Mizzer Foreclosure Newsletter

For those agents who were not licensed during the Savings & Loan crisis of the late 1980s, welcome to a Buyer's Market - too many houses and not enough qualified buyers willing to pay yesterday's price in today's declining market. Indeed, it is a very confusing place to try and make a living selling real estate. Market value can be a fleeting concept when held hostage to falling prices and a glutted marketplace where the bottom-line is ultimately determined by incentives and Interested Party Contributions (IPCs).

Still, it presents wide opportunities to create wealth buying real estate. The "Mortgage Meltdown" closely resembles the Savings and Loan Crisis - a weak economy, cheap and easy insider undervalued loans, overvalued properties, and defaulting financial institutions. As Yoggi Berra, MVP philosopher for the Champion 1950s New York Yankees once said, "It's Deja Vu all over again. "

Let me read a few lines from Profiting from the Bank and Savings & Loan Crisis. "It's the fire sale of the century! As banks and savings and loans have failed, our government has been left with over $400 Billion (later turned out to be over $500 Billion) assets that it now has to sell. Fast! And with more banks teetering on failure, there's more to come. Cut rate prices have been characterized as more in the realm of a steal than a good buy and a blowout of the bottom of the market.

You want to know why lender's aren't receptive to "short sales" or auction "minimum bids." There seem to be a number of reasons, but more and more smart money analysts are coming to the conclusion the major issue is that lenders believed the government will bail them out. And after the Bear Stearns bailout, the blank check for the Fannie & Freddie overload, and the IndyMac takeover by the Federal Deposit Insurance Company (FDIC), I'm inclined to agree. There are too many harbingers of change, to totally rule it out. The Washington Post editorial page recently referred to Federal Reserve Chairman, Ben Bernanke as "Bail Out Ben." Yet, I don't necessarily believe this is a bad idea for the real estate business. In negotiating with the government's selling arm for the savings and loans fiasco - the Resolution Trust Corporation, both as an agent and investor, I made deals as low as 50 cents-on-the-dollar.

Interestingly, the problem with what we now call the "Morgage Meltdown" has roots in the Savings and Loan Crisis. After the "cirisis property" sale, a financial innovation was created to insulate lenders from sharp interest rate spikes by spreading the risk amoung many investors. Wall Street called it securitization. So to a large degree, the current housing market problems are a product of a change brought about to avoid the problems of the late 1980s savings and loan debacle. These securitized vehicles mixed the good, the bad, and the ugly mortgages and were sold as a low risk product. But by the 4th quarter of 2006 , the so-called "chickens came home to roost" and foreclosure signs started to grow like weeds in a garden. Recently on CNBC, Robert Shiller, co-author of the Case-Shiller housing report, projected a housing downside into 2009-10. The Harvard economist professor who predicted the high tech bubble claimed the worst was far from over in housing. Further, a June report by the Metropolitan Counsel of Governments claimed the Washington region foreclosure rate grew six-fold surpassing most urban areas in the nation. And Mortgage Banker's Association claimed defaults broke all existing records.

The role of Federal Reserve in this crisis is still evolving. The "Fed" regulates the flow of money and interest rates in the marketplace. It determines the discount rate for it's member banks, the federal funds rate the banks charge each other, and the prime rate which is used as a base for consumer borrowers. But there is another power the "Fed" wields in the marketplace which should be of particular attention to anyone interested in "steals and deals" from distressed properties. The Federal Reserve requires that each member bank keep a certain amount of assets on hand as reserve funds. In effect, it limits the amount of money that a member bank can use to make loans. This requirement protects customers and allows the "Fed" to control the flow of cash in the marketplace by defining liquidity.

The current question before the "Fed" is how long a period of time must pass before a securitized, non-producing loan goes from asset to liability and is charged against the reserve requirements? The current question before you is are you ready to move on a "fire sale" market when the government steps in? Do you understand the foreclosure process? Have you analyzed areas and neighborhoods? Is your money in place? Have ytou upgraded your credit scores? Do you have investors waiting in the wings? Can you do your own appraisals? Do you know the secrets of an experienced buyer's agent? Can you determine "True Market Value" in an overpriced marketplace? Do you know how to avoid the most costly mistakes? Can you do a title search? These questions and more are answered in the foreclosure mentoring seminar.

Author: Tony Mizzer has 40 years real estate experience as broker, educator, investor, regulator, writer and foreclosure and real estate investment specialist. he also teaches several investment, foreclosure, tax free exchange courses and others at PDI.