09.26.08
WAMU fails, sold off to JP Morgan
Ah, nothing like sitting down with a cup of tea and reading the morning news. And if you follow the financial sector, it continues to be bad news after bad news after bad. This morning’s shocker was the spectacular failure of WAMU. I just recently wrote about WAMU a few weeks ago. They offered me a loan modification that I gratefully took. Maybe it was a desperate move on their part (although I still think it worked out well for them).
This opens up some speculation. Since I’m not in a strong position to weather this crisis forever, could my lenders become more pliable in the future? Maybe I should monitor their health and swoop in in their waning days and offer to keep paying the loan, on my terms. With the way things are going, with so many walking away from their houses, people who are actually paying their mortgages could have negotiating power. Now or in the future.
09.24.08
Where you live might affect your personality
Check out this recent study that identifies different regional personalities for the various United States. It says that while Californian rank high in openness they are not very extraverted. After living here for a while I agree with this. Californians tend to want to know that you have something in common before becoming friendly. Compare this with other states.
09.14.08
Changes in the mortgage market
The mortgage market, particularly with the take over of Fannie Mae and Freddie Mac by the US government, continues to be in flux. If you own more than 4 properties or want to do a cash out refi: watch this mortgage market update.
Disclaimer: I am not recommending this business. However I have talked to Todd and in my opinion he is knowledgeable.
09.13.08
Hurricane Ike and Property Management
As a remote real estate investor, I am reliant on my local team to help me with the management of my properties. With Hurricane Ike threatening the Texas Gulf Coast, I called early Wednesday to ask the property management firm to board up the property. I was particularly concerned about a row of windows set into the roof that faced east, as they had leaked in the past and were the most vulnerable part of the house.
Not only did was the answer, “we don’t do that“, but they couldn’t even recommend someone for me to call. The insurance agent, also local to the area, was also quite worthless, they couldn’t help me out either. Pointing out that it was in their best interest to help me protect the house got me nowhere.
I then called my tenant. She had also called property manangement and asked for help boarding up the house and gotten a similar unhelpful response. There was boards for the lower windows and she had taken care of those, but we were missing the boards for the clearstory and she did not have a truck to get the boards or a ladder to access the roof. She also had had recent surgery and wasn’t up to climbing up on the roof, and quite frankly I didn’t want her to. It was a job for a professional. We both agreed that the property management firm wasn’t living up to the spirit of what they were supposed to do.
It took me close to 48 stressful hours to get the problem resolved, only 8-10 hours prior to Ike’s arrival. The water had already started rising due to the storm surge and flooding some areas. Luckily my mother lives in the area and could pay the service provider .. as he wasn’t taking credit cards. Do you agree with my tenant and I that property management is supposed to take care of these sorts of issues? At the very least, you would think that a local business would have a list of contractors and handyman services I could call.
09.07.08
Smart loan modification strategy from WAMU
I had an 5 year ARM on a duplex whose fixed interest rate was about to expire. As I previously written it was a dilemma. Refinance and increase my already negative cash flow by hundreds of dollars. There are no investor loans out there for 5.6% (my current rate). Or try to sell in a down market. Since my real estate broker said there was investor activity, I listed. However my listing hit the market literally hours before the Humboldt fire which almost wiped out the town of Paradise. A last minute wind shift spared most of Paradise but the fledging real estate activity was snuffed out.
So I then spent some time reading through the note trying to understand what would happen in a few months. It was confusing so I called my lender, WAMU, they had been sending me letters about the reset anyway.
The bad news? Once the ARM expired, the interest rate would be recalculated every month. If it had been once a year, I could have taken my chances and re-evaluated the situation next year as the margin would have kept the rate around 6%. Although interest rates are not moving up very quickly right now, in time, inflation will push them up, so a significant risk.
The good news? They offered me a loan modification. And get this, I did not have to qualify for it. The deal was a 7% 5 year fixed rate with interest only payments. Since my current 5.6% loan was fully amortized, my payments would actually go down by $50. I took the deal.
Is a good deal? Well it’s really not a great deal. I would stop making progress at paying down the principal. And I would be paying quite a bit more in interest. So the numbers are not great. However for my current situation, it was a good enough deal. Here’s why:
I didn’t have to qualify. While my FICO is good, my debt to income ratio is not the best and I have more than four properties. Some of you might not know this, but borrowers with more than four properties are having problems getting any loans at all. I recently talked to a big time investor that has hundreds of properties. His financials are pretty good, but no one will give him a loan, he has to pay cash.
5 years of breathing room. The property is essentially break even, and with this deal it will stay break even. The extra $50 a month cashflow will cover the loan modification fee in a year.
I keep the HELOC that sits behind this loan. I have a second lien on this property that is a HELOC, there is a balance that would need to be paid off with any refinance or sale. The property isn’t underwater but in this market paying off the first and second liens when selling would leave very little profit likely to be eaten up by the transaction fees. Also keeping the HELOC is a nice bonus as it is a possible emergency cash source for me. It helps me sleep a bit better at night.
Since WAMU is making better money on the increased interest rate, it’s a good deal for them. And by offering this deal they prevent a possible foreclosure and have a performing loan on their books. I believe WAMU is yet another lender that has been slammed by foreclosures and the subprime debacle. So it’s a win win for every one. I wonder how many banks are adopting this strategy.
09.02.08
Eviction process in Florida – the 3 day notice
I been struggling to think of some witty post for this blog. To post some upbeat story that gives a glimmer of hope for this awful market which threatens to stretch on for years and bankrupt a lot of people. Then it hit me, I’ve got tons of material to write about. Just none of it is very fun.
I really hate it when people don’t return phone calls. When a rent check doesn’t show up in the mail, I call. And I get really irritated when I have to call again and again, leaving voicemail that is never returned.
Ok, so what to do? Well the next step is to figure out how to evict a tenant that doesn’t pay rent and doesn’t return phone calls seeking an explanation. With the internet, it was really pretty easy to find out. In Florida, before you can begin an eviction you have to serve a 3 day notice to pay up or to cede possession of the property. There are numerous downloadable pdfs on the web you can use. I used this one from a CSEU course.
Pay attention to the fine print, it’s only 3 days if you hand deliver the notice and the tenant can pay the rent at a physical address. The 3 day notice starts when the notice reaches the tenant, and you may need to allow for snail mail time for the rent to reach you. And you can not count weekend days and holidays. So in the end the time period ended up being 2 1/2 weeks. If you mail the notice you need to use certified mail w/ return receipt requested. Make sure to make three copies of the notice for use in the next step (the actual start of the eviction) if the 3 day notice expires without payment or possession delivered to you. You might want to read this article about how you can get tripped up by the details by a tenant lawyer.
Before the notice period was up, I received the rent in the mail along with an explanation. I am sympathetic to my tenants plight as one of them is really sick, but my mortgage company is not sympathetic at all.
