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Announcements

Announcements. Office: R m 1047 Office Hours? Exam sign-up 3 pass/fail Edel , Gloria, Kevin Tuesday after class? 5 graded Tuesday afternoon/evening? Two groups: Verena and Garrett Saurabh , Orge , Elisa. Another Term. How is interest rate set? What is it a lender wants?

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Announcements

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  1. Announcements Office: Rm 1047 Office Hours? Exam sign-up 3 pass/fail Edel, Gloria, Kevin Tuesday after class? 5 graded Tuesday afternoon/evening? Two groups: Verena and Garrett Saurabh, Orge, Elisa
  2. Another Term How is interest rate set? What is it a lender wants? Loan = product Lender = wants profit “Spread” = profit Mtg. broker – lender willing to lend at 4% Broker – arranges loan at 4.25% -or- Lender borrows money from fed at 2% Loans it to borrower at 2.25%
  3. Spread ARMs – affect of spread? Teaser rate Lender paying 2% for its money Lender initially loans at 1.75% Losing money Won’t last long
  4. “Mixed Collateral” Example Hotel What are you buying? What would lender want as security? Why?
  5. Multiple Security Refers to ? Example: Need $500k Have five properties Together equity = $1 million; individually none has $500K How might lender structure loan? One note? Several notes? What happens upon default?
  6. Buying Property in other Countries

  7. ITALY Can buy property even without an extended stay visa and without obtaining residency Private contract, called compromesso- Can register it A public notary,  super partes, completes sale. Parties sign before notary. http://www.italy-real-estate.net/buying_in_italy.php?lang=en http://www.keyitaly.com/article/legal-process/
  8. Italy - continued Some additional information: Principle of prelazione, third parties’ right to buy [farm land], allows neighbors adjoining the land first refusal on the property at the asking price. Sitting tenants and people conducting a business from the property also have a right to buy. Sale can be stymied by interested parties putting in a last-minute offer and having to be bought off.  Completion date or data del rogito.
  9. Spain PROPERTY REGISTRY (REGISTRO DE LA PROPIEDAD) Can use privateagreement (no notary) Housing purchase agreements - concluded in a notarial deed: public document authorized by a notary, who writes down the wishes of the parties, checks identity, legal capacity, etc. Notarization of the deed is tantamount to delivery of the home, and generally the price is handed over to the seller in the notary’s presence.
  10. SPAIN http://www.fomento.gob.es/NR/rdonlyres/55F07DA1-3DC3-4FB8-B140-3BE95097CD47/101724/guia_comprar.pdf
  11. GERMANY 42% of Germans own their own homes (lowest of entire European Union) http://www.howtogermany.com/pages/housebuying.html http://www.howtogermany.com/pages/mortgage.html
  12. TURKEY https://www.gov.uk/how-to-buy-property-in-turkey Must have military permission [?] http://www.mfa.gov.tr/guidance-for-foreigners.en.mfa
  13. INDIA http://www.buyassociation.co.uk/property/buying-a-property-in-india.html http://en.wikipedia.org/wiki/Indian_states_ranking_by_families_owning_house
  14. Housing Ownership Rates http://www.housingfinance.org/uploads/Publicationsmanager/0212_Hom.pdf Article: Ownership Rates: A Global Perspective “Homes” and “home ownership” defined differently Example: under Canada’s def., only 4 of 10 “homes” would qualify in India http://www.nationmaster.com/graph/peo_hom_own-people-home-ownersh [data as of 2000]
  15. Reactions/Solutions to the Financial Crisis

    Assignment Which country? What is that country doing to remedy financial crisis? Groups – share information
  16. Reactions/Solutions to the Financial Crisis 1999: repeal of 1933 Glass-Steagall Act US: Troubled Asset Relief Program [TARP] Dodd-Frank Wall Street Reform and Consumer Protection Act
  17. 1933 Glass-Steagall Act Enacted as reaction to ? Regulatory firewall between commercial and investment bank activities Severely limited right of commercial bank to issue securities Parts -repealed in 1999 - no longer illegal for investment commercial bank to also engage in business/commercial and retail banking.
  18. Troubled Asset Relief ProgramTARP U.S. Treasury - purchasing power of $475 billion to buy up mortgage backed securities (MBS) from institutions across the country, in an attempt to create liquidity and un-seize the money markets. “Bailout” “Toxic assets”
  19. TARP – cont. October 2012 Congressional Budget Ofc. report: govt. disbursed $313 billion to financial institutions, almost all of which was paid back. The CBO estimates that taxpayers will realize a net gain of about $25 billion. The government purchased $205 billion worth of preferred stock from 707 financial institutions. Of that investment, those institutions paid back $192 billion, or 94%. The CBO believes that taxpayers will see a net gain of $18 billion from that program.
  20. TARP - continued TARP provided an infusion of capital to banks (some would say they were "bailed out"), most of the banks have paid back the funds with interest.
  21. Home Loan Modification Program"Home Affordable Modification Program" Change terms so more affordable FHA loans
  22. Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 Several year implementation period Reduce risks in financial markets Created several new agencies Financial Stability Oversight Council (monitors financial stability of firms; liquidation/restructuring if nec. Federal Insurance Office (monitors ins. cos.)
  23. Dodd-Frank - continued Consumer Financial Protection Bureau (prevent predatory lending and easier for consumers to understand mtgs.) SEC Office of Credit Ratings (ensure that agencies provide meaningful and reliable credit ratings of the entities they evaluate) Years before full implications known
  24. EUROPE http://www.youtube.com/watch?v=wY6G6U4gU40 Banks – shedding assets around the world Euro zone – banks in healthy economies pulling out of weaker southern locales Significant retrenchment in global banking
  25. GREECE 3rdqtr. bailout installment: in 3 disbursements Each – linked to some condition re/ reform of public administration, privatization, administrative reforms [austerity program] Result? Massive public protests by municipal workers, teachers
  26. ICELAND – “THE NORDIC TIGER” Prior to 2008: Strong growth projectory High Growth Domestic Product Low unemployment Even income distribution 2008 – one of earliest casualties Banking sector – privatized in early 2000 Banks - aggressively expanded 2008 crisis - Iceland's three largest banks collapsed Economy contracting by 6.8% in 2009
  27. Iceland – cont. Much of capital – loaned outside country Dependent on other countries’ economies: residents needed to pay debts Oct. 2008: IMF: $2.4 billion loan plan Must adhere to IMF-supported economic program
  28. Ireland Road to recovery? 1,600 Irish workers per week leaving… Wages – fallen by 15% since crisis began Homes – under water
  29. China?
  30. Come up with 2 unintended consequences… Health care – Greece Lose job/lose healthcare Nationwide unemployment increase of 20% since last year (215,735 people) Free clinics Corruption: public trust in govt – eroded Greece – 90% say political parties affected by corruption.
  31. Group Exercise Brainstorm together – think of three questions you think I should ask in the oral exam. 1 – easy 2 – medium 3 - hard Discuss the answers. Synopsis? EXTRA CREDIT Office: 1047 Office Hours?
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