Mortgage Meltdown Has Banks and One Major Home Builder Looking For Answers
Lehman Brothers just posted their first quarterly loss since going public in 1994. The have raised 6 billion in new capital since February 2008, however analysts state that they have a massive portfolio of illiquid assets, like many of these institutional banks. i.e, Countrywide. State Street, another huge bank, just sold 2.5 billion in stock, cushioning against the loss of write downs, which has a negative effect on the value of their shares with their shareholders.
Conversely, one of the nations largest homebuilders of luxury homes, Toll Brothers, is seeking another form of recourse. HELP! They are calling on Congress to jump start the economy by inducing homebuyers to get off the sidelines, and buy homes. They want governmental aid with helping their business. They are losing millions and already posted their second quarterly loss. They have 174.6 million in write downs this year, with revenues down 30%. Most of this is due to cancellations of contracts, as homeowners are opting for less expensive homes during this economic downturn.
It is no question that everyone is feeling the pinch right now. With all the doom and gloom in this market, there is opportunity. The old adage, “when there is blood on the street, someone is making money”, holds very true. Foreclosures are at record highs, as investors are picking up deeply discounted real estate, and moving into these homes as their primary residences. Getting qualified for a mortgage is a lot more stringent in this market, however if the loan makes sense, underwriters will approve your loan.
In closing, everything is cyclical, and we are going through a very nasty downturn, however the buying season is in full force, so hopefully these banks can start recouping some of there losses in Q3 and Q4 of 2008. Highly unlikely, however it sets up a more promising 2009 and 2010.
Brian Quigley is owner of Fusion Financial Mortgage in Denver, CO and is a full service mortgage broker in Colorado. You can learn more about Brian and Fusion Financial at http://www.fusionfinancial.org
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