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The bailout, real estate, mortgages, the economy, and the stock market – oh boy!

What is my medical prognosis?

oh boy! Here we go again. We had a great reversal day in the stock market on Thursday which led to a great day on Friday with news about a mortgage market and a bailout of financial institutions. All of this combined with a massive reduction in the 799 financial stocks on which the SEC instituted a short-selling ban.

Then we had a Monday where Goldman and Morgan became banks, the dollar and bonds strayed, oil blew up (although the surge may have been technical), and apparently some people may have found ways around the ban on sales in short. The market gave back everything it had picked up on Friday.

What does this mean for me (and you) and the mortgage market?

Once the final shape of the rescue plan is established (hopefully sooner rather than later), what will it mean for me, for you and for the mortgage markets?

Good question.

As a participant in the real estate and commercial mortgage markets, I want to know if that will mean that the remaining financial institutions will be willing to lend again. Once we know that they are willing to lend, the question becomes who they are willing to lend to.

If I have a buyer looking to purchase a mixed use property that has a DSCR of 1.32, the buyer has a 660 credit score, and has the 6 month reserves that most lenders will require today, will they get a loan? Will liquidity return for a borrower like this, or will everyone remain in protection mode?

Some of the bridging loan lenders I know want to know if the exit strategies they had a year ago, which then evaporated, will ever be plausible again.

They have a borrower who borrowed on his income producing building at 50% LTV because he needed to make improvements, but his credit score was less than stellar. The exit strategy was to increase the credit rating and refinance with a conventional loan. The credit score has gone up, but will a lender lend now?

Then we have another borrower who has a construction loan to build a single-family home, has a score of 650, and an appraisal on the finished home that says they need a 75% LTV. I can’t find a lender.

This is a segment of the market that not everyone thinks about, but until the banks start lending, they cannot close good loans and make new ones. Worse yet, they will have to start foreclosure on borrowers who never thought these expensive loans would be outstanding for so long.

Enough of Negativity!

A week or so ago, I wrote an article that said let’s put the pessimism behind us and focus on the task at hand, which is a plan to drive the business forward. I said it with all sincerity and I still think so today.

The problem is that the government decision-making process and the news flow in general sometimes makes it difficult. I think the thing to do is stop watching the financial channels like CNBC and stick with reruns of All In The Family and MASH.

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Do you know what I’m going to do? Focus on my teams, the Mets and the Jets, to raise my head and focus on the eye of the tiger. I went to Shea last night and left early to go home and watch the Jet game. Oh boy!

I think I’ll put CNBC back on.

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