The Mortgage Bail Out. Have you heard about it? President Bush has introduced a plan to freeze adjustable mortgages and stop the schedule upward tick that many of these loans will do in January. “Yes that’s right, freeze the mortgage at its introductory interest rate.” “Wow” what a deal. This will solve all our foreclosure woes. This will get the housing crisis over with.

All of this is crap! It is a temporary fix to a long term problem. If you were to go to creditsuisse.com they monitor the loans and their adjustments. The scheduled adjustment is one of 2-3 cycles depending on the loans that is to take place. Another adjustment is scheduled in 2010. When we freeze the mortgage now, what happens in 2010?

Somewhere down the line, the investor in this secondary market will want their return on their investment. Who is that secondary market? It’s you!! Your mutual funds, your pension funds and your life insurance. It’s the land of big money. It’s the “They” that we always talk about.

If they quit getting a return on their investment and the funds are locked in at a low rate, they will not loan to you tomorrow. In effect while we solve a problem today with foreclosures it starts a new problem with new loans being almost impossible to get. Investors will tighten their standards, want more down payment and probably raise future interest rates to cover losses they are taking on current loans.

The foreclosure and bad loans affect about 10% of the homeowners in the USA. The solution is work through it now. Allow new interest rates to remain low. Banks need to take cash losses on some homes and people will lose their homes. They will have to rent for awhile. They need to solve their problem with good financial planning. I do agree that many of these people should be allowed to refinance at the current interest rate. Allow that solution. Allow the rates to adjust to today’s rate. Investors then can adjust the return on investment and loan accordingly. Somewhere, sometime we need to deal with this. Let’s do it now, no sense putting off to tomorrow what we can do today!

Thanks,
Brian

I just wanted to take a moment and wish all of you a Happy Holidays.

My wish is that all of you are healthy and happy and finding ways to make ends meet. With all the doom and gloom of shootings, foreclosures, economic bad news, global warming and anything else the media can print, it’s hard to be positive. Obviously we can’t put our heads in the sand and all the “bad” will go away. NO we all have to live through it.

Living through all these trials and issues means that we are “living”. Living has problems and issues daily. I hope that you can find good in everyday.

As for the tragedies, it’s hard to find positive. The shootings at New Life Church had only one positive, it could have been a lot worse. The reality is that in almost anything it can be worse. I hope that you are thankful for what you do have.

Just some thoughts!! I do hope the holiday season recharges you for a Happy and Prosperous New Year. I think 2008, from a real estate point of view, will be much the same as 2007. I expect the county to have around 9000 sales. Foreclosures will continue at their current pace. Investors will buy many of these homes. I hope first time buyers come into the market. Rates are low (6%) and home prices are very close to bottoming out. We all need to think positive and all things will be better.

Happy Holidays
Brian