Florida Mortgage Report

Florida Property Tax Reform Amendment - Update

As I mentioned earlier today, Floridians may be setting history today with their voting.  Property Tax has been a huge issue with property owners and real estate professionals alike and the controversial amendment was up for vote today as Amendment 1. 

As I mentioned earlier, everyone I encountered and asked how they would vote stated they just wanted something since the state government has not been able to come up with a better plan.  It appears that the amendment will pass with over 70% voting for at this time, showing government officials that Floridians are tired of waiting for nothing and are simply happy getting something, even if it isn't anything close to what they wanted.

So, hopefully this will send a clear message to Tallahassee that more reform is still needed and that Floridians faith in the government providing a genuine solution is lacking.

Florida Voters Make History?

Today is a big day in the state of Florida.  No, I am not talking about the Republican Primaries or even the Mayoral elections.  I am talking about the #1 question on the ballot, property tax reform.

That's right, today is the day Floridians get to vote on property tax reform.  With all of the controversy surrounding the amendment, most that I have talked to will vote yes, stating something is better than nothing.  Do you agree?

Take a moment to weigh in on your feelings about the Amendment.  Are you in favor or not?

Florida Real Estate Blogger Sued for $25 Million by Developer

Chances are you have heard about the recent lawsuit brought against Lucas Lechuga by Tibor Hollo about the Opera Tower condos apparently plagued by problems, delaying closings for months.  Rather than go into the details, check out the following links...

Miami blog postings spark $25 million lawsuit (Miami Herald)

Opera Tower, LLC & Tibor Hollo Sues Me for $25M (Miami Condo Investments - Lechuga's blog)

Real Estate Blogger Faces $25 Million Lawsuit (CBS4 (local) Video Clip)

Blogger Sued - $25 Million (Agent Genius - Benn Rosales)

NAR should defend Lechuga (Agent Genius - Ben Martin)

Real Estate Blogger Fired and Sued for $25M (The Phoenix Real Estate Guy)

I am sure there are more out there and likely more to come, so keep looking around the RE.net.

The New Face of Agent Genius: Brilliant!

Most of you probably already know that I contribute to other blogs on the Internet, and Agent Genius is one of them.  Benn Rosales has done a spectacular job of getting "genius" minds of the RE.net community together on one site and now he has revolutionized the blog design for the RE.net community blogsites.

So, visit the new AG site, namely this post, to get the lowdown on the transformation.  Benn revealed the new look, which includes a new Agent Genius logo, Sunday morning.  The new logo will be one you will more than likely see at upcoming RE.net events.

So, I would like to express a special thanks to Benn for all of his hard work and dedication to making AG a site worth bookmarking for everyone!!

What's In Store for 2008?

Many have asked what are my predictions for the next year and now I feel compelled to provide you the answers.  I have read many forecasts across the realm and agree with some and disagree with others.  I will focus the real estate forecast to that of Florida, namely South Florida, since that is where I am located and do most of my business.

I warn you that it is not a rosy picture, and hopefully I am way off with many of the predictions as I am certainly not going to sugar coat it.  Here are my predictions for the 2008 year:

• Florida real estate will see an average price drop of 22-25% before achieving its "reality price".  That will be fueled by more lenders taking on guidelines similar to IndyMac, but is necessary to begin the improvement cycle.  We will see the bottom in Florida during 2008 and probably even a slight improvement as well.
• Mortgage rates will continue to climb as inflationary pressures continue.  Rates will likely stabilize around the 7% mark, but will likely reach higher at least short term.
• Fed Funds Rate will likely see at least one more rate cut before the Fed changes stance.  They will continue to do everything in their power to flood money into the system and fuel inflation and fight the next financial bubble bursting.  They will likely start raising rates again by year's end.
• Credit cards will be the next liquidity crisis as more and more Americans will fail to pay off their Christmas spending spree fueled by lower interest rates.  Auto loans may not be far behind.
• Bankruptcies will continue to climb as Americans have drowned themselves in debt and are unable to tap into their house ATM machine.
• Inflation will continue to increase, reaching 3% or higher during the year settling around the 2.8% mark.
• Economic growth will continue to be slow as "stagflation" takes hold.  expect growth to be around .5-1.0% for the year.
• Unemployment rates will continue to climb, breaking 5.0% during the year.
• The dollar will see a rally before it continues to plunge further, setting new record lows against virtually every non-dollar pegged currency, except maybe the pound (it will start its own devaluation).
• Gold will pass the $1,000 per ounce mark and silver will trend to the $17.50 mark.

As I said, not a rosy picture, but the good news is I am not an economist, so I may be way off and things will be better.  I highly doubt it though.

As for South Florida, things will get worse before it gets better but the "end" is near.  Changes in real estate tend to start here and IndyMac's changes in mortgage guidelines are a good example of that.  More lender's will follow suit and change will take place and do so rather quickly.

Once prices have dropped, buying will begin and we can finally start seeing the inventory numbers drop back below 2 years.  We can weed out amateur investors that were chasing a quick buck.  We still have plenty of investors, and they are making money right now despite the market.  Many other buyers, including investors) are waiting on the sideline until the pricing becomes the "reality price".

Thank you for taking the time and expressing an interest in my 2008 predictions.  I invite you to add your predictions in the comments or email them to me.  I also want to take this time to thank you for helping Florida Mortgage Report grow during 2007 and wish you a Happy New Year!!!

Fannie and Freddie to Go Jumbo? Is the Government Going Insane?

"Stop the insanity" is the first phrase that comes to mind after reading this headline.  Why?  Think about what is truly happening in the mortgage market and where all of this is headed.

Basically, the government is trying to overtake the mortgage market through endless regulation.  They feel they must do something or else and are succumbing to pressures to "bail out" a market that was in desperate need of a correction to bring itself back to reality.

But is "over-regulation" what we truly need?  Don't take me wrong here as I am all for added regulation which protects the consumer, but when the government steps in, they tend to overdo it.  Allowing Freddie and Fannie to go into the Jumbo market, even if only temporarily, is one case in many of how the government is throwing Band-Aids on the gaping wound.  Sure it stops the bleeding some, but basically just prolongs death.

Paulson and Bernanke are doing everything in their power to Band-Aid the mortgage market.  Bernanke and crew are cutting the Fed Funds Rate and Discount Rates even with inflation showing signs of growing and the economy slowing.  He is giving stagflation an "open door".  Both are looking for any changes they can make or get other parts of the government to make in order to "save homeowners from foreclosure." 

Who stands to win though?  The homeowner?  Not likely.

The real winners in this game they are playing are the lenders and other financial institutions that are struggling due to their risky lending practices or over leveraged positions on mortgage backed securities.  Citigroup, Wachovia, Bank of America, Washington Mutual, Countrywide, the list goes on and on.  All are shouldering huge losses and will likely continue to do so into 2008.  They "need" the government to do something.

The homeowner's facing foreclosure, for the most part, deserve to be foreclosed upon.  While the media and government play that the typical foreclosure is a subprime borrower facing increased mortgage costs due to their payment adjusting, that represents the minority, yes the minority of foreclosures out there.  Factor in that the government portrays the mortgage professional that sold them the loan as an unscrupulous one and reality shrinks even further from the truth.

Again, don't get me wrong.  There are unscrupulous originators and there are homeowners that truly should be helped somehow, but they are the smallest percentage of the pie. 

So, why is the government willing to screw up the entire industry over the few?  Well, because that is what they do.  They disguise "bail outs" as "homeowner salvation plans".  They usually go out of their way to appease the minority groups on an issue, while sacrificing the desires of the majority groups. (Note:  I am not talking about racial or ethnical issues here, so don't even go that route in any comments please).

"Homeownership Preservation and Protection Act of 2007"

I have been reviewing the proposed bill formulated by Senator Dodd and, once again, there are provisions that will screw the consumer more than protect them.

Please keep in mind that I am not against legislation that works in favor of the consumer, but provisions in both the House's "Mortgage Reform and Anti-Predatory Lending Act of 2007" and this bill will actually hurt the consumer by making it harder to obtain potentially the best loan solution for them.  Both bills do have some good provisions, but its the harmful ones, such as outright prohibiting Yield Spread Premiums (YSPs) from being used.

In the House's "Mortgage Reform and Anti-Predatory Lending Act of 2007", there was an amendment to allow YSP when used to pay for justifiable fees as part of paying for the closing costs associated with the loan.  The Senate's "Homeownership Preservation and Protection Act of 2007" does not allow for that on many beneficial types of loans.  There are similar limitations on other types of loans.

When it comes to the use of YSP in the Senate's version, it is prohibited on all subprime and "nontraditional loans".  Nontraditional loans include interest only loans, thereby minimizing the access to a proven beneficial program.  Strangely enough, for high cost loans, YSP is allowed so long as it is not used to "steer" borrowers into a high cost loan when they can qualify for a better loan.  (There may be a few times when these limits will actually force borrowers into the high cost loan).

The Senate version also adds the requirement to escrow for any subprime or nontraditional loan.  While for subprime this is a good thing, for interest only loans it is not.  Why?  Most homeowners who use the interest only loans are financially savvy and would be better off waiving escrows.  Another limitation that would hurt many homeowners.

Limitations on low and no documentation loans may be excessive.  In fact, it leaves the Federal Reserve in charge as to what is deemed appropriate and they will likely not allow much.  This puts severe strains on small business owners and commission based workers that need the stated income programs to qualify.

So, once again the government is going after implementing legislation that will ultimately harm the consumer.  Also, as I mentioned before, there are good provisions, even many aimed at limiting mortgage brokers from screwing their clients for money which I agree with.  The points I made here are targeting provisions that will do more harm than good for the American homeowner.

This is a "Be Careful What You Wish For" Post

Recently, I began asking for more testimonials, something I usually do not do as I would like to think I would receive them when my services warranted.  Then I read something, somewhere that showed statistically that if you do not ask, you will not receive.  Well, being the numbers kind of guy I am, I realized quickly I needed to start asking.

Well, I have not mastered the art of asking for testimonials, but decided to ask one of the many non-clients that have come to me for advice to provide a testimonial if he chose to.  To say I was blown away is a major understatement as I was not prepared for the degree of impact I have had on this gentlemen's life.

Here is the exact testimonial, including his name, used with his permission...

"While reading the Active Rain real estate blog online, I stumbled upon some words of wisdom that made good common sense.  Those words were written by Mr. Robert Ashby.  I took the time to visit Mr. Ashby's website, found an email address,  and wrote a letter explaining my circumstances in hopes that he could lend some more solid advice.  Mr. Ashby found the time to respond to my request while he was on vacation, I couldn't help but think this was the type of person who truly cares about the advice they're giving.  That initial contact occurred over 1/2 year ago, and I've maintained loose contact with Mr. Ashby since then, and he always responds to my questions with what I still consider good solid advice.  I consider Mr. Ashby a great asset in my education and understanding of how to utilize my mortgage debt to create financial well-being. It should be noted that while Mr. Ashby works out of Florida, I live in the southwestern United States, and am NOT a client of Mr. Ashby's, yet he always listens to my concerns and responds in a timely fashion.  I wish my local mortgage lenders were half as helpful.  I look forward to my continued correspondence with Robert and consider him an "Advisor for Life".  Thanks Robert."

- Justin R.
Las Vegas, NV

(I underlined the one sentence for emphasis)

Is Shiller Full of It?

"WE have to consider the possibility that the housing price downturn will eventually be as big as that of the last truly big decline, from 1925 to 1933, when prices fell by a total of 30 percent."

That is how he starts his article in the New York Times.  I have seen many correlations in today's market with that of the Great Depression.  Are they justified?

Simply put, YES.

There are many things that are occurring in the markets today that can be seen similarly as back in the Great Depression when home prices plunged and foreclosures were rampant.  But there are also many differences, most which are key to today's homeowners, which Shiller doesn't delve into.

Back in the Great Depression, banks foreclosed to cover "margin calls" as they overleveraged.  That is not happening today although banks wish they could.

Back in the Great Depression, banks foreclosed on properties where homeowners had been paying down their equity because they could use the equity to pay off those margin calls.  Today, foreclosures are due to lack of payments only and many are "upside down", meaning more is owed than what the home is worth in today's market.

Back in the Great Depression, banks could foreclose on anyone, regardless of how well they were paying, allowing banks to go after the homeowners with the most equity in their homes.  Today, the acceleration clause in the documents prevent banks from foreclosing unless payments have been missed for several months in a row.

So, read through Robert Shiller's article as he covers some good points.  I do not agree with everything in it, but it does show how things are different today, yet the price reductions are similar. 

Does today's market resemble the Great Depression?  Yes, but not exactly.  The causes are the same though, expansion of money and credit leading to the collapse.

Just How Bad is The Real Estate Market in South Florida?

It is so bad, you have to pay people to buy your home.  Actually, that is not far from the truth.

Well, as much as we would like to joke about it, it is really ugly and here are some facts.  South Florida has 80,000 homes and condos on the market right now, slightly more than in 2005 when it had just 4,000.  A minor increase, right?

Do you really think the market is going to recover quickly down here?

Just look at my hometown's zip code, 33029 (West Pembroke Pines/Miramar, FL).  We lead Broward County in homes for sale at 743 homes, in one zip code!  Check out some of our neighbors...

33027  (right next door) - 687 homes + 780 condos
33331  (Weston) - 325 homes + 111 condos
33024  (West Hollywood) - 675 houses

These are just a few zip codes down here, but you can see their is a lot of inventory, in fact, more than 2 years worth, on the markets right now.  Miami-Dade County is even worse. And the problems don't end there.

Looking at strictly condos, the glut of for sale signs is through the roof.  Is it any wonder lenders do not want to finance these things right now?  Here are some stats for condos (Aventura wins, or is that loses?)...

33160  (Aventura) - 2,500 condos
33180  (Hallandale) - 1,800 condos
33139  (Miami Beach) - 2,200 condos

Taking a quick comparison of stocks and real estate, we are also looking at a major split in bid and asking prices.  Buyers won't spend more than XXX,XXX on the home and sellers aren't dropping their prices, so inventory simply isn't moving.

I do not think you need a crystal ball to see that 2008, while more than likely improving before the year's over, is certainly not going to be a good year for housing markets (unless you are the buyer) and the mortgage industry will still need another "flushing" before it improves.

Think I sound negative?  Actually I am not.  The world is not going to end, we are just going through a part of the normal cycle.  And even in South Florida, people are still buying homes, it's just that investors threw a boatload into the market all at the same time (part of the reason foreclosures are so high down here by the way).