Sunny Hilton Head, South Carolina

 Weak. Whimpy. Scared. That describes who? Not the Chinese.

What is the job of the Federal Reserve? Why it's job is to insure a smooth functioning banking system. I guess that now includes buying up baskets of sub-prime mortgage backed securities that no one esle wants.

It was reported that the Bank of China , once a major player in the U.S. Mortgage Market cut it's exposure to U.S. Sub-Prime risk by HALF!

It was also reported that "Treasury Secretary Henry Paulson said the troubles that brought down Bear Stearns underscore the government's need to strengthen and clarify the rules governing an array of financial players from commercial banks to investment houses. " (wsj)

Now what does that mean exactly? What I hear is more regulation of regulations. More overreacting. More difficulty in doing business in the financial arena

You know? The more we get government involved in anything the worse it becomes. Wanna talk about "health-care" for example?

Paulson said the Bush administration will soon release plans to promote the smooth functioning of financial markets. Now, what will that take? A Plan? More Regulation? What Else?

Let me guess: There's gotta be more money that we can throw. How could that be done:

Well, here's one potential way: Mr. Bush, the best Democrat-Republican we've had in office for a long time, will suggest that we need to be spending more money on the bureaucracy that will be required to insure this smooth functioning...just my guess.

"I have seen the enemy! and Im lookin right at him in the mirror..."

Have a wonderful, "as-governement-free-as-possible" day!

There are cycles. There are cycles, There are cycles. There will always be cycles--Stock market, housing market, life, health, marriage, age, nature, weather. So, why is it that we get so upset when there are downturns? Because our lives are affected, Because we can feel like we have no control. Nothing could be further from the truth.

If we can breathe we can find our own solutions.

I know 3 agents who did well in the up cycle and they are now no longer in the real estate business. They got lucky and didn't learn what it takes to do business in any climate. They failed to market in the good times. When the referrals from friends dried up--they were out of business.

I overheard one of this areas successful agents telling an associate that this was going to be the best year ever for him. How could that be? For one thing, he is always marketing,

Here is another word  of wisdom: "always be marketing."

My late father would call market downturns economic laxatives. The markets--are always adjusting--market forces tend to weed out the weak: companies, agents, people.

There are people who do well no matter the cycle--it can go up and it can go down. There is something in them that will not allow the negative to beat them down. They look for creative solutions. They learned in the good times how to market, generate leads, build relationships.

MEMO to SELF: "get off YOUR duff, stop crying in your beer, do much, much, more of the right things for the right reasons..." that's the best preventative medicine for two career ending maladies: notenufbiz and notenufcashflow.

The cycles will continue. I don't know about you, but I'd rather not be a statistic.

 Over the last few days, I have been referring to various agencies and their roles with respect to credit. There is a wealth of information on these agencies and it's worthwhile to spend time on these web sites to get a better handle on what's happenning in the world of credit and what it can mean to the sale or purchase of a home.

This is not the most exciting stuff to read about but it will help you to become much more aware of the governments role in home finance. It appears that that role is going to be increasing, should the Federal Reserve have its way.

Here are some useful links:

Fannie Mae Homepage:
http://www.fanniemae.com/

Fannie Mae Loan Limits:
http://www.fanniemae.com/aboutfm/loanlimits.jhtml

Freddie Mac Homepage:
http://www.freddiemac.com/

Ginnie Mae Homppage:
http://www.ginniemae.gov/

U.S. Dept. of Housing and Urban Development                

http://www.hud.gov

HUD Homebuying Programs State-by-State:
http://www.hud.gov/buying/localbuying.cfm

Federal Reserve Board:
http://www.federalreserve.gov/

U.S. Department of Veterans Affairs:
http://www.va.gov/

No She's not a country singer...nor is she a lady. Ginnie Mae  is the acronym for The Government National Mortgage Association, Ginnie Mae is Fannie Mae's ssister organization.

While Fannie Mae packages  loans into bulk shares for resale  to investors, Ginnie Mae buys home mortgages from banks and financial institutions, bundles them together into mortgage backed securities, and then markets portions of these to investors.

The big thing here is the Ginnie Mae's Guarantee:

Ginnie Mae securities are the onlyMortgage backed Securities (MBS) to carry the full faith and credit guaranty of the United States government,which means that even in difficult times an investment in Ginnie Mae MBS is one of the safest an investor can make.

From there web site, here's what their mission is:

"Ginnie Mae, we help make affordable housing a reality for millions of low- and moderate-income households across America by channeling global capital into the nation's housing markets. Specifically, the Ginnie Mae guaranty allows mortgage lenders to obtain a better price for their mortgage loans in the secondary market. The lenders can then use the proceeds to make new mortgage loans available."

Ginnie Mae does not buy or sell loans or issue mortgage-backed securities(MBS). Rather purchasers of the securities receive pass-through certificates to investors and guarantees government assisted loans where other financing is not available

Ginnie Mae guarantees investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans -

These are loans that are mainly those insured by the Federal Housing Administration (FHA) or VA loans--those which are guaranteed by the Department of Veterans Affairs (VA).

Other guarantors or issuers of loans eligible as collateral for Ginnie Mae MBS include the Department of Agriculture's Rural Housing Service(RHS) and the Department of Housing and Urban Development's Office of Public and Indian Housing(PIH).

The FED consists of 7 members of the Board of Governors--there are currently only five serving

The Fed has the authority to lend money a to individuals, partnerships and corporations since 1932.

This authority has never been used an it I snow being considered.

With respect to Fannie Mae the Fed is considering the purchase of debt and the purchase of mortgage-backed securities from Freddie Mac

Why? The credit market situation isn't getting better.

The FED is stepping up to the plate and is going to lend banks $100 Billion in collateralized loans and in addition, another $100 Billion to its network of 20 Bond Dealers for them to submit mortgage backed securities to Fannie Mae And Freddie Mac.

To get some perspective who is Fannie Mae and what do they do--this is taken from their web site, verbatim:

"Fannie Mae is a shareholder-owned company with a public mission. We exist to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market.

Fannie Mae has a federal charter and operates in America's secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.

Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.

The government established Fannie Mae in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.

In 1968, Fannie Mae was rechartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

Fannie Mae has a unique duty to the public it serves -- and the private investors that fuel its service -- to be a model company focused on service, reliability, and value.

As America continues to grow and change, Fannie Mae will be there to help meet its growing and changing housing needs."

See the underlined text above--these words apply today, don't they?

D

Daniel Mudd, CEO fo the Federal National Mortgage Association (Fannie Mae)  is off to Asia And Eurpoe's financial centers. This trip is an annual event.  an annual trip and he is taking the opportunity because investors here are averse to investing in the credit markets here. Mudd said they aren't hurting for capital now. However, if things get worse here, they may have a need. But what does that mean to consumers?

It is helpful to understand the mechanics of the global credit markets in order to understand answer that question.

Atop all of our financing is the FED. The Federal Reserve is a system charged with maintaining a sound credit environment. They are also to devise and implement policies to help control inflation or deflation and help to keep the economy from disaster. The FED controls the flow of money by setting the cost of money. A reduction in the Fed Fund Rate does not equate to reduced mortgage rates as many believe.

The FED is a "regulating" body of Federal Reserve banks who make  decisions on monetary policy based on reading the economic "tea leaves."

Remember, that a mortgage along with the note is a negotiable instrument, that can bought or sold. Therefore, there has to be a "marketplace to do that" --a place to get cash so mortgages can exist. There aslo has to be buyers and sellers.  The largest marketplace for that is the SECONDARY mortgage market. It is the ultimate source for mortgage funds.

The Secondary market  is made up of insurance companies, pension funds, real estate investment trust and major wall street financial institutions. These  are the big players. The Largest "dealer" in that market place is Uncle Sam. So, there is buying and selling in this market place. But what happens when there are a lot of mortgages to purchase and all of a sudden, the big players decide that isn't too risky to  hold on to their current holdings and there is a flood of selling?

You get a mortgage crisis-it's like a run on a bank where people think if they don't get to the bank fast enough, they'll run out of money. When you have more sellers than buyers of these securities you have a "bear market." Liquidity dries up.

When there are defaults, when there are fewer investors, Fannie Mae and Freddie Mac have less capital to do their business.

Therefore, People like Mr. Mudd of Fannie Mae have to be about finding  other sources of capital--should they need it to keep things on an even keel.

(More on  Fannie Mae in the next post.)

Well THEY are at it again.

Career politicians --"our complainers and blamers") want to grandstand again and want to now run American's corporations. And, they also want you to believe HOW BAD these criminal CEO's are!!!

After all, Capitalism is BAAAAD, And Socialism is GOOOOOD. Competition is BAAAD and redistribution of wealth GOOOD

Like, the CEO's of these companies committed the  CARDINAL sin of being compensated "too much."  After all, the employee who's punching numbers into a computer should be treated as fairly for her skill as the CEO, right?

--I haven't seen too many CEO's hired at$25 per hour--perhaps, if we find one of these altruistic sorts, we can get corporations to act morally-- cuz they're all immoral, right?

Again,  these baboons are addressing  the wrong problem. The mortgage mess has nothing to do with how much these CEO's were paid.

Utter stupidity. 

Quite frankly I'd love to look into all of the stock portfolio's of these "goodie-two-shoes"  bureaucrat phonies.

Wonder if I'd find that they owned any Merrill Lynch Stock. If they did, when did they sell it? Why did they sell it? Or maybe they had some Countrywide stock: (ditto) 

These lemmings who have better pensions than most of us will ever have--and better health care--(as we struggle to pay for ours)-- pontificate from their high places and babble on about something, they'll never fix until they address the right problems .

As I write this the DOW is down below 12,000!!!!!!!!!!! Keep talking you bureaucrat idiots. The more they talk, the worse things get. 

Realty Finance

This is a series of articles for consumers about real estate finance. Those who have cash to purchase a home with out any reliance on outside financing is rare. without the ability to finance, there is no way to buy and sell real estate. I think it's most important to have a better understanding of this subject. I once had broker who told me not to fuss so much about financing (when the market was red hot) and leave that to the mortgage guys. That wasn't good advice. As real estate professionals, we're a resource. We don't have to be the experts at everything, but you do have to have a good handle on all of he most important elements of buying and selling homes. Finance is a biggie.

The current state of the financial markets and the availability of mortgage money makes it difficult for the real estate market to improve. If you're selling a home, Be prepared to wait longer to find the right buyer--the one with excellent credit, the one with all their documentation "ducks" in a row and the one who has a lender who's willing to lend.

The party that BORROWS the money it the mortgagor

Borrowers mistakenly believe that a lender gives them a mortgage. No, the borrower gives the lender (the mortgagee) a mortgage. A bank lends because a borrower gave THEM a mortgage. With a mortgage, two contracts must be signed.

Picture the mortgage as a borrower putting the property they are purchasing into a safe deposit box. They take it too the lender (bank) and the bank holds that safe deposit box as security.

Often, real estate purchasers who get a mortgage think that the mortgage is the "title" for the property. This is not the case at all. A mortgage does not convey title--this is done at closing when the purchaser receives a transfer of the deed from the seller. More on that later.

A Mortgage contains covenants. A Covenant is simply defined as a promise:

• To keep update with real estate taxes
• To keep the property in good repair
• To allow the lender (the right to reentry"

Reentry refers to foreclosure for non-payment. Technically, you only need to miss one payment for banks to require you to pay up the entire loan (acceleration clause)

A Mortgage is a lien against real property for the money borrowed. The mortgage also includes a promissory note (a covenant ) where by the borrower PROMISES to repay both the principal amount with interest.

A mortgage looks like this"

• Part (a) the piece of paper which outlines the contractual obligations (often called Chattel Real) of both parties is given as security (collateral) for the real estate
• Part (b) is the NOTE: which is a contract, signed by the mortgagor (borrower) is the promise to pay the money back that was borrowed. Payments, due dates and other requirements for particular types of loans (like ARM's) and escrow requirements are contained in this contract.
• Part (a) + Part B= The Mortgage

A mortgage plus the note are a "negotiable instrument." It can be assigned to another party and transferred from one party to another party.

So who "owns" a property? In South Carolina only the mortgagor (borrower) has both title and possession. This is called "hypothecation" which simply means to pledge. A hypothecation clause means that there is a lien on a property (help by the bank) but the purchaser-borrower still gets to use it--he gets title and possession of the property.

In some States, the lender is recognized as the owner and . Called a deed of trust, title is held by a 3rd party until the mortgage is paid off. Once the mortgage is paid off it is then transferred to the borrower. If the borrower fails to pay, the bank gets the deed.

Note: we've read in the last several days and weeks about people who want to change the nature of real estate financing and even the essence of the mortgage contract. I submit that the place to start to make changes is with the banking system; to look for long-term solutions; to make the right policy changes. Quick fixes never work.

Expect HIS BEST for YOU!