My New Blog

President Obama’s first 100 days probably were not what he imagined when he began courting the American public for the Presidency in 2007. The stock market was over 14,000, unemployment was at 4.5% and large bonuses with shiny expensive cars were a part of the American Dream. Our charismatic, Harvard educated leader’s term is being compared to that of President Franklin D. Roosevelt our 32^nd President from 1933 to 1945. When President Roosevelt’s began his campaign for the presidency, our country was in the dark throes of the Great Depression. This visionary man implemented social security, appointed the first woman to his cabinet, and developed work programs so American’s could put food on their tables. One of his first triumphs as president was to repeal the 21^st Amendment Prohibition Act, or legalize alcohol consumption. Can you imagine a world without Bud-lite and boxed wine?

President Obama is still in the honeymoon phase although the stock market plunged to below 8,000, and unemployment rose to 8.5%. He successfully guided our Navy Seals to fight pirates, (not the “aahrr matey “of lore but mercenary’s on a mission of death and none of them look like Johnny Depp) and has improved our global image while introducing his political platforms. With all of our big problems it has given our President a smaller library to focus his talk of reform. The economy has provided him with an opportunity to pass his massive stimulus bill and probably will allow the implementation of a national health care. Immigration is a spicy subject and was brought to the forefront this week with demands to close our borders to contain the swine flu. After all, if you get rid of the Mexicans you will get rid of the flu. I always thought that germs were the reason for the illness but in High School I was too concerned about my hair and my date on Friday night so I probably wasn’t paying attention in class when the teacher said it was the Mexicans.

President Obama’s exuberant confidence in the United States and his programs is contagious. With any relationship we must believe in our partner…..until proven otherwise.

FYI: All conventional appraisals are now required to be ordered through specific Fannie Mae approved Web sites. No exceptions. You can thank Attorney General Andrew Cuomo for determining that ground zero for the housing crisis was all due to the appraisers.

BY DIANE GERDES

Appraisals have become the grizzly bear in the zoo of lending.   New York Attorney General, Andrew Cuomo, determined the housing crisis was caused by appraisers and their relationship with real estate agents and lenders.  Legislation was passed to keep lenders, agents and borrowers all separated from the dangerous and evil appraisers.   In addition new tweaked guidelines to determine value have eliminated the “most beautiful house on the planet” key and replaced with foreclosure and short sale trends.  The sellers that think their house is worth more because it is not a bank owned property better think again.  Appraisers are now required to note recent REO’s and short sells in their report.  If the neighborhood is foreclosure challenged, more than just one bank-owned in a neighborhood, the appraiser will be chastised if they try to bring the value up by using comps outside the subdivision.     Builders will no longer be able to direct business to their “chosen” appraisers specifically used for their communities.     The underwriter’s sworn duty to the bank making the loan is to scrutinize appraisals as well as the credit worthiness of the buyer.  They now have an automated system to help confirm value.  Most conventional loans are requiring a desk review or a field review.  A desk review is the process of the underwriter sending an appraisal over to an independent appraiser to validate the report.  A field review is a completely new appraisal.   Having a strong borrower or putting an obscene amount of money down will not weigh into the decision.  Back in 2005 if the buyer agreed to pay the sales price offered by the seller, the appraiser typically would make it work and with the trend at that time for rapidly appreciating housing values, underwriters rarely questioned the reports.   The combination of enforced underwriting guidelines and the current trend of declining housing values the lending process can get knarly.  Trying to get the value up by screaming and yelling or holding your breath until you pass out does not work, lord knows I’ve tried.   Today’s lending environment is a different animal and we are going to have to wrestle through it until the economy turns.

FYI:   Lenders were scratching their heads in amazement when FHA announced Wednesday that they would allow the 3.5% down-payment requirements for FHA first time home-buyers from the $8,000 housing credit.   The government did away with the down payment assistance programs in October due to the number of foreclosures for buyers that did not have any skin in the game.  And now they would allow Uncle Sam to gift the money?   As quickly as the mortgagee letter appeared it was yanked from the web site with a “oh, never mind.”  Stay tuned to see if  it reappears.

By Diane Gerdes

The S.S. Obama is steering our country into an untested economic frontier. This millennium has been filled with firsts from 9/11 that prompted the revenge motivated aggressions which led to the Iraqi and Afghanistan wars, and the true terrorist attacks: the beginning of the accounting fiascos with the imploding of Enron. Our economy blasted full speed ahead shaking off all of the soothsayers until the banking crisis sideswiped us sending us into an alleged death spiral, saved by the stimulus package and the restructured TARP, engineered by our very own Scotty, Timothy Geithner. TARP allowed the banks to borrow money from the FED at no interest and lend it out at the rates of their choosing. That is one of the reasons for the awesome profits showed by the ailing institutions last quarter. One of the FED conditions for taking the bail out money is that they can make management decisions for the banks that aren’t passing the governments “transparency” test for ready available reserves. The accounting cloaking devices have been on for years and it is a command to be turned off temporarily until the Fed can establish solvency. If reserves are not built up to the Fed’s standards, heads will roll. Talk about stress. In 2008 our globe was inhabited by 1125 billionaires, today there are 793, just a hair more than in 2003. A new law trying to pass legislation will outlaw off shore corporations that some enterprising CPA’s structure to avoid paying federal income taxes. Over 1100 corporations conducting business in the United States shared one address in the Caymans. The minority Republicans have temporarily lost the political battle of trying to utilize Reagonomics and the trickledown theory: giving tax breaks to the rich so they can spend money to trickle down to the rest of us folks. As soon as ex-Saturday Night Live alumna, Al Franken comes aboard as the Democratic senator from Minnesota, the Democrats will be slamming policy through at warp speed. The GOP’s should stop looking at the past and propel into the future or they will go the way of tribbles, cute and furry but no longer relevant.

FYI: Interest rates are inching back up. Investors snubbed the U. S. Treasury bond auction on Thursday. The Fed needed the auction to be a success so the interest rates would stay low. They may have to step back in and purchase more treasuries like they did in March or the interest rates will continue to climb.

BY DIANE GERDES