Archive for August 31st, 2007

Bush to Offer Aid to Homeowners

by David Bodamer August 31st, 2007

Offering federal help for strapped mortgage holders, President Bush is proposing to aid hundreds of thousands of borrowers hard hit by the housing slump.

The president on Friday was to talk about several initiatives and reforms to help homeowners with risky mortgages keep their homes, a senior administration official said Thursday. Bush also was to discuss efforts to prevent these kinds of problems from arising in the future.

The official said Bush will direct Treasury Secretary Henry Paulson and Housing Secretary Alphonso Jackson to work on an initiative to help troubled mortgage holders get services and products they need to keep them from defaulting on their loans. The official spoke on condition of anonymity to discuss details of the initiatives ahead of the presidential event.

Bush also planned to:

- Urge Congress to pass Federal Housing Administration overhaul legislation that would give the FHA more flexibility in assisting mortgage holders with subprime mortgages.

- Pledge to work with Congress to reform the tax code to help troubled borrowers rework their loans.

- Call for rigorously enforcing predatory lending laws and strengthening lending practices.

More details here.

(Link via Real Estate Bloggers)

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Market Corrections and Real Estate

by David Bodamer August 31st, 2007

NetGain Real Estate has a new essay up looking at the correlations between market corrections and real estate

What should real estate investors do? Follow a simple three-point program. Although there are exceptions to every rule, this program applies to most real estate.

1. After consideration of reasonable market debt (40% to 70%), does the property under consideration have cash flow (not including depreciation and non recurring expenses)? If not, discard the property and move along to the next one.

If number one passes muster, then move to number two.

2. Determine the quality of income. Expenses are very important and need to be carefully examined, but the success or failure of most properties will ultimately be determined by its income. The quality of income means exactly what it says. How sound is the income? What is the financial strength of the lessees? How committed are the lessees to staying at the property? How efficient (financially) is it to replace a lessee?

If number two passes muster, then move to number three.

3. What is the future growth of the income stream? Do the leases have annual bumps? Will lease increases be consistent with the market or will negative gaps develop? Are there sound reasons for believing that current and future lessees would pay more rent?

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