Toxic Assets and Real Estate
BY: Rick Soukoulis
Chairman and CEO
Intero Mortgage
President Obama has proposed a bold plan to form private-public partnerships to buy the toxic assets off the books of the nations’ books.
This could be a huge boon for the real estate lending industry.
Let me explain.
First, what are these so-called toxic assets. They are obscure financial instruments the common man has only herd of. Derivatives, CMO’s Credit Default Swaps, sub-prime mortgaged backed securities, and on and on and on. A derivative, at its heart, is simply a mirror image of a security, kind of like the real thing but not quite the real thing.
In any case, most of these assets have dropped enormously in value. The banks are afraid to mark them down to their fire-sale value, as that big a hit to capital could leave them in a severely impaired situation.
So they keep them on the books, and as long as they’re there, they’re afraid to really start lending again.
Through a variety of accounting games, they can avoid taking the real mark down, so while they avoid taking a huge loss, they’re also uncertain enough about just how toxic these are that they don't want to go too far out on the lending limb.
The great thing about the Obama plan is that it gets private institutional money involved, an the assumption is that there will be a true market in these assets, and not just prices based on s fire-sale.
As these assets are moved off the balance sheets of our banks and into the hands of private investors, the banks will start lending again, and that will play a very big role in the economic recovery.
While it’s much harder these days to get a mortgage loan, it’s still very possible.
But if you apply for s loan to buy an apartment building or build an office building, it will be almost impossible. Construction loans are almost impossible to get, and subdivision builders, especially the smaller ones, just can't find financing.
I could go on end on about the areas that have been impacted by banks with toxic assets. All of these areas will again feel the free flow of cash and new loans.
It will be a part of regaining our economic health and getting people back to work.
But as Jay Leno said, if you’re going to be selling these things, don’t you think you could call them something other than toxic assets?
Rick Soukoulis
Chairman and CEO
Intero Mortgage
408.578.8700
Thursday, July 30, 2009
Tuesday, July 28, 2009
Tuesday Market Update
Today's Commentary
Updated on Jul 28 2009 11:34AM EST
Tuesday’s bond market has opened in positive ground following early stock weakness and a weaker than expected consumer confidence reading. The stock markets are showing losses with the Dow down 34 points and the Nasdaq down 6 points. The bond market is currently up 14/32, which will likely improve this morning’s mortgage rates by approximately .250 of a discount point.
The Conference Board gave us today’s important data with the release of their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment about their personal financial situations, giving us an idea of consumer willingness to spend. It showed a reading of 46.6 that fell short of forecasts by a couple of points. This is good news for bonds and mortgage rates because a less optimistic consumer is less likely to make a large purchase in the near future, limiting economic growth.
Tomorrow brings us two reports that may influence mortgage rates. The first will come from the Commerce Department when they post June’s Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline in news orders of 0.5% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates tomorrow morning. If it reveals a much larger than expected decline, mortgage rates should drop. It should be noted that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.
The Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke’s testimony to Congress last week gave us a recent update, I don’t think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates tomorrow afternoon as a result of this report, but the possibly does exist.
Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are tomorrow’s 5-year and Thursday’s 7-year Note sales. The last auctions of the 5-year and 7-year securities were met with very good demand from investors, leading to bond strength following the sales. But there is a record amount of debt being sold this week, so we need to proceed with caution over the next few days. Results of the sales will be posted 1:00 PM ET each day. If investor interest is strong again in Wednesday and Thursday’s sales, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates during afternoon trading those days.
Updated on Jul 28 2009 11:34AM EST
Tuesday’s bond market has opened in positive ground following early stock weakness and a weaker than expected consumer confidence reading. The stock markets are showing losses with the Dow down 34 points and the Nasdaq down 6 points. The bond market is currently up 14/32, which will likely improve this morning’s mortgage rates by approximately .250 of a discount point.
The Conference Board gave us today’s important data with the release of their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment about their personal financial situations, giving us an idea of consumer willingness to spend. It showed a reading of 46.6 that fell short of forecasts by a couple of points. This is good news for bonds and mortgage rates because a less optimistic consumer is less likely to make a large purchase in the near future, limiting economic growth.
Tomorrow brings us two reports that may influence mortgage rates. The first will come from the Commerce Department when they post June’s Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline in news orders of 0.5% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates tomorrow morning. If it reveals a much larger than expected decline, mortgage rates should drop. It should be noted that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.
The Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke’s testimony to Congress last week gave us a recent update, I don’t think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates tomorrow afternoon as a result of this report, but the possibly does exist.
Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are tomorrow’s 5-year and Thursday’s 7-year Note sales. The last auctions of the 5-year and 7-year securities were met with very good demand from investors, leading to bond strength following the sales. But there is a record amount of debt being sold this week, so we need to proceed with caution over the next few days. Results of the sales will be posted 1:00 PM ET each day. If investor interest is strong again in Wednesday and Thursday’s sales, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates during afternoon trading those days.
Tuesday, July 21, 2009
Mountain View Ranked 4th best city by Forbes
**Mountain View has been ranked by Forbes Magazine as the FOURTH best city (population under 100,000) to live in and the BEST in the Bay Area –Source: Mountain View VOICE, May 22, 2009
Mountain View offers a plethora of activities to enjoy. Some of the “Goings-On” include an abundance of concerts to choose from at the outdoor Shoreline Amphitheater, dance and theater productions at the beautiful Center for Performing Arts and many other cultural attractions.
After dining at one of the many diverse restaurants located within walking distance of each other, enjoy a walk or hike in one of the 32 well-groomed parks. This city has developed a reputation for being one of the finest recreation destinations in the Bay Area. Shoreline Park is a 750-acre area that is home to a wildlife sanctuary, with many trails and an 18-hole championship golf course.
Sundays are a special treat to Mt. View residents with the ever popular Farmer’s Market located next to the CalTrain and Light Rail station. Afterward stroll down Castro Street and enjoy coffee from one of the several coffeehouses, window shop specialty shops and bookstores.
Mountain View topped the list in terms of venture capital activity and enjoys a strong and diversified local economy. Companies such as Google, Intuit, Microsoft, Symantec and start-ups such as Ooyala, are just a few headquartered here, Residents commute an average of 20 minutes to work which is considered low for the Bay Area.
The neighborhoods are vibrant and designed to fit every lifestyle with quality public schools, and a centrally located library.
Mountain View offers a plethora of activities to enjoy. Some of the “Goings-On” include an abundance of concerts to choose from at the outdoor Shoreline Amphitheater, dance and theater productions at the beautiful Center for Performing Arts and many other cultural attractions.
After dining at one of the many diverse restaurants located within walking distance of each other, enjoy a walk or hike in one of the 32 well-groomed parks. This city has developed a reputation for being one of the finest recreation destinations in the Bay Area. Shoreline Park is a 750-acre area that is home to a wildlife sanctuary, with many trails and an 18-hole championship golf course.
Sundays are a special treat to Mt. View residents with the ever popular Farmer’s Market located next to the CalTrain and Light Rail station. Afterward stroll down Castro Street and enjoy coffee from one of the several coffeehouses, window shop specialty shops and bookstores.
Mountain View topped the list in terms of venture capital activity and enjoys a strong and diversified local economy. Companies such as Google, Intuit, Microsoft, Symantec and start-ups such as Ooyala, are just a few headquartered here, Residents commute an average of 20 minutes to work which is considered low for the Bay Area.
The neighborhoods are vibrant and designed to fit every lifestyle with quality public schools, and a centrally located library.
Tuesday, July 14, 2009
Tuesday Mortgage Update
Mortgage Bonds are down this morning, due largely to a hotter than expected wholesale inflation reading in the Producer Price Index (or PPI). Even excluding volatile food and fuel prices, Core PPI rose quite a bit more than anticipated. Tomorrow's Consumer Price Index will give us a better idea of the threat of inflation.
In other news, Goldman Sachs reported blowout earnings as expected. Retail Sales were also released today, rising slightly higher than expectations. Overall, department stores and restaurants still showed weak results, signaling that consumers remain hesitant to spend discretionary dollars.
Currently, Bonds are up from their worst levels earlier this morning and are clinging to support at the 50-Day Moving Average. There is no urgency for locking rates for now, but be prepared to lock as the market is very dicey right now and can change quickly.
Have a great day!
In other news, Goldman Sachs reported blowout earnings as expected. Retail Sales were also released today, rising slightly higher than expectations. Overall, department stores and restaurants still showed weak results, signaling that consumers remain hesitant to spend discretionary dollars.
Currently, Bonds are up from their worst levels earlier this morning and are clinging to support at the 50-Day Moving Average. There is no urgency for locking rates for now, but be prepared to lock as the market is very dicey right now and can change quickly.
Have a great day!
Monday, July 6, 2009
Market Monday
The financial markets are back in full swing today after the long holiday weekend. Bonds continue to remain just beneath a tough resistance level, while Stocks are getting off to a sluggish start due to concerns for the overall global economic recovery.
In other news, the ISM Services Index, which gauges the health of the non-manufacturing or service industry, came in better than expectations. Overall, the report indicates continued contraction, but at a slower pace.
Many traders and investors may be taking the next few days off as an extension of the holiday weekend, which can increase volatility. There is no urgency to lock in rates. We will watch how Bonds and Stocks continue to react to important technical factors and the news of the day. The direction could change quickly. ~ as usual~
Enjoy your day!
In other news, the ISM Services Index, which gauges the health of the non-manufacturing or service industry, came in better than expectations. Overall, the report indicates continued contraction, but at a slower pace.
Many traders and investors may be taking the next few days off as an extension of the holiday weekend, which can increase volatility. There is no urgency to lock in rates. We will watch how Bonds and Stocks continue to react to important technical factors and the news of the day. The direction could change quickly. ~ as usual~
Enjoy your day!
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