Chat Transcript - September 8, 2008
Posted on September 9, 2008
Roger Dawson Hi Samueir and Linda. We’ve been having trouble with the website tonight. Too many people tried to log in at the same time and it overloaded the server
Linda Oh, that explains it… thanks for the heads up,
Roger Dawson Thanks for you patience. Mike Summey will be joining us mometarily.
sparky37 Hi Roger
Linda Hot topic with today’s news…
Roger Dawson Hi Sparky and Alex. Thanks for your patience.
sparky37 It took a long time to get in tonight
Roger Dawson We’ve been having trouble with the website tonight. Too many people tried to log in at the same time and it overloaded the server
alex hi everyone
Roger Dawson Mike will be here soon. He’s eager to discuss the Fannie Mae Freddie Mac takeovers. It’s one of the greatest Federal Government moves since the great depression.
sparky37 Hi Mike
Mike_Summey Hi everyone.
Mike_Summey Sorry I’m late.
Roger Dawson I’m sure that your all aware that Fannie Mae was created by the Roosevelt administration in 1938 or so to ensure that home loan mortgage money would be available.
Mike_Summey I understand we had a problem with the website a few minutes ago.
Roger Dawson We’ve been having trouble with the website tonight. Too many people tried to log in at the same time and it overloaded the server
Mike_Summey Our webmaster put a script on the website that was supposed to block attacks by hackers trying to overload the website, but apparently it blocked an overload trying to get in the chat.
Mike_Summey I have several emails from people who were trying to get in a few minutes ago.
Roger Dawson Fannie Mae worked so well that in 1968 it went private by issuing stock. I wish that all Federal government programs worked like that.
sparky37 Mike, I went to a foreclosure auction over the weekend I was the only bidder besides the bank, the bank opened the bid much higher then I was willing to go
Roger Dawson It took the Feds a few years to realize that they had created a virtual monopoly with Fannie Mae, which is a no-no. So they created a competitor and called is Freddy Mac FNMC.
Mike_Summey sparky, that happens quite frequently. The bank bids in the amount they are owed and then may sell it for less so they can go after the borrower with a defficency judgement.
Mike_Summey Does anyone have any feeling about the government takeover of Freddie & Fannie?
sparky37 Mike they were owed 574 on the 1st and they started the bid at 434K no positive flow on that amount
Linda This is a geat History lesson, I had no idea how they were started,
Roger Dawson Sparky, you should approach the bank with your low offer. They may have changed their mind by now.
sparky37 I am thinking about that, I know they just need it off there books
Roger Dawson Also they can prove to the borrower that they did everything they could to attract a buyer for the amount owed. Now they feel safer dropping the price.
Mike_Summey Sparky, if they sell to you they can get a judgement for the difference between what the are owed and what you pay them. If they let you bid low at the auction they can’t.
Linda We are buying a forclosed property (to live in) at the end of this month, and our biggest hurdle was getting financing… found a bank that would do a STATED INCOME believe it or not. We are thrilled, and figure we are getting it about $100,000 BELOW what it’s worth… some times luck is on your side, it doesn’t hurt to be persistant
Roger Dawson Mike, I hate to see the Feds take over anything. That kind of socialistic thinking ruined England. But this was neccesary.
Mike_Summey I wonder where Al Lee is tonight. I’d like to hear his take on the situation. He and I have debated the financing situation for a long time.
Mike_Summey Hi eerskine & david
davido had trouble loggin in
Roger Dawson Linda, this takover of FNMA and FNMC will probably make loans easier to get.
erskine214 hello
davido can someone bail me out?
Linda Does anyone have an opinion about what this will do to Rates? I’ve been told by our Bank, that they suspect it will drive them DOWN???
Roger Dawson Davido: which jail are you in? We’re here to help.
davido linda rates area already down today - check bankrate.com
Linda I know, but even further.
Roger Dawson The New York Times is predicting a drop of 1/4 %.
Mike_Summey Linda, I believe it will drive them down. Long-term rates were too high based on short term rates and I believe that was a reflection of uncertainty in the market. Now with the government guaranteeing things we should see rates fall.
davido Freddie Mac Island, Cell Fannie Mae block. I’m here with five mortgages. Bail out appreciated.
Roger Dawson Mike, what do you think about it?
davido Roger you’ll like this one, I actually met and did some work for Franklin Raines while liiving in Beijing. I helped organize a press tour tour for Fannie Mae and he was there to speak to the press. That was in 2003 when he was selling our loans to the Chinese.
Mike_Summey Roger, I would like to see the government get things stabalized and then break Freddie and Fannie up into several smaller companies and spin them off as competitors.
davido Raines is the former ceo of Fannie
Roger Dawson Davido, that’s fascinating. I spent two weeks in China at the end of July. Things are booming there.
Mike_Summey Hi Sandy
Mike_Summey I understand Freddie & Fannie tried to raise capital in Russia and Mexico but there were no takers.
Sandy hello…trouble getting on tonite
Mike_Summey Hi Luther
Roger Dawson Hi Luther and Sandy
Linda Do you think the rates will go more than 1/4, and by how much?
Roger Dawson We’ve been having trouble with the website tonight. Too many people tried to log in at the same time and it overloaded the server
Sandy hi Roger
Mike_Summey Linda, I think we could see the takeover result in a 3/4% drop. That’s just my opinion.
davido the worst part about this is that the bubble blogs were warning as far back as 2003 that a bailout was coming. and here we are today.
Mike_Summey What the takeover does is insure that there will be mortgage money available in the coming months. A failure of Fannie and Freddie could precipitate a worldwide crash that would rival the Great Depression of the 1930s.
sharon How will this make mortgages easier to get? Any thoughts?
Roger Dawson We’ve been consistent in telling our students not to do adjustable payment loans.
Mike_Summey david, I wasn’t talking about it in 2003, but I sure was by 2005.
Linda Mike, any guess on how long before we would see that amount of a drop? I’ve just signed a FLOAT Option on our mortgage, which today was at 6.375
Mike_Summey Hi luther. welcome back.
lutherblissett thanks, Mike
davido even if it does lower rates, i still think banks will be skittish about loans for five years.
Roger Dawson Sharon, yes it will. Now there is virtually no investor money available for loans. Investors have been scared off. Now there will be $80 billion of Fed money available.
Mike_Summey sharon, it will insure that banks have a market to sell the mortgage loans they originate. That will give them money to keep making mortgages.
Roger Dawson I don’t think that interest rates are stopping people from investing. It’s the lack of available loan money.
Mike_Summey Freddie and Fannie provided banks with a market for their mortgage loans. The banks made origination fees and in some cases got servicing fees for the loans, but they would package a bundle of loans and sell them in order to recoup their money to keep making loans. Investors ended up with the loans as stockholders in Freddie and Fannie.
Roger Dawson Investing in FNMA and FDMA stock has been a disaster. Stock has dropped from $80 to $7 and with the Fed investing by setting up a priviledged level of stock, regular stock is likely to get wiped out.
sharon Thanks, Mike & Roger. I now understand that this is a good thing for us as investors as well as home buyers that will buy my house that I would like to quick turn.
Mike_Summey Freddie and Fannie issued mortgage backed securities that were sold to investors, many of whom were foreign investors. When the packages that secured the securities were diluted with sup-prime and adjustable rate loans that started to default, Fannie and Freddie were unable to sell the securities to raise capital to keep buying loans.
Linda I had a convesation today with a bank V.P. who said that he figures within 2 yeas MORTGAGE brokers will be a thing of the past, and due to regulations the squeeze is on them, some banks won’t even pay a YIELD SPREAD anymore.
Mike_Summey Hi lanilizer
davido i’m not fond of mortgage brokers. at all.
Mike_Summey Linda, I recently read that half of the mortgage brokers that were in business a year ago are already gone.
Roger Dawson Sometimes a morgage broker can be helpful because they know about hundreds of creative loans that are available.
sparky37 as a squeezed mortgage broker we are hurting
Mike_Summey Hi Ken
Ken Hey guys Yeah i’m late
Mike_Summey Ken, did you have trouble getting in earlier?
Ken No, I was out slitting firewood
Ken splitting
Linda Thats true, there are all kinds of BACK ground checks, and CREDIT CHECKS that are done on them now. If you don’t have great Credit, the Division of Banks won’t issue you a license *(figuring someone with bad credit is a big risk for fraud).
davido mortgage brokers are good in that they have access to several loans, where as banks only offer theirs - most of the time. but i’m always interested in standard fixed rate 15 or 30 year loans. it’s the creatitivity that got us in this mess.
sparky37 it’s greed that got us in this mess
Ken Greenspan got us into this
Ken The idea of getting a morgage then selling it was crazy and should have been stopped back in the 90s
Mike_Summey david, do you recall my concern years ago about the interest only, sub-prime, adustable rate and other creative loans that were behind pushing the prices way beyond what any reasonable person would pay?
davido oh - i do.
sparky37 Ken are you in pa?
Linda The blame is in every part of this industry, people who didn’t care to learn what they were signing, Brokers who looked the other way on the paperwork, banks that said OK to high credit risk applicants, no one group is to be blamed in my opinion.
Ken Yeah
Roger Dawson I can remember the time when the FBI would investigate anyone who lied on a FNMA application for a loan. Somewhere down the line they threw out the rules and you could put anything on an application and get it approved.
davido every mrtg broker in cali was pushing an option ARM
Mike_Summey Ken, I agree that Greenspan is a major contributor. He kept rates unusually low for too long.
sparky37 Ken I was in Hershey last week, amazing place amazing man with incredible vision
Ken Mike I thought I read an article that clinton gave greenspan the option to stop the selling of some mortgages, The new guy Ben just implemented that in July this year.
sparky37 Mike, Milton hershey sold his cramel business in 1900 for 1million dollars and then bought 60k acres in pa and built Hershey
sparky37 *Caramel
Ken Sparky I live near Johnstown, Western PA were are motto is “we’ll Tax you”
Roger Dawson Someone told me that Hershey’s stock capitalization is bigger than GMs.
Ken Really? Thats amazing
Ken in PA you sure 
Mike_Summey Greed is the achilles heel of conservatives. If it weren’t for greed, the Republicans would hold all the political offices.
sparky37 he would be the richest person in the world if still alive
sparky37 Ken, yep thats how he built Hershey, he used the million and created the town and started the Hershey co.
Roger Dawson I had dinner Saturday night with a RE broker who is getting some fantastic buys, buying from investor sydications that are going under.
davido So just an update from California - esp Sacramento - there are deals out there, but even with excellent credit the banks want 20% down. Bad part is that most are foreclosures and no other owner financing available because they extracted equity and are underwater. I wish I had more cash right now. Lesson learned for future: Put yourself in a cash position.
alphonzawill hello
alphonzawill hello
Ken Sparky My area is all about towns that are made form big companys. If you get time check out www.heilwood.com thats the town I grow up in. 1930 is when the mines shut down and it is a big dump now.
Roger Dawson I think that prices will still come down more. In the Riverside area (east of LA) they are huge tracts of homes where everyone has moved out. It’s hard to sell in deserted neighborhoods.
Roger Dawson Alphonzawill: may be call you Al?
Mike_Summey I had a lengthy discussion with a young person this weekend who said that money wasn’t everything and that she didn’t need all the things that I have. I told her that she was right that money isn’t everything. I explained that financial independence is having enough money to live the lifestyle you want to live without having to work to do so. When you reach that point you get to do what you want each day when you wake up, not what someone else wants you to do to earn money to live. She had never look at it in that way. Interesting!
Linda Anyone else think the bottom will be the Spring 09?
Roger Dawson Mike, you got a great endorsement on the Mindset book didn’t you? Can you share it with us?
Ken Mike it blows my mind that people don’t look at it that way
sparky37 Linda, I think bottom is 2nd qtr 2010
alphonzawill Hello everyone
Mike_Summey Linda, for two years I’ve been predicting late 2009 or early 2010 before we see a bottom. More and more, I’m feeling that might be optomistic.
davido mike - i don’t money, i just need to be able to do what i want to do everyday
davido in this world, money helps a lot
alphonzawill well, not everyone has been exposed to that way of thinking
Roger Dawson Linda, I think that it’s going to vary very much by location. Here in LA beach property is still booming for example.
alphonzawill people have never seen that up close or believe it is possible
davido i say late 2010, linda
davido SF Bay Area prime homes are still super expensive
davido i even think they are expensive for the wealthy
Linda Recently Boston was listed as one of the areas in the country that was starting to actually increase in pricing, so right Roger, I guess it all depends on where you are….
Roger Dawson Hi Al, where you bin
Al Lee Well, I am in time to see it all end.
Al Lee I have been BUSY!
Al Lee Hi Roger, Mike
Mike_Summey Roger, I posted the endorsement as a testimonial in the testimonilas section of the website. Everyone can read it after the chat if they want.
davido the end happened today Al - Fannie and Freddie are gone
Roger Dawson Gone to the bosom of socialism.
Al Lee Oh, yes, I sent ot a bulletin early this morning on that Fannie Freddie thing.
Mike_Summey Al, I asked earlier where you were. What’s your take on the Freddie & Fannie situation?
Linda So, I’m not clear, is this a Good thing that Happened, or Not?
davido it’s bad that it had to happen, it’s good that it did happen.
Al Lee The governmetn caused the problem, created Fannie and Freddie, then uses OUR money to bail them out. They were run by politically chosen CEO’s
sparky37 nite all
Mike_Summey Al, you were one of the biggest advocates for the interest only, sub-prime mortgages.
Roger Dawson Night Sparky
Al Lee It started with the “RedLining issue” many years ago. Then Fannie started buying the questionable loans in bad areas because it was politically correct. Now, it will be OUR mony that bails them out and the corrks at the top of the organizations will walk away with tens of millions of dollars in bonuses for a job well done.
Mike_Summey We’ll stay a few minutes longer tondight since so many people had problems getting in earlier.
Mike_Summey tonight
Ken http://money.cnn.com/2008/08/22/real_estate/barney_frank.moneymag/index.htm
Al Lee Mike, I think that Interest only is great, I never advocated sub-prime loans. I deal only with peipel with a 700+ FICO, they don;t need sub-prime loans.
Al Lee Mike, are you staying late just for me? That is nice!
Al Lee the was “people” not peipel
Roger Dawson In one corner Mike, in the other Al. This should be good!
Mike_Summey Al, you are correct on that point. When the government tried to force lenders to make loans in low income areas, to poor people, it was a good idea politically, but a disaster economically.
Mike_Summey Al, just for you! 
Al Lee Mike, that is exactly what started all this.
Linda wasn’t that about 15 years ago?
Roger Dawson Al, are you sure that greedy investors didn’t have something to do with this?
Mike_Summey Linda, that’s correct. We are now feeling the results.
alex godd nite, all
Ken Mike that article shows the government tried to help back in 94 but greenspan refused. How ever You know how politics are not sure how right braney frank is
Al Lee Then Wall Street sharpsters got into the act and started “securitizing” these junk loans and created a market for them. Then lenders started to seek bad loans because they could sell them easily.
Mike_Summey Roger, not greed “investors” . . . greedy “speculators”
Al Lee Roger, a few California investors might have, but not us Texas investors.
Roger Dawson Ooops, mea culpa!
Roger Dawson Al, I can see the Texas bumper stickers now: “Dear Lord give us one more boom and this time we won’t piss it away.”
Mike_Summey We are investors, not speculators. My definition is very simple, “If you have to sell a property to make a profit, you are a speculator, not an investor.”
Al Lee Roger, you are so right.
Ken Mike that is true
Al Lee The Texas economy is doing better than the rest of the country.
Roger Dawson That ain’t saying much, Al.
Ken Al the biggest thing with the economy is the inflation of food
Al Lee These days, Mike, if you have to sell a property you had better be rady to finance it. There aren’t many lenders left.
Ken and gas
Mike_Summey Everyone, I’m sorry about the problems early in the chat. We are working on the new website and trying to prevent hackers from attacking it. Our protections apparently worked too well tonight because it shut down when many people tried to log on all at once. We’ll get it worked out soon.
Mike_Summey I know several people tried to get in early and couldn’t because I got emails from them. I see they didn’t try later.
Roger Dawson Did you buy anything this week Mike?
Mike_Summey Al, we are entering a new era of seller financing that will be unlike anything you have ever seen. As Baby Boomers start converting real estate equities into income streams there will be more seller financing that we’ve ever seen. Just my opinion!
Mike_Summey Roger, I made offers on two bank foreclosures, but they were not accepted . . . yet!
Mike_Summey JN & Karl, you’ve been very quiet tonight. Any questions before we wrap it up?
Linda I plan to sell a property in the spring, and maybe it will attract more buyers if I offer a % of Seller financing, do you think the banks are still going to be hording the money in the spring?
Mike_Summey You too Tom!
Roger Dawson Goodnight everyone. I’ll see you next week.
Al Lee Mike, that might well be accurate. We have had houses that we built for investors get bumped out of closing because two were with Wachovia, who decided to get out of the home loan business, two with Homecomings, who went belly up, and two with another bank that I can not recall at the moment.
Mike_Summey Al, I think Wachovia may be on its last legs.
Al Lee Folks, I need to go get packed for a trip to Orlando tomorrow.
Mike_Summey It wouldn’t surprise me if they are gone by year end.
Al Lee Mike, I think you are right.
karl l First timer here! Glad to get in on the chat. Very informative. Will be back with ???? another time, for sure.
Al Lee We have had a lot of loans with IndyMac and they are gone.
Mike_Summey Karl, we’re all friendly and there are no dumb questions, so please join us again.
Al Lee I may need to do seller financing to sell the remaining houses we have.
Al Lee I will try to be here next Monday, Mike. I need to run now.
Al Lee odnight!
Al Lee Goodnight!
Al Lee Oh yeah! Palin 2012 !!!
Mike_Summey Al, I’m getting ready to make an offer later this week on property to build a block of townhomes only I won’t be selling them. They will be rental if I build them.
karl l Thanks all.. Goodnight
Mike_Summey I’ve got to run too. Goodnight. I’ll see you next week.
Mike_Summey Hi Jess, you’re late. we are just wrapping it up.
Linda Good night everyone, have a great week!
Mike_Summey Join us nex week about an hour earlier.
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