Hot Dog Story – Do What You Do and Change for No One

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Okay, I know there is so much talk about all the awful things that people see happening in our world. Lucky for me I DO NOT  buy into that.  There will always be challenges and struggles and while this one seems to be very daunting I have learned that those that find the bright spots and DO NOT operate out of fear end up on the top and better yet they enjoy getting there.

Please go to this link and read this incredible hot dog story that just might convince you to just keep on doing those things that you know work.  I have always loved this story and it is quite relevant today.  Do not give in to the negative small minded thinking and talking that we hear so much of. Most of us have more than we need and plenty that we could be sharing with others.

I am so grateful to all of you that have made my life so bright and always filled with promise.  I decided a long time ago to align myself with people that were looking for the possibilities rather than the problems.  I have been writing gratitude list since I was 10 years of age and it has never failed that my life is so filled with more goodness than not.

Thanks to all of you and go read that story and share it with others…. lets the spread the good stuff.   I believe the world needs a shot of happy stuff and I am just the girl to deliver it.

Remember my get even list, it is really long…. “The only people we need to get even with are those that have helped us”

with overflowing gratitude,

Karen Key Smith

Adjustable Rate Mortgages Are Our Friends

Yes, I know what you’re probably saying already. Where has this guy been? Living under a rock somewhere? Hasn’t he heard the nightmare stories about sub-prime mortgages, option ARMS and “liar loans” and how all of these ultra-risky vehicles got us into the mess we’re in right now? Indeed, the media has placed much of the blame for the collapse of home prices and the ongoing foreclosure crisis on the loose credit and lax credit standards for the proliferation of these exotic mortgage products that now make up much of the toxic debt on banks’ balance sheets. Yet, somehow, the plain old adjustable rate mortgage that has been around for decades has been painted with the same brush as the other mortgage products and unfairly so. Let me explain why ARMs are still around, always will be around, and why they may be the best friends we have right now.

The complete evaporation of a secondary mortgage market for condominiums and their twin the condo-tels, has forced banks to develop new vehicles for financing these properties. This is where the in-house loans, or portfolio loans as we call them, come in to play. These loans accept the risk associated with condos as collateral in a market that has seen condo prices plunge in recent years and ignore other factors that Fannie Mae and Freddie Mac, along with all the mortgage insurance companies, deem derogatory. But banks can’t loan money on these properties forever when they have no market to sell the loans. Eventually, they would have no money left to lend and would simply have a fat portfolio of nothing but condo loans and no capital. Corus Bank, the owner of Laketowne Wharf, is a great example of this scenario. That is why banks, like the bank I work for, turn to ARMs – they provide interest rate protection to the bank while offering the consumer a quantifiable risk scenario where they can weigh the pros and cons and make an informed decision.

I have been a little perplexed lately when potential borrowers call to inquire about financing for a fantastic deal they are getting on a condo. When I explain I have two options, a 3/1 ARM at 6.00% or a 5/1 ARM at 6.75% there is often an immediate rejection of anything that isn’t a fixed rate and an inferred suspicion that I am some sort of snake oil salesman. Never mind there are no other options out there. What about the fact these ARMs have initial fixed periods at very attractive rates? What about the fact that there are no pre-payment penalties, (we want them to pay it off) very low fees, and annual and lifetime rate caps of 2% and 6% respectively? Do they even give me the opportunity to explain that the ARMs are tied to the 1 year Treasury yield which is one of the most stable indexes to be found having averaged 4.38% over the past twenty years? Do I have a glimmer of hope that they will listen to me explain how ARMs work and that if these ARMs were to adjust today they would actually go down? Nope. If it’s an ARM it’s snake oil and will lead them to financial ruin. Yet for those who don’t associate every ARM loan with housing horror stories and who weigh the pros and cons are using my ARM loans to scoop us fabulous deals on beachfront condominiums and stand to make substantial returns on their measured risk proposition. Did I say risk? Of course there is risk with an ARM. Rates could sky rocket in a worst-case scenario but given that the U.S. will probably keep short-term rates low for a very long time, the risk is acceptable.

No one wants you to take an ARM more than the bank someone once told me. Over the years I have found this to be more or less true from a banker’s perspective. So why have I, personally, taken out several ARM loans over the years? It is because that while an ARM provides some safety for the banks, it also provides opportunities to borrowers. Lower rates equate to qualifying for more loan. If I anticipate a rise in property values or an increase in my income, why not look at an ARM? But most significantly, when it is the only mortgage option available and there perhaps once in a lifetime opportunities on beach-front real estate, do ARMs not beg some consideration? ARMs are like bridges, they get us over an obstacle though we may not know what we’ll find on the other side. One borrower said to me recently when we were discussing the end of that bridge on a 5/1 ARM he was applying for, he poignantly stated, “If things aren’t better than this in five years then God help us all.” This lead me to reflect that the bank portfolio ARMs may not be a panacea but they do offer buyers, Realtors and bankers alike, a bridge to better times ahead.

For this and more, visit my blog at www.activerain.com/blogs/hpalmer

With over fifteen years of mortgage and real estate experience, Hunter Palmer has the knowledge and expertise to help home buyers and Realtors navigate the ever changing real estate finance landscape.

Laketown Wharf – Corus Bank "Unlikely to Survive '09"

The future of Laketown Wharf in Panama City Beach is again dealt a blow of uncertainly as the owning bank, Corus shows increasing signs of weakening.  Friday, they reported a quarterly loss of $260.7 million and stated that more than a third of their “$4.1 billion in outstanding loans were nonperforming.”  On the bright side, Mike Dulberg, Corus’s CFO reported that they have $758 million in capital and $4 billion in liquid assetts and the vast majority of its $7.6 billion in consumer deposits is federally insured.

In the article, Daniel Cardenas, senior vice president at Chicago brokerage Howe Barnes Hoefer & Arnett Inc., was quoted:

“The company is in dire straits.  Barring a surprise injection of private capital and/or a dramatic rebound in condo values, Corus appears unlikely to survive 2009.”

The article was published in the Wall Street Jounal Commercial section in limited “subscriber only” format, but I found it elsewhere, in full:

Condo King Corus Weights Its Options

Few Borrowers Benefiting from latest "Refi Boom"

I can remember back sixteen years ago when thirty-year mortgage rates fell below 7% sparking a flood of refinances. I also remember 2003 when rates dipped again and another “refi boom” ensued. So with thirty year mortgage rates now at their lowest levels in history, why are we not seeing the kind of refi hysteria we have seen in past? Ironically, the cheap mortgage money of the past that helped drive up homeownership rates and property values has left us between a rock and a hard place. Despite historically low rates, much tighter underwriting guidelines coupled with the crash in home values leaves few borrowers in a position to refinance.

The Mortgage Bankers Association reported on Wednesday that the national average interest rate for thirty-year, fixed-rate mortgages stood at 4.89% at the end of last week, down from 5.07% a week earlier and down from 6.50% in October. Much, if not all, of the decline in interest rates can be credited to the Federal Reserve’s program of buying up to $500 billion in mortgage-backed securities from Fannie Mae and Freddie Mac which started on January 5th. This has narrowed the risk premiums associated with mortgage yields leading to the unprecedented drop in long-term rates.

However, according to Doug Duncan, chief economist for Fannie Mae, only a third of outstanding mortgage debt is eligible for refinancing. “Nearly 70% don’t make the cut,” he said ” because their credit isn’t good enough or they owe more than the current values of their homes.” Another set of homeowners locked out of the refinance opportunity are “jumbo” loan holders whose loan amounts exceed the Fannie Mae and Freddie Mac maximum. Rates on “jumbo” loans have failed to follow the downward trend of conforming loan rates and have stayed stubbornly around the 7% mark.

Mortgage lenders are reporting that while refinance activity is up, only 50% of applicants end up closing due to credit or appraisal issues. In Florida, where home values have fallen sharply, only 25% of refinance applicants make it to the closing table. While Fannie Mae is looking into the possibility of allowing borrowers to refinance up to 120% of the current property value to help more “upside down” borrowers refinance, there is still no viable program in place. So while refinance “booms” of the past allowed a majority of homewowners to benefit from lower rates and monthly payments, along with the relatively cheap access to their home’s equity through cash-out, the only ones benefiting this time around seem to be those who need it least.

Borrowers who have been in their homes for a number of years and have substantial equity along with excellent credit are taking advantage of the lowest rates in history while those struggling in “upside down” mortgages are stuck with their higher rates. A silver lining would be if the rates stay low enough for long enough, borrowers may begin to choose to move up rather than sit tight in their homes. It will be that slow increase in demand that, ultimately, will stabilize home prices and spread the opportunity of lower rates to more homeowners.

Stimulating More Than the Economy

Over the coming weeks and months I will be explaining or trying to explain some of the complexities that exist in our current economy. First off let me explain to you that in no way am I trying to claim that I am an economic expert, but I do have access to privileged economic data, economic experts and I have an understanding of complex economic issues and concerns. That being said feel free to ask any questions in the comment section and I will try to answer them to the best of my ability. I will start by addressing issues that I hear in my everyday life from concerned people.

Are we heading towards a depression? The answer is maybe. The experts estimate that the national unemployment rate should peak at about 10 – 11%. The depression of the 1930’s had unemployment rates near 25%. Currently unemployment is just above 7% with a record layoff of more than 500,000 people just last month. 5% unemployment is considered full employment in the U.S. economy and if the unemployment rate hits 10% or more and stays there for more than a year then there will be a depression discussion. There is no standard definition of a depression and we cannot compare this crisis to the Great Depression because there are major differences in this economy when compared to the economy of the 30’s (no U.S. Securities and Exchange Commission, etc.). The bright side is that the Great Depression was marked with high unemployment for many years and this financial crisis should clear up in a year or so.

How or will we recover from this crisis? This is the worst financial crisis since the Great Depression, but we will absolutely recover. Our economy is cyclical and goes through regular cycles of peaks and valleys. Quietly the U.S. dollar has steadily risen back to normal levels and foreign investors are investing in U.S. Treasury securities in a major way. No matter how bad our economic condition, U.S. Treasury securities are the most sought out investment instrument in the world. The Federal Reserve is also purchasing U.S. Treasury securities to infuse cash into the system. This infusion of cash will hopefully help ease the credit crunch (a lack of lending and loans from lending institutions). The easing of the credit crunch will hopefully help to stabilize financial institutions and help increase consumer confidence. And when consumers start buying again then slowly jobs will be created. Employment numbers are the last thing to be hurt from a recession and the last thing to recover from one.

Recessions are vicious cycles. Consumer confidence lowers and consumer spending decreases. Business profits shrink and these businesses have to lay off employees. These layoffs help to reduce consumer confidence even more and business profits decrease even more. This creates more layoffs and you can see how this cycle can spiral out of control.

Do not freak out when on January 30 you hear a report that gross domestic product (measures our nation’s income) has had the worst decline in one quarter in the history of the U.S. It will be the worst ever but the bright side is that the “worst quarter in history” is over and the first quarter of 2009 will be a little better.

Top Stories for 2008 on PCBDAILY.COM

2008 has been a monumental year for us at pcbdaily.  We’ve seen super awesome growth, expanded our content base tremendously and have reached out to more people than we had ever expected.

Looking back, the top stories covered good times and bad, with some of the bad times being good for others and some of the good times being bad for some.

4 of the top 10 articles talked about new additions to our area, namely Pier Park and the new Panama City Bay County International Airport (I know, we need a new name, and that will be addressed in 2009).

Walking around the mall, it is sometimes hard to imagine that this time last year, Pier Park’s roads were not even paved yet.  Colorful buildings had been erect for some time, but the mall as a whole was still just under 2 months from opening.  Looking back, it amazes me how quick somethings get done.

The new airport has hit milestones aplenty during 2008.  Just a little over a year ago, the airport groundbreaking ceremony took place.  When 2008 rolled in, the airport was caught in a legal battle with the NRDC and the Fiends of PFN.

In what was expected to draw out for months, the case was totally thrown out on January 25th, clearing the Airport Authority for construction immediately. The case was in many instances described as frivolous, and was not taken seriously by the judge.  Opponents touted the failure of an affirmative vote in a non-binding referendum vote, but were never able to validate the fairness of the actual vote in regards to it being represented to all those affected.

For the new airport, 2008 brought the site from a stumpy, patchy 4,000 acre site to a cleared, grubbed site that is almost completely brought to grade with terminal parking installed, foundation work for the terminal complete, an asphalt-paved runway with some concrete and funding for a full 10,000 foot runway.

As the economy has plunged during 2008, so have real estate prices.  Now, this has been a topic of hot debate on pcbdaily.  I’ve oft been blasted by the Realtor community for spreading “bad news” and not “helping” the market by taking part in the media frenzy of negativity.  However, the reality is, those that are complaining should be putting that energy into finding buyers because now is a great time to buy real estate.

Plunging prices mean good deals for all buyers.  I understand the hesitation and skepticism, but things will not always be this way, and in 10 years, us agents will be doing our homework on baypa.net thinking to ourselves that we should have bought as much as possible back in 2008 and 2009 when prices were so cheap.  3 of the top 10 articles of 2008 were specifically about condo auctions in Panama City Beach.  The Palazzo condo auction story took the cake, trailed by the Ocean Reef Auction and the cancelled Marina Landing auction.  The Seahaven auction actually made it in the top 15 and is only a few weeks old.

The other 3 articles of the top 10 articles of 2008 on pcbdaily have to do with problems at local condos and the condo market as a whole.  Laketown Wharf has been a sore topic for many with the developer being a self-proclaimed Trump with a Drawl – Jerry Wallace.

A largely vacant, 750 condo, elephantine monolith, Laketown Wharf actually had great aspirations, with some possibility of success had it come unto creation mid 2004.  With huge swimming pools, a Balagio-style fountain/light show, a 650-seat live performance theatre, 5 restaurants and 1,000’s of square feet of retail space, it was planned to be almost a small town.

With less than 70 closings, it has been largely regarded as a complete and utter failure, but Laketown Wharf yet has a bright future with Corus stepping in.  2009 should bring something good for that development, hopefully.

Anyway, enough – enjoy the articles and looking back on 2008!

10.) Marina Landing Auction – CANCELED

9.) New Airport is on Schedule – Construction Update

8.) 35 Condos Sold at Ocean Reef Auction

7.) Pier Park – Margaritaville Grand Opening in Panama City Beach (video)

6.) Construction Update – New Panama City Bay County International Airport

5.) 50 Palazzo Condos Sold at Auction on Panama City Beach

4.) Problems at Nautilus Cove Condominiums?

3). Panama City Beach Condo Market Analysis After The Palazzo Auction

2.) Pier Park Grand Opening was a Smash Hit

1.) Laketown Wharf Busts, Leaves Developer Crying

Historically Low Mortgage Rates Should Kick-Start Housing Market

Through a series of rate cuts and capital market tinkering, the Federal Reserve has finally managed to push down long term mortgage rates to levels not seen in nearly forty years. The rate on the conforming thirty-year,  fixed-rate mortgage was hovering close to 5% on Friday as the yield on the ten year treasury note sank to 2.07%. This thaw in the mortgage credit market is a welcomed sign that the ingredients are coming together to hopefully re-energize the comatose housing sector.

This huge swing came after the Fed lowered the funds target rate to a range between 0% and .25%.  This marks the tenth time for the Fed to cut rates in the last 15 months.

The Mortgage Bankers Association reported a surge in mortgage application activity over the past week as homeowners rushed to refinance their existing mortgages.  The combination of low rates and low housing prices should also create some demand in the purchase money market as well as consumers look for safe investments in these difficult economic times. Though a flood of buyers is unlikely, we can be optimistic that the first quarter of 2009 and beyond may see an increase in real estate sales and, hopefully, an end to home price declines.

For this and more, visit my blog at www.activerain.com/blogs/hpalmer

Hunter Palmer

No Real Mortgage Relief Despite Government Efforts

To say 2008 has been a bad year for real estate is just a wee bit of an understatement. Property values have plunged by some 35% nationwide and foreclosures are expected to exceed 2.2 million for the year. Nearly 4% of all outstanding mortgages are currently delinquent and in Florida the rate of delinquent mortgages leads the nation at 7.82%.

The impacts of the sub-prime fallout, resulting credit crunch and global recession are all taking a serious toll on homeowners who often find themselves unable to sell or refinance as they owe more than their homes are currently worth. The Federal Government has made several impotent attempts to bring relief to homeowners and stem the tide of foreclosure and it seems more plans are bandied about almost daily.

So what options are available to struggling homeowners?

Early this year, the President announced an informal plan that brought together a coalition of banks, mortgage-servicers, credit counselors and investors to provide loan work-out solutions to borrowers facing foreclosure. The Hope Now Alliance, as it was called, was a non-governmental effort and since its inception has helped some 1.7 million homeowners through loan restructuring and modification. Unfortunately, the Comptroller of the Currency reported this week that, of all those helped in the first six months of the year, more than half were already back in default.

In July, The Housing and Economic Recovery Act of 2008 became law creating, among other things, the Hope for Homeowners program to be administered through HUD and offer a vehicle for borrowers who were upside down in the homes to refinance to a lower, more affordable interest rate. The plan, intended to help hundreds of thousands of homeowners relied on the current lien-holders of the properties willingness to write down the principal balance of the mortgage to 90% of the current market value. Second lien holders would have to also agree to re-subordinating their liens to the new first making them basically worthless.

As one might imagine, most lenders were reluctant and chose to pursue their own work-outs with borrowers on a case by case basis. As a result, only a handful of borrowers were helped by the plan. HUD has since revised the principal write down requirement to 96.5% of market value but still requires the borrower’s new payment be no more than 31% of their gross monthly income.

So what is on the horizon? Is there any real relief in sight for homeowners facing foreclosure? Several plans have been presented from a variety of governmental agencies but none yet have the full support of Congress and the White House. One plan offered by Sheila Bair, Chairwoman of the FDIC, would lower borrower’s rates to as low as 3%, extend the amortization period to as much as 40 years and defer a portion of principal to some future time.

Another plan proposed would have Fannie and Freddie offer a low fixed rate to both homeowners and buyers to not only help those with unaffordable payments but also generate demand for housing as buyers would presumably be drawn into the market – attracted by the lower rates. This would help stabilize home prices that ultimately are at the heart of the problem. The Obama transition team also is said to be working on a plan though no details have yet emerged.

So what help is there for struggling homeowners right now? Sadly, very little. The silver lining is that several robust plans that could have a real impact on the problem are being discussed seriously and the new administration will have the political capital to insure that whatever plan emerges victorious passes quickly. That is why Fannie Mae and Freddie Mac, along with Governor Charlie Crist, have placed a temporary moratorium on foreclosures until January.  The hope is that by that time, after a new president is sworn into office and details of the plan are ironed out, there will finally be a real and workable alternative to foreclosure for millions of Americans.

To have any teeth, the final plan will have to contain several aspects of the plans already discussed. It will have to provide for a low fixed rate, a forty year amortization and some postponement and/or forgiveness of some portion of principal. It must also, and this is critical, offer the same terms to homebuyers with a minimum down payment requirement of 5% and a HUD backed mortgage insurance plan to safeguard banks so they will indeed lend. Without renewed demand for housing to stop home price decline, any new mortgage rescue plan will simply be buying time.

For this and more, visit my blog at www.activerain.com/blogs/hpalmer

Hunter Palmer

Can we start buying again yet?

“The answer is a qualified yes,” stated a November issue of Fortune Magazine in an Investing column titled Time to Jump In?

The author then goes on to explain that now is a great time to get into, or get back in, the stock market.  “Stocks aren’t exactly cheap, but for the first time in years investors can expect annual gains that should eventually approach double digits.”

Well, cheap is always a relative term.  Stocks ARE cheap right now compared to where they were 12 months ago.  With the 12 month high at just under 14,000, the DOW has dropped 41% since this time last year.  I just bought a new pair of Sperry’s this weekend at a 40% off sale.  I saved 35 bucks!  That’s dinner and a matinee.

This is not to say that in the next 6 to 12 to 18 months that those purchasing stocks now will not lose money, because there is actually a good likelyhood that they will.  However, the longer the term, the smaller the risk.  The advantage to buying now is the tremendous long term gain potential.  The disadvantage to NOT buying now is the risk of missing the bottom and losing an opportunity at potential long term gain.  We may be in a recession, but historically, the market comes flying out of downturns.  A study performed  this year by Ned Davis Research found after studying 10 recessions after WWII, the average market return one year after the market low point was around 32%.

If the last 10 years have been on average bad, does that mean that the next 10 years will be bad also?  Most likely no.  In fact, odds are overwhelmingly good they will yield much better than average returns.

The interesting observation to be made right now is that the quite opportune time to purchase stocks now is actually parallel with the real estate market.  Now is the time to be buying real estate.  Like stocks, real estate is likely to continue to fall, but the bottom is near.  Real estate, historically, has always been a good long term hold.  Ownership is not without heartburn, but if you can’t stomach seeing your property values come down a little over the course of 10 years, maybe investing in real estate isn’t for you.

In many cases, prices have come down to 2003 levels.  The average sold price on Panama City Beach during the third quarter 2008 was 10% less than what it was during the same period in 2006.  On an individual basis, some prices have come down as much as 20 to 40%.  Right now there are deals everywhere with motivated sellers willing to do just about anything to sell their property.  In many cases, velocity sales has actually increased from last year, indicating the entrance of buyers into the market.

The best way to acheive healty returns in any investment is buying low.  You know the saying – you make money when you buy, not when you sell.  Now is the time to be making money.

Laketown Wharf – Corus Bank bracing for money outflow

I’ve had some dialogue with a Corus Investor who has been kind enough to keep me updated with what Corus is up to regarding Laketown Wharf.  Below is the most recent update:

1)  They suspended payment of interest on $404m of debentures (type of bond).  This is the only debt that Corus (holding company) has, other than deposits.  The rules of the debenture allow this for up to 20 quarters.  The holders of the debentures cannot be too happy.  This was done to preserve cash for operations.  No big deal unless you need the interest and own the debentures.
 
2)  They disclosed that they formally applied to TARP funds from the Treasury.  If granted, they will issue preferred stock to US Treasury at 5% for 5 years.  I DO NOT think they would have applied if there was any chance of rejection.  This may also force a merger of Corus with another bank, but I put that at less than 5% odds because the Glickman family owns half the bank and they are not going to be too happy taking orders from anyone.
 
One of the Glickman wives sold about 20% of her shares.  No big deal.  the proceeds were enough to buy her a $30k car.  She’d probably going to use the proceeds for a divorce!  Her spouse owns about 6 million shares.