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Posts : 58
Position Held : Int'l Corporate Transactional Attorney

PostNew Banking Rules

Over the last couple weeks things have developed in the Banking arena which will have a substantial impact on the real estate market. First, The Government has settled with Bank of America over the issues surrounding Country Wide and foreclosures. Bank of America is now gearing up to address the 2 million foreclosures which have been stopped. As I posted on our Forum for everyone to read, there are several hundred thousand people who have been living in their homes for over 24 to 36 months now without making any mortgage payments. And due to the number of foreclosure pending, this does not bode well for the real estate market as when these properties are foreclosed on, surrounding property values around these foreclosed homes will DROP. Most people have most of their investments tied up in their homes. This will further affect the economy. To make matters worse, the Federal Government has changed the rules and how it will now conduct business with the banks. The Government will no longer cover loses due to real estate problems. They will no longer take toxic loans which represent non-performing real estate from the banks. The Government also will no longer bailout banks. Instead they are going to allow the public sector to resolve bank issues. The Government will now only provide assistance in the form of a loan up to 50% to the bank. The balance must be raised in the public or private sector. If the bank cannot raise the capital, then they must seek to be acquired by another bank. Otherwise the Governement will let the bank fail. From a depositor's perspective, this means the insurance limits by the FDIC will be the published limits, which is $200,000 per account. The account holder bears the risk for any balance over the insured limits. If the bank has too many REOs which causes the bank to be under capitalized to run, the bank's doors will be closed and allowed to fail. Banks are no longer going to discount and sell non-performing loans, or discount their REOs. Mortgages will go back to the 20% cash down and 650+ credit scores with FULL underwriting packages as banks will now be subject to penalties and buy back provisions for any real estate loan they make. This will make it very difficult for people to buy homes, or refinance homes. Plus mortgage banking will now be a public sector business. The Government is phasing out government backed mortgages, EXCEPT to veterans. Due to this, the real estate market is going to change. Stricter rules will apply to realtors as they will be held accountable for real estate transactions they draft, manage, rent, lease, sub-lease, etc. The bottom line, with the Government getting out of the mortgage business and focusing on rules, regulations and controlling how the real estate market transacts its business, things are going to change. When these changes will occur depends on Obama as most of this will be part of his re-election platform to gain public trust and promise accountability in the real estate markets. As a result, the states will change their rules as well. Personally, with 25 years experience in real estate, I have my own comments. But this is the wrong forum. Our Senators are the proper forum. The problem is, Senators are driven by their own political agendas. And its not always in the best interests for those they represent as they always vote their party's agendas; rather than voting for the people. Case-n-point, those senators who believe we can spend our way into prosperity and believe the solution is to just raise the debt ceiling so they can spend more money are friggin INSANE. As for raising taxes, just ask yourself, would you be in a position to spend more money buying new cars, clothes, food, etc. if you have to pay more taxes? Apply that thought to the average businessman. Common, the reality is NO. It may be painful, but the easiest and simplest way is to just REDUCE Government spending. Its just common sense. Enough said.
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