My wife introduced me to Sir Ken Robinson, whom I had not heard of before. I work in the field of economics, and it intrigues me to no end. Even though I work in this economic field, my education is a Master’s Degree in Philosophy from a European University. I would not trade that for anything, because philosophy is the study of truth – specifically the root truth beyond every cause and consequence.

Heavy? Not really. But it makes all of life more interesting to live. And, psychology is brushed upon, necessarily, in the philosophical studies. Perhaps that is why I am intrigued by the way that mass psychology moves the stock market and the bond market – not mathematical fundamentals. Know sentiment, and you can read the market.

I have always been a proponent of students being required to study humanities first, before specializing in math and science. Know Shakespeare and Monet, Aristotle and Rafael, before specializing in Molecular biology. Because humanities not only teach history; they teach one how to think.
And the process of thinking is more important than knowing the answers.

This struck a cord. And I think Sir Robinson said it even better than I have tried to express the problem with education. Perhaps education should focus on nourishing innate talents rather than producing desired results.

And for those of us who are beyond our formative years? Let’s live life and try things and fail only to change and try again and succeed. Let’s live. And living involves failing, sometimes. And living is learning and it is exhilarating.

This is a video that I shot with my friend, Randy Watson, who is one of the leading Realtors by sale in Georgia. Since Randy has sold over 120 foreclosed homes for banks so far this year, and I have financed many foreclosures for investors and for owner occupants, I thought you might enjoy this brief sit with Randy and I to highlight a few of the pitfalls to avoid and advantages to enjoy when buying a foreclosure.

By the way, one clarification in this video that has been asked. Real Estate Investors should plan to put 15-20% down on an investment property today. If you are looking at buying a home for your primary residence, then financing is very attractive with 0%, or 3%, or 5% down payment.

To your success, should you decide to wade into the land of buying a foreclosure!

A common question from both buyers around Atlanta and from Realtors and others, is what is the difference between a mortgage broker, banker, lender, etc.  That is a very good question, and here goes the answer:

• Lender – The ability to structure, underwrite, approve and fund a deal directly, then either service the loan or sell the ‘service release’ to either Fannie Mae or Freddie Mac. This license requires a significant net worth held in the company, which is why most mortgage operations do not have this license. However, this lender license affords the greatest degree of flexibility in underwriting and approving all loans. Phoenix Global Mortgage is a true lender, selling loans to Freddie.
• Correspondent Lender – The ability to underwrite, approve and fund a loan the fits the guidelines of another, larger lender. For example, a loan might be sold to Wells Fargo or Suntrust after it is approved and closed. So, that correspondent lender would underwrite strictly according to Well’s guidelines. The advantage for the borrower? Well, service is better with a smaller lender who does not have the ‘red tape’ of a bigger player.
• Broker – The ability to structure a loan file to fit the guidelines of a lender, then the file is sent to the lender to be underwritten, approved and funded. Advantage: the broker can scan multiple lenders to find the one where a ‘quirky’ loan scenario fits. Disadvantage: timeliness is sometimes compromised, because the file leaves the broker’s office to be underwritten, so the timeline is up to the lender. We currently broker Jumbo loans (> $417K), because jumbo loans are hard to find with good interest rates. We have closed a bunch with our broker relationship, because they are offering 5.5% for loans up to $1.5MM. That is worth a little extra wait on turn times.
• Government Loans – FHA, VA and Rural Housing. These loans are insured by their respective government agencies, for example by HUD in the case of FHA loans. But, HUD does not buy loans like Fannie and Freddie do. They just insure the loan against default. Therefore, different levels of being able to approve these loans exist, commonly referred to as “Full Eagle”, the ability to underwrite, approve and fund FHA loans directly, and “mini-Eagle”, the permission to broker the loans to a lender. Phoenix Global Mortgage is a Direct Endorsement (D.E.) Underwriter and approves these loans directly, and service levels are very quick.

There you have it. We are a true lender, just like the big boys. But, we are small, so service levels are optimal. If you need a mortgage loan, give me a call. I will work hard so that you will be as happy as the last several testimonials that have come my way.

Source: LA Times. So.Cal Median Price

Southern California and Florida along with a few other markets mostly out west, have been hit the hardest by the housing bubble bursting, you will agree.

So, if the California home market begins to turn, would you also agree that it is a sign that the housing crisis is beginning to find a bottom?  Give it some thought, since this aricle in the LA Times reports that home sales in Southern California rose by 65% in September, compared with Sept. one year ago.

Half those homes were previously foreclosed, and the median price continued to fall.  But with so many homes sold, I believe it would indicate that the market is finding an affordable bottom.

And, here in Atlanta, the same holds true.  I will have to find real numbers – maybe for a later blog post further on in the week – but anectdotal evidence that I have seen shows that prices are shoring up and finding an acceptable bottom.  If that is the case, sentiment towards housing will shift to positive again shortly.  You want to buy before that happens, if you are in a position to buy.

That is especially true if you are around Atlanta, and looking for a home at $350K or below.  Let’s look at an FHA loan.  Very easy qualifying, and rates have been dropping quickly since late last week.

Source: Yahoo! Finance

My opinion of the near future?

Well, I’m more optimistic than I have been in some time.  And the optimism stems from one bit of knowledge – that the markets are driven by sentiment.  And, the overriding sentiment for quite a few months now was that the market needed to let the deleveraging take effect, so it was fear of the unknown.  The unknown being not knowing where the bottom would be found nor how long it would take to find it.

Well, note today that, none of the $700B bailout has been spent on actually bailing the market out; but the Dow closed up 930 points.   I think the sentiment among investors is that the market has now found a bottom.  There may (will) be other downturns as we wriggle out of this, but investors feel like they have found the bottom and are becoming happy about it.

The people on the street will follow shortly – meaning (more…)

Several questions have come up recently from folks considering selling their home and moving, but wondering if they should wait.  For most, the consideration for waiting comes either from the concern over the economy or from the conventional wisdom that Winter is a bad time to put a home on the market.

Well, I disagree, for a variety of reasons.  Some of the reasons are common to every Winter season; and others are pointing to an opportunity right now, that means it is a good time to sell and buy again right now.

• Less homes are typically on the market in the winter, and less buyers are looking.  So, the buyers that ARE looking, are serious.  That means a lot less calls early on a Saturday morning from a Realtor asking if she can show your home at 9:30am. (more…)

Evidently the Dow has now dropped to 420

Okay, this is not any great insight or commentary, but this has got to be one of the funniest sites I have seen in one of the ugliest markets we have seen.

Sad Guys on Trading Floors

Enjoy!

But as you enjoy this, be sure to read the captions, not just laugh at the photos.  I don’t know who put this thing together, but, man, there had to be a few beers knocked back while coming up with the captions.

In December, 2006 I attended an industry conference in Las Vegas.  Excellent event.  It was at that event that I took a good hard look at the future three years in the mortgage industry, and a cold chill went down my spine.  Not because of any great insight that I had; but because an industry veteran, Bill Dallas, gave a talk.  He said, in essence, ‘you do not want to be in wholesale going forward, and you do not want to be a broker.  You will survive (maybe) as a retail loan officer – if you really know your stuff’.  

I took note.  You see, Bill founded a large and (reputable) subprime lender, First Franklin.  He sold that to National City Bank, and then started Ownit Mortgage.  Two days after that talk on stage in Vegas, Ownit was the first of the big lenders to be forced to close their doors.  That was December, 2006.  I was a bit nervous.

Now for the purpose of this post.  On the final day of that conference, Ben Zander gave a talk.  All I can say is, “How Facinating!”.  First off, he was an excellent speaker, and I had never heard of him before attending the event.  He surpassed Tony Robbins, who opened the event.  

Ben said that he teaches his students, when faced with an unpleasant turn of events, to avoid getting negative and instead accept each event and just say, “How Facinating!”

Sound corny?  That’s because you weren’t there. 

Okay, in fairness, the idea was to remain completely open to learning and gaining more experience and knowledge – and wonderment – from each experience.  It keeps one humble; and that keeps us from becoming cynical toward life.

Well, I don’t know about you, but the last three weeks I have been Facinated by the wild gyrations in the stock market.  And, I watch the bond market closely, because that is what moves mortgage rates.  You probably don’t, so let me tell you, the movements have been just as wild and, yes, just as facinating.

I do not want to make light of the hurting economy, and the effect it has on our ability to make a living, and our savings.  But, it is no less facinating to me.  So, as I watched bonds go from positive to very negative to moderate losses today; and the past several days, I cannot help but sit back and wonder, “How Facinating!”

How Facinating that there are so many intelligent people who cannot predict where the markets will take us one day to the next, nor one hour to the next.  How Facinating that so many people are letting factors completely outside of their control dictate what they do in their daily lives and businesses.  How Facinating to contemplate the fragility of the things we put our trust in, and how the eternal truths fly in and out of our lives like we day trade them.  How Facinating!

A quote from Warren Buffet has been flying around the internet of late, and for good reason as it is right for the times, ”Be fearful when everyone is greedy and greedy when everyone is fearful.”

Well, I would submit that there has not been a time in our lifetimes when the general populus has been more fearful.  Uncertainty surrounds us, in areas which neither you nor I can control.  And uncertainty stirs more fear than the known bad event.

For the brave of heart, there is plenty of opportunity that you can control, and you should.

Here are a few:

• Investment property:  If you have ever thought of jumping into buying rental real estate, now is the time.  A perfect storm is brewing.  Interest rates are low, and less people can buy a home than two years ago, so there are more renters on the street looking for a roof over their heads.  And, at least here in metro Atlanta, I have noticed home prices dropping dramitically in the lower priced homes, and in the upper end of the market.  The middle of the market is fairly stable in many areas around Atlanta.
• First Time Home Buyers:  On top of the $7500 tax credit for First Time Home Buyers in place now through June of ‘09, again, home prices in the first time buyer market are low, and rates are great.  Sure, you will most likely need a down payment now, but there are creative ways to come up with that.  See my post on that topic.
• Shoring up your finances for what appears to be a prolonged period of economic downturn:  If you have equity in your home, and have some credit card or other unsecured debt that you just cannot seem to get rid of, now may be the time to do a debt consolidation loan.  Along with that, take a good, hard look at your expenses.  And, cut where necessary.  Financial stress is eating a lot of people alive.  Don’t be one of them.