It just gets weirder and weirder.
Each time I think that the mortgage companies and banks can’t get any more creative I find out something new. We all saw the rise of No-Doc loans, stated income loans, loans at 125% of value, etc; all of those were odd enough, but they were sort of, well, standard-weird.
Now it’s just gotten spooky.
One of my bird-dogs (see a previous post for a definition) recently talked to me about something that’s going on with the loan modification program. We’ve all been hearing about how well that program is NOT going, but here’s a new twist. It’s called re-capitalization.
Now remember, I’m not a big banking analyst, so I encourage you to take a look at this stuff on your own and make your own conclusions, but this stuff really making me think, so I figure I should get it off my chest and over to you, my rebellious entourage. In a nutshell, recapitalization is a way for banks and mortgage companies to hand-off their risk onto somebody else, this time via the Troubled Asset Relief Program (TARP) by taking all the fines and penalties and overdue $$ a homeowner owes and bundling it up into something that you and I (um…I mean the government, with our money) will buy up in order to bail them out.
Here’s how it works.
As it stands, TARP will only buy up the toxic asset at the value of the principal-the money the homeowner owes, net of penalties, late charges, fees, etc (which can run into the tens of thousands of dollars). Now, those items are important parts of a bank’s revenue stream. So how can a bank get TARP to reimburse them for all those fees that right now, they just have to eat?
By making a new loan to the homeowner, that’s how. And by making it a condition of the loan that all of those fees, late-payment penalties, etc, are now part of the CAPITAL, the amount of the mortgage. It then becomes one clean amount that TARP will happily spend your money on for you.
BUT wait-why the heck would a homeowner agree to that, you ask, with a rebellious look on your face and sharpening your cutlass, ready to cut away a bunch of financial BS.
After all, that new loan is a “modified” loan, offered to the homeowner at a lower interest rate designed to give them payments that are more affordable. It’s for a trial period, to see if the homeowner can make the new payment better than they were making the old payment. Exactly what the loan modification process is supposed to be doing.
So, at face value, the bank is doing everything it’s supposed to due to help out homeowners in trouble, via the loan modification programs. Right?
NOT!
Because the modified loan with the reduced interest rate is for a limited time (around 6 months is what I’m seeing). And part of the deal, is that at the end of 6 months, a new loan is created that encompasses all the outstanding interests, penalties, etc, and another NEW interest rate-usually HIGHER than what was being charged during the “trial period”.
So, the homeowner (who was struggling with the original amount due), now has a BIGGER mortgage than they started with, at an interest rate HIGHER than what they were offered as a trial, and which they will most likely go into default with AGAIN.
But the bank…ah, the BANK now has one nice and tidy mortgage that they can show to the government and have it bought up under TARP with our money. They win. The homeowner loses, you and I lose, the whole system loses.
Now, as I’ve mentioned, I do a lot of work with banks and mortgage companies and I don’t really believe that there are little banking trolls sitting around board room tables inventing ways to screw over their customers.
All this just seems awfully convenient.
That’s all I’m sayin’!
Sheesh! I feel better now.
Stay Rebellious!
-Larry
Wednesday, September 30, 2009
Wednesday, September 16, 2009
Jermaine Makes Money! (Guest Blogger)
The Real Estate Rebel Sez:
This is a guest blog written by a colleague, Joshua Ramey-Renk. I asked him to talk to one of my “Bird-Dogs” to find out more about her success as part of my team. I know Real Estate…Joshua knows how to tell people’s stories…this “Bird-Dog” knows how to spot a property…read on…
Jermaine Jenkins knows how to recognize an opportunity. Jermaine is part of Larry’s extended network of “Bird-Dogs”: people keeping an eye out for property owners that may be able to use his services to work through a short-sale. Not too long ago, Jermaine, who isn’t a real estate agent but has a good eye for properties, earned a nice Finder’s Fee by identifying an opportunity for Larry and his team. She did this just by talking to a potential seller about their distressed property and making the referral. She knew that even though the property wasn’t something a Real Estate agent could do a lot with from a marketing perspective, she could help the sellers by connecting them with Larry.
“The occupants were in default,” says Jermaine, describing the problem. “The property needed a lot of work, so a standard real estate agent listing wasn’t going to be an option, especially with the owners facing foreclosure and clock ticking. But I know that Larry’s business is helping people who are stuck in the pre-foreclosure madness, and I gave him a call.” Jermaine knew that Larry would treat the owners with respect and courtesy, and that, as an investor, Larry and his team could help navigate the short-sale process with the seller’s dignity intact.
I asked Jermaine how she found the potential sellers. “I was looking through the list of pre-foreclosures in my county, and calling on them to see if they were interested in getting some help. To be honest, I got a lot of hang-ups and some fairly rude responses, but on this particular property, the owners’ son answered the phone and was very open in talking with me.”
Jermaine felt that the property would be a good match for Larry and his team. And of course, she got some cash in her pocket too. “It works on two levels,” she says. “On the one hand, I like the referral bonus that Larry pays when an owner decides to put his property on contract, but I’m also really happy to have been able to help out some people in a tough spot. They got out from under the property, I got a spiff, and Larry got a lot of leg work done for him identifying a potential property. I think we all win.”
What advice does Jermaine have for people interested in working with Larry like she does? “First, make sure you know what Larry’s looking for,” she says. “Second, just start digging!”
The Real Estate Rebel sez:
She’s absolutely right! For more information about how to make money in Real Estate like Jermaine did, drop me a note! For more from Joshua...check out http://www.thefarwalkerchronicles.blogspot.com/
This is a guest blog written by a colleague, Joshua Ramey-Renk. I asked him to talk to one of my “Bird-Dogs” to find out more about her success as part of my team. I know Real Estate…Joshua knows how to tell people’s stories…this “Bird-Dog” knows how to spot a property…read on…
Jermaine Jenkins knows how to recognize an opportunity. Jermaine is part of Larry’s extended network of “Bird-Dogs”: people keeping an eye out for property owners that may be able to use his services to work through a short-sale. Not too long ago, Jermaine, who isn’t a real estate agent but has a good eye for properties, earned a nice Finder’s Fee by identifying an opportunity for Larry and his team. She did this just by talking to a potential seller about their distressed property and making the referral. She knew that even though the property wasn’t something a Real Estate agent could do a lot with from a marketing perspective, she could help the sellers by connecting them with Larry.
“The occupants were in default,” says Jermaine, describing the problem. “The property needed a lot of work, so a standard real estate agent listing wasn’t going to be an option, especially with the owners facing foreclosure and clock ticking. But I know that Larry’s business is helping people who are stuck in the pre-foreclosure madness, and I gave him a call.” Jermaine knew that Larry would treat the owners with respect and courtesy, and that, as an investor, Larry and his team could help navigate the short-sale process with the seller’s dignity intact.
I asked Jermaine how she found the potential sellers. “I was looking through the list of pre-foreclosures in my county, and calling on them to see if they were interested in getting some help. To be honest, I got a lot of hang-ups and some fairly rude responses, but on this particular property, the owners’ son answered the phone and was very open in talking with me.”
Jermaine felt that the property would be a good match for Larry and his team. And of course, she got some cash in her pocket too. “It works on two levels,” she says. “On the one hand, I like the referral bonus that Larry pays when an owner decides to put his property on contract, but I’m also really happy to have been able to help out some people in a tough spot. They got out from under the property, I got a spiff, and Larry got a lot of leg work done for him identifying a potential property. I think we all win.”
What advice does Jermaine have for people interested in working with Larry like she does? “First, make sure you know what Larry’s looking for,” she says. “Second, just start digging!”
The Real Estate Rebel sez:
She’s absolutely right! For more information about how to make money in Real Estate like Jermaine did, drop me a note! For more from Joshua...check out http://www.thefarwalkerchronicles.blogspot.com/
Wednesday, September 9, 2009
BIRD DOG 101
Ok, really this is Bird Dog 101A-"What is a Bird Dog". We'll get to the 101B-"How to Be a Bird Dog" later on...as needed.
Bird Dogs are the CORE of what it means to run a Real Estate Rebellion. These are people who want to make some money in real estate, who know their neighborhoods, know how to learn to do some basic research, and make cash by identifying homes that fit into my Rebellious activities. They are not Real Estate Agents, they don't lose out by refering a property to me, and they don't need to have any kind of special license. They just need sharp eyes and an understanding of what we're looking for.
A Bird Dog (BD, for simplicity), keeps an eye out for properties that are looking at foreclosure and could benefit from talking with a Short Sale person (like me and others on my team). They then refer the property to me and my team, and if the owner agrees to work with us for a short sale contract, the clever BD who spotted the deal and brought it to my attention gets paid.
Even better-
They might get paid TWICE! (more on that later...)
Simple enough? In the next couple of days, check back here for the story of Jermaine J. Her story of finding an East Bay property for us is a great example of how to make money in real estate without being a real estate agent, investing your own cash, or even having an office!
Oh, did I mention that I'll teach you most of what you need to know to identify properties for us? Silly me.
I'll teach you almost everything you need to know to identify properties for us.
The only thing I CAN'T teach you is how to have the drive and desire to put the energy in. If you KNOW you've got that, drop me a note and we can talk more about how to be a BDFR (Bird Dog for the REVOLUTION!).
Rebelliously,
Larry
Bird Dogs are the CORE of what it means to run a Real Estate Rebellion. These are people who want to make some money in real estate, who know their neighborhoods, know how to learn to do some basic research, and make cash by identifying homes that fit into my Rebellious activities. They are not Real Estate Agents, they don't lose out by refering a property to me, and they don't need to have any kind of special license. They just need sharp eyes and an understanding of what we're looking for.
A Bird Dog (BD, for simplicity), keeps an eye out for properties that are looking at foreclosure and could benefit from talking with a Short Sale person (like me and others on my team). They then refer the property to me and my team, and if the owner agrees to work with us for a short sale contract, the clever BD who spotted the deal and brought it to my attention gets paid.
Even better-
They might get paid TWICE! (more on that later...)
Simple enough? In the next couple of days, check back here for the story of Jermaine J. Her story of finding an East Bay property for us is a great example of how to make money in real estate without being a real estate agent, investing your own cash, or even having an office!
Oh, did I mention that I'll teach you most of what you need to know to identify properties for us? Silly me.
I'll teach you almost everything you need to know to identify properties for us.
The only thing I CAN'T teach you is how to have the drive and desire to put the energy in. If you KNOW you've got that, drop me a note and we can talk more about how to be a BDFR (Bird Dog for the REVOLUTION!).
Rebelliously,
Larry
Wednesday, September 2, 2009
September Buyer's Tip-Work with an expert to get the edge
Last month I talked about the advantages, for a seller, of talking to a short-sale expert as soon as things get rough and they're in default. There's a flip-side to that idea that I thought I'd bring to your attention this week.
This is one of the best rebellious tips I can give a buyer in this market, especially somebody looking to buy a home for themselves versus an investor looking for a portfolio property (although the idea certainly applies):
If a property shows up on the MLS or with a "For Sale" sign, you may already be too late for the party! Sad but true.
Once the sign goes up, it's like blood in the water for buyers of all types. And a lot of times, if you are looking at the same property that an investor is looking at, you are going to have less cash, less credit, and a weaker bargaining position.
BUT...
What if you do what one of my clients is doing? Let's call him...Ronnie Rebel.
Ronnie is looking for a few of things for his family:
This is one of the best rebellious tips I can give a buyer in this market, especially somebody looking to buy a home for themselves versus an investor looking for a portfolio property (although the idea certainly applies):
If a property shows up on the MLS or with a "For Sale" sign, you may already be too late for the party! Sad but true.
Once the sign goes up, it's like blood in the water for buyers of all types. And a lot of times, if you are looking at the same property that an investor is looking at, you are going to have less cash, less credit, and a weaker bargaining position.
BUT...
What if you do what one of my clients is doing? Let's call him...Ronnie Rebel.
Ronnie is looking for a few of things for his family:
- A good school for his kids
- A safe neighborhood with good opportunities for outdoor recreation
- Close proximity to his work because he likes to ride his bike
- Getting all that within his budget
Ronnie is NOT so concerned with:
- Finding his "dream house" with the spiral staircase and the built-in outdoor jacuzzi
- Waiting until the "perfect" place comes along
- Having a brand-new house
- Paying a premium for the "right" address
Ronnie is my kind of Rebel.
Ronnie came to me and told me what he was looking for, and mentioned a couple of neighborhoods that he liked. I mentioned it to a couple of my Bird-dogs (don't know what a Bird-dog is? Stay tuned for an upcoming Topic on how to make money in Real Estate WITHOUT being a Real Estate Agent) and they did some digging and located a couple of places whose owners were looking at default and are talking about the short sale process with those owners...if one of them is interested in working with us for a short sale, Ronnie definitely has the inside track. Because he is looking at buying a property that will never go on the market and never have a "For Sale" sign attracting a bunch of potential competitors to the sale.
So, be like Ronnie: invite a short sale expert in early when you are considering buying a property and want to take advantage of the best bargains out there.
Yours (and Ronnie's) in Rebellion!
-LARRY
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