Monday, March 30, 2009

Refi Rescue from Washington Will Be Met with New Whining from Wall Street

After an outcry from the public, the stimulus package from DC has help for people who need to refinance their properties in order to keep them.

The result is the “Refi Plus Program” which will go into effect April 5th, 2009. So now the following bullet points that sum up the loans:
  • Present loan must be a FNMA loan
  • No Minimum Credit Score Required
  • New Lender Does Not Need to Be the Current Lender
  • Reduced Income Documentation Allowed on All Loan Applications
  • The automated system most lenders use will assess borrowers for this program and the automation will help increase the number of approved clients requesting Refi Plus.
  • If existing loan does not have mortgage insurance (MI), the new loan will not have MI regardless of the Loan to Value.·
  • The New Loan must be a 5+ year fixed term loan (5, 7, 10, 15, 30 year type loan).·
  • Loan to Value(LTV) OK up to 105% with an unlimited CLTV(combined ltv--for more than one loan) subject to the 2nd lender allowing the subordination.
  • 3 to 4 unit only ok to 80% but after May 3rd, 2009, ok to 105% Loan to Value.

There will be more to follow as we get closer to April 5, 2009. Even so, looking at the list, one colleague pointed out that even though the LTV is over 100% it will be hard for many who are under water to actually float again. Because even that high Loan to Value doesn't cover the 50 plus percent that housing values sank.

For example Joe and Jane Wishful bought a house in Tracy in 2005 at $400,000 and borrowed $390,000 . Well they would pay about $2400/month. Even if they had a regular loan, one that paid principal and interest without mortgage insurance and never missed a payment they would be in trouble. Not through their wrongdoing, but because of their luck. Part of the trouble is basic, in every loan the first payments basically cover more of the interest than the principal. So, with perfect payments on a $390,000 at 6.25% fixed interest for 30 years at the end of 3 years, they would still owe $388,884.06. That's not the bad luck part, that is basic finance.

Now enter bad luck. Because so many other houses have foreclosed, because their neighbors didn't make the mortgage for whatever reason, the market is down. Meaning that Joe and Jane's house is losing value as their loan interest accrues. And they are not alone; this housing crisis has hit California hard. The overall decrease in house value in CA is over 50%. So that means Mr and Mrs Wishful have a $390,000 loan on a $200,000 house, in TODAY'S MARKET. The refinance options in the stimulus allows a LTV (Loan to Value) 105% which means that they can only get a $210,000 loan. So that amount won't cover a $390,000 refinance.

There is a loss no doubt. The question is, 'who should take the loss?' Joe and Jane Wishful, or the bank? How about the taxpayer? Who?

Welcome to the new debate. No one wants the loss. If the bank takes the loss for all the houses in this predictament then the bank fails. To many banksWell one idea is to allow the house be valued on a horizon of 3 to 5 years from now. The lender would not use today's market but base the value of the house on a prognostication (uhh, i.e. guess) of the house's future value. Okay, what is the upside to this future value loan? Simply, the it is that the loss is delayed or softened by time. And, ironically, time is the downside too. What if the estimate is wrong? There will still be a loss, but the pain of that loss would be compounded by a new loan for an amount that is more than the value of the house. That kind of speculating got us in this mess in the first place.

Look for this, a new debate--"Should houses be marked to Market?" And if they aren't, are we still in a free market system?

Monday, March 23, 2009

Photo Challenge Can You See Through the Recession Angst to the Real Estate Opportunity?

Is the glass half full or empty? The full extent of the economic crash has yet to be felt in the commercial real estate market. So is that a good thing or a bad one?

Depends if you are wanting to lease or buy commercial properties. Here's a challenge. Look at the CNN slide show and think about the amount of opportunity in the vacated land of those closed stores.

What can you do to make this work for your good and the good of your community?

If you have some ideas, it's your turn to share them. Take some pictures and in the comments, post or link your photos of stores that have closed in your neighborhood. Then give ideas of what the land should be used for now. Should it be a little league baseball diamond? Should it be a grocery store? A human services storefront? You decide.

Friday, March 20, 2009

New Release of Federal Income Limits

Earlier this week, U.S. Department of Housing and Urban development, a.k.a, HUD released its median family income (MFI) limits for the fiscal year of 2009. These limits are the benchmarks for participation in many HUD programs. including Public Housing, Housing Choice Voucher, Community development Block Grants, and HOME programs. But the real significance is how these limits influence other government, financial and private institutions most notably the Department of the Treasury, the Federal Deposit Insurance Corporation,and the Federal Housing Finance Agency. In other words, these limits will be credit factors for individuals, local and state governments.

Because geographical economies vary, limits are divided by county. HUD, after adjustments uses a 3% upward trend for every 1.25 years. As a result the median income for Yolo County has risen to $72, 600 (HUD rounds to the nearest $100) from $51,600 in the 2000 census. Sacramento County has a higher number, but slightly less of an increaserising from $53,800 to $72,800 in the same period. To see how your family incomes fares in your county go to

Friday, November 28, 2008

More From Kiyosaki

Excerpt from Kiyosaki,
Read the whole thing at the link above.

Three Approaches to a Crumbling Economy

I spoke to three young couples from Zimbabwe while I was in South Africa. Two couples were recent refugees now living in South Africa, and one couple still lives in Zimbabwe. All three couples had interesting stories to tell. One couple said that they would have quit their jobs earlier. Instead, they hung on, hoping the economy would change. Then, virtually overnight, the value of the Zimbabwean dollar dropped and inflation went through the roof. Even though they received pay raises, the couple couldn't survive and soon depleted their savings. They left Zimbabwe by car with almost nothing. If they could've done something differently, they told me, they would have started a business in Zimbabwe and began exporting products to South Africa, so that they would have had South African currency and a bank account there before they fled.

The second couple that fled the country said they saved money and paid off their house and other debts even as the Zimbabwean dollar fell in value. Looking back, they say they would've saved nothing and gotten deeply in debt in Zimbabwe, allowing them to pay off their debt with the cheaper dollars. Instead, they fled after they lost their jobs, leaving behind their house and owning $200,000 in nearly worthless Zimbabwean dollars. The third couple still lives in Zimbabwe. When they saw the writing on the wall, they set up a business in South Africa and, with the profits, began acquiring tangible assets in Zimbabwe. Often, they'll buy an asset in Zimbabwe and pay the seller in South African currency. They believe that once Mugabe is gone and order is restored, they'll be in a strong financial position.

Many Problems, Few Solutions

There are three major problems with the events of 1913, 1944, and 1971. The first is that the Fed, the World Bank, and the IMF are allowed to create money out of nothing. This is the primary cause of global inflation. Global inflation devalues our work and our savings by raising the prices of necessities. For example, when gas prices soared, many people said that the price of oil was going up. In reality, the main cause of the high price of oil is the decreasing value of the dollar. The Fed, the World Bank, and the IMF, like Zimbabwe, are mass-producing funny money, thereby increasing prices and devaluing our quality of life. The second problem is that our economic crises are getting bigger. In the 1970s, the Fed faced and solved million-dollar crises. In the 1980s, it was billion-dollar crises. Today, we have trillion-dollar crises. Unfortunately, these bigger crises mean more funny money entering the system

Robert Kiyosaki Why the Rich Get Richer

This is an excerpt from Robert Kiyosaki
Read the whole thing here
Interesting article, but I do not reccommend gold or a gold backed dollar.

Article begins:

How did we get into the current financial mess? Great question.
Turmoil in the Making
In 1910, seven men held a secret meeting on Jekyll Island off the coast of Georgia. It's estimated that those seven men represented one-sixth of the world's wealth. Six were Americans representing J.P. Morgan, John D. Rockefeller, and the U.S. government. One was a European representing the Rothschilds and Warburgs.
In 1913, the U.S. Federal Reserve Bank was created as a direct result of that secret meeting. Interestingly, the U.S. Federal Reserve Bank isn't federal, there are no reserves, and it's not a bank. Those seven men, some American and some European, created this new entity, commonly referred to as the Fed, to take control of the banking system and the money supply of the United States.
In 1944, a meeting in Bretton Woods, N.H., led to the creation of the International Monetary Fund and the World Bank. While the stated purposes for the two new organizations initially sounded admirable, the IMF and the World Bank were created to do to the world what the Federal Reserve Bank does to the United States.
In 1971, President Richard Nixon signed an executive order declaring that the United States no longer had to redeem its paper dollars for gold. With that, the first phase of the takeover of the world banking system and money supply was complete.
In 2008, the world is in economic turmoil. The rich are getting richer, but most people are becoming poorer. Much of this turmoil is directly related to those meetings that took place decades ago. In other words, much of this turmoil is by design.

Power and Domination
Some people say these events are part of a grand conspiracy, and that might well be. Some people say they represent the struggle between capitalists, communists and socialists, and that might be, too.
I personally don't participate in the debate over a possible global conspiracy; it's a waste of time. To me, the wider struggle is for power and domination. And while this struggle has done a lot of good — and a lot of bad — I just want to know how to avoid becoming its victim. I see no reason to be a mouse trying to stop a herd of elephants from fighting.
Currently, many people are suffering due to high oil price, the slowdown in the economy, loss of jobs, declines in home values, increased bankruptcies and businesses closings, savings being wiped out, the plummeting stock market, and rising inflation. These realities are all direct results of this financial power struggle, and millions of people are its victims today.
An Extreme Example
I was in South Africa in July of this year. During my television and radio interviews there, I was often asked my opinion on the world economy. Speaking bluntly, I said that South Africans had a better opportunity of comprehending the global turmoil because they're neighbors to Zimbabwe, a country run by Robert Mugabe.
In my interviews, I said, "What Mugabe has done to Zimbabwe, the Federal Reserve Bank and the IMF are doing to the world." Obviously, my statements disturbed many of the journalists. I did my best to comfort them and assure them I was not an anarchist. I explained, as best I could, that Zimbabwe was an extreme example of an out of control power struggle.
After they were assured I was only using Zimbabwe to illustrate my point, I said, "If you want to understand the world economy, take a refugee from Zimbabwe to lunch." I advised them to ask the refugee these questions:
1. How fast did the economy turn?
2. When did you know that you were in financial trouble?
3. When did you finally decide to leave Zimbabwe?
4. If you could do things differently, what would you have done?


Thursday, November 20, 2008

Sacramento Events: International Transgender Day

November 22, 2008 Saturday at 6:30 p.m. A Church For All, 721 North B Street, Sacramento. Annual interfaith candlelight vigil in observance of the International Transgender Day of Remembrance. All are welcome.

This year’s vigil will be specially dedicated to the memory of Ruby Molina, a transgendered male whose body was found in the American River in September.

There will be speakers and refreshments will be served after the memorial.Information at

To read more about Ruby Molina

Friday, November 14, 2008

What is the Link Between Healthcare Providers and Proposition 8 Supporters?

While looking at the list of Top Proposition 8 supporters, one professional field keeps coming up. Healthcare. Look at the list here. Why is this? Is this just a career field that has a lot of conservative people in it or something else?
Is the healthcare industry trying to keep down costs by keeping the definition of marriage as narrow as possible?

According the Human Rights Campaign, the worry is baseless.
"In short, extending marriage to same-sex couples will have a negligible impact on the cost of providing employee benefits. In fact, because same-sex couples make up a small percentage of the U.S. population, the cost of allowing same-sex couples to marry will be no greater for employers than the costs caused by fluctuations in the U.S. heterosexual marriage rates."

But the fear remains. According the Pew Forum on Gay Marriage, only one percent of those polled consider economic reasons for opposing gay marriage. Still the concern remains, when it comes to healthcare professionals, they may more carefully consider economic reasons because the impact will directly affect their profession.

A person is pro or anti same-sex marriage is largely indicated by political affliation and if a person believes that homosexuality is biologically determined or not. So why so many healthcare professionals in the anti category? Isn't healthcare a science driven profession and therefore wouldn't healthcare professionals be more likely to be sympathetic to same-sex marriage?

Interestingly enough, no. Healthcare is being led by MBAs vs. MDs, so because healthcare has changed from a service to a business, it is easy to see how determining factor is the bottomline and not biology-- or even justice for that matter. The fight for same-sex marriage is reflecting the struggle of American healthcare. Profits vs. People.

Will human concern trump profitabilty? Not today, as for the future, we'll see.