Invest in Singapore: Bernanke says credit is easing.
The unemployment rate will continue to get worse and more jobs will be lost. However Credit is easing. Companies are running down their inventory. Increased in production activity may resume towards the end of this year as inventories need to be replenished.
Interest rates are near ZERO, though not all may benefit from these low interest rates. US Consumer income continue to drop. Last month consumer income shrank some US$29 billion.
Even after GDP picks up, there will still be considerable slack in the economy in that there is likely to be economic growth without significant net job additions, until such time that the economy is back on a firm footing.
Showing posts with label singapore refinance. Show all posts
Showing posts with label singapore refinance. Show all posts
Wednesday, May 6, 2009
Monday, April 20, 2009
Singapore Property Investor: Is the US recovering in Q3, 2009?
Is the recovery going to be V-shape, U-shape or L-shape?
Some leading indicators are looking positive. If property investors can time it right, they can easily become richer. The doom and gloom is affecting judgement, but these are very real fears. Even the very rich are getting burnt or feeling the uncertain sentiment.
According to www.PropertyBuyer.com.sg, there has been increased House Hunting and Mortgage Refinancing activities. Many of these are from people who already own 2 to 3 properties. So there is indeed some cash flushed buyers out there shopping for good value deals.
Contact them: -
http://www.PropertyBUYER.com.sg/contactus.php
Email them: loans@propertybuyer.com.sg
Friday, April 3, 2009
Elevated Risks for Uncompleted under-construction Pre-TOP Properties
Singapore Mortgage and Home Loan: Elevated Risk for Uncompleted pre-TOP Properties
Elevated Risk for yet to be complete Pre-top properties.
Courtesy of www.PropertyBUYER.com.sg
Contact them
Email: loans@propertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php
Financial Institution reduces loan quantum for Rivergate Condominium
Singapore
There is now elevated risks for home owners with building under construction (pre-top)
properties. Some of these properties were sold during the boom time in
2006 and 2007 with TOP in 2009, 2010 and beyond. Valuations have
dropped, some heartless financial institutions do not stand behind their
home owner.
Rivergate Condo owner gets "betrayed" by Financial institution.
Someone who has bought a Rivergate Condominium unit during the launch
around 2007. He told us he bought it for $2000 per square feet for a property
of 2025 sq feet. The price bought was $4 million dollars.
At that time, he arranged financing for 80% of $4 million from a financial
institution (which we shall not name, there are more than 1). The loan size at full
disbursement is $3.2 million dollars.
Recently, just 3 days prior to the TOP, the financial institution sent valuers to
re-value the place. They arrived at a figure of $1200 per square feet. This
valued the property at $2.4 million. A 80% loan to valuation equals $1.92
million. From a loan size of $3.2 million to $1.92!!!
This leaves the home owner short of $1.28 million dollars!!!
He has to let go of the property at fire sale prices or work out a plan with the
developer. The consequences are dire. A few more such cases can
really sink an already weak economy. Yet another bad example of
pro-cyclical behaviour.
Financial institutions have every right in their legal contract to exercise this
adjustment in loan size. However such a scenario was never fully explained
by the bankers on lending him the money.
The owner has a choice, forfeit all the proceeds paid up till this point or work
out a mutually acceptable plan with the developer. But the consequences
are dire as the properties may be dumped into the market with few buyers
depressing the prices for all properties, which in turn lead to more financial
institutions pulling the plug on borrowers.
Our question has always been, why lend in the first place and then to pull it
back at the very last moment?
This is another example of pro-cyclical behaviour that typically makes a
recession worse or a boom time bubble bigger than it is. This totally
destroyed that person's wealth as there is no way he could have come up
with $1.28 million in 3 days and he may have to dump his assets cheaply.
Opinions
There is now an elevated risk of buying new launches of uncompleted and
yet to be TOP properties. Home buyers who commit to pre-top and
uncompleted properties with completion dates in 2009, 2010 and perhaps
even 2011 is likely to be exposed to risks whereby the financial institution(s)
reduce the loan size at their whims and fancy. Do think twice.
contact them at:
loans@propertybuyer.com.sg
Elevated Risk for yet to be complete Pre-top properties.
Courtesy of www.PropertyBUYER.com.sg
Contact them
Email: loans@propertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php
Financial Institution reduces loan quantum for Rivergate Condominium
Singapore
There is now elevated risks for home owners with building under construction (pre-top)
properties. Some of these properties were sold during the boom time in
2006 and 2007 with TOP in 2009, 2010 and beyond. Valuations have
dropped, some heartless financial institutions do not stand behind their
home owner.
Rivergate Condo owner gets "betrayed" by Financial institution.
Someone who has bought a Rivergate Condominium unit during the launch
around 2007. He told us he bought it for $2000 per square feet for a property
of 2025 sq feet. The price bought was $4 million dollars.
At that time, he arranged financing for 80% of $4 million from a financial
institution (which we shall not name, there are more than 1). The loan size at full
disbursement is $3.2 million dollars.
Recently, just 3 days prior to the TOP, the financial institution sent valuers to
re-value the place. They arrived at a figure of $1200 per square feet. This
valued the property at $2.4 million. A 80% loan to valuation equals $1.92
million. From a loan size of $3.2 million to $1.92!!!
This leaves the home owner short of $1.28 million dollars!!!
He has to let go of the property at fire sale prices or work out a plan with the
developer. The consequences are dire. A few more such cases can
really sink an already weak economy. Yet another bad example of
pro-cyclical behaviour.
Financial institutions have every right in their legal contract to exercise this
adjustment in loan size. However such a scenario was never fully explained
by the bankers on lending him the money.
The owner has a choice, forfeit all the proceeds paid up till this point or work
out a mutually acceptable plan with the developer. But the consequences
are dire as the properties may be dumped into the market with few buyers
depressing the prices for all properties, which in turn lead to more financial
institutions pulling the plug on borrowers.
Our question has always been, why lend in the first place and then to pull it
back at the very last moment?
This is another example of pro-cyclical behaviour that typically makes a
recession worse or a boom time bubble bigger than it is. This totally
destroyed that person's wealth as there is no way he could have come up
with $1.28 million in 3 days and he may have to dump his assets cheaply.
Opinions
There is now an elevated risk of buying new launches of uncompleted and
yet to be TOP properties. Home buyers who commit to pre-top and
uncompleted properties with completion dates in 2009, 2010 and perhaps
even 2011 is likely to be exposed to risks whereby the financial institution(s)
reduce the loan size at their whims and fancy. Do think twice.
contact them at:
loans@propertybuyer.com.sg
Tuesday, March 17, 2009
Singapore Home Loan and Car Home: An Anomaly (Something not quite right)
Article contributed by www.PropertyBUYER.com.sg
HOUSING LOAN
Many banks have cut back on home loan lending. Even the lending Loan to valuation ratio has been reduced from 80% to 70% in some cases.
We all know that Free-Hold or 999 lease hold land appreciates over the longer term of 10 years or 20 years cycle. This coincides with the loan tenure of typically 20 to 30 years cycle. In other words, lending money to individuals for property purchases for first homes are actually very safe banking activities as the land or property is used as collateral not only keeps it's value, but appreciates over the longer time horizon.
There are some 270,000 private houses and condominiums in Singapore. Assuming 10% of households are in negative equity, that is 27,000 units.
And assuming that those 27,000 are in negative equity to the tune of 10%. Assume that their loan size is $500,000. 10% of $500,000 is $50,000 per household. Even if we assume all of these households default on their repayment, we are talking about: -
$50,000 x 27,000 units of housing = $1.35 Billion of losses for banks.
100% CAR LOANS
Since a few years ago, we have seen MAS relaxing rules on banks for Car loan lending. Banks started to lend out 100% for car loans.
Almost everyone knows that except in rare circumstances, most cars are depreciating assets.
If a car of $110,000 price has a scrap value of $10,000. In Singapore cars have a life span of 10 years. This means the depreciation is $10,000 a year. But we all know that cars have steeper depreciation in the earlier years.
So let's say: -
Year 1 - Depreciation = $15,000
Year 2 - Depreciation = $15,000
Year 3 - Depreciation = $13,000
Year 4 - Depreciation = $12,000
Year 5 - Depreciation = $10,000
By the end of each year, the car is worth: -
year 1 - Value of car = $110,000 - $15,000 = $95,000
year 2 - Value of car = $80,000
Year 3 - Value of car = $67,000
Year 4 - Value of car = $55,000
Year 5 - Value of car = $45,000
Assuming that the car's values fall linearly and assuming that the car owner pays up linearly over the course of the 10 years. I.e. $110,000/10 = $11,000 of repayment every year in principle.
Year 1 - Amount owed = $110,000 - $11,000 = $99,000
Year 2 - Amount owed = $99,000 - $11,000 = $88,000
Year 3 - Amount owed = $88,000 - $11,000 = $77,000
Year 4 - Amount owed = $77,000 - $11,000 = $66,000
Year 5 - Amount owed = $66,000 - $11,000 = $55,000
What this means is that, in the case of default (i.e. person stops paying for his installment), in Year 1, bank is owed $99k while car is worth $95k.
Negative Equity in Car loan
Year 1 - Amount owed - Value of car = $99,000 - $95,000 = $4,000
year 2 = $88,000 - $80,000 = $8,000
year 3 = $77,000 - $67,000 = $10,000
Year 4 = $66,000 - $55,000 = $11,000
Year 5 = $55,000 - $45,000 = $10,000
What this means is, the bank stands to lose $4,000 to $11,000 in each of these car loans if the loans are not recoverable from the car owner.
There were some 3,000 COEs (Certificates of entitlement per month) therefore about 30,000 cars sold each year, imagine if 50% of these cars sold were through 100% loans.
And Imagine if 20% of these people default on their loans.
That is 15,000 cars x 20% = 3,000 car loans in trouble. Let's assume the average car loan size $50,000, that is $150,000,000 (of 150million of problem for the banks). Since 100% car loan financing has been around for roughly 3 years. A rough estimate of that would be $0.5 Billion of problems which will hit the bank's bottom line.
WHY HOME LOAN is 90% Maximum (Most banks lend only 80% now) and Car Loan is 100%
Car loans is a small magnitude problem of $0.5 billion of potential losses versus that of housing loan of $1.35 billion of potential losses. Both are easily absorbed by the banks which are operationally profitable.
However, we do feel that Car loans is another problem that will blow up should the economy head further south.
It is a small magnitude problem comparatively with car loans no doubt, but still I do not see the logic of such risk taking behaviour by the banks by giving 100% car loans.
If banks are going to lend 100% for cars in which their collateral is suspect, why not lend 90%, 95% or 100% for Houses?
Nevermind short term house price volatility, because on a longer term, property value tends to go up. Banks will tend to have better Collateral that backs the money they lent out.
Now you see where this logic goes?
Banks charter is to make money.
Banks executives are compensated on profitability of banks, not on risk management.
(No one will pad the CEO on the shoulder for having the safest rating, but making just a bit of money)
Banks, like all organizations are run by people. If there are no rules, human behaviour dictates that banks may take excessive risks just like any organizations would, when they are allowed to do so in order to achieve a reward for meeting objectives or avoid NOT meeting objectives and getting fired or demoted.
This calls for a back-to-basic ground rule and a return to some kind of a keynesian economics whereby some regulatory control are essential.
Milton Friedman's Free Market only works within a certain range, at the extreme end of tight credit squeeze or excessive credit, Free market mechanism breaks down and industries are permanently damaged and do not bounce back in years leading to massive unemployment.
They can be reached at: -
http://www.propertybuyer.com.sg/contactus.php
HOUSING LOAN
Many banks have cut back on home loan lending. Even the lending Loan to valuation ratio has been reduced from 80% to 70% in some cases.
We all know that Free-Hold or 999 lease hold land appreciates over the longer term of 10 years or 20 years cycle. This coincides with the loan tenure of typically 20 to 30 years cycle. In other words, lending money to individuals for property purchases for first homes are actually very safe banking activities as the land or property is used as collateral not only keeps it's value, but appreciates over the longer time horizon.
There are some 270,000 private houses and condominiums in Singapore. Assuming 10% of households are in negative equity, that is 27,000 units.
And assuming that those 27,000 are in negative equity to the tune of 10%. Assume that their loan size is $500,000. 10% of $500,000 is $50,000 per household. Even if we assume all of these households default on their repayment, we are talking about: -
$50,000 x 27,000 units of housing = $1.35 Billion of losses for banks.
100% CAR LOANS
Since a few years ago, we have seen MAS relaxing rules on banks for Car loan lending. Banks started to lend out 100% for car loans.
Almost everyone knows that except in rare circumstances, most cars are depreciating assets.
If a car of $110,000 price has a scrap value of $10,000. In Singapore cars have a life span of 10 years. This means the depreciation is $10,000 a year. But we all know that cars have steeper depreciation in the earlier years.
So let's say: -
Year 1 - Depreciation = $15,000
Year 2 - Depreciation = $15,000
Year 3 - Depreciation = $13,000
Year 4 - Depreciation = $12,000
Year 5 - Depreciation = $10,000
By the end of each year, the car is worth: -
year 1 - Value of car = $110,000 - $15,000 = $95,000
year 2 - Value of car = $80,000
Year 3 - Value of car = $67,000
Year 4 - Value of car = $55,000
Year 5 - Value of car = $45,000
Assuming that the car's values fall linearly and assuming that the car owner pays up linearly over the course of the 10 years. I.e. $110,000/10 = $11,000 of repayment every year in principle.
Year 1 - Amount owed = $110,000 - $11,000 = $99,000
Year 2 - Amount owed = $99,000 - $11,000 = $88,000
Year 3 - Amount owed = $88,000 - $11,000 = $77,000
Year 4 - Amount owed = $77,000 - $11,000 = $66,000
Year 5 - Amount owed = $66,000 - $11,000 = $55,000
What this means is that, in the case of default (i.e. person stops paying for his installment), in Year 1, bank is owed $99k while car is worth $95k.
Negative Equity in Car loan
Year 1 - Amount owed - Value of car = $99,000 - $95,000 = $4,000
year 2 = $88,000 - $80,000 = $8,000
year 3 = $77,000 - $67,000 = $10,000
Year 4 = $66,000 - $55,000 = $11,000
Year 5 = $55,000 - $45,000 = $10,000
What this means is, the bank stands to lose $4,000 to $11,000 in each of these car loans if the loans are not recoverable from the car owner.
There were some 3,000 COEs (Certificates of entitlement per month) therefore about 30,000 cars sold each year, imagine if 50% of these cars sold were through 100% loans.
And Imagine if 20% of these people default on their loans.
That is 15,000 cars x 20% = 3,000 car loans in trouble. Let's assume the average car loan size $50,000, that is $150,000,000 (of 150million of problem for the banks). Since 100% car loan financing has been around for roughly 3 years. A rough estimate of that would be $0.5 Billion of problems which will hit the bank's bottom line.
WHY HOME LOAN is 90% Maximum (Most banks lend only 80% now) and Car Loan is 100%
Car loans is a small magnitude problem of $0.5 billion of potential losses versus that of housing loan of $1.35 billion of potential losses. Both are easily absorbed by the banks which are operationally profitable.
However, we do feel that Car loans is another problem that will blow up should the economy head further south.
It is a small magnitude problem comparatively with car loans no doubt, but still I do not see the logic of such risk taking behaviour by the banks by giving 100% car loans.
If banks are going to lend 100% for cars in which their collateral is suspect, why not lend 90%, 95% or 100% for Houses?
Nevermind short term house price volatility, because on a longer term, property value tends to go up. Banks will tend to have better Collateral that backs the money they lent out.
Now you see where this logic goes?
Banks charter is to make money.
Banks executives are compensated on profitability of banks, not on risk management.
(No one will pad the CEO on the shoulder for having the safest rating, but making just a bit of money)
Banks, like all organizations are run by people. If there are no rules, human behaviour dictates that banks may take excessive risks just like any organizations would, when they are allowed to do so in order to achieve a reward for meeting objectives or avoid NOT meeting objectives and getting fired or demoted.
This calls for a back-to-basic ground rule and a return to some kind of a keynesian economics whereby some regulatory control are essential.
Milton Friedman's Free Market only works within a certain range, at the extreme end of tight credit squeeze or excessive credit, Free market mechanism breaks down and industries are permanently damaged and do not bounce back in years leading to massive unemployment.
They can be reached at: -
http://www.propertybuyer.com.sg/contactus.php
Sunday, March 8, 2009
Singapore Home Loan: Indonesia Interest Rates
Singapore Home Loan and Refinance
Indonesia has further dropped interest rates to stimulate their domestic economy.
Indonesia has further dropped interest rates to stimulate their domestic economy.
Singapore Home Loan: Global Finance world's 50 Safest Banks? Oh really?
Article contributed by www.PropertyBUYER.com.sg
http://www.propertybuyer.com.sg/contactus.php
READ ARTICLE
GLOBAL FINANCE WORLD's 50 SAFEST BANKS, REALLY???
1. KfW
(Germany)
2. Caisse des Depots et Consignations (CDC)
(France)
3. Bank Nederlands Gemeenten (BNG)
(Netherlands)
4. Landwirtschaftliche Rentenbank
(Germany)
5. Rabobank
(Netherlands)
6. Landeskreditbank Baden-Wuerttemberg-
Foerderbank
(Germany)
7. NRW. Bank
(Germany)
8. BNP Paribas
(France)
9. Banco Santander
(Spain)
10. Royal Bank of Canada
(Canada)
11. National Australia Bank
(Australia)
12. Commonwealth Bank of Australia
(Australia)
13. Banco Bilbao Vizcaya Argentaria (BBVA)
(Spain)
14. Toronto-Dominion Bank
(Canada)
15. Australia & New Zealand Banking Group
(Australia)
16. Westpac Banking Corporation
(Australia)
17. Banco Espanol de Credito S.A. (Banesto)
(Spain)
18. ASB Bank Limited
(New Zealand)
19. HSBC
(United Kingdom)
20. Credit Agricole
(France)
21. Wells Fargo
(United States)
22. Nordea Bank
(Sweden)
23. Scotiabank
(Canada)
24. La Caixa
(Spain)
25. Svenska Handelsbanken
(Sweden)
26. US Bancorp
(United States)
27. Banco Popular Espanol
(Spain)
28. DBS Bank
(Singapore)
29. Pohjola Bank
(Finland)
30. Deutsche Bank
(Germany)
31. Société Générale
(France)
32. Intesa Sanpaolo
(Italy)
33. Bank of Montreal
(Canada)
34. DnB NOR Bank
(Norway)
35. The Bank of New York Mellon
(United States)
36. Caixa Geral de Depositos
(Portugal)
37. United Overseas Bank
(Singapore)
38. OCBC
(Singapore)
39. Axa Bank Europe
(Belgium)
40. Credit Suisse Group
(Switzerland)
41. Landesbank Baden-Wuerttemberg
(Germany)
42. Nationwide Building Society
(United Kingdom)
43. CIBC
(Canada)
44. National Bank Of Kuwait
(Kuwait)
45. Barclays
(United Kingdom)
46. UBS
(Switzerland)
47. JPMorgan Chase
(United States)
48. Bank of Tokyo-Mitsubishi UFJ
(Japan)
49. Banque Federative du Credit Mutuel (BFCM)
(France)
50. Credit Industriel et Commercial (CIC)
(France)
Global Finance magazine February 25, 2009
OH REALLY?
Here are the list of the world's 50 Safest banks. However, we would take it
with a pinch of salt as many of the same rating agencies did not spot the
problem with sub-prime mortgages and Collaterized Debt Obligations
(CDO).
OUR DOUBTS
We have doubts as to how much ability the rating agencies have with
regards to estimating off balance sheet risks.
We also have doubts as to how much ability the rating agencies has, to assess
the exposure of each one of the complicated derivatives that each bank
holds and it's liabilities and valuation, as the trading volume is so thin,
derivatives are mostly mark to model. But in times of credit crisis, the
derivatives can be useless and worthless if it is mark-to-market. That could
mean that banks who dabble in derivatives are technically insolvent if they
are Marked-to-market.
CONSOLATION PRIZE
The only consolation we have is, the world's leaders are sitting up and
nobody wants another bank to fail. Many banks who take excessive risks,
will be nationalized, the shareholders will be punished for their faith in the
banks.
CLAW BACK THE BONUSES OF GREEDY BANKERS
Previous CEOs of banks will get away with all the big fat bonuses for taking
the excessive risks and bring the banks to their knees for their greed.
We strongly feel that banks who are currently in trouble, there is a record to
trace back to the time when they first take excessive risks. Executives who
received big fat bonuses and share option plans, should be liable to repay
most of their bonuses. They should not be let off easily.
We quote a section from NYT
"
Arthur Levitt, the former chairman of the Securities and Exchange
Commission, charges that “the credit-rating agencies suffer from a conflict of
interest — perceived and apparent — that may have distorted their
judgment, especially when it came to complex structured financial products.”
Frank Partnoy, a professor at the University of San Diego School of Law
who has written extensively about the credit-rating industry, says that the
conflict is a serious problem. Thanks to the industry’s close relationship with
the banks whose securities it rates, Partnoy says, the agencies have
behaved less like gatekeepers than gate openers. Last year, Moody’s had to
downgrade more than 5,000 mortgage securities — a tacit acknowledgment
that the mortgage bubble was abetted by its overly generous ratings.
Mortgage securities rated by Standard & Poor’s and Fitch have suffered a
similar wave of downgrades."
We are independent mortgage consultants for home loans in Singapore.
Property Agents tell you that it is a Valuable Buy
Sometimes some property agents tell the buyers that a property is worth it
and they have good bankers that can get a bank approved, do you really
think that it is really worth it?
Sometimes it's true, other times, it simply means, "Quickly buy so that I can
get my commission".
Property Agents specialized in Properties, we specialized in Home Loans.
At www.PropertyBUYER.com.sg, we don't rush you and we have no conflict
of interests with buying or selling properties. We will handle all the
paperwork for you and compare the various packages. Most important of all,
we never emphasize cheap rates or cheap loans. We first evaluate your
personal and family financial situation and then evaluate the risk versus
rewards of each possible choice.
http://www.propertybuyer.com.sg/contactus.php
READ ARTICLE
GLOBAL FINANCE WORLD's 50 SAFEST BANKS, REALLY???
1. KfW
(Germany)
2. Caisse des Depots et Consignations (CDC)
(France)
3. Bank Nederlands Gemeenten (BNG)
(Netherlands)
4. Landwirtschaftliche Rentenbank
(Germany)
5. Rabobank
(Netherlands)
6. Landeskreditbank Baden-Wuerttemberg-
Foerderbank
(Germany)
7. NRW. Bank
(Germany)
8. BNP Paribas
(France)
9. Banco Santander
(Spain)
10. Royal Bank of Canada
(Canada)
11. National Australia Bank
(Australia)
12. Commonwealth Bank of Australia
(Australia)
13. Banco Bilbao Vizcaya Argentaria (BBVA)
(Spain)
14. Toronto-Dominion Bank
(Canada)
15. Australia & New Zealand Banking Group
(Australia)
16. Westpac Banking Corporation
(Australia)
17. Banco Espanol de Credito S.A. (Banesto)
(Spain)
18. ASB Bank Limited
(New Zealand)
19. HSBC
(United Kingdom)
20. Credit Agricole
(France)
21. Wells Fargo
(United States)
22. Nordea Bank
(Sweden)
23. Scotiabank
(Canada)
24. La Caixa
(Spain)
25. Svenska Handelsbanken
(Sweden)
26. US Bancorp
(United States)
27. Banco Popular Espanol
(Spain)
28. DBS Bank
(Singapore)
29. Pohjola Bank
(Finland)
30. Deutsche Bank
(Germany)
31. Société Générale
(France)
32. Intesa Sanpaolo
(Italy)
33. Bank of Montreal
(Canada)
34. DnB NOR Bank
(Norway)
35. The Bank of New York Mellon
(United States)
36. Caixa Geral de Depositos
(Portugal)
37. United Overseas Bank
(Singapore)
38. OCBC
(Singapore)
39. Axa Bank Europe
(Belgium)
40. Credit Suisse Group
(Switzerland)
41. Landesbank Baden-Wuerttemberg
(Germany)
42. Nationwide Building Society
(United Kingdom)
43. CIBC
(Canada)
44. National Bank Of Kuwait
(Kuwait)
45. Barclays
(United Kingdom)
46. UBS
(Switzerland)
47. JPMorgan Chase
(United States)
48. Bank of Tokyo-Mitsubishi UFJ
(Japan)
49. Banque Federative du Credit Mutuel (BFCM)
(France)
50. Credit Industriel et Commercial (CIC)
(France)
Global Finance magazine February 25, 2009
OH REALLY?
Here are the list of the world's 50 Safest banks. However, we would take it
with a pinch of salt as many of the same rating agencies did not spot the
problem with sub-prime mortgages and Collaterized Debt Obligations
(CDO).
OUR DOUBTS
We have doubts as to how much ability the rating agencies have with
regards to estimating off balance sheet risks.
We also have doubts as to how much ability the rating agencies has, to assess
the exposure of each one of the complicated derivatives that each bank
holds and it's liabilities and valuation, as the trading volume is so thin,
derivatives are mostly mark to model. But in times of credit crisis, the
derivatives can be useless and worthless if it is mark-to-market. That could
mean that banks who dabble in derivatives are technically insolvent if they
are Marked-to-market.
CONSOLATION PRIZE
The only consolation we have is, the world's leaders are sitting up and
nobody wants another bank to fail. Many banks who take excessive risks,
will be nationalized, the shareholders will be punished for their faith in the
banks.
CLAW BACK THE BONUSES OF GREEDY BANKERS
Previous CEOs of banks will get away with all the big fat bonuses for taking
the excessive risks and bring the banks to their knees for their greed.
We strongly feel that banks who are currently in trouble, there is a record to
trace back to the time when they first take excessive risks. Executives who
received big fat bonuses and share option plans, should be liable to repay
most of their bonuses. They should not be let off easily.
We quote a section from NYT
"
Arthur Levitt, the former chairman of the Securities and Exchange
Commission, charges that “the credit-rating agencies suffer from a conflict of
interest — perceived and apparent — that may have distorted their
judgment, especially when it came to complex structured financial products.”
Frank Partnoy, a professor at the University of San Diego School of Law
who has written extensively about the credit-rating industry, says that the
conflict is a serious problem. Thanks to the industry’s close relationship with
the banks whose securities it rates, Partnoy says, the agencies have
behaved less like gatekeepers than gate openers. Last year, Moody’s had to
downgrade more than 5,000 mortgage securities — a tacit acknowledgment
that the mortgage bubble was abetted by its overly generous ratings.
Mortgage securities rated by Standard & Poor’s and Fitch have suffered a
similar wave of downgrades."
We are independent mortgage consultants for home loans in Singapore.
Property Agents tell you that it is a Valuable Buy
Sometimes some property agents tell the buyers that a property is worth it
and they have good bankers that can get a bank approved, do you really
think that it is really worth it?
Sometimes it's true, other times, it simply means, "Quickly buy so that I can
get my commission".
Property Agents specialized in Properties, we specialized in Home Loans.
At www.PropertyBUYER.com.sg, we don't rush you and we have no conflict
of interests with buying or selling properties. We will handle all the
paperwork for you and compare the various packages. Most important of all,
we never emphasize cheap rates or cheap loans. We first evaluate your
personal and family financial situation and then evaluate the risk versus
rewards of each possible choice.
Saturday, February 28, 2009
Singapore Mortgage: High Pay attracts the BEST bankers or the greediest?
Will high pay attract the best or the greediest bankers?
Article contributed by: http://www.PropertyBuyer.com.sg
Contact them at: -
http://www.PropertyBUYER.com.sg/contactus.php
Throughout the world, bankers are paid huge salaries. No doubt the
organisations are huge, therefore in order to manage organisations of such
enormous size, you will need someone of enormous talent.
For such enormous talent, you will then have to pay millions, even hundreds
of millions. This is true even for national banks or quasi-national banks.
Does this Logic hold water?
We think that the relationship between bigger organisations and pay is not
linear. Managing a 1 man company requires not so much skills as opposed
to managing a team of 300 people. But between managing 300 people and
3000 people, there is yet again a skill pre-requisite.
However from managing a team of 3,000 people to 30,000 the incremental
skills required for that may be marginal. As a result the salaries increase for
that types of roles should also consequently be marginally higher, not that
much more.
Why the logic doesn't hold water, If you extend this logic more, then the US
president which presides over a USD$ 14 Trillion economy and 300 million
inhabitants should perhaps demand US$ 500 billion in annual salary.
Even using Singapore's Char Kway Teow analogy, where it is claimed that
it's only $2 a person a year for good leadership (Just the cost of Char Kwya
Teow), that means that we should pay the US president $600 million or (0.6
billion dollars).
Greed takes Over
When some companies are obviously better off being split into smaller and
nimbler companies when they grow too big. Instead the management
insisted that they are better off being the big organisations that they are.
However way they structured it or argued, the logic is tenuous.
Because the organisation is so big, this necessarily entails a very HIGH pay
for the top few layers of management. The argument is often that these are
talented people and they manage such a big team.
In fact the executive's time is same as everyone else, just 24 hours a day.
No matter how capable he or she is, he/she doesn't do the actual work. He/she has
someone reporting to him/her to carry out the work, while he/she sets the direction. Because the business is so big and
contains some many business units and divisions whose head of Business Units are already setting the strategy and directions,
so we don't see why there should be someone sitting yet on top.
BANKS and their SHARE OPTIONS
We cannot really blame the bankers, the system encourages greed. With
employee share option schemes, it encourages executives to BOOST
earnings.
The boosting of earnings can come in many ways.
1) Real earnings through best practices and ethic businesses practices.
2) Real earnings through taking excessive risks on behalf of the banks. (If
the risk pays off, the bankers get a big PAY cheque)
3) Create accounting profits, that are nonetheless legal, but will need to be
write down or accounted for in later periods.
4) Create outright fraud.
Now, because the regulatory oversight has failed in the USA, banks have
largely become "Bankrupt" and that has deprived many home owners and
businesses from credit (i.e. funds and borrowings).
We strongly condemn such activities, but these are systematic failures in the
systems. Checks and balances has also failed in the US with the republican
lobbying for more tax-cuts on behalf of big and profitable businesses and a
FREE Market knows best logic. That has obviously not worked.
We are hopeful that President's Obama stimulus package will clean up this
mess. But we are not happy that the package was watered down by
including tax-cuts in the package as a result of concessions to the
Republicans, that means that actual package is smaller than it is actually
stated. Tax cuts does not immediately create employment and the logic of a
trickle down economy has been given 8 years of trial and failed.
What does this do for Singapore Mortgages?
Singapore banks have also started to invest for higher returns and some of
them got caught out by Lehman brothers and others. Most of Singapore's
properties are backed by CPF and are by and large more resilient to
sub-prime mortgages. But Singapore's banks are not immune to global trade
and credit tightness. Singapore has a high number of expatriate workforce
and is highly dependent on external trade, And as a result, credit has also
dried up. Many Singapore home loans and home owners are faced with
banks becoming more and more stringent in lending out money.
If you have a home loan in Singapore and are considering to REFINANCE
or are thinking of getting one, we are a research focused mortgage advisory,
our service is free to you because the bank pays us separately.
AMAZON Property and Finance Books
READ FULL ARTICLE at: -
http://www.propertybuyer.com.sg/viewnews.php?article=78
Read more of their articles: -
http://www.propertybuyer.com.sg/articlesnews.php
PM Lee's Call to Foreign Banks to take long term view
The Expatriate population wild card - Could cause your property prices to swing wildly.
Don't believe in Good Debt Bad Debt as 100% gospel
Learn how your Property can have Perpetual Option value
Article contributed by: http://www.PropertyBuyer.com.sg
Contact them at: -
http://www.PropertyBUYER.com.sg/contactus.php
Throughout the world, bankers are paid huge salaries. No doubt the
organisations are huge, therefore in order to manage organisations of such
enormous size, you will need someone of enormous talent.
For such enormous talent, you will then have to pay millions, even hundreds
of millions. This is true even for national banks or quasi-national banks.
Does this Logic hold water?
We think that the relationship between bigger organisations and pay is not
linear. Managing a 1 man company requires not so much skills as opposed
to managing a team of 300 people. But between managing 300 people and
3000 people, there is yet again a skill pre-requisite.
However from managing a team of 3,000 people to 30,000 the incremental
skills required for that may be marginal. As a result the salaries increase for
that types of roles should also consequently be marginally higher, not that
much more.
Why the logic doesn't hold water, If you extend this logic more, then the US
president which presides over a USD$ 14 Trillion economy and 300 million
inhabitants should perhaps demand US$ 500 billion in annual salary.
Even using Singapore's Char Kway Teow analogy, where it is claimed that
it's only $2 a person a year for good leadership (Just the cost of Char Kwya
Teow), that means that we should pay the US president $600 million or (0.6
billion dollars).
Greed takes Over
When some companies are obviously better off being split into smaller and
nimbler companies when they grow too big. Instead the management
insisted that they are better off being the big organisations that they are.
However way they structured it or argued, the logic is tenuous.
Because the organisation is so big, this necessarily entails a very HIGH pay
for the top few layers of management. The argument is often that these are
talented people and they manage such a big team.
In fact the executive's time is same as everyone else, just 24 hours a day.
No matter how capable he or she is, he/she doesn't do the actual work. He/she has
someone reporting to him/her to carry out the work, while he/she sets the direction. Because the business is so big and
contains some many business units and divisions whose head of Business Units are already setting the strategy and directions,
so we don't see why there should be someone sitting yet on top.
BANKS and their SHARE OPTIONS
We cannot really blame the bankers, the system encourages greed. With
employee share option schemes, it encourages executives to BOOST
earnings.
The boosting of earnings can come in many ways.
1) Real earnings through best practices and ethic businesses practices.
2) Real earnings through taking excessive risks on behalf of the banks. (If
the risk pays off, the bankers get a big PAY cheque)
3) Create accounting profits, that are nonetheless legal, but will need to be
write down or accounted for in later periods.
4) Create outright fraud.
Now, because the regulatory oversight has failed in the USA, banks have
largely become "Bankrupt" and that has deprived many home owners and
businesses from credit (i.e. funds and borrowings).
We strongly condemn such activities, but these are systematic failures in the
systems. Checks and balances has also failed in the US with the republican
lobbying for more tax-cuts on behalf of big and profitable businesses and a
FREE Market knows best logic. That has obviously not worked.
We are hopeful that President's Obama stimulus package will clean up this
mess. But we are not happy that the package was watered down by
including tax-cuts in the package as a result of concessions to the
Republicans, that means that actual package is smaller than it is actually
stated. Tax cuts does not immediately create employment and the logic of a
trickle down economy has been given 8 years of trial and failed.
What does this do for Singapore Mortgages?
Singapore banks have also started to invest for higher returns and some of
them got caught out by Lehman brothers and others. Most of Singapore's
properties are backed by CPF and are by and large more resilient to
sub-prime mortgages. But Singapore's banks are not immune to global trade
and credit tightness. Singapore has a high number of expatriate workforce
and is highly dependent on external trade, And as a result, credit has also
dried up. Many Singapore home loans and home owners are faced with
banks becoming more and more stringent in lending out money.
If you have a home loan in Singapore and are considering to REFINANCE
or are thinking of getting one, we are a research focused mortgage advisory,
our service is free to you because the bank pays us separately.
AMAZON Property and Finance Books
READ FULL ARTICLE at: -
http://www.propertybuyer.com.sg/viewnews.php?article=78
Read more of their articles: -
http://www.propertybuyer.com.sg/articlesnews.php
PM Lee's Call to Foreign Banks to take long term view
The Expatriate population wild card - Could cause your property prices to swing wildly.
Don't believe in Good Debt Bad Debt as 100% gospel
Learn how your Property can have Perpetual Option value
Monday, February 23, 2009
Singapore Refinance: Commentaries on PM Lee's call to Foreign bank to take long term view
SINGAPORE REFINANCE: PM Called on Foreign banks to take a long-term view
This week, reported in the straits times on the 20th Feb 2009 and Channel
News Asia, Prime Ministers Lee Hsien Loong spoke at a dinner held by
Standard Chartered. PM Lee called on foreign banks to take a long term
view and to consider the merits of borrowers who need financing to do
business, and continue to nurture clients.
We view this as a pre-emptive notice or plea to banks to stand behind
borrowers in times of hardship.
Just a few weeks ago, DBS chairman, Mr. Koh Boon Hwee re-iterated that
DBS will "stand behind it's loyal customers."
These are confidence boosting measures which we hope carry some weight
as Home Owners whose property's valuation has fallen a lot are in real
danger of the bank asking them for topping up CASH.
As we discussed in our previous article, where we highlighted the risks of banks
turning on your backs during tough times. One of the ways they can do that is not to
lend you money. Another even more drastic measure is to ask you to top up your equity
in your home loan in cases where your Property value has fallen.
An example of how a bank ask you for money when you need it most.
For example (The figures are just illustrative), your Home loan was $800,000
and your property value was $1,000,000. Banks usually have a provision
that states that they may require equity top up if valuation falls below
$900,000. If the bank valued your property and the valuers come up with a
value of $800,000, the bank, in order to maintain a Loan to Valuation Ratio
of 80%, that means the bank can only lend you $640,000.
The Bank asks you to TOP UP CASH of $800,000 - $640,000 = $160,000!!!
If valuations of properties could fall so quickly, it signifies severe distress and
many people are out of cash.
If you do not have the cash, you can refinance your loan with another bank
(which most likely will reject your application) or you can SELL you house at
a FIRE-SALE price to pay back the loan.
You very likely will lose Hundreds of thousands of dollars and perhaps go
bankrupt.
What we think
PM Lee's call to Foreign bank is an open call for them to NOT to do anything
so drastic and add to the market woes.
We hope the "Call to take a long term view" is also followed up with some
Carrot and Stick to greater effect. The fact is, borrowing money, despite your
credit rating has become very hard. This is making the already bad
economic situation even worse.
In fact, the banks in Singapore should have not lent too freely during the
economic boom times which created this problem in the first place, this also
applies to banks in Singapore.
They were lending money to the tune of 90%, creating an asset price
bubble.
Banks Make the BOOM and BUST even worse
So in order words, banks made the BOOM and BUST cycle worse! It may be
time to have a back to basics bank. And a bank that is an "efficient
thermostat", to turn on the heat when it's cold and turn on the Cool air when
it's hot. Not the other way round, giving you ice when you are freezing and
pouring hot water on you when you are already scalded.
This week, reported in the straits times on the 20th Feb 2009 and Channel
News Asia, Prime Ministers Lee Hsien Loong spoke at a dinner held by
Standard Chartered. PM Lee called on foreign banks to take a long term
view and to consider the merits of borrowers who need financing to do
business, and continue to nurture clients.
We view this as a pre-emptive notice or plea to banks to stand behind
borrowers in times of hardship.
Just a few weeks ago, DBS chairman, Mr. Koh Boon Hwee re-iterated that
DBS will "stand behind it's loyal customers."
These are confidence boosting measures which we hope carry some weight
as Home Owners whose property's valuation has fallen a lot are in real
danger of the bank asking them for topping up CASH.
As we discussed in our previous article, where we highlighted the risks of banks
turning on your backs during tough times. One of the ways they can do that is not to
lend you money. Another even more drastic measure is to ask you to top up your equity
in your home loan in cases where your Property value has fallen.
An example of how a bank ask you for money when you need it most.
For example (The figures are just illustrative), your Home loan was $800,000
and your property value was $1,000,000. Banks usually have a provision
that states that they may require equity top up if valuation falls below
$900,000. If the bank valued your property and the valuers come up with a
value of $800,000, the bank, in order to maintain a Loan to Valuation Ratio
of 80%, that means the bank can only lend you $640,000.
The Bank asks you to TOP UP CASH of $800,000 - $640,000 = $160,000!!!
If valuations of properties could fall so quickly, it signifies severe distress and
many people are out of cash.
If you do not have the cash, you can refinance your loan with another bank
(which most likely will reject your application) or you can SELL you house at
a FIRE-SALE price to pay back the loan.
You very likely will lose Hundreds of thousands of dollars and perhaps go
bankrupt.
What we think
PM Lee's call to Foreign bank is an open call for them to NOT to do anything
so drastic and add to the market woes.
We hope the "Call to take a long term view" is also followed up with some
Carrot and Stick to greater effect. The fact is, borrowing money, despite your
credit rating has become very hard. This is making the already bad
economic situation even worse.
In fact, the banks in Singapore should have not lent too freely during the
economic boom times which created this problem in the first place, this also
applies to banks in Singapore.
They were lending money to the tune of 90%, creating an asset price
bubble.
Banks Make the BOOM and BUST even worse
So in order words, banks made the BOOM and BUST cycle worse! It may be
time to have a back to basics bank. And a bank that is an "efficient
thermostat", to turn on the heat when it's cold and turn on the Cool air when
it's hot. Not the other way round, giving you ice when you are freezing and
pouring hot water on you when you are already scalded.
Saturday, February 14, 2009
Singapore Economy: What we want for Budget 2009
WATCH VIDEO ON SUPPLY AND DEMAND (VERY EASY TO UNDERSTAND)
http://www.propertybuyer.com.sg/viewnews.php?article=74
WHAT WE WANT FOR BUDGET 2009
LOOSEN CREDIT ON LENDING FOR SME and FOR PROPERTIES, ETC.
We have an opinion, CREDIT if already existed in the past, should not be
taken away at a time when people most need it. The government needs to
step in to legislate that banks must lend as per normal. (They can tighten
in the next boom cycle to rectify the problems)
DON'T REDUCE CORPORATE TAX
Only companies that make money pay tax. Don't reduce tax indiscriminately
as it reduces the government's total revenues. Companies in need of help
are not making money, so reducing tax is giving away money
indiscriminately.
RICH PEOPLE DON'T SPEND
It's okay to reduce the top bracket of Income tax, but give that as a tax
rebate on consumption. I.e. if they buy something. The rich do not need the
money as much as others. If you just cut their income taxes, they may not
spend more.
JOB CREDITS BOOST MORALE
Schemes such as Job credits though gives a boost to morale, it is not
money well spent. There could be some net good coming out of such "Job
Credits" Scheme, but it is NOT targeted and very expensive. For example,
the jobs credit scheme gives credit to companies that keeps their employees
for 3 months to lower their costs. But it is demand that has fallen through the
floor, between keeping an employee where there is NO demand and jobs
credit, most companies will choose to FIRE the employee. The savings is
obvious. In other words, it benefits those industries that are already
profitable and does not much to keeping employee's employability where
demand has fallen off.
GIVE DIRECT AID - LOAN
People that have fallen on hard times need a hand. Government should
structure something to give aid to these people so that they live in a dignified
way. This however should NOT be FREE money and a plan must be
made on how such people can pay it back or pay back in-kind.
CO-OPT Industries in Long term investments
Many downturns are cyclical. During a recession, things are much cheaper.
Many industries are faced with a crunch of credit. This is probably the best
time to consider and use money to co-opt or co-invest with the industry
in infrastructure investments or other long-term projects. This will keep our
core skills intact and people employed at a time when companies are starve
of cash. This is what will make the country strong, not indiscriminate tax
cuts.
CREATE A FUND TO SUPPORT THE SHARE MARKET
Just like Hong Kong did in the 1997 financial crisis, it put it's funds behind
Hong Kong's share market and stopped the fall. People needing money are
unwinding from the market. If the government further dithers, the market will
further gets decimated and more jobs may be lost. This is by no means
FREE-MONEY, markets do recover and when they do, the government
stands to make huge profits when the market recovers. These profits can
then go back into the coffers.
MORATORIUM ON BANK SEIZURE OF PROPERTIES
Create an emergency Law to stop the banks from foreclosing on properties.
This stops fire-sale from happening in an extremely soft market condition. As
the transaction volumes are very little, distressed assets cause the market to
panic further depressing prices of assets and putting more banks under the
danger of bankruptcy.
http://www.propertybuyer.com.sg/viewnews.php?article=74
WHAT WE WANT FOR BUDGET 2009
LOOSEN CREDIT ON LENDING FOR SME and FOR PROPERTIES, ETC.
We have an opinion, CREDIT if already existed in the past, should not be
taken away at a time when people most need it. The government needs to
step in to legislate that banks must lend as per normal. (They can tighten
in the next boom cycle to rectify the problems)
DON'T REDUCE CORPORATE TAX
Only companies that make money pay tax. Don't reduce tax indiscriminately
as it reduces the government's total revenues. Companies in need of help
are not making money, so reducing tax is giving away money
indiscriminately.
RICH PEOPLE DON'T SPEND
It's okay to reduce the top bracket of Income tax, but give that as a tax
rebate on consumption. I.e. if they buy something. The rich do not need the
money as much as others. If you just cut their income taxes, they may not
spend more.
JOB CREDITS BOOST MORALE
Schemes such as Job credits though gives a boost to morale, it is not
money well spent. There could be some net good coming out of such "Job
Credits" Scheme, but it is NOT targeted and very expensive. For example,
the jobs credit scheme gives credit to companies that keeps their employees
for 3 months to lower their costs. But it is demand that has fallen through the
floor, between keeping an employee where there is NO demand and jobs
credit, most companies will choose to FIRE the employee. The savings is
obvious. In other words, it benefits those industries that are already
profitable and does not much to keeping employee's employability where
demand has fallen off.
GIVE DIRECT AID - LOAN
People that have fallen on hard times need a hand. Government should
structure something to give aid to these people so that they live in a dignified
way. This however should NOT be FREE money and a plan must be
made on how such people can pay it back or pay back in-kind.
CO-OPT Industries in Long term investments
Many downturns are cyclical. During a recession, things are much cheaper.
Many industries are faced with a crunch of credit. This is probably the best
time to consider and use money to co-opt or co-invest with the industry
in infrastructure investments or other long-term projects. This will keep our
core skills intact and people employed at a time when companies are starve
of cash. This is what will make the country strong, not indiscriminate tax
cuts.
CREATE A FUND TO SUPPORT THE SHARE MARKET
Just like Hong Kong did in the 1997 financial crisis, it put it's funds behind
Hong Kong's share market and stopped the fall. People needing money are
unwinding from the market. If the government further dithers, the market will
further gets decimated and more jobs may be lost. This is by no means
FREE-MONEY, markets do recover and when they do, the government
stands to make huge profits when the market recovers. These profits can
then go back into the coffers.
MORATORIUM ON BANK SEIZURE OF PROPERTIES
Create an emergency Law to stop the banks from foreclosing on properties.
This stops fire-sale from happening in an extremely soft market condition. As
the transaction volumes are very little, distressed assets cause the market to
panic further depressing prices of assets and putting more banks under the
danger of bankruptcy.
Wednesday, February 11, 2009
US Mortgage rates at 50 years Low
THE US MORTGAGE RATES ARE AT A 50 YEAR LOW.
The reports have highlighted that many people in the US are refinancing their
home loans at an unprecedented level. They can typically safe a few hundred
dollars off their monthly installments. These days, a few hundred dollars
extra in a household is useful.
IS REFINANCING COMMON?
Refinancing is very common in the USA and Australia and many western
countries with a highly developed Property and mortgage market. It is still
not main-stream in Singapore as awareness is still not that high for
Refinancing.
IS REFINANCING DIFFICULT?
Refinancing is not that simple, neither is it that difficult. Anyone who can set
aside 5 to 10 working days reading, talking to bankers, corresponding,
sending documentation, etc., can do it. It is tedious, that is part of the reason
why people do not always do it.
WHAT ARE THE THINGS TO LOOK OUT FOR IF I DO IT MYSELF?
Here are the things we feel you should look at.
First, be honest with yourself and get a financial bearing of you and
family. Assess whether the current bank loan protects you
adequately in terms of loan repayment serviceability. Then you
can branch out to things that affects Loan repayment
serviceability. I.e. What if I change employment and I receive less
pay in the new job, can I still pay the mortgage? What if my child
goes to college and need funds, will it affect my ability to service
the loan? Be as exhaustive as possible with the scenarios. After
this exercise, you will get a pretty clear picture of what affects
your ability to service your loan.
2nd thing, never assume anything. If today you have a 20 years tenure
Some people will think, it's okay, I can always go to the bank to
extend my loan tenure if I need an easier repayment schedule.
That is not always the case.
Work out the possible cost savings.
Understand the minor differences in the clauses, legal clawbacks,
Repayment penalty, pre-payment penalty, legal subsidy, fire and
insurance subsidy, mortgage insurance, Repayment penalty
subsidy. Loan benefits and risks. Features Benefits and risks.
Some of the possible features are (non exhaustive list): -
Overdraft, Term Loans (Cash out), Construction loans,
Renovation loans, Interest offset savings account, combination
packages, Interest only loans, Variable Sibor Pegged rates with
fixed repayment, fixed rate loans for 1 year, 2 years, 3 years,
even 10 years...
Read more
READ MORE
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