Secrets from Secret! University

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Many of you already know the Emergency Economic Stabilization Act of 2008 (EESA) is now Law. At first glance is seems to have 3 sections:

TITLE I—TROUBLED ASSETS RELIEF PROGRAM (TARP)
TITLE II—BUDGET-RELATED PROVISIONS (Reporting Requirements)
TITLE III—TAX PROVISIONS (”Sweetners” - The Senate sweetned the package - and enlarged the legislation to 450 pages (from 106 pages) these last 3 days - by linking the rescue/bail-out plan to a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000. The Senate also tied the package to a two-year extension of tax breaks that will save individuals and corporations about $149 billion over the next decade, a move popular among House Republicans. The provisions include $17 billion in credits for the development of solar, wind and other forms of renewable energy, among other interesting white-meat additions.

It’s my plan to study the TARP section over the week-end to try and make heads or tails out of it for you and others in our residential real estate mortgage lending industry … the overall ‘Economic Stabilization’ effect, you’ll hear on TV from many others far more qualified than I am in that area … stay tuned … as now we’ll be on to it’s implementation and then on to long over-due regulatory reform (the REAL scary stuff).

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Let’s see, the latest TRICK word is ‘SWEETNERS’ (some of us still call that ‘PORK’ - $190+ BILLION on top of the $700 Billion!), and it looks like there’s plenty to go around!  … money for Carribean Rum Exporters, Nascar, Hollywood Producers  (in an economic stabilization package) … ya gotta be kidding me. Are ALL of these clowns so dam corrupt, they think even now, they’re bulletproof and can’t get fired? Who was it that once said (right before an election) THROW THE BUMS OUT? … I’m with him these days, it looks like.

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Many of you have your own website and are struggling with who, where, how, when, why, etc. to SEO it, so you’ll potentially rank relatively high when your potential focused future customers search using the key words and phrases you feel would attract what you want to visit your website. As a non-tech person, but significantly anal about statistics (like many of my generation are about this lending industry), I too read all I can on this subject, and study our results to try and make them make sense to my brain; that’s tough usually.

I have some select data for you about our website for the calendar month of September. Last month, a full 45% of our website’s unique visitors were people who were referred to us from search engine results from our pals at Google, that’s up from 42% just 60 days ago. Translating that into what I care about as the boss, that tells me the ‘right sort of website visitor’ is reading various pages within our main website. They’re not blundering over it, looking for a bass fishing boat or something not relevant to what we offer … and that’s GREAT! WE WANT TO BE ‘THE’ AUTHORITY!

The next thought naturally is, do we have to offer what they want? If, BTW, you think ’sales’ is that singular answer, you’re completely wrong. In our case, our potential students/customers (mortgage brokers, mortgage bankers and loan officers) are a tough bunch … when times we good, I would hear  “we don’t need no stinking training”  (actually a neighbor of mine in Covina - Rick Garcia - was the actor who made that phrase infamous in Blazing Saddles!) then as economic times became more challenging, it was ” yep, you were right, we do need more training, but we’re broke and can’t afford it now” … lately it’s “what do you got that’s free?” My answer to those situtations is simply to continue to gain more experience and knowledge myself, so when they’re ready, we’ll be ready at Secret! University! to help. Mean while I want to reinforce that we’re the place to get what ever you/they need as it relates to our industry.

One really nifty thing our website stats tell me, is called Recent Visitor Map. I look at it from time to time, sort of like a small bit of mid-day receation. Among other things it shows me the last 25 or so of our main website’s visitors, which pages of our they looked at, and and where they’re located, and in some cases a lot of info on who they are … so get a load of this: In September we had among our Blog readers (besides YOU):

House of Representatives, The Treasury Department, the Internal Revenue Service, National Credit Union Administration, the American Bankers Association Inc., Congressional Budget Office, Fannie Mae, and Department Of Housing And Urban Development … so you’re among some pretty big big-shots that read the Blog from time to time … so if you’ve got something to say to people like these … LEAVE ME A COMMENT … they might pick up a good idea from you!

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This just in: House Rejects $700 Billion Bailout Bill 

“The House of Representatives failed to pass a $700 billion bill to purchase troubled mortgage assets from financial institutions as two-thirds of Republicans voted against the bill and Democrats could not muster enough support to push it over the top. The final vote was 205 for passage and 228 against the bill. A close vote on the Bush administration plan was expected. However, the measure is very unpopular back home with constituents and lawmakers were reluctant to vote for such a huge package that critics painted as a bailout for Wall Street firms and banks that profited and later got into trouble because of reckless subprime mortgage lending. The Senate was expected to pass the Emergency Economic Stabilization Act if approved by the House.” … and here I was getting ready to fly back to Washingston DC an pick up MY $21,959.42 RESCUE check !

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I learned on the news a few minutes ago, the first draft of what may be the new Government ‘rescue’ plan, is now available to review before they vote on it, making it Law. I downloaded it to my hard drive and tried to post it all here … to punish you :-} … the Blog software wouldn’t accept its 106 pages … I’m persoanlly hopeful that they’ll BAIL ME OUT to the tune of $21,959.42 that “I” have lost through this credit crisis ….

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If you were one of the people that missed our September Master Seminar series web-seminars, don’t worry - we have four (4) of them scheduled for October. You’ve still got plenty of time to reserve your slot. All of our Upcoming Events are lised in one place on our website, so you can find a time and date that fits your busy schedule. I, on the other hand, have no time it seems these days, even though I’m up at 5AM glued to the Fox Business News on the TV for 2 hours before breakfast (so I can get smart); now I have to completely re-write the outlines I planed on utilizing for the October webinars … think can you guess the main topic? TARP of course, and how it will effect us every day folks in the residential real estate mortgage lending industry, right here on Main Street USA.

One of the commentators on the news was saying this crisis is like a house on fire, and it wasn’t struck by lightening, it was arson from within … a witty remark I thought …. made me think of this (new Fannie/Freddie requirement with all appraisals on and after January 1, 2009 when Mortgage Brokers can no longer order real property appraisals … a google earth view of the property as well as the other traditional photos).

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These are some historic times which all of you in our industry will not soon forget; I myself remember the S&L crisis of the 1980’s like it was just last week, and this is Much much bigger than that.

If you are on the origination/production side of the residential real estate mortgage lending industry yourself, you may very well know the sort of individuals who can help with this mess.

The single biggest issue facing the Treasury Secretary and all those that will vote to make his proposal (as modified) into Law over the next couple of days is … HOW to value those TOXIC assets.  Although that is merely the first step, which will be followed by who and how to ‘hold’ them, the ‘wisdom and timing’ necessary to off-sell them at a later date, plus the ‘re-regulation of the oversight’  that we all saw was lacking the past several years (we don’t need any new laws - what we need is ENFORCEMENT AND AGGRESSIVE PUNISHMENT of wrong-doers who violate any of the 253 laws that regulate our industry already) … all of those challenges and others, will have different skilled player needed, so those tasks can go relatively smoothly … but back to Today … WHO’S the sort of individuals the TARP people will need to leap over this first hurtle?

Lower, mid-level, and administrative supervisors - those who have been in the trenches - who have been in residential mortgage underwriting for most of the past 10+ years (definately since before the Aug ‘98 correction) and those with residential mortgage servicing employment during this same period, are the exact types that will be needed to work and guide those who are attempting to Value those Assets, so a sensible number can he offered to sellers and backed up by the locic of knowing the facts at the level of the people I encourage the TARP folks to engage.

If you know people like these, I strongly encourage you to influence them to make contact with their Congressional representatives, send their Resumes in, and follow through so they get considered as resources of Country needs to help get us all out of this mess ….

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I spent a few minutes on the phone yesterday with the former Chairman & CEO  (J. Livingston Kosberg) of First Texas Savings, a firm my company did a great deal of business with, before they were the biggest part of the ‘Southwest Plan’ (the Government’s first big step with the RTC) in the late 1980’s during the Savings & Loan crisis. We were talking about the serious challenges and opportunities that are facing our industry today; he acknowledged several high-powered investors he knows there in the Houston and Dallas areas, are putting together some serious capital to help with this mess, I asked him to pass alog my name to any of them who might need somebody who’s long experienced and knowledgable about the residential real estate mortgage lending industry from the ground up … maybe something will develop up from that conversation … I’ll keep you posted.

Along another track, this morning I spent time with one of the sharpest young men in the biz (who I’ve known for more than 25 years) and we talked about the ANTIDOTE to those TOXIC assets. Both Dave and I agree, there will be many Wall Street type experinced bean-counters needed to get through to the end of this $700 Billion problem. HOWEVER, like we’ve seen before, frequently decisions are made by ‘big-shots’ without all the necessary facts to draw sound conclusions. Both he and I are hopeful, when the people are selected to actually analyze the underlying individual loan’s situation, and the likelyhood for a worthwhile recovery if the subsequent sale of the real estate becomes necessary, that they engage expereinced and knowledgable mortgage people to not only hire the right kind of individuals to do much of the leg work once the bean counters think they’re done, but wise enough to make sound determinations as to the likely value today of those (plug in buzz word of the day here) TOXIC assets after reviewing all the relevant and available facts.

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We’re living through some interesting times in our industry. First, the passage of Public Law No. 110-289 was a very good idea, it will help a wide-cross section of Americans in so many ways (I translated it from Lawmaker/legislator back into English over a 3 week period right here in my Blob during August in case you don’t want to read the seven inch stack of paper containing all the words in that legislation); it enabled the subsequent take-over (and a $200 Billion cash injection) of Fannie & Freddie which was long overdue (gotta straighten them out, they both been plagued with scandal and ‘looting from within’ for a decade), and THAT keep the CEO’s of Fannie & Freddie from leaving with Big severance packages (they tried to get out of town with $25 Million, but 110-289 stopped that - YEA!); because of the heavy risk AIG has in insuring-backing many mortgage instruments (CDO’s, MBS, etc.), they would have made a much bigger mess in our economy had they failed, they were/are too important to fail (plus all the Government did was make them a BIG [well secured/collateralized] loan). Given what’s been happening in the credit markets, all of this was necessary … today’s $700 Billion capital markets stability deal (TARP?) Hank Paulson is trying to put together (once the ‘pricing issue details’ are clear) will make capital flow once again (in a lot of places here and abroad),  but especially in the mortgage finance sector (that’s been choking lately) … and THAT’S real good for homeowners and everybody in our industry. We’ll get through this, and then on to long over-due regulatory reform.

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Troubled Assets Relief Plan (TARP) is what I heard they’re going to call it, from the people at Fox Business News just about 15 minutes ago.

To put this into simple terms this morning (add the zeros as you like) … if a Bank owned one $500,000 home loan, that had an appraisal of $500,000 10 months ago, and originally gave out a no money down 100% financing ‘reckless’ no doc or stated loan) plus if this borrower hasn’t paid one penny …  that TOXIC loan (as I understand it) will be eligible for the TARP people to buy from the Bank (since it’s surely $$$$ in jeopardy and the Bank’s facing a serious loss), and I hear they’ll pay the Bank somewhere between $50,000 to $100,000 for the sale and purchase of that loan.

If that’s correct (because details are unavailable this moment), and IF “I” owned that bank, I would probably not sell that loan to TARP. Why you ask? Because I would know the likely value of the real estate collateralizing that loan today (here in CA probably somewhere around $350,00 or so); therefore I would take that into REO, sell it and take a loss of $150,000 (plus unearned interest income and expenses along the way). A total number far less that $400,000 to $450,000 if TARP stepped up! … I clearly need more details to give you my educated opinion ( I DO see several other pluses for the Bank, the Borrower and TARP … but the logic to sell escapes me this early today).

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