LuxuryBlurb
Posts Tagged ‘mortgage’
Monday, December 3rd, 2012
 Posted by Leonard Steinberg on December 3rd, 2012
A recent survey shows that one in three US consumers would consider a mortgage by retail giant WALMART. The study shows consumers are willing to try alternative lenders as borrowers focus on price, customer service and trust in their provider when selecting a mortgage, said Doug Hautop, lending practice lead at the Carlisle & Gallagher Consulting Group, which conducted the survey.
If WALMART were to get into the mortgage game, they could pose a significant threat to the banking industry. The four leading Walton heirs are personally worth over $ 107 billion combined, significantly more than Bill Gates or Carlos Slim, the most talked-about billionaires. WALMART operates 10,524 stores throughout the world and has annual sales in excess of $ 440 billion…..about as large as the total GDP of Saudi Arabia, Argentina, Sweden or Austria.
Would WALMART finance high priced properties like those found in New York City? It seems doubtful, yet who would have thought 5 years ago that Walmart would have an organic produce section to rival those found at some Whole Foods stores?
Thursday, October 11th, 2012
 Posted by Leonard Steinberg on October 11th, 2012
The Douglas Elliman RENTAL REPORT just came out and Manhattan rents soared 10.2 percent in the past year as tenants scrambled for new apartments in the tightest, fastest-moving market in years, new figures show. The median rent hit $3,195 a month — and $3,500 with a doorman. Apartments are being snatched up at the fastest pace in 20 years. Apartments were on the market for an average of only 39 days, compared with 55 days last year. Tenants are looking to move to new neighborhoods or to cheaper apartments in response to rising rents. Many are also looking at buying as an alternative for the first time in years with record-low interest rates: I just re-financed a mortgage of mine yesterday, dropping my monthly payment to just under $ 4,000/month. I am 100% certain that for $ 4,000/month plus the common charges and taxes, I would be renting a significantly lesser apartment. I will however say that the demands on obtaining the mortgage were very strict, so by limiting buyers, I see the potential for further rental escalation as the pool of buyers is kept smaller. But don’t believe rentals are only for those who cannot afford (or qualify) to buy…we just rented a $ 30,000/month apartment and received an offer on a $ 100,000.00/month rental….
Amazingly, housing costs are not a factor in our nation’s inflation figures (HUH????) even though in New York they account for the largest percentage spending item of income (for most)……so while everyone may tell you inflation is not that bad, throw a 10% rent escalation in with rising food costs, cab fares, subway fares, etc,etc and you can be CERTAIN Manhattan is experiencing MAJOR INFLATION. I estimate close to 10%. One of the best hedges against inflation is owning real estate…..and many who buy real estate in Manhattan are capitalizing on the fact that Manhattan’s inflation rate is consistently high, higher than anywhere else in the USA in my estimations.
Wednesday, January 11th, 2012
 Posted by Leonard Steinberg on January 11th, 2012
In a recent Wall Street Journal article a survey of those with investable assets of $ 30m+ revealed that the rich prefer commodities, real-estate, private companies in 2012 to place their investable dollars. 48% plan to increase their allocation to commodities in 2012, and 45% of respondents are looking to real estate….we see this already with the market starting off with a bang.
The message is all about the need to invest in tangible assets. Art, collectibles should do well to. Maybe this is the strongest argument that those in the know (and lets face it, the rich usually know first) feel certain that inflation is on the horizon…..we think its here already, quietly hidden by government statistics that omit critical factors when evaluating inflation. And real estate has always been a solid hedge against inflation, which bodes well for the New York luxury cash-driven market. With Metlife getting out of the mortgage business too, obtaining mortgages will be the challenge for the rest of the market.
I suspect pricing records for premium properties could be broken in 2012. We shall soon find out.
Monday, July 4th, 2011
Posted by Leonard Steinberg on July 4th, 2011
Bank of America Corp and JPMorgan Chase & Co have started modifying tens of thousands of mortgages where the banks deem the loans especially risky, even if the borrowers have not asked, the New York Times reported yesterday.
In some cases, the banks are slashing the amount borrowers owe, citing one case in Florida where a woman’s principal balance was cut in half. The paper said the banks are targeting holders of pay option adjustable-rate mortgages, a type of loan where borrowers have the option of skipping some principal and interest payments and having the amount added back onto the loan.
Such “option ARM” loans were seen as especially high risk in the wake of the financial crisis; the two banks collectively still have tens of billions of dollars of such loans in their portfolios. One law professor quoted by the Times said the banks were behaving in contradictory ways, modifying some loans that should not be and not modifying some loans that should be.
Would it not be smarter for banks to evaluate each mortgage on a case-by-case basis, and make adjustments to that mortgage in the hopes of the borrower being in a better position to continue paying down that mortgage without defaulting? Surely much more time and cost is incurred when a foreclosure takes place, and surely those foreclosures further de-value surrounding properties thereby making the owners of those properties more at risk to default?
Maybe I am over-simplifying this, but a few years ago I provided a 2nd mortgage to a friend. He only needed the ‘loan’ for a few months. The loan was at a high rate of 12%. Then the financial storm hit and he could not pay down the loan. I recently halved the interest to 6%, thereby allowing my friend to have the additional money he would have paid to me to do repairs to the property. Now apply this same philosophy to banks and it becomes clearly evident that money forced into the hands of banks and corporations does not necessarily fuel the economy (It certainly has not fueled job growth!). Putting the cash into the hands of the (responsible) consumer fuels spending, the ultimate driving force of this economy.
Monday, April 11th, 2011
Posted by Leonard Steinberg on April 11, 2011
Many buildings seeking to re-finance their debt to take advantage of the still historically low rates, come across a little problem …..pre-payment penalties. With the potential for rising interest rates increasing daily, those wishing to re-finance now cannot do so as the pre-payment penalties are often severe.
Winter & Company, a New york based firm specializing in commercial real estate finance, have come up with a solution that I think is rather brilliant: a FORWARD COMMITMENT, whereby a rate is locked now with a closing date set well into the future to allow for avoiding an early loan pay-off of an existing mortgage with pre-payment penalties. Buildings with debt should take heed now, before rates rise.
Unlike larger banks, I have found Gregg Winter and his team of creative bankers to be highly efficient problem solvers. For the sake of full discloure, I do invest in a Winter Fund: that should not take away from the company’s history for strong, solid performance, even through the roughest times. And no, this financial institution did not require a Federally funded bailout in the recent meltdown.
Sunday, December 19th, 2010
 Posted on December 19, 2010 by Leonard Steinberg
Sorry we have been MIA lately, so back to the BLOG: Potential presidential candidate Mike Huckabee is building an 8,224 sf, $3 million home on the beach in Walton County. The Arkansas Times reported that the building permit for the three-story house lists the projected cost of construction at $2.2 million. This is in addition to the cost of the land, which Walton County most recently appraised at $853,062.
We have no issue with someone building a house in Florida, but how on earth could a fiscally conservative POLITICIAN build a house like this with a $ 2,8million mortgage? More than 90% financing? Didn’t we just experience the worst economic meltdown because of this very activity? Is Huckabee crazy? Surely we have learned SOMETHING from the past 2 years and one lesson was not to over-leverage homes, especially second homes? Which bank is financing this when they have difficulty justifying financing 70%? Does this kind of fiscally irresponsible behaviour set a good example?
We think this is disgraceful behaviour from a very likeable guy: Please Mr. Huckabee, as a potential President of the USA, how do you justify to your conservative (and non-conservative) flock more than 90% financing in 2010? Granted this is not Charlie Rangel-style abuse, but…..please help us out here.
Sunday, October 24th, 2010
 NOT SEEN ON YOUR STREET, BUT COMING TO YOUR WALLET SOON. The foreclosure mess could hurt homeowners in Manhattan in an indirect way: The costs of buying an apartment and paying off the mortgage are likely to go up, say housing experts.
The rising costs will come both during the closing and throughout the life of the loan.
At the closing, the cost of title insurance, which protects a property buyer from claims of ownership made by other people, is likely to rise, industry officials say.
“At a closing last week I witnessed an ‘additional title insurance fee’ to cover additional insurance.,” says Leonard Steinberg, managing director of Prudential Douglas Elliman and publisher of LUXURYLETTER.
The foreclosure mess has sent insurers scrambling. One of the largest, Old Republic Title Insurance, told its agents on Oct. 1 not to issue policies on homes that have been foreclosed by GMAC Mortgage or J.P. Morgan Chase. And on Wednesday, the nation’s largest title insurer, Fidelity National Financial, said lenders must vouch for the accuracy of their paperwork before it will insure properties.
Just like homeowners-insurance rates rise after a hurricane, the rates for title insurance are expected to rise, to compensate for the added risk.
The turmoil will likely lead to pricey premiums for new homeowners, says McLean, Va.-based housing economist Tom Lawler. Adds Cameron Finlay, chief economist at mortgage lender Lending-Tree.com: “Any time there is uncertainty in the market or risk implied, it follows that costs go up.”
Other costs could be felt during the life of the loan. Until the current mess, servicing loans was a low-margin, high-volume business. Servicers collect mortgage payments from borrowers and send them off to mortgage holders, and if the loan gets into trouble, they manage the foreclosure. Few doubt this process will get costlier now that it is under scrutiny from regulators and the courts. That higher cost likely will show up in higher interest rates for borrowers.
Both of these higher costs also would hit homeowners who refinance their loans.
How much the costs of buying a home will rise is unknown. Mortgage industry officials say it is too soon to tell. And no one believes the costs will significantly change the price of a home. So if you thought anyone was immune to the foreclosure mess, think again.
And no, Manhattan is not immune even though foreclosures are still extremely rare here. The only good news: all these rising costs equal INFLATION, not the worse option, deflation. Owning real estate during inflationary times is a good thing.
Monday, September 20th, 2010
 Just to-day, Bank of America withdrew a loan that had been completely signed off on and referred it to another lending institution…..word on the street is Bank of America may be exiting the residential mortgage market…..
“Its amazing how many smaller banks and untraditional lenders are eating away at the market share of the more obvious banks,” says Leonard Steinberg, managing director of Prudential Douglas Elliman and leader of the LUXURYLOFT team. “Recently I re-financed a CHASE mortgage, at their suggestion, and at the last minute they wanted to charge me a $ 1,600 fee for extending the mortgage commitment: This, even though the rates had come down! Large banks may be in for a shock.”
Is Bank of America the BANK OF OPPORTUNITY, or a LOST opportunity?
Has anyone heard anything about this? If so, please let us know….
Tuesday, August 17th, 2010
 While politicians bury their heads in the sand and focus on pointing fingers for blame, building mosques and Bristol Palin, the single largest problem our economy is dealing with is still housing. Until we have a solid plan in place to clean up the housing mess and a solidly revised plan for the future of financing housing, the chance of future financial meltdowns remains strong and certain. We MUST remove politics from this debate: voters should insist on it. The lax laws governing qualifying for housing financing has cost this country way too much. And both parties are to blame for this in their embarrassing quest for power.
Reuters reports that the Obama administration called for “fundamental change” at Fannie Mae and Freddie Mac, but a long, politically explosive debate lies ahead on the future of the bailed-out mortgage finance giants and U.S. housing policy.
U.S. Treasury Secretary Timothy Geithner on Tuesday raised basic questions with housing industry leaders about the U.S. government’s long-standing role in subsidizing and supporting the $10.7 trillion housing market.
“It is not tenable to leave in place the system we have today,” Geithner said at a conference hosted by the Treasury Department almost two years after the government seized Fannie Mae and Freddie Mac to save them from collapse.
Since then, the two firms have received nearly $150 billion in taxpayer bailout money and have been placed in conservatorship, sharply restricting their past activities.
“We will not support returning Fannie and Freddie to the role they played before conservatorship, where they took market share from private competitors while enjoying the perception of government support,” Geithner said.
“We will not support a return to the system where private gains are subsidized by taxpayer losses.”
The conference, with some of the mortgage sector’s top lenders and investors, is billed as a “listening session” for the administration to gather ideas as it develops an overhaul plan by January. No major changes are expected before 2011.
“It’s safe to say there’s no clear consensus yet on how best to design a new system,” Geithner said. “But this administration will side with those who want fundamental change.”
With Congress focused on elections in November, federal spending coffers depleted and nerves on edge about changes that could trigger another housing crash, lawmakers looked likely to move slowly on overhauling housing finance, analysts said.
Enthusiasm in some quarters for removing government from housing finance was certain to collide with the political reality that housing subsides, such as the mortgage interest deduction, are deeply entrenched facets of U.S. economic life.
The problems and costs of Fannie Mae and Freddie Mac were not addressed in the sweeping Wall Street reform legislation approved by the U.S. Congress in July — a yawning gap in the Democratic bill that Republicans have sharply criticized.
Bank and mortgage-backed securities investors are watching warily as the administration weighs options, ranging from full nationalization at one extreme to privatization with no government support at the other, and alternatives in between.
Geithner said there is a strong case for a carefully designed government guarantee for mortgages, and that a key question will be whether the private sector can provide a form of insurance or guarantee on its own.
“The challenge is to make sure than any government guarantee is priced to cover the risk of losses, and structured to minimize taxpayer exposure,” Geithner said.
A government guarantee is considered essential to at least one major investor — Bill Gross, co-founder of bond-trading firm Pacific Investment Management Co. Gross told the housing conference participants that a government guarantee is needed to keep mortgages affordable.
Geithner also said government should reassess how it promotes access to affordable housing.
Shaun Donovan, secretary of Housing and Urban Development, told the conference the government’s “footprint” in housing finance needs to be much smaller than it is today.
Fannie Mae, Freddie Mac and the Federal Housing Administration now back 90 percent of new U.S. home mortgages, he added.
Geithner stressed a smooth transition period so as not to disrupt the fragile housing market. “As we go through this transition, it is important that consumers maintain access to credit at attractive rates,” he said.
Fannie Mae and Freddie Mac both jumped into subprime mortgages during the housing boom in the early 2000s in an attempt to broaden home ownership — with disastrous results.
Participants at the conference included executives from Wells Fargo and Bank of America, as well as Lewis Ranieri, who helped develop the model for the private mortgage-backed securities market that was central to the housing bubble that burst in 2007-2008.
The conference occurred a day after U.S. home-builder sentiment unexpectedly fell for a third straight month in August to its lowest level in nearly 1-1/2 years, according to a survey that added to evidence of slowing economic recovery.
A stubborn housing crisis is likely to weigh on voters already concerned about a sluggish economy headed into November elections.
Across America, the average congressional district has more than 9 percent of its mortgages delinquent by 90 days or more, according to a study by Deutsche Bank. That’s more than 2-1/2 times the delinquency rate on election day in 2008
Friday, August 13th, 2010
The FHA has come out to guarantee mortgage loans on a few new buildings in Manhattan: While the idea is brilliant, and long overdue, the plan is a perfect example of how governments can take a great idea and muck it up really badly. As we exit (very slowly and grindingly and uncerytainly) from the worst recession since the Great Depression, the FHA wants to offer guarantees on loans involving up to 96.5% financing! Did we learn ABSOLUTELY NOTHING from the mistakes of the past few years?
“This stupidity makes me want to take to the streets and yell at the top of my lungs!” says Leonard Steinberg, leader of the LUXURYLOFT team specialized in luxury Downtown Manhattan/New York real estate. “One of New York’s saving graces in this recession was that New York hardly accepted financing with less than 10% down: co-ops required a minimum of 20% down, unlike the rest of the country. Yes, help 50% or less sold buildings obtain financing, but don’t provide it to unqualified buyers and don’t minimize the commitment to the point where walking away is a no-brainer.”
Whitney Gollinger, marketing chief for a Manhattan condo building with an outdoor movie theater and panoramic city views, is highlighting a different amenity to spur sales: the financial backing of the federal government.
The Federal Housing Administration agreed in March to insure mortgages for apartments at the 98-unit Gramercy Park development, known as Tempo. That enables buyers to make a down payment of as little as 3.5 percent in a building where apartments range from $820,000 to $3 million.
“It’s a government seal of approval,” said Gollinger, a director at the Developments Group of New York-based brokerage Prudential Douglas Elliman Real Estate. “We need as many sales tools as we can have these days, and it’s one more tool.”
The FHA, created in 1934 to make homeownership attainable for low- to moderate-income Americans, is providing a lifeline to new Manhattan luxury condominiums after sales stalled. Buildings featuring pet spas, concierges and rooftop lounges are applying for agency backing to unlock bank financing for purchasers. The FHA guarantees that if a homebuyer defaults on his mortgage, the agency will pay it.
At least nine Manhattan condo developments south of 96th Street have sought approval for FHA backing since the agency loosened its financing rules in December, according to a database of applications kept by the U.S. Department of Housing and Urban Development. The change allows the FHA to insure loans in new projects where only 30 percent of units are in contract, down from at least 50 percent. About 1,900 apartments in New York’s most expensive neighborhoods would be covered by the applications.
Filling a Void
The agency also offers insurance to half of all mortgages in a single building after previously setting a limit at 30 percent, according to the new standards, which expire in December. The entire property must be approved for a buyer to get backing. Most of those that applied in Manhattan are buildings converted to condos or built since 2007.
The FHA is filling a void left after mortgage-finance agency Fannie Mae tightened its condo lending standards last year. The Washington-based company won’t back loans made in new buildings where fewer than 51 percent of the units are in contract, sometimes setting a requirement as high as 70 percent.
That in turn makes mortgage lenders hesitant to make loans at developments under those thresholds, said Orest Tomaselli, chief executive officer of White Plains, New York-based National Condo Advisors LLC, which advises condominiums on how to adhere to Fannie Mae and FHA standards.
‘Not an Accident’
“It’s not an accident that the FHA is offering this — not private lenders,” said Christopher Mayer, senior vice dean at Columbia Business School’s Paul Milstein Center for Real Estate in New York. “An unfilled condominium complex is not the kind of thing that a bank looking to rebuild its balance sheet on real estate is looking to do.”
In New York City, the priciest urban U.S. housing market, the FHA insures loans of as much as $729,750, and permits buyers to borrow up to 96.5 percent of the price.
No buildings in Manhattan applied for FHA recognition between 1998 and 2008 — though in those years the program didn’t require an entire property be approved and condo buyers could seek FHA-insured loans on their own, Tomaselli said.
New development in Manhattan represented 23 percent of the sales market in the second quarter, compared with 35 percent two years earlier, according to New York appraiser Miller Samuel Inc. About 8,700 new apartments in the borough were empty as of June, partly because of a lack of available financing for buyers, said Jonathan Miller, president of the firm.
‘Ironic’ Move
“Something has to happen for this product to be marketable,” Miller said. “I just find the whole thing ironic that FHA is providing financing for luxury housing.”
The FHA loosened the condo rules because of “market conditions,” according to Lemar Wooley, an agency spokesman.
“We are certainly cognizant of falling sales prices, limited availability of liquidity, etc., so we wanted to be flexible,” Wooley wrote in an e-mail. “The risk was considered before issuance of the temporary guidance.”
The new rules are a “game changer,” said Ryan Serhant, vice president at Nest Seekers International, a brokerage with offices in New York and Florida. He’s marketing 99 John Deco Lofts, a 442-unit conversion project in downtown Manhattan that features a “zen” flower garden and Brooklyn Bridge views.
The development, where sales began more than two years ago, had 10 units go into contract with FHA backing since approval in March. The FHA suspended its support for the building Aug. 3, according to the agency website. The property is working to have it reinstated, Serhant said.
Eager for Approval
Angela Ferrara, who markets the Sheffield condos on West 57th Street, checks every day whether the 597-unit property, which applied to the FHA in May, has won approval. Ferrara, vice president of sales for New York-based the Marketing Directors Inc., says she is eager to start touting the FHA backing to potential buyers. That’s a reversal from the past, when government loan programs weren’t necessary — or advertised.
“People would get the wrong idea, and think it was a different type of government-subsidized product,” Ferrara said. “It was almost regarded as a negative, particularly in the luxury properties.”
Now, she said, “It’s actually became a widely accepted marketing tool.”
The Sheffield promotes amenities such as concierge service, a pet spa and massage rooms, according to the project’s website. A neighborhood guide on the site lists chef Thomas Keller’s four-star restaurant Per Se as a nearby attraction, along with Lincoln Center, Carnegie Hall and Tiffany & Co.’s flagship Fifth Avenue store.
‘Great Solution’
The Sheffield’s owner, New York-based Fortress Investment Group LLC, took over the condo conversion project in foreclosure last August after the original developer, Kent Swig, defaulted on a loan. With 56 percent of the converted units sold or in contract, the building has about 230 units left to sell, Ferrara estimates.
FHA is “definitely is a great solution right now,” said Tomaselli of National Condo Advisors, which prepared the FHA applications for Tempo and Sheffield.
“The savvy developers did it first,” Tomaselli said. “But everybody else is catching up.”
In the borough of Brooklyn, FHA support accounted for half of the 29 units sold at the 111 Monroe condos in Clinton Hill and a quarter of apartments in Williamsburg’s NV building, which is sold out after two years on the market, said David Behin, executive vice president at the Developers Group, a New York brokerage for new buildings.
Limits to Success
The FHA’s effectiveness will be limited in Manhattan because apartment prices are higher than in Brooklyn and the insured loan is capped at $729,750, Behin said. The median price of a Manhattan apartment in a new development was $1.4 million in the second quarter, according to Miller Samuel and Prudential Douglas Elliman.
“With apartments over $1 million, FHA isn’t going to help you,” Behin said. “You’d have to put down 30 percent to get the loan of $729,000. And if you have 30 percent to put down, a bank will loan to you without FHA.”
Borrowers backed by FHA are essentially buying mortgage insurance, said Debra Shultz, managing director at Manhattan Mortgage Company Inc. in New York. Buyers pay an upfront premium of 2.25 percent of their loan value, and a monthly fee equal to about 0.5 percent of the loan amount for at least five years, she said.
Nationwide, the FHA insured 21 percent of all mortgages made in the second quarter, or $71.4 billion worth of loans, according to Geremy Bass, publisher of the Inside FHA Lending newsletter. That’s close to the $79.5 billion total value of all FHA-backed loans in 2007.
Rising Defaults
Nine percent of all FHA-insured loans were 90 days or more past due or in the process of foreclosure in the first quarter, compared with 7.4 percent a year earlier, data from the Washington-based Mortgage Bankers Association show.
The agency doesn’t require a minimum credit score for the mortgage insurance, though many lenders who fund the loans insist on a rating of at least 580, said Shultz.
The FHA is considering a minimum required score of 500, according to a notice the agency filed in the Federal Register on July 15. A person with a 500 rating is in the lowest one percentile of credit scores nationally and was likely delinquent on several accounts in the last year, said John Ulzheimer, president of consumer education for Credit.com, a consumer and credit education company based in San Francisco.
Taking on Risk
“The government is taking on more risk,” said Guy Cecala, publisher of Inside Mortgage Finance. “That’s the bottom line. They really can’t say no, because that’s their purpose. It’s to support the housing market when there’s no other funding.”
Until they heard about FHA, Asha Willis and her boyfriend, Cesar Rivera, didn’t think they would buy a place for at least five years — enough time to save a 20 percent down payment, she said. The couple reasoned that they earned enough to make monthly mortgage payments, and began an apartment search in February, limiting their hunt to buildings with agency backing.
Willis, an attending physician at Maimonides Medical Center in Brooklyn; and Rivera, a sales associate at Chelsea Piers in Manhattan, toured several glass and steel high rises and decided on a one-bedroom at Toll Brothers Inc.’s Two Northside Piers in Williamsburg, Brooklyn. It didn’t have FHA approval at the time, but developers promised it was on its way, Willis said.
Contract Contingency
“Our contract had a contingency that if they weren’t FHA approved we could get out of the contract,” said Willis, currently a renter at Manhattan’s Stuyvesant Town.
Prices at the building range from the “high $300,000s” to more than $2 million, according to Adam Gottlieb, project manager for Northside Piers. The property, which began sales in October 2008, received FHA approval in June.
Shultz, whose Manhattan Mortgage has sourced FHA loans for buyers in Brooklyn, the borough of Queens and on New York’s Long Island, said the last month brought a sudden surge of calls from would-be buyers seeking FHA insurance for Manhattan purchases.
“It’s definitely breaking through to the Manhattan market,” she said.
At Tempo, which is still under construction, developers are hoping that FHA approval will appeal to buyers of lower-priced units and inch the number of contracts signed to the 51 percent that conventional mortgage lenders require, Gollinger said. About 15 percent of the 98 units are under contract.
The developers plan to tout FHA support in e-mails and other promotions in a sales push next month as the building nears completion, Gollinger said.
“I never even dealt with this,” she said. “All of a sudden it became an absolute must.”
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lola gardner 
Nice and very informative post. Your point of view is more or less the same as main. Thanks!(Charlxtz)