So what if bear Stearn was purchased by JP Morgan Chase! Most real estate agents will ask me "What does this have to do with real estate?" My answer? "Everything!" Things are changing at the speed of light in the banking and investment world. As of a half an hour ago JP Morgan Chase announced it had agreed to purchase Bear Stearns for a stock swap trade based upon Bear Sterns close on the stock market Friday at $2 a share! Upon reading many news sources consensus was that the Federal Reserve had placed pressure on the deal to come to an agreement prior to the foreign stock markets opening on Monday. Bear Stearns is the 5th largest investment bank and was heavily vested in mortgage backed securities that started to correct last year and Bear Sterns had to close two hedge funds that were very big into sub-prime investments.
So Friday the market was buoyed by a Federal Reserve intervention with JP Morgan Chase acting as a go between on the surface, but in actuality was probably meant to keep confidence in the market. So the Bank too big to fail was simply acquired.
In real estate we have to stop and ask ourselves what impact will this have on future lending? Will credit tighten further? Will it be harder to get a loan, and sell a loan? Or will loans be only for those with large down payments and superb credit in effect locking all others out of the market that would like to buy a home. In thepast if a bank, or mortgages investment company may decide to sell a loan to another bank and make a profit on the sale, and at the same time free up capitol. The bank may want to hold the loan for the entire term and collect the interest due on the loans for 30 years. Now, fear has gripped the market. Risky sub-prime and Alt A Jumbo no or low document loans have stopped paying or are delinquent in paying and now everyone is questioning the value of the loans them-self! Are they worth buying? Are they worth owning? How much fraud and bad paper is out there?
In the higher level Bear Stearns Hedge Funds had been major players in accumulating these notes in very large numbers. Everything was fine until these Hedge Funds became undone last summer..and brought our attention to the term sub-prime. This preceeded Countrywide's troubles (and most likely a Federal Reserve intervention with Bank of America!)
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Things are happening so fast and furious now, it's hard to keep up with it all. That's what I like about AR. If I miss it, chances are someone else caught it. One stop shopping.
I heard and read the news when you did. I still can't get over the price. $2 a share. Such a deal!!!
Chase has been my preferred mortgage company for myself and my buyers for 15 years. Most of what they underwrote is still serviced by Chase. They didn't play revolving door. For a direct lender, they are the best I've ever worked with.
Hope things don't change.
This is getting downright interesting.
Frank Rubi Louisiana Real Estate-Homes for Sale What we are seeing are American bank failures. They may call it an intervention or a buy out but common sense knows what is going on! Where would Countrywide be if Bank of America was buying it out? I mean BOA is not worried about the bad paper? The reason is they have assurances from the Federal Reserve! I thought there was transparency, but the obvious will probably not be acknowledged. Sort of like an episode of Mission Impossible!
Mark Horan P.A. "The Resident Chef" at Keller Williams I personally do not think a lot more foreign dollars are going to move in. Some dust has to settle. There may be a sell off in stocks that allows things to level out. I also listened to a Harvard economist from Harvard last night on he mentioned there can be no bottom until real estate has bottomed and that is no where in sight! It is a very visious and insidious circle that moves beyond normal recessionary fears. The term was "Epic!" It moves beyond corrections we've had in the past from segmented corrections like the stock market plunge of 88, or the ".Com" and "TelCom" bubbles. This is real estate that is secured by bad mortgages and securitized into investment instruments. The problem? Bad borrowers, fraud, delinquency...= bad investments! They have pulled down the value of those notes, and lenders cannot sell them, and at the same time the asset values from the bad loans are dropping also! So banks which lend us the money to buy homes are in deep trouble! Can you say "Holy Cow?"
Mike Norvell Sr., Developers Capital Realty I do not thinking that we will technically see bank failures, they will do consolidations and supposed buy outs! In the real world? They are bank failures! Credit is pretty frozen!
Jennifer Fivelsdal,ABR,GRI,SRES Well I think it is a house of cards becoming undone. The problem is this is why persons need to have 20% down, and be qualified to buy before just signing on the dotted line. Home ownership should be something a person can afford. Those are the fundimentals that were abandoned. Now we have to deal with the fallout which is going to go on for quite a while to come. Banks cannot start to recover until the bad debt is behind them!
Craig W. Barrett - Hughesville MD Real Estate This is going to be an interesting week. Tomorrow the Federal Reserve is likley to cut rates, and the stock market will probably rally, but in the long term it will not sustain. Bad debt is still in the gas tank, and we cannot move forward until it is removed.
My jaw is still on the floor--how could SO much change in just ONE week?! The rate change is great for my Buyers this week but, I'm really feeling for those who were heavily invested in Bear Stearns.
Eliese Pivarnik, Century 21 Ski Town, RSPS, Steamboat Springs, CO Real Estate Yep! If the Fed had not intervened it would have been something else!