Saturday, October 23, 2010

Cashflow game today in Fitchburg!

Come and bring a friend. Click the link below, RSVP and let us know if you want pizza by 4PM. Robert Kiyosaki, author of "Rich Dad Poor Dad", created this powerful financial education tool but it's up to you to take advantage of it.

Why do you want to be there? How about learning about money and investing in a fun environment? How about associating with people with a common future? How about networking with the people doing what you want to do?

All of those are great reasons to attend and it's worked for me. I've met partners and found deals for real estate investing through Cashflow games. I've found clients, customers and business partners for my other businesses. You could too!

See you there! Playing Cashflow 101 and Cashflow 202.
Cashflow game today in Fitchburg!

Saturday, October 2, 2010

Foreclosures, reversals, consolidations and what's next!

First we received word that some banks were halting foreclosures to conduct internal audits for their improprieties while suspending foreclosure evictions. Now there's word that at least a second bank improperly seized homes and may reverse foreclosures. These reversals would also reverse sales, sometimes multiple sales.

Reuters reports that GMAC has halted foreclosure evictions in 23 states and in a December 2009 deposition, a GMAC official admitted to signing thousands of foreclosure documents without checking accuracy. Add to that JPMorgan Chase telling CNBC that it will delay 56,000 foreclosures. Mortgage consultant Mark Hanson told CNBC, 'as of right now this is a policy and procedure issue until proven otherwise, but never underestimate mid-term electioneering,' says mortgage consultant Mark Hanson. 'If this does go to the next level (i.e. national foreclosure moratorium, fear that hundreds of thousands of foreclosures have been performed illegally, etc.), the unintended negative consequences on the mortgage market, MBS investors, banks' balance sheets and ultimately the housing market will be significant.' http://pittsburghlive.com/x/pittsburghtrib/business/s_701546.html

Wow. Let that sink in.

Mortgage services and banks are overwhelmed. I happen to think that is their fault but they are. Also, they were treating mortgage documents like the were bearer notes, i.e. who ever possessed them last was the owner of the note. Not so fast. In Massachusetts, law requires that the borrower always know who the lender is. In Massachusetts, that's defined as filling with the Registry of Deeds that you hold the note. Apparently New York sees it the same way as they have rescinded foreclosures for the same reason. I'm curious how many other states are doing this to (please feel free to comment and let me know!).

Add to that that JPMorgan Chase foreclosures of Washington Mutual mortgages may all be invalid. Why you ask? Because despite repeated statements that the deal has been finalized, it actually still hasn't apparently according to the FDIC and could be extended further. What does that mean? It means JPMorgan Chase doesn't own it. They've transferred the assets but the don't own it! That means if they've misstated who is the holder of the note, it's invalid, in at least two states and probably a lot more. Can you make an omelet with eggs that haven't been made?

There will likely be a number of long-term effects from all of this depending on how it plays out. As I see it, these are:

1) Investors will be scared to buy REOs (bank owned real estate) for fear that the bank acted improperly and will take it back, even if it's already been sold! Imagine if you bought an REO, renovated and wholesaled to another investor who sold it to an end buyer. That's four sales that get undone. Let's assume that I made $50,000 on the sale after spending $25,000 in repairs and have reinvested or otherwise spent that money and I don't have $50,000 in liquid assets. Do I get back the $25,000 or is that just gifted to the previous property owner whose bank acted improperly? Buyer's title insurance will be critical in this case but I think there are still unanswered questions that a lawyer would need to answer.

2) Housing prices will continue to drop. There will be fear in the marketplace over thousands of properties not yet on the market. Uncertainty is a killer! Scared or confused people do nothing.

3) Banks will post greater loses and we'll see more failures. Imagine the additional legal fees, property taxes, reimbursements, etc. Plus non-recoverable expenses like realtor commissions, appraisal fees, etc. Will the banks have to reimburse the new owners who acted in good faith and paid fees associated with an acquisition that's taken away because the bank rescinded the sale?

4) State and federal courts will be tied up for years. The ambulance chasers will move on in a big way to real estate foreclosures. Heck, I've already seen ads by them.

Let me know what you think!

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