It's always amazing to see the lengths Congress will go to in order to make things worse.

For one thing, despite the fact that subprime loans are not the major problem here, they are easy to report on as if they were (and, after all, can we expect reporters to notice houses that HAVEN'T been foreclosed on?).

I have to say, from a purely personal perspective, that what appears to be going on is that a lot of Wall Street types thought they were smarter than they actually were, and the numbers they ran didn't conform all that closely to the reality they wanted to describe. The repercussions are being felt in the commercial market, whose excellent loans were used to make portfolio products more attractive, with the result that investors are now being shy about securitized loans, knowing that the guys with water-cooled calculators will have put some bad loans in the woodpile.

What's doing well?

Well, there are still developers out there expanding, because the economy as a whole is absorbing new projects. I'm aware of projects in Central California and in Texas that are ongoing (and, since I know some of those developers, I'll stay mute about which should be snapped up by potential investors). I know that in an election year, people worry about illusory problems: it helps give the candidates something to talk about. We've had "outsourcing", and "a giant sucking sound in Mexico" and we'll probably have another in a quarter or so that people can get all in a lather about and that the successful candidate can claim s/he solved without doing much other than waving his/her hands.

Probably the most important reason to use a mortgage broker, rather than going down to the bank is that you get the chance to see which of several possible ways to finance your property might work for you.  Every lender has a limited suite of loan products: the advantage of brokerage is that we see a lot of them, and can bring them to you.

 

But perhaps the most important reason is a little odder: a good broker is in the "exception" business.  Not every building, or every situation, is properly covered under the generic loan products, and our job is to talk to the underwriter and see if this loan should be an exception to the rule, and get funded anyway.  Not every lender is ready for this aspect of brokerage: and some are actively afraid of it, sending out their loan officers to turn down anything that looks like it might be outside of their designated packages.  Sometimes there are good reasons for that: conduits, for example, don't have the flexibility to deal with changes in the use of a building, or plans to change its use during the loan period, no matter how profitable those changes might be.

 

Occasionally, I hear that someone is promising that the package they get the borrower will be "the best deal available on the market" -- and I'm impressed.  Really impressed.  After all, there are many, many lenders out there for commercial property, and they all have different loan programs, and different receptivity to changes and negotiation.  A broker who says he's gotten the best loan on the market has impliedly spent months negotiating with them to give you the loan he brings.  Instead, I promise something else: I bring several possible loan scenarios, and discuss them with you.  They will be as good as I can reasonably get in the time allowed.  I will try and bring only loans that will close, because that's how I get paid.

 

I really can't promise more than that.  But that's me. 

It's time for a confession: when I was first introduced to computers, everything that went into them went in on punch cards, and there was not only a question of what computer language to use, but how to get the JCL to process the cards properly. As an undergraduate, the closest I came to seeing a screen edit were the terminals to the PDP-11, which were teletypes. Not an impressive editing medium.

It was into this mess that a friend introduced me to Unix, and the emacs editor, and I became a convert. Though I am still a novice (I have only been using it for a couple of decades, and I never program in lisp), I like the keyboard tricks that enable me to touch-type and move around the page. When the IBM PC is invented, they sensibly put the control key where it was meant to be for these tricks to work properly: they put it above the shift key next to the asdf line. Once microemacs was available, I was good to go: creating text first, then importing it into Wordperfect, and making it pretty so I could print it.

This whole process has become harder over the years on IBM PCs. First, the "caps lock" key, which belongs on typewriter keypads, not computer keypads, was introduced. Then the word processing programs got more and more elaborate, trying to tempt me to do my composition in them: but they rarely accepted the emacs keystrokes. I learned the Wordperfect keystrokes, then learned the WORD keystrokes. But both of these started to use function keys and the mouse: innovations that meant that I wasn't resting with my hands on the keys.

Finally, delightfully, happiness again. Xkeymacs is a little utility to make my keystrokes work in firefox and notepad and all those other editors that don't accept emacs control codes. And, today, I came across the instructions to change the keyboard so that capslock goes back to being the control key. Result? My web browsers are suddenly emacs compliant. I can type with my hands resting comfortably on the home row, rather than getting repetitive stress injuries.

And, as evidenced by this post, I'm suddenly comfortable enough typing that I write more. Not bad for a couple of technical fixes.

This question has been the subject of a lot of hand-wringing, and several people eager to expand their reach have leapt in ineptly.

 There are two tests for "what is a security".  First, from a federal perspective, the answer comes from the case SEC v. W.J. Howey Co., 328 U.S. 293 (1946).  An interest will be classified as a security if the following three elements are present:

a) an investment of money has been made
b) in a common enterprise
c) and the investor has the expectation of profits, which profits are expected to arise solely, or substantially, from the efforts of the promoter or third party.

If you are in California, like me, there is another test that is applied, as well: Silver Hills Country Club vs. Sobieski, 55 Cal.2d at 811, 361 P.2d 906 (Cal. 1961) in determining whether an interest constitutes a security.   It should meet these 4 factors:

 (1) whether funds are being raised for a business venture or
enterprise;
(2) whether the transaction is offered indiscriminately to the public at large;
(3) whether the investors are substantially powerless to effect the success of the enterprise; and
(4) whether the investor’s money is substantially at risk because it is inadequately secured.

Notice that you don't have to meet these tests in a TIC: and that if you follow the IRS ruling, it's pretty easy not to meet them.  Note that if you do, you'd better have a securities license.  Keep in mind that our state has a lot of regulations about real estate syndications, because we've had a lot of crooks doing it, and give those a glance, too (that, too, is group ownership, though of a different variety)

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