My New Blog

The hummingbirds are chirping, the cacti are blooming, and the trees are becoming a beautiful green. Spring is in the air. But wait….What is that smell?

With unemployment at 8.5% the highest since 1983, the loser twins Fannie Mae and Freddie Mac adopted by Uncle Sam last August announced that they were paying out 210 million dollars of retention bonuses over the next 18 months. Paying their executives extravagant bonuses is their way of keeping them in the mortgage business so they will not add to the unemployment rate. Actually if my Uncle (or any relative) would pay me 1.5 million dollars, I could retire and someone else could have my job. Please.

All of the big talk of disclosure with banks was just hot air when new accounting practices were announced allowing secrecy in reporting the value of mortgage securities. As of Thursday they will not have to disclose losses from those toxic loans. Chase, Bank of America, Wells Fargo will show profits on their books due to the creative bookkeeping. So if I walk away from my $50,000 Visa bill will they understand it was just too icky for me to continue paying?

The top 20 Leaders of our world were on spring break in London attending the G20 summit to discuss the issues of the world. France’s President Nicolas Sakozy and Chinese President Hu Jintao got into it after throwing back a few shots of tequila with President Obama keeping the peace. (Okay, I am making the part about the tequila but it does make for a good visual) President Sakozy insisted that China should list all of their offshore tax havens including Hong Kong and the new Asian gambling capital, Macau. But because the currently cash rich China has agreed to contribute 40 billion dollars to the International Monetary Fund to help impoverished countries of the world, like the US, no one was willing to upset the big Panda.

So what is that smell? Some call it justification and we all know it stinks.

FYI: Lenders will be rolling out the refinance portion of the stimulus package. Stay tuned for details

BY DIANE GERDES

The housing market in Arizona is attempting suicide from lack of understanding and attention. President Obama made the trip to Arizona in February to grandly announce the Foreclosure Prevention Program modifications and the new refinance guidelines. The government, with Sheila Bair’s instruction gave Arizona (and other at risk states) a pat on the head instead of a much needed, full blown, intervention.

Property values in Arizona have decreased on an average of $8,000 per month since the bank meltdown last summer. Just when it seemed that the housing market was stabilizing in the Spring of 2008, the financial world collapsed and the already steep decline in housing prices accelerated.

People are fleeing their homes, leaving neighborhoods with an ocean of foreclosure signs because their American Dream is now worth several hundred thousand dollars less than what they originally paid. You read it right. One of my clients, a fire fighter in Scottsdale, cannot get anyone to talk to him about modifying his loan because there is no hardship. He purchased his home for $250,000. It is now worth $70,000. Explain to him why he should stay in his home. In the Verrado subdivision in Buckeye, Arizona, homes that sold for $500,000 or more in 2005 can be purchased from a bank for less than $200,000. Houses in some neighborhoods can be picked up for $50,000, devastating property values for the “good” home owners that continue to make their payments. Today's Conventional Wisdom for the "good" homeowners is that the values will never appreciate to the purchased level. Why continue to make the inflated payments on a house that is now worth less than your car?

After several years of making a healthy six figure income, a colleague of mine purchased his dream home in 2006 for $680,000 He financed it though GMAC. It does not matter to him that his home is now worth $350,000: he would do anything to keep it. When his income started to decline along with the Arizona market, he tried to modify his loan only to be told that he would be required to miss at least one payment before the loss mitigation department would consider his request. After extinguishing his home equity line of credit, his savings, and all that is sacred to him, he missed a payment. GMAC then told him, “Gee, we are sorry but your house does not qualify for a modification.” GMAC gave him no options.

Is our government so hobbled by their own arrogance and misinformed financial advice that they cannot mandate the investors that are holding these loans to help the homeowners? By the way, you cannot purchase a Countrywide /Bank of America foreclosure unless the client is preapproved by a Countrywide loan officer and it takes divine intervention to allow another lender to originate the loan. Does anyone else see the logic in allowing a company that was one of the architects of the housing meltdown to profit in today’s market?

Sheila Bair’s modification program would have been a great option: in 2007. It is two years too late. If the government wants to stop the flow of foreclosures they better reconsider a major intervention to address our property values or it will take decades to resuscitate the life line of our economy: The housing market.

BY DIANE GERDES

The big, bad banks are responsible for blowing our homes out from under us. The mortgages they devised had all of the integrity of sticks and bubblegum and were shattered when housing prices began to nose dive. Lately, they have been tiptoeing around the media with their heads down acting meek as sweet little lambs. But the same banks that shepherded the meltdown are in control of the current housing market. Fully executed contracts? You don’t need any stink’n signatures. Either take the verbal acceptance or we will snatch the house away and give it to someone else. Want proof that the asset manager has the authority to sign off on a deed or addendum? Forgetaboutit! Lil’ Red Riding Hood is a perfectly acceptable name especially when it is stamped. Your client is already preapproved with their lender? Use our bank’s lending programs and pay what we determine or find another house. The big boys, Chase, Bank of America and Wells Fargo have gone as far as bullying President Obama’s administration into enacting the “Safe Harbor” legislation. This will give servicers, which include all of the major banks, protection from any lawsuits from the mortgage investors that backed the loans; as well as the ability to modify loans without their approval. A smack-down is coming from these investors that want the banks share the billions of dollars of losses from the modified first and second mortgages and stop crying wolf.

FYI: Arizona will receive up to $20 million to spruce up our National Parks. It will mean more jobs and greener pastures.

BY DIANE GERDES

Love was never mentioned with the announcement of two arranged mergers this week. Pulte and Centex, two of the top five home builders are structuring a $1.3 billion marriage of debt and assets in an attempt to survive today’s housing market. With builder’s orders dropping 70% since 2005, other builders may decide that love is the air and join together. The shotgun arrangement between Chrysler and Fiat has taken on serious tones. President Obama is threatening to take away Chryslers’ dowry of billions of dollars of TARP aid if they do not take plunge by April 30th. General Motors was unable to find suitable match and will end up a bankrupt bachelor since Uncle Sam has cut off the mega auto manufacturer’s government money. Wells Fargo merged with the 4^th largest bank, Wachovia last fall and as a result turned a $3 billion profit for the first quarter of 2009, thanks in part to a new accounting procedure that allows certain flaws to be overlooked. And the music? HARP or Home Affordable Refinance Program introduced by President Obama on March 3^rd was kicked off this week with lenders presenting their guidelines for allowing homeowners to take advantage of the lower interest rates. There are many nuances to the program, but it may allow some of the stated income borrowers the opportunity to refinance. But no options were given to property owners with negative equity over 105% of their current loan amount. Love is certainly missing from the current administration for the Arizona, California and Nevada housing markets.

Have a great holiday weekend!