The real estate blog.

For the experience, one of my favorite and scariest roller coasters in existence is the Wild Mouse at Lagoon in Utah. It’s unique in that the cars are small, but the ride is extraordinary.

It’s had several incantations and I may be projecting an older version on the newer one, but here’s what I remember - this ride will take you to the edge of oblivion and then at the very last second jerk you back to a higher and more exhilarating drop. At the end of it all you feel lucky to have survived, but you can’t wait to do it again.

Welcome to Wall Street this past week.

It began with a proposed bailout to protect the backbone of U.S. mortgage lending and ended with huge gains for the very same stocks that supposedly needed bailed out.

At the end of it all,
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The mirror test for underwriting is finally over. It’s been over for some time, but prospective home buyers still don’t know you’ve got to have consistent employment, decent credit and financial assets to get a home loan these days.

In the past few days I’ve had a “come to Jesus meeting” so to speak with 2008 underwriting. Unfortunately I’ve had to turn down two loans because the underwriters are paying attention. One deal was pretty obvious. The other one was questionable, but these days, ties go to the lender.

Then there’s the wannabees. Considering the times, I don’t feel bad turning down boneheads that can’t afford homes. They’re being saved from themselves and declining values. Today I had the pleasure to discuss real estate with a man, a young man, who made a record
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Friday was a very concerning day. As regular readers may have noticed, I made three posts. This is not regular behavior and we are not living in regular times.

Personally, I was rather distraught about the events Friday disclosed. So far in this crisis, anytime a company had been mentioned, despite the media from said company, the worst has been realized. Countrywide, Bear Stearns, Indymac. I don’t think for a second the rumors surrounding Freddie and Fannie are not unfounded.

Today the Fed reached out to abate/validate those concerns when it announced -

The Treasury Department and Federal Reserve on Sunday outlined a comprehensive government plan to prop up Fannie Mae and Freddie Mac - the two mortgage finance giants that play a crucial role in the U.S. economy.
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IndyMac Bank has officially failed. The FDIC has swooped in and taken over to stabilize operations while a buyer is found. The $8 billion dollar cost to its insurance fund makes the IndyMac collapse the 2nd largest in U.S. history. An epic run on deposits totalling $1.3 billion in the past 11 days contributed to the failure.

Earlier this week the California lender shuttered its mortgage operations amidst the credit crunch. It had hoped to survive the downturn by re-tooling and waiting it out. Not even three days later it has been taken over by the FDIC.

“This institution failed today due to a liquidity crisis,” OTS Director John Reich said. “Although this institution was already in distress, I am troubled by any interference in the regulatory process,” he said.
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“Welcome to Utah, one of the new foreclosure capitals of the United States,” read the opening line of today’s Tribune story on foreclosure rates in the beehive state.

Strike out “new” in that sentence and the Trib author would be right. Being number 10 in foreclosures is actually an improvement as this state has been a perennial top five in foreclosures, bankruptcy filings and mortgage fraud.

In June alone, 1,501 households received some type of foreclosure-related filing, up 141 percent from the same month last year, RealtyTrac said. National foreclosure filings were up just 53 percent.

Utah’s foreclosure rate still remains below the national rate - one for every 501 households. But it is now higher than all but nine states.

The last time I checked,
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Something big is brewing in the mortgage markets today…something that will change mortgage lending forever. For the first time in their history, the Government Sponsored Enterprises (GSEs) Freddie Mac and Fannie Mae are being seriously tested about the implied government guarantee that allows them to get favorable interest rates and keep the flow of money for mortgages flowing.

I’m not going into a detailed explanation of how this process works. There are plenty of excellent sources for that on the Internet. Google is your friend.

CNN reported -

The anxiety over Fannie Mae and Freddie Mac, crucial to a recovery of the battered housing market and the economy as a whole, reached fever pitch on Friday as shares plunged on speculation of a looming bailout.
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Regular readers may have noticed I haven’t posted here for a while. Besides the short week due to the holiday, I’ve been very busy at work getting loans closed. The effects of the credit crunch are really hitting home.

The underwriters in the office are making sure every “i” is dotted and every “t” crossed. This is taking files longer to close and causing borrowers to produce additional documentation. The end result for was a very stressful week for me and three of my borrowers. By Thursday I got one of three files closed that should have been finished on Monday. Yesterday I got another one closed.

Besides the particulars of each individual file, the biggest questions lingering for underwriters are those affecting credit and income. Borrowers with any past credit problems
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Bank of America (BAC) officially closed their deal with Countrywide (CFC) only a few days after major legal action against the troubled mortgage company had been revealed. State’s Attorneys’ General continue to take action against the lender.

The nation’s largest bank wanted to close quickly on the deal before legal action worsened. BofA will continue to treat Countrywide as its own unit. The following email was sent out to Countrywide’s network of brokers today:

Dear Valued Business Partner:

Countrywide®, America’s Wholesale Lender® is pleased to announce that as of July 1, 2008, Countrywide Financial Corporation has merged with Bank of America. We have become America’s leading home loan provider and we know with this position comes great responsibility to
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This week has been pretty chaotic for the financial markets. The Fed held rates steady for the first time after a nine month lowering campaign. Mortgage rates came down after a six week rising trend. Unemployment held steady and first quarter GDP was revised up. The mix of bad news and good news has yet to define any particular trend, but the Fed seems to think the economy is getting better.

The central bank’s statement said that the rate cuts it has already made should help lead to improved economic growth ahead, although it cautioned the economy is still weak due to tight credit, a weak housing market and high energy prices.

A critical point will be the next Fed meeting at the first of August when it is thought a rate raising campaign will begin. How the Fed acts then
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Former Eagle Mountain Mayoral candidate Richard Culbertson and his wife Kathleen have both pleaded guilty to the fraud charges they faced.

The Culbertson’s misled their son-in-law and used him as a straw buyer on four house purchases. Those homes are now facing foreclosure.

Richard Culbertson had previously lost his real estate agent’s license because of his involvement. He blamed the inquiry on his political opponents.

On Thursday Richard Culbertson pleaded guilty to four second-degree felonies, of fraud and a pattern of unlawful activity. Each count carries a penalty of up to 15 years in prison.

Kathleen Culbertson faced identical charges, but cut a deal with prosecutors and will only face class A misdemeanor penalties. She could spend four years in jail.
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