You are here: Home / Archives for how to invest

Fitch Projects More RMBS Re-Defaults as HAMP Disappoints

October 20, 2009 By Trent Dyrsmid Leave a Comment

Servicers of residential mortgage-backed securities (RMBS) continue to increase loss mitigation resolutions, including a significant push in the number of loan modifications, according to a report from Fitch Ratings.

As of September 2009, roughly 10% of all RMBS loans and 25% of all subprime loans received at least one modification. A year ago, servicers modified only 3% of all loans, and 7% of subprime loans, according to the report.

Fitch estimated a “conservative” projection of 65% to 75% of subprime delinquencies of 60 days or more that will re-default after 12 months post-modification.

“As in prior statements, market pressures to allow more aggressive [modifications], continued home price declines, and the economy’s effect on job losses factor into this projection,” according to Fitch analysts.

The projection includes re-defaults on loans that received a second and third modification after the first one failed. Roughly 11% of all modified RMBS loans received a second modification, and of the modifications done in Q308, 17% were re-modified, according to the report.

The monthly modification volume dropped from the peak in the middle of 2009, because loan modifications under the Home Affordable Modification Program (HAMP) are not considered complete until a three-month trial finishes.

Through HAMP, the US Treasury Department allocates capped incentives to servicers for the modification of loans on the verge of foreclosure.

HAMP’s first modifications did not begin to complete the trial period until early July and are not included in the January through June 2009 results, according to the report. But cumulative modifications increased during the first half of 2009 as servicers continued non-HAMP modifications.

“Initial indications suggest the conversion from trial mod under HAMP to actual finalized
modification status has been disappointing,” according to Fitch analysts.

Through September 2009, there has been no “pick-up” in modification activity stemming from the completion of HAMP trial modifications.

According to[1] a report from the Congressional Oversight Panel (COP), which reviews actions taken by the Treasury, only 1,711 of the 360,000 trial modifications started passed out of the HAMP trial period and into permanence as of September 1.

Filed Under: Blog Tagged With: avoid foreclosure, CA housing data, Economics, economy, foreclosure, how to invest, how to stop foreclosure, investing in real estate, real estate investing, real estate market statistics, san diego investment property, stimulus plan, stop foreclosure

A Snow Ball’s Chance in Hell

September 21, 2009 By Trent Dyrsmid Leave a Comment

In my last post, I shared with my readers some soon-to-be-released research on the FDIC and its upcoming challenges. If you haven’t read it, you should.

In tonight’s reading I came across another significant fact worth sharing: According to the New York Times account, ” Fannie (Mae) and Freddie (Mac) now buy or guarantee almost two-thirds of all new mortgages. The Federal Housing Administration guarantees another 25 percent.”

Put another way, the Gov’t is financing 9 out of 10 new mortgages in the United States.

Hmmmm…….

With the S&P500 over 55% off its lows, one could say that the stock market has priced in a V-shaped economic recovery. Damn the torpedoes, baby!

But wait! How could this be? Is the recession really over?

Not so fast, partner!!

  1. We’ve got banks going broke, with more to come, and no money to lend in the meantime.
  2. The only reason that houses are selling at all is because the Gov’t is lending the money, plus giving 1st time buyers a free $8,000 for buying a house. (how else could houses sell with unemployment as high as it is?)
  3. And heck, if you bought a new car recently, you’d have received another $4500 as part of the cash for clunkers trade in program, also courtesy of Uncle Sam.
  4. Delinquency rates are home loans are still extremely high
  5. Oh, and did I mention there’s no jobs?

Seems to me that without all the Gov’t stimulus, GDP would be so far into the toilet, we’d be seeing the D-word instead of “The Great Recession”.

Despite this, the stock market is going no where but up. I don’t know about you, but I don’t see ANY part of this picture that says “sustainable economic recovery”.

What’s the point of this rant?

Do you honestly believe that decades of excess, speculation, and outright fiscal lunacy can honestly be undone in a year or two?

I don’t know about you, but I don’t buy it. If I was a betting man, I’d say how about a “snowball’s chance in hell?”

So what should you do if you are an investor? Same advice as yesterday:

  1. cut your living expenses to the bone
  2. raise as much cash as possible
  3. do as many seller financed purchases as possible (as seller financed deals are also the easiest to renegotiate if needed)
  4. focus on flipping short sales, as opposed to fixing & flipping REOs, because it can be done without the need to tie up any capital

Your comments are always welcome,
TRD

Filed Under: Blog Tagged With: banks, CA housing data, california housing starts, Economics, financial management, financing, how to invest, invest in real esate, investing in real estate, personal finances, real estate investing, real estate market statistics, san diego investment property, stimulus plan

Free Groceries for Life

September 1, 2009 By Trent Dyrsmid Leave a Comment

I just finished a post detailing why I thought the housing recovery was further out than many think, and just as soon as I posted it, I started thinking about the concept of control.

What do I mean?

Instead of worrying about the economy and the never ending data-points that pundits (like me) are continually blabbering about, might I suggest that you focus your energy on the items in your economic existence over which you have direct control.

Burn Rate = Fate
Essentially this boils down to one simple concept; it is easier to lower your overhead than it is to raise you income. Moreover, when you earn a dollar, you must pay tax on that dollar, whereas when you save a dollar, you get to retain and then re-invest that entire dollar.

In the last 3 months, I made a decision to reduce the cost of my housing by 35%, or about $730 per month. We’ll come back to this in a minute.

Money spent is no longer available for investment
If you consider each dollar that you own as an employee, which I do, the act of spending a dollar is akin to firing an employee. And, unlike “real” employees, all “financial” employees are first class workers! How successful do you think your enterprise would be over 20 years if you continually fired your best employees? The answer is obvious.

It was this realization that made me want to sell my fancy car and buy a pickup truck. No matter how much I loved that car, it was never going to love me back. A nice rental house with tenants paying my mortgage, on the other hand, will love me for years to come.

Knowing what you are spending is one thing, knowing what it is costing you is quite another.
Using the $730/month that I’m no longer spending on my housing, lets look at how much it was actually costing me.

Assuming that I invest that $730/month an earn just 10% (and for those in my profession, earning 10% is the LOW end of what is easily possible) for 20 years, I will have amassed the tidy sum of $722,156 – probably enough to buy me groceries for at least a few months, don’t you think? Yes, there will be some taxes payable, however, if you have $0 and I have $722,156 before tax, I’m pretty sure I’ll be better off than you even after Uncle Sam’s share, no?

Your comments are always welcome,
TRD

Filed Under: Blog Tagged With: financial management, how to invest, investor, personal finances, san diego investment property, san diego real estate

Switch to our mobile site