First, our condolences. We know—it’s that bittersweet week when your country club is about to shut down for the season. Tell your beer cart girl we’ll miss her.
Despair not, as we’ve found a country club where your golf cart is a Lambo, your swimming pool is all of Manhattan, and your cannonballs in said pool are… glorious.
It’s called the Willow Club, it’s a combination private country club meets concierge service for the best things the city has to offer, and it’s taking membership now.
Here’s the deal: you sign up for a membership, and then five days (and a cool 28 grand) later, you’ll possess a tiny black member’s card, good for 7,000 “points.” And then, using those points, you can start making plans. Big plans.
Perhaps a little yachting, followed by sitting courtside at the US Open. Racing sports cars down the FDR followed by a quick run through the MoMA. (Your card will get you to the front of the line.) Or you’ll take a Ferrari out to Yankee Stadium, then back down to a Fashion Week party. (They’ll put your name on the list; you can change in the car.) Then, you’ll close your day with a nice, relaxing glass of wine—served at the after-party you’re hosting in a Midtown penthouse.
That would run you a cool 3,500 points, so you can blow it up Bueller-style not once but twice a year. (We’re feeling November 14 and April 22.) Should you just need to get out of Dodge for awhile—and by Dodge, we mean America—you can use your points at some hotels overseas.
We are collecting horror stories about condo finance, and there are allot of nightmares out there. There are 2 dirty words to bankers today: “sub prime” is so yesterday, while the hated word of 2009-10 seems to be ‘condos’.
But why are condos such bad news in the minds of lenders and are they really as risky as they are perceived? We are working on finding the facts and statistics to answer this question, but my gut says, it has more to do with the fact that many of the new inventory of properties were condos in the last few years in the priciest markets, and therefore condos are getting a bad rap.
22 years ago when I started in the mortgage business, there were few condos to be purchased. The condo projects that were out there were a combination of co-op style apartments and apartments that were being converted to condominium form of ownership.
As my friend (and real estate legend) Jerry Kaufman once explained to a packed room full of condo sales people in Miami Beach (circa 2004), “condominium ownership has existed since the Roman Empire” it is simply a division of living space and real estate above the dirt, a space of air clearly defined by the interior walls. This explanation lingers with me, because it truly is that simple, it is ’shared ownership’ of the exterior structures or amenities that define a legal condominium.
From this viewpoint, anything can be ‘condominiumized’ or divided into shared blocks of ownership: fractional and timeshare just take it to the next logical step - sharing ‘time’ and ‘usage’.
So, the first reason that bankers hate condos is that it is believed to be less ’scarce’ than single family forms of ownership that might be more unique. But this is a false belief when you look at the typical American suburb. These tract homes are anything but scarce and unique. You can drive across America and find inter-changeable homes that look and feel alike.
Next, bankers dislike condos for the ‘other macro risks’. Because condos have shared amenities (roofs, lawns, community centers, golf courses, pools, rock climbing walls), these present expenses and risks to each individual owner. Management of these elements, HOA organization, insurance costs, maintenance expenses all play a role in decided whether a condo project is safe or riddled in risks. Since any one home owner has little to no effect over these elements - fear can enter a banker’s risk management mind.
Mixed use projects scare lenders even more - these are projects with commercial space in the project - for example a condo with retail on the first floor, office on the next floor, and then residential condos above. What if the the businesses go bust, and the first floor is empty, and there is no coffee shop, or spa or bookstore to go to downstairs? What does this do to the value of the condos above?
But even single family projects face macro risks, what if the neighboring strip mall goes dark? The golf course at the end of the block closes? The movie theater goes bust? How will this effect your neighborhood? What if a pawn shop replaces the jewelry store on the corner?
Condos, I believe, we will prove are no greater risk to lenders than any other form of residential ownership.
Revolutionary private membership club debuts in new york city
NEW YORK (August 10, 2010) – Willow Club, a first-of-its-kind revolutionary New York City private membership club, today announced its official launch. Combining the ultimate in benefits and privileges with upscale lifestyle hotels in the city’s best locations, Willow Club allows members to experience the best of New York City – and the world – with exclusive insider access and ease.
Willow Club is unique in that it offers members entrée to events and lifestyle experiences typically inaccessible or cost prohibitive. Examples of club benefits include: season tickets to all major New York sports teams, including the club’s luxury suites at select venues; use of the club’s private yacht; the club’s tickets to premier Broadway shows and performing arts; insider access to New York Fashion Week; use of limited-edition, luxury and high-performance cars; complimentary entry into New York City’s most celebrated and internationally-noteworthy cultural attractions and museums; member golf and tennis; and insider shopping and fashion experiences with personal stylists.Members have the very best New York has to offer, all in one place, and all included within the price of membership.
“In creating Willow Club, we drew upon our extensive understanding of travelers who visit New York City to secure and acquire an incredible and unparalleled selection of benefits for our members – including great hotels – the outcome was the creation of a private club product never seen before,” said Willow Club President John Yoon.“Every benefit was selected to provide members with the ability to enjoy some of the most sought after city experiences, with the flexibility to enjoy the world.”
Willow Club is a points-based membership whereby members redeem points to reserve club benefits and amenities, which include hotel and international exchange benefits at an unprecedented value.
“Willow Club is a completely new product resonating with sophisticated consumers who understand both luxury and value. The club already has generated a tremendous number of membership inquiries and pre-sale reservations,” said Jay DiGiulio, Managing Director of Membership Sales. “Willow Club offers premiere access to the finest New York experiences through a single membership – truly an “Urban Country Club” in the world’s greatest city.”
Members can choose from lifestyle hotels in premiere locations throughout New York City, as well as hotel and resort stays internationally, with no additional room night charges.Willow Club’s New York City hotel properties currently include The Mansfield on 44th Street and The Shoreham on 55th Street, both located just off Fifth Avenue, and The Franklin, on the Upper East Side at 87th Street and Lexington Avenue. Willow Club members also become preferred members in an international travel exchange program, allowing use of Willow Club points to stay at more than 2,500 properties in 75 countries.
Willow Club memberships and membership preview packages are currently being offered on an introductory basis.For more information call (877) 330-9650, visit willowclub.com on the Web, or visit the club’s interactive and technologically-advanced membership gallery at 33 West 55th Street, between Fifth and Sixth Avenues in New York City.
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About Willow Club:
Willow Club is a revolutionary private membership club providing a choice of three New York City hotels and an extraordinary array of one-of-a-kind lifestyle experiences. Combining diverse options for overnight hotel stays at some of the city’s best addresses with the most desirable venues, events and attractions, members can enjoy unforgettable experiences in the world’s greatest city. Visit www.willowclub.com for more information.
Note to Editors:
Willow Club Membership Benefits Include:
·Sporting and special events including the club’s luxury suite at Madison Square Garden for over 250 events, including the Knicks, Rangers, concerts and special events.
·Premium season tickets to all New York area sports teams.
·Premiere access to performances, private events and special engagements at Carnegie Hall, the Metropolitan Opera, the NY Philharmonic, the Beacon Theater and Broadway.
·Membership at a private, 54-hole golf club.
·Year-round court time to the USTA Billie Jean King National Tennis Center.
·Luxury suite for Grand Slam tennis including court side seats at Arthur Ashe Stadium.
·Complimentary entry to New York City museums such as the Museum of Modern Art (MoMA), the Guggenheim, the American Museum of Natural History and The Whitney.
·Insider shopping and fashion experiences with industry-leading stylists.
·Use of limited-edition, luxury and high-performance cars.
·Private use of Willow One – Willow Club’s Jeanneau Prestige 42S yacht – for half-day, full-day or overnight use.
·Overnight hotel stays at The Mansfield, Shoreham and Franklin Hotels in New York City, along with opportunities for exchange stays at properties around the world.
Willow Club Membership Details:
·Membership initiation fees currently begin at $28,000.
·Members receive and redeem points for the club’s benefits.
·Members may purchase more club points to coincide with their intended use patterns.
·Flexible memberships allow access and use of points for family, friends, business associates or clients.
Today the Obama administration will begin a discussion on how to overhaul our nationalized housing finance system. Moderated by Treasury Secretary Timothy Geithner and Shaun Donovan, secretary of the Department of Housing and Urban Development (HUD), the “Conference on the Future of Housing Finance” seeks answers to what went wrong in the U.S. housing market. This promises to be the next big domestic policy debate—one that could mold housing finance for a generation or more. But the early signs of where policy makers might be headed are not promising.
A consensus is building around a three-part grand bargain:
• An explicit federal guarantee of a large portion of the mortgage-backed securities created to finance American’s home mortgages;
• A tax on these securities to fund low-income housing initiatives; and
• A requirement that issuers of securities meet affordable housing mandates.
This is a dead end for two reasons. First, while supporters of an explicit federal guarantee tell us it will never be called upon, Americans have read this book before and know how it ends.
Former Chief Credit Officer Edward Pinto explains how it all went wrong.
The second is much less well known but equally deadly: the central role in the recent real estate collapse that was played by the federal affordable housing policy created by Congress and implemented since the 1990s by HUD and banking regulators.
In 1991, the Senate Committee on Banking, Housing, and Urban Affairs was advised by community groups such as Acorn that “Lenders will respond to the most conservative standards unless [Fannie Mae and Freddie Mac] are aggressive and convincing in their efforts to expand historically narrow underwriting.”
Congress made this advice the law of the land when it passed the inaptly named Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (GSE Act of 1992). This law imposed affordable housing mandates on Fannie Mae and Freddie Mac.
Thus, beginning in 1993, regulators started to abandon the common sense underwriting principles of adequate down payments, good credit, and an ability to handle the mortgage debt. Substituted were liberalized lending standards that led to an unprecedented number of no down payment, minimal down payment and other weak loans, and a housing finance system ill-prepared to absorb the shock of declining prices.
In 1995, HUD announced a National Homeownership Strategy built upon the liberalization of underwriting standards nationally. It entered into a partnership with most of the private mortgage industry, announcing that “Lending institutions, secondary market investors, mortgage insurers, and other members of the partnership [including Countrywide] should work collaboratively to reduce homebuyer downpayment requirements.”
The upshot? In 1990, one in 200 home purchase loans (all government insured) had a down payment of less than or equal to 3%. By 2006 an estimated 30% of all home buyers put no money down.
“[T]he financial crisis was triggered by a reckless departure from tried and true, common-sense loan underwriting practices,” Sheila Bair, chair of the Federal Deposit Insurance Corporation, noted this June. One needs to look no further than HUD’s affordable housing policies for the source of this “reckless departure.” If the mortgage finance industry hadn’t been forced to abandon traditional underwriting standards on behalf of an affordable housing policy, the mortgage meltdown and taxpayer bailouts would not have occurred.
Compounding HUD’s forced abandonment of underwriting standards was a not-unrelated move to increased leverage by financial institutions and securities issuers. They were endeavoring to compete with Fannie and Freddie’s minimal capital requirements. The GSEs only needed $900 in capital behind a $200,000 mortgage—many of which had no borrower down payment. Lack of skin in the game promoted systemic risk on both Main Street and Wall Street.
How should we go about repairing this dysfunctional housing finance system?
The goals should be larger down payments, stricter underwriting standards, reliance on the private sector and private capital, and the removal of affordable housing mandates. If there is to be an affordable housing policy, it should not be implemented by hidden subsidies and loose lending standards, but instead made transparent and funded on budget by the government.
Getting there will take time—probably a 15-year rebuild that fosters an orderly phase-out of government guarantees and a transition to a deleveraged, market-based system. This will require both long- and short-term policies.
Long-term we should consider ideas such as: the proposal by Columbia University’s Charles Calomiris to increase minimum down payments by 1% per year over 15 years, bringing them back to 20%, where they had been for decades. Peter Wallison of the American Enterprise Institute has suggested that the private sector be encouraged to grow by reducing the GSEs’ maximum mortgage amount by a percentage every year until it matches the Federal Housing Administration’s (FHA) reduced limit, at which point the GSEs disappear. I have suggested that the FHA be returned to its former role of serving the low-income market over a five-year period, but with a higher minimum down payment so borrowers have more skin in the game.
Finally, the property appraisal process should be re-engineered along the lines suggested by the Collateral Risk Network, an organization representing the nation’s leading appraisal experts. The boom was promoted by appraisal practices that relied on one input—the latest prices that were the result of an overheated market. A return to traditional appraisal theory based on price trends, replacement cost and value as a rental is necessary.
To get the housing finance system out of intensive care, short-term policies need to be implemented that promote deleveraging. Perhaps some of the excess supply of foreclosed properties should be sold to buyers who agree to put 40% down and use the properties as rentals. Josh Rosner, managing director of the research firm Graham Fisher, has suggested that homeowners who voluntarily pay down a portion of the principal on their underwater mortgage receive a tax credit also applied to their mortgage principal. In return, they would forgo future tax deductions of their mortgage interest payments.
While the road to housing hell may have been paved by the government, the road back will be built by the private sector.
Mr. Pinto, a consultant to the mortgage finance industry, was executive vice president and chief credit officer at Fannie Mae in the late 1980s.
“No.” this is a common answer from lenders about whether they will finance even existing mixed use condominium projects.
The project approval rules are flawed, and lenders are creating their own crisis by denying good condo projects ANY financing, under ANY terms. The need for a condo finance reform has never been more important.
check out www.RCFRC.org for more information on how you can help us write letters, and petition Washington on smart reforms that will not cost tax payer money, reform mortgage rules to be more logical and less risky and help Americans protect their condominium values.
First, our condolences. We know—it’s that bittersweet week when your country club is about to shut down for the season. Tell your beer cart girl we’ll miss her.
