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Tuesday, July 6, 2010
Thursday, June 3, 2010
JUNE RANT: More about the CA DRE letter on short sale fraud
Ok, rebels, I think it’s time you saw another side of me.
You know me as an off-the-cuff, kinda crazy, lovably rascally rebel.
All true.
But I’d like to turn on my serious side for a minute. I think it’s important, sometimes, to get kinda serious, maybe even (gasp!) fairly rational in my arguments. And NOW is that time. You’ve heard me rant about the misinformation, logic-gaps, and rumor that exist out there in the world of real estate brokers and agents. A few weeks ago I wrote a bit about the DRE’s recent letter about short sales.
Well, I’ve been re-reading it, and I have more to say.
As a reminder, this is the California Department of Real Estate’s “Short Sale fraud Warning to Licensees”, co-authored by the DRE’s Senior Counsel and Senior Deputy Commissioner. You can get the text here.
Wow. Is it any wonder that most real estate agents won’t touch a short sale listing? Hell, even most of the brokers under whose license they work don’t really understand the ins and outs of the short sale process. Is it so much easier to present an example of a brew of multiple fraudulent or illegal practices than to give licensees a more specific list of the things that must be present than to throw together a concoction of practices that are questionable, fraudulent or illegal? I suppose it is.
So what is it that has me so wound up? Let’s start with one of my favorites, “Is a Real Estate License Required to Represent the Parties to a Short Sale?” And the DRE’s answer, “YES, with some extremely narrow and limited exceptions and exemptions.” They spend six paragraphs explaining their answer. In those six paragraphs, they devote all of one sentence to say that it is ok for the buyer to negotiate on his own behalf. Is this an attempt to drive all of this activity into the hands of licensees, or is it just an attempt to minimize the significance of the buyer in this transaction? As an investor, when I back up and look at a transaction at the simplest level, there are only two parties, the seller and the buyer. The real estate agents come in second, as those who are responsible for looking after the interests of their clients. And, by the way, insinuating that the listing agent somehow owes a duty to the lender is, in my mind, VERY dangerous ground.
As an investor, I insist on negotiating with the lender myself. And why not? It makes no sense to me to leave that in the hands of either the seller or their agent, neither of whom have my interests in mind. And yes, I am always represented by a licensed real estate agent in these transactions, one who understands them. But I talked about this last time, so I won’t keep beating away at that point.
There’s plenty more to tick me off in the letter.
There’s what appears to be a “tip of the hat” to the poor lenders. Yes, the same people who hold out a hand in the form of a short sale but make it so difficult and inefficient that most buyers lose interest before an approval is obtained. Why is it that only an estimated 20-25% of short sale approvals actually close? These are the same "poor" lenders whose collection tactics manage to milk the last dollar of savings from people on fixed incomes, knowing that they will never be able to resume a normal payment. They know this because they already have their financial information. And the best one of all? Some of these poor lenders are actually talked into believing that the property in question has a much lower value that it actually does. This type of “fraud” really has to stop. To suggest that all offers should be sent to the lender is absolutely ridiculous. It seems to me that once I enter into a contract with the seller, continuing to accept offers to pass on to the lender is a blatant violation of California law.
The “fraud” here really is that the authors actually know something about the short sale process. The lenders choose their own method for determining the value of a property, whether it be through BPO’s or appraisals.
I have a message about the lenders:
Stop trying to make like they’re the underdogs here, so easily duped!!
THEY ARE READY TO TAKE YOUR HOME FROM YOU. In the end, their only concern is that a short sale will result in less of a loss than a foreclosure. IT’S A BUSINESS! They really don’t give a tinker’s damn about the people making their home there.
And don’t get me started about the references to the listing agent’s responsibility to the lender. Assuming the listing agent is in compliance with the B & P Code, that agent is there to affect the best outcome for the homeowner. The lender isn’t mentioned anywhere in the contract. In the case of a short sale, the homeowner has elected to sell their home rather than have it taken away from them. It is the lender’s choice to offer that option and it is done on their terms, not the agent’s, homeowner’s or buyer’s.
As an investor, I regularly negotiate with a lender for a short sale price and flip it for a profit. I don’t allow anyone else to negotiate for me, certainly not the seller or their agent. Before I engage, I make it quite clear that my intention is to sell it for a profit and that neither the seller nor the listing agent will be paying a fee. It’s my money, after all, that’s being spent. And while the DRE is busy looking for fraud being perpetrated by investors, they turn a blind eye to the common practice of lenders demanding promissory notes to approve short sales. When this is routinely done, even in the case of a non-recourse loan, knowing that they can “hold up” the homeowner whose only other choice is foreclosure, THIS is unethical. But I somehow doubt that the DRE is going to scrutinize this practice, perpetrated by their friends the lenders. And while nothing will justify fraudulent practices, the inference that the practice of short sale flipping is harmful to the community completely ignores the negative impact that the sea of foreclosures we see is far more damaging, to the homeowner and the community.
The federal government continues to implement ineffective programs to assist those who find themselves facing foreclosure. In the meantime, the lenders continue, unencumbered, with their predatory practices. It’s time we start insisting that our state representative do something about these practices.
I, for one, intend to speak with both my state senator and assembly representative to enact legislation that prevents these practices and makes the LENDERS accountable when they violate them. The practices of making a short sale contingent upon the signing of a promissory note for a portion of the balance, or what amounts to deed restrictions limiting the resale of the property have got to stop. Is anyone in Sacramento paying any attention to what the lenders are doing???
Come on, people!
Wheeew. I think that got my blood pressure up!!
Stay rebellious!!
-Larry
You know me as an off-the-cuff, kinda crazy, lovably rascally rebel.
All true.
But I’d like to turn on my serious side for a minute. I think it’s important, sometimes, to get kinda serious, maybe even (gasp!) fairly rational in my arguments. And NOW is that time. You’ve heard me rant about the misinformation, logic-gaps, and rumor that exist out there in the world of real estate brokers and agents. A few weeks ago I wrote a bit about the DRE’s recent letter about short sales.
Well, I’ve been re-reading it, and I have more to say.
As a reminder, this is the California Department of Real Estate’s “Short Sale fraud Warning to Licensees”, co-authored by the DRE’s Senior Counsel and Senior Deputy Commissioner. You can get the text here.
Wow. Is it any wonder that most real estate agents won’t touch a short sale listing? Hell, even most of the brokers under whose license they work don’t really understand the ins and outs of the short sale process. Is it so much easier to present an example of a brew of multiple fraudulent or illegal practices than to give licensees a more specific list of the things that must be present than to throw together a concoction of practices that are questionable, fraudulent or illegal? I suppose it is.
So what is it that has me so wound up? Let’s start with one of my favorites, “Is a Real Estate License Required to Represent the Parties to a Short Sale?” And the DRE’s answer, “YES, with some extremely narrow and limited exceptions and exemptions.” They spend six paragraphs explaining their answer. In those six paragraphs, they devote all of one sentence to say that it is ok for the buyer to negotiate on his own behalf. Is this an attempt to drive all of this activity into the hands of licensees, or is it just an attempt to minimize the significance of the buyer in this transaction? As an investor, when I back up and look at a transaction at the simplest level, there are only two parties, the seller and the buyer. The real estate agents come in second, as those who are responsible for looking after the interests of their clients. And, by the way, insinuating that the listing agent somehow owes a duty to the lender is, in my mind, VERY dangerous ground.
As an investor, I insist on negotiating with the lender myself. And why not? It makes no sense to me to leave that in the hands of either the seller or their agent, neither of whom have my interests in mind. And yes, I am always represented by a licensed real estate agent in these transactions, one who understands them. But I talked about this last time, so I won’t keep beating away at that point.
There’s plenty more to tick me off in the letter.
There’s what appears to be a “tip of the hat” to the poor lenders. Yes, the same people who hold out a hand in the form of a short sale but make it so difficult and inefficient that most buyers lose interest before an approval is obtained. Why is it that only an estimated 20-25% of short sale approvals actually close? These are the same "poor" lenders whose collection tactics manage to milk the last dollar of savings from people on fixed incomes, knowing that they will never be able to resume a normal payment. They know this because they already have their financial information. And the best one of all? Some of these poor lenders are actually talked into believing that the property in question has a much lower value that it actually does. This type of “fraud” really has to stop. To suggest that all offers should be sent to the lender is absolutely ridiculous. It seems to me that once I enter into a contract with the seller, continuing to accept offers to pass on to the lender is a blatant violation of California law.
The “fraud” here really is that the authors actually know something about the short sale process. The lenders choose their own method for determining the value of a property, whether it be through BPO’s or appraisals.
I have a message about the lenders:
Stop trying to make like they’re the underdogs here, so easily duped!!
THEY ARE READY TO TAKE YOUR HOME FROM YOU. In the end, their only concern is that a short sale will result in less of a loss than a foreclosure. IT’S A BUSINESS! They really don’t give a tinker’s damn about the people making their home there.
And don’t get me started about the references to the listing agent’s responsibility to the lender. Assuming the listing agent is in compliance with the B & P Code, that agent is there to affect the best outcome for the homeowner. The lender isn’t mentioned anywhere in the contract. In the case of a short sale, the homeowner has elected to sell their home rather than have it taken away from them. It is the lender’s choice to offer that option and it is done on their terms, not the agent’s, homeowner’s or buyer’s.
As an investor, I regularly negotiate with a lender for a short sale price and flip it for a profit. I don’t allow anyone else to negotiate for me, certainly not the seller or their agent. Before I engage, I make it quite clear that my intention is to sell it for a profit and that neither the seller nor the listing agent will be paying a fee. It’s my money, after all, that’s being spent. And while the DRE is busy looking for fraud being perpetrated by investors, they turn a blind eye to the common practice of lenders demanding promissory notes to approve short sales. When this is routinely done, even in the case of a non-recourse loan, knowing that they can “hold up” the homeowner whose only other choice is foreclosure, THIS is unethical. But I somehow doubt that the DRE is going to scrutinize this practice, perpetrated by their friends the lenders. And while nothing will justify fraudulent practices, the inference that the practice of short sale flipping is harmful to the community completely ignores the negative impact that the sea of foreclosures we see is far more damaging, to the homeowner and the community.
The federal government continues to implement ineffective programs to assist those who find themselves facing foreclosure. In the meantime, the lenders continue, unencumbered, with their predatory practices. It’s time we start insisting that our state representative do something about these practices.
I, for one, intend to speak with both my state senator and assembly representative to enact legislation that prevents these practices and makes the LENDERS accountable when they violate them. The practices of making a short sale contingent upon the signing of a promissory note for a portion of the balance, or what amounts to deed restrictions limiting the resale of the property have got to stop. Is anyone in Sacramento paying any attention to what the lenders are doing???
Come on, people!
Wheeew. I think that got my blood pressure up!!
Stay rebellious!!
-Larry
PS-I'll be taking a week off next week, but stay tuned for all kinds of cool changes, here at the Real Estate Rebel and at our investor websites!!
Wednesday, May 19, 2010
May Buyer's Tip-Everybody Marches Out of Step but Jimmy
I don't remember which TV show it was, but there was a sit com back in the *harumph*ties where somebody read a letter from an elderly relative talking about how proud they were of a young man who was doing so well in the army. "I was at the parade when his unit came past," says the letter, "And everybody was marching out of step but Jimmy..."
I think about that scene whenever I start to think about market trends and forces, whether Doom & Gloom Analyst A or Perky & Optimistic Talking Head B is right about what's going to happen in real estate over the coming months. Should we all step out with our left foot, or lead with our right?
Then another memory pops up. I was at an investor conference and the speaker asked the room how many people thought the market would go up over the next 6 months, about half the audience raised their hands. He then asked what how many thought the market would fall, and the OTHER half of the room raised their hands. He smiled at us and then said, "Half of you are wrong. But nobody knows which half."
And so, since May is here and spring is definitely arrived in our City by the Bay, I thought it couldn't hurt to remind people of some basics of buying a home. Like last week's column, this is targeted at your Average Rebel, who is looking to buy a home for their family.
I think about that scene whenever I start to think about market trends and forces, whether Doom & Gloom Analyst A or Perky & Optimistic Talking Head B is right about what's going to happen in real estate over the coming months. Should we all step out with our left foot, or lead with our right?
Then another memory pops up. I was at an investor conference and the speaker asked the room how many people thought the market would go up over the next 6 months, about half the audience raised their hands. He then asked what how many thought the market would fall, and the OTHER half of the room raised their hands. He smiled at us and then said, "Half of you are wrong. But nobody knows which half."
And so, since May is here and spring is definitely arrived in our City by the Bay, I thought it couldn't hurt to remind people of some basics of buying a home. Like last week's column, this is targeted at your Average Rebel, who is looking to buy a home for their family.
- Just because everybody is doing something, doesn't mean you should do it, too. If all your friends are finally buying houses because they're afraid the market is going to to soar and they want the lowest price possible, fine. It doesn't mean YOU should do it. Plenty of people did NOT follow their friends' actions during the run up to the recession, and also DID NOT follow their friends into foreclosure. Buy only if the deal works for YOU.
- Don't try to time the market. I'm a real estate investor and finance professional, and even I don't try to time the market when I'm looking at a property. I know what risk-levels work for my investment portfolio, and what represents a good deal today.
- Don't wait for a perfect deal. I have said this so often I think it's become a meditation mantra. If you are looking at a home that you like, and it fits most of your criteria, and you know you can afford the payment over time, and that you wouldn't mind living there...what's stopping you??
- Don't rush into things. This is the flip side of the "Don't wait" rule. If you're not sure you can keep up the payment (fer instance), or your real estate Agent is prodding you into making an offer just because "Well, the market's turning and you won't see these prices again," take a deep breath and re-run the numbers, or ask to see another property more within your budget.
Enough said!
And I'm pretty sure Jimmy was a Rebel...
Best,
Larry
Friday, May 14, 2010
May Resource Post-ARGH, I'M HIJACKING MY OWN BLOG!
Ok, this week, I’m going to rebel against myself.
Normally, I’d be putting together a resource post for you Rebellious Readers out there, choc-full of useful links, sites, and tools to help you navigate the short sale real estate world and beyond.
But I’ve been going over and over in my head a recent issue that has come to my attention, and I thought I’d spend a little time talking about it…
You’ve all heard me rail against the craziness that seems to be inherent in the real estate industry when it comes to understanding short sales.
Now, there seems to be a whole ‘nother layer being created, this time coming from the Department of Real Estate in California (CA DRE). Now, they seem to say, only licensed real estate agents are allowed to talk to people about short sales on their properties, or to banks to negotiate a short sale price. I keep hearing this from both RE brokers and agents, so I started doing some digging myself. And, of course, I found that it ain’t necessarily so. IF YOU READ REBELLIOUSLY, and most people don’t, here’s what you find…
The core of the issue seems to come from the question of who is allowed to talk to a lender to negotiate a short sale on a property, as a recent article from the DRE muddies, er, I mean “attempts to clarify”, the issue. A short excerpt follows:
A real estate broker license (or a real estate salesperson license where that person is working under the supervision of his or her broker) is required under section 10131 (d) of the California Business and Professions Code (B&P Code) where a person, in a representative capacity on behalf of another, "negotiates loans…or performs services for borrowers or lenders …in connection with loans secured directly or collaterally by liens on real property…" for or in expectation of compensation, "regardless of the form or time of payment".
In addition, under section 10131 (a) of the B&P Code, a real estate broker license (or salesperson license with appropriate supervision by the broker of record) is required of any person who, as a representative of another, "Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property…" (http://www.dre.ca.gov/pdf_docs/Article_ShortSales03_2010.pdf accessed May 10, 2010)
I’d like to bring your rebellious attention in particular to this sentence from the above excerpt: “a person, in a representative capacity on behalf of another, "negotiates loans…or performs services for borrowers or lenders”
And that, my friends, is the rub. When I take a look at an investment property, I look at buying it FOR MYSELF, and, sometime later, SELLING IT. Nobody is “representing” me in the sense of the law, and while I may have employees engaged in some of the tasks involved in the process along with me, it’s my money and my company purchasing the property. YES, later on I will sell it, for more money than I bought it for. That’s kinda the point of being an investor.
So tell me, what is to stop me from talking to the banks to negotiate a short-sale on a property?
As I read it, as long as I’m the buyer, then nothing at all. Again, it comes down to that line that reads “…as a representative of another”. If I want to negotiate a price on something I’m spending my own money on, nothing in the code prohibits me from doing so.
I’ve got more to say about this letter in coming weeks, but I’m doing a bit more digging first. So stay tuned!
Rebelling everywhere,
Larry
Normally, I’d be putting together a resource post for you Rebellious Readers out there, choc-full of useful links, sites, and tools to help you navigate the short sale real estate world and beyond.
But I’ve been going over and over in my head a recent issue that has come to my attention, and I thought I’d spend a little time talking about it…
You’ve all heard me rail against the craziness that seems to be inherent in the real estate industry when it comes to understanding short sales.
Now, there seems to be a whole ‘nother layer being created, this time coming from the Department of Real Estate in California (CA DRE). Now, they seem to say, only licensed real estate agents are allowed to talk to people about short sales on their properties, or to banks to negotiate a short sale price. I keep hearing this from both RE brokers and agents, so I started doing some digging myself. And, of course, I found that it ain’t necessarily so. IF YOU READ REBELLIOUSLY, and most people don’t, here’s what you find…
The core of the issue seems to come from the question of who is allowed to talk to a lender to negotiate a short sale on a property, as a recent article from the DRE muddies, er, I mean “attempts to clarify”, the issue. A short excerpt follows:
A real estate broker license (or a real estate salesperson license where that person is working under the supervision of his or her broker) is required under section 10131 (d) of the California Business and Professions Code (B&P Code) where a person, in a representative capacity on behalf of another, "negotiates loans…or performs services for borrowers or lenders …in connection with loans secured directly or collaterally by liens on real property…" for or in expectation of compensation, "regardless of the form or time of payment".
In addition, under section 10131 (a) of the B&P Code, a real estate broker license (or salesperson license with appropriate supervision by the broker of record) is required of any person who, as a representative of another, "Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property…" (http://www.dre.ca.gov/pdf_docs/Article_ShortSales03_2010.pdf accessed May 10, 2010)
I’d like to bring your rebellious attention in particular to this sentence from the above excerpt: “a person, in a representative capacity on behalf of another, "negotiates loans…or performs services for borrowers or lenders”
And that, my friends, is the rub. When I take a look at an investment property, I look at buying it FOR MYSELF, and, sometime later, SELLING IT. Nobody is “representing” me in the sense of the law, and while I may have employees engaged in some of the tasks involved in the process along with me, it’s my money and my company purchasing the property. YES, later on I will sell it, for more money than I bought it for. That’s kinda the point of being an investor.
So tell me, what is to stop me from talking to the banks to negotiate a short-sale on a property?
As I read it, as long as I’m the buyer, then nothing at all. Again, it comes down to that line that reads “…as a representative of another”. If I want to negotiate a price on something I’m spending my own money on, nothing in the code prohibits me from doing so.
I’ve got more to say about this letter in coming weeks, but I’m doing a bit more digging first. So stay tuned!
Rebelling everywhere,
Larry
Wednesday, May 5, 2010
May Seller's Tip-Distilled Wisdom for yer Average Joe
Hola, Amigos, and Happy Cinqo de Mayo! I think I'll celebrate the victory of the Mexican Army over the better equipped French force at the Battle of Peubla in 1862 by taking a look at how an Average Joe looking to sell their home can come out ahead in these tough real estate times. I'm bringing you a few tips to navigate today's market as an average, non-short sale, non-foreclosure seller. Oh, and of course, I'll head out for some cervezas too...
What if, instead of fighting of French soldiers, that Average Joe (AJ) is stuck in the mire that is today's real estate market and is trying to sell his house? Supposing AJ is being moved out of town by his company and just needs to sell his Bay Area home and move to another state, but is worried about getting the best price when so many homes are on the block for below market rates? Or if AJ (Average Jane, in this case), just watched her last kid graduate from college and head for the big city to start a career and she is starting to think that it might be time to relocate herself?
Here are the top three things that I'm seeing recommended for a "normal" home seller in today's market. Now, remember, I spend most of my time focusing on the Bay Area short sale market, but I do keep my eyes and ears open to all aspects of Real Estate in San Francisco and beyond.
Larry
PS-Coming next week, The Government is dictating who can negotiate on your behalf with a bank?? What the..?
What if, instead of fighting of French soldiers, that Average Joe (AJ) is stuck in the mire that is today's real estate market and is trying to sell his house? Supposing AJ is being moved out of town by his company and just needs to sell his Bay Area home and move to another state, but is worried about getting the best price when so many homes are on the block for below market rates? Or if AJ (Average Jane, in this case), just watched her last kid graduate from college and head for the big city to start a career and she is starting to think that it might be time to relocate herself?
Here are the top three things that I'm seeing recommended for a "normal" home seller in today's market. Now, remember, I spend most of my time focusing on the Bay Area short sale market, but I do keep my eyes and ears open to all aspects of Real Estate in San Francisco and beyond.
- Get a REFERRAL to a good Real Estate agent. As much as I get frustrated with brokers and agents in the Short Sale environment, a good agent is your best bet for getting the top price for your home in a regular sale. If there's any good coming out of the housing crash, it's that a lot of half-baked agents are getting out the industry, leaving a smaller pool of dedicated professionals. BUT ASK AROUND, check with friends and colleagues who have USED the person's service. "Cousin Bob is a real estate agent" doesn't cut it. "The agent who helped me sell my house in a week at a great price six months ago" is closer to what you're looking for.
- Make absolutely sure there's not much of work that will need to go into your home. The days when a seller could knock down the price a little during negotiations because the potential buyer spotted a ragged corner of carpet are gone. Fixer-uppers are everywhere, especially in areas where the previous owners walked away from a mortgage payment but took the faucets with them.
- BE REALISTIC. As I've mentioned before in these pages, this is not the market in which to try and recoup all your stock market losses at one fell swoop. Although there seems to be some light in the tunnel, it's still a tunnel and we're not sure if that's a train or not, so if an offer comes in that looks good but isn't exactly what you want, think hard before you turn it down.
That's it, Rebels, if you read through all the blogs and articles, it still comes down to being smart, flexible, and realistic.
And drinking Cerveza. Which I'm heading off to do...
Rebelliously,Larry
PS-Coming next week, The Government is dictating who can negotiate on your behalf with a bank?? What the..?
Wednesday, April 28, 2010
April Resource Post-Raw Rate Data Rocks!
Greetings Rebels!!
I have been accused of being everything from an old fogey to a young whippersnapper, and never has my age and skill set been more questioned than when it relates to the Internet and the tools it represents.
Obviously, I love the Internet. I'm on LinkedIn and FaceBook, I Blog (duh), and every now and then, I even Tweet. But I don't Digg stuff, I don't have a playlist on MySpace, and my old college photos of that embarassing incident with the goat better not show up on Flickr any time soon. I consider the Internet a tool for business, staying in touch with clients, colleagues and some friends, and most of all, RESEARCH.
I find that the flattening of the playing field when it comes to available data is probably the best aspect of the dub-dub-dub, and while my years of digging deep into obscure financial info are behind me, I do keep an eye on what's happening that effects my business-particularly information on interest rates.
If anything, there's TOO much data out there, and more often then not you're asked to provide some kind of contact data before you can get the information you're looking for. So for this month's Resource Post, I thought I'd separate some metaphorical wheat from the virtual chaff and show you a few spots where I keep an eye on the financial indicators around lending/borrowing. As always, read rebelliously and make up your own mind.
So, my Rebellious Readers, go forth and get informed! No more excuses!
Yours in Rebellion,
LARRY
I have been accused of being everything from an old fogey to a young whippersnapper, and never has my age and skill set been more questioned than when it relates to the Internet and the tools it represents.
Obviously, I love the Internet. I'm on LinkedIn and FaceBook, I Blog (duh), and every now and then, I even Tweet. But I don't Digg stuff, I don't have a playlist on MySpace, and my old college photos of that embarassing incident with the goat better not show up on Flickr any time soon. I consider the Internet a tool for business, staying in touch with clients, colleagues and some friends, and most of all, RESEARCH.
I find that the flattening of the playing field when it comes to available data is probably the best aspect of the dub-dub-dub, and while my years of digging deep into obscure financial info are behind me, I do keep an eye on what's happening that effects my business-particularly information on interest rates.
If anything, there's TOO much data out there, and more often then not you're asked to provide some kind of contact data before you can get the information you're looking for. So for this month's Resource Post, I thought I'd separate some metaphorical wheat from the virtual chaff and show you a few spots where I keep an eye on the financial indicators around lending/borrowing. As always, read rebelliously and make up your own mind.
- For the official picture, if you can ignore the "Aint we cute, we got a website" nature of the government's online presence, the Dept of the Treasury has the 411 on interest rates. And if there's not enough there for you, head over the the Federal Reserve website. Also VERY handy if you find yourself needing some help getting to sleep. Just click the link to any of Chairman Bernanke's speeches and save a fortune on Sominex.
- For something a little more consumer friendly, as well as comparison shopping for things like credit cards and mortgages, I'm a fan of Bankrate. Plus, they have a lot of helpful calculators that don't require you to give them your contact data before making the calculations.
- While I think it's important for Rebels to think about their own situations before thinking in big, national terms, there is room for some counter opinions. So for data with a bit of a technical bent and analysis, more technical head to tradingeconomics.com
- And lastly, for the die-hard big picture people, if you're looking for worldwide stats at your fingertips global-rates.com has a wealth of data, including historic and in-depth American inter-bank numbers.
So, my Rebellious Readers, go forth and get informed! No more excuses!
Yours in Rebellion,
LARRY
Wednesday, April 21, 2010
April Rant-It may be Lending...or it may be Predatory Lending
I was having coffee the other day with one of my bird dogs (the people who hunt up properties at risk of foreclosure), and he said to me, “Ever notice how ‘Banker’ rhymes with ‘Wanker’?”
I nearly choked on my coffee! I’m proud of being The Real Estate Rebel, but we were at a crowded café in the middle of San Francisco’s financial district, and even Jack Sparrow (er…CAPTAIN Jack Sparrow) knew to keep his voice down when the Governor could hear him.
Although now I can admit that the thought had occurred to me. Especially after I spent some time catching up on some of the latest shenanigans in the banking world. And “shenanigans” are about the nicest things I can call them.
Seriously, I’m thinking that some of this latest stuff may fall in the predatory lending category. I urge you to do some more digging and, if you agree, it may be time to call your local lawmakers to action.
So here’s what I’m hearing in the Loan Mod world, through conversations and digging around…
A homeowner applies for a loan modification…then the lender says that they’ll “consider” the application and while they’re doing that, the homeowner will be put on a 3-month trial repayment plan with a lower interest rate.
So far, nothing abnormally abnormal here. I’ve talked before about how shaky that is, but for now, I’m more ticked off at the NEXT point…
BUT THE BANK ALREADY KNOWS THEY WILL BE DECLINING THE MODIFICATION.
Yes, that’s right. This stuff isn’t rocket science. It’s not like there is an army of analysts taking that application for modification and pouring over it with a fine tooth comb to see what the bank should do with it. A few key pieces of data are plugged into a spreadsheet and the answer is there.
SOOOOOoooo…why do the wankers…I mean Bankers…approve the “trial period”??
Because it does two things for them:
1) During the trial period, any outstanding interest piles up and is capitalized if the application is ultimately declined. If the bank already know the application will be declined, it’s a way to get the outstanding balance even higher than when the trial period started
2) It creates a larger asset that may be picked up eventually by you and me via the intervention of TARP, who won’t be looking at where the balance comes from.
And if TARP doesn’t buy it, and if the owner goes into foreclosure, well, that’s just a bigger, inflated number that can be written off as a loss against any profits that year.
Holy cow. I’m really really smart, I’m really really tricky, and even I couldn’t have come up with a scheme that does all this.
So, ya know what, for the next few weeks, even if I whisper it, “Wanker” it is…
Stay Rebellious!
-Larry
I nearly choked on my coffee! I’m proud of being The Real Estate Rebel, but we were at a crowded café in the middle of San Francisco’s financial district, and even Jack Sparrow (er…CAPTAIN Jack Sparrow) knew to keep his voice down when the Governor could hear him.
Although now I can admit that the thought had occurred to me. Especially after I spent some time catching up on some of the latest shenanigans in the banking world. And “shenanigans” are about the nicest things I can call them.
Seriously, I’m thinking that some of this latest stuff may fall in the predatory lending category. I urge you to do some more digging and, if you agree, it may be time to call your local lawmakers to action.
So here’s what I’m hearing in the Loan Mod world, through conversations and digging around…
A homeowner applies for a loan modification…then the lender says that they’ll “consider” the application and while they’re doing that, the homeowner will be put on a 3-month trial repayment plan with a lower interest rate.
So far, nothing abnormally abnormal here. I’ve talked before about how shaky that is, but for now, I’m more ticked off at the NEXT point…
BUT THE BANK ALREADY KNOWS THEY WILL BE DECLINING THE MODIFICATION.
Yes, that’s right. This stuff isn’t rocket science. It’s not like there is an army of analysts taking that application for modification and pouring over it with a fine tooth comb to see what the bank should do with it. A few key pieces of data are plugged into a spreadsheet and the answer is there.
SOOOOOoooo…why do the wankers…I mean Bankers…approve the “trial period”??
Because it does two things for them:
1) During the trial period, any outstanding interest piles up and is capitalized if the application is ultimately declined. If the bank already know the application will be declined, it’s a way to get the outstanding balance even higher than when the trial period started
2) It creates a larger asset that may be picked up eventually by you and me via the intervention of TARP, who won’t be looking at where the balance comes from.
And if TARP doesn’t buy it, and if the owner goes into foreclosure, well, that’s just a bigger, inflated number that can be written off as a loss against any profits that year.
Holy cow. I’m really really smart, I’m really really tricky, and even I couldn’t have come up with a scheme that does all this.
So, ya know what, for the next few weeks, even if I whisper it, “Wanker” it is…
Stay Rebellious!
-Larry
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