Dia Sies.
More interesting topics were discussed in class today.
There are non-judicial foreclosures in Texas.
A hearing by a judge is not necessary to proceed with the foreclosure process in Texas.
Deed of Trust- effectively officiates in case a tenant stops making payments.
Workouts- the Lender decides to work out a deal with a troubled tenant’s ability to service debt.
The lender may lower payments and push back the principal payments.
The lender may also get shared appreciation for a property if it is sold.
New foreclosure notices need to drop, not just stay at around at their near-record highs. Banks do not want to be homeowners, and they do not want spend cash for repair and maintenance services. Banks hold on to foreclosure inventory, but in a few cities, they're getting a big incentive to let it go. According to an article discussed in class, L.A. last week passed a new city ordinance that fines banks, servicers, whoever owns the foreclosed property, up to $100,000 for letting the property fall into disrepair. There are many run-down, stripped homes with overgrown lawns that are examples of what is not recovering in the housing market. .
"There is a commercial real estate crisis on the horizon, and there are no easy solutions to the risks commercial real estate may pose to the financial system and the public," says a report issued by the Congressional Oversight Panel.
But in a sign of the government's unpreparedness, Warren notes that last year's stress tests were overly limited. The largest loan losses are projected for 2011 and beyond, but the stress tests conducted on big Wall Street banks last year examined their stability only through 2010."
Some banks have a special technique for dealing with business borrowers who can't repay loans coming due. The banks give them more time, hoping things improve and they can repay later. Banks believe this is a wise strategy, but we have learned in class this is simply called "extend and pretend." Banks are simply prolonging the inevitable by doing this.
The following example was discussed. In Atlanta, Georgian Bank lent $13.5 million to a company in late 2007, some of it to buy land for a 53-story luxury Mandarin Oriental hotel and condo development. The loan came due in November 2008, but the bank extended its maturity date by a year. The bank extended it again to May 2010, with an option for a further extension to November 2010, according to court documents.
Atlanta has more loans in special servicing than any other city and it is yet another sign the region is a poster child for risky real estate deals. The No. 1 issue is that values have fallen as vacancy has risen. The average loan to value was up to 80 percent. When many owners didn’t put a lot of equity into their deals, there wasn’t much of a margin for error. Many borrowers will be unable to get refinancing without injecting a large amount of equity. And, many are going to be unwilling to infuse equity into a loan that is already under water.
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