The Federal Deposit Insurance Corporation (FDIC) has alerted Chief Excutive Officers of banks with a Special Alert.  The FDIC has become aware of e-mails appearing to be sent from the FDIC that are asking recipients to download and open a “personal FDIC insurance file” to check their deposit insurance coverage.  These e-mails are fraudulent and were not sent by the FDIC.  The FDIC is attempting to identify the source of the e-mails and disrupt the transmission. 

E-mails fraudulently claiming to be from the FDIC are attempting to trick recipients into installing unknown software on personal computers.  These e-mails falsely indicate that recipients should download and open a “personal FDIC insurance file” to check their deposit insurance coverage.  The “insurance file” may actually be a form of spyware or malicious code and may collect personal or confidential information.

Information about counterfeit items, cyber-fraud incidents and other fraudulent activity may be forwarded to the FDIC’s Cyber-Fraud and Financial Crimes Section, 550 17th Street, N.W., Room F-3054, Washington, D.C. 20429, or transmitted electronically to alert@fdic.gov

Sharon J. Ricciardi, our Relationship Manager at MainStreet Bank was kind enough to pass this on to us.

Last week the Treasury Inspector General for Tax Administration told congress the $8,000 tax credit incorporated in the economic stimulus package enacted in February is full of fraud.  As an example, it said that the youngest applicant for the program was 4 years old.  It estimates that one in fifteen of the applications are bogus and do not meet eligibility.

What did they expect?  Give away money and you will find some people can't stay away.

Now, there will be a delay in receiving your credit as investigators will be reviewing each applicant very closely before releasing the funds.

Otherwise, is the credit a good idea?  Since not all first time buyers purchase because of the tax credit the actual cost to the government is higher than the $8,000 price tag.  Not good.  Some suggest that the tax credit is one more bogus program to help the banks by propping up housing prices while they unload their foreclosures.  Extremely bad.  In the end, it is helping some first time buyers who can afford a monthly payment but who are otherwise short on cash.  This is very good.

Helping ensure that loan originators be required to “act in the best interests of the consumer”.

With these words one would suspect that they are being represented perhaps even in a fiduciary capacity.

When you act in the best interest of another you may be said to act as a fiduciary.  Black's Law Dictionary describes a fiduciary relationship as "one founded on trust or confidence reposed by one person in the integrity and fidelity of another."  Or in other words, a fiduciary is someone who accepts the responsibility for taking care of the needs or property of another person for the benefit of that person.  A fiduciary has a duty to act primarily for the client's benefit in matters connected with the undertaking and not for the fiduciary's own personal interest.  Scrupulous good faith and candor are always required.

When you go to obtain financing for purchasing or refinancing real property you are not represented.  In fact, we are required to have you sign a form that says we are not your agent and therefore no fiduciary relationship exists.  This form was designed by the Mortgage Banker's Association and no lender will accept a loan that does not have this form included.

It is a veiled attempt by the banking industry to leave you naked when you seek financing.

As a seller of real estate you are represented by the listing agent.  And as a buyer of real property you have the right to elect representation in the form a buyer's agent.  When you go to trial you have a fiduciary in the form of an attorney.  Your CPA can represent you before the IRS.  But when you seek financing for the largest financial transaction that most of us will make the banking industry in the guise of the Mortgage Banker's Association doesn't want you to be represented.

Don't go looking for representation from the loan officer at a bank.  You'll find none.  They are employees of the bank that doesn't want you represented.  Their hands are tied.

Come see us.  We may have a solution.

Much discussion has been generated about the errors made by personnel assigned by the appraisal management companies (AMCs).  In the months following the implementation many deals died because of these egregious errors.

The item I have not seen mentioned is how this new system benefits the lenders out there.  Every new order placed has to have an assigned lender, the party providing the funds for the loan.  Instantly, the borrower is locked into a lender without necessarily locking the terms or even knowing whether the loan will be approved.

Being locked into a lender with the order of an appraisal is very different from the recent past and certainly a benefit to funding lenders.  Before HVCC, as an originating broker that appraisal was completed in our licensed name and we could take that appraisal to whichever lender was offering the best rate and terms and the one that would close the loan with the fewest hoops to jump through.  Now, with the appraisal being one of the items with the longest lead times and especially not knowing whether there is going to be an issue with errors it typically has to be ordered prior to approval.

This is a direct benefit to funding lenders as they can tell the exact number of appraisals committed to their pipelines.  There is no need to be as competitive as they once did.

What happens when government stimulus comes to an end?  When the guarantees from the FDIC for “too big to fail” bank's debt ends?  When the privately owned Federal Reserve stops buying the bonds of Fannie Mae and Freddie Mac?

Don't believe that anyone really knows how this struggling economy will perform once it’s weaned off Uncle Sam’s massive federal subsidies.

Did you ever see that picture of the telephone lines in Bangalore, India, hanging out in the open, hundreds of lines draped and crossing one over the other in hopes that someone can answer your call.  That's sort of how I picture our economy today.

Here's a very revealing graph:

The Fed Funds are at a low.  This is why real estate investors speculated with real estate.  They leveraged an asset (be it a company or a property) with the hope that lower interest rates would enable the next borrower to pay more for it than they did.  Now we are doing this with governement debt.  Is this the next bubble?  Are there anymore buyers?

And we are close to having that stimulus removed.  Or at least the recent jawboning by the Fed's personnel suggest this.  Nouriel Roubini in a WJS article today calls for the Federal Reserve to have a unified exit strategy from the massive monetary bailouts.  The title asks, “How can the Fed avoid the next bubble?”  My feeling is that when you have to ask it is usually too late.

There's a mountain of stimulus and subsidies that can be removed before the Federal Reserve does any tightening to the Fed Funds rate.  Any “tightening” there will affect the prime rate and any interest that accrues on the outstanding balance of your home equity line of credit.  Or on any car loan that you try and get.  Probably on your credit card rates.

My guess based on previous actions suggest the Federal Reserve will find some reason to maintain the subsidies to its member banks while throwing the individual taxpaying consumer to the wolves.  Be careful out there.