When the new conforming guidelines are fairly applied to all condominium projects, bank portfolio loans with adjustable rates will be the only loans available to most projects. I do wish that the conforming loan guidelines could be eased so that with today’s strict underwriting, condominiums loans would qualify for sale to the secondary market. It seems that Congress is going to do something to boost the real estate market; however, condominiums may be left out of the picture.

Be carefull what you wish for.

If Corus goes, it will be because the economy has continued a damaging and precipitous downward decline, changing forever the economic landscape for the next 20 years. 300-500 banks will precede Corus on the path to receivership. If we go there, its likely that PCB will have an 50% drop in tourism.

Unlike you, I actually hope that Corus makes it because it will mean the economy in the U.S., and globally, has reversed course downward and stabalized.

I do not work at Corus. I have invested in Corus stock in the past. I have also traded it successfully. I have CDs at Corus. But I watch Corus’ business and their development partners because it is a proxy for how bad things are proceeding with the U.S. economy. It is also a firm indicator of how the upper middle class to wealthy are reacting to this financial crisis.

You are very confident that Corus will be out of business by 12/31/09. The only way you could know that is if you work for the Treasury’s Office of Thrift Supervision and you intend to put them out of business. Or one could assume you are not with OTS and that you are just pissed off because Corus kept your deposit on Laketown Wharf. Or you worked for the developer and they let you go. All sorts of assumptions could be made about you.

Andrew Mellon would also be shocked that mortgage brokers are able to provide adjustable rate mortgages.

You either have to be on the Corus payroll or you have to have Shares in the bank. You can’t be serious jerking on Hunter Palmers chain, by telling him financial history. He has been in the game long enough to know the rights and wrongs of the banking business.
Blowing smoke about how stong and great the financial condition is at Corus is not factual. The past quarter financial statement will be restated on March 12, 2009, just to give the bank a chance to correct the cooked books…Then the real facts will come out…the stock is worth less then 50cents a share….The Glickman family controls 40% of the stock. Sixteen months ago when they knew the game was over, they paid a Special Dividend of $57 million. They paid loan officers bonuses for loans not paid off. They made the biggest dumbest loans and concentrated its bets in the worst bubble markets, like Miami, Las Vegas, and P.C.B.
The only strong developer they have is , Hyperian Condos, they borrowed $1 billion and they will be lucky to pay back 50 cents on the dollar. And I am willing to bet you Silicon will not pay Corus a dime.
Corus will be out of business before the year is over.

“Purge the Rotteness, out of the System so that Values will be adjusted and enterprising people will pick up the wrecks from the less competent people”. Andrew Mellon, 1934.
History repeats itself….

Hunter, your desciption does not match Corus’ business.

Corus’ focus is as a lender to developers, not individuals. They do not sell their loans like many banks do on individual mortgages. Their focus was high end Condo’s, apartment buildings, office buildings and condo conversions. Most of their conversion loan business is now paid off.

Most of Corus’ book is first mortgage. They have very little mezzanine business. So when a developer fails, they usually turn over the building to Corus without any fight or foreclosure proceeding.

For the most part, Corus’ clients are extremely strong developers. Recent developer failures in their book have seen the developer stay on to close units in the building for Corus.

Corus had a plan to deal with failures. That is why they are still standing. They had very strong capital going into the recession and reserves inside their bank holding company to back that capital up. They have plenty of cash to fund the projects under construction and implement their stated plan for Laketown Wharf. They have launched a new web site for Laketown Wharf and hired a new management company. We should see additional signs of that plan soon.

I have studied each bank that has failed from January 2008 to the present. The common theme is individual mortgages, and housing development. The one bank in Kansas failed because they did not secure appropriate collateral on commercial and development loans in FL and TX. This is an area that Corus excels at ~ collateral.

Corus has about $4.6B in deposits that are currently not allocated to any lending purpose. They have not entered into any new loans since early 08, and those were for offices in DC. If the stimulus plan works, Corus will be in a great position to resume lending. If they continue their plan to to enter the individual mortgage business for condos in buildings they own a large piece of, they will be competing in a market that many banks have exited.

ARMs have been misused by the borrower over the past 6-7 years to lower their interest and payment without a thought to what would happen at the end of the bridge you describe.

ARMs became viable in the late 80′s and 90′s because the nations homeowners became a mobile society, rarely owning a home longer than three years. The 3/1 and 5/1 ARM became a powerful tool for homeowners that expected to move or trade up.

The ARMs you are working with are tied to Treasuries. Wall Street banks issued ARMs tied to LIBOR. This has created many ARM holders to experience unusual volatility in their rates.

Consevative people will avoid any future risk, and the ARM presents future interest rate risk. In 2004 (before the influx of CA investors), my sister bought her first home in Phoneix. I strongly suggested she save 1/2 of 1% by taking the 5/1 year arm. It would allow her to take savings of $5,000 over that 5 years and reduce prinicpal. She was scared and took the fixed at 5.75%. Had she taken the ARM, she would be adjusting right now from 5.25% to 3.875% for the next full year. But these are unusual times. The low rates will “save” some ARM owners from painful resets.

The best course of action for any mortgage borrower is to match their specific financial plan with their selected mortgage. We are in this housing foreclosure mess because too many borrowers and lenders gave no thought to the borrowers ability to repay.

How long will rates remain low? We all know this is an unknown. If rates remain low, our greatest risk is hyperinflation brought on by the devaluation of the U.S. Dollar. And there is real risk to an ARM borrower approaching a reset in that event depending on what their rate is tied to. Borrower beware.