[Client Canceled] Iowa Dirt Lawyer : Iowa Real Estate Lawyer & Attorney : Pat Burk : Brick Gentry Law Firm : Des Moines, Central Iowa

In a pre-announced change of course, the Federal Reserve Bank of New York has begun the process of purchasing $500 billion in mortgage-backed securities in large part guaranteed by Fannie Mae and Freddie Mac.  Unlike the original plan to purchased troubled securities, these securities are low-risk investment grade. They are not the mortgage-backed securities partially causing the current credit collapse.  For a more detailed story, check out this article by Stephen Bernard:  www.builderonline.com/mortgages-and-banking/ny-fed-begins-purchasing-mortgage-securities.aspx.

This is great, but what does it mean to Des Moines, Des Moines Attorneys and Des Moines real estate in general. The truth is - nothing.  I'm anxious to hear the justification. At least some of the money is being spent on investment grade purchases, but is this the purpose of providing these funds for public use? It smacks to me of some sort of trickle-down theory that has been proven not to work - unless your Sean Hannity or Rush Limbaugh. Fannie Mae and Freddie Mac assumably didn't need help with the guarantees of quality investments. It was the guarantee of troubled mortgages that allegedly caused the problems. Or maybe not. I can't make heads nor tails of this stuff most of the time, but I know its not working in my home town.

We have yet to see these types of federal investments assist local banks, developers, entrepreneurs or consumers. If these moves really loosen lending, then what is the reason for continued tightened lending? Let's incentivize local lenders and national banks to lend locally, especially in real estate. I know Des Moines real estate entrepreneurs and this Des Moines real estate attorney would welcome it readily.

I'd enjoy knowing your thoughts.

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Starting essentially from Scratch, Michael Myers grew Regency Builders into the largest home builder in Iowa.  By following a well-established pattern of pre-designed homes, Regency allowed thousands of Iowans to break the chains of renting and move into their own homes.  Regency homes and neighborhoods throughout Iowa became very recognizable by the uniformity of color and design, but few seemed to care.  Other than attempting to break into higher-profit custom homes, the Regency business plan did not seem to change.  Michael then suffered through a long illness which apparently ran in the family - Lou Gehrig's Disease.  Remarkably, his brother Mark died almost exactly one year later of the same disease. In recognition of Michael's accomplishments - and a $15 million donation - a local hospital planned to name a new west-side hospital after the accomplished home builder.

During his disease and following his death, his two sons took over the company with the assistance of some of the Michael's trusted colleagues. Almost overnight, Regency became a significant competitor in commercial buildings and commercial developments throughout Iowa, but primarily in Des Moines and Cedar Rapids. Anyone driving on I-80 west of Des Moines could hardly miss the huge new office building with the trademark blue Regency sign. Regency seemed to spend with near reckless abandon. You would have had to have your head in the sand not to notice. But, the success seemed undeniable, until 2008.

In text-book style, the seems of Regency's success began to burst. Rumors of the inability to meet payroll for the significant number of employees flashed across the business grapevine. Unfortunately, several of the subcontractors were not part of that network. Both employees and subcontractors went unpaid for weeks of work. Des Moines and communities throughout Iowa were immediately stung.  Regency employed hundreds of subcontractors, several of which relied solely on Regency for their work.  Mechanics' liens outpaced the local clerk and abstracter's office ability to keep up. Recent home purchasers were left with unsodded yards and incomplete warranty work.  No bank in the area dared loan additional funds. Dozens of partially completed homes and several partially completed developments were strewn throughout Iowa. Foreclosure suits by the lenders allowed some of these homes and developments to start to be completed through the appointment of receivers; but, as we all know, now is not the time for such things. The national economy had already burst.

The continued acts of robbing Peter to pay Paul caught up with Regency.  It is no more.  The large and nearly empty office building sits immediately across the street from me and serves as a daily reminder of excess.  The hospital graciously allowed the family to forgo the $15 million donation, and the naming rights for the new hospital.  Thank heaven not all home builders in Des Moines went this route. We will dig out.  But, because of Regency, it will take all that much longer.

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The economic crisis is big news.  It affects nearly everyone.  Either you are directly affected or you know someone that is.  The speculation regarding how we got here, when it will end and how best to end the current crisis are all over the board.  An interesting example of the rise of the crisis lies right here in Des Moines.

Des Moines and the Midwest are often insulated from the dramatic economic swings taking place on the coasts.  Simply put, as a whole we are more conservative.  But a few relatively large scale economic stories highlight past problems in the real estate and investment industry.  Probably the biggest for Des Moines is the story of Ed Boesen.

Like many others in Des Moines, I knew Ed, worked with Ed and sincerely liked Ed.  His energy was boundless and creativity mind boggling at times.  His charisma literally lit up a room.  Using money from a family flower business, he began to grow a real estate and business empire.  Many speculate Ed's intentions were not genuine.  Nobody can prove a thing and I'm giving him the benefit of the doubt - things simply started to get out of control.

He began borrowing to pay debt - large debt - to the tune of over $50 million.  Lenders bypassed typical lending due diligence and would apparently lend him money on charisma and reputation alone.  One lender approved a loan for over $5 million in part by relying upon a security interest in a non-existent $7 million plus investment account .  The lender verified the existence of the account by relying upon an AOL e-mail which included the name of the brokerage in the address - yes, really. That was the type of due diligence required of a man with this type of reputation before the economic collapse.  I imagine he never dreamed he couldn't turn it around and pay everyone back. But the bottom fell out.  His world crashing, he very sadly decided to end his own life.  Only then did the debacle become public and what a story it was. There are far too many links to list here, but simply Google his name and Iowa or Des Moines and you will find vast sources of information and speculation.

The point of mentioning this story here is that it highlights the problems in the industry and helps explain the knee-jerk reaction of restricted lending.  Like a spurned lover seeking the arms of a polar opposite for comfort, lenders and governmental oversight workers alike have tightened lending policies to the point of lunacy.  We need to find the middle ground.  There are still excellent and charismatic entrepreneurs willing to risk their own assets to move forward.  Why can't we all open our eyes, make necessary and reasonable adjustments to the system and move on?  I don't think we'll know for some time.  For a little insight though, pay attention to what is going on in Des Moines.

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