All posts by jd

Real estate broker, civil engineer and general contractor.

Subprime Foreclosures, Move Over for Alt-A Foreclosures!

March 13, 2009 jd

pick1
Gone are the days when subprime loans were what kept bankers up at night, thanks to explosions in other corners of finance. But, In terms of toxicity, subprime loans had no equal. That is until now. The loans of better heeled people are now beginning to go bad at an alarming rate.Alt-A troubled loans have already brought down some banks, including IndyMac, a California bank. Mooney’s, a rating agency, has recently quadrupled its loss projections on bonds backed by Alt-A loans. It now projects losses for 2006-2007Alt-A securities to top 20%, compared to a historical average of under 1%.

The problem is that much of the Alt-A lending came at the tail-end of the credit boom in late 2006 and 2007. By then subprime was already getting a bad name. So Wall Street hit on a ruse. What it did was to take borrowers who in normal times would have been subprime and dressed them up as mid-prime! Many of these loans were doomed from the start. According to the Bank for International Settlements, a staggering 40% of these American mortgages originated in the first quarter of 2007 were interest only or negative amortization loans.

Alt-A mortgages, were offered to borrowers sandwiched between subprime and prime. These loans were supposed to be for people who had reasonable credit standing but unsteady income, such as the self-employed. The lending institutions had very low standards for these loans, using scant documentation and any way to make a loan, such as exotic negative-amortization mortgages, which allow borrowers to pay less than the accrued interest, with the difference added to the loan balance. Like I said before, the main requirements were to put a mirror in front of your face, if the mirror steamed, it meant you were breathing and you had a loan.

Analysts at Goldman Sachs put possible write downs on the $1.3 trillion of total Alt-A debt, including both securitized and un-securitized loans, at $600 billion, almost as much as expected subprime losses.

So, prepare yourself for another wave of foreclosures, this time the Alt-A mortgages, due to poor lending practices by banks and Wall Street.

Octo- Mom Gets New House and Other Revelant Real Estate News

March 11, 2009 jd

Large building in back is Puget Automaker's Office Building in Buenos Aires (Possibe quarters for Octo-Mom?)

Nadya Suleman’s the gal that just had eight more children, along with the six she already had, is going to have to move. Seems like the house she is living in is owned by her mom, which is being foreclosed on. The news is that the family is about $20.000 behind in their mortgage payments.

So what is she to do, well, don’t worry, her father is buying her a bigger and better house. Seems like Nadya’s father is buying her a home in La Habra, south of Los Angeles for $564,000, that’s right over half of a million dollars. The home is around 2,500 square feet and features four bedrooms, three baths and a large fenced in backyard. Well one house foreclosed, another taken off the market, have to look at the bright side of things.

Let’s see, if Nadya sleeps on the couch, and you take 14 kids and divide it by four bedrooms, that’s 3.5 kids per bedroom. If she has two more, then it would be a better fit, 4 kids per bedroom. (Don’t tell her that)

Nadya gave birth to eight children in January when she already had six.

I’m not going to go into the fact that some homeowners are thinking of letting their house foreclose or just walk away because their house is worth less than their mortgage. I hear this more and more recently. So what are you going to do if you let your house foreclose? You can’t buy another house for five years, and if history is any clue, the value of the house you left behind will be more then the mortgage you walked away from. Well, I guess I did rant a little?

Real Estate, Travel

Refinancing? Be Careful

March 10, 2009 jd

Tile mural in subway at station Plaza Italia, Buenos Aires (I'm still here)

Along with scams to help you avoid foreclosure, which I talked about in the past, there are others out there trying to take money away from home owners in distress who need to refinance because they are facing foreclosure or those whom are just refinancing to get a lower interest rate on their mortgage.

Rule number one is that you never pay in advance to have someone help you get a loan. Some banks or lenders may require that you pay upfront for an appraisal, which can run between $300 to $450 at the most. However, my experience is that you are better off using your local bank, mortgage broker or credit unions before you pay for anything, which at the most would be an appraisal. Companies outside your home area are not familiar with local real estate conditions and you may spend several weeks or months until you find out they can’t make the loan. I was surfing the net, looking for some information to bring you that might be of help if you are considering refinancing and the pitfalls that I was talking about.I happened to come across Attorney General’s website, Jerry Brown, and he has prosecuted some scam artists. These scammers were taking advantage of people trying to refinance by charging upfront fees of between $1,500 to $2,500 and doing nothing. Here is part of his press release:“In November 2008, Attorney General Brown announced the break up of the First Gov scam ring. First Gov, — which also operated under such misleading names such as Foreclosure Prevention Services; Resolution Department; Reinstatement Department; and Reinstatement Processing — solicited hundreds of homeowners, offering to help them stop the foreclosure of their homes.Ring members promised victims they would renegotiate their mortgages and reduce monthly payments. They demanded an up-front fee, ranging from $1,500 to $5,000, to participate in the loan-modification program.

Victims were told to stop making mortgage payments and communicating with their lender because this would interfere with the loan modification process. After collecting their fee, ring members pocketed the money and did nothing to help victims.”

The full text of his press release is at Office of Attorney General

By the way, talk to your mortgage company if you can, but so far they have been dumb and want you to stop making payments before they will talk to you!

Real Estate, Travel

Jon Stewart Blasts CNBC

March 9, 2009 jd 1 Comment

: Another picture of a professional dog walker. Possible new occupation for some of the people on CNBC (I’m still in Buenos Aires and I love dogs)

I love comedy. Comedy takes a complex situation and makes it so easy to understand. This was so much so with the Comedy Central’s skid by Jon Stewart taking on the high and mighty prognosticators of stock market trends on CNBC. Those advisors on CNBC are always full of advice of which stocks to buy, interviewing CEO’s of large companies and glowing about their potential outcome. Jon Stewart shows several of these interviews by them. He then shows the outcome shortly afterwards where for all of their wisdom the companies fail. I love the interview shown of Sir Allen Stanford, a billionaire at the time of the interview on CNBC. Shortly after the interview, the FBI stated that they think Sir Stanford is running a Ponzi scheme.

But the most telling part of the program was when they showed Rick Santelli ranting and raving at the Obama Administration for giving a small portion of the bailout money to homeowners facing foreclosure. Wow, what a rant. (By the way, Santelli was supposed to appear on the show, but didn’t show) But Jon Stewart puts it all in perspective when he proceeded to show that these icons of prognosticators had no problem with the present and past Administrations giving billions of bailout funds to banks, General Motors, Chrysler, AGI and other large companies.

You know it’s easy to place the blame on people facing foreclosure because they should have known what they were getting into when they took out a loan to buy a house. But who set the standards for these loans? It wasn’t the Realtors or the mortgage brokers or the homeowners. Yep, it was the banks setting the lending standards, enticing people into buying a home with low interest rates. Once people bought a home, the loan was set to trigger into a higher interest rate. Don’t you think the banks knew some people could not afford the mortgage? In the old days they called that bait and switch. Now who is getting the majority of the bailout funds, hummm, of course, the banks.

I don’t know what CNBC’s qualifications are to hire Rick Stanletlli or any of the other interviewers. Is it that they are highly educated to help people lose their money, or are they poorly trained psychics? So Rick and his cohorts are hired by CNBC to advise people of the best stocks to buy, and they are almost always 100 percent wrong, so why are they picking on people who are losing their homes? Is it because the homeowners are not as educated in financial matters as they are and should have never bought a home? (Or their stock recommendations)

Like Jon Stewart said, “If I had listened to them, I would be a millionaire, that is, if I had started out with $100 million.” Their coding is screwed up so here’s the best i could do here’s the link to the video.

Real Estate, Travel

Trip to a Museum & Bits & Pieces in Buenos Aires

March 7, 2009 jd

Friday I went to the Museo Nacional De Arte Decorativo or National Museum of Decorative Art. First an update of what’s happening here. The peso was propped up Thursday by the Central Bank and state run banks as they heavily intervened in the market to stop the peso from further weakening. The US gained two cents on the peso Friday, its highest value since 2002. When the banks offered $100 million dollars of its reserves, the peso settled at 3.622 pesos to one dollar. It’s the pesos lowest level since November of last year.

If you think that your credit card interest rate is high, how about the interest rate for commercial construction in Argentina? Argentine President Christina Ferandez complained about “the usurious interest rates” banks are charging private companies for infrastructure works. “Local banks have offered rates of up to 40 or 41 percent” she blasted. Of course Argentina is presently having a 20 percent inflation rate and real estate in Argentina is bought for cash, no low down payment and 30 year mortgage.

Back to the museum, the original structure was built by Mr. Matias Erazyriz and his wife Mrs. Josefina De Alvear. They resided in this huge palace with their two children. The palace was the hub of many major social events until Mrs. Alvear passed away in 1935. The remaining family sold the palace along with the art collection to the Argentine Government shortly thereafter.

The museum is huge, with four floors and a basement that was used for servants, boilers and garage. The museum holds over 4,000 exhibits, some dating back to the 15^th century. It is well worth going to this museum if you happen to be in Buenos Aires. Just the workmanship of the building itself is worth the trip. The museum is located at Av. Del Libertador 1902 in Buenos Aires. Their website is Nacional De Arte Decorativo

So I called the bank again, after paying to rent a computer to get all the information the previous agent wanted. I gave a new agent my card number, social security number and said, now do you want my mother’s name, my address and she cut me off and said “Oh, no you’ve given me enough information.” (Grrr!) She got off the phone for a few minutes, came back and said they were upgrading my card, which was the problem, they were taking care of the problem now and I should be able to use my card in a few hours. So today, I was able to use my card, its fun dealing with a bank, NOT!

Professional Dog Walkers, There are many of Them in Buenos Aires

Prior to traveling abroad, I advised my bank that I was traveling to Buenos Aires. What a surprise when I went to draw out some money and my card was rejected! Calling the international toll free number listed on the back of my card, (which does not work here in Buenos Aires), I was asked for my card number, my social security number, my address, my mother’s name, and then what was the last deposit or what was the last expenditure or my account number. After 10 minutes, having none of that information, I gave up, went on line and got all the information that the agent for the bank requested.

Real Estate, Travel

Worried, Recession? The US is Still the Best

March 5, 2009 jd

There was a very interesting article in the Buenos Aires Herald today by James Neilson. The Herald is a news publication printed in English and you can usually get one at the numerous newspaper stands on the streets of Buenos Aires.

Mr. Neilson points out that we are in a better position to pull out of this recession quicker and healthier then Europe, Japan, China or Africa. If you notice, our dollar continues to gain strength against the Euro, the Yen and almost all other currencies of the world.

In his article, Mr. Neilson states in part:

“But bad as the situation in the US undoubtedly is, elsewhere it is even worse. That is one reason why in these troubled times jittery investors want to get their hands on dollars. Another is that, no matter what happens in the next year or so, the medium-term prospects facing the US are far more promising than those of Europe, China or Japan, to name just three possible alternatives. This being the case, it is somewhat premature to speak of the imminent end of US economic hegemony and its replacement by a more equitable arrangement involving at least half a dozen other countries. “

Mr. Neilson goes on to explain the problems that Europe, Japan, Russia, China, Africa and South America are facing. Problems that is severe with no easy or probable solutions for them.

For example, Mr. Neilson says about China and summary:

“China’s outlook is only marginally less alarming than that of Europe and Japan. Thanks to the one-child policy, before too long there will be a huge number of single men who will be expected to support their aging parents. Many will not take kindly to the idea. Though China is bursting with talented people who, unlike so many of their North American and European contemporaries, are willing to study and work as diligently as any Victorian, before that immense human capital can be properly tapped China’s rulers must find a way of maintaining social discipline during slumps like the current one. That will not be easy. Before everything went haywire, Chinese officials insisted that their country’s economy would have to grow by at least 8 percent a year simply to provide enough work to satisfy the millions who were leaving the poverty-stricken countryside. China’s GNP may still be increasing, but at an annual rate that by all accounts is far lower than 8 percent.

As a result, if the recession, or depression, lasts as long as pessimists fear, the US will in all probability emerge in far better shape than any of its hypothetical rivals. With this in mind, it is quite natural for Asian, European and Latin American investors to put their money on the US dollar rather than on the Euro — which may not survive the mayhem — the battered pound sterling, the Swiss franc, the yen, the yuan or even the peso. The US may be groggy and could soon hit the canvas, but it would be less likely to remain there for longer than the other big countries that would go down with it.”

Real Estate, Travel

Argentina Real Estate

March 4, 2009 jd 2 Comments

First a little update as to what’s happening in Argentina. It’s raining here now which is a relief because just like us in California they are having a drought. My understanding is that it has been so dry that they have lost over 800,000 head of cattle. The government, along with the drought is putting Argentina once the third leading exporter of beef in the world to seventh in the world. (BBC News) Since Judy and I were down here in November of 2008, the peso has depreciated from 3.40 pesos to 1 dollar, to the present time of 3.70 pesos to the dollar.

Everyone I talked to down here blame the recession on America’s and Europe’s ability to borrow money to buy houses with a low down payment and to have a thirty year mortgage. They say that cannot happen in Argentina because there, everyone pays cash for their homes. Paying cash for their homes assures them that they will not lose their homes to foreclosure. They said if we had paid cash for our homes, we would not be in this real estate melt down.

In Argentina there is only one way to buy a residence and that is strictly cash. You offer fifty percent down and on closing you put up the other fifty percent. There are no title companies there; you rely on a notary to assure you that you are getting a clear title to the property that you are buying. He or she is insured and they charge two percent of the purchase price for their service.

For them, it limits their market tremendously, only those that can afford to raise cash in the amount of $90,000 to $500,000 can afford to buy a home. (About the going rate in Buenos Aires for apartment condominiums)

It is hard for the Argentineans to see the advantages of being able to borrow money to buy real estate, since all they read about and see is the news about foreclosures, here in the United States and abroad. They are not aware of the greed of the banks and their CEO’s that led to this present crisis. Their qualifications for a loan were simple, they put a mirror in front of a person’s nose and if they detected that the person was breathing, the loan was approved.

Of course paying cash also limits your market, since so few here in Argentina (And the United States) can afford to raise that kind of cash. Even now, in the United States, our ablity to borrow money is what will pull us out of the housing crisis. First time home buyers, real estate investors, almost all of them rely on borrowed money. So we still have in my opinion, the best system in the world. Borrowed money has made a lot of people wealthy and provided homes for the majority of people in the United States. In contrast, the real estate market is flat in Argentina, since no one is spending money and the majority of the people do not have the resources’ to buy a home.

Travel

In Buenos Aires

March 3, 2009 jd 1 Comment

Containing on from my last post, I boarded an American Airline 777 for a nine hour and forty four minute flight to Buenos Aires. I asked my agent who booked my flight to get me a seat next to the emergency exit as you have more room to stretch your legs. Instead, she booked me a seat ahead of the exit and in the middle row!

Now you may not know this, but when manufactures’ design airplanes, they spend thousands of hours designing the seats, using live people for testing, computers and engineers with PHD’s. When they find just the right amount of leg room so that people can barely get into their seats and when they find just the right angle for the seat to tilt back so there is no way you can fall asleep, they go, that’s it, put it into production!

I arrived in Buenos Aires at 9:30 in the morning. My friends were to pick me up and of course they went to the terminal for American Airlines. This being Argentina, our plane landed in the terminal for the Argentina airlines NOT American Airlines. After much searching for me and an hour later, they did finally find me.

Now you may not know that for the last three times I was in Buenos Aires, in addition to vacationing, I was also trying to get my DNI, fighting an endless amount of red tape. DNI stands for Documento Nacional De Identidad or National Identification Number. (Think of something similar to a social security card) Since I was born in Buenos Aires and left for California when I was seven years old, I have dual nationalities. Thanks to my girlfriend’s help with Spanish translation and Buenos Aires maps every time we went there, it was now finally ready to be picked up on my forth trip.

My friends that picked me up were helping me in my final leg of getting my DNI . You have to know in Argentina that is easier said than done. The first office that they drove me to said we had to go to another office. We went to the other office and they said to go upstairs. We went upstairs and they told us to go downstairs. We went downstairs and the clerk said they did not have my DNI. We said “Yes you do.” He asked where did you apply for this. We said here. He said “Oh”, and then he looked for my DNI and found it! So, I finally have it and everyone says what are you are going to do with it. I don’t know, when I figure it out, I’ll let you know. Chow.

Oh, by the way, I’m having breakfast, lunch at Lo De Mateo at austria y juan maria gutierrez

Travel

Flying to Buenos Aires

March 1, 2009 jd

american-airline

I’m sitting here at the Sacramento International Airport waiting for my flight to take off at 1:20 pm. I’m flying American Airlines this time instead of Delta. Going through security I thought I was going to have to take off all my clothes before the darn alarm would stop going off. Every time I walked through the metal detector monster that everyone has to walk through it would just keep buzzing. Finally, down to my shorts, I got to go through. (just kidding)

You know the gig, take your shoes off, then your belt, your keys, your cell phone, you cell phone case, pull the laptop out of the case, remove the steel plate out of your head, (no, they haven’t gone that far yet).

Once I get to Texas there is a two hour delay for the flight to Buenos Aires. Good thing to do when you get on the long flight to Buenos Aires is take a sleeping pill, forget about whatever they bring you that they call food and wake up to summer in South America.

I’ll keep you posted.

Nevada County Home & Land Statistics, Real Estate

Nevada County Residential Sales January-February 2008 vs. 2009

February 28, 2009 jd

And the real estate market is going to go?

Residential sales for the period January 1, 2009 to February 28, 2009 compared to the same period last year remained about the same. Eighty homes were sold this year compared to eighty six homes last year. However, average sales prices dropped 12% or about $48,500 per home. The average sale price this two month period was $340,866 compared to the same period last year’s average of $389,350.

Days on the market increased to 158 days compared to 128 days on the market for last year or about 19 percent longer on the marked before they sold.

That’s the long and short of it, but I did an analysis of the entire year of 2008. Sales figures for residential home prices in Nevada County indicate a 12% decline in value. Prices of residential homes in Nevada County are still higher than our surrounding neighbors and higher than the State average of $281,100 versus our average of $340,866.

A report from the California Association of Realtors states that “The median price of an existing, single-family detached home in California during December 2008 was $281,100, a 41.5 percent decrease from the revised $480,820 median for December 2007, C.A.R. reported. The December 2008 median price fell 2 percent compared with November’s revised $286,850 median price.

“Median prices continued to decline in December, and based on preliminary calculations, the statewide annual median price declined 38 percent for all of 2008 compared with 2007,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “While the month-to-month decrease in December was considerably smaller than in recent months, it remains too early to determine if prices are beginning to stabilize. Many distressed sales still must work their way through the system.”