Tuesday, July 16, 2013

VIGODA - A Vignette for Film

Open on an office, a room full of cubicles, there are 5 young staffers (Courtney, Judd, Noble, Cindy and Ting) huddled around one young (Ryan) man at his desk. 
Ryan: I called it the VIGODA Courtney: After Abe? Ryan: Huh? Judd (to Courtney): He doesn't know Courtney nods and scowls at Ryan Ryan: Know what? Courtney: You have no pop culture. Abe Vigoda was a...ah it doesn't matter, why do you call VIGODA? Ryan: It stands for Velocity In Gain Or Decrease Algorithm. It attempts to measure the speed at which a candidate's polling will increase or decrease in left leaning or right leaning districts, but not solid left or solid right districts. I'm trying to get a handle on at what point, the candidate gains traction or should be considered a loss for that district. Telephone rings on Ryan's desk. He answers. Ryan: (checking watch). He's right on time. OK, I'll be right there. (Hangs up telephone). OK, Barnes is here, I gotta do this. Cindy: The beacon of New Hampshire. How did you pull the interview? Ryan: (grabbing suit jacket from the back of the chair) Just luck I guess. 
Conference Room (not large, speaker phone in the middle of the table. TV mounted on one wall, 6 chairs) Receptionist opens the door and shows an African American man wearing an American flag pin in his lapel into the room. Receptonist: Mr. Barnes, please have a seat anywhere you like. May I bring you anything? Roy Barnes: No, I'm fine, thanks. 
Roy Barnes is the African American Republican candidate for an New Hampshire district where he is polling high and seems to be the one to beat. He is well groomed, well spoken, and obviously works out regularly. He is often photographed running or swimming, with his body on full display. 
The door to conference room opens and Ryan, a young African American male hurriedly walks in. He is wearing a suit carelessly in contrast to Roy Barnes' meticulous stylish, yet conservative attire. Ryan approaches Roy with an outstretched hand. Ryan: Mr. Barnes, it's nice to meet you. I'm Ryan Hattern and I'll be conducting this interview on behalf of Thom Roy Barnes: You know (flexing arm) I work out a lot. Do you?
Barnes: Yeah, you look it. Where? I go to SportsClub so that I have access when I travel. Also they have an excellent steam room. You ever go there?
Ryan: Looking at his note to prepare for the interview Shakes head
Barnes: You should (leans back, and rubs his stomach) it feels great to take a nice long steam. I have some guest passes if you would like to check it out. Perhaps we could get a workout in too.

Ryan: Nods
Ryan: Ah, I'm pretty busy right now. So you are originally from Boston, is that correct?
Barnes: Yeah, I grew up in New Hampshire though. My family moved when I was 11. We own a farm up there. Majestic beauty, away from everything.
Ryan: And this is your first entry into politics?
Barnes: Yep, my first go.
Ryan: Can you tell me why you are running for office aside from the campaign rhetoric?
Barnes: What do you think about hitting the gym tonight?

Tuesday, July 05, 2011

Fewer Borrowers & fewer qualify

I'm probably the last to say it, but while rates are at an all time low, it seems that very few can qualify. The ones that can seemed to have had their head in the sand for the past year or so. For unknown reasons, they just didn't refinance at any previous time. Maybe they were waiting for rates to get lower, not much chance of that according to the smart folks who opine on such things as inflation and the economy. Maybe they were waiting for their home to increase in value? The good people at Case-Shiller say, "fat chance." Maybe they were hoping their income would rise? It seems that's not going to happen that much either as corporations have been given the green light to hold the profits and pay the executives more without increasing the pay of the minions working tirelessly.

I know this comes off as negative, but where's the upside?

Sunday, September 19, 2010

According to WSJ, there are 10 reasons to buy a home

A Wall Street Journal blog article outlines 10 reasons to buy a home now. Take a look. For the full article, click here.

Enough with the doom and gloom about homeownership.



Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.

After all, at the peak of the bubble five years ago, Time had a different take. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make you rich?"


But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.


1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.


Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.
Brett Arends discusses why he thinks now is a particularly good time to buy a home.


2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.


3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.

4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.


5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.


6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.

7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.


8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.


9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.
 10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.

Write to Brett Arends at the Wall Street Journal for more information about this article.

Sunday, May 02, 2010

Shortenin' Bread

Now that I've read Michael Lewis' The Big Short, read the recipe for a CDO short done by Dr. Mike Burry that he graciously left on his now closed money management firm's website, I think I have an idea about the Goldman Sachs case that is in the news. According to the individuals in Lewis' book, Goldman hadn't thought of shorting their CDOs and thought that these buyers were the dumb money until they figured out where the smart money was.
Another interesting aspect to this whole debacle is that CDO exist, on some level, because the army of originators on the street (such as me) couldn't provide enough debt to consumers to supply the machine's need for ABS (Asset Backed Securities), so they came up with CDOs, and then synthetic CDOs.

Saturday, February 13, 2010

New Year, New Deal? Hardly

This year is shaping up to be one of the hardest yet in the mortgag business. There's going be many, many more REOs (foreclosed houses that the bank owns) on the banks' books, likely driving prices downward further.

That's not the problem if that increases buying activity, but with double digit unemployment (real unemployment), uncertainty, tightening underwriting standards, destabilizing appraised values and unknowns yet to come, it seems like a good year to hide under the desk if you are a Loan Officer.

Even good Loan Officers are heading for the hills, and here in NYC, they are jumping from bank to bank seeking greener grass that likely doesn't exist. Files are stacking up against the weight of regulations, underwriting that requires over documentation, and audit after audit of every file. Jumbos and High Balance Conforming loans are seeing the worst of it, but conforming loans can be painful too.

This business is tough, 7 days a week tough, but, sick as it may seem, I enjoy it.

Saturday, December 05, 2009

Fannie & Freddie are pushing more loans back to lenders

According to WSJ, Fannie and Freddie are making banks buy back poorly underwritten loans that have soured.

No wonder we have pre-closing audits, pre-funding audits, post-closing audits, post-post closing audits and so on and so forth. The documentation that borrowers must provide almost never ends at this point. Properly prepare borrowers for the onslaught of documentation requests. Banks don't want loans on their books when they could have sold it to Fan/ Fred.

FHA Loosening Condo Approval Guidelines

Haven't posted in awhile. Business has been pretty good lately, despite all the whining I do on this blog.

FHA is changing some of their condo guidelines which should play well in the NYC market. First off, they are lowering the required pre-sales to 30% which will help many of the new developments offer FHA loans until they reach that magic 51-70% threshold needed for FNMA approval. Another nice thing is that they are willing to allow condos with a right of first refusal clause in their by-laws if it's shown that it's not used for discrimination. That will play well in NYC where almost all of the condos have this clause.

There are a few pull backs in the new guidelines as well, such as a 50% concentration limit, and the requirement that the condo be transferred into the hands of the Homeownwer's Association 12 months from the time of the first sale. This doesn't matter as much to existing condo buildings, but new development condos will hate it since they may not be finished with construction within that timeframe.

All in all, I say "thanks."