Sunday, January 04, 2009

Real Estate and IndyMac

There were a few good articles in yesterday's WSJ, none described why we are in this Credit Crisis more then Would you pay $103,000 for this Arizona Fixer-Upper? (this is the actual house)The answer in case you were wondering is a definite no!

The story of this Foreclosure is that of Ms Marvene Halterman. This is a good woman from all indications who was given poor advise which led to a major problem. Ms Halterman has not worked in years and received income from the government in the form a disability pay, welfare and other forms of Government assistance. In 2006 a telemarketer called (Integrity)and the cash strapped women was provided with a credit line from another lender. This in addition to the $36,000 that was already owed on a home equity loan. Ms Halterman says she used the money to pay off her pickup, in addition to other things, but within months she was again in financial trouble. She went back to integrity and this time was provided with a 30 year adjustable rate mortgage for $105,000. The rates 9.25% for the first year with a lifetime cap of 15.25%. Of course this is not just a once off occurrence but rather something which occurred everyday across this country. In Avondale, where Ms Halterman lived from 2000-2005 the number of residence doubled in size to 70,000. Today one in nine Avondale homes are in foreclosure.

Now I do not know Ms Halterman, but I think that lending anyone size able money twice (on the same piece of property)within a year is crazy. Place on top of that the fact that Ms Halterman was on public assistance and it throws the entire equation out of balance.

Does Ms Halterman have some responsibility, of course, but a great responsibility has to rest with the appraiser and lender. A lender has the responsibility to determine the "willingness and ability to pay". People may have the "willingness" but not the ability due to the inability to manage their money effectively. Is this, or should I say was this taken into account, I do not think so. But moving forward I certainly hope it is. I guess this is a little like closing the barn door after the horse has left but there is little else that can be done.

Is the bottom near?

It seems a group of investors led by George Soros, John Paulson, Christopher Flowers and Micheal Dell have gotten together and purchased IndyMac bank (of course with Government assistance). Could this be a sign that the bottom is near? My 101 year old Grandmother has been advising me to "Buy Real Estate". She remembers many people who did just that during the Depression and again after World War 2 who became quite rich doing just that. I guess time will tell this time around, but right now I am not exactly flush with cash......maybe Intergity Mortgage will lend me some cash so I can invest?

Check back tomorrow for my 2009 Predictions.

Good Luck and Good Currency Trading.



Anonymous Toronto condos said...

Perfect article! Whom to blame?? Both sides, Ms. Halterman and the lender have completely neglected the possible risk. Possible... almost certain risk! I don't know about Ms., maybe she was desperate, maybe not very clever, maybe cheated. But the lender has career based on picking the good mortgages and disapproving the wrong ones. The question WHY they approved this one is much harder....
Take care

11:34 AM  

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