Not for Reproduction Copyright 2008 <strong>QNotes</strong> Not for Reproduction40 SEPTEMBER 20 . 2008 • <strong>QNotes</strong>Q - L I V I N GMortgage crisis failed industryc o p rRealiestate crisis agconcern forh thome owners, buyersby Jeff HammerbergThe current real estate crisis was precipitatedby problems in the mortgage industryclosely related to reckless Wall Street players.In other words, the tail has been wagging thedog and that is never a good sign. But aslenders adopt smarter policies to distancethemselves from mavericks and unnecessaryrisk, it will be good for real estate and forAmerican homebuyers.2 0 0 8The lending industry — in cahoots withWall Street — failed what was otherwise a relativelystable and robust real estate sector andthe initial impetus for the dramatic economiccrisis came from the wholesale marketing or“securitization” of subprimes and other lowqualitymortgages. Such loans always yieldhigher rates of foreclosure because they aremade for borrowers who have a proven trackrecord of terrible credit. They should neverhave become widespread — and such an integralpart of investors’ core portfolios — thatthey threatened to infect the entire real estatec o p rmarketiand bring thegwhole nation’s economyh tto its knees.The reason these securitized loansstarted wagging the dog is that WallStreet — in partnership with globalfinancial interests including China’sgigantic emerging economy — developeda raging appetite for mortgageinvestments. As Americans pouredmoney into China, for instance, muchof that money returned to the U.S. inthe form of investment capital spentto buy mortgage-backed securities.These new investment products werec o p rinnovative,ibecause theygbundledh tmortgages together into multi-milliondollar pools — not unlike stocks orjunk bonds — that could be sold toinvestors who ultimately profited from themortgage interest payments.But as with most get-rich-quick schemes, afew things about the mortgage backed securitiesgame were potentially hazardous:• An artificially high demand for mortgageswas created, because instead of the demandcoming from people wanting to buy homes, itcame from powerful investors wanting to buy2 0 0 8mortgages. The market was essentially turnedon its head and that is a gravity-defying act.• To make the products profitable, higherinterest rates were necessary. But to meet thehuge demand for them, it was important tosell them to as many homeowners as possible.So teaser rates — which enticed morepeople to take out more mortgages - wereused to lure borrowers. Then adjustable rates— with payments that sometimes doublewhen they reset — were added to ensurehigher interest payments to investors.• The mortgage industry treated investors onc o p rWalliStreet like preferredgVIP customers, buth ttheir customer service orientation shouldhave been focused instead on regular customerstrying to borrow money with safemortgages in order to buy homes for theirfamilies.• To churn out enough loans to keep up withWall Street’s insatiable hunger, lendersencouraged consumers to borrow when theycould not afford to and pushed refinancesand home equity loans like real estate ATMmachines. Some resorted to illegal tactics,and a lack of government oversight made iteasier to get away with such crimes.• Scores of borrowers who qualified for lowcost,low-risk prime loans, for example, weresold expensive subprimes instead —because those carried higher rates of returnfor Wall Street.• Eventually, as we now know, loose lendingpractices and exotic mortgages led to disaster.Major investment portfolios were populatedwith bad loans that infected them likea virus. Mortgage activity slowed, puttingthe brakes on the housing market. That putthe squeeze on homeowners who reliedupon home equity as a huge part of theirnet worth.The good news is that as strategies areimplemented to remedy the financial mess,the real estate business will not only turnaround, but it will also become better andmore reliable than ever before. The evidenceis already emerging. Tighter oversight of themortgage industry to prevent predatory lendingwas recently enacted at the federal level.Support for the nation’s two biggest mortgageagencies — Fannie Mae and Freddie Mac —was also provided. The FHA was given morepower to make affordable loans — especiallyto homeowners with good credit who do notwant to make hefty down payments — andFannie Mae was authorized to make jumboloans, which used to be only provided by privatelenders.All of these factors help to ensure thathome ownership will remain possible — andmore affordable — over the long haul.Meanwhile the artificial and dangerousexcesses created by an ill-conceived partnershipbetween Wall Street hedge fund managersand the lending industry are beingwrung out of home prices. As soon as thoseartificial and greed-induced influences aregone, real estate will regain traction, sales willpick up, and real estate equity will rise withsolid integrity and longevity.Had the credit crisis not happened when itdid, problems would have continued to festerand worsen. But history will most likely showthat this year — although challenging — is ahealthy turning point for real estate ownershipand investment in the USA. Many buying duringthis rare opportunity for bargain huntingcan already attest to that fact. ◗— Jeff Hammerberg is the president ofGayRealEstate.com, an online real estatecompany dedicated to the LGBT community.Not for Reproduction Copyright 2008 <strong>QNotes</strong> Not for Reproduction
Not for Reproduction Copyright 2008 <strong>QNotes</strong> Not for ReproductionEx-HRC head coming to UNCCElizabeth Birch to speak on gay rights, businessand communitycompiled by Q-Notes staffCHARLOTTE — OUTspoken, a group of students, facultyand staff at the University of North Carolina-Charlotte, will hostguest speaker Elizabeth Birch (pictured), a former president ofthe Human Rights Campaign, on Oct. 7.Addressing LGBT civil rights and social progress, Birch willdiscuss how gay equality affects individuals, businesses and thelarger community.Birch is a former attorney and corporate executive. Shedirected the Human Rights Campaign from 1995 to 2004. She•• • •OuttoEat• • •Q - L I V I N Gc o pand her former partner,rHilary Rosen, wereioutspoken advocatesgand politics.”h tfor Hillary Clinton’s presidential bid. Birch currently operates her The event, open andown consulting firm and runs Rosie O’Donnell’s production free to the public, beginscompany, KidRo Productions, Inc.at 7 p.m. in McKnightIn 2007, the university brought transgender author, playwright,performance artist and activist Kate Bornstein to cam-University Center atHall in the Conepus. OUTspoken was born out of the desire to see more LGBTinclusivespeakers and events at the school and in the greaterMore informationUNCC.Charlotte area.about the evening can beStudents are excited about their participation in the group found at outspoken.and the chance to help organize events for noted and respected uncc.edu. ◗LGBT leaders.In a statement, OUTspoken said they anticipate “Birch’s— Cristina Dominguezspeech to be an illuminating exploration of both litigation contributed to this report.2 0 0 8YourRestaurantHerec o p r i g h tas low as $35c o p r i g h t2 0 0 8c o p r i g h tSEPTEMBER 20 . 2008 • <strong>QNotes</strong> 41Not for Reproduction Copyright 2008 <strong>QNotes</strong> Not for Reproduction
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