I talked to a mortgage broker today who has 4 loans scheduled to close tomorrow. The lenders (2) went out of business this week and now he is scrambling to find a different lender.
The real estate agent on all of these is wondering if they will get paid a commission too.
7 days away from a mortgage commission and it is pulled out from under the broker
7 days away from a real estate commission and it is pulled out from under the agent
7 days away from a sold house and the seller is left holding the bag.
7 days away from a great deal, and the buyer can’t get financing.
7 days away from a closing at the title company and no title policy is issued if it does not close – even through they already did all the work.
This is another reason to stay away from institutional lending and stick with private financing.
I wonder if lenders who have ALREADY funded loans will call them due before they go belly up. Can it happen? I don’t know. My guess is they would sell the notes to wall street instead. But what if there are no buyers at wall street.
But one thing is for sure, the rules have all changed.
If I were a mortgage broker or a real estate agent I would be worried about how I would get paid. If lenders are not lending, there is no commission to be paid.
Interesting times ahead, that’s for sure….
August 20, 2007 at 4:54 am
From Jack Miller
All of what you said is true, and according to mortgage brokers who have called me, the problem is going to get a lot worse before it gets better. All of those people you mentioned are going to see some real financial trouble. They should be reducing debt as fast as they can by selling off property to build a cash reserve. When this has happened in the past, many bank loan departments have simply shut down and all hope of refinancing to stretch out payments has disappeared.
One ploy that I tried was to concentrate as much debt as possible on as few properties as possible by getting the lender to switch collateral. Once I had done this, I discounted the highly leveraged properties on installment wrap around contracts and let occupants make the payments. This gave me free and clear rentals that produced income. At the bottom of the abyss, I then swooped in with my cash and replaced the properties I had sold at very low prices.