Every morning I wake up, walk the dogs, make my coffee, and move towards the highlight of my pre-lunch day: reading the Wall Street Journal. Yesterday, I picked up the paper expecting to see the usual (albeit the WSJ always keeps me on my toes so I am not sure why I was “expecting to see the usual”) only to find that reporters across the nation had been doing overtime on researching the foreclosure industry. Which points out the fact that I too am so swamped with the foreclosure industry that I’m just now writing this article about yesterday’s WSJ. hmmm.
Anyways, what I found was a barrage of information about our twisted duality relationship with foreclosure. It then occurred to me that in most of my conversations with fellow REO industry professionals the conversation begins in a straight-line direction only to eventually derail in an attempt to converse about the umpteen different aspects, lawsuits, discoveries, etc. of foreclosure. The only logical step for me to take as an educator is to share this knowledge compiled by the WSJ and dozens of REO professionals across the nation with my fellow bloggers.
- “Consumer Confidence Plummets” – The front page of the WSJ covers the statistics recently unveiling the fact that consumers are not confident enough to part with their hard-earned money. This could have two major impacts: It could send the economy into a recession (or more deeply into one if you are of the belief that we are already in recession), and it’ll keep interest rates steady.
- “A foreclosure-rescue bill cleared a key Senate test, putting it on track for full Senate passage as early as today” – This bill would allow the government to back $300 billion in new, cheaper mortgages for debt-ridden homeowners facing foreclosure.
- The 2 Bear Stearns employees, Ralph Cioffi and Matthew Tannin, who were arrested earlier this month are charged with conspiracy, securities fraud, and wiring fraud hiding mounting losses in funds. The debate now becomes, how much intentional conspiracy occurred versus working within the confines of the high-risk stakes within the hedge fund market. The argument becomes something along the lines of “these guys didn’t cook the books intentionally like Enron, but one manager did sell his stocks just before the hedge fund plummeted.”
- “Small Banks Face a Looming Hit From Builder’s Interest-Reserve Loans” – A lending practice, which is more exposed to smaller banks, allows the lender to postpone payment of interest to real estate investments such as condo complexes until the investment becomes profitable or “cash flows”. The lender can then indicate on their books that the loans are performing, when in fact these real estate projects are failing.
- GMAC, the lending branch of General Motors, whose business backbone has always been in the motor industry, followed by home loans, then credit cards, is feeling a huge crunch as their large vehicles are failing to sell and home loans are defaulting. In the true form of a trifecta, GMAC is finding it near impossible to sell off their credit card division.
So as you can see, we aren’t out of the woods yet. I’m not an economist with a PhD, but I can say with confidence that we are most likely in the middle of the woods. It’s the end of the 2nd quarter this week and I’d be willing to bet that before July 1st, 2008 we’ll be hearing more truths about the state of major corporations around the nation/globe. As we all know REO starts at Wall Street and works its way down.
