NEWSLETTER!

XANTHUS LETTER JULY 2009

“Liquidity is when you look at your retirement funds and then you wet your pants.” - Unknown

FAIRY TALE.... OR NOT?

Once upon a time, I was invited to the White House for a private dinner with the President. I am a respected businessman, with a factory that produces memory chips for computers and portable electronics. There was some talk that my industry was being scrutinized by the administration, but I paid it no mind. I live in a free country. There's nothing that the government can do to me if I've broken no laws. My wealth was earned honestly, and an invitation to dinner with an American President is an honor. I checked my coat, was greeted by the Chief of Staff, and joined the President in a yellow dining room. We sat across from each other at a table draped in white linen. The Great Seal was embossed on the China. Uniformed staff served our dinner.

The meal was served, and I was startled when my waiter suddenly reached out, plucked a dinner roll off my plate, and began nibbling it as he walked back to the kitchen.

"Sorry about that," said the President. "Andrew is very hungry."

"I don't appreciate..." I began, but as I looked into the calm brown eyes across from me, I felt immediately guilty and petty. It was just a dinner roll. "Of course," I concluded, and reached for my glass. Before I could, however, another waiter reached forward, took the glass away and swallowed the wine in a single gulp.

"And his brother Eric is very thirsty." said the President.

I didn't say anything. The President is testing my compassion, I thought. I will play along. I don't want to seem unkind.

My plate was whisked away before I had tasted a bite.

"Eric's children are also quite hungry."

With a lurch, I crashed to the floor. My chair had been pulled out from under me. I stood, brushing myself off angrily, and watched as it was carried from the room.

"And their grandmother can't stand for long."

I excused myself, smiling outwardly, but inside feeling like a fool. Obviously I had been invited to the White House to be sport for some game. I reached for my coat, to find that it had been taken. I turned back to the President.

"Their grandfather doesn't like the cold."

I wanted to shout- that was my coat! But again, I looked at the placid smiling face of my host and decided I was being a poor sport. I spread my hands helplessly and chuckled.

Then I felt my hip pocket and realized my wallet was gone. I excused myself and walked to a phone on an elegant side table. I learned shortly that my credit cards had been maxed out, my bank accounts emptied, my retirement and equity portfolios had vanished, and my wife had been thrown out of our home. Apparently, the waiters and their families were
moving in.

The President hadn't moved or spoken as I learned all this, but finally I lowered the phone into its cradle and turned to face him.

"Andrew's whole family has made bad financial decisions. They haven't planned for retirement, and they need a house. They recently defaulted on a sub prime mortgage. I told them they could have your home. They need it more than you do."

My hands were shaking. I felt faint. I stumbled back to the table and knelt on the floor. The President cheerfully cut his meat, ate his steak and drank his wine. I lowered my eyes and stared at the small grey circles on the tablecloth that were water drops.

0h,"By the way," He added, "I have just signed an Executive Order nationalizing your factories. I'm firing you as head of your business. I'll be operating the firm now for the benefit of all mankind.

There's a whole bunch of Eric's and Andrews out there and they can't come to you for jobs groveling like beggars."

I looked up. The President dropped his spoon into the empty ramekin which had been his crème brulee. He drained the last drops of his wine. As the table was cleared, he lit a cigarette and leaned back in his chair.

He stared at me. I clung to the edge of the table as if were a ledge and I were a man hanging over an abyss. I thought of the years behind me, of the life I had lived. The life I had earned with a lifetime of work, risk and struggle. Why was I punished? How had I allowed it to be taken? What game had I played and lost? I looked across the table and noticed with some surprise that there was no game board between us.

What had I done wrong?

As if answering the unspoken thought, the President suddenly cocked his head, locked his empty eyes to mine, and bared a million teeth, chuckling wryly as he folded his hands.

"You should have stopped me at the dinner roll," he said.

PROPERTY TAX RELIEF APPLICATIONS

If you applied to have your property taxes temporarily reduced, you should soon be receiving your notice. The San Diego County Tax Assessor says the following:

The Property Tax Relief application period for 2009-2010 has ended. If you applied for a 2009-2010 reduction you will receive a notice in the mail by July 15th. If you have not received your notice or disagree with the value, you will need to file an appeal between July 2 and November 30, 2009.
http://www.sdcounty.ca.gov/cob/aab2008 Assessment Appeal Applicants
We are currently processing your applications and hope to respond by Fall 2009.

CHANGE
John is 63 years old and owns his own business. He is a life-long Republican and sees his dream of retiring next year is now all but gone. With the stock market crashing and all the new taxes coming his way, John knows he will be working for a good number more years.

John has a Granddaughter. Ashley is a recent college grad. She drives a late model car, wears all the latest fashions, and also likes going out and eating out a lot. Ashley campaigned hard for Obama, and after he won the election she made sure her Grandfather (and all other Republican family members) received more than an earful on how the world is going to be a much better place now that Obama won the election.

Ashley recently found herself short of cash and cannot pay her bills...again. As she has done many other times in the past, she e-mailed her Grandfather asking for some financial help.

Here is his reply:

"Sweetheart, I am replying to your request for more money. Ashley, you know I love you dearly and am sympathetic to your financial plight. Unfortunately, times have changed. With the election of President Obama, your Grandmother and I have had to set forth a bold new economic plan of our own...the 'Ashley Economic Plan'. Let me explain. Your grandmother and I are highly productive, wage-earning tax payers. As you know, we have lived a comfortable life and in return have forgone many things like fancy vacations, luxury cars, etc. We have worked hard and were looking forward to retiring soon. But this plan has changed. Your president is significantly raising our personal and business taxes. He says it is so he can give our hard earned money to other people. Do you know what this means, Ashley? It means less income for us. Less income means we must cut back on many business and personal expenditures. One example is, we were forced to let go of our receptionist today. You know her. She always gave you candy when you visited my office. Did you know she worked for us for the past 18 years? I can't afford her anymore. That is a taste of the business side. Some personal economic affects of Obama's new taxation policies include none other than you. You know very well that over the years your grandmother and I have given you thousands of dollars in cash, tuition assistance, food, housing, clothing, gifts, etc., etc. By your vote, you have chosen another family over ours for help. Judging from your Email requesting more money, I recommend you call 202-456-1111. That is the direct telephone number for the White House. You yourself repeatedly told me I was foolish to vote Republican. You said Mr. Obama is going to be the people's president and is going to help every American live a better life. Based upon everything you have told me and things we heard from him as he campaigned, I am sure Mr. Obama will be happy to send a check or transfer money into your checking account. Have him call me for the transaction and account numbers, which by now I know by heart. Perhaps you now can understand what I have been saying for all my life: those who vote for the president should consider what the impact of an election will be on the nation as a whole, and not just be concerned with what they can get for themselves (welfare, etc.). What Obama voters don't seem to realize is all of the government's money he is 'redistributing' to illegal aliens and non-taxpaying Americans (deemed "less fortunate") comes from tax money collected from income tax-paying families. Remember how you told me, "Only the richest of the rich will be affected"? Guess what, honey? Because of our business, your Grandmother and I are now considered to be the richest of the rich. On paper, it might look that way. But in the real world, we are far from it. But, as you said while campaigning for Obama, some people will have to carry more of the burden so all of America can prosper. You understand what that means, right? It means that raising taxes on productive people results in them having less money. Less money for everything, including granddaughters. Congratulations on your choice for "change". For future reference, I encourage you to attempt to add up the total value of the gifts and money you've received from us over the years, and compare it to what you expect to get over the next four years from Mr. Obama. Remember, we love you dearly... But from now on you'll need to call the number referenced above when you need help. Good luck, sweetheart.
Love, Grampa

PS: How was your recent trip to Jamaica? I have never been there but I hear it is lovely this time of year."

OUR REAL ESTATE MARKET

Ok, by now regardless of who you voted for in the last election, you have a pretty good idea of just how much trouble we are in. If you voted for “change” you’re getting it. I’m not going to discuss the mess the country is in or the risk to our sovereignty like you have been reading about or hearing about elsewhere. I’m thinking that anyone with a brain already has figured out the giant mistakes that were made this past November and can determine the fallout that we are going to suffer from it. I’m also not going to really spend any time discussing the mess that the state of California is in financially. There’s lots of news out there about that even though it seems to be eclipsed by the national idiocy so we don’t focus much at home.

So financially, here’s the deal. At home, here in San Diego County, we are experiencing a financial climate much like some areas in the country and much different than others. I’m going to just discuss OUR bank accounts and OUR investments for now.

Last September, California’s jobless rate soared to 7.7% (meaning 1 in 13 people who wanted to work did not have a job). That was an increase of 413,000 from a year earlier. We need to remember that this does not count all the commissioned sales people who are still actually employed but making much less because of the downturn in the economy. In February of this year the rate increased to 10.5% but San Diego suffered less with only 8.8% unemployment... but still the highest unemployment rate on record since the data has been collected. In May when the national unemployment rate was 9.1% and the state of California unemployment rate jumped up to 11.5%, the highest since World War II, San Diego County was hovering around 9.4%. Why do we discuss unemployment when I’m discussing the rental or sale real estate market? When people began to lose their homes a few years back, we saw an increase in applicants needing homes to live in. They were good quality applicants who had previously owned homes with good jobs and had been accustomed to paying several thousands of dollars in mortgage payment. That made it easy to pay a meager $2000 for rent once they lost their homes. Kotinca used to say “The rental market is great when people are losing their homes” Now she says “The rental market is horrible when people are losing their jobs.”

Well you guessed it. When there are fewer families with incomes, there are fewer applications for our homes and condos and apartments. Where do they go? From our experience, what we are seeing is lots of people getting out of California entirely. Many people are moving back home with parents, some are double bunking with family and friends and overloading houses and apartments with lots of occupants. I continue to see lots of trailers and motor homes around with people living in them in back yards. I talked to a guy last week who actually sleeps in his office and showers at the gym saying that the gym membership is cheaper than rent. Lots of creativity for living is going on out there. With the fall off of demand, getting good quality tenants and top dollar is very difficult right now. Prices and taxes are going up, new fees are being added and incomes are going down. Well luckily the end is in sight...... ok, that’s a lie. There is no end in sight. Any optimism is overshadowed by our state budget crisis. Just this month our State declared a fiscal state of emergency. Does this line up logically with the news you are reading about the real estate market has hit bottom and is finally beginning to recover? There is news that falling prices and lower interest rates have driven many new buyers into the market. Houses are selling at prices much less than years ago, but at least they are starting to sell. In April 2006 the San Diego County median house price was $537,666 and three years later in April of this year it was $393,225 or about a 27% drop in prices. With this new pressure on the market we expect this median price to go up a little but does it help us? If you bought your house for $537k and can afford to sell it at $400k then maybe. That would be better than only getting $300k if the market falls off again. But most who purchased a $537k house three years ago still owe $530k or more to the bank.... we simply cannot accept a selling price of $400k so we’re stuck. Banks who are foreclosing are making these sales. So what do we do? Well that is a tough question almost like asking a doctor what the best remedy is. He’s got to know the problem first in order to prescribe a solution. With the current real estate market, you need to develop your own belief system before taking action. If you believe that the news is great and that this new influx of buyers is going to save us all, then hang in there (depending on holding cost issues) and see what happens. In fact if you believe this you might want to actually jump in and buy a few other properties at the bottom of this trough in the market and wait for the increases. On the other hand, if you are still pessimistic and think that it is likely to get darker before the dawn, you might consider jumping ship and selling what you have before the prices get worse so you can be prepared to jump back in when things turn around. If you are still confused and don’t know for sure what is going to happen (like many of us) then you might prefer to just sit tight and pay attention. When you are convinced of a direction you can act. Personally, I have to be convinced of a direction before I take action.... and there is not enough evidence of a committed direction at this time. More on this later, it’s an important issue and I monitor it everyday.

OBAMA FINANCIAL TRACKER

11/4/08 Dow Jones 9625.28 close (election), 1/16/09 Dow Jones 8281.22 close, 7/8/09 Dow Jones 8178.41 close

These are just the facts, you decide for yourself if you think that the programs are working and the economy is in for a nice “change”

MORTGAGE PAYMENTS A PROBLEM?

Someone else’s opinion.... so far everyone I have talked to about loan modification has been jerked around and had no meaningful solution offered to them. This might be changing, I’ll continue to watch and report my findings to you if things look positive.

Is your mortgage becoming too much to handle? Are you one of the thousands of Americans who are struggling with your monthly payments, or wondering if it is worth it? Asking your lender for a loan modification or workout is one way to save your home and your sanity.

Make sure your mortgage is eligible for a loan modification or workout. Lenders will generally only do them on mortgages loans in which:

1) Loan is for primary residence
2) Loan is through lender/bank who originally wrote the mortgage. You can find this out by calling your mortgage company and asking if they are the original lender.
3) Borrower (you) have a high debt-to-income ratio, at least 38% or more. (To calculate your debt-to-income ratio, take your total monthly expenses and divide by your total monthly pre-tax income.)

If your loan does not qualify for a loan modification, call and ask them what they can do for you (investment properties and second homes). Remember, the bank really does not want your house back. In this case, you hold the cards.

Understand what options may be available. Obviously your lender/bank would prefer you pay your mortgage at the original terms, but instead of having the home go into foreclosure, they may agree to one of the following modifications:

1) New loan terms: They will offer you a new loan with lower interest rate. Could be ARM or fixed.

2) Principal forbearance: Your lender subtracts a fixed amount from your loan balance and recalculates payments. You pay new lower monthly payment on rest of the loan. When you sell or refinance, the bank adds subtracted amount back into the loan assuming you will enough equity built up by that time to repay the full amount.

3) Balance decrease (least likely): Lender decreases the loan balance and reworks the loan with new terms. This is the rarest type of modification.

Call your lender & ask for loss mitigation department. Have your supporting financial documents ready, the same type of documentation typically needed when applying for a loan. This information includes:
Your assets/income—include balances & values:

Loan number/property info, including balance, estimated market value, etc., current monthly income via 3-4 months pay stubs plus W2, social security/pension, child support/alimony/welfare, any other non-wage income, bank accounts/savings, IRA/401Ks , stocks/bonds/CDs, auto(s), etc.

Your liabilities—include payments and balance owed:
Alimony/child support, dependent care/child care, taxes/insurance, tuition/student loans, credit cards, auto/personal loans, medical/dental expenses, HOA fees, cable/cell/internet, utilities/groceries/auto expenses (gas & maintenance), etc.

Explain your entire situation and refer to your documents as backup. The loss mitigation specialist will likely have you complete a worksheet either on the phone or via email/fax. Your documents and data will help you to complete it.

Document everything including the name and phone of loan specialist and any information or instructions they give you. Keep track of your notes and docs in a file. Follow-up as necessary. It may take several calls and some time for your lender to come to a decision. Be patient, but persistent. The savings may be worth it!!

You do not need to be behind on your payments to begin negotiation with your bank. If the bank will not assist you with your loan, and you do not feel comfortable continuing to pay the loan, ask your bank if they will allow you to short sale your home. Xanthus would be happy to assist you through the short sale process. If you have any questions or need assistance, call us and we’ll help you or find someone who will.

Thank you for taking the time to read my newsletter and to put up with my opinions, my thoughts and my way of thinking. I appreciate each and every one of you whether or not you subscribe to my way of thinking or not. We are in the real estate business for profit by owning, acquiring, managing and brokering real estate. Please remember us and any obligations you may have when considering the listing of your property for sale or exchange. We have many investors ready to do quick deals. This letter is intended to be a thought-provoking tool to assist you. It does not adequately address any problem or law. Always seek professional help before entering into any legal, tax, or real estate transaction or problem. At Xanthus, we want and appreciate your business and will prove it to you every day.

Until Next Month,

Mark Allen, Broker mark@xanthushomes.com (760) 787-7452 emergency pager

"NO EXCUSES" Full Service Financial Planning, Sales and Rental Management at Xanthus