What is my medical prognosis?
Oh boy! Here we go again. We had a big reversal day in the stock market on Thursday which led to a big day on Friday with news about a mortgage market and a bailout for financial institutions. All this combined with a massive reduction of the 799 financial stocks on which the SEC instituted a short-selling ban.
Then we had a Monday where Goldman and Morgan became banks, the dollar and bonds went off course, oil exploded (although the rise may have been technical) and apparently some people may have found ways around the sales ban on short. The market returned everything it had picked up on Friday.
What does this mean for me (and you) and the mortgage market?
Once the final shape of the bailout is set (hopefully sooner rather than later), what will it mean for me, for you, and for the mortgage markets?
Good question.
As a participant in the real estate and commercial mortgage markets, I want to know if that will mean that the remaining financial institutions will once again be willing to lend. Once we know that they are willing to lend, the question becomes to whom will they be willing to lend.
If I have a buyer who wants to buy a mixed-use property that has a DSCR of 1.32, the buyer has a credit score of 660, and has the 6 month reserves that most lenders will require today, will they get a loan? Will liquidity return for a borrower like this, or will everyone remain in protection mode?
Some of the bridge loan lenders I know want to know if the exit strategies they had a year ago, which then evaporated, will ever be plausible again.
They have a borrower who borrowed on his income producing building at 50% LTV because he needed to make improvements, but his credit score was less than stellar. The exit strategy was to increase the credit rating and refinance with a conventional loan. Credit score has gone up, but will a lender lend now?
Then we have another borrower who has a construction loan to build a single-family home, has a score of 650, and a finished home appraisal that says they need 75% LTV. I can’t find a lender.
This is a segment of the market that not everyone thinks about, but until banks start lending, they can’t close good loans and make new ones. Worse yet, they will have to start foreclosures on borrowers who never thought these expensive loans would be outstanding for so long.
Enough of the Negativity!
A week or so ago, I wrote an article saying let’s put the doom and go behind us and focus on the task at hand, which is a plan to boost the business. I said it in all sincerity and I still think so today.
The problem is that the government’s decision-making process and the news flow in general sometimes make it difficult. I think the thing to do is stop watching financial channels like CNBC and stick with reruns of All In The Family and MASH.
Sport News
Do you know what I’m going to do? Focus on my teams, the Mets and the Jets, to lift my head and focus on the eye of the tiger. I went to Shea’s last night and left early to come home and watch the Jet game. Oh boy!
I think I’ll put CNBC back on.