It is actually getting hard keeping track of just how much money the government’s various bailout initiatives add up to. An Associated Press report says “total bailout commitments, loans and pledges of backing neared a staggering $7 trillion.”

Of course, much of this is “money” that may never get spent, or will be returned to the government when it sells shares of stocks it has received to bailout many banks or lending institutions. But a lot of that money, of course, will probably never be seen again by human eyes.

The latest is a massive program the purpose of which is to free up credit. That was tried before; but this time the government is sort of saying “we mean it.”

And, perhaps it does.

The part that relates directly to real estate is this: The Fed is going to spent $500 billion to buy mortgage-backed securities. But it is only going to buy the ones backed by Fannie Mae and Freddie Mac, which means not the subprime ones that seemingly ignited this financial fire more than a year and a half ago.

Another $100 billion goes to buy mortgages currently held by the mortgage giants, says the A.P.

Not everyone thinks all this is a good idea.

I’ve talked to a few investment experts the last couple of days and some say , though painful, it would actually be best to let home prices sink more rather than keeping them inflated with an infusion of taxpayers’ money. They argue that this will only set up a vicious cycle and we will find ourselves right back where we started from not too far down the road.

Of course, no one really knows what will happen next, least of all the federal government.

Barack Obama has assembled his financial team–he is seeking continuity. But is that such a good idea? Many of the people the President-elect has tapped were involved in the months long bailout effort, much of which has not worked outright or backfired and made matters worse.

Hardly an encouraging reference I’d say!!

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Tags: bailout, banks, barack obama, Economy, paulson, subprime

As we discussed last week, the banking bailout bill is helping mega-bank takeover artists like Wells Fargo, Bank of American and others. As I predicted last week, the Paulson plan to give these predatory banks a direct cash injection to continue their bargain hunting, this week went into full overdrive without a word of dissent from regulators, Congress, or consumer groups. Paulson announced the Treasury would take a “stake” in nine mega banks with $250 Billion. The government would get some warrants in exchange and share in the upside down the road.

People are incorrectly calling this move a “nationalizing” of the banking industry. It’s not. It’s simply a signal to the smaller banks who won’t get any subsidy, “Watch your back, Jack!”. Even though the TED spread dropped toward the end of the week, it was nothing to write home about. So the banks are still suffering from the same “ailments” we had last week, but the media spin is different.

Suffice it to say, those banks not hand-picked by Paulson, are getting squeezed by no liquidity in the capital markets and now will have a vulture looking over their shoulder for the next mis-step.

I learned something new about the TARP system Paulson initially said the $700 billion would be used for…the buying of “troubled assets” from the banks. TARP rules state a bank can’t “flip” bad loans to the government…buy them at a discount from one bank and resell to Paulson for a profit.

That’s a no-no…as it should be.

However, there’s a loophole!

If the bank obtained the bad loan through a merger, acquisition (read takeover), bought them out of a conservatorship (what typically happens when a bank is shut down by the FDIC) ….these TARP “unjust enrichment” rules do NOT apply!

If this isn’t the biggest motive in all the world to gobble up more banks…I don’t know what is!

Unbelievable…

The unmitigated greed these guys have…the nine banking moguls who met with Paulson this week just got handed the keys to the kingdom.

And we all sat here barely noticing…doing nothing…saying nothing…probably not even sure it was what was going on or if it was wrong.

Well, I’m here to tell you exactly what’s going on…and it’s not only wrong…it’s evil.

We will all pay the price for a consolidation of power in so few hands.

Mark my words.

Tags: $700 billion, bank takeover, banking, banks, conservatorship

Great. Taxpayers now own banks, investment houses, probably an auto company or two before long, and the British have shown that, despite having lost their empire, they still know a thing or two about handling a financial crisis that the U.S. and others can take lessons from…

But does this mean that people who were on the cusp of being kicked out of their homes are all of a sudden safe –if not sound–once again?

The wolf may not be at the door, but he is still lurking just around the corner, for sure.

We keep being told that these massive government measures are aimed at helping Wall Street as well as Main Street–and, to some degree, this is certainly true.

And yet, we still do not have a firm plan in place that has as its primary purpose the preservation of home owners facing foreclosure. The housing plan passed earlier this year by Congress still hasn’t had much of an impact. And, one can only wonder whether the government buying stakes in troubled banks will actually force them to amend the mortagage terms of their most troubled clients?

If banks are really going to use their new financial lifeline provided by taxpayers to extend a helping hand to home owners, why are they still so vigorously opposed to changing the bankruptcy laws to allow judges to amend mortgage terms to help people stay in their homes? Most experts think that is the best way to ease the housing crisis, so why are they trying to block it at every turn?

One can’t help but wonder whether the big banks will take the money and help themselves while giving the cold boot to the rear ends of cash starved homeowner/clients?

90 days?
Barack Obama is proposing a 90 day hold on any pending foreclosures, but is that really going to help much? Seems a bit like a band-aid being applied to a cancerous mole. But McCain’s notions don’t really seem better. So, on this front, it may just end up being a draw.

What should have Americans really worried, if they are not already, is the lack of political leadership across the board. Neither Obama nor McCain have exactly been ahead of the curve on this one. And, the Bush administration is apparently taking its bailout cues now from the U.K.–talk about Masterpiece Theatre!

The more things change, the more they stay the same?

The other day, I received in the mail an invite of sorts from WAMU–now Chase–telling me how I could, if I qualify, get a nice, cheap mortgage at incredible rates. Odd, isn’t this how we sort of got into this mess allegedly in the first place? I know, the bank will no doubt say that what has changed is that it will now actually try and make sure that it only lends money to those likely to pay back. But, one can’t help but wonder, what with the US government pumping billions into these institutions, whether or not they won’t quickly revert to their past practices? That WAMU letter I got would suggest that is a real possibility.

If it does start getting easier to get credit, then, it would stand to reason, those cheap homes now on sale all over the country should be bought up fairly quickly.

But homes prices are still expected to drop so , even if credit become more available, buyers may still elect to stay on the sidelines waiting…which would only bring home prices down more.

Also, some economists are now predicting–even with this massive bank rescue plan–that U.S. unemployment may rise to more than 8 percent this coming year! Not great news for the housing market, either.

Don’t let the current excitment fool you. We are not out of the woods. Not by a long shot.

Photo Credit: kyz

Tags: bailout, banking, banks, Economy, government bailout, mortgage, REO

It’s soooooo old news, isn’t it? I mean, all that stuff about people not being able to pay their mortgages and the rising population of those facing foreclosure, is so old hat now.

What is really important, after all, is the survival of big banks! At least, it would seem that way from the news coverage of the last few days.

Asia stocks drop, says one headline. Britain to unveil major bank rescue package, says another. The U.S. stock market drops for 2nd, 3rd, 4th, 5th………day . Another bank wants to buy another bank. The Feds want to rescue another lending institution…..on and on it goes.

This is the big stuff. This is what the world really is all about.

But notice what is getting lost in the discussions: the homeowner and what will happen to him.

It’s not like they are not linked. We keep being told, in fact, that the world’s credit crunch will only be resolved when the housing market returns to normal, whatever the hell that means?

Really?

Then how is it that pretty much nothing is being done along those lines?

The much rushed socialized bailout to rescue big banks went out of its way to not include any language that would allow bankruptcy courts to change the terms of mortgages, something many experts say is vital to help the housing market recover.

The housing legislation that was passed earlier this year to help distressed homeowners is hardly off the ground, because it has no way to force banks to re-negotiate mortgages. In fact, with the government now waiting to buy these bum loans from the banks, why should they re-negotiate anything with homeowners? And, in point of fact, for the most part, they are not.

Backers of the bailout say that by buying up bad mortgages and mortgage related investments, the government itself will be able to change the terms of mortgages that are on the verge of default.

But anyone who understands anything at all about this crisis knows that a large part of the problem is, most mortgages are no longer owned by the bank that issued them…each mortgage has been divided and divided again and spread across many different investments owned by many different institutions. How can the government do anything with these mortgages when it is all but impossible to find out who exactly owns them?

Further, it is this very uncertainty that is fueling the crisis of confidence that is leading the world down the road to economic ruin.

And yet, I have zero doubt that things will improve…and sooner rather than later. This is NOT the 1930s when the government not only failed to act (before FDR anyway) but felt no need to do anything.

Unlike in the 30s, even the smallest country understands this is a credit-driven world. The system will be fixed to make credit flow again simply because there is no other choice and everyone understands this to be true.

Still, the $700 billion bailout is not the best way to do this. AIG already has reportedly zipped through lots of the taxpayer money pledged only a week or so ago. This will not ease the credit crisis for sure.

Those who say the economy will not recover till the housing market does are correct. But then the game plan needs to be focused directly and clearly on achieving that goal and not on helping one bank buy another.

Tags: $700 billion, bank crisis, banks, Credit, Economy, housing

Talk about a banking coup! Just last week we thought that Citi would wind up as the winner of the Wachovia banking sweepstakes . . . fast forward to this morning, and it looks like Wells Fargo’s bid, which is over 7 times that of Citi - a whopping $15.1 billion, is going to help to create Wells Fargo Wachovia, the largest retail bank in the country.

According to the Columbus Business Journal:

San Francisco-based Well Fargo (NYSE:WFC), whose home mortgage division runs three branches in Central Ohio, said Friday it intends to buy all operations of Charlotte, N.C.-based Wachovia with no need for financial assistance from the Federal Deposit Insurance Corp. or other government agencies.

Wells Fargo expects the combination would be profitable in its first year, excluding integration costs, write-downs, transaction charges and additions to its credit reserves. The company expects to incur merger and integration charges of about $10 billion. The bank plans to issue up to $20 billion of new Wells Fargo securities, primarily common stock.

The combined company would take the title of the largest coast-to-coast retail bank in the U.S. away from Wachovia’s crosstown rival Bank of America Corp. (NYSE:BAC), which has $701.5 billion in domestic deposits. The merger would create a bank with $1.42 trillion in assets, $787 billion in deposits and a customer base of 48 million and nearly 11,000 branches.

What are your thoughts? Who will end up owning Wachovia?

Tags: bank merger, banks, merger, wachovia, wells fargo

NOTE: Image below is $15,000 Cash . . . pretty nice, huh?

If someone came into your home and held you at gunpoint and forced you to fork over $15 thousand dollars in cash (provided, of course, you kept such a large amount at home), you’d call the cops as soon as you could, wouldn’t you? In fact, if you had a gun at home, you might even try and shoot the bastards before they could get away with your money.

But what happens when it is the U.S. government that is about to break into your house and make off with that much money? Whom do you call? Batman?

And yet, that is exactly how much money, thus far, the current round of government bailouts of big financial institutions is costing American households.

When you add up the $700 billion dollars of taxpayers’ money the government wants to spend to buy up all that bad debt out there, with the money already pledged to take over Fannie Mae and Freddie Mac, AIG and to help broker the Bear Stearns/JPMorgan Chase deal, “A $700 billion fund would push the total pledged to combat the crisis to $1.8 trillion, or $15,000 per U.S. household, says a Reuters analysis.

No Help For The Rest Of Us

While the big boys will apparently get their burdens lifted, so far, there is nothing in the proposed plan for those who are about to foreclose on their home, or can’t find a job, or can’t afford health insurance or can’t afford gas for the car or heat for the home or food for the table.

In fact, this past Friday, even after the bailout was announced to a stunned world, the average rate on a 30 year, fixed rate mortgage actually went up to 6.11 percent from 6.07 just the day before, says the Associated Press. We are clearly not out of the woods yet!

Would the alternative be worse? Maybe. Maybe not. But I can tell you this: This entire bailout is happening so fast , in such a crisis atmosphere, red lights should be blinking and alarm bells sounding from sea to shining sea.

Photo Credit: Neville’s Financial Blog

Tags: bailout, banking, banks, Economy, financial crisis, Henry Paulson, investment bank

Last week I spoke about why Portfolio Lenders are important to investors, but the bigger question may be how to find them.   

Tracking down a financing source is never an easy task.  Many individuals have no idea where to start so they usually talk to there personal bank first.  While the likes of Wells Fargo, Chase, Bank of America and more are large institution’s and have mortgage services, they generally are not competitive or creative when it comes to investment properties.

So how do you find a local or regional portfolio lender/bank?  

The yellow pages cant help you.  If you called every local bank the employees might not even know the meaning of portfolio lending and you could spend a better part of your day trying to get help.  For those in need of help there are a couple of solutions.

The first one is networking.  If you want to become an investor you must join them.  Find local clubs and associations that support and host networking events for investors.  These events will give you a chance to find out how others are finding outside the box financing solutions.

The second one is your sales team.  If your sales team consists of a Realtor, ask for a referral.   If you are working with a wholesaler, they could have a name, number or source for your needs.

An other good option is a mortgage broker.  Then whole concept for a mortgage broker is to seek out financing options.  There are many mortgage broker that are tremendously successful, not because they have the lowest rates and fees, but because they understand how to carve out a niche and network between several banks, sometimes 100’s of them, to find the financing solution that an investor may need.

A recap:  To find the next best Portfolio Lender you need to network.  Talk to Realtors, wholesalers, mortgage brokers and even other investors. 

Tags: banks, lenders, lending, loans, mortgage, portfolio lenders, real estate, real estate investing, real-estate-finance