A mortgage rescue to help hundreds of thousands of struggling homeowners avoid foreclosure and get more affordable, safer loans passed the Senate overwhelmingly Friday, but it faces a bumpy road amid continuing turmoil in the housing market.
The 63-5 vote reflected a keen interest by Democrats and Republicans to send election-year help to distressed homeowners with economic issues topping voters' concerns.
The plan lets homeowners buckling under mortgage payments they can't afford keep their homes and get more affordable mortgages backed by the Federal Housing Administration. Banks that agreed to take substantial losses on those distressed loans could avoid costly foreclosures and be assured of recovering at least some money.
The new program would let the FHA insure as much as $300 billion in new mortgages, helping an estimated 400,000 homeowners.
It still faces challenges, however, with the House planning to rewrite key details and the White House threatening a veto without major changes.
"It's not the final stop, but it is a major stop in getting this bill done," said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee. "For those who said this Congress cannot come together in a bipartisan fashion to do something responsible about housing, this bill does that."
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman and an architect of the bill, says the few but significant revisions House leaders are seeking could be made in as little as one week.
Dodd said he was expecting minor "tweaks" that could be dealt with quickly.
But key players are bracing for intense negotiations to resolve the differences. They hope to smooth over disputes with the White House at the same time, with an eye toward producing a bill President Bush could sign later this month.
The White House Friday renewed its warning that Bush would veto the Senate-passed bill without revisions, citing $3.9 billion in the measure for buying and rehabilitating foreclosed properties it said would help lenders, not homeowners.
The measure includes a long-sought modernization of the FHA and would create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage giants. It also would provide $14.5 billion in housing tax breaks, including a credit of up to $8,000 for first-time home buyers.
Democrats are divided over important elements of the plan, including limits on loans the FHA may insure and Fannie Mae and Freddie Mac may buy. The Senate measure sets them at $625,000, while House leaders — including Speaker Nancy Pelosi, D-Calif. — want the cap as high as $730,000.
House leaders also oppose the immediate effective date of the Senate plan, preferring to phase in the new regulations for Fannie Mae and Freddie Mac over six months.
"We'd have a hard time agreeing to that," Dodd told reporters Friday. He called a Capitol Hill news conference to dispel fears about the financial health of Fannie Mae and Freddie Mac as their stocks plummeted on reports that the government was considering taking over one or both of them.
Another key point of dispute is the funding in the Senate measure for buying and fixing foreclosed properties. The House's band of conservative "Blue Dog" Democrats oppose the money, arguing that it would swell the deficit unless paired with cuts or tax increases to cover the cost.
But many Democrats, particularly members of the Congressional Black Caucus, are fighting to keep the funding, which they say will help prevent the communities hardest hit by the housing crisis from sliding into blight.
"There are people who tell me to ignore" that threat, Frank said in a statement Friday. "But there is too much that is important in this bill, and it has already been too long delayed by procedural problems in the Senate, for us to risk the further delay involved in a veto."
He said he was working to find a way to shift the funds to a must-pass spending bill that would be approved before lawmakers scatter for the year in September.
Dana Perino, Bush's spokeswoman, said the money should be stripped out of the measure "so that they can get a housing bill to the president that he could sign right away."
Sen. Barack Obama, D-Ill., the presumptive presidential nominee, said Bush should drop his opposition to the housing plan and other Democratic efforts to ease economic pain.
"I call on the administration to support this bill along with a second emergency stimulus package to jumpstart the economy and build on this important start to advance more rigorous measures to protect homeowners from foreclosure," he said. Obama was on the campaign trail Friday and did not vote on the measure, which had been expected to pass by a wide margin. He was one of 32 senators not voting.
With the administration scrambling to tamp down on investor fears about Fannie Mae and Freddie Mac, Perino called the new regulations in the measure for the two mortgage giants its "most important feature."
Lawmakers and the Bush administration agree on the central concept behind the housing package: allowing the government to backstop new mortgages for struggling homeowners.
To make it more palatable to Republicans, the Senate measure would take responsibility for any losses away from taxpayers and instead cover them by diverting a newly created affordable housing fund drawn from Fannie Mae and Freddie Mac profits.
Saturday, July 12, 2008
Friday, July 11, 2008
IndyMac Bank's - largest regulated thrift to fail
IndyMac Bank's assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures.
The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.
The Office of Thrift Supervision said it transferred IndyMac's operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors' demands.
IndyMac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks, regulators said.
Other bank services, such as online banking and phone banking were scheduled to be made available on Monday.
"This institution failed today due to a liquidity crisis," OTS Director John Reich said.
The lender's failure came the same day that financial markets plunged when investors tried to gauge whether the government would have to save mortgage giants Fannie Mae and Freddie Mac.
Shares of Fannie and Freddie dropped to 17-year lows before the stocks recovered somewhat. Wall Street is growing more convinced that the government will have to bail out the country's biggest mortgage financiers, whose failure could deal a tremendous blow to the already staggering economy.
The FDIC estimated that its takeover of IndyMac would cost between $4 billion and $8 billion.
IndyMac's collapse is second only to that of Continental Illinois National Bank, which had nearly $40 billion in assets when it failed in 1984, according to the FDIC.
News of the takeover distressed Alan Sands, who showed up at the company's headquarters in Pasadena, Calif., to find out when he could withdraw his funds.
"Hopefully the FDIC insurance will take care of it," said Sands, of El Monte, Calif. "I'm also kind of kicking myself for not taking care of this sooner, sooner as in the last couple of days."
A couple of dozen customers could be seen outside the building, reading fliers handed out by FDIC staff. The agency set up a toll-free number for bank customers to call.
IndyMac Bancorp Inc., the holding company for IndyMac Bank, has been struggling to raise capital as the housing slump deepens.
IndyMac had $32.01 billion in assets as of March 31.
A spokesman for the lender referred media queries to the FDIC.
The banking regulator said it closed IndyMac after customers began a run on the lender following the June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent IndyMac's collapse.
In the 11 days that followed the letter's release, depositors took out more than $1.3 billion, regulators said.
In a statement Friday, Schumer said IndyMac's failure was due to long-standing practices by the bank, not recent events.
"If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today," Schumer said. "Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs."
The FDIC planned to reopen the bank on Monday as IndyMac Federal Bank, FSB.
Deposits are insured up to $100,000 per depositor.
As of March 31, IndyMac had total deposits of $19.06 billion.
Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said.
Customers with uninsured deposits could begin making appointments to file a claim with the FDIC on Monday. The agency said it would pay unsecured depositors an advance dividend equal to half of the uninsured amount.
During a conference call with reporters, FDIC Chairman Sheila C. Bair said the agency would cover all insured deposits and then try to recover its costs by selling IndyMac's assets.
"We anticipate trying to market the institution as a whole bank," Bair said. "How much money we derive from that will depend on who gets paid what."
Holders of unsecured IndyMac debt may not fully recover their investment, Bair said.
"Generally if a creditor is secured, they are at the top of the claims priority," she said. "If they are unsecured, they're pretty low on the claims priority and probably will take some type of haircut with this, but we have not had a chance to do a thorough analysis to know ... how extensive those losses will be."
IndyMac spent the last two weeks trying to reassure customers that it was not near default.
On Monday, IndyMac announced it had stopped accepting new loan submissions and planned to slash 3,800 jobs, or more than half of its work force — the largest employee cuts in company history.
In the letter to shareholders, IndyMac Chairman and Chief Executive Michael W. Perry said the drastic measures were made in conjunction with banking regulators to improve the company's financial footing and "meet our mutual goal of keeping Indymac safe and sound through this crisis period."
The plan was supposed to generate roughly $5 billion to $10 billion per year of new loans backed by government-sponsored mortgage companies, Perry said at the time.
But the run on its deposits ultimately short-circuited the strategy, prompting regulators to take action Friday.
The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.
The Office of Thrift Supervision said it transferred IndyMac's operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors' demands.
IndyMac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks, regulators said.
Other bank services, such as online banking and phone banking were scheduled to be made available on Monday.
"This institution failed today due to a liquidity crisis," OTS Director John Reich said.
The lender's failure came the same day that financial markets plunged when investors tried to gauge whether the government would have to save mortgage giants Fannie Mae and Freddie Mac.
Shares of Fannie and Freddie dropped to 17-year lows before the stocks recovered somewhat. Wall Street is growing more convinced that the government will have to bail out the country's biggest mortgage financiers, whose failure could deal a tremendous blow to the already staggering economy.
The FDIC estimated that its takeover of IndyMac would cost between $4 billion and $8 billion.
IndyMac's collapse is second only to that of Continental Illinois National Bank, which had nearly $40 billion in assets when it failed in 1984, according to the FDIC.
News of the takeover distressed Alan Sands, who showed up at the company's headquarters in Pasadena, Calif., to find out when he could withdraw his funds.
"Hopefully the FDIC insurance will take care of it," said Sands, of El Monte, Calif. "I'm also kind of kicking myself for not taking care of this sooner, sooner as in the last couple of days."
A couple of dozen customers could be seen outside the building, reading fliers handed out by FDIC staff. The agency set up a toll-free number for bank customers to call.
IndyMac Bancorp Inc., the holding company for IndyMac Bank, has been struggling to raise capital as the housing slump deepens.
IndyMac had $32.01 billion in assets as of March 31.
A spokesman for the lender referred media queries to the FDIC.
The banking regulator said it closed IndyMac after customers began a run on the lender following the June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent IndyMac's collapse.
In the 11 days that followed the letter's release, depositors took out more than $1.3 billion, regulators said.
In a statement Friday, Schumer said IndyMac's failure was due to long-standing practices by the bank, not recent events.
"If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today," Schumer said. "Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs."
The FDIC planned to reopen the bank on Monday as IndyMac Federal Bank, FSB.
Deposits are insured up to $100,000 per depositor.
As of March 31, IndyMac had total deposits of $19.06 billion.
Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said.
Customers with uninsured deposits could begin making appointments to file a claim with the FDIC on Monday. The agency said it would pay unsecured depositors an advance dividend equal to half of the uninsured amount.
During a conference call with reporters, FDIC Chairman Sheila C. Bair said the agency would cover all insured deposits and then try to recover its costs by selling IndyMac's assets.
"We anticipate trying to market the institution as a whole bank," Bair said. "How much money we derive from that will depend on who gets paid what."
Holders of unsecured IndyMac debt may not fully recover their investment, Bair said.
"Generally if a creditor is secured, they are at the top of the claims priority," she said. "If they are unsecured, they're pretty low on the claims priority and probably will take some type of haircut with this, but we have not had a chance to do a thorough analysis to know ... how extensive those losses will be."
IndyMac spent the last two weeks trying to reassure customers that it was not near default.
On Monday, IndyMac announced it had stopped accepting new loan submissions and planned to slash 3,800 jobs, or more than half of its work force — the largest employee cuts in company history.
In the letter to shareholders, IndyMac Chairman and Chief Executive Michael W. Perry said the drastic measures were made in conjunction with banking regulators to improve the company's financial footing and "meet our mutual goal of keeping Indymac safe and sound through this crisis period."
The plan was supposed to generate roughly $5 billion to $10 billion per year of new loans backed by government-sponsored mortgage companies, Perry said at the time.
But the run on its deposits ultimately short-circuited the strategy, prompting regulators to take action Friday.
Thursday, July 10, 2008
New YMCA Myrtle Beach
Wednesday officials held a groundbreaking ceremony to celebrate the 35,000 square foot building will sit on a 12-acre lot on the waterway side of Highway 17 Bypass, at 62nd avenue North.
The facility will be a big improvement!
The facility will be a big improvement!
Wednesday, July 9, 2008
Weekly Mortgage Applications increase of 7.5 percent
The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending July 4, 2008. The Market Composite Index, a measure of mortgage loan application volume, was 513.4, an increase of 7.5 percent on a seasonally adjusted basis from 477.7 one week earlier. This week’s results include an adjustment to account for the Independence Day holiday. On an unadjusted basis, the Index decreased 14.1 percent compared with the previous week and was down 18.1 percent compared with the same week one year earlier.
The Refinance Index increased 8.7 percent to 1379.3 from 1269.2 the previous week and the seasonally adjusted Purchase Index increased 6.7 percent to 365.8 from 342.8 one week earlier. The Conventional Purchase Index increased 1.6 percent while the Government Purchase Index (largely FHA) increased 19.8 percent.
The four week moving average for the seasonally adjusted Market Index is down 2.3 percent to 489.7 from 501.1. The four week moving average is down 0.9 percent to 350.0 from 353.2 for the Purchase Index, while this average is down 4.4 percent to 1309.8 from 1370.5 for the Refinance Index.
The refinance share of mortgage activity increased to 37.3 percent of total applications from 36.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 10.0 percent from 8.5 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages increased to 6.43 percent from 6.33 percent, with points decreasing to 1.06 from 1.09 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 5.94 percent from 5.90 percent, with points increasing from 1.02 to 1.10 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for one-year ARMs increased to 7.24 percent from 7.14 percent, with points decreasing to 0.26 from 0.31 (including the origination fee) for 80 percent LTV loans.
The Refinance Index increased 8.7 percent to 1379.3 from 1269.2 the previous week and the seasonally adjusted Purchase Index increased 6.7 percent to 365.8 from 342.8 one week earlier. The Conventional Purchase Index increased 1.6 percent while the Government Purchase Index (largely FHA) increased 19.8 percent.
The four week moving average for the seasonally adjusted Market Index is down 2.3 percent to 489.7 from 501.1. The four week moving average is down 0.9 percent to 350.0 from 353.2 for the Purchase Index, while this average is down 4.4 percent to 1309.8 from 1370.5 for the Refinance Index.
The refinance share of mortgage activity increased to 37.3 percent of total applications from 36.8 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 10.0 percent from 8.5 percent of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages increased to 6.43 percent from 6.33 percent, with points decreasing to 1.06 from 1.09 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 5.94 percent from 5.90 percent, with points increasing from 1.02 to 1.10 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for one-year ARMs increased to 7.24 percent from 7.14 percent, with points decreasing to 0.26 from 0.31 (including the origination fee) for 80 percent LTV loans.
Indymac is the latest casualty in the mortgage meltdown
Indymac is the latest casualty in the mortgage meltdown. IndyMac Bancorp Inc. is the 7th largest savings and loan and the 2nd largest independent mortgage lender in the nation.
Indymac, based in Pasadena, California, was founded by Countrywide nearly two decades ago. Countrywide, the nation’s largest lender, was acquired by Bank of America Corp after financial woes of their own.
Indymac began shutting down lending operations this week and said it will cut about 3,400 employees or about 53% of their staff. The company will continue to provide reverse mortgages through its Financial Freedom division.
On July 7, 2008 Indymac issued the following letter to its stakeholders:
Dear Indymac Stakeholders:
In this very difficult and challenging environment, any of the actions that we take to keep Indymac safe and sound unfortunately have negative consequences to some important constituency. As we stated in our financial update on May 12, 2008, we have been working with our investment bankers to raise additional capital. To-date, we have not been successful with these efforts, and, while we will continue these efforts with our bankers and others, we don't expect to be able to raise capital until there is more stability and less uncertainty in the housing and mortgage markets. While some shareholders may believe it is in their best interests that we not raise capital right now given the significant dilution that it would cause, there are consequences of not being able to raise more capital and, therefore, actions that we now must take.
Given the continued downward trend in home prices and a resulting increase in our forecasted credit losses and the related downward trend in the pricing of all mortgage related assets in the capital markets, especially mortgage-backed securities where we have experienced significant rating agency downgrades this quarter, we expect our loss for the second quarter to be larger than Q108, but it is difficult at this time to be more precise given the significant uncertainty surrounding accounting estimates, fair value accounting and other accounting matters.
In light of the current environment and related deterioration of our financial position since last quarter, we have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping Indymac safe and sound through this crisis period. In that respect, based on information we have provided to our regulators, they have advised us that we are no longer "well capitalized", which we stated on May 12 was a possible scenario. Our regulators have also asked us to submit to them a new business plan for their review and approval, something on which we have been working with them for some time. We have agreed on the basic elements of the plan, and the regulators have directed us to begin executing on it. An important element of our plan is to improve our capital ratios. Without an external capital raise, the traditional way to improve safety and soundness is to sell assets and shrink the balance sheet, which in normal times generally has the effect of improving capital ratios and bolstering liquidity. Yet in this environment, where either there are no bids for most of IMB's mortgage loans and securities or the bid/ask spreads are abnormally wide, "fire-selling" assets would actually deplete capital further. As a result, the most realistic and cost-effective way to shrink both our balance sheet and our servicing rights asset (which, as discussed in previous communications, is up against the regulatory cap limit), is to curtail most new loan production.
In addition to needing to shrink our assets to improve our capital ratios, we also need to do so to ensure that we maintain prudent operating liquidity. A consequence of falling below well-capitalized is that we are no longer permitted to accept new brokered deposits or renew or roll over existing ones, unless we get a waiver from the FDIC. While we have submitted a waiver application, it is uncertain as to whether such a waiver will be granted.
As a result of the above, we have made the difficult decision, effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel. We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks. While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets. At the same time, these operations take up significant balance sheet capacity and "feed" growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital.
In closing our forward mortgage business, we will refocus our lending efforts on supporting and building within regulatory constraints Financial Freedom, our reverse mortgage unit (FHA production only), and on continuing the retention activities associated with our servicing portfolio. Combined, we currently expect these units to produce roughly $5 billion to $10 billion per year of new FHA/GSE loans. Thus, our core business model will include (1) Financial Freedom, one of the largest reverse mortgage lenders in the Country; (2) a top ten mortgage loan servicing operation, with a solid retention production unit; and (3) a Southern California retail bank branch network, including 33 branches and roughly $18 billion in deposits, of which over 96% is fully covered by FDIC insurance. In addition, when this housing and mortgage crisis abates and we return to health, we would also hope to be an investor in mortgage loans and mortgage-backed securities and might re-enter the national forward mortgage production business with a low-cost, non-commissioned-based business model.
Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months, which should reduce our operating expenses by roughly 60%. We will retain about 1,100 employees in loan servicing in Kalamazoo and Austin; 350 in our servicing retention group in Irvine and Kansas City; 800 at Financial Freedom, primarily in Irvine, Sacramento, and Atlanta; 400 in our Southern California retail and web bank; 500 in portfolio management and administration, largely in Pasadena; and 250 in discontinued businesses. In building Indymac up from 4 employees in 1993 to its present size, we have had to retrench and then rebuild several times over the past 15 years, but clearly these are the largest and most difficult staff reductions we have ever had to make. If we had another alternative, we clearly would have chosen it, as we understand how painful these workforce reductions can be for the affected employees and their families. Given Indymac's current financial position and these significant layoffs, I strongly believe it is appropriate that I further materially reduce my own compensation. As a result, I have requested of Indymac's Board of Directors that they reduce my base salary by 50%.
With respect to severance, our policy has always been that the fair and right thing to do is to provide our departing employees with a generous severance program to ease their transition to the next stage of their career. Our severance program, which provided one month of pay and one month of Indymac-paid COBRA insurance coverage for each year of service, was clearly the most generous in the mortgage industry, if not among most of the Fortune 500. I very much regret that the reality today, however, is that we can no longer afford this program given our need to preserve capital and return to profitability. Therefore, we will be providing employees with a minimum 30-day notice of the termination of their employment (effectively, 30 days severance), with employees covered under the Federal WARN Act and similar state statutes ("WARN") receiving 60 days of advance notice prior to the effective date of the their termination. Affected employees with five or more years of service will receive a minimum $20,000 severance, including any compensation payments made during the notice period.
With all of the above said, in this environment plans can change often and quickly (e.g. ability to raise capital and/or liquidity, regulatory actions, etc.). All we can do is continue to work hard and do our very best to keep Indymac safe and sound, so that we can rebuild our workforce and shareholder value when the housing and mortgage markets stabilize. We will be providing more information on our plans and prospects when we release Q208 earnings.
Very truly yours,
Michael W. Perry
Chairman and Chief Executive Officer
Indymac, based in Pasadena, California, was founded by Countrywide nearly two decades ago. Countrywide, the nation’s largest lender, was acquired by Bank of America Corp after financial woes of their own.
Indymac began shutting down lending operations this week and said it will cut about 3,400 employees or about 53% of their staff. The company will continue to provide reverse mortgages through its Financial Freedom division.
On July 7, 2008 Indymac issued the following letter to its stakeholders:
Dear Indymac Stakeholders:
In this very difficult and challenging environment, any of the actions that we take to keep Indymac safe and sound unfortunately have negative consequences to some important constituency. As we stated in our financial update on May 12, 2008, we have been working with our investment bankers to raise additional capital. To-date, we have not been successful with these efforts, and, while we will continue these efforts with our bankers and others, we don't expect to be able to raise capital until there is more stability and less uncertainty in the housing and mortgage markets. While some shareholders may believe it is in their best interests that we not raise capital right now given the significant dilution that it would cause, there are consequences of not being able to raise more capital and, therefore, actions that we now must take.
Given the continued downward trend in home prices and a resulting increase in our forecasted credit losses and the related downward trend in the pricing of all mortgage related assets in the capital markets, especially mortgage-backed securities where we have experienced significant rating agency downgrades this quarter, we expect our loss for the second quarter to be larger than Q108, but it is difficult at this time to be more precise given the significant uncertainty surrounding accounting estimates, fair value accounting and other accounting matters.
In light of the current environment and related deterioration of our financial position since last quarter, we have been working closely with our federal banking regulators with respect to the actions that they and we must take to meet our mutual goal of keeping Indymac safe and sound through this crisis period. In that respect, based on information we have provided to our regulators, they have advised us that we are no longer "well capitalized", which we stated on May 12 was a possible scenario. Our regulators have also asked us to submit to them a new business plan for their review and approval, something on which we have been working with them for some time. We have agreed on the basic elements of the plan, and the regulators have directed us to begin executing on it. An important element of our plan is to improve our capital ratios. Without an external capital raise, the traditional way to improve safety and soundness is to sell assets and shrink the balance sheet, which in normal times generally has the effect of improving capital ratios and bolstering liquidity. Yet in this environment, where either there are no bids for most of IMB's mortgage loans and securities or the bid/ask spreads are abnormally wide, "fire-selling" assets would actually deplete capital further. As a result, the most realistic and cost-effective way to shrink both our balance sheet and our servicing rights asset (which, as discussed in previous communications, is up against the regulatory cap limit), is to curtail most new loan production.
In addition to needing to shrink our assets to improve our capital ratios, we also need to do so to ensure that we maintain prudent operating liquidity. A consequence of falling below well-capitalized is that we are no longer permitted to accept new brokered deposits or renew or roll over existing ones, unless we get a waiver from the FDIC. While we have submitted a waiver application, it is uncertain as to whether such a waiver will be granted.
As a result of the above, we have made the difficult decision, effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel. We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks. While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets. At the same time, these operations take up significant balance sheet capacity and "feed" growth in the servicing asset, an asset we need to shrink given its size relative to our existing capital.
In closing our forward mortgage business, we will refocus our lending efforts on supporting and building within regulatory constraints Financial Freedom, our reverse mortgage unit (FHA production only), and on continuing the retention activities associated with our servicing portfolio. Combined, we currently expect these units to produce roughly $5 billion to $10 billion per year of new FHA/GSE loans. Thus, our core business model will include (1) Financial Freedom, one of the largest reverse mortgage lenders in the Country; (2) a top ten mortgage loan servicing operation, with a solid retention production unit; and (3) a Southern California retail bank branch network, including 33 branches and roughly $18 billion in deposits, of which over 96% is fully covered by FDIC insurance. In addition, when this housing and mortgage crisis abates and we return to health, we would also hope to be an investor in mortgage loans and mortgage-backed securities and might re-enter the national forward mortgage production business with a low-cost, non-commissioned-based business model.
Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months, which should reduce our operating expenses by roughly 60%. We will retain about 1,100 employees in loan servicing in Kalamazoo and Austin; 350 in our servicing retention group in Irvine and Kansas City; 800 at Financial Freedom, primarily in Irvine, Sacramento, and Atlanta; 400 in our Southern California retail and web bank; 500 in portfolio management and administration, largely in Pasadena; and 250 in discontinued businesses. In building Indymac up from 4 employees in 1993 to its present size, we have had to retrench and then rebuild several times over the past 15 years, but clearly these are the largest and most difficult staff reductions we have ever had to make. If we had another alternative, we clearly would have chosen it, as we understand how painful these workforce reductions can be for the affected employees and their families. Given Indymac's current financial position and these significant layoffs, I strongly believe it is appropriate that I further materially reduce my own compensation. As a result, I have requested of Indymac's Board of Directors that they reduce my base salary by 50%.
With respect to severance, our policy has always been that the fair and right thing to do is to provide our departing employees with a generous severance program to ease their transition to the next stage of their career. Our severance program, which provided one month of pay and one month of Indymac-paid COBRA insurance coverage for each year of service, was clearly the most generous in the mortgage industry, if not among most of the Fortune 500. I very much regret that the reality today, however, is that we can no longer afford this program given our need to preserve capital and return to profitability. Therefore, we will be providing employees with a minimum 30-day notice of the termination of their employment (effectively, 30 days severance), with employees covered under the Federal WARN Act and similar state statutes ("WARN") receiving 60 days of advance notice prior to the effective date of the their termination. Affected employees with five or more years of service will receive a minimum $20,000 severance, including any compensation payments made during the notice period.
With all of the above said, in this environment plans can change often and quickly (e.g. ability to raise capital and/or liquidity, regulatory actions, etc.). All we can do is continue to work hard and do our very best to keep Indymac safe and sound, so that we can rebuild our workforce and shareholder value when the housing and mortgage markets stabilize. We will be providing more information on our plans and prospects when we release Q208 earnings.
Very truly yours,
Michael W. Perry
Chairman and Chief Executive Officer
rates will likely find their level and stabilize.
Last week, rates edged higher on positive economic news. However, after last week's jammed economic calendar, the week ahead looks timid at best. But could this be what rates need to stabilize?
After returning to work after the long holiday weekend, bond investors will be greeted by a slow economic calendar. This hiatus from high impact reports will likely cause rates to continue to move higher early in the week, then stabilize.
The bottom line: Unless some unexpected statements are released rates will likely find their level and stabilize.
After returning to work after the long holiday weekend, bond investors will be greeted by a slow economic calendar. This hiatus from high impact reports will likely cause rates to continue to move higher early in the week, then stabilize.
The bottom line: Unless some unexpected statements are released rates will likely find their level and stabilize.
South Carolina Senator Jim DeMint to endorse off shore drilling
Wednesday Katon Dawson became the first Republican Party Chairman to endorse off shore drilling.
He supports the drill here, drill now, pay less campaign. He says the campaign is the first step to breaking America's dependence on foreign oil and lowering prices.
U.S. Senator Jim DeMint also endorses the campaign.
He supports the drill here, drill now, pay less campaign. He says the campaign is the first step to breaking America's dependence on foreign oil and lowering prices.
U.S. Senator Jim DeMint also endorses the campaign.
celebrity financial trouble
Tabloid magazines like to reassure us that celebrities are just like us -- they go grocery shopping, take their dogs for a stroll around the neighborhood, even pump their own gas.
These days, that also can hold true when it comes to the plummeting real estate market. Several celebrities have dealt with foreclosure issues on their luxurious estates and many more have had to drop their asking prices, putting some high-profile faces on a growing problem: The real estate meltdown is hitting every socioeconomic class.
The case of Ed McMahon has shown that you can make millions over a lengthy show business career and still find yourself in foreclosure. Johnny Carson's former "Tonight Show" sidekick owes more than $644,000 in mortgage payments on his Mediterranean estate in Beverly Hills, a house he and his wife have been trying to sell for two years. The six-bedroom and five-bathroom home -- in the same exclusive, gated community where Britney Spears lives -- is on the market for $6.5 million, down from an original price of $7.6 million.
The 85-year-old television personality, who has been unable to work since breaking his neck in a fall 18 months ago, described his economic problems as "a perfect storm."
"If you spend more money than you make, you know what happens.
And it can happen. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen," McMahon said on "Larry King Live" recently. "You want everything to be perfect, but that combination of the economy, I have a little injury, I have a situation. And it all came together."
McMahon is not the only celebrity to find himself in such financial trouble. Former NBA player Vin Baker saw his home in Durham, Conn., go up for auction last weekend. The seven-bedroom, six-and-a-half-bath mansion, on about 11 acres with a basketball court and a bowling alley, had been on the market for $2,950,000.
Earlier this year, former baseball star and "Juiced" author Jose Canseco stopped making payments on his $2.5 million home in the upscale Encino section of L.A.'s San Fernando Valley.
Rick Sharga, vice president of marketing for RealtyTrac, which monitors foreclosures, said that people of any income level can get in trouble by buying overvalued homes at the peak of the market that they ultimately can't afford.
"Ed McMahon's a sympathetic character in this scenario, in that he got into a house that possibly he could have afforded if he had been able to keep working; then he had an injury that upset his financial apple cart pretty badly," Sharga said. "What you don't know is, in a normal real estate market, if the same lender would have taken a look at an 82-year-old man at the tail end of his career and written him a $4.6 million mortgage he had to keep working to be able to afford."
It's not all doom and gloom, of course. Avril Lavigne listed her nearly 6,900-square-foot Mulholland Estates mansion for $5.8 million and, after 36 days on the market, recently accepted a cash offer of $5.2 million.
But as celebrity real estate columns such as "Hot Property" in the Los Angeles Times and "Gimme Shelter" in the New York Post show, other stars can't command the same prices for their homes that they might have been able to a few years ago.
The price of Angela Bassett and Courtney B. Vance's house has dropped more than $2 million in the past year. The French Colonial in a gated section of Los Angeles' old-money Hancock Park neighborhood has five bedrooms, seven and a half bathrooms, a gym, a hair salon and a two-story guest house. An agent listed it last year for $5,999,000, then a month later took it off the market for seven months. Then June Ahn of Coldwell Banker got the house and listed it for $4,999,000; she soon reduced it to $4.6 million, and now has reduced it again to $3.9 million.
"It was overpriced," Ahn said. "The price difference from $5,999,000 to $3.9 (million), obviously we'll have a bigger number of buyers that can afford to get into it and even take a look at it."
It helps that the husband and wife, who bought the house 17 years ago for about $1.8 million, own it outright. "They're very flexible, they just go with the flow of the market," Ahn said.
"Unfortunately, this happens. Last year was better than this year. Now they realize they didn't reduce in time. They were hoping to get the best (price) last year, but it didn't happen. So they learned the lesson."
The primary element driving where a celebrity chooses to live is privacy, said Jordan Cohen of Re/Max, who has represented more than 50 stars and athletes in real estate transactions, including Shaquille O'Neal and Marilyn Manson. He's selling actress Joely Fisher's house -- a four-bed, seven-bath, midcen-tury Craftsman at the end of a secluded drive with a pool and a screening room for $3,295,000, about $1 million less than the asking price when another agent first listed it last summer.
He said he believes a star's property can bring in more money than a regular house.
"I know it adds value," said Cohen, sitting on a limestone countertop in the kitchen of the suburban Encino home. "A good analogy would be (that) shoe companies pay athletes millions of dollars to wear a specific shoe so you'll have young America buy that shoe because a celebrity endorses it. It's the same thing with a house."
But Mark David, who follows celebrity real estate on his blog "The Real Estalker" disagrees.
"It's not common. Property values are property values," said David, a 38-year-old graphic designer who writes under the pseudonym "Your Mama." "You've really got to be somebody for it to add cachet. Maybe if it's a major A-list celebrity who's going to go down in Hollywood history, like Jack Nicholson. But does anybody really care about most of these people's houses? Would you pay more for Danny Bonaduce's house? And I'm not trying to bag on him. I can't imagine that people would do it. Then again, there's a lid for every pot."
These days, that also can hold true when it comes to the plummeting real estate market. Several celebrities have dealt with foreclosure issues on their luxurious estates and many more have had to drop their asking prices, putting some high-profile faces on a growing problem: The real estate meltdown is hitting every socioeconomic class.
The case of Ed McMahon has shown that you can make millions over a lengthy show business career and still find yourself in foreclosure. Johnny Carson's former "Tonight Show" sidekick owes more than $644,000 in mortgage payments on his Mediterranean estate in Beverly Hills, a house he and his wife have been trying to sell for two years. The six-bedroom and five-bathroom home -- in the same exclusive, gated community where Britney Spears lives -- is on the market for $6.5 million, down from an original price of $7.6 million.
The 85-year-old television personality, who has been unable to work since breaking his neck in a fall 18 months ago, described his economic problems as "a perfect storm."
"If you spend more money than you make, you know what happens.
And it can happen. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen," McMahon said on "Larry King Live" recently. "You want everything to be perfect, but that combination of the economy, I have a little injury, I have a situation. And it all came together."
McMahon is not the only celebrity to find himself in such financial trouble. Former NBA player Vin Baker saw his home in Durham, Conn., go up for auction last weekend. The seven-bedroom, six-and-a-half-bath mansion, on about 11 acres with a basketball court and a bowling alley, had been on the market for $2,950,000.
Earlier this year, former baseball star and "Juiced" author Jose Canseco stopped making payments on his $2.5 million home in the upscale Encino section of L.A.'s San Fernando Valley.
Rick Sharga, vice president of marketing for RealtyTrac, which monitors foreclosures, said that people of any income level can get in trouble by buying overvalued homes at the peak of the market that they ultimately can't afford.
"Ed McMahon's a sympathetic character in this scenario, in that he got into a house that possibly he could have afforded if he had been able to keep working; then he had an injury that upset his financial apple cart pretty badly," Sharga said. "What you don't know is, in a normal real estate market, if the same lender would have taken a look at an 82-year-old man at the tail end of his career and written him a $4.6 million mortgage he had to keep working to be able to afford."
It's not all doom and gloom, of course. Avril Lavigne listed her nearly 6,900-square-foot Mulholland Estates mansion for $5.8 million and, after 36 days on the market, recently accepted a cash offer of $5.2 million.
But as celebrity real estate columns such as "Hot Property" in the Los Angeles Times and "Gimme Shelter" in the New York Post show, other stars can't command the same prices for their homes that they might have been able to a few years ago.
The price of Angela Bassett and Courtney B. Vance's house has dropped more than $2 million in the past year. The French Colonial in a gated section of Los Angeles' old-money Hancock Park neighborhood has five bedrooms, seven and a half bathrooms, a gym, a hair salon and a two-story guest house. An agent listed it last year for $5,999,000, then a month later took it off the market for seven months. Then June Ahn of Coldwell Banker got the house and listed it for $4,999,000; she soon reduced it to $4.6 million, and now has reduced it again to $3.9 million.
"It was overpriced," Ahn said. "The price difference from $5,999,000 to $3.9 (million), obviously we'll have a bigger number of buyers that can afford to get into it and even take a look at it."
It helps that the husband and wife, who bought the house 17 years ago for about $1.8 million, own it outright. "They're very flexible, they just go with the flow of the market," Ahn said.
"Unfortunately, this happens. Last year was better than this year. Now they realize they didn't reduce in time. They were hoping to get the best (price) last year, but it didn't happen. So they learned the lesson."
The primary element driving where a celebrity chooses to live is privacy, said Jordan Cohen of Re/Max, who has represented more than 50 stars and athletes in real estate transactions, including Shaquille O'Neal and Marilyn Manson. He's selling actress Joely Fisher's house -- a four-bed, seven-bath, midcen-tury Craftsman at the end of a secluded drive with a pool and a screening room for $3,295,000, about $1 million less than the asking price when another agent first listed it last summer.
He said he believes a star's property can bring in more money than a regular house.
"I know it adds value," said Cohen, sitting on a limestone countertop in the kitchen of the suburban Encino home. "A good analogy would be (that) shoe companies pay athletes millions of dollars to wear a specific shoe so you'll have young America buy that shoe because a celebrity endorses it. It's the same thing with a house."
But Mark David, who follows celebrity real estate on his blog "The Real Estalker" disagrees.
"It's not common. Property values are property values," said David, a 38-year-old graphic designer who writes under the pseudonym "Your Mama." "You've really got to be somebody for it to add cachet. Maybe if it's a major A-list celebrity who's going to go down in Hollywood history, like Jack Nicholson. But does anybody really care about most of these people's houses? Would you pay more for Danny Bonaduce's house? And I'm not trying to bag on him. I can't imagine that people would do it. Then again, there's a lid for every pot."
Tuesday, July 8, 2008
How low can you go?
The number of homes under sales contracts fell more than expected in May after a surprising spike the month before, a real estate trade group said Tuesday.
The report by the National Association of Realtors was another sign that the nation's housing problems are not abating.
The Realtors Pending Home Sales Index fell to 84.7 in May, down 4.7% from an upwardly revised reading of 88.9 in April. The index was 14% below its level in May 2007.
The recent decline was steeper than the 2.8% fall that economists had forecast, according to a consensus of estimates compiled by Briefing.com.
"The overall decline in contract signings suggests we are not out of the woods by any means," said Lawrence Yun, NAR chief economist.
Yun said that some pullback had been expected after April's surprise increase. The index jumped more than 7% in April as falling home prices sparked a bout of bargain hunting.
"The housing market had a nice bounce in April - too bad it doesn't appear to have carried through into May and June," said Mike Larson, real estate analyst at Weiss Research.
Larson says the May decline was caused by weak consumer confidence, rising unemployment, tight credit conditions and high energy and food costs straining household budgets.
"Unless and until the economic clouds part, we'll likely see the housing market continue to struggle," Larson said.
In the report, the NAR lowered its existing-home sales outlook for 2008, saying it now expects sales of 5.31 million, down from the 5.39 million forecast in April.
The NAR said existing home prices are also expected to fall. The aggregate median existing-home price is projected to fall 6.2% this year to $205,300, and then rise by 4.3% in 2009 to $214,100, the report indicated.
The outlook for new-home sales was also revised lower to 525,000 from the 529,000 prediction a month ago. And the median new-home price was expected to decline 3.2% to $239,300 this year.
Pending home sales declined in all regions. They were down 1.3% in the West, 2.9% in the Northeast, 6% in the Midwest, and 7.1% in the South.
The report by the National Association of Realtors was another sign that the nation's housing problems are not abating.
The Realtors Pending Home Sales Index fell to 84.7 in May, down 4.7% from an upwardly revised reading of 88.9 in April. The index was 14% below its level in May 2007.
The recent decline was steeper than the 2.8% fall that economists had forecast, according to a consensus of estimates compiled by Briefing.com.
"The overall decline in contract signings suggests we are not out of the woods by any means," said Lawrence Yun, NAR chief economist.
Yun said that some pullback had been expected after April's surprise increase. The index jumped more than 7% in April as falling home prices sparked a bout of bargain hunting.
"The housing market had a nice bounce in April - too bad it doesn't appear to have carried through into May and June," said Mike Larson, real estate analyst at Weiss Research.
Larson says the May decline was caused by weak consumer confidence, rising unemployment, tight credit conditions and high energy and food costs straining household budgets.
"Unless and until the economic clouds part, we'll likely see the housing market continue to struggle," Larson said.
In the report, the NAR lowered its existing-home sales outlook for 2008, saying it now expects sales of 5.31 million, down from the 5.39 million forecast in April.
The NAR said existing home prices are also expected to fall. The aggregate median existing-home price is projected to fall 6.2% this year to $205,300, and then rise by 4.3% in 2009 to $214,100, the report indicated.
The outlook for new-home sales was also revised lower to 525,000 from the 529,000 prediction a month ago. And the median new-home price was expected to decline 3.2% to $239,300 this year.
Pending home sales declined in all regions. They were down 1.3% in the West, 2.9% in the Northeast, 6% in the Midwest, and 7.1% in the South.
Monday, July 7, 2008
12 % said rock bottom has been attained
Don't be too (67%)optimistic about a housing market rebound yet. That's the finding of the latest Business Pulse Survey, the nonscientific weekly online poll from the Business Journal.
The pain in the form of weak demand, dropping prices and foreclosure is likely to be with us at least 12 months -- the choice of the majority of the 545 votes cast, or 22 percent. Those votes combined with those who believe the housing slump could be with us for one to two years accounted for 54 percent of the vote.
There were some optimists as 67 percent, or 12 percent, said rock bottom has been attained. Nearly equal, there were 63 respondents who said the rebound won't happen until summer of 2011.
The poll generated nearly 4,000 words of comments.
"Every month this year, home sales in Tampa Bay have increased in a classic 'v' recovery," said a reader with another reporting that "orders are up" at its business that relates to residential building.
Financing is still very tight, reported several readers. For one, rebound is easily a year away still.
"Although absorption is improving, there is still enough existing home inventory that is overpriced to extend the rebound out far enough for those prices to come in line with reality," said the respondent. "That existing home inventory will increase substantially over the next year as the next wave of foreclosures hits the area in response to next quarter's ARM rate re-sets. I say summer of '09."
The pain in the form of weak demand, dropping prices and foreclosure is likely to be with us at least 12 months -- the choice of the majority of the 545 votes cast, or 22 percent. Those votes combined with those who believe the housing slump could be with us for one to two years accounted for 54 percent of the vote.
There were some optimists as 67 percent, or 12 percent, said rock bottom has been attained. Nearly equal, there were 63 respondents who said the rebound won't happen until summer of 2011.
The poll generated nearly 4,000 words of comments.
"Every month this year, home sales in Tampa Bay have increased in a classic 'v' recovery," said a reader with another reporting that "orders are up" at its business that relates to residential building.
Financing is still very tight, reported several readers. For one, rebound is easily a year away still.
"Although absorption is improving, there is still enough existing home inventory that is overpriced to extend the rebound out far enough for those prices to come in line with reality," said the respondent. "That existing home inventory will increase substantially over the next year as the next wave of foreclosures hits the area in response to next quarter's ARM rate re-sets. I say summer of '09."
Use your relocation benefits
Running a public company is a tough job these days. Competition is brutal and the economy is uncertain.
Top executives, though, increasingly seem to be cushioned from economic risks and realities when it comes to their personal finances.
Compensation packages -- in additional to salary, bonuses and stock awards -- routinely included extra perks for travel (to protect from high gas prices) and financial planning (to minimize taxes and maximize investments).
It's like having a financial nanny.
Some companies are even insulating their top executives from the downturn in the nation's real estate market.
Escalade, an Evansville-based maker of sporting goods and office equipment, last week announced that Chief Executive Officer Robert Keller is receiving an extra $70,000 in relocation benefits to help compensate him for "lost home equity" from the sale of his Atlanta home.
Keller, who joined the company as CEO last year, had already received $25,768 in relocation assistance, according to Escalade's proxy statement. His annual salary is $300,000.
Escalade said Keller was unable to sell his home for the price first envisioned. The problem was "adverse real estate market conditions beyond his control."
So, Escalade's compensation committee -- which OK'd the extra $70,000 -- came to the rescue.
Both Escalade and Richard White, chairman of the compensation committee, declined to comment.
At Indianapolis-based radio broadcaster Emmis Communications, Chief Financial Officer Patrick Walsh received $8,000 in relocation expenses that were above the amount agreed to in his contract, according to the company's proxy statement.
The extra money was to cover Walsh's rent and travel expenses caused by a delay in him selling his home in Maryland.
"No one anticipated how long it would take to sell the house," Emmis spokeswoman Kate Snedeker said. "He really tried hard to minimize that additional cost."
Snedeker added that Walsh rented a modest apartment and used a discount airline during his commute from Maryland to Indianapolis.
In fiscal 2007 and 2008, though, Walsh received $106,042 in perks mainly for relocation, auto and travel expenses, according to Emmis' proxy. His salary was $400,000 for 2008.
Plenty of other top executives receive help in moving.
In 2007, 25.3 percent of Fortune 100 companies disclosed relocation benefits for CEOs, with a median value of $27,000 for the perk, according to executive compensation research firm Equilar. Also, 7.4 percent of Fortune 100 companies disclosed housing or apartment allowances for CEOs, with that perk carrying a median value of $67,671.
It just seems a bit odd for companies to shield top execs from the unpredictability of the housing market when their very job is to navigate the unpredictability of the financial markets.
Top executives, though, increasingly seem to be cushioned from economic risks and realities when it comes to their personal finances.
Compensation packages -- in additional to salary, bonuses and stock awards -- routinely included extra perks for travel (to protect from high gas prices) and financial planning (to minimize taxes and maximize investments).
It's like having a financial nanny.
Some companies are even insulating their top executives from the downturn in the nation's real estate market.
Escalade, an Evansville-based maker of sporting goods and office equipment, last week announced that Chief Executive Officer Robert Keller is receiving an extra $70,000 in relocation benefits to help compensate him for "lost home equity" from the sale of his Atlanta home.
Keller, who joined the company as CEO last year, had already received $25,768 in relocation assistance, according to Escalade's proxy statement. His annual salary is $300,000.
Escalade said Keller was unable to sell his home for the price first envisioned. The problem was "adverse real estate market conditions beyond his control."
So, Escalade's compensation committee -- which OK'd the extra $70,000 -- came to the rescue.
Both Escalade and Richard White, chairman of the compensation committee, declined to comment.
At Indianapolis-based radio broadcaster Emmis Communications, Chief Financial Officer Patrick Walsh received $8,000 in relocation expenses that were above the amount agreed to in his contract, according to the company's proxy statement.
The extra money was to cover Walsh's rent and travel expenses caused by a delay in him selling his home in Maryland.
"No one anticipated how long it would take to sell the house," Emmis spokeswoman Kate Snedeker said. "He really tried hard to minimize that additional cost."
Snedeker added that Walsh rented a modest apartment and used a discount airline during his commute from Maryland to Indianapolis.
In fiscal 2007 and 2008, though, Walsh received $106,042 in perks mainly for relocation, auto and travel expenses, according to Emmis' proxy. His salary was $400,000 for 2008.
Plenty of other top executives receive help in moving.
In 2007, 25.3 percent of Fortune 100 companies disclosed relocation benefits for CEOs, with a median value of $27,000 for the perk, according to executive compensation research firm Equilar. Also, 7.4 percent of Fortune 100 companies disclosed housing or apartment allowances for CEOs, with that perk carrying a median value of $67,671.
It just seems a bit odd for companies to shield top execs from the unpredictability of the housing market when their very job is to navigate the unpredictability of the financial markets.
buying real estate
It is hard to imagine or understand, but not everyone trusts real estate agents or Realtors. According to a Harris poll, 20 percent don't trust us at all and only 7 percent trust us completely.
As an industry we shoot ourselves in the foot when it comes to being trustworthy. Examples include the press releases and other information from the National Association of Realtors (NAR). NAR is a huge trade association and exists to promote our industry. As such, NAR likes to put a positive spin on buying real estate.
In the land of NAR it is always a great time to buy real estate. The truth is it isn't always a good time to buy real estate, not every market is the same, and not everyone who can buy real estate should be buying real estate. In recent months NAR has started telling consumers that real estate is local, which is true.
Some real estate companies and agents like to make general statements, which are misleading and breed distrust. One company had signs up all over town advising buyers not to miss out on this great buyer's market. It sounded like a kind of cheap salesman's trick -- they were saying, "Hurry and buy now before they are gone." They also give their agents seasonal marketing materials with messages for every season outlining why it is the best time to buy or sell real estate.
Instead of just publishing numbers and statistics, as an industry we like to put a special spin and paint a rosy picture of the housing market. The general public sees right through it. We are treating them like idiots when we take the numbers and weave them into a fairy tale that ends with: They bought real estate and lived happily ever after.
We should be saying that real estate has appreciated but past performance is no guarantee of future appreciation, and that there are tax advantages to home ownership, emotional advantages, and we all need a place to live. When I am asked if it is a good time to buy, my answer is and always has been the same: It depends.
For people like me, it is a good time to buy and sell real estate. Owning a home that is almost paid for has advantages. It could be sold quickly, because it could be priced for 2008, not 2005. The proceeds could be used to buy another home, and as a Realtor I know where the bargains are and how to negotiate a deal.
For my neighbors two doors down who bought a townhouse three years ago, it is a bad time to buy real estate. They would take a loss if they sold, as it is worth less now than when they bought it and townhouses are the hardest type of housing to sell in my market. I would advise them not to sell, and if they have to leave for some reason they should consider renting it out.
As an industry, when we make general statements to promote sales we are not promoting sales -- we are instead breeding distrust. Do we expect consumers to trust us when the foreclosure rate has gone through the ceiling and we are still telling buyers that now is a good time to buy? Apparently, for some who bought it the last couple of years it was not such a good time to buy, yet we still repeat the same old message. It might really be a good time to buy real estate, but it depends.
As an industry we shoot ourselves in the foot when it comes to being trustworthy. Examples include the press releases and other information from the National Association of Realtors (NAR). NAR is a huge trade association and exists to promote our industry. As such, NAR likes to put a positive spin on buying real estate.
In the land of NAR it is always a great time to buy real estate. The truth is it isn't always a good time to buy real estate, not every market is the same, and not everyone who can buy real estate should be buying real estate. In recent months NAR has started telling consumers that real estate is local, which is true.
Some real estate companies and agents like to make general statements, which are misleading and breed distrust. One company had signs up all over town advising buyers not to miss out on this great buyer's market. It sounded like a kind of cheap salesman's trick -- they were saying, "Hurry and buy now before they are gone." They also give their agents seasonal marketing materials with messages for every season outlining why it is the best time to buy or sell real estate.
Instead of just publishing numbers and statistics, as an industry we like to put a special spin and paint a rosy picture of the housing market. The general public sees right through it. We are treating them like idiots when we take the numbers and weave them into a fairy tale that ends with: They bought real estate and lived happily ever after.
We should be saying that real estate has appreciated but past performance is no guarantee of future appreciation, and that there are tax advantages to home ownership, emotional advantages, and we all need a place to live. When I am asked if it is a good time to buy, my answer is and always has been the same: It depends.
For people like me, it is a good time to buy and sell real estate. Owning a home that is almost paid for has advantages. It could be sold quickly, because it could be priced for 2008, not 2005. The proceeds could be used to buy another home, and as a Realtor I know where the bargains are and how to negotiate a deal.
For my neighbors two doors down who bought a townhouse three years ago, it is a bad time to buy real estate. They would take a loss if they sold, as it is worth less now than when they bought it and townhouses are the hardest type of housing to sell in my market. I would advise them not to sell, and if they have to leave for some reason they should consider renting it out.
As an industry, when we make general statements to promote sales we are not promoting sales -- we are instead breeding distrust. Do we expect consumers to trust us when the foreclosure rate has gone through the ceiling and we are still telling buyers that now is a good time to buy? Apparently, for some who bought it the last couple of years it was not such a good time to buy, yet we still repeat the same old message. It might really be a good time to buy real estate, but it depends.
Subscribe to:
Posts (Atom)