The government has been talking about wanting to “get credit going again” and encourage banks to lend money. We already gave the banks several hundred billion , but it still sounds like they are reluctant to lend. The gov and banks need to focus on investors as part of this solution , instead of just part of the problem ("greedy speculators that defaulted on properties,etc). Investors will buy properties that cash flow IF they can get financing.
Has anyone heard if there are any plans for this TARP/Bailout money to be used to help out mom and pop investors at all?
TARP money is not going to be handed out directly to investors. The program is designed to acquire or insure the troubled assets on bank balance sheets so that bank management will quit worrying about not meeting their capital requirements and dealing with the problem assets and instead get out there and lend money. As an investor you need to convince your local bank that you are a good credit risk and will repay any loan they might make to you.
It may be a little harder for an investor to get financing, but it is still being done every day. The banks are just a little more cautious about who they lend to.
Some banks are temporarily suspending loans on NOO properties. That’s what happened with our bank for now. We’re searching again for someone to work with us. Many of the others just want a bigger percentage down now.
I’m just cynical enough to wonder if this entire “crisis” has been orchestrated by the socialists to take over the banking system and thereby control the country (and the world). Once the government nationalizes the banking system, they will have complete control of just about everything. If you say something big brother doesn’t like; you don’t share big brother’s socialist goals; you don’t use the profits from your business as big brother likes; then your benevolent government simply won’t allow you or your business access to money from the bank.
This is a scary time and the things that we are witnessing are historic. Is this government action going to make investing easier? NO!
What would make investing easier is getting the government out of banking and out of our businesses!
Propertymanager, you just don’t get it. It’s because the government stayed out of banking and didn’t regulate in the first place that we are in this financial crisis. The lack of regulation allowed corporate greed to flourish and run rampant creating the subprime mortgage mess… Wake up already
I completely disagree. The free market will work correctly if the government stays out of things. Unfortunately, the government caused this entire mess by pumping huge amounts of cheap money into the economy after the dot-com crash and September 11th. Then, to make matters worse, the government pushed banks to make bad loans through ridiculous programs like the Community Reinvestment Act. Even after these huge mistakes by the government, things would still have corrected if the government would just let the losers fail. Banks that made bad loans should fail. People that took out mortgages they can’t afford should fail. Insurance companies that bought worthless securities should fail. Businesses that can’t compete should fail (like the auto companies).
If you haven’t noticed, the government is in the process of Nationalizing the banking system. They are forcing banks to take money in exchange for an ownership interest. We have FAR too much government and too little free market.
TARealty and propertymanager you are both right. TARealty is right because there was not enough government oversight to prevent us…and I do mean us from playing fast a loose with the credit rules. That is what allowed Countrywide to lend me an 80% loan and another 20% loan to get out of PMI and spread the risk on the same house. The same company did both loans. Dumb. But propertymanager is right when the government comes up with solutions they are always socialistic. They attempt to bring income down and disincentivize any independent action. An example is that now that the government is involved and Freddy and Fanny have decided that they don’t want anybody to have more than 4 mortgages. That means that they don’t want people buying all these foreclosures and fixing them up. The government wants people like me and you that have experience turning the boarded up neighborhoods into places that people actually live shut out of the market. It is like the government thinks that experience is bad and that each person that tries to do a make ready it should be their first or second one instead of their 12th. It is like the government thinks that companies should not pay anybody a salary of more than $400k/year. If you have a rain maker you need to encourage him to make rain. You do that by taking off the limits to how much he can make. The government also doesn’t like corporate retreats. These junkets to Las Vegas that they think are terrible are how you strategize. You can’t just go to the conference room on the fourth floor; you have to get away to an environment conducive to planning and creativity so that we can get out of the problem we are in.
I have heard from 2 different lenders now that Fannie/Freddie will allow you to have 5 loans that are sold on the secondary market, up from 4. I don’t understand why they are suddenly restricting the number of loans, either. It makes sense to tighten up qualifying due to the huge number of defaults though.
Bank regulation by the government is absolutely necessary. Remember the bank crash stories of the Great Depression? The common investors were the ones losing their money and stampeding the banks.
Wall Street as well must be reined in by the government or there will be excesses of plundering, such as outrageous salaries and bonuses. You’ve seen it on the news–that’s what happens with NO regulation.
Just like I believe in having a social safety net for the poor, elderly, mentally impaired, etc. there must be regulation of institutions that can rob us blind.
An individual citizen can not oversee a bank. For the economy to function there must be trust in those institutions. Oversight has been instituted in the past because of the excesses of monopolies, robber barons, and unscrupulous people in power.
Well, money printing will go on overdrive. Taxes will go up, productivity will go down. Government will really show us how to mismanage the economy this time around. Just review the history from the Pilgrim communes to FDR. Look what they did with the money since August.
However, I am optimistic about the real estate investment. We will adjust. Real estate is local, deals are small in size, investors are too fast for the government to catch up with us.
Cheers.
Can you cite a source for that? Strangely enough I just talked to a couple of banks on the 3rd of February and they were all telling me about the 4 mortgage rule. They might not be familiar with the latest changes. I was actually going to talk to a few commercial banks. Their rates aren’t as good, but if the property cash flows, they’ll do 75% LTV. Rates I heard were in the 6.5-6.75 range.
As for the community reinvestment act, those rules didn’t really apply to brokers and much of this mess can be laid at the hands of the subprime brokers like Ameriquest which is of course no longer in business. CRA loans were actually more difficult because people had to really income quality and meet the guidelines. None of those problems with stated income loans.
[quote author=henryinma link=topic=41170.msg196357#msg196357 date=1234069248]
Their rates aren’t as good, but if the property cash flows, they’ll do 75% LTV. Rates I heard were in the 6.5-6.75 range.
[/quote
Henry…a side question…what kind of documentation do banks require when asked to show the property cash flows?
I’m not sure as to what documentation is required as I haven’t done the commerical one yet, but when I got regular residential loans in the past, they just wanted to see signed leases. I suppose they could also ask for copies of checks or bank statements to show the deposits.