Wednesday, September 10, 2008 at 05:10AM
Game the System
Congress is going to sneak through the bill allowing the DAPs to survive.
They can say they didn't know how it worked, or didn't look into enough, up until now. But let's be clear about what is about to happen.
There are companies that "arrange" the down payment for buyers using FHA loans to purchase. They provide the 3.5% down payment, and get reimbursed by the seller. They biggest problem we've had is buyers with no skin in the game, yet this program is doing just that - allowing seller funds to be used for the buyer's down payment.
Yet Frank and his cronies are going to allow this practice to continue, probably due to intense lobbying by realtors and the companies who get paid $500 per deal to "arrange" the down payment.
If the powers that be refuse to ban the practice of the seller giving the buyers their down payment, they have sold out . They are shamelessly supporting the very lending practices that got us here in the first place.
Here's a link sent over yesterday from the NAR president on how they plan to continue their influence on the congressional members - warning, many of you will find this offensive:
http://www.realtor.org/about_nar/presidents_report/_podcast_archive/podcast_rpac_20080909
For those waiting for the option-arm implosion, the politicians may disappoint you again. The way these government folks are doing everything they can to keep the market afloat, don't be surprised if they prop up the neg-ams too.
Jim the Realtor
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Reader Comments (10)
This will be a repeat of Japan 16 year real estate recession. The more the government gets involved, the longer it will take to bottom.
The normal recession will last 18 months. So the banks just needed to hang on normally. This recession/depression will last years.
A year from, now a lot of banks will be in trouble because they did not sell their real estate loan.
Wells Fargo has $84 billion home equity loans. Fifty percent in California and Florida. Wonder what those loans will be worth in a year.
The best thing for real estate would be do dump everything on the market and find it real value. Instead we will have a slow drip by drip price reduction.
Using housingtracker.net Real Estate prices were down another $10,000 in August and already down $4,000 the first week in September.
Jim, you were right. It will get ugly this winter when the foreclosure almost equal the sales. Prices are going to come down real good the next five months.
Mid 2009 till 2012 - option arm. Carmel Valley your turn is coming. Mission Beach also.
How far in do you have to get before it gets less nauseating? I couldn't last long enough to get to anything other than, "give us money."
Not to be too juvenile, but - "Dick Gaylord"? Seriously??
I can haz moral hazard?
so what are REALTORS(TM)(R)(C) going to do when FHA goes bust, or needs to double/triple insurance rates to keep from going bust? I guess that's a problem for next year, so there is no need to worry about it now.
This is exactly the short term profit-now thinking that got Countrywide, Lehman on others in trouble.
I think they will be happy when the gov't is just directly providing mortgages from the treasury, at 5% interest, no money down, no credit check required, and a mandatory 6% commission.
Rob, you CAN'T haz moral hazard. All your moral hazard are belong to me!
Implosions are still going to happen - the government can only draw it out and occasionally bailout financials here and abroad. They can't make the economy whole or boost everybody's incomes, especially forever.
Off topic; but I wanted to mention the following in public.
I visited San Diego this week (from Seattle) to view some land and a particular house I had in mind and to use the Padres tickets I won for guessing Jim's first REOs from Countrywide. I met Jim and he drove me around to look at a few houses.
1. He indeed seems as real as he does here on the blog. Haven't finished the entire process yet, but at this time I would strongly recommend you consider Jim for your real estate needs. I will follow up when I finally find the right house and buy.
2. The seats at the game were fantastic. You all will want to try harder to win any of his future contests. 6 or so rows up from the visitors dugout; very nice.
3. Damn it he didn't blow through a single stop sign! I feel screwed.
Thanks Jim.
Safety first, man.
Touring high-end Poway, we saw two houses over-priced by about a million each, a partially-built house that the bank took back, a house on the trustee-sale list this week, and the lot.
Banks/REOs are the market leaders, regular sellers need to smarten up.
Thanks for the plug Keith, glad you enjoyed the game!
Those who cite the Japanese-style deflation are exactly right.
What nobody in charge is mentioning is that plentiful, well-paying JOBS are what make an economy strong.
The longer we drag this recession out, and the more good money we throw after bad, the longer it will take for us to begin a REAL turnaround in the economy (not like the fake one we had after the 2001 recession...all due to artificial housing "wealth").
We need to put money into infrastructure and R&D. There is so much to be done in the healthcare and energy sectors, as well as maintaining and improving our national infrastructure. Why in the world are these politicians throwing money at housing????
If they insist on having DAPs, they should have a charitable fund that investors (homebuilders and other supposed do-gooders) can contribute to and receive a tax deduction in return. Then, borrowers would apply to get loans from this entity and should QUALIFY based on a DTI ratio of less than 28% (PITI and 33% back-end ratio) of gross income -- **proven** income. They should be able to use this money to buy any house of their choice. IOW, the financial assistance should be distanced from any particular seller or house.
If sellers (including homebuilders) think these programs don't increase prices, they shouldn't care where/how the buyers decide to use this money.
If these programs DO increase prices (and increase default rates), then they are accomplishing the exact opposite of what they purport to do ("affordable" housing for poor people), and they should be banned.