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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: John Vosilla who wrote (104555)	8/21/2009 5:13:26 PM
From: Elroy Jetson	4 Recommendations Read Replies (1) of 110194

We went to a bar-b-que last week at the home of a friend who owns a construction company. He and his wife filed for bankruptcy a few weeks ago and are closing their firm. That's 14 employees filing for unemployment, plus the two of them. He was excited about a deal where some guy owns a lot in Malibu nearly outright, small loan, where they could build an $8 million home. He could live off the construction draw if they can get a bank to pony up for a construction loan on a home that would be ready in a few years - to meet an unknown fate on the other end at the hands of potential home buyers. We tried to dissuade him. But when you're drowning everything looks like a raft. I suppose you could say, what's the downside? You just file bankruptcy again if things don't go your way. That's a tough way to live. But first a bank has to say yes to this scheme. Another couple there had finally finished their home a month ahead of schedule with a Wells Fargo construction loan. Even though they had paid Wells a fee for a take-out commitment, WF refused to give them a mortgage, pointing to a clause which states they reserve the right to change the terms of the agreement at any time. So now they're stuck trying to get a mortgage about $150k over the maximum for conforming loans. So far their best option is a tentative offer from BofA for a conforming mortgage and a very expensive personal line of credit backed by the home, everything they own, and their own credit. In the interim they're continuing the construction loan, now with a monthly penalty. As you can see, things haven't fully gone over the falls here yet. .

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