Bank of America's Brand - Shelter in the Storm

Worried consumers are looking for a safe haven for their deposits  and Bank of America is clearly benefiting from the flight to safety. Troubles at IndyMac Bank, Washington Mutual, Wachovia and others helped Bank of America to increase it's consumer base.

HarperMees & Associates met with Harold Michaud, Area Manager & Senior V.P. for Bank of America, yesterday at the Keller Williams Realty offices in Danville, CA. Keller Williams Realty in Danville & Walnut Creek recently chose Bank of America to to be their "in-house lender." Businesses are also looking for safety & stabiity.

I asked Harold Michaud what was the foremost message he would like to get out to worried consumers - "Bank of America is Funding Loans."

Bank of America has the largest underwriting base in the United States and Harold Michaud wants consumers to know that B of A's doors are open to consumers looking for shelter from the storm.

• Washington Mutual (WaMU) announced yesterday that it will be laying off 1600 employees in Pleasanton (1200) & San Francisco.
• About 40 percent of Bay Area companies intend to chop jobs during the coming six months, according to a new survey of local executives released Thursday.

Mortgage orphans is a term used to describe homeowners with mortgages that no longer have a mortgage broker or loan officer due to their lending institution going out of business. There are a lot of mortgage orphans these days. The most recent deluge of orphans is a result of the IndyMac Bank takeover by the FDIC.

Last Tuesday, I attended the Contra Costa Realtors in Motion meeting at Concord Centre. IndyMac Bank was this month’s sponsor of the CCRIM. A representative of IndyMac Bank told the group – though IndyMac is leaving the traditional mortgage business, IndyMac is strong and remains a big player is certificate of deposits. I guess the upper echelons of the corporate structure weren’t sharing the depth of the troubles with their employees. This is often the case. It’s sad to see people put into these types of situations.

I ran into one of IndyMac’s former agents yesterday. He used to be part of their retail lending division in San Ramon, CA. I asked him what he was going to do and what he thought of the current situation.

He told me that he started looking for other options several months ago. He also told me that in his opinion the big banks taking over the lion’s share of the mortgage business is not good for consumers.

“The big lending institutions are top heavy with expensive level after level of management. The consumer winds up footing the bill for all of those salaries and the mortgage business does not really need or require all of that structure.”

I was also informed that there is a group trying to buy IndyMac’s former retail lending group. He did not feel that this was going to be a good thing either. My sense was because of the group involved in the takeover attempt.

Many homeowners' relationship with their lender or mortgage broker is a fleeting affair when it should be a long-term relationship. Finding a good lender or mortgage broker and consulting with them regularly like you would your financial advisor or CPA is a good thing.

If you find yourself in the position of being orphaned, pick up the phone and start the process of finding a lending professional that can help keep you abreast of what all the changes in the industry mean to you as a homeowner.

REOs – bank owned properties – are on the rise nationwide and California is leading the way. According to reports, California has led the nation in foreclosure filings for 15 straight months.

Real Estate Owned properties are houses which do not sell at foreclosure auctions. When houses are returned to the bank, the mortgage is eliminated and the bank negotiates with creditors to remove or reduce liens.

The 680 corridor from Walnut Creek to Pleasanton is one of the most stable real estate markets in the country, but that doesn’t mean that communities like Alamo, Danville and San Ramon are immune to the foreclosure problems.

The big lenders like Bank of America, Countrywide, IndyMac and others are ramping up their foreclosure and REO efforts to help homeowners in trouble and expedite the process.

Three perspectives to the foreclosure/REO situation:

• Homeowners in trouble – need help with restructuring to save their homes or expedited processes that help them move quickly through the difficulties and challenges with as little damage to their financial future as possible.
• Investors – individuals looking to invest in REOs and foreclosures will benefit from expedited procedures.
• Communities – neighborhoods like Danville and San Ramon will benefit by reducing vacant homes in the area and the quicker the inventory is moved, the sooner property values can be freed from the negative impact of REOs in the area.

Countrywide Mortgages Foreclosure Blog  indicates that they currently have over 14,000 properties available representing almost $3 billion of property – $1.3 Billion in California.

Financing REO properties in Danville and San Ramon is the same as any other investment property. Plan to contribute at least 10% or more toward the down payment. Do your due diligence to properly cash flow your investment; with this you will be able to weather any market volatility in the future.

From Owen Hennefer, our in-house lender:

Indymac yesterday completed two trades for mortgage-backed securities with Private Investors.

These are the first non-GSE trades in the last 36 days. So, this is a good sign that the panic may be subsiding and private money could bring liquidity back to the mortgage market. I still wouldn't expect a quick turn-around, but it's a start. As things come back it will unfold from quality prime loans first and eventually we'll see some movement in some of the riskier products as they start to open up a bit again. Don't hold your breath for option arms or stated w2 to get aggressive again, but we could see some of the other alt-a products that make sense and have historically performed well come back, but likely at reduced loan-to-value.

People are going to have to be able to afford their home now. That's the new market and that's the mentality you have to embrace to continue to survive this market. The quicker you move to build your business, marketing and clientele around that concept the quicker you will ramp up start to take advantage of what is there.