The Future of PPIP and Short Sales
 
With the recent expansion of incentives designed to increase short sale closures, many would be real estate investors may have come to the conclusion the current administration is investor friendly. However, exactly how friendly and in what format may still come as a surprise.
 
The PPIP or Public Private Investment Program is one of the more recent plans proposed by the administration as a way for banks to sell toxic assets and other securities to private investors. The idea was to eliminate much of the risk associated with the purchase of these assets through a government sponsored initiative that would use up to $100 Billion dollars in federally funded (taxpayer supplied) funds in conjunction with up to $400 billion more from private investors and FDIC financing. The program was supposed to begin within weeks as of the date of this writing.
 
So, what is the problem? In a nutshell, banks now want to buy the troubled assets themselves! Yes, you are reading this right...the banks that have been trying for months to sell foreclosed homes and rid themselves of non-performing mortgages and other securities now want to turn around and buy them using even more taxpayer bail-out dollars...and why not? With the government footing the bill for well over 90 percent (plus) of the loan, it's a win-win for large institutional investors. On the one hand, the banks get federal funds to 'bail them out'. On the other hand, they get even more funds to repurchase those same assets - for a fraction of the cost - and then profit on them.
 
Sheila Bair, Chairman of the FDIC, has come out with an official statement that essentially states banks will not be allowed to purchase their own impaired assets...but to date, no mention has been made of banks purchasing non-performing assets from other banks. So, what is to stop Citigroup from purchasing assets from Bank of American and vice versa rather than simply purchase their own? In the long run, it will matter little to the American public that foots the bill for one of the largest transfers of wealth in the history of the nation.
 
Now ask yourself, if banks are trying to get in on the action of buying "toxic assets" - why aren't you? The PPIP is targeted to major institutional investors (including banks) which only make money if those same assets are expected to go up in value over the coming years. Now may be a good time to consider the recent admonishment by Marc Faber who believes the United States is heading for Zimbabwe type hyper-inflation...
 
"I am 100 percent sure that the U.S. will go into hyperinflation," Faber said. "The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate."
 
Prices may increase at rates "close to" Zimbabwe's gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe's inflation rate reached 231 million percent in July, the last annual rate published by the statistics office."
 
Marc Faber knows it. The banks know it. The federal government knows it...inflation is the name of the game for the coming economy and real estate is one of the only measures the average person can take to protect themselves against the ravages of inflation. You can bank on it!
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See you on the other side!

Charles Gardner, Real Estate Investor

http://humble-homz.com