earth did the U.S. mortgage market get here?
Answer: We had too little regulation at a point of great financial innovation. Twenty years ago, most loans were made by someone who expected to be paid back by the borrower. And lenders who want to be paid back by the borrower are careful about who they lend to.
Then came this great innovation called securitization. Securitization means that I lend you money and quickly sell the right to be paid back by you to other people. Well, when the lender ceased to have an ongoing relationship with the borrower, a tremendous amount of banking discipline was lost. And it was much harder to replace than we thought.
Q. Where were the regulators during all of this? Why didn't they step in?
A. Back in 1994, Congress gave the Federal Reserve the authority to ban irresponsible mortgages. Alan Greenspan, as a very committed anti-regulation conservative, refused - literally refused - to use that authority. Congress can give people authority; we can't compel them to use it.
Ben Bernanke, to his credit, realized that it was time to use that authority. So he promulgated a set of rules on July 14 of this year to prohibit a lot of the mortgages of the type that got us in trouble. If Alan Greenspan had done 10 years ago what Ben Bernanke did this past July, we would have much less of a problem in subprime mortgages.
Q. Is the current mess a result of naive consumers being duped into horrible mortgages or is it a case of greedy consumers chasing cheap loans?
A. Some were misled, others took part in the deception. There were people, for instance, who lied about their incomes.
But we have made a mistake in this society. The assumption that everybody can be a homeowner is wrong. We pushed and encouraged people into home ownership - people who, in some cases, weren't ready for it. You can't act on wishes that are unrealistic without having negative consequences.
Q. You are the architect of new legislation aimed at stemming the rise of foreclosures. How is that going to work?
A. The initial approach taken a year ago by Treasury Secretary Paulson, who has handled this crisis very responsibly, was to get lenders to hold off on resetting adjustable-rate mortgages to a higher interest rate. The theory was that homeowners could refinance at a lower interest rate than the 11% or 12% rates they were facing.
But because of the drop in house prices over the past year, the problem now is that most of these people owe more on the house than it's worth. Once the house is worth less than the loan, you can't refinance. People hadn't figured on that happening.
So we're now telling lenders that if they agree to modify these mortgages so that the loan amount is equal to no more than 90% of the home's current value, the Federal Housing Administration (FHA) will step in and guarantee the reduced mortgage against default. The homeowners will then be able to refinance into more affordable mortgages.
Q. But the lender still takes a big loss. Why would a lender go along?
A. We're telling them, "Look, if the borrower defaults you're going to take a loss anyway. We'll guarantee that you'll lose no more than you give up when you modify the loan."
I think a lot of lenders will take advantage of that. And they understand that massive foreclosures are bad for the economy - and for them. Plus, this is purely voluntary. If you think you're better off foreclosing on a homeowner, we won't stop you.
Q. How much will this cost taxpayers?
A. The borrower's mortgage is reduced by the lender, but the borrower gets no money from the government to pay off the new mortgage. Taxpayers are on the hook only if a borrower subsequently defaults on the reduced mortgage and the government has to take over the house.
Some of those houses won't be worth as much as the mortgage that we had guaranteed. The Congressional Budget Office estimates that our proposal would cost taxpayers about $1.7 billion. But it would also prevent 500,000 foreclosures. That's less than $4,000 for each avoided foreclosure.
Q. Why should responsible homeowners be forced to spend even a nickel of their tax dollars giving irresponsible borrowers a break on their mortgages?
A. Here's why: Foreclosures do damage in concentric circles. The pain hits hardest on the people whose houses foreclose, but it also hits the entire neighborhood. If you're a hard-working person making your mortgage payments and people around you are getting foreclosed, then your neighborhood starts to deteriorate.
The value of your home falls, and the entire city suffers because homes that used to generate property taxes are now eating up tax dollars. And when that happens, the whole economy suffers. So doing something about foreclosures helps the broader economy, not just the individual.
Q. Your legislation will also provide support to Fannie Mae and Freddie Mac should they need it. The tab could run tens of billions of dollars. Again, why should taxpayers bear the cost?
A. I believe Fannie and Freddie are better off than the market thinks. Over the long term the market is a very rational distributor of resources, but in the short term it can fall prey to hysteria. Sometimes you need to deal with that.
Part of the problem is rumormongering by short-sellers [investors who bet that a company's stock price will decline]. Our hope is that just by making U.S. financial support available, we'll quiet the fears and eliminate any need for that support.
Q. This isn't the first time we've seen housing prices fall. Why not just let the market work itself out?
A. Because it will cause tremendous pain that won't be restricted just to housing. If the housing market simply deteriorates, the problem won't just be foreclosures. Banks will fail. Pension funds won't be able to pay workers their pensions - because they all own these securitized mortgages. Packaged mortgages have now become such a major part of the economic landscape that a massive failure of them would have serious consequences around the world.
Q. IndyMac Bancorp failed in July, the third-largest bank failure in U.S. history. Are we going to see more bank failures before all this plays out?
A. I'm sure there will be more bank failures, but we shouldn't panic about that. Banks fail. That's why we have deposit insurance. I don't think we're at the point where we're going to have a rash of bank failures of the magnitude that could cause systemic failure.
Q. What has to happen to make you confident we're not going to relive this mess all over again someday?
A. The Federal Reserve should be given the authority to exercise regulatory authority over investment banks. The time has come to regulate the securitization process. We need the kind of regulation that diminishes abuses but doesn't stifle economic activity.
Money Magazine senior writer Janice Revell recently caught up with Frank in Washington a few days before President Bush signed the bill into law in late July.
Question: How on earth did the U.S. mortgage market get here?
Answer: We had too little regulation at a point of great financial innovation. Twenty years ago, most loans were made by someone who expected to be paid back by the borrower. And lenders who want to be paid back by the borrower are careful about who they lend to.
Then came this great innovation called securitization. Securitization means that I lend you money and quickly sell the right to be paid back by you to other people. Well, when the lender ceased to have an ongoing relationship with the borrower, a tremendous amount of banking discipline was lost. And it was much harder to replace than we thought.
Q. Where were the regulators during all of this? Why didn't they step in?
A. Back in 1994, Congress gave the Federal Reserve the authority to ban irresponsible mortgages. Alan Greenspan, as a very committed anti-regulation conservative, refused - literally refused - to use that authority. Congress can give people authority; we can't compel them to use it.
Ben Bernanke, to his credit, realized that it was time to use that authority. So he promulgated a set of rules on July 14 of this year to prohibit a lot of the mortgages of the type that got us in trouble. If Alan Greenspan had done 10 years ago what Ben Bernanke did this past July, we would have much less of a problem in subprime mortgages.
Q. Is the current mess a result of naive consumers being duped into horrible mortgages or is it a case of greedy consumers chasing cheap loans?
A. Some were misled, others took part in the deception. There were people, for instance, who lied about their incomes.
But we have made a mistake in this society. The assumption that everybody can be a homeowner is wrong. We pushed and encouraged people into home ownership - people who, in some cases, weren't ready for it. You can't act on wishes that are unrealistic without having negative consequences.
Q. You are the architect of new legislation aimed at stemming the rise of foreclosures. How is that going to work?
A. The initial approach taken a year ago by Treasury Secretary Paulson, who has handled this crisis very responsibly, was to get lenders to hold off on resetting adjustable-rate mortgages to a higher interest rate. The theory was that homeowners could refinance at a lower interest rate than the 11% or 12% rates they were facing.
But because of the drop in house prices over the past year, the problem now is that most of these people owe more on the house than it's worth. Once the house is worth less than the loan, you can't refinance. People hadn't figured on that happening.
So we're now telling lenders that if they agree to modify these mortgages so that the loan amount is equal to no more than 90% of the home's current value, the Federal Housing Administration (FHA) will step in and guarantee the reduced mortgage against default. The homeowners will then be able to refinance into more affordable mortgages.
Q. But the lender still takes a big loss. Why would a lender go along?
A. We're telling them, "Look, if the borrower defaults you're going to take a loss anyway. We'll guarantee that you'll lose no more than you give up when you modify the loan."
I think a lot of lenders will take advantage of that. And they understand that massive foreclosures are bad for the economy - and for them. Plus, this is purely voluntary. If you think you're better off foreclosing on a homeowner, we won't stop you.
Q. How much will this cost taxpayers?
A. The borrower's mortgage is reduced by the lender, but the borrower gets no money from the government to pay off the new mortgage. Taxpayers are on the hook only if a borrower subsequently defaults on the reduced mortgage and the government has to take over the house.
Some of those houses won't be worth as much as the mortgage that we had guaranteed. The Congressional Budget Office estimates that our proposal would cost taxpayers about $1.7 billion. But it would also prevent 500,000 foreclosures. That's less than $4,000 for each avoided foreclosure.
Q. Why should responsible homeowners be forced to spend even a nickel of their tax dollars giving irresponsible borrowers a break on their mortgages?
A. Here's why: Foreclosures do damage in concentric circles. The pain hits hardest on the people whose houses foreclose, but it also hits the entire neighborhood. If you're a hard-working person making your mortgage payments and people around you are getting foreclosed, then your neighborhood starts to deteriorate.
The value of your home falls, and the entire city suffers because homes that used to generate property taxes are now eating up tax dollars. And when that happens, the whole economy suffers. So doing something about foreclosures helps the broader economy, not just the individual.
Q. Your legislation will also provide support to Fannie Mae and Freddie Mac should they need it. The tab could run tens of billions of dollars. Again, why should taxpayers bear the cost?
A. I believe Fannie and Freddie are better off than the market thinks. Over the long term the market is a very rational distributor of resources, but in the short term it can fall prey to hysteria. Sometimes you need to deal with that.
Part of the problem is rumormongering by short-sellers [investors who bet that a company's stock price will decline]. Our hope is that just by making U.S. financial support available, we'll quiet the fears and eliminate any need for that support.
Q. This isn't the first time we've seen housing prices fall. Why not just let the market work itself out?
A. Because it will cause tremendous pain that won't be restricted just to housing. If the housing market simply deteriorates, the problem won't just be foreclosures. Banks will fail. Pension funds won't be able to pay workers their pensions - because they all own these securitized mortgages. Packaged mortgages have now become such a major part of the economic landscape that a massive failure of them would have serious consequences around the world.
Q. IndyMac Bancorp failed in July, the third-largest bank failure in U.S. history. Are we going to see more bank failures before all this plays out?
A. I'm sure there will be more bank failures, but we shouldn't panic about that. Banks fail. That's why we have deposit insurance. I don't think we're at the point where we're going to have a rash of bank failures of the magnitude that could cause systemic failure.
Q. What has to happen to make you confident we're not going to relive this mess all over again someday?
A. The Federal Reserve should be given the authority to exercise regulatory authority over investment banks. The time has come to regulate the securitization process. We need the kind of regulation that diminishes abuses but doesn't stifle economic activity.
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