REBA Nominee...and Happy New Year

I hope everybody had a great Christmas holiday and is looking forward to a Happy New Year and productive 2007!

I have done some upgrades to the site software, so that should allow me to spend a lot less time managing the SPAM attacks, and getting new posts up!

That said, apparently this blog 'Another FB' along with several of your other favorite 'real estate blogs' have been nominated for a REBA (Real Estate Blogging Award)!! Please go to THIS LINK TO VOTE for your favorite RE blogs. The voting has already started and ends at 10pm CST on January 10, 2007.

Thanks for reading my blog...and look forward to new posts and an exciting year in 2007!

Best,

SoCalMtgGuy

Too Little...Too Late

This is what you call 'TOO LITTLE TOO LATE". While I'm somewhat glad that the media is talking about this now, why weren't they doing this 2 years ago?? Come on, it doesn't take an MBA (it only takes a clear head and a calculator) to figure out that this was a recipe for disaster, not success.

What I am talking about, is this article from the LA Times titled: A Loan That'll Get Ugly Fast. I REALLY suggest you read the whole thing. It is a great article on soooo many levels.

Before we get started, lets take a little test...don't worry, it is only one question!

"Like hundreds of thousands of other homeowners around the state, Hertzberg has a mortgage that lets him choose how much he pays each month."

Question 1. Do you think Hertzberg will chose the little amount, or the big amount to pay each month?? (Take your time...clear your head...take a deep breath...raise your hand if you need another pencil or an eraser. This is a question so tough that it didn't even make the California High School Exit Exam...)

And the answer is........

"Like many of them, he always chooses to pay as little as possible."

DING DING DING....if you said the 'little payment' you won!!

It isn't really any secret that when people are faced with spending a little money or a lot of money for the same 'item', they choose to spend the little amount. The problem is that you get 'behind' on that item if you pay the little amount. I saw an article many months ago in the OC Register that said something like over 70% of the people that were trading in cars in California now days are 'upside down'. That is because people are getting these low payments for 6-8 years on assets that are depreciating faster than they can be paid down.

A similar thing is starting to happen now with real estate, except the difference is that the real estate is not appreciating at a rate to accomodate the 'negative amortization' these borrows are adding to the principal every month.

I have gone over the pitfalls of these loans, how they are sold by brokers so they can make a fat commission at your expense, and what to look out for here.

I suggest you read the entire article...but here is a nice little statistic to think about:

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In 2003, only about 8 of every 1,000 people buying a home or refinancing a mortgage in California got a pay option loan, according to San Francisco-based data tracking company First American LoanPerformance.

Last year, 1 in 5 loan applicants got one.

In the first eight months of 2006, even as the real estate market began to weaken amid fears of a downturn, the appeal increased again. Nearly 1 in 3 California loan applicants are now choosing them. The state boasts about 580,000 active pay option mortgages, about half the U.S. total.
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Lets pretend this was a 'game' in Vegas and you could place a bet on how you thought things would turn out. Would you bet that most of the 580,000 people with these mortgages are going to be earning the extra money needed to swing the full mortgage when the time comes? Are you willing to bet that appreciation saves them? Or do you think there are a LOT of over extended people out there who are going to be enrolling at FB University in the coming semesters?

Its your money...where would you put it?

Stay tuned...

SoCalMtgGuy

Another one bites the dust - OwnIt Mortgage

I was out of town on the east coast for a little while catching up with friends, and going to the Army/Navy game in Philadelphia. Navy made it a 4 year sweep of both Army and Air Force...too bad they didn't play that well when I was there. Anyway, I have quite a bit on my plate right now, but lets look at a few things.

First off, OwnIt Mortgage went down faster than a Pamela Anderson marriage. It appears that their website is already shut down... www.ownitmortgage.com I remember when this company hit the market, and now I got to see it go full circle. Here you go:

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From: OwnIt Mortgage Solutions [mailto:info@ownitmortgage.com]
Sent: Tuesday, December 05, 2006 4:26 PM
To:
Subject: Ownit Mortgage Solutions is Closing Its Doors

To view this email as a web page, go here.

December 5, 2006

To All Ownit Mortgage Solutions Friends and Partners in Business,

It is with deep regret that we inform you Ownit Mortgage Solutions will cease operations on December 6, 2006. For the past three years, we have pursued a mission to influence the mortgage industry toward increased affordability options for a changing market of home buyers. Change takes time, and we are saddened that the current unfavorable conditions of the mortgage industry did not afford us sufficient time to see our mission through.

We have been blessed with the opportunity to work with you over the past three years, and we wish each and every one of you success in your endeavors. We look forward to future opportunities to work with you again. Provided below are regional contacts for loan status: (I removed the contact info - SCMG)

Ownit Mortgage Solutions . 27349 Agoura Road, Agoura Hills, CA . 877-443-0405

This email was sent by: OwnIt Mortgage Solutions
27349 Agoura Road Suite 100 Agoura Hills, CA 91301 USA
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What I find really interesting is how this company, and the whole RE industry as a whole thinks they are doing people a favor by adding more 'affordability options'. It is really simple...you either have, or make enough to afford something, or you don't.

I can't afford a new Ferrari F430 with the Novitec Rosso package right now. The only way I could afford one is if I either 1. started making a lot more money (must...blog...harder...) or 2. saved my money for a long, long time. Some 'nice' company on a 'mission' to help me 'afford' one by finding some way to stretch my current pay is NOT really doing me any favors in the long term. But hey, I could get into a Ferrari today and live the 'American dream'! We'll worry about tomorrow another day...

The same thing has happened to many with Real Estate. So many bought into homes they couldn't 'afford' in the long term, but they could afford the interest only, or neg-am payment today. And that my friends is why we have a bubble. You can't stretch the dollar forever...no matter what OwnIt or any other 'helpful' mortgage company tells you.

That brings me to my next point. See this story from the NYT. Look at this quote from a top mortgage executive at a major bank:

“We all should be proud as an industry,” Michael W. Perry, chairman and chief executive of IndyMac Bank, a lender in Pasadena, Calif., told his peers at the Mortgage Bankers Association’s annual convention in Chicago recently. “We have created an enormous amount of wealth for Americans.”

Yeah, I could've sworn the CEO of 'whatever.com' said the same thing a few years ago. These people have made sooo much money off the masses, what do you think they are going to say? Just like the stock market boom, there are a lot of people who made a killing in the RE and mortgage industries and will be set for life. BUT, there will be many more that are left clenching 'old' appraisals the same way stock-jockeys were left clenching Wall Street Journals from 1999.

I am working on a few things that I think you will find very informative. I have saved a LOT of information from when I was in the industry. I think it is time to peel back the curtain and let you see for yourselves what was REALLY going on. Look for these posts throughout the holidays.

Also...I just got my annual web hosting and URL bill in the mail. So if you need to do any Christmas shopping this season, help out the bloggers that you read by shopping through their e-tailers. I have Amazon.com on my site...so if you are buying any books, music, or electronics for anybody, going through my site is greatly appreciated. Every little bit helps!

Stay tuned...

SoCalMtgGuy