LETTER TO PRESIDENT October 27, 2008 AN OPEN LETTER TO THE PRESIDENT OF THE UNITED STATES, CONGRESS, CHAIRMAN OF THE FEDERAL RESERVE George W. Bush President of the United States Washington, DC 20515 Congress of the United States Washington, DC 20515 Attn: N. Pelosi Chairman of the Federal Reserve Board 20th Street and Constitution Ave NW Washington, DC 20551 Attn: B. Bernanke Honorable Mister President of the United States and all the honored and distinguished members of the United States Congress and the Federal Reserve System. Only two years ago the real estate market was booming and everybody was happy. Nobody realized that major economic problems began when lenders started giving low-interest loans to everybody without checking their ability to pay back the loans. New loan programs were created and were available for anybody who wanted to participate in the game, which artificially inflated value of real estate. Real estate professionals, loan officers, escrow and title companies, insurance agents, appraisers, home inspectors, and building contractors were prospering. Some, so called, professionals didn’t care about integrity, instead, they learned how to twist the rules and make more profit in that situation. Unfortunately, there was no way to stop them because of the lack of regulations. I sensed something was about to happen and it surely did in 2008. The real estate bubble burst, and everybody started to lose. Big banks went out of business one after another and were swallowed by other banks. Wall Street crashed, and thousands of investors lost their money over night, 401Ks shrank. Millions of home owners throughout America lost their homes to foreclosures and continue to lose every day, value of real estate plummeted down, and a chain reaction began. Banks stopped financing construction loans, in some cases in the middle of the home construction. Developers had to freeze their projects and builders stopped building homes due to the shortage of finances. Because of no salability and high inventory, sellers, one after another, have to lower the price and buyers went on hold, market stopped. Common sense tells us all, “Why buy today, when tomorrow I can buy for less?” or “Why lock in my rate now when tomorrow’s interest rates might be lower?” Real estate agents are among the first victims of this economic crisis. Many decided not to renew their licenses, real estate offices closed their doors for operation, and the entire economy slowed down not only in America but around the world. The U.S. government led by President Bush hurried to the rescue. Congress was pushed to work through weekends looking for solutions. Feds were spinning their heads, searching for the way out of this crisis. Together, and after hot debates, they agreed to inject $700 Billion to bail out bad debts in order to free capital for new loans. World leaders agreed to get together to discuss the situation and work it out. The best minds were working hard to fix the problem. It is no secret that real estate is the largest purchase for most Americans. Owning real estate is an all-American dream and it has tremendous effect on the rest of the businesses, as well as families. If real estate is moving, families are buying everything - new houses need new furniture; older/outdated homes need to be fixed up and brought up to date; older cars to be replaced by new ones, and so on. We, real estate agents and mortgage brokers, are on the front line and have direct contact with consumers. We have an opportunity to hear directly from potential buyers why they do not want to buy now, and we need to speak out and address higher authority. Based on our professional opinion and experience of working with clients, we believe there is a way to stop the panic and bring back confidence to the lending institutions, the main cause of all this mess. In order to stop the decline in the housing market, we need to bring back qualified buyers who are willing and ready to buy, but are cautiously waiting for a lower market price and better interest rate. We all know, - this needs to be stopped, but the big question is, - how? 1. Bring back the basics: lending rules and regulations are a must! 2. Stop property value declining by preventing foreclosure and short sales, instead – offer aggressive loan restructuring with affordable fixed interest rate in the area of 5% and adjusted principle according to current property value. 3. For a very fixed period of time (18 to 24 months) interest rates should be frozen around 5% to prevent artificial price inflation and no higher than 7.5%, to be affordable to buyers (based on the credit history, debt-to-income ratio and other qualifications.) 4. Stop the daily fluctuation of the interest rate. We need to keep the interest rate relatively low and steady for at least a year or two to remove an anxiety. Potential buyers should know that, to be approved for a loan, they need to qualify; waiting for a better rate will not work, if they want a lower rate they must improve their financial and credit situation or buy it down. 5. After 18-24 months banks can start slowly increase the rate (1/8th of a point at a time) to encourage new buyers to buy, while interest rate is low. We believe this will stop panic, get the housing market moving again and bring the confidence back into the industry. Anatoly Kalchik Designated Broker A Kalchik Realty, LLC 2025 S 341st Pl Federal Way, WA 98003 www.akalchikrealty.com akalchik@comcast.net 253-569-5849