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Good News Amidst the Carnage

Posted by: Chris Palmeri on September 17, 2008

People say us reporters never write any good news. Well, there may just be some silver lining amidst all these dark clouds on Wall Street.

Gibran Nicholas, who heads a mortgage industry certification outfit called the CMPS Institute, notes that all the panic selling on the Street means banks will be far more likely to offer better mortgage terms to distressed home owners rather than foreclose on them. It also means they’ll be more willing to negotiate with any real estate buyers interested in bank-owned property.

The government taking over Fannie Mae and Freddie Mac will mean lower interest rates, in spite of the recent Fed decision to hold them steady. “These rates should remain low well into 2009 because they closely track the Fed Funds rate that is controlled by the Federal Reserve,” Nicholas says. “The Fed really has no desire to increase interest rates in the middle of credit crisis.”

Lastly, and this is a big if, Nicholas notes that the U.S. government just may come out ahead on its market interference. The $85 billion bailout of AIG is a lot of money. But the feds could be earning 11% on that loan, plus any appreciation they get from owning 80% of the world’s largest insurance company. As far-fetched as that sounds, the government made money off its early 80s bailout of Chrysler.

The time to buy, the old Wall Street saying goes, is when there is blood on the street.

Reader Comments


September 18, 2008 10:33 AM

Just who can head a mortgage industry certification outfit? Former real estate salemen and similar characters. Since possession of mortgage certification is entirely a voluntary program without any state mandate, those who issue such certificates require nothing more than a regular business license. Many creative entrepreneur include in their business DBA the use of "Institute" to insinuate some sort of public institution status. Real estate salemen and their ilks are noted for their immense knowledge and expertise on all subjects, complex and simple not to mention their legendary honesty. Apparently, Palmeri agrees and happily quotes his guess speaker. Where does Nicholas finds his credential to speak with such authority on topics ranging from future mortgage rates, bank foreclosure policy, Federal Reserves'interest rate, to the cost to taxpayer bailing out corporations? The obvious answer: running a paper mill that issues certificates. If readers listen to Palmeri's past articles, they would have bought real estate 6 months ago and subsequently lost at least 15% equity; they would have kept their Freddi Mac and Fannie Mae shares in their portfolio and lost millions. Palmeri's latest recommendation, "The time to buy, the old Wall Street saying goes, is when there is blood on the streets" needs to include the times when he has had blood on his hands. As to Palmeri's claim that "government made money off its early 80s bailout of Chrysler," the truth is that taxpayers lost money while funding the lifeline loan. Years later when the reorganized and rehabiliated Chrysler neared its peak, Mercedes' purchase of Chrysler rewarded Chrysler shareholders handsomely while government(taxpayers) received a token thank you. Truth be told about this article, Palmeri's real motive is his naked promotion of stock purchases during these tumultuous markets. Apparently, Palmeri has his personal agenda. To masquerade his intentions, Palmeri invites Gibran Nicholas, a sidekick with weak credentials but a loose canon, to lay the foundations for Palermi's recommendation. In essence, Palmeri dressed-up Nicholas as the "expert" so that Palmeri can deliver his punch line with impunity. Palmeri has used this technique before. Readers should beware and shun Palmeri, the manipulator, the ruse, the exploiter.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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