Fort Worth Real Estate Online

A thought came bouncing into my brain this morning... about the "sub-prime" crisis, and all the foreclosures that have followed, and are continuing to follow.  I have thought about this on and off... throughout my entire real estate career.

It all has to do with how the sub-prime loans are put together in the first place.  Many of them are set up for the increased likelyhood of failure... from the "get-go."

Just what is a "sub-prime" loan ?  It is simply a loan that is made to buyers that are not "prime" buyers.  They are buyers with questionable credit scores, or short job history, or buyers with high debt to income rations, or buyers that for some reason or other... are less desirable borrowers... as far as the lenders are concerned.

Lenders lend mony for one reason... To Make Money.  Nothing wrong with that.  Making money is a good thing.  I think everyone who works a job, or invests in something or other... should make money from doing it.

Lenders lend money... mortgages... on the basis of one thing, and one thing ONLY.   That one thing... is "risk."  The lower the risk... the quicker the loan is approved.  The lower the risk... the better the interest rate will be for the borrower.   These borrowers are "prime" borrowers.  Lenders lend to them very quickly... because of the extremely low risk... and because there is a much smaller chance... much smaller... that the mortgage loan in question will ever go into "default."

When a lender considers making a loan to a borrower who is a greater credit risk... of course they hesitate in making the loan.  The RISK is greater, so the possibility of default is greater. 

So... what does the lender do ?  When they see that making a certain loan has a greater risk to it... they look at the risk, and often decide that IF... they can make a higher profit on that loan... by charging a higher interest rate... anywhere from two percent to five percent higher... or even higher than that... sometimes they decide to make the loan.  The higher the return for them on the loan, the greater risk they are likely to take.

Sometimes in addition to charging the "riskier" borrower a higher interest rate, they also charge the borrower "points"... to increase the "yield" of the loan... which, of course, makes making the loan more profitable for them.  A buyer who get this type of loan... has a higher interest rate... which means his payments are higher... which of course makes it more difficult for him to make his mortgage payments.

They lenders figure that the increased risk might be worth it because of the higher rate they make, and the one, two or more points they get at closing... right up front.

Finally... I'm getting to the point of all this !  Whew !  So, from day one, the "high risk buyer" gets a higher interest rate, and sometimes they get charged extremely high loan fees (which depletes their "cash reserves").  Both of these things make it much more difficult for the "high risk" borrower to make their mortgage payments.  It's almost like they are set up for failure... right from the beginning.

A final problem with this type of sub-prime loan... is that the loan... if it is a conventional loan... often does not have an "escrow account."  This means that the taxes and insurance are not collected monthly.  What it also means is that this riskier buyer with depleted cash reserves gets faced with having to come up with a huge chunk of money at the end of each year... to pay their real estate taxes.  Many, many times... this is impossible for them to do.

I do not have any ideas or answers to this. 

Perhaps the lenders may decide not to make these higher-risk "sub prime" loans.  But, when they do that... they cast aside the higher return on those "risky" loans... which in turn lowers their profit.  That... in turn... throws a giant monkey wrench into the wheels of the overall economy. 

What to do, what to do ?  The only way I can see out of this... is for the lenders to make more money on the "prime" loans... to build up their "corporate reserves..." to help them cover their losses when the defaults start happening.  If higher lender reserves were required, fewer lenders would be in such deep trouble.  A mortgage company that goes under... helps no one.

And... ironically... the lenders who set these sub-prime borrowers up for failure... are also setting themselves up for failure by so doing.  Why can't they see how backwards this all is ?

In the mortgage industry... just as in so many other things in life... there must be a "balance."  How to achieve it... seems to be the big "sub-prime" question of the day !

If you have ever heard Dr. Maya Angelou speak in person... you truly know how special she is.  If you believe in Peace... and would like to participate in something positively meaningful that will truly raise your spirits, and lead you to believe that Peace is Possible... then you are In For A Treat !

The World Renowned Poet Dr. Maya Angelou is coming to Dallas, Texas.  On March 1, 2008, Dr. Angelou will be appearing as the Keynote Speaker at the Voices of Hope presentation at the Meyerson Symphony Center ... on the Fifth Anniversary of the Invasion of Iraq.

Joining Dr Angelou at the Meyerson Symphony Center will be the Voices of Peace Chorus, with Timothy Seelig, Conductor.  The Voices of Peace Chorale includes members of the Turtle Creek Chorale, the Women's Chorus of Dallas, One Achord, MosaicSong, and the Cathedral of Hope Sanctuary Choir.

Also appearing and performing at the Voices of Peace presentation are the New Texas Symphony Orchestra with Kathryn Brown, Conductor; and the Male Chorus of the First Baptist Church, Hamilton Park, with John Tatum, Conductor.  Tickets are available at www.H4PJ.org .

This joyous celebration of peace is being presented by the organization Hope For Peace & Justice, Michael Piazza, President.  Addtional information is also available at the website www.h4pj.org .  From hearing many of these performers in the past, and from both reading the works of Dr. Maya Angelou, and actually seeing and hearing her speak, this event... the Voices of Peace... will truly bring Hope to all who attend.

Today's Fort Worth Star Telegram carried a story that very much goes against all the doom and gloom we too often see both in print, and on the "downer" networks of Fox Noise, MSNCB, CNN and CNBC.

The article shared the news of the recent opening of a commercial real estate brokerage office on the second floor of the office building called "The Tower" in downtown Fort Worth.  The very fact that these folks have the nerve... the sheer gumption... to open a new commercial real estate office downtown is awesome news !

Drew Kile, speaking of the new office, exclaimed that "There's no doubt that Tarrant County and Fort Worth, in every headline and statistic you see, is one of the strongest markets, really, anywhere in the country."

Tarrant County, home of Fort Worth, has a multitude of weapons to fight off the fears of recession that have spooked much of the remainder of the country.  The Fort Worth economy is quite diverse... with the military-jet production at Lockheed Martin, the busy shipping and transportation provided by both Burlington Northern Sante Fe and Union Pacific... both of which operate out of Fort Worth.

There is currently much construction under way in Fort Worth... in both commercial and large convention-center hotels.  This, coupled with the one of the regions most powerful economy drivers... the Barnett Shale Natrual Gas find that spreads beneath Metropolitan Fort Worth... providing royalty and bonus checks for many throughout the county... brings great news to formerly nervous folks.   And TCU... Texas Christian University in Fort Worth... has expansion underway, too !

Compared with the rest of the U.S., North Texas income growth is stronger, the jobless rate is lower, and hotel revenue is better.  And through all of this, commercial construction remains strong.

And, Fort Worth is not alone.  Currently every other major metro area in Texas is performing above most of the rest of the metro areas throughout the country.

With Fort Worth being on I-35... coupled with Burlington Northern Sante Fe, Union Pacific, and the Alliance Corridor with Alliance Airport (primarily shipping) and the Texas Motor Speedway continuing to fuel growth, many are finally starting to echo what Fort Worthians have known all along... Fort Worth Rocks !

On Sunday afternoon, February 17, the Lady Frogs of TCU in Fort Worth met with the Lobos of New Mexico at the Daniel Meyer Coluseum, shown below.  It was an extremely hard-fought game... with both teams going all-out !  This was the third from the last home game for our Lady Frogs, and they knew they were in for a battle from the start !

The Lady Frogs of TCU had a sluggish start.  Going scoreless in the first nearly eight minutes, our killer Lady Frogs fell behind 11-0... and remained behind throughout the first half.  But... our Fearless Lady Frogs showed what they were made of, and clamped down hard on defense... as shown below.  Adrianne Ross, who made her 100th career start for TCU, scored eight points, and had four assists, which tied for the team lead.

TCU regrouped well enough to end the first half only down by six points... 24 - 18.  Over an eight minute span covering the end of the first half and the start of the second, Our Lady Frogs went on a 19-0 run.  They scored seven straight points to end the half, and opened the second half with a 12-0 run.  When the second half started, everyone was wondering what would happen.  But... the Lady Frogs came out on fire... playing like women possessed !

Playing almost the entire game, Helena Sverrisdottir piled up a total of 24 points in the 38 minutes she played.  Lorie Butler-Rayford pulled out an incredible double-double with 12 points and 11 hard-fought rebounds.  Without Lorie's efforts, our Lady Frogs would have been in deep trouble. 

The Lady Frogs took the lead near the end of regulation, but New Mexico came back hard, and the second half ended with the score tied at 46-46 apiece.  This was to be the Lady Frogs first overtime game of the season, and the crowd at Daniel Meyer Colusium knew it would not be easy... both teams had played their hearts out !

In overtime our Lady Frogs came out "pumped."  They had five minutes of overtime to play, and knew if they were going to win... now was the time.  Lorie Butler-Rayford helped send the game into overtime by scoring the final points in regulation.  Lorie scored six points in the overtime frame, also pulled down three rebounds in OT, two of them extremely important offensie boards.

TCU went on to outscore New Mexico 13-5 in the overtime period, and won going away... 59-51.  Helena  Sverrisdottir, who scored 24 points on 10 of 15 shooting, was named Star of the Game, and was interviewed by MTN... Mountain Television Network, which fed the broadcast back to New Mexico's home town fans. 

This evening I read another one of those panic articles on real estate.  The headline of course blared on and on about home prices dropping "all across the United States."

The article was from the Reuters News Wire.  It even had a nice pretty map along with the article.

As I read the cities from the nice, pretty map... I saw Los Angeles with a decline of 11.9 %, San Diego with a 13.4 % decline, Las Vegas with a 13.2 % decline, San Francisco with an 8.6 % decline, Denver with a 3.1 % decline, Chicago with a 3.9 % decline, New York declined 4.8 %, Boston declined 3.0 %, and Miami declined 15.1 %.

That was it.  That was what Reuters was blowing their trumpet about.  Texas was untouched.  No declines, no bad news, no weeping and gnashing of teeth, no end-of-the-world.

So why then... are so many buyers afraid of the market ?

It's that doggone broad paint brush that the national media paints this negativity with.   Maybe more like a paint roller.  Nah... it's really more like they are using a power paint sprayer.

Why wasn't there any news about the markets across the country that are HOT ?  I guess HOT markets are bad for TV ratings.  Perhaps HOT market news is bad for selling newspapers ?

Well... all you folks at MSNBC, you guys at FOX, you clowns at CNN, you know-it-alls at CNBC.  Texas is FINE !  Texas is ALIVE !  And... Texas is KICKING !

Please... all you national media types.  Take your silly negative news paint brush and go somewhere else and play !

Every once in awhile I wonder.  What would life be like if I could be a little girl again ?  Would the world be peaceful ?  Would life be closer to "normal"... whatever that means ?

Everyone has fantasies.  Everyone occasionally dreams of escaping, of doing something to some way create a world of peace, of carefree times, or perhaps of days gone by.

So... I ask this question.  If you had the power to go back in time... in some cases wayyyy back in time, and be a little girl again... Would You ?

What would your life be like ?  Would you simply re-visit your little girl-hood the way it was when you originally lived it ?  Or... would you re-create your little girl-hood into a girlhood you would choose for your self... making some changes... making it a "brand new" little girl-hood ? 

Talk to me... tell me your story.  Make it as short or as long as you wish.  If YOU could be a LITTLE GIRL again... either the little girl you were... or the little girl you'd now create... just for a month... would you ?

Having a Buyer who is both Ready to buy the home you have found for them, and Willing to write up an offer to purchase that home... these are good things !

But in order to make the whole thing work... three things must be in place. 

First... you must have a buyer, or pair of buyers who have good credit.  These days... having good credit scores is more important than ever.

Second... you must have a buyer, or buyers, who have sufficient credit to support the mortgage payment.  This is also a good thing !

But... Third... your buyer must have sufficient up-front cash to close... enough cash to bring to the closing table to cover their down payment (if any), their closing costs, and their prepaid items.  This can often be a problem... especially for first-time buyers.

If numbers One and Two are there... decent credit, and sufficcient income... but the buyer cannot perform because of insufficient cash... then having the seller pay some, or perhaps all of the buyers closing costs and prepaids can turn a non buyer into an able buyer.

Many times when making an offer for my buyers... I have as part of the contract that the seller pay most of, or even all of (if the type mortgage allows that degree of "seller contributions") my buyer's prepaids and closing costs... I get read the riot act from the listing Realtor. 

It goes something like:  "I presented your offer to my seller, and they absolutely REFUSE to pay your buyer's closng costs.  They feel it is not their responsibility to pay any of the buyer's costs.  They said they had to pay their own costs when they bought, and that their buyers need to do the same."

Whew... nothing quite like a good "chewing out !" 

There is nothing wrong whatsoever for a buyer... instead of making an offer that asks the seller to drop their price... to ask the seller to pay all of their closing costs... to make the sale work.

Buttom line... paying buyer's costs takes a willing buyer and makes them able to buy.  Having a seller pay the buyer's closing costs and prepaids is something I always suggest to my sellers when I make my presentation to them on a listing.  It usually works.

What do you think ?  Would you recommend that your seller pay most of all of the buyer's closing costs to make the sale work ?

There have been times when I have gone on a listing, and while chatting with the sellers about the in's and out's of marketing their home, sometimes they get around to telling me that they recently refinanced.

My first reaction is usually to "cringe!" 

Now why would I do that ?  Well... most of the time they tell me that they were able to lower their payment by several hundred dollars because of the refinance.  It is then that I ask them the question that usually tells the tale...

Gee, Mr and Mrs Seller... what was your loan amount before you refinance ?  Oh... $235,000.  Ok... and did you have to pay any "closing costs" when you refinanced ?" 

Oh no... we refinanced with "no cash out of pocket."  Our loan officer told us we could roll the closing costs into the mortgage... so "it didn't cost us a thing !"

My next question is always... "So, how much were the closing costs ?  How much did you 'roll in' to the new loan ?

"Well... the closing costs came to about three percent of the loan amount, and then we paid two more 'points' to get an even lower rate.  So... our total closing costs were about $13,000.  But, that was ok... we rolled it into the new loan.

Of course, I asked them what the new loan amount was.  They said... oh...  it comes to $248,000 all together, but our monthly payment is still over $200 a month lower than it was before.

It was my hurtful task to gently tell them that they just pretty much wasted that Thirteen Thousand Dollars.

First of all... I never recommend refinancing unless the "spread" between the previous rate, and the new rate is more than 2 percent.  This way, instead of rolling in the closing costs, the lender can "buy up" the rate rather than "buy it down".  Doing that creates a "credit" which can usually pay for most of, if not all of the closing costs for the new loan.

Recapping... here are the two choices... 1)  Roll in closing costs and extra points so that the rate is the lowest and the out-of pocket is zero... or 2)  pay no points, and perhaps "buy up" the rate by a 1/4 to 1/2 %... which creates a credit which takes care of the closing costs.  The second way leaves the seller with exactly the same mortgage amount as before, and also with a lower monthly payment... just not quite as low as with the first method.

In doing that... if things change, and the owner suddenly has a need to sell... he or she has not painted themselves into a "money corner" they cannot get out of.

As is usually the case... the best thing for the seller to do when contemplating refinancing depends on their individual situation.  Sometimes it makes sense to roll in costs and points, but most of the time it's not the best alternative.