Shift Happens

I wrote an article for BHB regarding a new commercial listing and the effects the slowdown in the residential market is having on some commercial businesses:

But, what we don’t hear is that one of Northern California’s most successful and prolific ancillary housing suppliers (having been in business 20+ years) is facing the business equivalent of Russian Roulette in 2008 and asking me take inventory of their value in the market. As it stands for their specific “wares”, the Home Depots, Wal-Mart’s and Lowe’s of the world have decided to adjust their inventory allocation systems to “pay by scan”, meaning that the item is never sold to the vendor but consigned to the store. The item sits on the shelf until it is scanned at “point of sale”. Once sold, the supplier will be credited for each item purchased on a piecemeal basis paid weekly, bi-weekly, or monthly as agreed per vendor. Long gone will be the days of vendor meetings at Vegas strip clubs pushing the contract line of supplier “garb”. New online industries will emerge as old purchasing habits may soon be replaced by the online “dot com’er” bidding up shelf space to the highest bidder at Home Depot #6620 in Sacramento, CA.

What Is A Poor Boy To Do?

I was asked today at a luncheon about the current state of affairs in the residential lending market and the attitude of the lenders towards homeowners with 'troubled times' ahead. By coincidence, I ran across the following article from Marketwatch this evening about the lender's attitude towards forebearance:

Lenders have several workout options up their sleeves:

• Partial reinstatement. Under this plan, the borrower would agree to begin making regular payments and make up what is owed in, say, 12 monthly installments over the next year.

• Short-term forbearance. Here, the lender will suspend your payments for, say, three months or reduce your payment for six months, and then you'd make up the difference in some kind of repayment plan as described above.

• Long-term forbearance. Payments might be suspended for anywhere from four to 12 months, with a corresponding repay plan to follow.

• Loan modification. This would be a permanent change in one or more of your loan's original terms. The rate might be cut, the payment period extended or both so that the payment once again becomes affordable.

So my advice is to get on the horn right now with your lender. Make sure you talk to the workout department, though, not the collections folks. Though many lenders are training their repo staff to spot people who need a break and hand them off to the right people, most are bill collectors, short and simple. If the person you speak with has no idea what you are talking about, ask to be transferred to the chairman's or the president's office. You can bet they'll know whom to transfer you to.

You don't need anybody to speak for you, either. So stay away from the growing group of charlatans who are preying on financially distressed homeowners by offering -- for a fee, of course -- to act as a go-between between you and your lender. They don't have any more of an inside track than you do.

If you honestly feel you need to have someone holding your hand, contact a local credit or homeownership counseling agency. These nonprofits don't charge a thing. In fact, in some cases, lenders are paying them to go out into their communities to persuade troubled borrowers to contact their lenders.

The Department of Housing and Urban Development has a list of government-sanctioned counselors on its Web site, www.hud.gov. Also try the National Foundation of Credit Counselors, www.nfcc.org, or the Homeownership Preservation Foundation, www.995hope.org (888-995-HOPE).

From One Pickup Truck Driver to Another

It is with great sadness that I have to write these words about my recollections of my grandfather and the time we spent together over the years, but even more disheartening, given the timing, that I can’t be there in person to convey them. I trust that my brother can deliver our deepest sympathies to Terry, Jim, Paul, my mother, our family and friends on this day, as we honor the life of Robert “Bob” Comstock, my grandfather.

Think back almost thirty years ago, before PlayStation 3, XBox, iPhones, YouTube and the internet when all that a teenager could dream about was getting his driver’s license. During that time, my immediate problem was that every able-bodied driving instructor in my family was too busy. There was no one available, or willing to volunteer, to teach an anxious teenager the finer points of driving a 4-ton pickup truck with a 2-ton lift gate on the back. No one, that is, except my grandfather.

It was Bob’s responsibility to drive the truck, nicknamed “big blue”, around the neighborhoods taking care of the rentals, which was always a full time job (and still is). It was some of my fondest memories being there next to him. During those summer months, I had two choices; one, either hang out in the front of the office with Doris (and if you knew my grandmother you’re probably waiting to hear the second option), or two, jump in “big blue” for a “roadie” with Bob around “the Park”, eagerly waiting for my opportunity to get behind the wheel.

For me (and many of you), the choice was simple. And without fail, every time we went out on “a call”, I got my chance to hone my driving skills, while Grandpa sat patiently, calmly next to me. Don’t get me wrong, we had work to do and Bob made sure that I earned “my keep”. There were numerous refrigerators, stoves, or old furniture that needed hauling to the dump, but those were minor details to a 14 year old Jeff Gordon in training.

We’d spend an hour or so loading the truck (Grandpa would always do the heavy lifting), then he’d throw me the keys and tell me to get behind the wheel. With “big blue loaded to the hilt” with our responsibilities, Bob would coach me out of the driveway, around the block and down 66th Street to the dump, making sure that I didn’t take out a mailbox or parked car along the way. He used to love seeing the expression on the guys’ faces when I’d pull into dump with another load. Bob would wave to the guys showing his approval, and I’m sure a little satisfaction that we made it there in one piece, again and again. Then, he’d make it a point to drive us back down Park Blvd himself, slowing in front of the office, so no one would suspect a thing, including Doris.

During those drives in the truck, we would talk mostly about baseball and his beloved Cubs. After college, I remember getting my share of grief for signing with the Yankees. But, I know that he was just as proud and eager to hear stories of my time in the minors, as I was to hear his stories of the late night dances with the ladies, bad knees and all.

Last week after I received word that his health had taken a turn for the worse, I called Bob from my pickup truck. Knowing his condition from my mother’s report, I anticipated a brief, unresponsive conversation, but was surprised to hear the cheerful, appreciative sound of his voice. It took me back to those times in “big blue” and made me appreciate him even more. I will miss him dearly, and regret that I am not there to honor his life, with our family, in person.

Need To Qualify For The Mortgage Freeze Program?

Want to qualify for the new government mortgage freeze program? You can apply online here. But don't worry about your FICO score. In fact, you may need to skip some payments in order to qualify:

To qualify for the fast-track program, borrowers must have a FICO score of less than 660 and it can't have increased by more than 10% since they took out their original subprime mortgage.

Because income isn't checked, some experts worry that borrowers who might otherwise be able to afford higher payments will try to lower their FICO score to qualify for a rate freeze.

"The message here is to get your FICO score down," Mark Adelson, a structured finance expert, said. "Don't pay some bills, but keep up with mortgage payments."

"They're skipping over the part where they actually evaluate whether people can really afford to pay after resets," he added.

Other experts agree.

"There's certainly a lot of potential for gaming this system," said Andy Chow, portfolio manager at SCM Advisors LLC, a $14 billion San Francisco-based investment firm specializing in fixed-income and structured-finance markets.

"The five-year freeze on rates is the most troubling part of the proposal," said Joseph Mason, associate professor of finance at Drexel University. "That will create great uncertainty, hurting investors and mortgage-backed security valuations in the secondary market."

A lot of home loans are packaged up into mortgage-backed securities and sold to institutional investors around the world. The value of these bonds is based on future cash flows from interest payments on the underlying loans.

For investors in subprime home loans that may be frozen under the new plan, there's a delicate balance to consider. If resets are allowed to happen, they will get higher cash flows, but there could be more defaults. If resets are frozen, cash flows will fall, but fewer defaults may occur.

Real Estate Journal

OFHEO STATEMENT

Sent: Thursday, December 06, 2007 12:04 PM
To: OFHEO-NEWS@LISTS.OFHEO.GOV
Subject: OFHEO STATEMENT

Contact Corinne Russell (202) 414-6921 Stefanie Mullin (202) 414-6376
For Immediate Release December 06, 2007
	STATEMENT OF OFHEO DIRECTOR JAMES B. LOCKHART
“As Director of OFHEO, the regulator of Fannie Mae and Freddie Mac, I believe that the foreclosure prevention initiative announced by President Bush is a major step forward. I thank Secretary Paulson and Jackson and everybody from the private-sector involved. Fannie and Freddie are the largest investors in AAA subprime mortgage backed securities. They hold $160 billion of these securities and they are the major buyers of the refinanced subprime mortgages. This plan is a win-win for homeowners, neighborhoods, investors and the markets. But more has to be done. Fannie Mae and Freddie Mac have played an extremely important role in supporting the mortgage market as all the problems erupted this summer. Since then, they have been buying and securitizing almost $100 billion a month in mortgages. Their market share of all new mortgages has grown from 38 percent last year to over 60 percent. We need to make sure that they will continue supporting the mortgage markets. That is why we need now, as President Bush and the Secretaries have just said, GSE reform to strengthen the regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. For the last six years Congress has been considering GSE reform legislation. Given the problems faced by Fannie Mae and Freddie Mac and the current market conditions, it is time to act to ensure that they will be here to support the mortgage market, especially affordable mortgages for lower income families, now and in the future.” ###
OFHEO's mission is to promote housing and a strong national housing finance system by ensuring the safety and soundness of Fannie Mae and Freddie Mac.