Mar
8
Take Our Country Back: A Two Step Process
March 8, 2010 | 1 Comment
TAKING OUR COUNTRY BACK: A TWO-STEP PROCESS
Still think we can work within the system? Still think business as usual in DC can be changed by a little antigovernment sentiment? Well, I don’t. Nothing short of bringing them all home and starting over with a new crop could correct such firmly entrenched arrogance and abuse of power. Case in point: the latest escapades unearthed on Representative Charles Rangel. Rangel is no ordinary garden-variety congressman. This guy has served 20 terms! He is arguably the most powerful man in Congress. As chairman of the House Ways and Means Committee, he and his committee hold the purse strings to America. Basically, any legislation that requires funds to be effective is at his mercy. If he and his committee do not approve the funds then the legislation is moot. He is also in charge of writing the tax code. More on that little piece of irony later.
Here’s the short version of the story. But to keep this in perspective, (that’s writing lingo for why Robert is so mad) please keep in mind that this guy is at the top of the heap for setting the example. Rangel accepted what he of all people, or anyone else should have known were corporate sponsored Caribbean trips. Not once, but multiple times. And that’s just the ones that have recently come to light from 2007 and 2008. How should he have known you ask? Well he knew he wasn’t paying for them. And at least on planet Earth, Caribbean trips don’t just fall out of the sky. Granted he is in DC, where the laws of physics are different. You see, that’s part of the problem. I believe in DC it does customarily rain Caribbean vacations. Then there are those two pesky e-mails from his staff warning him that it was not Caribbean Vacation Falling From The Sky Day. Then, apparently because they know how stubborn he is about passing up any freebie, they also sent him a letter. His response to the warnings? Well, it was basically gibberish. But I think what he was trying to do was pin it on his staff, which is beneath contempt. And if that didn’t work, he would employ the argument “you can’t prove I read them”. Then, if that didn’t work, he went into some ramblings about the definition of corporate sponsor. Now that brought me back to the day when my head completely spun around as Bill Clinton said his answer “depended upon what the definition of is is”.
Now before we move on… let’s make this crystal clear: this leader of leaders knew he was accepting free trips to St. Maarten and Antigua from big business. End of story. It wasn’t the first time, but maybe it will be the last for him. But the point is; it’s not just him. This is the climate in Washington, and until we throw them all out on their well tanned butts nothing will change. For the time being Rangel is cooling his heels in the shadows waiting for all this to blow over. Now that’s up to us, isn’t it?
Moving on. It gets better. Remember he heads up the tax writing committee. Guess who forgot to report rental income on his villa in the Dominican Republic? Guess who forgot to list several hundred thousand dollars of additional wealth? Is this the guy you want writing the laws that we have to abide by? One of our members recently took a job with the IRS. He was worried sick that he had not distributed 1099s to everyone falling in the gray area that worked on his rental properties. Oh but wait, that’s not apples to apples. If you work for the IRS, you must be squeaky clean. If you run the IRS (Geithner), or write the tax laws (Rangel) it’s no big deal.
Step One
Of course we throw Rangel out. Because thankfully, in spite of warnings from his staff, his arrogance got him caught. That’s a no-brainer. Step one begins with throwing out all 435 members of Congress and 100 senators. The business climate in DC has corrupted the thought process of so many of them that it would be too much trouble to sort them out. I’m willing to accept a little collateral damage to send a stronger message. End of step one.
Step Two
The real issue is the perverted climate in Washington. Until this climate is eradicated we can never expect to see any noble legislation. Even if you brought in an entirely new group of lawmakers nothing would change because the lobbyists are there waiting to help them get “settled in”. Unless it benefits big business in some way, it just won’t happen. Three quick examples.
1. The bailout of course is probably the best example in history; pouring money into the very institutions that nearly brought upon us the collapse of our monetary system and economy.
2. Look at the changes being proposed to stop owner financing of any kind in real estate. I can only imagine that notion came from the banking industry somehow in order to tighten their grip on the market.
3. And here’s a classic. For over 50 years the government has struggled to put the tobacco industry under FDA supervision. What a waste of time. Why? Because Congress wrote into the legislation that they could not ban nicotine from tobacco products. That’s the addictive part; the part that deprives you of free will to quit. You would have to be as dumb as a bag of hammers to write legislation like that. Or could it be that you have been bought by the tobacco lobby?
So how do we stop all the backroom dealings with special interest groups? The simplest way would be to take some guidance from the court system. I am referring to the “ex parte” rule. That means that generally a judge cannot hear evidence in a case without both sides present. In this case, the American people are one side and special interest groups are the other. We both need to be present. A simple way to do that would be to forbid anyone from approaching a Congressman to influence legislation outside the halls of Congress. Make it a criminal offense for both parties. Simply set up meeting rooms within the halls of Congress and times for legislators to be present to hear input from anyone wishing to influence legislation. C-SPAN must be running. Any printed materials would have to be scanned and made available on the Internet. Now you have true transparency.
The exception of course would be publicly held meetings. “Public invited” is the key term here. So if someone from the mortgage industry wants to talk to an elected official about legislation in his Miami condo, I claim dibs on the bedroom overlooking Biscayne Bay.
Remember that phrase on one of those hugely historic documents? “A government of the people, by the people, for the people”? Well, they are still governing us. But by the people? They’re not paying any attention to us. Money speaks louder than words. They already have all of our money. The only one left “speaking” is big business and special interests. For the people? What a joke.
Robert Clifton, VP PTREIA
North Star Properties of NC, Inc CEO
Jan
19
The Second Wave of Mortgage Defaults
January 19, 2010 | 1 Comment
By Jim Nelson
Baltimore, Maryland
<< Compliments of Coleman Alderson >>
Our economy is about to relapse into the disease that sent us into the Great Depression: Part Deux. Subprime loans caused the initial illness. Option-ARMs will cause the relapse.
In the first half of the past decade, subprime loans were king. They were cheap and easy to get approved. Along with the subprime boom came subprime adjustable-rate mortgages (ARMs), which were equally easy to afford…for a while.
Of course, the “A” and the “R” in ARM meant that the interest rate borrowers pay changes, or resets. The majority of these resets occurred between the summer of 2007 and the summer of 2008.
This period saw a massive amount of mortgage interest rate hikes, which caused millions of foreclosures. Things spiraled down from there, eventually freezing nearly all credit and causing the panic of 2008.
Of course, that’s the 50-cent version of recent history. There were plenty of other financial calamities that went along with this, including the bundling of mortgage-backed securities and risky derivative products.
If you believe the Obama White House and the glass-half-full press corps, you’d think this mess is now behind us. We are, after all, in a recovery…right?
Unfortunately, no one is talking about the second wave of ARM resets and foreclosures…
You see, this second wave will come crashing even harder than the first. It’s made up of a type of mortgage called “Option ARMs.” These give borrowers the option of how much they want to pay during the first five or 10 years of repayment:
1) The full amortized rate, including interest and principal.
2) Interest only, or…
3) A token payment, well below the amount needed to cover the interest on the loan.
This third option causes the mortgage balance to INCREASE instead of decrease. And usually, the borrower can continue to make minimum payments until the mortgage balance increases to 125% of the original amount. That’s when the trouble begins…especially if the interest rate increases at the same time.
This is the exact situation in which many homeowners now find themselves.
Obviously, these option ARMs were supposed to be reserved for customers with better credit than those who took out subprime mortgages. But apparently, they were handed out to almost anyone who wanted them.
According to Whitney Tilson and Glenn Tongue of T2 Partners, who are experts on this subject, about 80% of option ARMs are negatively amortizing. Meaning these so-called top-tier borrowers are heading further into the hole. Once their rates reset, they could be in serious trouble.
And that could be happening very soon:
The chart above shows the two peaks in the mortgage-reset wave. The first peak is comprised of subprime ARM resets. And the second is mostly constructed of option ARM resets. We appear to be in the eye of the storm.
That fact alone shook our nerves when we first discovered it. But it was a different chart in Tilson and Tongue’s most recent presentation that really got us startled… It’s also the reason I’m predicting the dollar spike in 2010.
Instead of resetting as expected after the first five years, many option ARMs are so negatively amortized that they are hitting their automatic reset cap.
That means they are resetting early…like right now.
As you can see from the second chart, the expected reset peak was to occur in 2011. But the real peak is happening now. You can also see that the amount of mortgages resetting is spread over a longer period of time than originally thought, but is peaking much earlier. Unfortunately, it’s not the peaks that matter.
You see, those are just resets. But with unemployment reaching quarter- century highs every month, and the massive number of homeowners about to receive mortgage bills for two to three times what they are used to paying, we find ourselves in an even scarier environment than this time last year.
It takes anywhere between 3-12 months for most homeowners to actually go into foreclosure. Therefore, the wave of Option-ARMs that are now resetting could cause a major wave of foreclosures over the next 6 to 18 months.
It’s tough to say exactly when the storm will come. But my guess is the second half of 2010.
This second wave of foreclosures will not be good news for the economy or the stock market…At least that’s my guess.
Regards,
Jim Nelson,
for The Daily Reckoning
Jan
18
90 Day Seasoning Waived!
January 18, 2010 | Leave a Comment
Great news for rehab investors and wholesalers. FHA waves the 90 day seasoning requirements…more information on this HUD PDF document.
Jan
5
January 5, 2010 PTREIA Meeting
January 5, 2010 | 4 Comments
“How to Prepare for investing in 2010!”
Including: Goals, the proper investing techniques for this ever changing investing climate and the latest lending strategies
We will also review the new website and all of it’s new features.
Only $10.00/person [...]
Dec
16
January 15th Piedmont Real Estate Council Lunch at the Piedmont Club
December 16, 2009 | Leave a Comment
Piedmont Real Estate Council Lunch.
Topic 2010 Economic Forecast with Guest Speaker Dr. Donald Jud, University of North Carolina
Dr. Donald Jud is Professor Emeritus and Research Fellow in the Office of Business and Economics Research at the Bryan School of Business and Economics at UNC-Greensboro.
He has taught courses in finance, real estate, and economics. Dr. Jud received his Ph.D. from the University of Iowa. He is author of over 80 academic articles and three books, including “Inflation and the Use of Indexing” and the “Desktop Encyclopedia of Banking”.
The domestic and global economy is recovering from one of the greatest economic downturns since “The Great Depression” of the 1930’s. Markets appear to be stabilizing, employment losses are moderating, and banks are coming off the life support generously provided by Uncle Sam. Which industry will drive growth in 2010? Will companies restart hiring in 2010? How will government policy impact business? Dr. Jud will answer these questions and many more when he provides a comprehensive analysis of current trends and future prospects for the national and local economy.
When: Friday, January 15, 2010 / 11:30 a.m. – 1:00 p.m.
Where: Piedmont Club / 200 West Second Street (19th Floor) in downtown Winston-Salem.
Cost: $15.00 (Members) / $20.00 (Non-Members)
Please contact Judy Sutherin at 336.724.7077, or email Judy.Sutherin@ourclub.com to RSVP for this meeting.
Onsite registrations will be accepted on a first available basis.
