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Reporting on BAMCRES

The FIRST Yogendra Singh, President SAREAA

Coming together of the 11 organizations to hold the first Bay Area Multi Cultural Real Estate Summit at Elks Lodge, San Mateo on October 25th was truly The First in the history of California real estate industry. The Summit brought together Bay Area Real Estate Practitioners, government officials and Service Providers in an educational conference format focused on the dissemination of information, demographic trends, financial reforms, and business practices which affect the fast growing multi cultural real estate communities within Alameda, Contra Costa, San Francisco, San Mateo, and Santa Clara Counties. The eleven organizations - 7 ethnic real estate associations, Asian Real Estate Association of East Bay, Chinese American Real Estate Association, Chinese Real Estate Association of America, Filipino American Real Estate Professionals Association, National Hispanic Real Estate Professionals of San Francisco and Silicon Valley, South Asian Real Estate Association of America and 3 local boards of realtors, Bay East Association of REALTORS®, Silicon Valley Association of REALTORS®, San Mateo County Association of REALTORS® and Fidelity National Financial did a tremendous job in showing unity of purpose in diversity.

The initiative made by these 11 organizations was heartily supported by NAR, CAR, SJAOR, Wells Fargo Home Mortgage, Stewart Title of California, Chicago Title, Old Republic Title, Land America Title, Asian International Real Estate Expo & Conference and Pre-Paid Legal Services and by an attendance of over 300.


The panel consisting of, from right to left, Jeff Davi, Commissioner DRE California, Sergio Barajas, Expanding Markets Manager, Freddie Mac, Steve Goddard, State Legislative Chair, CAR, Julius Nyanda from San Jose Realtists Association, Allen Okamoto, Chairman AREAA and Pablo Wong, Senior Vice President, Market Development, Fidelity National Financial who moderated the panel discussion.

The proceedings of the Summit were eloquently conducted by Geoffrey Craighead, President SAMCAR and Patricia Lindo, Chair of the Steering Committee. Jorge Carcamo, President of NAHREP-SF and Patricia Lindo, President NAHREP-SV gave a power point presentation on "Preventing Foreclosures," To obtain a copy of the presentation and the loss mitigation and due-diligence forms please email to jcarcamo@goldkeysf.com.


Forthcoming SAREAA Event

Road to Cultural Harmony
An Evening of Thanksgiving & Entertainment
Dinner, Dance & No Host Bar
To Celebrate the Success of Bay Area Multi Cultural Real Estate Summit (held on Oct 25)

November 18, 2007 (Sunday) from 5 to 10 PM at
Chandni Restaurant
5748, Mowry School Road
Newark, Bay Area 94560
Phone: (510) 668-1051

Make a small contribution of $20 to SAREAA and mail the check to
SAREAA, P O Box 18243, San Jose CA 95158
RSVP & Sponsorship enquiries to yogendrasingh@SAREAA.com.
View Flyer.


International Events

2nd Annual Convention & Gala at Bellagio in Las Vegas, Nevada
www.AREAA.org

November 11 - 13, 2007, AREAA, the Asian Real Estate Association of America will be holding their 2nd Annual Convention & Gala at Bellagio in Las Vegas, Nevada. AREAA Convention will bring together some of the leading real estate professionals, developers, investors and brokers from the United States and Asia. Speakers include Convention Co-chairs Malcolm Morris, Stewart Information Services Co-CEO and Carmela Ma, AREAA Director, Douglas Duncan, Chief Economist, Mortgage Bankers Association, Lawrence Yun, Chief Economist, National Association of Realtors, Stephani Schaeffer, The Apprentice winner and Donald Trump's representative.

An exclusive session, "The Asia Report" will discuss the current state of affairs in India, China, Japan, Korea, Thailand and other Asian countries, with a broad perspective on real estate opportunities and challenges in these most dynamic Asian markets. Panelists include: Ms. Carmela Ma, CJM Associates, Inc. Mr. Yun Chang Gu, Vice President and Secretary General of China Real Estate Association, China, Mr. Naresh Malkani, CIPS, Chairman of the Board of the India Institute of Real Estate, India and Mr. Khan Prachuabmoh, President of Government Housing Bank, Thailand.


AIREEC, Asian International Real Estate Expo & Conference, Manila
www.AIREEC.com

December 6 - 10, 2007 AIREEC, Manila, Philippines International Convention Center. The 1st Asian International Real Estate Expo & Conference (AIREEC) 2007 is a groundbreaking event that will bring to Asia all real estate developers, practitioners, trade organizations, speakers, investors, professionals, government sectors and end-users, gathering nearly 10,000 participants and 400 corporations from 54 different countries.

AIREEC 2007 will be the ultimate venue for exploring, networking, promoting and growing your business not just in Asia but also in the global arena. It will provide an exclusive platform for around 1,000 of the world's top industry players for exploring new business opportunities and forging new partnerships in Asia, covering 50 sectors of activities and bringing together millions of dollars in business transactions.


Sub-prime Loans For Commercial Properties - Andy Bagchi

Until 2002 no one wrote stated-income commercial real estate loans. This was a safe practice. A stated-income loan is one where the lender does not ask for tax returns or even a Profit and Loss Statement on the borrower. Instead, the commercial real estate lender merely relies on the borrower's income declaration on his loan application. Back then you would have looked like a total rookie if you had asked for a stated-income commercial real estate loan. Only residential lenders offered stated-income loans at the time. Up until June 2007 or so, plenty of large, national,

commercial mortgage bankers offered stated-income commercial real estate loans. But good times did not last too long. Here's why.

Borrowers with good credit and more than sufficient cash flow to service their loans ("A" quality borrowers) are not afraid to show their tax returns. It is the borrowers who are losing money in their businesses or hiding their incomes who choose to go stated-income. Stated-income loans are therefore more risky than "A" deals and are considered sub-prime. A loan that is sub-prime is not a loan where the interest rate is less than the prime interest rate. Instead, a sub-prime loan is one where the quality of the borrower or the property is less than prime; i.e., a "B" or "C" quality borrower or property.

After the commercial mortgage banker has assembled about $150 million in stated-income commercial loans, the mortgage banker places the loans in a pool. Then the mortgage banker borrows against this pool of mortgages. This kind of secondary market operation is known as a collaterized debt obligation ("CDO").

The difference between a CDO and a normal CMBS (Commercial Mortgage Backed Security) deal is that the mortgage banker has to leave some skin in the game in a CDO. He can only borrow against 80% or 90% of the face value of the pool of mortgages. This leaves the mortgage banker in a first loss position. If the loans in the pool perform poorly, the mortgage banker can lose up to 10% to 20% of the value of pool, or $15 million to $30 million in our $150 million example.

The mortgage banker makes his money on an interest rate spread. He borrows at one rate and books his sub-prime loans at a much higher rate. Normally the interest rate spread is so large that the mortgage banker makes back his $15 million or $30 million in just a few years.

But herein lies the problem. Stated-income lenders all require immense prepayment penalties in order to lock in their interest rate spread. Therefore virtually all stated-income commercial mortgage loans have huge prepayment penalties.

Since 2003, faced with a sagging residential market, sub-prime lenders had become more aggressive, giving out risky loans to borrowers. Hesitant home buyers were lured into these products with low interest rates for the first few years. The interest rate would adjust steeply upward after the "teaser" rate was over - hitting borrowers with a steep hike. Most borrowers could not afford these high rates. The softening of the residential real estate market had added to their woes since they were unable to sell their properties to pay off the loan. For many borrowers, foreclosure was the only option. The ex-Fed chairman, Alan Greenspan recently said he did not notice this trend in time to take a corrective action.

Lenders are now having to take over properties they do not want to own (they are in the lending business, not in the home ownership business). If they hold a B-paper mortgage, they are left with notes that they cannot liquidate or borrow against. Their money is thus not circulating and is locked up in non-performing assets.

Here is the good news though. Commercial loans have lower chance of suffering from this malady as they are based on the financial performance of the property. Lenders have however learned a lesson from the residential fallout and have made underwriting guidelines on stated-income loans for commercial properties more strict these days.

Andy Bagchi is Vice President and a commercial loan officer at Sirius Bancorp, Cupertino, CA. He may be reached via phone at 408-625-7022 or by email at andy@siriusbancorp.com. Sirius Bancorp (www.siriusbancorp.com) is licensed in California and provides loans for commercial properties only all across US in the contiguous 48 states.



About SAREAA

SAREAA has a mission to promote the general success of South Asian American real estate professionals by providing the opportunities to network with fellow real estate professionals serving South Asian American housing market, through a nationwide network.

SAREAA membership is presently FREE to all Real Estate practitioners who abide by the NAR code of ethics and are serving the South Asian American communities helping them realize their American Dream of Homeownership. To join SAREAA, visit www.SAREAA.com.

SAREAA, the South Asian Real Estate Association of America has been incorporated in the State of California as a Non Profit Mutual Benefit Corporation and is dedicated to the mission of providing the Consumers resources that will help them realize their American Dream of homeownership.

SAREAA will provide the consumers a web based countrywide database of real estate professionals who speak South Asian languages and or understand the real estate needs of the South Asian communities. The users will be able to search the database of real estate practitioners easily by visiting the web site www.SAREAA.com and clicking on the "Find a Member" link.

SAREAA is also developing SAHARAA, a multilingual resource center that will help both the consumers and real estate practitioners & affiliated businesses understand the real estate and mortgage processes in their language of choice. The consumers can visit the web site www.SAHARAA.org and learn about the home buying, selling, mortgage loan and other financial assistance programs by choosing the language of their choice, that is, English, Hindi, Punjabi, Urdu, Gujarati, Tamil, Telugu or Bengali.

"SAREAA will be an important resource in our community" said Colleen Badagliacco, President, California Association of REALTORS® while commending the efforts made by SAREAA in developing a multilingual resource center.

Allen M Okamoto, Chairman, Asian Real Estate Association of America has rightly said that, "It is groups such as SAREAA that will help close the homeownership gap experienced by Asians" and "will create a level playing field so that all Asians will have the equal opportunity to compete for the American Dream of Homeownership".

"Building the Community with Bricks and Trust" is the slogan for SAREAA.

SAREAA membership is free to real estate practitioners and affiliates who believe in helping the communities realize their American Dream of homeownership.

To join SAREAA visit www.SAREAA.com or write to SAREAA, P O Box 18243, San Jose, CA 95158.

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