Fannie and Freddie versus The Federal Government

The article below is the latest in the housing war in the United States.  I don't know about you but I'm getting pretty tired of the blame game on both sides.  As I see it, the same people who created the crisis are now getting PAID to clean it up?!  This is primarily being done through loan modifications or short sales where the servicers or investors are paid to accept these.  There are definitely valid reasons for both approaches however these are currently being abused...


 You have to understand that the current governmental stance is to "incent" these folks with tax payer money.  I liken it to paying my children to clean their room after they've made a mess.  If I tell them "For every mess you clean up, you will get $5" I can guarantee that they would create more mess in order to make more cash.  This is exactly what the administration and congress is doing to the banks and servicers right now. 


I am in a uniqe position to see behind the curtain as I work directly to sell the bank owned homes for both Freddie and Fannie.  These two organizations are committed to Neighborhood Stabilization and stewardship of the tax payer monies.  When they market a home they analyze fully the effect of marketing the property as-is or as-repaired.  They walk a tightrope of balancing the their duty to stewardship for the taxpayer with the need for stabilizing neighborhood values.  On one hand we need to look at the return on investment for the money spent.  On the other is the need, sometimes regardless of cost, to keep neighborhood values up long term.  Enter short sales...


Again, I'm not down on Short Sales (OK... kind of on brokers who don't think about the effects of pricing a home at a ridiculously low price) but short sales have limited thought about the effect on the tax payers or stabilization.  So before they throw the proverbial baby out with the bathwater, possibly they should look at the long term ramifications of unwinding Fannie and Freddie and not just election year political moves.  (I would truly hate to see these two replaced by a "new government agency" which is one of the options in play.)


The article even admits that "Fannie and Freddie have almost single-handedly kept the housing finance market afloat in recent years.

Is real estate truly a good investment in the Seattle area?

At Pillar Northwest we broker bank owned homes and have for over 15 years.  Over the past years the real estate has taken a beating on many fronts.  It has been a scapegoat for most of the economic woes.  Recently I found this article taking a snapshot look at the last 10 years. As it turns out, the average price is still higher than it was just 10 years ago.  I was just reviewing one of our bank owned properties with a client who was going to use it for a rental.  With 10% down payment the principle, interest, tax and insurance payment was under $600/month.  The down payment was only $8,000 and the cash flow was $200 per month or $2400/year.  This is a return on the downpayment of 30%!! Not to mention that applying the $200/month cash flow to the outstanding principle balance would pay off the property in 15 years...  Here is the article I was referring to!  -Scott Germino   http://seattletimes.nwsource.com/flatpages/businesstechnology/realannual05chart.html

My son asked me, "Who is Seattle's Basketball Team"?

I had to tell him about the departure of the Sonics.  It looks like I may need to change my story!  They would HAVE to call them the Sonics - of course!  http://tinyurl.com/6pa6jm4

Scott's Thoughts

Coming soon!