Mortgage Implode: Time to Get Your Bailout…The ‘Gimme Mine Coalition’

2% Interest Only 5-year loans available again?!? Yes, but beware.

-Home Owners and Mortgage professionals, this one is for you.

I am a big advocate of mortgage modifications that include a fully documented re-underwrite and re-qualification of every borrower in America allowing a maximum of 28/36 debt to income ratios with market-rate 30-year fixed mortgages.

Yesterday, the video camera was calling my name so I decided to go into more color on mortgage modifications.  Pass this video around to friends and family. Take matters into your own hands because it is obvious nobody will be riding to the rescue anytime soon.

That being said, I do believe a large scale home owner bailout will come, but it will likely involve giving up present and future equity in your home.  Right now you do not need to do that.  You can even negotiate into the modification a better reporting of this event to the credit reporting agencies with some banks.

In recent weeks I have seen banks get very aggressive including reducing principal balances to lower than the present home values and giving borrowers 2% interest only loans for five years.  Wachovia offered to buy down a friends mortgage to 2% on a 30-year fixed, however, they had to refi through FHA and carry a silent second for the principal balance reduction needed to get them to the FHA limit for the area.  This sounds great but I do not advocate a super low interest only rate without a principal balance reduction. Getting 2% today with no principal reduction just kicks the can down the road and will cause major troubles then.  Without a principal reduction you are still stuck unable to move or refi.

I truly believe that there is a small window in time that exists right now where banks can’t handle any more foreclosures and you hold all the cards. The last thing the bank wants is another foreclosure and 65% write down.  If you play your cards right you can win and the bank can have a long-term customer paying her mortgage payment each and every month who will some day own the home. That is what it is all about.

I also went into great detail on mortgage modifications on July 4th and I urge you re-read the posts. There is information in here you must know BEFORE taking on this task. You have to know what to ask for because banks are a ‘for profit’ business, which means decisions are not going to be in your best interest. – Best, Mr Mortgage

Can Home Buyers Get Help When Still Making Their Payments?

Must a Borrower Stop Paying in Order to Get Help?

by Jack M. Guttentag

Inman News


“Is it true that mortgage servicers will not help borrowers who are in trouble until they stop making their payments? I am a home retention counselor, and I keep hearing from people referred to me that they have received no response from their servicer because they have not yet missed a payment. I would hate to advise people that they have to stop paying if they expect to get any help if it is not true.”

There is certainly much truth to this because I have heard the same story from numerous people I have counseled, whose stories I have no reason to doubt. The most common thing I hear is that they were told by the servicer to come back when they were two payments behind.

There are understandable reasons why borrowers who are delinquent on their payments receive more prompt consideration than those who are current. To the degree that servicers are faced with more requests for help than they can handle at one time, they have to set priorities. The number of borrowers in trouble has ballooned over the past year, outstripping the efforts of servicers to expand their capacity to deal with them.

Setting Priorities

A plausible way to set priorities is in terms of the degree of urgency of the problem. A borrower 60 days behind in his payment is closer to foreclosure, and if he is going to be saved, he needs faster action than a borrower who is current. So borrowers who are current get placed at the bottom of the list of borrowers requiring special treatment, if they are even placed on the list at all.

This tendency is reinforced by the fear of free-riders. All borrowers would like to get a better deal on their mortgages, whether they have trouble making their current payments or not. If loans are being modified to help borrowers, some borrowers who are not in financial distress will try to take advantage of the situation by pretending that they are. But potential free-riders may not be willing to become delinquent because that would hurt their credit. By only considering modifications for borrowers who are already delinquent, the servicer reduces the number of potential free-riders.

In addition, the practice of dealing only with borrowers who are delinquent keeps loans in good standing for longer periods. Consider the borrower who loses her job but has savings sufficient to cover the payments for some months. Investors would prefer that the borrower make the payment out of savings for as long as possible, since she might find another job during this period, avoiding the need for any modification of the mortgage.

Moving Up on the List

If I were a borrower with reduced income but with good prospects of recovery, I would make the payment out of savings, avoiding the hit to my credit. If I considered the prospects of recovery to be poor, however, I would stop paying and husband my savings. This would move me up on the servicer’s priority list for special treatment. While it also moves up the hit to my credit, that is something that would happen anyway as soon as my savings were exhausted.

If I did not have a problem making the current payment but would have a problem dealing with an anticipated payment increase, I would handle it differently.

First, I would determine exactly how large the payment increase would be. If the increase stemmed from an interest-only loan reaching the end of the interest-only period, the new payment could be found using any monthly payment calculator (including calculator 7a on my Web site) inputting a term equal to the remaining life of the loan. If the increase stemmed from an ARM (adjustable-rate mortgage) adjustment, the new payment wouldn’t be known exactly until a month or two before the adjustment, but an estimate based on the current value of the rate index would provide a good estimate.

A Detailed Budget

Step two is to develop a detailed budget which documents the point that the expected payment is not affordable. Use the form provided by Genworth to show your income, expenses, and assets.

Submit your document to the servicer well in advance of the anticipated payment increase. There is no guarantee that it will lead to a contract modification before the payment increase materializes. However, it gives you a good shot to move up in the servicer’s queue by providing the concrete detailed information that servicers require. It also keeps you out of the hands of the modification hustlers who want to be paid upfront for doing what you can do yourself.



How Long Will it Be Before the Foreclosed Homeowner Feels Relief From the 700 Billion Dollar Bailout

Not soon enough if ever. Let me explain.

Bush announced that the first 250 billion dollar infusion is targeted for the banks. Which will take time to do and time to see if it works. Which will mean that the balance of the money will not be used (350 billion dollar) until the next president is inaugurated in January 2009.

However, the Bush Administration has unveiled additional mortgage assistance for homeowners at risk of foreclosure. The HOPE for Homeowners program will refinance mortgages for borrowers who are having difficulty making their payments, but can afford a new loan insured by HUD’s Federal Housing Administration (FHA). There are a lot of issues to be dealt with, plus pre-qualifications needed by the homeowner, which means it will take time to be effective.

So what is offered by both candidates and when will it start?

Barack Obama proposed more immediate steps to heal the nation’s ailing economy, including a 90-day moratorium on home foreclosures at some banks. Obama proposed that banks participating in the federal bailout should temporarily postpone foreclosures for families making good-faith efforts to pay their mortgage.

Sen. John McCain proposed a plan to help millions of people around the country facing foreclosure by ordering the Treasury secretary to purchase and renegotiate faulty home loans.

The plan is aimed at homeowners who owe more than their houses are worth or who are otherwise in danger of foreclosure. The government would use Fannie Mae, Freddie Mac and private mortgage brokers to pay off the troubled loans and refinance the homeowners, making their payments more affordable.

Again, this will take time and concerted effort by the powers to be to implement any program before relief is felt by the homeowner who is facing foreclosure or who is in foreclosure.

The common thread above is TIME, no matter what you like or dislike about the government, the presidential candidates, or what is going on in Washington (D.C.).

Bankers/ Lenders, realtors, real estate investors, and all scam artists want you to believe that you do not have enough time and, especially, they do not want you to know how the foreclosure process works.

You are nothing more than a new profit center for them, and they only have their best interest at heart (not yours).

I have a short video that will show you how scam artists work, and it may help you understand what not to do. Check it out:

Help Us Save The Housing Industry

Dear Reader,

 I wanted to make you aware of an important petition that is being circulated in support of a new plan to save the housing industry. It was developed by a mortgage industry insider and we, at the Originator Times, believe it’s the only current plan to restore faith in the housing market and create profitability within our industry once again.

If you are sick of getting calls from potential customers you can’t help because they are upside down on their mortgages; tired of loan programs that are here today and gone tomorrow; frustrated with volatile rates and increasing credit score requirements; and angered by plans that bail out the wealthy and powerful and do nothing to fix the real problem then join mortgage industry veteran Scott Messina and the Originator Times in making our voices heard in Washington.  

Now is the time to act!  Sign the petition to support Messina’s “Save the American Dream” plan – the only plan that solves the root of the housing problem and sets the wheels in motion for a 2009 refinance boom similar to 2003 levels. 

Click here to sign the petition, or visit to read about the complete plan, or scroll down to read a summary, then forward this e-mail to everyone you know in the industry.



Melissa Sike



Save the American Dream Plan


The banks on Wall Street got their bailout. Now, what about all of us in the housing industry and those who work on Main Street?   

Were still hurting because the big Wall Street bailout did nothing to address the root cause of the housing crisis.   We need a real solution instead of a band-aid.  The Save the American Dream plan is the correct solution and it isn’t being heard in Washington because the people on Main Street – whom would be helped – aren’t donating millions of dollars to a particular political campaign, and therefore, have no economic representation in Washington.  For two reasons, it’s our responsibility as mortgage industry professionals to speak for those that have no voice and make Washington listen to the plan that will save struggling homeowners …and ourselves.  It’s our responsibility because we were a part of the problem (along with many others, including borrowers) and because we are the ones that have the industry knowledge and expertise to really do what needs to be done.  We are in a unique position here to really solve this crisis.  Click here to join us in support of the Save the American Dream plan .

The Save the American Dream plan will empower those millions of Americans who because of foreclosure and financial chaos have been living out their worst nightmares and provide them with viable refinance options to wake up and restore their dream. 

By providing millions of Americans with a refinance option as an alternative to foreclosure, we’ll in turn create a refinance boom within the industry. 

The Save the American Dream plan will save Wall Street by lending Main Street a hand and will rescue the U.S. housing market in the process.

Betty Jung’s Blog: Market Update: Building Permits 2007 vs. 2008

And, here are some more numbers:

According to the Construction Monitor and the Home Builders Association of Metropolitan Portland, here is the 2008 Year-to-Date Building Permit activity by county.  It is at its lowest since 1991.

Many small builders haven’t built anything new in several months and in some cases more than a year.  If you read my recent post Market Update:  New Construction, you will see there is still a large inventory of new homes that builders need to unload.  Remodeling is also lagging.

In addition, many of the local builders here have filed for bankruptcy protection as I reported in my “Top 50 Builders in Oregon” post.  This weekend, I happened to notice another one of our larger local builders, whom I won’t name, is selling some of his lot inventory.  Is he in trouble or is he just making sure he won’t be? 

2008 Year-to-date Building Permit Activity by County








Single Family




Duplexes/Twin Homes




Other Residential Structures




Residential Remodels








Single Family




Duplexes/Twin Homes




Other Residential Structures




Residential Remodels








Single Family




Duplexes/Twin Homes




Other Residential Structures




Residential Remodels








Single Family




Duplexes/Twin Homes




Other Residential Structures




Residential Remodels




Source:  Construction Monitor ( and David Nielsen, Home Builders Association of Metropolitan Portland.

Copyright ©Betty Jung 2008.  All Rights Reserved.

Disclaimer: All information in this post is subject to change without notice. Subject matter is an opinion, is not guaranteed, may be time sensitive, and may be based on information collected from several sources which may or may not be reliable at the time of sourcing.  

(For more local and national real estate news, click on my monthly newsletter – JUNG’S JOURNAL – on my website
Betty Jung
RE/MAX equity group, inc.
503-495-5220 or

Portland Tribune: Mortgage losses mounting, Steve Law

More area homeowners at risk as foreclosure proceedings double


Uncle Sam is bailing out Wall Street wheeler-dealers who invested in home loans, but there’s no relief in sight for the homeowners on Main Street.

On Southeast Main east of 144th Avenue, stretching from outer Southeast Portland into Gresham, 14 homeowners have been hit with foreclosure filings in the past year, plus scores more in nearby blocks.

• Judy Myer pawned her wedding ring and stopped taking prescribed medicines in a futile bid to save her Southeast Main Street home of 18 years, after husband Mark Myer lost his job and his unemployment benefits expired.

• Judy’s son, Steve, who lives down the street, got socked with foreclosure after his 7-year-old daughter required heart surgery. Steve took out a second mortgage to cover the medical bills, then fell behind on house payments after suffering an on-the-job injury.

• Across the street from the Myers, Ron Zitzewitz just got a six-month notice to vacate his mother’s home – one month after she died. Zitzewitz, 51, isn’t old enough to assume his mother’s reversible mortgage, and can’t refinance the loan because he’s permanently disabled.

Portland is no real-estate basket case like Las Vegas or Phoenix. But the national foreclosure crisis that initially spared Portland has arrived here in a big way, bringing more human suffering and dampening housing prices.



Foreclosure forum

Oregon’s presumed next attorney general, John Kroger, along with state lawmakers and community leaders, will host a town hall for people facing foreclosure or who think they were victimized by deceptive lending practices.

The event, called There’s No Place Like Home, takes place 9 a.m. to 2 p.m. Saturday, Nov. 22, at Portland Community College’s Cascade campus, Moriarty Auditorium, at the corner of North Killingsworth Street and North Albina Avenue.



The number of Multnomah County residents in jeopardy of losing their homes has nearly doubled in the last year, based on the number immersed in foreclosure proceedings. Over the spring and summer, 300 Multnomah County homeowners a month got slapped with foreclosure notices – topping the peak levels reached in the last recession of 2001-02.

In August 2007, the Portland area had an enviable 332nd-highest foreclosure rating among the nation’s 383 metropolitan areas. But by August 2008, Portland jumped to 254th-highest, according to First American CoreLogic, which provides real estate data services.

“There’s a shakeout right now, and we’re failing on all cylinders,” said Portland real estate economist Jerry Johnson.

Portland took longer than most cities to emerge from the last recession and didn’t get as overbuilt as other markets, Johnson said.

But Portland home prices kept rising during the last recession, he noted. If banks and besieged homeowners try to dump too many discounted properties, he said, “you could swamp the market and kill the guys who are OK.”

Home prices are sliding in large swaths of the metro area, especially in overbuilt sectors such as Portland’s condo market and suburban Happy Valley. In early October, in the 97086 ZIP code that includes Happy Valley, there were 247 homeowners facing foreclosure on top of 95 homes seized by banks, according to VisionCore, a division of First American CoreLogic.

Short sales drive down prices

Many overburdened homeowners, anxious to avoid foreclosures that soil their credit ratings, are resorting to “short sales,” in which they sell quickly for less than their home loan if the lender agrees to accept the lower amount. Banks also are auctioning off seized homes to investors looking for sweet deals.

Dumping all those distressed properties on the market, sometimes at fire-sale prices, is depressing home values for neighboring residences.

In a half-block stretch of Liebe Street southeast of Holgate Boulevard and 118th Avenue, four homes went into foreclosure in recent months. Investor Mark Bordcosh snapped up one of them, a three-bedroom townhouse appraised at $217,000, and offered it in an auction, with a minimum bid of $137,500.

“I’m basically getting the house at a discount and I’m selling it at a discount,” he said.

All parts of the city are seeing some foreclosures, though they are less common on the west side and close-in east-side neighborhoods, according to VisionCore. Portland working-class neighborhoods, especially in North Portland and the outer east side, are getting more than their share, as residents lose jobs or get burned by escalating interest rates on subprime loans.

Main Street doesn’t necessarily have the highest proportion of foreclosures. But it is representative of the outer east side – meaning it is seeing plenty of angst and misery.

Adversity is magnified

Southeast Main east of 144th Avenue, dotted with modest one-story homes and towering firs, has long been known as an affordable place to buy a home. But it’s no longer affordable to many longtime residents.

Mark Myer, 57, who lost his computer tech job after his company was sold, doesn’t expect any of the $700 billion Wall Street bailout approved by Congress Oct. 3 will trickle down to his end of the food chain.

“The people that are stomping on the individuals are the ones that got bailed out,” Myer said. “If they share and start helping out some people, fine. History shows they’ll just turn around and stomp on us again.”

Myer landed part-time work, but said employers have been reluctant to hire him now that there’s a foreclosure on his record. That’s despite 22 years’ service in the Navy.

Judy Myer stopped taking medicines a year ago for her anxiety attacks, high blood pressure and cholesterol. After two heart attacks, two back surgeries and anxiety problems, she’s not in good shape to work outside the home.

“I don’t know what’s going to happen. It’s just scary,” she said. “We’ll never be able to go out and have dinner and a movie.”

Her son, Steve, an automotive technician, was denied workers’ compensation benefits after his 2006 on-the-job injury. The injury was deemed connected to a pre-existing condition. He qualified for short-term disability payments, but that only covered 60 percent of his salary. It wasn’t enough to make full mortgage payments and pay his $10,000 hospital bill.

When his home lender demanded full payments on his mortgage, Steve threw up his hands. “I pretty much said, ‘Come and get it, there’s nothing I can do.’ ” he said.

The lender backed down and offered him a payment plan, Steve said. He was able to save the house for now, but said he’s still tapped financially.

A few doors down from the Myers, Trinidad Monje’s former Main Street home sits vacant, months after going into foreclosure. Judy Myer said it’s been languishing on the market at least two years.

Down Main Street near 148th Avenue, Maxsim “Max” Lysack said he was forced into foreclosure after his roommate died. He wound up doing a short sale – selling the home for less than his mortgage – in a deal worked out with the lender.

“I buy it for $285,000, and I sell it for $250,000,” Lysack said.

Ron Zitzewitz has lived on Main Street off and on since childhood. He doesn’t earn much from disability payments and income from a knife-sharpening business, and moved in with his mother.

Under her reverse mortgage, the lender takes a greater stake in the home’s equity each month, in lieu of mortgage payments. Zitzewitz can’t qualify for a new loan to refinance the $160,000 his mother owed.

The house should be worth about $225,000, he said. But Zitzewitz doubts he can sell it for anything close to that because the market is so sour.

Zitzewitz got married a few months ago, but so far his wife has been unable to find work.

“We’re going to have to find somewhere else to live.”

Making Capitalism More Creative

By Bill Gates,8599,1828069,00.html 

Capitalism has improved the lives of billions of people – something that’s easy to forget at a time of great economic uncertainty. But it has left out billions more. They have great needs, but they can’t express those needs in ways that matter to markets. So they are stuck in poverty, suffer from preventable diseases and never have a chance to make the most of their lives. Governments and nonprofit groups have an irreplaceable role in helping them, but it will take too long if they try to do it alone. It is mainly corporations that have the skills to make technological innovations work for the poor. To make the most of those skills, we need a more creative capitalism: an attempt to stretch the reach of market forces so that more companies can benefit from doing work that makes more people better off. We need new ways to bring far more people into the system – capitalism – that has done so much good in the world.

There’s much still to be done, but the good news is that creative capitalism is already with us. Some corporations have identified brand-new markets among the poor for life-changing technologies like cell phones. Others – sometimes with a nudge from activists – have seen how they can do good and do well at the same time. To take a real-world example, a few years ago I was sitting in a bar with Bono, and frankly, I thought he was a little nuts. It was late, we’d had a few drinks, and Bono was all fired up over a scheme to get companies to help tackle global poverty and disease. He kept dialing the private numbers of top executives and thrusting his cell phone at me to hear their sleepy yet enthusiastic replies. As crazy as it seemed that night, Bono’s persistence soon gave birth to the (RED) campaign. Today companies like Gap, Hallmark and Dell sell (RED)-branded products and donate a portion of their profits to fight AIDS. (Microsoft recently signed up too.) It’s a great thing: the companies make a difference while adding to their bottom line, consumers get to show their support for a good cause, and – most important – lives are saved. In the past year and a half, (RED) has generated $100 million for the Global Fund to Fight AIDS, Tuberculosis and Malaria, helping put nearly 80,000 people in poor countries on lifesaving drugs and helping more than 1.6 million get tested for HIV. That’s creative capitalism at work.

Creative capitalism isn’t some big new economic theory. And it isn’t a knock on capitalism itself. It is a way to answer a vital question: How can we most effectively spread the benefits of capitalism and the huge improvements in quality of life it can provide to people who have been left out?

The World Is Getting Better
It might seem strange to talk about creative capitalism when we’re paying more than $4 for a gallon of gas and people are having trouble paying their mortgages. There’s no doubt that today’s economic troubles are real; people feel them deeply, and they deserve immediate attention. Creative capitalism isn’t an answer to the relatively short-term ups and downs of the economic cycle. It’s a response to the longer-term fact that too many people are missing out on a historic, century-long improvement in the quality of life. In many nations, life expectancy has grown dramatically in the past 100 years. More people vote in elections, express their views and enjoy economic freedom than ever before. Even with all the problems we face today, we are at a high point of human well-being. The world is getting a lot better.

The problem is, it’s not getting better fast enough, and it’s not getting better for everyone. One billion people live on less than a dollar a day. They don’t have enough nutritious food, clean water or electricity. The amazing innovations that have made many lives so much better – like vaccines and microchips – have largely passed them by. This is where governments and nonprofits come in. As I see it, there are two great forces of human nature: self-interest and caring for others. Capitalism harnesses self-interest in a helpful and sustainable way but only on behalf of those who can pay. Government aid and philanthropy channel our caring for those who can’t pay. And the world will make lasting progress on the big inequities that remain – problems like AIDS, poverty and education – only if governments and nonprofits do their part by giving more aid and more effective aid. But the improvements will happen faster and last longer if we can channel market forces, including innovation that’s tailored to the needs of the poorest, to complement what governments and nonprofits do. We need a system that draws in innovators and businesses in a far better way than we do today.

Naturally, if companies are going to get more involved, they need to earn some kind of return. This is the heart of creative capitalism. It’s not just about doing more corporate philanthropy or asking companies to be more virtuous. It’s about giving them a real incentive to apply their expertise in new ways, making it possible to earn a return while serving the people who have been left out. This can happen in two ways: companies can find these opportunities on their own, or governments and nonprofits can help create such opportunities where they presently don’t exist.

What’s Been Missed
As C.K. Prahalad shows in his book The Fortune at the Bottom of the Pyramid, there are markets all over the world that businesses have missed. One study found that the poorest two-thirds of the world’s population has some $5 trillion in purchasing power. A key reason market forces are slow to make an impact in developing countries is that we don’t spend enough time studying the needs of those markets. I should know: I saw it happen at Microsoft. For many years, Microsoft has used corporate philanthropy to bring technology to people who can’t get it otherwise, donating more than $3 billion in cash and software to try to bridge the digital divide. But our real expertise is in writing software that solves problems, and recently we’ve realized that we weren’t bringing enough of that expertise to problems in the developing world. So now we’re looking at inequity as a business problem as well as something to be addressed through philanthropy. We’re working on projects like a visual interface that will enable illiterate or semiliterate people to use a PC instantly, with minimal training. Another project of ours lets an entire classroom full of students use a single computer; we’ve developed software that lets each student use her own mouse to control a specially colored cursor so that as many as 50 kids can use one computer at the same time. This is a big advance for schools where there aren’t enough computers to go around, and it serves a market we hadn’t examined before.

Cell phones are another example. They’re now a booming market in the developing world, but historically, companies vastly underestimated their potential. In 2000, when Vodafone bought a large stake in a Kenyan cell-phone company, it figured that the market in Kenya would max out at 400,000 users. Today that company, Safaricom, has more than 10 million. The company has done it by finding creative ways to serve low-income Kenyans. Its customers are charged by the second rather than by the minute, for example, which keeps down the cost. Safaricom is making a profit, and it’s making a difference. Farmers use their cell phones to find the best prices in nearby markets. A number of innovative uses for cell phones are emerging. Already many Kenyans use them to store cash (via a kind of electronic money) and transfer funds. If you have to carry money over long distances – say, from the market back to your home – this kind of innovation makes a huge difference. You’re less tempting to rob if you’re not holding any cash.

This is how people can benefit when businesses find opportunities that have been missed. But since I started talking about creative capitalism earlier this year, I’ve heard from some skeptics who doubt that there are any new markets. They say, “If these opportunities really existed, someone would have found them by now.” I disagree. Their argument assumes that businesses have already studied every possible market for their products. Their attitude reminds me of the old joke about an economist who’s walking down the street with a friend. The economist steps over a $10 bill that’s lying on the ground. His friend asks him why he didn’t take the money. “It couldn’t possibly be there,” he explains. “If it were, somebody would’ve picked it up!” Some companies make the same mistake. They think all the $10 bills have already been picked up. It would be a shame if we missed such opportunities, and it would make a huge difference if, instead, researchers and strategists at corporations met regularly with experts on the needs of the poor and talked about new applications for their best ideas.

Beyond finding new markets and developing new products, companies sometimes can benefit by providing the poor with heavily discounted access to products. Industries like software and pharmaceuticals, for example, have very low production costs, so you can come out ahead by selling your product for a bigger profit in rich markets and for a smaller profit, or at cost, in poor ones. Businesses in other industries can’t do this tiered pricing, but they can benefit from the public recognition and enhanced reputation that come from serving those who can’t pay. The companies involved in the (RED) campaign draw in new customers who want to be associated with a good cause. That might be the tipping point that leads people to pick one product over another.

There’s another crucial benefit that accrues to businesses that do good work. They will find it easier to recruit and retain great employees. Young people today – all over the world – want to work for organizations that they can feel good about. Show them that a company is applying its expertise to help the poorest, and they will repay that commitment with their own dedication.

Creating New Incentives
Even so, no matter how hard businesses look or how creatively they think, there are some problems in the world that aren’t amenable to solution by existing market incentives. Malaria is a great example: the people who most need new drugs or a vaccine are the least able to pay, so the drugs and vaccines never get made. In these cases, governments and nonprofits can create the incentives. This is the second way in which creative capitalism can take wing. Incentives can be as straightforward as giving public praise to the companies that are doing work that serves the poor. This summer, a Dutch nonprofit called the Access to Medicine Foundation started publishing a report card that shows which pharmaceutical companies are doing the most to make sure that medicines are made for – and reach – people in developing countries. When I talk to executives from pharmaceutical companies, they tell me that they want to do more for neglected diseases – but they at least need to get credit for it. This report card does exactly that.

Publicity is very valuable, but sometimes it’s still not enough to persuade companies to get involved. Even the best p.r. may not pay the bill for 10 years of research into a new drug. That’s why it’s so important for governments to create more financial incentives. Under a U.S. law enacted last year, for example, any drug company that develops a new treatment for a neglected disease like malaria can get a priority review from the Food and Drug Administration (FDA) for another product it has made. If you develop a new drug for malaria, your profitable cholesterol drug could go on the market as much as a year earlier. Such a priority review could be worth hundreds of millions of dollars. It’s a fantastic way for governments to go beyond the aid they already give and channel market forces so they improve even more lives.

Of course, governments in developing countries have to do a lot to foster capitalism themselves. They must pass laws and make regulations that let markets flourish, bringing the benefits of economic growth to more people. In fact, that’s another argument I’ve heard against creative capitalism: “We don’t need to make capitalism more creative. We just need governments to stop interfering with it.” There is something to this. Many countries could spark more business investment – both within their borders and from the outside – if they did more to guarantee property rights, cut red tape and so on. But these changes come slowly. In the meantime, we can’t wait. As a businessman, I’ve seen that companies can tap new markets right now, even if conditions aren’t ideal. And as a philanthropist, I’ve found that our caring for others compels us to help people right now. The longer we wait, the more people suffer needlessly.

The Next Step
In june, I moved out of my day-to-day role at Microsoft to spend more time on the work of the Bill & Melinda Gates Foundation. I’ll be talking with political leaders about how their governments can increase aid for the poor, make it more effective and bring in new partners through creative capitalism. I’ll also talk with CEOs about what their companies can do. One idea is to dedicate a percentage of their top innovators’ time to issues that affect the people who have been left behind. This kind of contribution takes the brainpower that makes life better for the richest and dedicates some of it to improving the lives of everyone else. Some pharmaceutical companies, like Merck and GlaxoSmithKline, are already doing this. The Japanese company Sumitomo Chemical shared some of its technology with a Tanzanian textile company, helping it produce millions of bed nets, which are crucial tools in the fight to eradicate malaria. Other companies are doing the same in food, cell phones and banking.

In other words, creative capitalism is already under way. But we can do much more. Governments can create more incentives like the FDA voucher. We can expand the report-card idea beyond the pharmaceutical industry and make sure the rankings get publicity so companies get credit for doing good work. Consumers can reward companies that do their part by buying their products. Employees can ask how their employers are contributing. If more companies follow the lead of the most creative organizations in their industry, they will make a huge impact on some of the world’s worst problems.

More than 30 years ago, Paul Allen and I started Microsoft because we wanted to be part of a movement to put a computer on every desk and in every home. Ten years ago, Melinda and I started our foundation because we want to be part of a different movement – this time, to help create a world where no one has to live on a dollar a day or die from a disease we know how to prevent. Creative capitalism can help make it happen. I hope more people will join the cause.

Tax Benefits of Homeownership

The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of homeownership. Here’s how it works.



$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)

$12,577 = Total deduction



Then, multiply your total deduction by your tax rate.

For example, at a 28 percent tax rate: 12,577 x 0.28 = $3,521.56


$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)

Note: Mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased when total income reaches a certain level.

If you are looking to buy a home in the US Virgin Islands, be sure to contact the team at Sea Glass Properties to help you through every step of the way., or



Wachovia’s New Pay Option ARM Plan – ‘The Spend’

Posted on October 8th, 2008 in Daily Mortgage/Housing News – The Real Story, Mr Mortgage’s Personal Opinions/Research

There is a new pilot program Wachovia recently put into place intended to rid themselves of that nasty $122 billion Pay Option ARM portfolio while keeping borrowers in their home. While this program definitely has its flaws because it does not come close to addressing the real problem (HOUSE PRICES ARE STILL SIGNIFICANTLY OVERVALUED) it is the closest I have seen yet.

Wachovia’s New Program – ‘The Spend’

First, Wachovia selected a certain number of Pay Option borrowers based upon internal modeling. Each borrower was assigned to a participating mortgage banker/broker and given what they call ‘The Spend’.  The Spend is how much money that will be used to modify and refinance the borrower into a new 30-year fixed loan, primarily FHA.

A portion of The Spend is used to buy down a 30-year fixed rate to a level at which the borrower can afford according to present day underwriting guidelines. A portion is also used to reduce the principal balance. From what I am hearing from early cases, the interest rate level on some first mortgages has been as low as 2%.  That’s pretty sad when it takes 2% to get borrowers to qualify for a fixed coming out of an Option ARM and just goes to show how leveraged up the borrowers still are. However, The Spend is not forgiveness of debt. It is put into the form of a silent second for a specified term and at an interest rate as low as zero that has to be repaid at some time in the future.

The benefits to Wachovia are obvious. They get rid of these toxic assets sitting on their balance sheet; they get rid of predatory lending liability through the refinance, as the borrower must sign away all rights to future claims; they outsource the loan origination staff expense to other firms; and they get to bring back a portion of the loan loss reserves set aside on each loan refinanced IF The Spend is less than the amount reserved.

If banks are going to start trying to get ahead of the game with proactive loan modifications/refinances, Pay Options are a great place to start. This is because they are truly toxic for the borrower and bank going forward.  Currently, Pay Option ARMs are being valued by the market as poorly as straight Subprime despite default rates being nowhere close…yet. This is because over time, most Pay Option borrowers will default due to the way the loan is structured and massive payment recast that occurs. Because Pay Option ARMs allow ultra-low teaser rates for up to 10-years at Wachovia , their Pay Option implosion could have been spread out over several years.  But, the market was smart with respect to this loan type realizing that despite the ‘high credit scores’ and ‘lower effective original loan to value ratios’ that they like to brag about, these are essentially all Subprime loans.

But unlike other program types awaiting implosion such as Jumbo Prime ARMs that are still rated and valued as ‘Prime’, Pay Options have been written down to some degree by banks already. This makes throwing money at them more palatable by the bank because if it cost less to make them ‘right’ than the value at which they are currently written down, it can lead to a write-up. Since Pay Option borrowers by and large are of decent quality and if they catch these before they go into default, refinancing them into a new fully documented loan should not be a problem. This may not be the case when dealing with Subprime borrowers, borrowers who are currently delinquent or low documentation borrowers.

There are significant problems with The Spend, however. Most obviously, they are artificially supporting house prices by giving borrowers extremely low interest rates such as a 2% 30-year fixed and a zero interest rate second. In addition, what if values are not at the bottom? The ‘negative equity effect’ is real and if values continue to tumble what’s to say that the borrower will not just walk at a later date. A good number of these may even turn into rentals because with a 2% fixed and zero% second, the property may cash flow.

The thought process is that if the borrower can afford their payments, especially on a 30-year fixed, it does not matter what the value of the home does – they will stay and make their payments. Well, this has obviously been proven wrong, as we are seeing Prime and Jumbo Prime default in greater numbers as values fall. On the other hand with house prices down so far in the areas in which this program is going into effect, there is a much better chance that this fundamental will play out going forward.

But then there is still the silent second hanging over their head and the fact that home owner is underwater by that large of an amount. This makes borrower repayment patterns totally unpredictable across all paper grades. This also makes typically life circumstances such as job loss or illness almost a guaranteed default.  If you have equity in your property, you have wiggle room.

One thing is for sure, The Spend is worlds better that the recent BofA/Countrywide settlement scam, in which the AG sold hundreds of thousands of borrowers down the river at a ridiculously low price. Remember gang, once you do something with respect to a mortgage modification or refinance, you lose your rights to come after the lender for predatory lending violations and forced rescission/modification.

The ‘relief’ the borrowers will get from BofA will be of the kind I mentioned in a recent post, ‘Countrywide/BofA – A Direct Threat to Borrowers’, where Countrywide gave a borrower a $900k five year 2% interest only loan on a $500k home essentially pushing the problem out five years and ensuring a foreclosure at that time.

That is why it is so important to do it right with permanent principal balance reductions if you are going to do it at all. I talk about this in my new video, ‘Mr Mortgage – Time To Get Your Bailout‘.

At my independent research firm, Field Check Group Real Estate & Finance, I can watch in real-time each and every loan default from all lenders so I will keep an eye out on how this program is working and how Wachovia’s portfolio is performing and periodically let you know.  If you get a call in the meantime by a Wachovia partner offering you something that is too good to be true, think very carefully because it just may be. -Best Mr Mortgage

Welcome to the Oregon Real Estate Round Table

The Oregon Real Estate Round table welcomes you and encourages you to jump in with both feet.   This blog is for the discussion of real estate, financing real estate, development of real estate and the selling of real estate.   

This blog is not meant  to be a marketing source, but understand those of you looking for a professional to work with will be able to gain an increadable insight on the dept of the knowledge of the people that post here.   A factual expression of ideas and experiences that we all can benefit from. Crisis Hits Main Street as Employers Cut More Jobs

By Shobhana Chandra and Rich Miller

Oct. 3 (Bloomberg) — U.S. payrolls plunged in September, signaling the economy may be heading for its worst recession in at least a quarter century as the 13-month-old credit crisis on Wall Street finally hits home on Main Street.

Employers cut the most jobs in five years in September as cash-squeezed companies pulled back in an effort to bolster pinched profits. In its last employment report before Americans choose their next president, the Labor Department said the unemployment rate was 6.1 percent, a climb of 1.4 percentage points from a year before.

“If credit markets remain dysfunctional, the current recession could turn out to be as severe as any in the postwar period,” said former Federal Reserve governor Lyle Gramley, now senior economic adviser at the Stanford Group Co. in Washington.

The spreading crisis is also having reverberations on the campaign trail, as polls show anxious voters increasingly see Democrat Barack Obama as the candidate best placed to see the U.S. through its economic travails. The unemployment rate has only risen twice in the year leading up to elections since World War II, and in each case the incumbent party lost.

`This country can’t afford Senator McCain’s plan to give America four more years of the same policies that have devastated our middle class and our economy for the last eight,” Obama, 47, said in a statement.

McCain’s Reaction

Arizona Senator John McCain, 72, took the opportunity to paint his opponent as a tax-and-spend liberal, whose prescriptions would exacerbate the crisis.

“Unlike Senator Obama, I do not believe we will create one single American job by increasing taxes, going on a massive spending binge, and closing off markets,” McCain said in a statement. “Our nation cannot afford Senator Obama’s higher taxes.”

Job losses accelerated as the credit crisis deepened last month, forcing the failure or government takeovers of Lehman Brothers Holdings Inc., Fannie Mae, Freddie Mac and American International Group Inc.

The figures came hours before a scheduled vote in the House of Representatives on a $700 billion rescue plan for the U.S. financial industry pushed by Treasury Secretary Henry Paulson. The Senate approved the legislation two days ago after the House rejected an initial version of the bill Sept. 29.

Market Reaction

Stocks rose and Treasury securities fell on optimism the rescue plan would pass the House. The Standard & Poor’s 500 index rose 2.9 percent to 1,146.1 at 11:08 a.m. in New York. The yield on the benchmark 10-year note rose to 3.72 percent from 3.63 percent late yesterday.

Today’s report showed that hours worked — considered a good proxy for the state of the overall economy — matched the lowest level since records began in 1964. That indicates the likely current recession may be at least as severe as the 1981-82 slump, during which gross domestic product shrank by 2.7 percent.

Payrolls fell by 159,000 in September, the Labor Department said in Washington. Aside from a 9,000 gain in government payrolls, all major categories showed declines except education and healthcare.

“The really bad news here is that job losses are now widespread,” said Nariman Behravesh, chief economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm. “The problems in housing and manufacturing are now spreading everywhere. We are in a recession, there is no debate about that.”

Health Services

Even the vibrant health-services industry is showing signs of succumbing to the economy’s troubles. Health care employment rose 17,000, about half the average monthly gain for the prior 12 months.

Walgreen Co., the largest U.S. drugstore chain, reported Sept. 29 that its profits rose less than analysts estimated after it posted its smallest sales increase in a decade.

A private report today showed that services-industry growth remained stagnant in September. The Institute of Supply Management’s non-manufacturing index slipped to 50.2 from 50.6 the month before. Fifty is the dividing line between growth and expansion.

Total payrolls were forecast to drop 105,000 after declining by a previously estimated 84,000 in August, according to the median of 76 economists surveyed by Bloomberg News. The jobless rate was projected to remain at 6.1 percent.

Rate Forecasts

Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, said the unemployment rate may eventually rise to more than 7 percent as the credit crunch takes its toll on the economy. If that happens, that would make the overall rise in unemployment the biggest since the early 1980’s.

Workers’ average hourly wages rose 3 cents, or 0.2 percent, to $18.17 from the prior month. Hourly earnings were 3.4 percent higher than September 2007. Economists surveyed by Bloomberg had forecast a 0.3 percent increase from August and a 3.6 percent gain for the 12-month period.

After today, the total decline in payrolls so far this year has reached 760,000. The economy created 1.1 million jobs in 2007.

Americans will go to the polls on Nov. 4 and the October jobs report is due Nov. 7.

`Angry’ Voters

“Voters are extremely angry, and they want someone to blame,” said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.

Obama has opened up a lead over Republican rival John McCain in the aftermath of their first debate and amid growing concerns about the economy, according to a Pew Research Center survey taken Sept. 27 to Sept. 29. A mid-September poll from Washington- based Pew had shown the candidates were in a statistical tie.

Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters believed he had better ideas to strengthen the economy than his rival.

Factory payrolls fell 51,000 after decreasing 56,000 in August. Economists had forecast a drop of 57,000.

Today’s report also reflected the housing slump. Payrolls at builders declined 35,000 after falling 13,000. Financial firms decreased payrolls by 17,000, the most since November last year.

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 82,000 workers after eliminating 16,000 in the previous month. Retail payrolls slid by 40,100 after a 25,400 drop.


In the past month, Hewlett-Packard Co., the world’s largest personal-computer maker, announced it will cut 24,600 jobs, and auto-parts maker Federal-Mogul Corp. said it would eliminate 4,000 positions globally.

Marriott International Inc., the world’s largest hotel chain, yesterday reported third-quarter profit fell 28 percent as U.S. companies and consumers cut back on travel.

Without action from Congress, “the resulting credit squeeze could threaten businesses,” Chief Financial Officer Arne Sorenson said on a conference call. There are “tens of thousands of jobs at stake in our company alone, and we are typical.”

Mounting job cuts will further limit consumer spending, which accounts for more than two-thirds of the economy. A Bloomberg survey in September predicted spending will be unchanged this quarter, the weakest performance since 1991.

The ISM on Oct. 1 said manufacturing shrank in September at the fastest pace since the last recession in 2001. The odds the central bank will lower its benchmark rate by a half percentage point, to 1.5 percent, were almost 100 percent today, up from 32 percent a week ago.

To contact the reporter on this story: Shobhana Chandra in Washington