More Turn Around Talk

You know, I said it first but John agrees with me :-)

Biz break: Cisco CEO foresees economic turnaround in 8 or 9 months, optimistic about stimulus plans - San Jose Mercury News

Biz break: Cisco CEO foresees economic turnaround in 8 or 9 months, optimistic about stimulus plans

Compiled by the Mercury News
Posted: 04/24/2009 01:50:43 PM PDT

This too shall pass: Cisco Systems CEO John Chambers said today he believes the global economy will begin to recover in December or January.

That view is based on the performance of the stock market and his personal experience, Chambers told reporters at a news conference in Mexico City. The remarks have no bearing on Cisco's financial results, he said.

Loan Mod Updates

It was only a few weeks ago that I read the statistics showing that the majority of borrowers that were given modified loan terms in order to keep the owner in the home were delinquent within 12 months of the modification!

I really thought that was the end of loan mods. I mean, if they don't work then why spend so much time and energy on them. After all, it's not really the loan terms that are the problems, it's that the borrowers were ill equipped to be home owners.

Perhaps they use some sort of "new logic", kinda like "new math" down at Fannie Mae because here's the latest article today from the LA Times:

More lenders allow “early workout” loan alterations

Borrowers with loans owned by Fannie Mae no longer have to be behind in payments in order to qualify for a loan modification. Borrowers facing financial difficulty, such as losing a source of income, now can apply for an “early workout” loan alteration. Under Fannie Mae’s program, borrowers who qualify will enter into a trial period of reduced payments, usually for four months. If the reduced payments are made on time each month during the trial period, the modified mortgage terms may become permanent.

I'm thinking I would do a better job with that bailout money...

NOD Filings Plummet!

Did the market suddenly move from 50+ Notices of Default filed per day to 3? Is the market miraculously fixed overnight?

I was at a meeting this week where we were discussing the market, foreclosures and Notices of Default.

Up until September 6th, NODs were being filed at a rate above 50 per day and sometimes hovering around the 100 per day mark. September 9th there were 3 NODs filed.

We were trying to figure out this huge drop off in NOD filings. We came up with all sorts of ideas ranging from the fannie/freddie take over, changing market, etc. but it all boils down to recent legislation that makes it harder to foreclose on a borrower in default.

SB1137 is legislation that requires lenders to give the consumer an extra 30-day notification prior to filing the NOD. The lender is now required to meet with the defaulter in person or via the phone to "explore options" to avoid foreclosure. Loans originated 2002 and earlier do not have the 30-day requirement and could proceed with their NOD filing. Using the 3 filings vs the 50/day prior minimum, 94% of the loans in trouble were originated post 2002.

I have mixed emotions about SB1137. On one hand, I like to see lenders working with borrowers in default. On the other hand, lenders have [mostly] realized that foreclosing on a borrower is MUCH more costly than working something out. Even Fannie and Freddie recently issued a press release basically saying that they were actively working on loan modifications wherever possible. Lastly, the crisis that we are having is one of liquidity. Loans are more and more difficult to get, even with big downs and good credit. If California makes it more difficult for the lender to get their money back, no one will be lending here. Not a good idea given the current climate.

I have heard of properties selling 3-4 times because of problems with loans. Have you heard of or experienced this? Do tell!

More Loan Modifications!!

Before 2007, I had never done a loan modification. Now it is 28% of my business revenue and takes up about three hours/day of my time - so, 37.5% of my time.

Of course, if I had gotten into real estate for the money, I would have put my MBA to better use years ago!

Over this last year or two, I have negotiated some pretty amazing deals for my clients but there needs to be someone willing to negotiate for the bank on the other side. There is nothing more frustrating than having a willing and able client, that has rectified their finances and can show that they can get back into their previous perfect payment history, only to have a bank that is absolutely inflexible to work with.

That's why I was very happy to see this article;

Distressed IndyMac borrowers to get relief - Aug. 20, 2008

IndyMac borrowers to get relief
FDIC offers plan to systematically modify loans for homeowners most at risk of foreclosure. Agency chief hopes program will spur other banks to take similar measures.

Not to mention the 5 or 6 clients in default right now that will also be thrilled to hear the news!