Real Estate Stabilization Act

The proposed Real Estate Stabilization Act of 2011 (RESA 2011) is a tri-party collaborative proposal mandating cooperation from lenders, government and homeowners that will stabilize the real estate markets, enabling a full economic recovery. This presentation represents the short form plan.

Overview

Legislation to require the holder of any note or portion thereof, said holder having received funds through EESA, TARP or any other relief/economic stabilization program, secured by 1-4 unit residential housing; the beneficial interest thereof obtained in any manner including, but not limited to origination, purchase in the secondary markets or acquisition of another institution, shall be required to offer loan modification.

Statement of Facts

Since the onset of the economic crisis, in California alone there have been over 3.5 million REO re-sales and Short Sales, with the resulting loss in real estate taxes exceeding $9 Billion (the projected deficit being $9.25 Billion). In addition there are another 2.5-3 million homes with negative equity; plus some 400,000 bank owned vacant properties that have yet to impact the real estate tax base. As the crisis that the states find themselves is caused by a banking crisis, and thus under federal regulation, they have no direct control over their financial destiny. The only options available, cost cutting, mostly through lay-offs and curtailing of services are by their very nature counter productive, actually worsening the downturn. Using the current FHA/HUD actuarial of 4% appreciation for the next 20 years, left unchecked, the real estate crisis will prevent an overall recovery until, at the earliest, 2022.

Lender Contribution

1. Existing mortgage to be written down to the current fair market value of the property

2. New mortgage loan to be written 5 year reset with a 50 year amortization.

3. Initial interest rate to be the lesser of 4% or 1 % over the

     current yield of the 10 year treasury note, with an adjustment margin of 2.5%.

4. Rate cap each 5 year period shall be 2%+/-, with a 5% lifetime cap.

5. The note shall be assumable and carry no pre-payment penalty.

6. No traditional debt-to-ratio qualifying.

7. In instances where the homeowner is currently unemployed, 1 year Principal-Interest to be calculated and added to the principal amount due. However, borrower to fund the tax a insurance escrow account.

Federal Government

Contribution

1.  Employing current loan-loss guaranty formulae, lender to be reimbursed for loan write down to 80% of the original principle, plus any accruals.

2.  Lender to receive additional tax incentives to offset the write down.

3. Lender reimbursement to be treated as a loan to the homeowner; and repaid through the waiver of the mortgage interest deduction.

5. On a dollar for dollar basis, lenders to be relieved of loan loss requirements for all modified loans. Caveat being that loans must be made for the easing. "Lend it or Lose it".

Homeowner Contribution

1. Waive the mortgage interest write off on federal and state tax returns.

2. In the instance of an existing foreclosure, a forbearance agreement to included with the note, and

recording documents.

3. Waive any reduction in real estate taxes

4. Establish an escrow account for taxes and insurance with the lender at 0%.

5. Should the homeowner fail to fund the escrow account, the lender shall be relieved of the terms of

RESA; and free to proceed with alternative methods of relief including deed in lieu,

foreclosure or short sale.

6. Government contribution to be a personal indebtedness. May be retired through the sale of the

subject property and/or the mortgage interest waiver in #1 above

Benefits

1.Stabilizes the housing markets, halting the current free fall in values.

2.Halts the dramatic erosion of the real estate tax base, thereby aiding in the financial recovery of the various states, and local governments.

3. Retains citizens in their homes.

4. Prevents the erosion of neighborhoods and communities.

5. Provides the confidence required for consumer spending needed to fuel the recovery.

6. Government contribution (stimulus) will result in greater overall confidence and consumer spending thereby fueling the recovery.

More Media and Government Lies

The media does the Wall Street bidding.... roots on a weaker dollar.... higher crude oil and commodity prices... all of which translate to higher retail pricing... then turns around and has the temerity to go along with the exclusion of those higher prices from the inflation numbers... more slight of hand...you paid more, but you really didn't more!! Yet further proof that congress has been bought off, yet again... what is good for Wall Street, is rarely, if ever good for the real world west of the Hudson...

Go back and check the time line of the housing crisis… at the exact same time that the first rate adjustment hit the sub-prime loans, pump prices leapt to the $4 range… People simply could not afford to get out of bed and commute to work… and there they were, and still are, the Cavuto's, Cramer's, Burnett's, Kudlow's, Wall Street Journal's, CNBC's, FBN's, CNN's all doing Wall Streets bidding... the truth be damned, have to keep those advertising dollars flowing...

This crisis will not end until there is rapid, make sense (for both lender and borrower) loan modification is in place… at present millions of the self employed are being denied any form of relief… Loan modification still demands that the homeowner be no less than sixty days past due, and takes five to seven months. Even when completed, the modification provided is very often a prescription for failure, causing the high recurrence of default figures. The residential crisis IS the root cause of the impending commercial real estate crash… consumers are not shopping in anywhere near the numbers required to provide the stimulus for businesses to recreate jobs… stores and businesses (many financed by CIT) close there doors… vacant retail and office space brings in how much rent???….

The “Great Depression” started on Wall Street, and ended fourteen years later on the deck of the USS Missouri… This crisis, caused by the actions of Wall Street, encouraged and enabled by congress, and rooted on by the media has its roots in the residential neighborhoods of Stockton, Riverside, Las Vegas, Detroit and countless cities across the county… and MUST end first where it began...The cures that have been employed to date, The Stimulus, TARP, EESA are all akin to going to the hospital with a heart attack, and being treated for an ingrown toenail… IT’S THE FORECLOSURES STUPID…. IT’S THE FORECLOSURES…

Home Builder Numbers or More Smoke and Mirrors

Toll Brothers reported increased sales, and a lower number of cancellations. Wall Street then proceeded to wet its panties... Now why not do what Wall Street seems incapable of doing... look beyond those statements... I know of one builder with 13 new homes listed in the MLS... all 3,200 to 3,800 sq. ft. in size, 3 to 5 bedrooms... these are homes that would previous have been in the high "7's and "8's"... now being offer at $100-110 per foot!! Great the builder loses $250,000 per home... but not to worry, it makes it up in volume!!! Then we have the cancellation numbers... how many homes in contract were renegotiated in price to keep the sale together?? Could it be that Toll Brothers has a construction loan that required a payment??? Could it be that through tax breaks and accounting smoke and mirrors "we" are able to put a positive spin on things...Gotta be sure that the big boys of Wall Street can turn a fast buck... legalized gambling against a stacked deck...

What don't I understand... Hillary Clinton immediately blamed mortgage brokers for the economic free fall... Those sub-prime loans the mortgage brokers created were responsible for the crash... they stole the equity from poor innocent unsuspecting buyers and homeowners... Little or no down payment, interest only loans, less than perfect credit... They made loans to people who should not have been buying homes... Right... So, please explain the following:

• Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
• You may qualify even if your credit is less than perfect
• Available to both owner occupiers and investors
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
• No mortgage insurance*
• No appraisal fees
• Also eligible for HomePath Renovation Mortgage
  
• HomePath Mortgage financing is available.

"....In addition, first-time home buyers can now use the $8,000 federal tax credit to help cover a down payment and other upfront costs if they are taking out a loan backed by the Federal Housing Administration...." The above is from Fannie Mae HomePath in selling off the REO properties that it owns... Do I smell a rat or what... are these guidelines even more onerous that the sub-prime loans... What don't I understand....

Let the bloodbath begin!

The vast majority of Toxic Assets, aka Legacy Assets, aka Non-performing Assets, are in fact loans on 1-4 unit residential real estate currently in one stage or another of default and foreclosure.

Read the Housing and Economic Reform (oxymoron) Act and you will find that it authorizes the Secretary of the Treasury to a) acquire these assets and b) dispose of them as he sees fit... As it did when it enabled this crisis years ago, congress has written a law with zero provision for CONGRESSIONAL OVERSIGHT.

Further, without exception, every housing loan modification program in place today is doomed to fail. The very conditions attached to all of them guaranty this fact. i.e. it is now virtually impossible for the tens of millions of self-employed Americans to qualify for ANY real estate loan modification or new purchase loan.

Should these assets be PROPERLY modified... ofttimes the current formula's in place are prescriptions for a second default... they will become performing assets, with no further losses for the lending institutions.

HOWEVER, should they be bundled (as did the RTC) and sold to these private investors at pennies on the dollar, there most like will be a "bloodbath" of new foreclosures. These are delinquent loans, the investor becomes the new note holder, bank if you will, free to accelerate the foreclosure process, and acquire what could amount to over a trillion dollars in residential real estate "on the cheap."

Congress can, and must immediately amend the HERA to prevent this potential debacle.

Residential real estate "lead the way" into this depression (and it is)... it must lead the way back out... I ask you the question, will you set foot in an auto showroom when you don't know if you will own a garage to park it in next week? Ours is a consumer based economy... only a fool would believe that "we the people" will consider spending on anything that isn't a requirement for survival again until the housing crisis has been addressed.

Without loan modification to stem it, we are about to enter another phase of defaults and foreclosures that will last no less than another 18 months to complete... and then an additional 1-2 years, if only that, to clear the inventory... all the while decimating the lives of Americans...

When consumers don't consume store close... the last time that I checked, a vacant retail space pays no rent... enough empty stores in a shopping center and... well why not check in with the bankruptcy courts to see what happens!

As Polonius said to Laertes when he was preparing to leave on a journey, "...to thine own self be true..." Well this is one hell of a journey that congress and Wall Street have taken us on...

it's the foreclosures stupid... it's the foreclosures...

False Hope

There was a spike in pending real estate sales last moth... the markets are all excited... the end of the depression is at hand... a light at the end of the tunnel... wrong...

Pray tell, how many were NOT either an REO or short sales... how many are NOT being financed by the FHA... should they all closes, how many will have an LTV below 95%... how many of these Buyer's have a FICO score that would pass muster at Fannie or Freddie...how many have borrowed down payments and non-occupant co-borrowers... don't get too excited... in failing to properly address the foreclosure issue, that great Cacophony of Conceited Condescending Clueless Clowns of Congress has made certain that "the markets" can stay all a twitter for no less than another 2 years... too bad that Disneyland isn't still selling "E" tickets...

In funding what can only be described as sub-prime loans, isn't the FHA merely laying the ground for the next real estate crash? ONLY a Realtor, Congress, Wall Street, media and the truly naive' believe that a person losing their home is a marvelous business opportunity...

What am I missing....

Beware the sale of "Toxic"... "Legacy" assets

The Treasury and FDIC have laid out the plans to acquire bank assets with private investors is fraught with danger for the homeowner's of America. This published plan is set to "encourage" (finance would be a better description) the acquisition of these "legacy"... "toxic"... in reality these are non-performing real estate loans and a far more accurate description, into the purchase of these assets (item of economic value).

The issue here is that virtually 100% of these assets are secured by 1-4 residential real estate. Once these mortgage loans are sold to the investors (Wall Street?) they become the new "bank"; and are free to move rapidly forward with the foreclosure process. Thus, they are "buying" these loans, thanks to the generosity of "we the people", with only 6% down, leveraged with government guarantees ... not a bad deal... buy a $100,000 loan for $6,000... then foreclose on the note... next turn around and resell the underlying asset... the house... for, say $50,000 in a fast sale... now think in terms of hundreds of billions of dollars, several million homes included in this next fiasco... if you think that real estate values have gone down... wait for this blood bath...

I warned of this 18 months ago... that UNLESS these loans are modified prior to any sale to these private investors, the bloodbath of foreclosures will make what has already passed seem like a family picnic in the park... Go back and read the Housing & Economic Reform Act and EESA; that provide the Secretary of the Treasury with unlimited authority to acquire these assets and sell them as he sees fit...

We are sitting on the precipice of a real estate Armageddon... should congress refuse to amend these grossly flawed laws and exercise its responsibilities, it will be complicit in the further rape of the American homeowner...