AM I NEXT? ANOTHER MAN-MADE MORTGAGE CRISIS LOOMING?

One of the proximate causes of the 2008 mortgage meltdown and resulting near collapse of the financial industry can be related to the Wall Street Wizards and their need to create additional mortgage products for sale in the secondary marketplace.

Essentially there came a time when the pool of the well-qualified borrowers was satisfied and new originations stagnated. The mortgage industry, in conjunction with key politicians, decided the answer was to loosen the underwriting criteria used for new mortgage applications and refinancing opportunities.

Thus the alt-a marketplace was encouraged until that market stagnated.

Enter the subprime era of the so-called NINJA-loan (No Income, No Job, and no Assets) were required for underwriting. Including zero-down payment schemes or deferrals of fully-amortized “teaser” loans.

The sales pitch was simple, in a rising real estate market, nothing could go wrong and that an increase in home equity could be used to pay off credit cards, take a vacation, or simply let the rise in equity pay-off your loan when you were ready to sell and move on to another property.

And the pattern seems to be repeating itself…

One look at previous blog posts and you can see a number of financial firms downsizing and laying off employees. Part of this is due to increasing automation and self-serving web sites, part due to increasing interest rates, and part due to rising property values and the lack of refinancing activity.

So it should come as no surprise that the industry has responded again with relaxed underwriting criteria, low credit score, little or no down payments, interest rates a little below market, but with the added twist of “borrower education.” Especially community-based organizations who offer the lead generation and educational component while securing funds from tie-ups with major financial institutions.

Consider the programs being offered by NACA, the nonprofit, Boston-based brokerage Neighborhood Assistance Corporation of America, whose educational programs may be back-ended with low-credit score loans, relaxed documentation, and zero-down subprime mortgages that might be just below the advertised (and inflated) market rate.

And ask yourself, how am I prepared if the unthinkable happens again and there is a significant downturn in the economy? Are you depending on the pundits to explain why this time it is different?

Are you wondering, Am I Next?

DID KYLIE JENNER TEMPORARILY TANK SNAP CHAT? (UPDATE)

UPDATE: March 30, 2018 --

It appears that the company has announced another round of layoffs, this time said to be approximately 100 employees. This time mostly in advertising and sales. 

"Over the past two years our company has grown a tremendous amount. Late last year we asked senior leaders across Snap to look closely at their teams to ensure they had the right resources and organizations to support their missions," Chief Strategy Officer Imran Khan said in a statement. "As a result, new structures have been put in place for Content, Engineering, Sales and many other parts of Snap."

UPDATE: March 8, 2018 --

It appears that Snap, Inc. is on the move. Not only are they consolidating there rabbit warren of offices in Venice into a more centralized facility, they are also laying off 120+ engineers.

The head of engineering, Jerry Hunter, in a memo to the remaining SNAP engineers wrote, "We have made the exceptionally difficult decision to exit just over 120 members of our team from the company.” Having high-performance, technically excellent, and appropriately aligned teams will be critical to building both a compelling product and a compelling culture for engineers."

Snap has attempted to re-engineer its user interface which has met with a less than enthusiastic response. 

Did Kylie Jenner's Tweet act as a Black Swan and push Snap, Inc. down a slippery slope?

There is little or no doubt that Snap, Inc., the parent of Snapchat was already on the slippery slope of analyst downgrades and waning investor confidence when social media darling, Kylie Jenner, a member of the infamous Kardashian Klan, tweeted “sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad.”

With 24.5 million followers and Jenner’s position as a highly-regarded social media “influencer,” was Kylie Jenner the black swan, the symbol of an unforeseen event, that triggered a $1.3 BILLION loss in market valuation?

Some of the other factors include the fact that Snapchat did not have an intuitive user interface and using many of the Snapchat features can be a complicated task requiring a modest learning curve effort. The redesign to create a more friendly and intuitive user interface has met with a significant number of negative reviews. 

Then there is the optics of Snapchat’s CEO, Evan Spiegel, being granted  $636.6 million dollar stock option when the company is cutting costs, personnel, and remains unprofitable. 

Advertisers, like New York-based Maybelline Cosmetics, appeared to be openly asking its 665,000 followers whether or not “Should Maybelline stay on Snapchat?” The tweet was later deleted and a company spokesperson claimed that the tweet of an individual within the Maybelline group did not represent the position of the company. Of course, the tweet resonated in both the social media community and the investors wondering if this was a portent of the future. 

The issue for investors is one of platform engagement and can Snapchat retain its customer base or will the social media set move on to the next “cool” thing? Snapchat’s effect on Facebook (which took on the meme of being your parent’s social media tool) was noticed by Wall Street and factored into Facebook’s valuation. 

Let us not forget that the company itself was no different before and after the tweet – and only investors were impacted in the short term. Whether Snap will recover and thrive or continue losing ground to other social media platforms is a gamble – everyone place your bets using the best knowledge at your disposal. Full well knowing that the most significant lesson is that black swan events are unpredictable and the best countermeasure is being prepared to counter any situation that would result in a loss of market access or personal employment.

Are you asking yourself, Am I Next?