MLS-2 Blog

Let’s put this (subprime thing) in perspective

In an article today about Citicorp’s lossess, reported by Bloomberg this morning, comes this level-headed analysis (from a Goldman Sachs manager):

Gerald Corrigan, the managing director in charge of risk management at Goldman Sachs Group Inc., said that his bank had fared better than Citi.

“On balance, we probably made money,” Corrigan told lawmakers. “We have had a measure of success in hedging some of our exposure.”

Corrigan said that disruptions akin to the subprime crisis could happen again even if bankers devote “relentless energy” towards preventing them.

“It is the nature of things, sad but true, that these periodic disruptions will occur,” he said. “We have to be honest enough to recognize that as hard as we work at this, sometime in the future another surprise will occur.” 

Mabey it’s just that they (Goldman Sachs) made money and it’s easier to think about the problem from that prospective.

But I have to say I agree. We’re just on the downswing of a big cycle. What goes up must come down.

All the finger pointing, the laying of blame, the goverment interventions to fix things and prevent them from happening again are just pennance to make us feel better in the here & now. Later, when the storm passes, the “American way” will rise again and the cycle will repeat itself!

Let’s be honest about it.

Citigroup Just Can’t Get Enough CASH

Tired of hearing us drone on & on about Citi?

It’s just that

1) they’re big; an important player in a healthy financial system. If they go down, we’ll all be running around with gold in our pockets

2) they have a  tremendous eposure to subprime & SIVs, the off-ballance sheet vehicles set up to hide the subprime (& other mortgages)

3) we don’t fully know the extent of their problems (and we may not want to know, see #1)

4) we really care about the “subprime mess” spilling into the regular joe’s financial system. It’s already happening, but we’d like it to not get worse…

Anywho, the good news is, they just took in some fresh cash. $7.5 Billion from Abu Dhabi. That’s not a who, but a what - an oil-rich country’s investment authority. That’s right, it’s our gas money!

The bad news is Citi needed it, and may still be short $30 Billion by some analysts accounting.

Citigroup Just Can’t Get Enough Press

Citigroup in on the cover of the W$J today with the defaults they picked up when they bought not one, but TWO subprime mortgage originators & servicing pools. Over 16% of their subprime stuff is in default!

The article had some good stories of real situations and the people who got themselves into them. A good sinpet of these is over at Curbed.com (WSJ site is subscription only).

This article went to the trouble of showing how many of these subprime loans are not in foreclosure  or default as a result of interest rates resetting higher. Their rates in many cases haven’t even reset yet (which means the subprime mess is set to grow).  No, many borrowers either never made their first payment, or fell behind in teh first 12 months of the loan. These were people who were never meant to have that loan in the first place.

Wow - that’s a pretty big OTHER SHOE!

So, we’ve been anxiously waiting for the other shoe to drop on this credit crunch “thing”. If you thought the housing mess was over, sorry, we’re still in the early innings.

My prediction was that the large Structured Investment Vehicles (SIVs) that bought much of the jumbo loan production would implode and send new shock waves through the system, and also effect the larger (and international) credit markets. But no; while some of the SIVs may still implode, the shocker today is coming from Freddie Mac.

FNHMC, the number two residential mortgage lender and sanctioned by the goverment, reported a huge Q3 loss and said they would need to raise additional operating capital. Speculations on that number ranged upwards of $6 Billion! See this blog post on Seeking Alpha for more on the capital infusion.

Freddie Mac stock plummeted 29% Tuesday, dragging down Fannie Mae also 25%, and causing Countrywide to be the bankruptcy talk of the day (again).

This development is huge. Many expect Fannie Mae to report similar losses & problems. Fannie & Freddie were supposed to be our ticket out of this mess, at least in part or at least temporarily…

Well, not only is the ticket no good, but the plane just caught fire sitting at the gate!

Countrywide Foreclosed Homes: buy now, or buy when DOUBLE FORECLOSED?

Potential foreclosure home buyers have to really hunt around to get a complete list of homes that “may be” deals due to the fact that they’ve been foreclosed upon. 

MLS-2.com is working on a bigger solution to that search problem, but here is at least one of the bigger players in foreclosures you can search on - Countrywide REOs  (Real Estate Owned). In fact, they have a pretty big California inventory of homes according to LoanWorkout.org

But wait! DON’T Act Now, don’t pick up the phone!

Let’s just see first if countrywide is forced (or chooses) to use the same tactic so many of their borrowers are using & stop paying the mortgage. If they file BK, does that make all their REOs DOUBLE FORECLOSURES!?

Sure, you’ll need to be Warren Buffet or have your own hedge fund to buy them in bulk, but even when those guys resell them to us lilliputians, they should be cheaper than the asking price today (and not simply more market slide.)

New Financing Partner for California Real Estate Investment Opportunities & Deals

We are pleased to announce the partnership with Coast Capital Corp to help our real estate investors move quickly on deals.  They run a private money fund where investors can take advantage of a fast moving deal (when the investor has their skin in the game too!).  Specifically Coast can help with:

Commercial Loans for Investment and Owner-User Properties, including SBA financing

Residential Loans funded directly through our in-house mortgage banking

Private Money Financing used for purposes such as:

 -Bridge Financing sittuations

-Quick Closes, i.e., 1031 tax exchanges

-Helping borrowers with significant equity avoid foreclosures

-Assisting clients with the exercise of maturing purchase options

Philippe Tregon is your go-to guy, and will be contributing to the blog here with info on private money real estate opportunities, strategies & succes stories.

OK, *NOW* it’s getting wierd!

I don’t have more details at this time, but when Citibank home equity (the money we might use for home purchases over 80% loan to value, or less than 20% down), pulls out of California real estate, we wonder what’s going down…(besides home values of course).

 Citi has a tremendous exposure to the SIVs which have been at the root of the credit crunch for the last 60 days. Likely they just need to stop the hemoraging for a while.

 We just “got the email”

Going Once, Twice, Sold! Bank Owned Auction (REO) - where do these come from?

Here is a telling tale of the bubble & its aftermath….ever wonder where these homes come from in a bank owned REO auction? Here is a perfect example of one that is not a rundown problem in a bad part of town.

This is the MLS tearsheet of a home in Salinas, CA (not too far away!) when it sold in Aprinl 2005, literally the *peak*: Note only 9 days on market, and even had to wait until seller got their new place!

216 E ACACIA ST, SALINAS 93901 (South Salinas) $560,000 Beds: 2 bed(s) Baths: 1 bath(s)

Property Overview Detached Single Family (Class 1) Pricing/Dates List Price: $559,000 Sale Price: $560,000 Sale Date: 02/21/2005 COE Date: 04/08/2005 OffMktDate: MAPLE PARK TUDOR GEM. HARDWOOD FLOORS, COVED CEILINGS. CUTE KITCHEN W/ BREAKFAST NOOK. DINING RM, LAUNDRY, 2 CAR GARAGE w/ BONUS RM. CAUTION DOG IN LARGE FENCED YARD. COE CONTINGENT ON SELLERS “NEW” HOME.

Fast forward to Oct. 2007. Here is the home for sale again at an upcoming bank owned REO auction (note starting bid of $259,000, or the amount that was owed plus foreclosure costs, and the “previously valued to” price which is what someone in the heat of 2005 would pay for it!):

California, the Golden (Foreclosure) State. Capital is Modesto

The states with the top three foreclosure figures were Nevada, California and Florida. Six Californian cities were among the ten metropolitan areas with the highest foreclosure rates, with Modesto leading the country with one foreclosure for every 79 households. “This is just the beginning of a wave of new foreclosures,” said RealtyTrac’s EVP for marketing Rick Sharga.

Foreclosure filings were up 36% in August from July and 115% from last year, according to RealtyTrac’s U.S. Foreclosure Market Report, released Tuesday. Continue reading California, the Golden (Foreclosure) State. Capital is Modesto…

Worried about foreclosures cramping your style (Sellers?)

If you think the guys down the street are getting a little tired of their payments & are ready to give it back to the bank (foreclosure), consider if you live in this price point:

The last 6 months worth of BANK OWNED listings in the five counties of REinfolink (our local MLS, serving San Mateo, Santa Clara, Monterey, Santa Cruz, and San Benito counties in California) had an average list price of $470,861. (data sample = 118 listings - all active).

First, there are only 118 active listings for 5 counties! That’s not what the media would have you believe. (Plus some 5-6 were from East Bay / Oakland area trying to drum up interest in our MLS).

Second, the price is a bit low to be of concern for many neighborhoods around here.  That was the list price on the resale (and presumably the current value), so you can gross that up to maybe 525K- 575K for seller’s perception of value (or Zillow’s zestimate).

 So, if you live in (what you think is) a 550K-ish neighborhood, your neighbors are prime suspects for dragging you down to the 450K level. Another 20%.