MACPLAN – Foreclosure Crisis Analysis, By Dave McDonald


There are several updates and issues to bring to your attention. As things transpire I may not have time to e-mail pertinent updates to you so I have set up a blog at macplan.blogspot.com where you can go for the information. I will try to e-mail you when there is a new update on the blog. Here is what is happening now and what I am working on:

1) Late last week the largest mortgage insurance company, The PMI Group, instituted a policy that they would no longer insure mortgages that were originated by brokers. By implementing this policy the Mortgage Insurance companies will speed up the consolidation and nationalization of the banks, hasten the downfall of most if not all non-bank lenders that utilize brokers as their main source of business, and force the small mortgage broker to consolidate under a larger bank environment. This policy will also put most appraisers out of business.
The public, once again, is getting the shaft. By not allowing brokers to originate loans with less than 20% down on a purchase or less than 20% equity in the property for a refinance borrowers will have to go to the few remaining banks the exist who will be able to charge what the want because they won’t have competition from the brokers. A client that is over 80% Loan –To- Value that goes to a broker will be limited to an FHA product….which is insured by the government ad has not one but 2 types of mortgage insurance which in many cases makes it more expensive for the borrower than it would under a conventional loans with mortgage insurance. Again, customers wanting high LTV loans will need to go to banks, put up with higher rates, longer lines and bad service.
Yesterday I spoke to the upper management at the PMI Group to get their side of the story as to why they are implementing this policy. They told me, unlike published reports, that it was not due to quality of the loan originations submitted by brokers. Their take was that they do not have the capital necessary to reserve for future losses. They say that their low stock prices make it harder to attract new capital. They say that this a strictly a company survival mode tactic to make sure they don’t take on any more risk until the delinquency issues on the current loans in the market place have run their course. They say if they were able to raise more capital then the policy could change back.
I made clear to them what the ramifications of their policy implementation will do to the average borrower. I made clear that it will cause a domino effect with closing of the remaining non-bank lenders, brokers, appraisers and everybody else in the industry leading to a lot more unemployment while giving borrowers less loan options and higher rates.
The bottom line, there are ways to fight this which I will go into later.

2) Obama’s Foreclosure Rescue Plan – I am currently reviewing this. It seems like a lot of the same old stuff and need a lot of questions to be answered:
a) How are they going to implement the refinancing through FNMA and Freddie Mac for upside down borrowers? Where does mortgage insurance come in….are they going to do it without mortgage insurance. If mortgage insurance is required then San Diego is screwed again…because all mortgage insurance companies have designated us as a Declining Market. How is FNMA and Freddie going to get around that. Also, I understand that they will only allow up to 105% LTV….how is that going to help people that are upside down by 20-50%?
B) The incentives given to servicers…are they going to be enough. The modification plan is still voluntary for the servicers.
C) Throwing $400 billion more into FNMA and Freddie Mac to continue to buy mortgage backed securities that nobody else is buying and nobody can put a value on…is the govt over paying….and what are they paying for those securities. It is almost as if the government thinks that the securitization crisis has been solved. The buying up of the securities may have the effect of temporarily lowering rates but will those rates still be offset by the price and cost adjustments currently being added on by FNMA and Freddie.
And when will the money that is printed to fund the buying of the securities get circulated….the printing of the money will no doubt cause inflation which will increase rates significantly.
D) Currently in this plan there is absolutely no relief for people that have Jumbo Loan for more than the GSE Loan limit of $546250. Are we just going to let that deck of cards fall. One Jumbo default equals 3 or 4 condos…nobody has the guts to take this problem on.
E) There is still no relief for people that own rentals. The Popular thing to say is that we don’t want to bailout speculators an investors. But what about they guy who has owned a rental for 20 years and did some refinancing to better his cash flow…but now his value is down, his payment is up, and it doesn’t cash-flow. He is not a speculator. He is one guy that owns a property that is rented out. He did not buy it recently and try to flip it. Most likely, he isn’t rich either. People like that need relief, as much as it is politically incorrect to say such things.

3) The effect of the Stimulus Plan on mortgages – I am still digesting the 1100 or so pages. However, we do know that the loan limit for San Diego will go back up to $697,500. Once again, the key for this is how the loan limit is implemented and we are getting conflicting messages from the bond traders and the GSE’s. We do no that now there will a $8000 tax credit that does not need to be paid back for homebuyers that buy by the end of November. We do know that 2 Billion Dollars is going to be spent on local foreclosure prevention methods

4) The Mortgage Crisis is an Urgent event that could eventually and pretty quickly cost Americans our Sovereignty. The fact that very little is being done correctly to break up the bank oligarchy, correct our financial problems, and produce solutions that will stabilize our economy is absurd.

THE MACPLAN – An Action Plan For the Financial Crisis

1) Currently, I am assembling plans and ideas from many various sourcesfrom bond traders to securitizers to asset managers to Realtors to come up with an overall, well thought out comprehensive mortgage crisis and foreclosure prevention plan. Most plans are there come from one view or the other….they are not comprehensive and don’t attack all areas. If you have any ideas please e-mail them to me. Once these ideas are collected, I will setup meetings where everybody can show up, voice their opinions, and add ideas to for speak against the plan. Unlike Congress, you will have ample time to read the initial plan before you go to the meeting.
DEADLINE TO SUBMIT IDEAS AND PLANS: Sunday February 22nd
SELF IMPOSED DEADLINE FOR PUBLISHING INITIAL PLAN: March 1st
1st MEETING :tentatively March 1st at a place TBD

2) The final plan will be put together based on the response of the meetings

3) Once this plan is completed, then we will get it to our elected officials via e-mail, fax and regular. We will also post not only on my blog but several others.

4) We will start not only an online petition but a handwritten petition to implement this that will be delivered to our officials

5) SAN DIEGO ECONOMIC AND MORTGAGE REVOLT DAY – APRIL 1st

This is where all of the mortgage and real estate professionals, our families, and our customers take to the streets to promote the plan that we come up with….yes picket the banks, picket intersections, rally at the park, etc.

We will need a committee to put this on and I will be looking from leaders and non-leaders in all parts of the county to step up.

Be looking for the MACPLAN to take form….we will eventually change the name but it’s good for now.

Dave McDonalds Blog
http://www.macplan.blogspot.com/

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