While I was moderating EasyHUD/forum today I ran across an interesting video .
Here is the link to the YouTube Video if the player doesn’t load below.
http://www.youtube.com/watch?v=pmeBSWI9sF8
There is a crisis that taking place right now of which VERY FEW are even aware. It is called the “Alt A” Crisis.What is ALT A CRISIS?
Here are some hints:- It is 50% BIGGER than Subprime Loan Types and growing larger!
- It has an Over 14% default with higher than a 700 avg. CREDIT SCORE/FICO
- It is going to be MUCH larger than the Subprime Crisis
- It involves many exotic loans
- Many of the loans balances will go up significantly thus creating even more defaultsTake a look at this website: http://www.newyorkfed.org/regional/subprime.htmlBottomline: Negative Equity is a HUGE Contributor to loan default. It will make Subprime Crisis look like a baby.
I recommend you check out Mr. Mortgage Blog/Website and subscribe to his RSS Feed.
What do you think about the “Alt A Crisis”? Do you think it would be beneficial to start focusing more of your real estate investing on short sales?Do you agree or disagree with Mr. Mortgage?
BECOME A SHORT SALE INVESTOR TODAY.RIGHT NOW, YOU ARE STANDING IN A RARE PLACE IN HISTORY FOR THE OPPORTUNITY IN INVEST IN SHORT SALES.Think you don’t have time to invest in short sales? Join our Team at www.ShortSaleology.com and let us do them for you.
Remember… be a servant,
Cory Boatright
Loss Mitigation Specialist
www.ShortSaleFundamentals.com
P.S Download the “Short Sale Trifecta” and join our GROWING COMMUNITY.
In fact, the month of February 2008, Our Lender Negotiation Team discounted… ready for this? $2,028,268.33 and we closed over $3,793,918.67 Quick side note: because I LOVE to brag on my students. One of my students recently closed on a short sale deal and walked away with a check for over $96,000 profit! And get this… since he went through my study course he has made over $700,000 PROFIT!!!
The Prime and Alt-a crisis that no one’s really talking about yet was well documented and predicted by Credit Suisse in January of last year. Based on their stats, there remains a minimum of $20b per month of subprime resets untill 9/08. The majority of that will go REO and the after effects will drag the market down for at least a year after that.
However, Starting in 1/09 there’s another 24 months of Option Arm, Alt-A, and Prime borrower loans resetting at a rate of $15b-$25b per month. That takes the resets thru 2012 and if there’s no concrete intervention, the after shock could last a year or maybe even 2 after that.
With a slowing economy in front of us the light at the end of the tunnel may end up being an on coming train.
On of the things I happen to do is BPO’s for Lenders. It helps me to keep a better pulse on valuations for my own Loss Mitigation companies deals (no I wont do a BPO on one of my own short sales..). Even now I’m seeing more and more subdivisions with 30%-50% of listings being retail short’s. And considering the absorption rate is less than 3% in my area, when these assets go Corporate it’s gonna kill the markets. And I dont mean just the housing market.
As a friend from Jersey told me after I explained all this to him last summer, “It’s time to hunker down…”
I’d expect by election time to see the pressure build for the FHA to step in with some kind of equity sharing refi for upside down borrowers. The write downs are gonna cost lenders big (and hopefully no ultimately us taxpayers), but if nothing is done to bring this around there’s gonna be so much red ink it’ll be flowing in the streets.
This is a very good video showing the “vehicle” that will drive more default loans.
I just took a call with a guy in Los Angeles County who had 760 fico score two years ago. He got excellent financing at 100% of value. But guess what? His work slowed down and his income dropped
He received a notice of default and he needs to close his negative equity position on his home. He called me to assist him in the Short Sale of his home.
It’s happening right now. This is a good video for all Short Sale real estate investors.
If the world economy keeps getting worse,we may be in for a world wide catastrophe that will fell the economies of the major countries on this planet.The fed will have its hands full trying to head this off ,and will push lenders to dump properties in order to stay solvent.This is where we,the short sale investor,come in to help save ,not only distressed homeowners,but perhaps our own financial futures as well.There will be some interesting times ahead,and it is only going to get worse.
In order to keep our countries financial system operating there will have to be major changes in the way loans are originated,the way reos are handled and cleared from the banking arena,and the way current loans are serviced that allow investors to acquire these homes in order to turn money over and fuel economic growth.If individuals and corporations with adequate funding can step in and buy homes then the economy can be stimulated.If not enough big money comes in to save the day,then the fed needs to give smaller investors grants,loans ,or other assistance to buy properties ,rehab them causing jobs to be created and thus helping lower income buyers to afford homes .As the video shows ,this is just the tip of the iceberg that may sink us all if not handled correctly.
Thanks for posting that, Cory. I ran into the same video from another source. It seems that many of the experienced investors are talking about how bad Alt-A is going to be, but this sort of thing never seems to hit popular media until *after* it becomes a big problem.
http://bp3.blogger.com/_pMscxxELHEg/RxzD0s_7EYI/AAAAAAAABB4/ljDSXZhMG3o/s1600-h/IMFresets.jpg
Alt-A resets will peak in 2011. Things will remain bad for quite a while. Bad for everyone else, that is, and good for those who help bring liquidity to the markets through short sales, REO purchases, and note purchases.
The Fed currently isn’t doing much to “save” the markets. The swaps for T-bills aren’t inflationary (yet), since the assets have to be swapped back every 28 days. I think swaps will become inflationary when the paper stops performing while it’s being held by the Fed.
I think Bernanke is more concerned about the value of the dollar than he is with bailing out the markets. I’ve written about this before:
http://disasterinvestor.com/2008/04/10/the-fed-is-not-inflating-lets-make-some-money/
http://disasterinvestor.com/2008/04/14/will-the-fed-bail-us-out/
Readers may feel free to let me know how wrong you think I am.
I agree with Roger that we need major change in the real estate industry. The sudden “tightening” of lender guidelines is like slamming the barn door shut after the horse has already run away.
The biggest sweeping reform that we need right now is an overhaul of the Fannie/Freddie and FHA system that will COMPLETELY overlook a foreclosure/short sale/DIL as long as the rest of the credit profile is somewhat sound.
We’ve got good people all over getting foreclosed on because they are in a bad loan and then they can’t buy another house for 3 years because of “underwriting guidelines”. This is taking a HUGE number of people out of the market that would otherwise be buying a home and taking a house off the market.
Of course, if we DID go this route, I guess there would be nothing to stop everyone from stopping payment on their house so that they could let one go and buy another at a KILLER discount. I think that would be more hype than realty though. It’s like asking why everyone doesn’t just buy a new house in the wife’s name, move, and then let the other one go. It would work just fine in a LOT of cases, but 97% of people just don’t think that way.
Another thing that needs to happen is that Short-Refi’s need to start becoming a common thing. People need to be able to short refi their homes, stay in them at an affordable price and keep another house from going on the market.
Thank you for the wonderfull feed Cory I am new to this side of the business and am looking forward to the study program i ordered from you can’t wait to dig in.
A real eye opener.
Nick