Market Update
As Of
10/16/2007

As a preface to this update, I am very pleased with this industry and my company's success and continuous evolution within it. However, gradually everyday, I come to more realizations that were once hidden deep within my belief system and are now surfacing to my day to day beliefs.

In my humble opinion, this whole mortgage crisis and meltdown is due in most part to our government. There was a day in time (in my parents and grandparents' time), where someone worked hard and purchased a home. This home would be an appreciating asset, since it was being paid down/off and equity would rise slowly but surely. However, with our recent happenings within this industry, we must pose the question: why did the government insist on homeownership for everyone?!

Why? Well, think about it. Think about a business that every single person is your client. Every single person would owe you money. Every single person would have to pay you regardless of income, age, sex, activities, interests, etc. It is called TAXES. Homeownership for everyone means more income for the government. Of course the government likes money, and likes income. Now that this big meltdown has occurred, where is the government? They were quick assess property values and tax homeowners.

It was in the best interest of the government entity to harvest these risky loans. The government has known all along what a 1% negative amortization loan is; they have know all along what a 2/28 teaser rate/adjustable rate loan is. Now though, the blame has trickled to everyone but the government. There is some blame on real estate agents, appraisers, brokers, bankers, loan officers, mortgage companies. Yes, everyone had their fair share of blame. But where is the guy at the top? Where is the government within this mess?

Imagine looking down on a map as you see on Zillow.com or Google Earth. Imagine those blocks of homes. That is what the government looked at: potential income! Of course they wanted developers to develop; they insisted planned communities pop up from here to there. That only meant more money for the big entity at the top.

While there was mishap and bad-doing in between A and Z, we can not and should not and can not forget that the almighty government must take on some responsibility. The analogy I always use is the era of Adolf Hitler and the Nazi campaign. Yes, every soldier who took part in the massacre is responsible for his atrocious actions. However, there was someone at the top; there was that entity giving orders, who knew what was going on all along. He is the person that is ultimately to blame.

It is not a direct comparison, but this analogy does stand true in the case where our government for the sake of creating more wealth and money for those at the top (government leaders, moguls, companies lending money, hedge fund managers, etc.) compromised the lives and security of those at the bottom. Usually, these types of instances occur from time to time as controlling mechanisms to simply control society and make wider the gap between the top and bottom.

I see this every single day. People who have lived in their homes for years, have paid their mortgage consistently, and now due to misleading and deceitful loans, are victims of an institutional madness that was employed indirectly, if not directly, by our government. The government made incentives for banks to fund these loans, securitize them, and sell them off to investors in Ireland, China, Dubai, etc. These poor homeowners will not have credit issues, will pay MORE money to agencies (for credit cards, loans, etc.) and will perpetuate the whole concept of division between the classes.

It is just a bit unfortunate to see these things, which are now my day to day realizations. But I suppose this is simply the real world and what I only read about in economics class, when we discussed Capitalism and the division between the classes. Thank God we are still functioning and actually doing well. We are founded on truly trying to help people. This means sometimes not necessarily making money on transactions but simply doing the right thing.

I suppose that is the long-lost story of this industry...a group of professionals who once actually cared for the clients' best interest, and not simply their own pockets.

Until the next blog, make it an awesome day!

Cyrus Khadivi
Managing Partner
Freedom Lending Group, Inc.

www.freedomLG.com