Wednesday, December 10, 2008

Hi Everyone:

Why is it in a crisis, everyone seems to forget the rule "Buy low, sell high?" Well, maybe it's because we've watched too much "Deal or No Deal" and keep thinking there's more, more more. I was discussing the historically low interest rates (in the low 5's for FHA - unheard of!) with my good friend Vince Ventura at Evergreen Mortgage. He shared an article with me that came from one of their Senior Loan Consultants. I hope it helps you understand why continuing to say "No Deal" to this market and these interest rates might be a huge mistake!

As always, feel free to call us with any of your questions concerning real estate. We can be reached at 503-371-5209 during business hours.


From: Vince Ventura, Branch Manager
Evergreen Home Loans
3400 State Street, Suite G-780
Salem, Oregon 97301
(503) 588-2667 tel
(503) 588-2236 fax
(503) 932-4621 cell
(888) 821-9251 toll free

From: Donald Burton Sent: Wednesday, December 10, 2008 11:43 AMTo: AllEMMCSubject: I'm waiting for my 4.5% mortgage the government promised....

Ginny Lee in our Seattle office forwarded me this article. Greed was a factor in the real estate meltdown. No one was immune. Now it seems that greed again, is playing a role as would-be homebuyers and refinancers are waiting for their gift from the government of a 4.5% mortgage. It's possible but they could be waiting a long time.....

4.5% Rates Possible?The news is abuzz about the Treasury lowering home loan rates to 4.5% to stem the foreclosure crisis but details have been lacking. The Treasury Department stated it is looking for additional ways to help the struggling housing industry and believes lower rates are needed.
This idea is similar to the November 26th announcement from the Federal Reserve where they indicated the intent to purchase up to $500 billion in mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae. In addition they would buy another $100 billion in direct debt issued by those firms. The November news caused bond prices to spike higher and forced mortgage rates lower. Just like any commodity, whenever tremendous buying interest exists, prices rise. Mortgage rates fell almost 1/2% in rate following the announcement. However, the following week market forces continued and rates spiked a bit higher from the recent lows.
It is important to remember that there are no details to the Treasury plan as of yet. The Federal Government does not directly dictate home loan rates. Rates are determined by price movements of Mortgage Backed Securities (MBS), which compete for investor funds in the open market. The Treasury can buy mortgage bonds on the open market but remember that they are not the only entity buying and selling these instruments.
The Treasury is in a very tough position in trying to manipulate home loan rates. Creating a new Federal mortgage program could be very risky. How would rates be set, who would qualify, and can the funds be used for purchases and refinances are just some of the questions being asked. The other critical concern is implementing such a program without destroying the current mortgage securities market. Doing so could have the unintended consequence of causing additional economic turmoil.
Rates are not going to 4.5% with the wave of a wand by Hank Paulson or Ben Bernanke. As a matter of fact, the massive borrowing to fund the TARP program has a negative effect on rates. At this time, the announcement still leaves a lot of uncertainty. What we do know is that rates are at historic lows and house prices have moderated setting up a great scenario for people who need to refinance or are looking to buy a home. Waiting for rates to fall to 4.5% may leave people sorely disa

Ginny Lee
Senior Loan Consultant
Evergreen Home Loans

Monday, December 8, 2008

Hi Everyone,

If you're like me, you're REALLY busy getting ready for the Christmas holiday. This year has been interesting, to say the least. This is the first Christmas my husband Greg and I have had an "Empty Nest." I never realized how much scurrying around I did so the kids would have that magical Christmas! This year, though, we've decided to merge the old traditions with some new ones. And it's been an exciting adventure.

One thing that never changes, though, is the reality of the real estate market. I recently came across an article at that does the best job I've seen, of explaining pricing strategy.

I'd encourage you to read it in it's entirety. It explains why the worst news from your Realtor might be the very best news you could receive.

I can tell you this is the approach we're taking with our sellers. And what are they seeing in terms of results; selling in 2/3's the time the average Realtor takes, for 9% higher average sales price. That's a strategy worth talking about!

If you have any questions about what you're reading, please don't hesitate to call my office at 503-371-5209.

Have a merry holiday season.


Monday, December 1, 2008

Hi Friends,
Well as you might imagine, anyone in the real estate industry, who plans to survive this market correction, is staying very very focused right now....and I'm no exception!

In spite of that, I found this opinion from the New York Times, and felt it was important for all of you to be alerted. Please feel free to call us any time you need a referral to a reputable mortgage broker, we'd be happy to assist.

Happy Holidays!

OPINION November 24, 2008 Predatory brokers have returned, but this time as loan-modification companies, offering to work deals — for cash up front.

Tuesday, October 14, 2008

What Really Happened to the Real Estate Bubble...

"How AIG's Collapse Began a Global Run on the Banks
By Porter Stansberry October 4, 2008

Something very strange is happening in the financial markets. And I can show you what it is and what it means...

If September didn't give you enough to worry about, consider what will happen to real estate prices as unemployment grows steadily over the next several months. As bad as things are now, they'll get much worse.

They'll get worse for the obvious reason: because more people will default on their mortgages. But they'll also remain depressed for far longer than anyone expects, for a reason most people will never understand.

What follows is one of the real secrets to September's stock market collapse. Once you understand what really happened last month, the events to come will be much clearer to you...

Every great bull market has similar characteristics. The speculation must – at the beginning – start with a reasonably good idea. Using long-term mortgages to pay for homes is a good idea, with a few important caveats.

Some of these limitations are obvious to any intelligent observer... like the need for a substantial down payment, the verification of income, an independent appraisal, etc. But human nature dictates that, given enough time and the right incentives, any endeavor will be corrupted. This is one of the two critical elements of a bubble. What was once a good idea becomes a farce. You already know all the stories of how this happened in the housing market, where loans were eventually given without fixed rates, without income verification, without down payments, and without legitimate appraisals.

As bad as these practices were, they would not have created a global financial panic without the second, more critical element. For things to get really out of control, the farce must evolve further... into fraud.

And this is where AIG comes into the story.

Around the world, banks must comply with what are known as Basel II regulations. These regulations determine how much capital a bank must maintain in reserve. The rules are based on the quality of the bank's loan book. The riskier the loans a bank owns, the more capital it must keep in reserve. Bank managers naturally seek to employ as much leverage as they can, especially when interest rates are low, to maximize profits. AIG appeared to offer banks a way to get around the Basel rules, via unregulated insurance contracts, known as credit default swaps.

Here's how it worked: Say you're a major European bank... You have a surplus of deposits, because in Europe people actually still bother to save money. You're looking for something to maximize the spread between what you must pay for deposits and what you're able to earn lending. You want it to be safe and reliable, but also pay the highest possible annual interest. You know you could buy a portfolio of high-yielding subprime mortgages. But doing so will limit the amount of leverage you can employ, which will limit returns.

So rather than rule out having any high-yielding securities in your portfolio, you simply call up the friendly AIG broker you met at a conference in London last year.

"What would it cost me to insure this subprime security?" you inquire. The broker, who is selling a five-year policy (but who will be paid a bonus annually), says, "Not too much." After all, the historical loss rates on American mortgages is close to zilch.

Using incredibly sophisticated computer models, he agrees to guarantee the subprime security you're buying against default for five years for say, 2% of face value.

Although AIG's credit default swaps were really insurance contracts, they weren't regulated. That meant AIG didn't have to put up any capital as collateral on its swaps, as long as it maintained a triple-A credit rating. There was no real capital cost to selling these swaps; there was no limit. And thanks to what's called "mark-to-market" accounting, AIG could book the profit from a five-year credit default swap as soon as the contract was sold, based on the expected default rate.

Whatever the computer said AIG was likely to make on the deal, the accountants would write down as actual profit. The broker who sold the swap would be paid a bonus at the end of the first year – long before the actual profit on the contract was made.

With this structure in place, the European bank was able to assure its regulators it was holding only triple-A credits, instead of a bunch of subprime "toxic waste." The bank could leverage itself to the full extent allowable under Basel II. AIG could book hundreds of millions in "profit" each year, without having to pony up billions in collateral.

It was a fraud. AIG never any capital to back up the insurance it sold. And the profits it booked never materialized. The default rate on mortgage securities underwritten in 2005, 2006, and 2007 turned out to be multiples higher than expected. And they continue to increase. In some cases, the securities the banks claimed were triple A have ended up being worth less than $0.15 on the dollar.

Even so, it all worked for years. Banks leveraged deposits to the hilt. Wall Street packaged and sold dumb mortgages as securities. And AIG sold credit default swaps without bothering to collateralize the risk. An enormous amount of capital was created out of thin air and tossed into global real estate markets.

On September 15, all of the major credit-rating agencies downgraded AIG – the world's largest insurance company. At issue were the soaring losses in its credit default swaps. The first big writeoff came in the fourth quarter of 2007, when AIG reported an $11 billion charge. It was able to raise capital once, to repair the damage. But the losses kept growing. The moment the downgrade came, AIG was forced to come up with tens of billions of additional collateral, immediately. This was on top of the billions it owed to its trading partners. It didn't have the money. The world's largest insurance company was bankrupt.

The dominoes fell over immediately. Lehman Brothers failed on the same day. Merrill was sold to Bank of America. The Fed stepped in and agreed to lend AIG $85 billion to facilitate an orderly sell off of its assets in exchange for essentially all the company's equity.

Most people never understood how AIG was the linchpin to the entire system. And there's one more secret yet to come out...

AIG's largest trading partner wasn't a nameless European bank. It was Goldman Sachs.

I'd wondered for years how Goldman avoided the kind of huge mortgage-related writedowns that plagued all the other investment banks. And now we know: Goldman hedged its exposure via credit default swaps with AIG. Sources inside Goldman say the company's exposure to AIG exceeded $20 billion, meaning the moment AIG was downgraded, Goldman had to begin marking down the value of its assets. And the moment AIG went bankrupt, Goldman lost $20 billion. Goldman immediately sought out Warren Buffett to raise $5 billion of additional capital, which also helped it raise another $5 billion via a public offering.

The collapse of the credit default swap market also meant the investment banks – all of them – had no way to borrow money, because no one would insure their obligations.

To fund their daily operations, they've become totally reliant on the Federal Reserve, which has allowed them to formally become commercial banks. To date, banks, insurance firms, and investment banks have borrowed $348 billion from the Federal Reserve – nearly all of this lending took place following AIG's failure. Things are so bad at the investment banks, the Fed had to change the rules to allow Merrill, Morgan Stanley, and Goldman the ability to use equities as collateral for these loans, an unprecedented step.

The mainstream press hasn't reported this either: A provision in the $700 billion bailout bill permits the Fed to pay interest on the collateral it's holding, which is simply a way to funnel taxpayer dollars directly into the investment banks.

Why do you need to know all of these details? First, you must understand that without the government's actions, the collapse of AIG could have caused every major bank in the world to fail.

Second, without the credit default swap market, there's no way banks can report the true state of their assets – they'd all be in default of Basel II. That's why the government will push through a measure that requires the suspension of mark-to-market accounting. Essentially, banks will be allowed to pretend they have far higher-quality loans than they actually do. AIG can't cover for them anymore.

And third, and most importantly, without the huge fraud perpetrated by AIG, the mortgage bubble could have never grown as large as it did. Yes, other factors contributed, like the role of Fannie and Freddie in particular. But the key to enabling the huge global growth in credit during the last decade can be tied directly to AIG's sale of credit default swaps without collateral. That was the barn door. And it was left open for nearly a decade.

There's no way to replace this massive credit-building machine, which makes me very skeptical of the government's bailout plan. Quite simply, we can't replace the credit that existed in the world before September 15 because it didn't deserve to be there in the first place. While the government can, and certainly will, paper over the gaping holes left by this enormous credit collapse, it can't actually replace the trust and credit that existed... because it was a fraud.

And that leads me to believe the coming economic contraction will be longer and deeper than most people understand.

You might find this strange... but this is great news for those who understand what's going on. Knowing why the economy is shrinking and knowing it's not going to rebound quickly gives you a huge advantage over most investors, who don't understand what's happening and can't plan to take advantage of it.

Good investing,Porter Stansberry"

It's important to have all the information about the crazy situation that our money markets are in at the moment, so you can make the best decision possible for your family.

Best Wishes,

Thursday, July 10, 2008

Grab Your Nine Iron & Pitching Wedge!

Every summer golfers from the Salem-Keizer area band together for an afternoon of sun, fun, and most of all - golf! Keizer Young Life sponsors a shot-gun 9 hole golf tournament each year as an opportunity to raise support for the organization. Money that is raised goes directly to helping kids within the community go to summer camp at Young Life's Wildhorse Canyon in Central Oregon.

This isn't just any tournament! Golfers of all ages enjoy a BBQ dinner, KP & Long drive competitions, as well as a shot at the top team chance to putt for the Keizer Young Life famed plaid jacket - a Keizer Young Life Golf Tournament tradition.

This year's golf tournament will be held August 25th at McNary Golf Course. Registration begins at 3:30pm, with a shot-gun start at 4:30pm. A foursome for this event will only cost $150. Not really a golfer? No worries - you can participate in this event as well through sponsoring a hole for the tournament. Each hole sponsor will have a sign rider noting either you personally or your business for golfers to see as they approach each hole. Hole sponsorship costs $100.

No matter what - you're guaranteed to "Have Fun While Helping Keizer Kids!" If you're interested in registering for the golf tournament - or in sponsoring a hole, please visit the Keizer Young Life webpage: for a registration form.

Thanks in advance for being a part of an organization that is near and dear to my heart!

Monday, July 7, 2008


Well - it's been far too long since I last posted here. As with everyone, June brought a round of graduation parties, vacations and much needed sunshine.

Let me say, in the McLeod house, we're celebrating my daughter Anna's graduation from Portland State University....IN 4 YEARS! It's quite an accomplishment. When asked how I felt about this occasion, my answer was simple, "Like I've crossed the finish line!"

As a reward for her fine work, her Dad and I had the treat of taking her to Maui for a week (there's the sunshine). We thoroughly enjoyed our time together and I was even able to take a peak at a few real estate magazines. If you think things are expensive here, you oughta check out Maui! The average sales price is right around $469,000....and that's not beachfront!

At home, here's what we're seeing in the real estate market. FHA is currently our Knight in Shining Armour. With 3% down and lower credit scores allowed, this is the loan most of our buyers are using right now. For more information, give me a call for a referral to several quality Loan Officers in our area.

In the meantime, adopt my motto: "What doesn't kill ya, makes ya stronger." ARGGHHHH!

Wednesday, June 11, 2008


The second Wednesday of every month is the ever entertaining gathering of the Keizer Chamber of Commerce. The food is good, the fellowship is fun and the speakers are usually informative. Today was no exception. But one of my favorite activities is the opportunity to meet fellow business owners.

Today I had the privilege of sitting next to Susan Parker, the owner/operator of THE SOUP SHACK. She's developed some amazing gourmet soups. The soups are packaged, frozen and delivered directly to the customer.

When she said "delivery," my ears perked up. I heard from all around me how wonderful her soups are - so I thought I'd share her business with you, via her website. You'll find Susan at

Enjoy - and let me hear about your experiences with her product. I'm going for the Potatoe with Cheese & Ham!

Ciao for now.

Tuesday, June 10, 2008


Well I'm just getting started with this new fangled blogging technology! And I am about as excited as I could be!

I'm looking forward to sharing my thoughts and knowledge with you around the local Real Estate market, community events, recognized businesses, and many other interesting aspects of living in Salem-Keizer!

Here we go!