Blog photo: This is (was?) the Coast Guard Commander’s digs on Yerba Buena Island. Could be about the coolest piece of real estate in the bay area. One night 6 of us (our two kids included) were driven there by friends (long before the security concerns existed), and we quietly walked down the yard towards the water, saw some lights in the home, and the operating light house. Yes, it was scary…but fun…and what a swell example to set for the kids. Reminds me that I was the one who taught Evan how to seriously T.P. a house (belonging to one of the same friends on the light house jaunt), and I am personally responsible for all the foul words they know. What a fine mom.
Blog post: What is loan warehousing and how does it fit into the market? I first came across the concept which was completely foreign to me about 3 years ago. I had client who had his house on the market, and he and his wife needed to sell that in order to buy the next one. We got both homes pending, the upleg property contingent on the close of the downleg property…which is where a portion of the equity was coming from.
It was pretty tense as the parties manuvered to get the transactions closed. One of the lenders kept saying the funds were coming but nothing happened. Finding the people behind the voice mail was almost impossible. Turns out, we were dealing with a small time lender who got his money from big time lenders.
That guy held the loans only as long as it took to sell them on the secondary mortgage market (to investors who buy loans at a discount through some vehicle like FNMA or Freddie Mac, or to bundlers). Thus the concept of warehousing: moving the inventory or goods quickly in and out of the financial storehouses.
The problem occurred when the guy was not getting the replacement funds as quick as he was making the purchase loans for buyers. And that’s where my client found himself. He was ready to close on his place but funding wasn’t showing up, despite promises and lies.
As money would drift in, he no longer worked from the top of the pile down, he picked up a loan or loans that added up to what was coming in and funded those. That way they could whittle the pile down but the larger loans were kind of stuck.
Somehow, by the grace of God, we got a contact who I pictured was in the warehouse, waiting with a forklift to pick up a pile of money. He finally admitted what was going on and that they were waiting for investors to come back around, creating “new” money. The squeaky wheel got the grease, and dollars.
So what’s that got to do with today. It’s all happening again. It happened today! As the little guys are trying to make plays, they are finding a shortage of $ to meet what they have promised to their clients, and thus their own promises are stringing out a whole bunch of people. They tell the escrow officer the wire has been sent to fund a loan. It never shows up. What often takes but seconds becomes a slow motion train wreck.
What’s that mean to us? It’s another way the legitimate small guys are going to disappear because the big guys are sitting on huge forklifts loaded with money, ready to go, but only when they deem you worthy. I think we will see the big names getting bigger, and names that you may not know that are mortgage bankers (not brokers) will get bigger too. Business will migrate to the businesses that have loads of cash at hand. And don’t be surprised to see fees climbing.
What’s that mean to your purchase? If you can’t fund your loan you may have your deposit at risk. You may be dealing with legal counsel as your new best (?) friends. What to do? Get out your tool box and start to drill down to find out how your lender works. Never stop asking questions. And ask them again.
ALAMEDA REAL ESTATE THIS WEEK…
The new listing at 316 Sunset Road went pending today….10 days on the market.
These are challenging times for all the parties so anything agents and their companies can bring to the table to minimize angst and anxiety is more than appreciated. It means understanding the processes and being able to anticipate next steps and plan B’s and plan C’s. Here’s my truth. I love this market because it is clearing the riff-raff out. There are many skilled agents out there. But there are too many more who have either no clue about the biz because they haven’t had to think, and worse, have no guidance from management in their offices. aarrgh!
Unsold inventory this week 193, 186 last report
Pending sales this week 104, 107 last report
ALAMEDA REAL ESTATE AWARDS THIS WEEK…
It was a glorious bike ride! YAY! but I didn’t see anything that rang my chimes enough to give awards!
THAT’S A WRAP! MAKE IT WORK! START PLANNING WHERE YOU WANT TO SIT FOR THE 4TH OF JULY PARADE!
HAVE A GREAT WEEKEND!