Sunday, January 20th, 2008
Donald Trump’s brokerage firm has completed its final morph into a full service mortgage banker/lender in the realm of residential real estate. Initially starting of as Meridian Capital, TrumpFinancial will now service individual loans to borrowers for real estate in the high-end market. And yes, TrumpFinancial is HUD approved. This newly acquired designation will allow this firm to service loans in the not-so-high-end market as well.
Interestingly, even with the subprime woes bringing markets down worldwide, a few savvy businessmen/women are positioning themselves to dominate this market when the time is right. From mergers and acquisitions, to individual investors, like me, the ones who are looking for bargains are taking actions now during this “low-tide” time that will pay off big time 18-24 months from now. Sure some people will struggle and get the shaft now and again. But, if you are making $45,000 a year, do you really think you should have bought a house that cost you $275,000??? Come on now.
Every action has a direct re-action or consequence. My question to you is, “What actions are you taking now?”.
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Let’s look at a timeline, shall we?
Wikipedia’s SubPrime Crisis Impact Timeline
- 2001: US Federal Reserve lowers Federal funds rate 11 times, from 6.5% (May 2000) to 1.75% (December 2001).[2]
- 2002: Annual home price appreciation of 10% or more in California, Florida, and most Northeastern states.
- 2004-2005: Arizona, California, Florida, Hawaii, and Nevada record price increases in excess of 25% per year.
- 2005: Boom ended August 2005. The booming housing market halted abruptly for many parts of the U.S. in late summer of 2005.
- 2006: Continued market slowdown. Prices are flat, home sales fall, resulting in inventory buildup. U.S. Home Construction Index is down over 40% as of mid-August 2006 compared to a year earlier.
- 2007: Home sales continue to fall. The plunge in existing-home sales is the steepest since 1989. In Q1/2007, S&P/Case-Shiller house price index records first year-over-year decline in nationwide house prices since 1991.[3] The subprime mortgage industry collapses, and a surge of foreclosure activity (twice as bad as 2006[4]) and rising interest rates threaten to depress prices further as problems in the subprime markets spread to the near-prime and prime mortgage markets.[5] The U.S. Treasury secretary calls the bursting housing bubble “the most significant risk to our economy.”[6]
- February–March: Subprime industry collapse; more than 25 subprime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale.
- April 2: New Century Financial, largest U.S. subprime lender, files for chapter 11 bankruptcy.
- July 19: Dow-Jones closes above 14,000 for the first time in its history.[7]
- August: worldwide “credit crunch” as subprime mortgage backed securities are discovered in portfolios of banks and hedge funds around the world, from BNP Paribas to Bank of China. Many lenders stop offering home equity loans and “stated income” loans. Federal Reserve injects about $100B into the money supply for banks to borrow at a low rate.
- August 6: American Home Mortgage files for chapter 11 bankruptcy.
- August 7: Democratic presidential front-runner Hillary Clinton proposes a $1 billion bailout fund to help homeowners at risk for foreclosure [1].
- August 16: Countrywide Financial Corporation, the biggest U.S. mortgage lender, narrowly avoids bankruptcy by taking out an emergency loan of $11 billion from a group of banks.[8]
- August 17: Federal Reserve lowers the discount rate by 50 basis points to 5.75% from 6.25%.
- August 31: President Bush announces a limited bailout of U.S. homeowners unable to pay the rising costs of their debts.[9] Ameriquest, once the largest subprime lender in the U.S., goes out of business;[10]
- September 1–3: Fed Economic Symposium in Jackson Hole, WY addressed the housing recession that jeopardizes U.S. growth. Several critics argued that the Fed should use regulation and interest rates to prevent asset-price bubbles,[11] blamed former Fed-chairman Alan Greenspan‘s low interest rate policies for stoking the U.S. housing boom and subsequent bust[2], and Yale University economist Robert Shiller warned of possible home price declines of fifty percent.[12]
- September 14: A run on the bank forms at the United Kingdom‘s Northern Rock bank precipitated by liquidity problems related to the subprime crisis.[13]
- September 17: Former Fed Chairman Alan Greenspan said “we had a bubble in housing” [3] and warns of “large double digit declines” in home values “larger than most people expect.”
- September 18: The Fed lowers interest rates by half a point (0.5%) in an attempt to limit damage to the economy from the housing and credit crises.[14]
- September 28: Television finance personality Jim Cramer warns Americans on The Today Show, “don’t you dare buy a home—you’ll lose money,” causing a furor among realtors.[15]
- September 30: Affected by the spiraling mortgage and credit crises, Internet banking pioneer NetBank goes bankrupt, the first FDIC-insured bank to fail since the savings and loan crisis,[16], and the Swiss bank UBS announced that it lost US$690 million in the third quarter.[17]
- October 10: Hope Now Alliance was created by the US Government and private industry to help some sub-prime borrowers. [18]
- October 15–17: A consortium of U.S. banks backed by the U.S. government announced a “super fund” of $100 billion to purchase mortgage backed securities whose mark-to-market value plummeted in the subprime collapse.[19] Both Fed chairman Ben Bernanke and Treasury Secretary Hank Paulson expressed alarm about the dangers posed by the bursting housing bubble; Paulson said “the housing decline is still unfolding and I view it as the most significant risk to our economy. … The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.”[6]
- October 31: Federal Reserve lowers the federal funds rate by 25 basis points to 4.5%.
- November 1: Federal Reserve injects $41B into the money supply for banks to borrow at a low rate. The largest single expansion by the Fed since $50.35B on September 19, 2001.
- December 6:President Bush announced a plan to voluntarily and temporarily freeze the mortgages of a limited number of mortgage debtors holding adjustable rate mortgages (ARM). He also ask Members Of Congress to: 1. pass legislation to modernize the FHA. 2. temporarily reform the tax code to help homeowners refinance during this time of housing market stress. 3. pass funding to support mortgage counseling. 4. pass legislation to reform Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae. [20].
- January 11, 2008: Bank of America announced it had agreed to buy Countrywide for $4 billion in an all-stock transaction. The deal is expected to close in the 3rd quarter of 2008.
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