Lenders Clearing Deck To Blink, Uh, Lend — What Will They Think of Next?
Posted @ 12:16 am - Filed under Financing, subprime, Economy, Investment Lessons
I’ve been waitin’ to write this post for too dang long. There was just no way lenders weren’t gonna blink, no way. No matter what though, I’m not gonna say those three little words. It’d be too easy.
Since at least the first of this year, I’ve been saying lenders will not allow hundreds of thousands of adjustable loans to adjust payments to ridiculous levels. You think their borrowers would be up the creek without a paddle?
They’d be in better shape than lenders trying to cope with massive increases in foreclosures on their books — not to mention the practical side of getting them off their books. Lenders are notoriously incompetent when in possession of foreclosed properties. Most of their, (insert laugh track here) REO Departments, and/or Short Sale staffs couldn’t organize a one man picnic. Ask your local short sale specialist. Buy them a beer, ask them for some short sale stories, and stand back.
Lenders lend — they don’t, they’re in fact terrible, at selling property. You’d think my college student daughter, who can’t stand real estate, could sell an REO (lender speak for — foreclosed real estate we now own) without too many hitches. After all,
The experts out there, have been telling me how wrong I was. “BawldGuy, with all due respect, I’m surprised you’re posting before removing the rose colored glasses. The sky is falling, prices are about to fall even more, and the end of the world is nigh.”
Or, and this is one of my all time favs — “What are you going to do when the defaults and foreclosures start hitting the fan, and housing prices fall 60-80%?”
How do ya top that one? You don’t try. It’s one of those stand-alone-forever statements, best left to ferment on their own.
Jeff, what about the sub-prime problem? What about it? For a year this blog has been saying it’ll ultimately prove to be a large ripple in the large pond, not the tsunami the media has been predicting. You wanna see a tsunami? Watch the tears fall from all the journalists as they’re forced to report we’re really not all going to hell in a hand basket. 
Sub-Prime Dominos
The Treasury Department has been, according to the Wall Street Journal, 
(and many others) still talking with the major players about what they’re gonna voluntarily do about the more than 2 million loans about to adjust upward. Kinda like when I used to voluntarily mow the lawns every Saturday. I’m the last guy to promote government intervention. Anyone who knows me, will attest to that. What the treasury is doing here is avoiding regulation — more regulation.
Here’s what the Chicken Littles will say next.
Yeah, but the investor’s won’t go for it. They’re the ones getting the loan payments, and there’s no way they’re gonna take less interest.
Oh yeah? That’s not their choice. Here’s their choice, and they know it. A) Keep getting the interest they are now. OR B) In hundreds of thousands of cases — get no interest at all.
Jeopardy music playing in background. Ding!! Time’s up. What’s yer choice Mr. Investor?
Uh, What’s ‘Freezing the interest at the teaser rate level is fine?’
As said here recently about the Governator’s so called deal with four large lenders, when finally announced, this will be cover for the lenders.
Here’s what they were facing. Put yourself in their collective shoes.
Over 2 million sub-prime borrowers are beginning to lose sleep. Ironically, lenders have been far more anxious about those loans. They’ve been frettin’ about these adjustments for quite awhile. Then, like an answer to prayer, (not doubt literally for some) the Treasury arrives like Grandma with an umbrella, just before lightning strikes and the storm hits.
Cover — ain’t it grand?
Yeah, we’re gonna do what’s best for our borrowers. We’ll take the pain onto our little ol’ selves.
Here’s what our reaction might be. Smile, and go along with this solution. The result will be exactly what should’ve happened ‘voluntarily’ at least six months ago. Hundreds of thousands of families will, if this voluntary agreement is finalized, wake up the next morning secure in the knowledge they’ll wake up Thanksgiving morning next year in the same home.
And for the record, don’t think for a minute, Fed Chairman Bernanke doesn’t have his hand somewhere in this. I told you he didn’t care a wit about Wall Street big shots. He does care about the health of the country’s real estate markets in general. He won’t, under any circumstances allow it to go under if he has anything to say about it.
I think he’s discovered a lot to say about it, and this announcement, if it indeed comes, is just one example.
There’s no reason to believe this won’t be worked out, cuz for lenders the alternative for will read like a Stephen King novel. 
They don’t wanna be known as Cujo, which would likely be the case once all those thousands of loans began adjusting.
By executing this agreement, if they do, you’ll be see lenders blinking in unison.
BawldGuy Axiom: Lenders Lend
Corollary: And they’ll do whatever it takes to continue doing so.
The biggest winner? Could be the family next door.
This entry was posted on Saturday, December 1st, 2007 at 12:16 am and is filed under Financing, subprime, Economy, Investment Lessons. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.