Archive for September, 2008

Where do we go from here?

I did not expect it, nor did the financial markets. Not when the $700 billion bailout package had the support of the Democratic and Republican leadership teams. But obviously, there were enough disgruntled members in the House (and angry Amercians contacting their congressmen about the unbelievable price tag of this mess) to scuttle the bailout bill as it failed to pass today. Republicans failed to back their President and voted 2-1 against the bill. Democratic leadership took verbal shots at the present administration rather than leading the cause. The impact on global financial markets was immediate. The Dow Jones fell 777 points, the largest drop ever in a single day. The question now is where to from here. I suspect a bailout package (though revised) will still go through at some stage but will require more horse trading from the dissenters and likely a few other failures along gtghe way. I would think it is too important to just toss away now. However, the longer it takes, the more carnage we’ll see in the markets as the liquidity squeeze continues to chock financial institutions globally. For the time being, policy makers will need to rely on other tools to help stabilize markets. Central banks continue to inject liquidity into the system, but these are only temporary stop-gap measures. Markets will remain turbulent as US lawmakers continue to haggle. What a fine mess we have managed to get ourselves into……I pray for my childrens’ future…….I am instructing my buyer clients to stand asisde until the markets stabilize…….because we just might be on the verge of a national economic depression. Let’s pray our government leaders can work together and solve this national/global crisis soon.

Have you thought of everything?

This checklist is a quick reminder of the things you might have to do before your big move.

Send Change-of-Address Cards to:

Post Office
Charge Accounts

Transfer Bank Accounts

Certificate of Deposit
Safe Deposit Box

Disconnect Utilities


Obtain Medical Records From
General Practitioner

Notify Insurance Companies


Cancel Deliveries



Obtain school records for children
Obtain birth and baptismal records
Have drug-prescriptions refilled
Have car tuned-up

Transfer Memberships

Church / Synagogue
Civic Organizations

Hope this list helps……Jon.

Well, after a chaotic week on Wall Street, and in an attempt to avoid an economic depression, the federal government has now intervened to provide support for the economy and restore investor confidence by potentially risking hundreds of billions of taxpayer dollars. While allocating taxpayer money to support illiquid mortgage assets of questionable value is hardly ideal, it will likely prevent the failure of a major facet of the U.S. financial system.

The good news is that action by the Fed, the Treasury Department, and in coming days, Congress, should provide short-term stability in the face of what had been a rapidly accelerating financial crisis that was having impact around the globe.

The bad news is that these actions will obligate U.S. taxpayers to as much as $1 trillion dollars in future cost. Additionally, the situation is not likely to right itself in rapid fashion as the many years of loose lending cannot be repaired overnight.

The ugly news is that the federal government providing the “solution” is the same entity that has been asleep at the wheel while the massive government sponsored enterprises of Fannie Mae and Freddie Mac recklessly expanded their lending practices to the point of eventual failure. To make matters worse, they had plenty of private investment banks and lending institutions come along for the ride. Such a failure, the American people were assured, would never happen to Fannie and Freddie, yet somehow here we sit today. And as a result of all the bailout activity, the federal government will be the primary backer for the lion’s share of residential mortgages for the foreseeable future.

Only time will tell how this all shakes out……I just hope it does not get worse before it gets better.

FYI….Thanks to Hanley Wood (which can be found at at ) for providing some content for this blog.

“We live in interesting times” goes the saying……..If the current financial market is “interesting”, I prefer “boring”. Please. Pretty please. Give me boring.

This week US stocks tumbled and bond prices soared in the wake of of the Lehman Brothers Bankruptcy, the Merrill Lynch buyout and the AIG Bailout…… Gold – often seen as a safe-haven asset – experienced its biggest one-day gain since 1980.

These are incredibly turbulent and concerning times. US investment banks Morgan Stanley and Goldman Sachs appear to be latest in the firing line with their stocks falling sharply overnight and this is despite both reporting better than expected results over the past couple of days. However, the SEC has now stepped in and will put restrictions on the short-selling of stocks.

Officials around the globe are struggling to boost market sentiment. So when will the crisis end? It is of course impossible to say. But one of the prerequisites will be a recovery in the US housing market, and with housing starts falling to a 17½ month low in August, any recovery looks some way off yet.

I am often asked in today’s Oahu marketplace, what is a short sale?

The short answer is…….

Short Sale: Sale of property valued for less than the amount due on the loan.

The long answer is…….

Short sales can be a win/win in a losing situation. Borrowers may be relieved from their debt and Lenders may save the time and costs of a foreclosure. In a short sale, the borrower (Seller) negotiates with the Lender to allow a sale of the property either to a third-party or back to the Lender in lieu of foreclosure, and the Lender will in turn require either a gross, net or minimum payoff.


Gross Payoff - Lender is paid the amount the property is sold for and Sellers are responsible for all closing costs.

Net Payoff - Lender is paid the net proceeds after all closing costs are paid.

Minimum Payoff - Lender requires a specified minimum amount of proceeds, and the Seller may be entitled to the surplus proceeds and is usually responsible for all or
a portion of the closing costs, and the Seller may have to bring in money to satisfy the Lender’s minimum payoff requirement.

Transaction Issues
To numerous to mention all of them, but here are a few……Time limitations; property values changing; Buyer needs quick loan approval; Seller should consult tax advisor for tax ramifications of short sale; Seller may be unable to come up with additional closing monies, if needed; and Escrow can’t proceed without payoff and release instructions from seller’s lender.

Bottom line, these types of transactions are complicated and require excellent Realtors, Lenders, and Escrow firms. Thanks to Title Guaranty Hawaii for contributing content for the blog entry.

I am frequently asked by clients in today’s Oahu marketplace about foreclosures….availability, types, etc.

The following paragraphs are general descriptions only; the actual processes are substantially more detailed/complicated. Call me if you have any general questions and please consider contacting an attorney for situation-specific information/guidance.

A legal procedure instituted by a mortgage holder to cause the sale of property encumbered by a mortgage to satisfy the debt secured by that mortgage.

Judicial Foreclosure:
Involves a civil action filed and carried out in circuit court.

- Commenced by the filing of a foreclosure complaint;
- A commissioner is appointed by the court to conduct the sale, usually by public auction;
- These public auction sales are almmost always cash only sales;
- The sale must be confirmed by the court, usually free and clear of encumbrances that were subordinate to the mortgage being foreclosed;
- If the sale proceeds are insufficient to satisfy all of the liens against the property, then unsatisfied lienors may seek a deficiency judgment;
- The court may issue a writ of possession against the owners/tenants;
- The entire process usually takes between 6 to 12 months.

Non-Judicial Foreclosure:
Involves a public sale carried out by or on behalf of the mortgage holder pursuant to a power of sale contained in the mortgage. This process does not involve a court action.

- The power of sale remedy must be contained in the mortgage;
- Timely notices must be served as required by the mortgage, and must also be served, posted, and published as required by Chapter 667, Hawaii Revised Statutes;
- No commissioner is appointed; sale is usually conducted by a representative of the mortgage holder;
- Title derived through the sale may be free and clear of encumbrances that were subordinate to the mortgage being foreclosed if proper notices have been served;
- The notice of sale and an affidavit describing the mortgage holder’s actions must be recorded in the Bureau of Conveyances or the Office of the Assistant Registrar of the Land Court within 30 days of the public auction;
- A separate legal action must be filed if possession is an issue;
- Most title companies will require the recordation of a deed to the buyer and the waiver of any deficiency judgment in order to insure title;
- The entire process usually takes between 4 to 8 months.

Bankruptcy Filings:
A timely filing of bankruptcy by the debtor/owner will put a halt to the foreclosure action. In order to proceed, the mortgage holder will need a bankruptcy court order “lifting” the automatic stay. Generally, the mortgage holder must show that the debtor has no equity in the property and that the property is not essential to the rehabilitation of the debtor.

Condominium Association Dues:
A condominium association’s common expenses are generally subordinate to the mortgage being foreclosed. However, it may be possible for the association to make a special assessment and recover up to the lesser of six month’s delinquent common assessments or $1800 from the buyer of the foreclosed property.

Next I will tackle Short Sales……

Here are a few “Red Flags” that suggest mold testing is needed for your home:

1. Moisture:
Mold grows where there is a moist environment. The first indication that you may need to test for mold is the discovery of any water related structural or design problem such as:

a. Evidence of water penetrating the home (stains, moist areas).
b. Evidence of a condition that may allow water into the home (poor grading, bad flashing or gutters).
c. Actual construction defect or deterioration that might allow water in (roof, decks, windows, concrete slab, vapor barriers).
d. Plumbing defects (leaky drains, pipes or toilet seals, missing caulking on sinks or tubs)
e. HVAC problems (dirty, moist filters, poor condensation drainage)
f. Dryer vented indoors; inadequate ventilation for a bath or spa.

2. Sensitivity:
Human senses are a valuable tool for mold detection…..

a. If you or an occupant thinks that there is a musty odor, there is potentially a mold problem
b. If you or an occupant feel a room has a damp atmosphere, there may be conditions for mold to grow.
c. If anyone in the home complains of allergy-like symptoms, which seem to increase while in the home, it is possibly caused by mold.

3. Visible Mold:
(Various colors are possible)

a. Tiny spots
b. “Hairy” covering on the surface. Such as white or green molds seen on fruit or bread.
c. Slimy surface.

Here is an excellent web resource and free PDF regarding mold……

A new law that went into effect on July 8, 2008, requires the Hawai’i State Historic Preservation Division (SHPD) to sign off on all building work (renovation, repair, demolition) on any structure over 50 years old. Applicants are required to follow SHPD requirements to document the structure with archival quality black and white photographs as a pre-condition to clearance. County permitting departments cannot issue any permits without this. Currently, The Department of Land and Natural Resources (DLNR) is backlogged with requests, but is in the process of adding additional staff. The Hawaii Association of REALTORS (HAR), along with other building industry professionals, are looking to amend this convoluted law. This law will potentially effect the nearly 50,000 structures over 50 years old on Oahu.

On March 18, 2008, I wrote The Good News And The Really, Really Bad News.

Today, the other shoe has dropped and I write PART 2.

Today, a Sunday, (the day the goverment takes serious action to avoid immdiate market reaction and possible negative press), the government seized the troubled mortgage giants Fannie Mae and Freddie Mac in a potentially $200 Billion dollar bet that it will help reverse a prolonged housing and credit crisis. The companies, which together own about $5 Trillion in home loans, about half the nations total, have lost $14 Billion in the last year and may likely lose much more as the year progresses.

Many analysts worry that it may not be enough to stabilize a slumping housing market given the glut of vacant homes for sale and foreclosures on the Mainland, rising unemployment and weak consumer confidence. Until this financial crisis and associated remedies by the FED filters through the economy, look for more stringent requirements for getting a loan, nationally and locally

The Good News and The Really, Really Bad News…….Part 2:

As I mentioned in March, ther is both good and bad in the announcement…….

The good news is that rates will probably go lower to attract borrowers/buyers to our market with rates likely falling as much as one percent.

The bad news, in my opinon, and this is REALLY, REALLY BAD NEWS, (just like stated in March)…..”is that the FED is taking these steps to avoid a full-fledged economic collapse much like the Depression of the 1930’s instead of just trying to support the economy in an election year, as some have claimed…..Until now, given that Hawaii has been somewhat spared from much of the sub-prime crisis with relatively few foreclosures (see other entries in this blog), I have not expected the likelihood of a Depression, figuring that we would just be in for a long recession that would lead to a 5 to 7 year period of plateuing home prices and then normal appreciation after that for another few years………Now I am not so sure, and I pray to the Lord above that the FED is successful in its financial market management attempts. May God provide these decison-makers with wisdom as we journey through these perilous times.”……..May God be with our country’s leaders and decision makers that they might be successful in their efforts. That is my prayer for my family and yours.

The Honolulu Advertiser reported on Friday that the mild weakening of O’ahu home prices that has emerged this year should continue for at least two more years, according to a new local economic forecast that predicts an 11 percent median price drop over three years.

A lot of factors, including where interests rates may move and the future health of the local and national economies, lend uncertainty to where O’ahu home prices will move.

But if the projection by the University of Hawai’i Economic Research Organization is on the mark, the median price of previously owned single-family homes on O’ahu in 2010 would be about $570,000 — $70,000 below last year’s presumed peak of about $640,000 and $20,000 below the median price in 2005.

In the forecast update published today, UHERO predicts a 3.6 percent decline in the median home price this year, followed by a 5.2 percent decline next year and a 2.6 percent decline in 2010.

UHERO said such a change would still be a relatively modest decline compared with Mainland housing markets, but is worse than the organization was forecasting in a March report. In March, UHERO forecast a 3.2 percent decrease in home prices this year, followed by a 2.3 percent drop next year.

This year through August, the median price is down 2.8 percent to $629,000, according to the Honolulu Board of Realtors, which tracks sales differently than UHERO to arrive at slightly different median price figures.

UHERO said the degraded view of home prices is driven by continued turmoil in credit markets, weak housing demand and growing unemployment.

The following charts were provided: