Thread: New bailout/rescue so called plan to destroy real estate investing

I agree. This is a tendance to socialist takeover, or the opposite of a free american market where "you eat or you're eaten".
If the bailout is not approve, you'll have so many foreclosure that you'll have not enough money buy all good deal you'll see. Properties at $1,000 or less. You might even buy a bank in foreclosure...
The problem, what to do with these properties?
Sell then to the unemployed people? No money...
Rent them to unemployed people? no money...
Or maybe you think that you'll find some employed people, right? Think twice then...
Even in a open american market, boundaries have to be drawn. If not, it's anarchy. We might have passed a boundary with this matter, IMO...

I have a substantial amount of education on markets and have taken the time to read the whole bill. It will impact the investment side of the business in that it will reduce the number of single pre-foreclosure properties. However, there will be many opportunities at bulk pricing that will blow the pre-foreclosure property deals out of the water. Trouble being you will need more capital or you will have to form a trust to take advantage.

The good end of this for you is that credit markets will not completly seize which if they had you would not be able to sell the properties you did buy and repair. And further more as time went on people would not have been able to afford to pay the rent on the property. To add to this you would have had to come forth with 100% of your own money as loans would have been non-existent.

The bill that was voted down was a good and well thought out plan with little pork barrell add ons. The bill that past has around a 150 billion worth of junk thrown on it. If you want to read the bill that passed I have provided a link below.

http://money.cnn.com/2008/10/01/news/pdf/

So, then this prices the little guy out of the market. Unless I'm another bank, or form a trust, or am my own government, I will not be able to continue to invest in foreclosure properties. Great, this really sounds like a bill that will help "main street America". This is the same political BS that will do the exact opposite. It is only going to help those who are already rich get richer, the government being one of those entities. They are masking this as an attempt to prevent individual homeowners from experiencing large losses in the real estate market. What that really means, and they know it, is that the individual homeowners will not be able to see large gains either. That will be only reserved for these entities that can afford these "bulk pricing opportunities" as Jamesww stated. Everyone knows that if there is no/little risk for an investor/homeowner to loss money, then there is probably little or no potential to make money either. This is going to crush the real estate market, which not only effects the real estate, and mortgage industry, but every other related industry as well, such as construction. Construction is hard work. If these small companies are looking at a diminished up-side as a result of all this they are going to bail. That means lost jobs. This will not help "main street america".

As for the credit crunch. I beleive that is a bunch of media/election year hype. Yeah some banks that made or were forced into some bad decisions were going to go under. That's probably a good thing. This whole idea of making loans to people who couldn't afford them had to be stopped one way or another, and the market was doing just that. I do not beleive that credit would have completely dried up. I've talk to many banks, and several economist. None of the economists beleive that credit would go away, and I have had no problem qualifying for loans. It is simply going back to the way it should be, which is you only get a loan if you can afford it. 20% down? That's great. It forces the owner to take a vested interest attitude in the property rather than an I can just walk away attitude towards the propety that you get with 0% down. Should your monthly payments have to fit within a reasonable percentage of your income. Duh!! Of course. Should you have to have a good credit score. Of course. Why should anyone get a loan if they have a history of not making payments. No, credit and loans were not going away, they were just going back to where they belong. When I grew up, I would have never fathomed that I could buy a house with 0 down. That just didn't even fit into rational thinking. Now we've got everybody thinking they can afford, and that they deserve that 3000 ft2 house and that hummer. Doesn't it seem odd to anyone that we've seen such an increase in all the outrageoulsy fancy cars driving around. Where did all that money come from. It came from bad loans to people who couldn't afford them.

I love this country, because there is opportunity like no other country on earth. But opportunity doesn't mean freebies. People should have to work for what they get, and should be able to afford what they buy.

The credit problems in this country were self correcting. This bill stops that correction and only helps the government, and the largest of investors, and the lobbyist groups.

Your statement that credit would not have dried up is b.s. it would have and I do not know of any economists that say credit would not have dried up. Mortgage Backed Securities were getting nearly impossible to sell even those that were made up of solely AAA paper. This was preventing lenders from turning over their assets and thereby starting to affect portfolio lending.

Most people to not understand how monetary policy works. The world now has a fractional reserve system that means every dollar that is taken out of the system turns into some multiple of it. In our system each dollar not available to be lent removes 9 dollars from the system. It was getting worse every day and many other banks were going to fold including those that did not take part in risky lending. The sub prime loans in and of themselves did not create this mess. It is a very misunderstood principal known as the lemon phenomenon.

I posted what is below in another forum but it is in the form of a rant because I had been ignoring what I felt was ignorance all around me. Guess I couldn't hold my tongue any longer.

I know this thread was intended to be humorous, however, I am getting fed up with misinterpretation of the markets. I also want to note that sub prime loans in and of themselves has not caused this mess. The default rates of this loan class is not what caused the unravelling of the markets. I have provided links to explain the process of building M.B.S. and an explaination of the series of events leading to the freeze of trading on nearly all M.B.S.s not just sub prime.

http://www.youtube.com/watch?v=0YNyn...eature=related :CNBC news clip with a over simplified but accurate explaination of how sub prime derivitives where designed.

http://www.imf.org/external/pubs/ft/...07/12/dodd.htm :International Monetary Fund article on how M.B.S. where developed and why default levels of this paper do not explain the troubles in the market.

http://expertvoices.nsdl.org/cornell...rities-market/ :Brief article on how our troubles evolved that led to the paper that the link below provides.

http://houstonhousingmarket.org/2008...credit-crisis/ :This is a thesis paper written for a course at Cornell University covering this topic in detail.

Another thing I need to get off my chest is the idea that the bail out bill is unneeded or just socilization of Wall Street loses is ludicrious. We are in every bit as dire a situation as is being reported. In addition to this a crumbling of the financial markets will not cause the pain to members of Wall street so many wish to see. The pain will be felt by all of us and in greater amounts. The bill that went to vote on Monday was as good for the ecomomy as anything our pork barrel political system could turn out. The bill contained the components below as well as others.

1. Severance packages to CEOs of any firm that would have taken advantage of the fund where to be nearly wiped out.

2. The government was to be allowed to purchase up the worst performing M.B.S. allowing for renegotiation of the loans that could be salvaged. (Having these assets in the hands of an entity who's best interest and goals where to reintroduce liquidity rather than maximize profit will allow more of the loans that can be renegotiated worked out. In addition those loans that could not be renegotiated would have a better chance of being worked out in a short sale. That would allow for reduction of increased losses caused by vandalism of foreclosure properties. It would allow for the lenders to begin lending again as many have come to a near halt.)

3. Instead of buying all of the bad paper the bill gave an option to move in and insure the paper against losses. (This has the ability to return investor confidence for M.B.S. allowing for the return of a market for these products.)

4. Any firm that took part in using money alloted to the bail out fund would have to repay any losses that the government incurred within 5 years or be subject to a 2% higher tax rate.

My complaints with the bill are that it created a heavy burden for the federal reserve system to work out. I would have preferred a plan that encouraged private investors money to be used along with funds from the government to encourage the purchasing of the worst securities. An example of this was suggested by Warren Buffet. I have provided the link below. The other complaint with the bill is that it is not large enough now that congress has stalled.

http://money.cnn.com/video/#/video/n...ffett.cnnmoney

In conclusion to this post I would like to remind everyone that thinks it would be a great idea for funds to go directly to individuals to be used against paying off their mortgages, credit cards, and student loans that we have a fractional reserve monetary system and paying off all those loans rapidly would cause a collapse of the money in circulation. As loans in todays fractional banking system actually expand the money available. I have provided a link below to a video that gives a simple explaination of the worlds banking system. It was intended to be a conspiracy theory piece that was anti-fractional reserve system but it does do a decent job explaining how our system works in a simplified manner.

http://www.youtube.com/watch?v=cy-fD78zyvI :It would not be a bad idea to watch the series of videos if you have time.

In the end it is simple anything that rapidly reduces the ability for lenders to make loans wll reduce the funds available by 9 times in a rapid fashion. The rapid change is what can cause a depression. Especially if it is a large amount. If you want the banking system fixed fine but first we have to keep ourselves out of what my grandmother and others her age consider hell.

I would like to add to this the revised bill that passed and was signed into affect today.

http://money.cnn.com/2008/10/01/news/pdf/


Now on the point of it removing the opportunities for the small guy this is just not the truth. It will reduce the number of actual foreclosures and pre-foreclosures but it will not eliminate them. Also it should actually make it easier to close pre-foreclosure deals. This will most likely allow the number of total closed short sales to stay around the same.

Originally Posted by miket1970

This will eliminate free market involvement, and I'm sure it will have devastating effects on real estate investors, but the feds will be able to make all kinds of money off the deal, and I don't think they will ever give it back to tax payers, even though we payed for the whole darn package to begin with. This is a socialist takeover of the real estate market.

This may well be true. However, the picture is not so simple. Real estate is tied to so many other sectors of the economy. If the real estate goes down further, it can have more serious ripple effects and cause more serious problems. The bailout plan sounds too costly. However, doing nothing can be worse and cause more money to the economy, tax payers and the government. Most of the congressmen who voted for the bill voted for it because of this simple reason. Sometimes the free market isn't really free.

to have an impact on short sales as well. If banks can get the full loan amount back from the bailout money why would any bank except a short sale at 40 or 50 cents on the dollar?

Your thoughts?

Originally Posted by fmike630

to have an impact on short sales as well. If banks can get the full loan amount back from the bailout money why would any bank except a short sale at 40 or 50 cents on the dollar?

Your thoughts?

They will not recieve the full amount and the individual loans themselves are not what shall be purchased with the 700 billion. They will be purchasing securities which are 1,000s of loans. In any unperforming security there are performing loans plus there are loans that can be renegotiated. And to top this off the security will not be purchased at face value.

The Bailout is bad news, years ago we put people in jail, for ripping off the country.
Now we are going to reward people for doing that?
While at the same time take food away from our own kids when we are taxed for it?
Many of these guys who caused our problems world wide are giving themselves huge bonus's is a joke, Now every one knows they'll find a way to get more bonus's with this Bailout money, putting money into the hands of the rich again, just to save their greedy butts.
Those guys need to serve jail time.

Between the high gas prices and CEO's with 1 million to 50 million dollar bonus, these people broke the country with their greed.
You can say what you want, that not everyone does it, but those who do, took us for a ride and now we reward them?

If my business crash who's going to reward me?.....No one that's who !!

Originally Posted by Fresno Office Rentals

The Bailout is bad news, years ago we put people in jail, for ripping off the country.
Now we are going to reward people for doing that?
While at the same time take food away from our own kids when we are taxed for it?
Many of these guys who caused our problems world wide are giving themselves huge bonus's is a joke, Now every one knows they'll find a way to get more bonus's with this Bailout money, putting money into the hands of the rich again, just to save their greedy butts.
Those guys need to serve jail time.

Between the high gas prices and CEO's with 1 million to 50 million dollar bonus, these people broke the country with their greed.
You can say what you want, that not everyone does it, but those who do, took us for a ride and now we reward them?

If my business crash who's going to reward me?.....No one that's who !!

Trust me we will not be rewarding them and if you think that we would be better off without the bailout you do not understand financial markets. The fat cats will not feel the pain if we have a depression they will actually have the closest thing to being able to mint money. The rich benefit hugely from down markets.