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There’s always something to howl about.

Author: Brian Brady (page 22 of 27)

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

September 27, 2007

Active Rain Wuz Robbed

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Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

There are so many ways to play the puns here.  Who Moved my Rain?  Move before you get Rained Upon.  It’s Rainin’ Moves.  All pretty goofy.

In the interest of full disclosure, I’m biased but so is Greg Swann.  Greg calls Active Rain stoopid technology, I call it useful,  Again, my interest in Active Rain’s success is financial; I write to and market to the Realtor channel.

Move’s shuck and jive play for Active Rain is indefensible.  If Move were a home buyer, they would be entitled to material information in the interest of full disclosure.  Real estate agents call this the inspection or contingency period.  In the corporate finance/M&A world, it is referred to as the due diligence period.  Move had every right to reverse it’s offer to purchase Active Rain if it discovered something during the due diligence period.

Here’s where Move screwed up; they started a competing business while fleecing the boys of their member roster and competitive points system plan.  That is referred to in the lawsuit as the “confidential information”.  They placed contingencies upon the purchase:  Active Rain was instructed to cease all merger and acquisition opportunities, revenue opportunities, and financing plans.  Those very actions, combined with a simultaneous push to present a competing product, suggest that Move perceived  Active Rain as a competitive threat.  It used the carrot of its deep pockets as a tool to paralyze the industry leader while developing a competing product.

Are the boys at Active Rain insane to think that the platform is worth $33 million?  I think so but I’m no investment banker (and I clearly have no experience in valuations of tech start-ups).  The figure, however, was set by the perpetrator of this scheme.  Move played the old Nigerian e-mail scam on Active Rain.  Naivete doesn’t make the victim any less injured nor does it make the scam artist any less culpable.  That means you can’t say “What are they stupid to think we’d pay them that much? ” as your defense.

A jury trial will be a nightmare for Move, especially if that jury is in California.  Twelve reasonably hard-working men and Read more

September 26, 2007

Advertising to Ashley

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Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Guy Kawasaki moderated a panel of college students in a combination panel/ focus group about marketing to the Wired generation. The results are predictably astounding.

See the one hour video here.

Conversations are electronic– two users sent over 4000 text messages each month. From texting, they progress to mobile voice communication; nobody uses landlines anymore. Very few actually use the camera function of the mobile phone; they prefer digital cameras.

They use e-mail serially. Every panelist said that they can be reached via e-mail throughout the day.

Here’s the interesting part- they all use MySpace and Facebook and consider that to be the primary communication tool. When asked to explain the fascination, they all pointed to communication as the primary reason.

They read but don’t write blogs. Most read celebrity blogs and don’t comment (no surprise there). None of them knew what a RSS feed is. They rely on wikis to obtain information but are somewhat skeptical about the veracity of the information there. If they see a disclaimer from a moderator, they tune out immediately.

They rarely watch television and when they do, they use TiVo to block ads.. They watch YouTube and read magazines. Wired Magazine is on everyone’s reading list. When asked how they receive marketing communications, they pointed to celebrity users. Endorsements of a product, by a celebrity, hold a tremendous amount of value with them.

When questioned about their dream gadget, all of them requested a device that integrated an iPod, a cell phone, and a personal computer that had data safety if lost.

What does that mean to us, real estate marketers, in the next five years? These young adults will be the first time home buyers of 2010-2020. Certainly, their habits will change as they age but their commitment to communications technology and social networking will not.

Does this mean that the real estate weblog of the future will be written by Paris Hilton on Facebook? If you sell a home to Matt Leinart, you’ll want to make sure your Facebook profile publishes his video endorsement Read more

September 23, 2007

Can the NAR Improve a Buyer’s Financing Experience?

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Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Realtors have to stop complaining about the sorry status of the lending industry.

Why?

They have the power to make a difference but refuse to take action. I have often heard the Realtors’ cry for licensing of loan originators and a plea for lending advisers to adopt a fiduciary capacity when originating a mortgage loan. Steve Berg makes an excellent case on The San Diego Home Blog for abolishing dual capacity, licensing originators, and establishing a fiduciary capacity for loan originators. The problem? Realtors are waiting for the lending industry to do this. That just ain’t gonna happen.

Realtors assume a fiduciary capacity for buyers. With that capacity comes a responsibility to assure that the buyers is getting good loan advice. The challenge? It’s the money, stupid!

How can the NAR really protect the consumer from unscrupulous loan originators? Adopt a standard which closely aligns itself with what the NAR membership wants. NAR membership wants to deal with licensed originators. NAR membership wants an independent fiduciary duty imposed upon originators.

Here are three ways Realtors can adopt to truly align their buyers with the originators they want:

1- Stop referring loans to originators at federally chartered banks. These banks are exempt from licensing and are limited in their product selection. The only way a fiduciary relationship can be established for your buyer is to refer him/her to an independent mortgage broker who is able to shop ALL of the big banks and smaller mortgage companies.

2- Insist on loan commitments from originators who are General Mortgage Associates of the of the National Association of Mortgage Brokers. To date, this is the only national organization that has stated that its membership must act in a fiduciary capacity to the borrower. In practice, the NAMB doesn’t give a damn but at least they state that they do.

3- Prohibit the membership from originating loans. That means that all affiliated business arrangements and common ownership of lending institutions and brokerages must be terminated. It further means that splits for individual Realtors (from employing brokers) will Read more

September 19, 2007

Are You Better Off Now Than You Were Four Years Ago?

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Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Ronald Reagan asked us that question in the 1980 Presidential debate. The obvious answer, in 1980, was NO.

Are we better off now, in the real estate markets, than we were four years ago? I think the obvious answer is YES. Now, bubble bloggers and end of the world prognosticators will most likely throw out graphs, cite the reasons for a depression, and suggest that Greenspan created an artificial bubble.

The problem with bloggers is that we have a short-term memory. We should; we’re rewarded for doing just that. Let me give you an example: I tripled my page views by covering the Countrywide Financial crisis on my home weblog. If I want more traffic, all I have to do is research the referring search terms and tailor my new content to those interests. The result? An exponential climb in page views.

Bloggers are rewarded for living in the moment not for seeking the truth (or a deeper understanding of it).

How different is your net worth today from 2005? Well, if you’re in San Clemente, CA, Goodyear, AZ, Naples, FL, or Henderson, NV, it’s probably down. These four areas have been brutally hammered with foreclosures while the rest of the country has been riding out this slowdown. And that makes good headlines fodder for the mainstream media and good page view bait for the real estate weblogger.

How different is your net worth in the aforementioned cities if you bought, say, four years ago– in 2003? It’s pretty darned good ! In 2003, a home in Goodyear, AZ could be had for about $200,000. That home may have risen to a peak of $325,000 in 2005. It may have retreated to $275,000 today. Let’s say it drops to $240,000 in two years. A 20% down payment (of $40,000) would have doubled in value in a six year period. The debt service could be written off to rent collected or opportunity cost (rent that would have been paid). The resulting return on equity, for that Read more

September 11, 2007

How to be a Successful Originator For About $25,000

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Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Blogging for business is NOT the most efficient use of your time. Your time is better spent mining your database. This is a topic near and dear to my heart; my database is a mess. Had I properly maintained it these past 7-8 years, I’d probably be retired today. If I employed the 33-touch system, suggested by Gary Keller,  I’d not be hunting for the next batch of loans. I certainly wouldn’t be, as one online marketing vendor called my strategy, “puking all over the internet” , sifting through inquiries, to find serious borrowers.

That is not to say that blogging doesn’t have it’s place; it does. As Greg suggests, it is an excellent way to connect “viscerally” with your database. Creating a cozy community may be the focus of my online marketing efforts once I practice the “Law of the Broom” and clean house. This is not a reversal of my claim that keyword-rich text gets search engine results; it most certainly does. Blogging for your customers, employing a few basic keyword search terms, can attract more like-minded people which makes your business proposition more efficient (READ: I want more people that are just like my best clients). By playing to your strengths, you can hit more balls out of the park because you’ll start seeing the same kind of pitches.

Enter someone like Ray Cobel. Ray runs an outfit called Cobel Target Marketing. I met him on Active Rain and realized that he knows a helluva lot about mining databases. Ray has agreed to let me interview him for a podcast, to be hosted here on Bloodhound Blog. I’m still working on my questions so you can e-mail me if you have one for him.

I have some advantages as I start to apply the Law of the Broom. I’ve been in business for some twenty years, thirteen as a loan originator. I have a lot of people’s name in the computer, on business cards, or on cocktail napkins from Durant’s or the Poseidon. Read more

September 4, 2007

ARMs Look Scary Before They Look Good or (How Wall Street Dupes the Little Guy)

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Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I don’t look real smart today, do I ?

Mortgage rates in general took a fairly substantial dive during the previous week with longer term rates dropping double digits in most cases and some rates returning to mid-2006 levels. However, the Mortgage Bankers Association reported a spectacular increase in the interest rate of the one-year adjustable rate mortgage (ARM).

Hold on just one second ! Now is the time when you SHOULD be a contrarian. The alternative title of this post is the one you should read. Wall Street has always been ahead of the little guys and gals. They look into the future, and try to get money committed to best profit off of their forecast. If an annual ARM rate is rising above the fixed rate mortgage rate, Wall Street is trying to induce borrowers to lock up money.

Why would anybody in their right mind do that?

Wall Street thinks rates are going to drop like a ball off of a table. They think the inverted yield curve we’ve seen is a precursor to a recession. The inverted yield curve has indicated an impending recession some 85% of the time since the Civil War – which side would you bet on if this were Vegas?

Nobody likes the R word. I’ve been sensitive to the R word since Bill Gross of PIMCO talked about the housing recession in late 2005. He, and I, are more sensitive to the concept of a “housing recession”; we’re both in California. It’s estimated that close to 10% of the jobs in California are related to the housing industries be they Realtors in Rialto or a painters in Petaluma.

Why the Wall Street shuffle with higher ARM rates? They want you to take the risk of a fixed rate so they can stick them in the MBS pools for a few years. They know those loans will sell at a premium in 12-18 months- when rates are dramatically lower. To continue the Vegas Read more

August 28, 2007

Active Rain Unleashes Impression Advertising

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

If they’re ain’t no margin, there ain’t no mission. Active Rain has released it’s revenue model to the network of 43,000 members. My only question is, “What took you so long?”

In the interest of fairness, Jon Washburn, Caleb Mardini, & Matt Heaton are tech-guys. They always felt that if they build it, the money will come. And build it they did. In the course of 13 months, Active Rain has grown to over 43,000 registered members and has established a community blogging platform that is unparalleled in the RE.net.

The idealistic approach of MyHouseKey.org was a great one but it failed because of a lack of participation. No points? No interest.
Gather.com is another approach to communal blogs outside of the RE.net. Gather also uses the point system and offers rewards of free Borders’ gift cards for serial contributors. It seems to attract a sort of pseudo-intellectual Myspace user and doesn’t get the communal participation Active Rain does.

The boys of Active Rain have done a great job of balancing the fragile egos often associated with top-producing Realtors and loan originators. They’ve established community guidelines and let the members pretty much police themselves. Their Localism.com portal is an interface with consumers. They won the coveted Inman Innovation Award in San Francisco. earlier this month; it couldn’t have happened to a nicer group of guys.

The climb to revenue wasn’t an easy one. Rumors abounded of lead poaching, black hat SEO, and other conjecture about the unbeleiveable and meteoric rise in the RE.net; none of it was true. Strategic alliances, partnerships, news sharing with mainstream media, and rumors of a buyout were all bandied about as the boys toiled away. They kept their focus and rolled with the punches.

Now, they want to get paid. Bravo! The success of the Active Rain Real Estate Network comes from the collaboration among its members. Members refer business back and forth, share marketing ideas, and help change the way we do business with the consumer. It is, without Read more

August 20, 2007

Sub-Prime Borrowers Got Lucky- They Didn’t Pay Enough

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I floated an idea about a federal bailout, along the lines of Chrysler in 1980, of Countrywide Financial Corporation. I wanted to highlight two things in this post: Countrywide is in trouble and their trouble is our trouble. My premise is that the collapse of CFC goes beyond the 55,000 employees. I may have been guilty of thinking like Charles Erwin Wilson.

Jeff Brown replied, “Countrywide ain’t no Chrysler” and proved that my premise may be an insult to Adam Smith. His idea of a bailout was more along the lines of a Tom Clancy novel with Ben Bernanke playing Jack Ryan, Angelo Mozilo playing Dr. Strangelove, and Bank of America playing the United States Marine Corps. Life often imitates art so my money’s on Jeff’s covert bailout plan.

What really happened to the mortgage market ? They didn’t properly price loans for the risk they assumed. While Hilary Clinton is crying about the “poor borrowers” what about the poor lenders who got caught in the middle of this mess? Borrowers said “We’ll buy it if you give it to us on the cheap !”, Wall Street said “We’ll take the extra yield!”, and we all said “This time it’s different !” Extrapolations proved that a two bedroom condo on the Las Vegas Strip would sell for at least $5 million in this new economy, fueled by leverage.

Read Ralph Alter at The American Thinker:

The dirty little secret of the sub-prime crisis is the fact that sub-prime lenders failed to charge interest rates high enough to offset their expected level of defaults. Make no mistake: sub-prime lending is going to have borrowers who fail. Even conforming borrowers sometimes default. Enabling lenders to charge enough to make profitable loans to less qualified borrowers will result in a higher level of foreclosures. But it will also enable legions of “sub-prime Americans” to realize the American dream of home-ownership.

Who were the losers of the explosion of non-prime lending? The 10-15% of the homeowners who were able to buy homes, Read more
August 15, 2007

The Countrywide Federal Bailout Act of 2008

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Have you ever felt your stomach drop?

I received an e-mail, from reader Robert Kerr today, asking if I had seen Merrill Lynch’s downgrade of Countrywide Financial. Merrill Lynch believes that Countrywide might face bankruptcy. Make no mistake about it, a collapse of Countrywide Financial will give everybody in the real estate and mortgage industry a case of the “awshits”.

The Secret be damned! I said this was plausible back on April 1, 2007:

Here are some warning signs the painfullly paranoid (like me) might feed upon:

1- Countrywide Announces Change in Board Of Directors

2- Fitch Ratings Agency Downgrades 33% of Countrywide Loan Pools; particularly their “expanded criteria” guidelines which include Pay Option ARMs

3- Methinks he doth protesteth too much; Chairman and Founder Angelo Mozilo sold $140 million worth of stock last year while literally screaming that Countrywide should not be penalized by stock traders because of the subprime meltdown.

Negative amortization loans are an excellent financial planning tool. Countrywide has long been a favorite of originators because of their adaptability and innovative lending products. This time, I think they may have overreached. I’m raising our readiness condition to DefCon-4.

I’ve been getting a lot of traffic on my home weblog. The reason is simple; I’ve been writing a lot about Countrwide lately. If you Google, “Countrywide In Trouble”, I’m close to the top. This is not a pat on the back for my SEO technique, it’s a realization of how severe the reach of a Countrywide collapse may be.

Two weeks ago, I questioned why Angelo Mozilo wasn’t owning up to the severity of the problem and getting the bad loans off of the books so we could move on with our lives. More traffic on the weblog. That’s a bad sign. I followed up and wrote a little joke about a federal bailout of Countrywide by President Fred Thompson in 2009 and likened Countrywide to Chrysler. I played with fuzzy numbers and determined that Countrywide’s net worth could conceivably drop some 70% from defaulted loans. Huge traffic on the weblog! Google finance and Yahoo finance picked it up. I think I struck a nerve.

This is Read more

August 12, 2007

It’s A Lenders’ Market

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Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I pulled a Cramer today. The pressure has been mounting for some time, now.

Roberta Lee, a real estate broker in Norco, CA left a comment on an article I wrote on Active Rain:

My son is in the mortgage industry. He took the time….. 🙂 to enlighten me…..”Mom this isn’t a buyers market or a sellers market, it’s a lenders market.”

Ain’t that the truth, Roberta? I had two, um, situations this week that influenced the Cramer that erupted at 3PM this afternoon. Both involved incompetence and arrogance by the wholesale lending “professionals”. THAT is going to be a problem that needs to be addressed immediately.

Customers are scared. I know and you know that this stuff happens every ten years or so but it’s pretty scary when it’s happening to you. I do a fair amount of business in negative amortization loans. That product has been repriced to reflect the investor’s perception of increased risk but the portfolio lenders are still in the game. I’ve come full circle and have started placing loans with the banks I used in the 90s. None of my old friends are there, anymore. They’ve been replaced with the cast of High School Musical.

One rep doesn’t truly understand her products. She parroted the sales manager’s script when I questioned about a recast and argued relentlessly while I did the math. She was off by about nine months…those nine months matter to an engineer (my customer). When I asked her to be more precise with her answers, that customers’ financial futures were at stake, she flippantly replied that it wasn’t her problem these “morons” are in trouble. She lacks what business school professors might call, um, a “consumer-centric” philosophy.

Another bank rep couldn’t understand why my customer was nervous when she broke a promise to me. The problem was exacerbated by her poor knowledge of her bank’s closing process, so she told another little white lie. This delayed the closing another day. When I explained why customers were stressing in this Read more

August 7, 2007

When Lenders Stop Lending, Another Lender Lends.

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

The title is a funny play on words from advice Jeff Brown and Ron Feinberg gave me last week. When I returned from Inman last week, the market started melting down. I pride myself on my cool head but some days the Awshits sneak up and dominate my mind; Friday was one of those days.

IndyMac- discontinued neg-am

Bear Stearns- repriced neg ams by adding 2.25 points to the fee (thievery)

American Brokers Conduit- I didn’t know they were owned by American Home Mortgage until it was too late.

World Savings- a workable solution but their margins are so expensive. Now, they’re cheaper than the rest.

Jeff Brown told me that some smart company would figure out the void in the market in less than one month. Ron Feinberg said six weeks. I called the 2-3 borrowers and explained that the repricing may have made the neg-am loans a poor recommendation; it just didn’t fit into the plan I had created for them.

Look who slipped in the back door with killer pricing and terms. I’ll be damned! It took less than a week!

August 5, 2007

The Mortgage Tax Act of 2007

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Michael Cook did an excellent job explaining the two noteworthy debacles of last week. American Home Mortgage went belly up and Bear Stearns may be downgraded to a negative rating. Thursday afternoon, Angelo Mozilo of Countrywide Financial, did his best Nero impression by muttering two words to analysts; “Don’t Worry“.

Mr. Mozilo may be parroting Bobby Mc Ferrin but the rest of the lenders aren’t. Non-conforming lenders readjusted to what they now call “risk-adjustment” pricing. Basically, at Wall Street’s direction, the large lenders added about a 1% fee to the stated income and no income documentation loan programs. Loans that conform to FNMA or FHLMC guidelines, with verified income and assets, remain at their original pricing. There still are 100% financing programs available to those with good credit and the ability to make the payments.

Have borrowers who choose not to disclose income documentation become personae non gratae overnight? Not really. We have always known that light documentation borrowers, who can not demonstrate an ability to repay the loans, have been a higher risk. There has always been a price adjustment for that risk. Large down payments (20-30%) used to be the norm for those programs. It wasn’t until after our country was attacked, in September of 2001, that Wall Street started reaching for yield. The easy money policy and anemic stock market of that post-attack economy left the investment bankers STARVED for business; they found that business in high risk home borrowers.

This brings us to the Mortgage Tax Act of 2007. The way out of this mess is to originate more product. That sounds counterintuitive, doesn’t it? Well, if lenders can originate more loans, they can spread the risk across more assets. The risky loans (stated and no doc) now have a higher risk adjustment. That risk-classified pricing model is not unlike the insurance industry’s move to segregate tobacco users from non-tobacco users. Smokers are charged a higher insurance premium than non-smokers because their life expectancy is lower. That’s what the lenders Read more

August 3, 2007

Ask the Broker- Did I Invest in a Sub-Prime Mortgage?

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Scott asks:

How can you tell if you have a sub-prime mortgage bond in a portfolio?

Scott, I’m taking a stab at this. I haven’t sold securities in 14 years. Mortgage-backed securities, in the early 90s, were mostly Ginnie Mae pass-through certificates or Agency-issued pass-throughs and collateralized mortgage obligations (CMOs). There were a few CMOs, issued by non-agency issuers, that may have contained a non-prime loan or two to “juice the yield”. Collateralized Debt Obligations, generally devoid of whole loan mortgages, may have been infiltrated these past few years.

How about this, Scott? I can’t say IF you have a sub prime loan in your portfolio. I can say that sub prime loans won’t be collateralizing GNMA, FNMA, or FHLMC issues. If you own an instrument comprised of primarily these issues, you should be in the clear.

Michael, your more current knowledge and experience might be more precise.

July 24, 2007

A Realtor’s Guide to Creating A Market Through Lease Options

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Realtors can increase business by solving problems. This twenty minute presentation is a recording of the lease option webinar I hosted on Meet Brian Brady, my webinar site.

We teach Realtors how to use lease option financing as an alternatve financing method. Of course, we didn’t invent this simple idea. We stole it from here and perfected it here, back in the late 1990s.

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