by P D Singer
“What I have isn’t so much a particular company as an industry that needs further examination.” Dwight laid out a series of printouts across Jon’s desk. “I haven’t really looked at the housing market as such until recently, and there’s some opportunity there.” He settled into the borrowed chair, which creaked under his weight. Jon scooted over, but there still wasn’t enough knee room for both of them.
“What brought this up?” Jon picked up a printout that had a government header on it.
“My cousin…,” Dwight sputtered. “Yeah, I know, that sounds like listening to a tout, but it isn’t like that. He was bragging about how much money he’s making.”
“How nice for him. How’s he making it?” If Dwight brought it up, there was a connection; Jon wondered how long it would take to get to the point. The next piece of paper was a 10Q government filing from a much larger investment bank down the street, though still not one of the biggest players. Jon squinted to see how many zeros he should mentally put behind the numbers in the columns.
“Real estate. He’s selling new houses out in California and getting them financed, and making a fortune doing it; he’s getting a commission on both the sale and the financing. Which is all fine, but there’s something really wrong about how he’s doing it.” Dwight sounded distressed. “He talks about the people like they don’t make much money, and then he mentions the price of the houses. I don’t see how half of these people are getting loans.”
Jon looked up from the 10Q form. There was a lot of information in one of these statements that the SEC required from every publicly traded company on a quarterly basis, but teasing out the pertinent bits could be time-consuming.
“He laughed and said it was easy—half of them were NINJA loans: no income, no job, no assets, and that his favorite lenders weren’t demanding any real proof of being able to repay.”
“That’s insane.”
“It gets worse. Some of these loans are for more than the sales price of the underlying real estate. Up to 125 percent. They’re upside down before they even move in. It all depends on the prices moving up, which they’ve done pretty steadily for years, but how long can that keep going?” Dwight shifted uncomfortably again, knocking against Jon’s knees. “Sooner or later the market has to get saturated.”
“I guess they don’t think it will.” Jon picked up the next sheet, unwilling to spend the time to extract the information that Dwight had probably already pulled, or would. This was a 10K, a yearly statement rather than a quarterly, for a lender, WideWest Financial. “It hasn’t been that long since the savings and loan fiasco. Has anyone said ‘It’s different this time’ yet?”
“Not that I’ve heard. Why?” Dwight pointed to a highlighted number, noting number of loan originations.
“About the second time you hear that, you’re seeing a market top.” Jon wondered who was buying all those houses—the figures were extremely high. Was this a nationwide lender or a really big regional lender? “You’re seeing what kind of opportunity in here, Dwight?” He glanced over at the tall, stout young man who was crowding his legroom.
“Not sure yet. I’m still figuring out where all the money is coming from and going to. That’s what I wanted to talk to you about.” Dwight pulled back, to Jon’s great relief. It was too much like playing footsie.
“I can tell you part of where it’s going. Not in detail, you get to dig that up, but a lot of these mortgages are getting securitized and resold as huge, highly rated bonds. Somebody from Lehman Brothers called and offered me one, but this whole firm isn’t that big—that thing was $3 billion. Then they offered me smaller sections, increments of a million, but it still wasn’t anything I wanted. I quit listening after that.” In retrospect, that might have been a mistake. Jon thought a bit further.
“I don’t know how they’re getting those ratings, either, with the kinds of loans you were talking about. NINJA loans? How are the borrowers repaying these things?” The next page Jon examined was an advertisement for a lender, featuring a very small number in very large type. “Though if people are borrowing at 1.5 percent, it wouldn’t be that difficult, but that’s pretty close to the discount funds rate.”
Jon brought up a mortgage calculator on his computer, doing some math in his head as he did. “That’s below the discount funds rate lately. How the heck are they doing that? Oh, it doesn’t last. First six months. That will be around a thousand bucks a month for a $300,000 loan. What happens after that?” He shoved the paper toward Dwight and punched some numbers into the computer.
“The rate resets periodically. I think my cousin said there are a couple of resets. It hits market rate after five years. I’ll get the exact numbers.” Dwight made some notes. Jon was slightly surprised that Dwight didn’t have the information at his fingertips, but this was a preliminary investigation.
“Oh, my.” Jon took a long, horrified look at the numbers he’d generated. “Just one reset upwards to 2.5 percent and it’s thirteen hundred and some, and at 5.5 percent, it’s over seventeen hundred, and if it gets to 7.5 percent, the payment is damn near double where it started. And that’s without taxes and insurance and whatever else. Dwight, is your cousin explaining this part to his customers? Who are his customers? Can they figure it out?”
“I don’t know, and I think he’s selling to regular people. Teachers and bus drivers and people who sell appliances. I wish I could find a decent place for $300,000. Or even two thousand bucks a month rent. He’s talking like he’s selling mini palaces.”
“Location, location, location. He’s not selling these in midtown Manhattan.” Jon typed more. “Course, a lot of places around here don’t sell with a mortgage at all, just nice green cash. Still….”
“Yeah, that’s why I’m still living in Brooklyn with my mother.” The flush on Dwight’s face glowed brightly in the corner of Jon’s eye; he didn’t swivel around to see it fully. The poor guy was embarrassed enough as it was.
“You could ask Edgar if the firm would cosign on a note or on the lease. He did it for Ricky.” Jon hesitated saying that, knowing how badly Ricky wanted out of his arrangement.
“I do not want to be one bit more beholden to Edgar than I already am.” Embarrassment turned to anger, and Jon did swivel around at that. “Never mind, we’re talking about mortgages that don’t make sense. Teachers’ and bus drivers’ income isn’t going to grow by leaps and bounds like these mortgage payments are.” Dwight waved his hand at the paperwork. Jon decided not to ask more questions. “And without qualifications—these people could really be in over their heads fast.”
“But AAA ratings on the securitized instruments? That’s like saying every one of the loans in the composite is gold-plated.” The big bond agencies gave their best ratings to companies that were rock solid, extremely unlikely to default on their obligations. “Something is really wrong here, Dwight.”
“That’s what I thought. The question I wanted to ask you is—what should I look at hardest for a way to make some money before it all blows up?”
LOGAN returned with coffee and papers. Ricky took his hands off the keyboard, where he’d been posting a review of the music at Sharkie’s, and took the cup. “What do you have here, Logan?” He took a deep sip of the coffee and waited until Logan returned with another chair.
“A nice regional builder that’s been showing some steady growth and looks poised to take off in a big way. They just bought four big parcels of land around Stockton, California, which is one of the fastest-growing areas in the country.” Logan tried to find some knee room, but apparently there was so little that he had to squash against Ricky. “They have next to no sitting inventory here or in the other states they build in, mostly Texas, Arizona, and Colorado. They sell it as fast as they can build it.”
Ricky took the folder Logan offered and began to examine the papers within. “Lasker Builders, hmmm. Thought they already had a pretty substantial run-up in the last couple years.” He didn’t withdraw his knees.
“They did,
from 17 to around 31.” Logan grinned widely. “But that was before they teamed up with WideWest Financial.”
“Aha, a tame lender?” Ricky ran his fingertip down a column marked “Single family units completed,” showing numbers that had grown every year for the last ten years. “Logan, I think you’re on to something here.”
Chapter Six
THE door on the beach house was unlocked when Ricky and Jon arrived Friday evening. “Hey, Kevin!” Ricky threw his bag in the corner. Jon followed in time to catch the tail end of the sour look Ricky’s co-renter threw them. “We just got off the ferry. How long have you been here?”
“I stopped for dinner in Cherry Grove, so not long. Didn’t expect you.” No, Kevin wasn’t glad to see them. He pulled back one corner of his mouth, which only emphasized his slightly crooked nose.
“Deal with it, Kev.” Ricky swung onto one of the swiveling barstools by the counter in the kitchen. “Jon and I are all set for a weekend on Fire Island, so here we are. Seen Christopher and Haden?” They also shared the rental of the tiny two-bedroom beach house. Jon knew why Ricky hadn’t said Christopher or Haden, because one had never been seen without the other.
Jon opened the fridge to stow the food that he’d insisted on bringing: eggs, milk for the coffee, bread, and some snacks. They’d eat out more often than not, but he hated the kitchen to be bare; it was too much like a hotel then. Kevin hadn’t put anything in the fridge. An omelet might soften him a bit.
“They won’t be out this weekend.” Kevin poured two fingers of gin over a couple of ice cubes. So he had brought what he considered essentials.
“Lucky you.” Ricky found a couple of glasses, added ice, and poured from Kevin’s bottle, despite his look of outrage. “You get the full-size bed and not the couch.” He handed one to Jon and then clicked their glasses together. “To fabulous sex.” Jon raised his glass to his lips, knowing they’d drunk to a certainty, and Ricky saluted Kevin. “May you ever get some.”
“Fuck you.” Kevin took a long pull at his drink. “I’m in the big bedroom. Anyone I bring home is going to need room to move.”
Ricky stuck his head into the larger bedroom, then went in, grabbed a duffel, and tossed it into the small bedroom on the other side of the single small bathroom. “Anyone you bring home will spend his thirty seconds on the full-sized mattress or be big, strong, and heartless enough to pull me and Jon out of the king bed, unless he decides to jump in with us instead.” He returned and refreshed his drink.
“Don’t even joke about that!” Jon whapped the back of Ricky’s head, making him hunch up and laugh. There was nothing humorous about it. Ricky might choose to run those kinds of risks, but Jon wouldn’t, even if he decided he wanted someone other than Ricky. Which he didn’t. “You’ll have fun on the full bed.” He could wish Kevin well; maybe some of the odd sorts he’d brought home were more talented in the sack than appearances and sound effects had suggested.
Kevin drained the gin and hurled the ice into the sink to melt. “You,” he said to Jon, “must be pretty good if he”—Kevin tossed his reddish hair toward Ricky—“keeps bringing you back, but some of us don’t have a regular squeeze for those times we don’t feel like hunting. I’m off to find true love, or at least true lust. Or a half hour of horniness. Whatever.” He slammed the door on his way out.
“I’m going to smack that little shit.” Ricky crashed his glass down on the counter. “Nobody gets to be rude to you.”
“We pushed him too hard, Ricky. Don’t.” Jon dragged his bag into the larger bedroom and stared at the big bed, wondering who Ricky had shared it with last weekend, when Jon hadn’t been there.
LETTING himself out quietly through the sliding glass door, Jon checked up and down the beach, planning his run. Keys, phone, shoes…. He sat in the flaking blue Adirondack chair to pull his running shoes on. Ricky was still asleep; all that sex and more gin than Jon had been willing to drink would probably keep him in bed another hour. Jon made a mental note to get Kevin a fresh bottle of a better brand. Jumping the stairs from the deck to the sand, he crossed the few hundred feet from bayside to seaside on the long, narrow island.
He ran down that narrow, damp ribbon where the Atlantic lapped the beach and compacted the surface, enjoying the breeze off the water that kept the morning from growing too warm. Cooped up all week and with nothing but a treadmill in the gym to stretch his legs, Jon chose a pace that would put him at his turnaround in the town of Ocean Beach in about twenty minutes. He found the illusion of solitude in the less populated stretches of beach between the towns, looking only at the shorebirds that skittered in front of him.
He passed one or two runners, was passed by another, and ignored the catcalls from a few sunbathers. Only once did he stop on his five-mile circuit, and that was to pick up a mermaid’s purse that had washed up on the beach. Still slightly greenish and damp, it would dry into a black, wrinkled reminder of the ocean. He held it carefully so as not to crush it as he ran, thinking of the place on the bookshelf it would have, next to the sand dollars and the razor clam shells he’d picked up on other weekends.
A still-rumpled Ricky was on the deck with a cup of coffee when Jon returned, flushed and sweaty.
“What’s that?” He took Jon’s beach find, turning it over to investigate the square-ish leathery pouch with tendrils at the corners.
“It’s the egg case of a skate, or maybe a shark.” Jon stole Ricky’s cup of coffee and took a long draft of the dark, rich fluid. “Leave it out here until it dries.” He shook the sand out of his running shoes before heading into the house. “I need a shower. Where’s Kevin?” He paused for a long drink of water.
Ricky followed, with a detour to the coffeepot. “He’s still in bed. Can’t you tell?” He grinned over his cup.
“Oh.” Well, Jon had wished Kevin some fun, which wasn’t the same as wanting to hear it.
Ricky offered his cup to Jon once more. Somehow the coffee in Ricky’s cup always tasted best. Another deep draft was almost as good as a hug, which Jon was too sweaty to offer, even given Ricky’s unshowered state. “Joining me?” He set down the cup and headed to the bathroom.
“You bet.”
Once into the water, Jon pressed close to Ricky, their rapidly growing erections trapped between them, their mouths together. Soapy hands everywhere, from muscular backs to sudsy cracks, traveling down strong arms and firm pecs, and the slickness of the shower gel let Ricky pump them both in one large hand.
“Help me here, Jon” got another slippery hand to hold their cocks together—Jon felt the ridges around each head bump and slide beneath the circle of his fingers. Starting slow but gaining speed, only the arm he had thrown over Ricky’s shoulder kept him close. Ricky sped up from playing to serious-about-coming-soon, his hand flying up and down, holding their shafts together. Unable to match the pace, Jon slipped his hand beneath them, gathering their balls in his palm, rolling and squeezing. The flat of his hand slid next to the flesh at Ricky’s groin; his fingers cupped around Ricky’s sack. The water beat down on them, over their faces, which touched forehead to forehead now, making the space between their bodies that they needed to move.
“Close?” Ricky gasped, his fingers tightening, and Jon groaned, on the cusp, and then proved it, spraying creamy white droplets over their bellies. Holding still, not crushing, Jon lost his awareness in the rolling waves of pleasure Ricky drew from him, until a moment later more hot fluid spattered their skins. Folding over onto Jon’s shoulder, Ricky panted until he could stand up again and let the water course over their bodies, washing away the traces of come.
Jon nearly had the last traces of conditioner massaged out of Ricky’s thick dark hair when the pounding started.
“Leave some hot water, Ricky!” Kevin yelled, his fist thudding against the wood. “You aren’t the only one here!”
“Relax!” Ricky commanded, but he turned off the water and handed Jon a towel. “We’re nearly out.”
Jon dried off and
kilted the towel around his waist, but Ricky started to shove his back onto the towel rack before slinging it around his hips after all. He opened the door. “All yours, boys.” He marched the few steps from the bathroom to the bedroom, past an irritated Kevin and a total stranger who followed Ricky with knowing eyes. Ricky turned to look back, closing the door behind Jon and just incidentally displaying himself. Jon waited until the door clicked shut to drop his towel.
He’d have sworn that the heavy-lidded, challenging look Ricky gave the stranger meant, “Don’t say anything; don’t admit you know me.” Or, it could have meant, “Wait ’til I ditch Jon.”
He couldn’t leave it alone. “Someone you know?”
Ricky dug clothing out of his bag. “Not exactly.”
“That means ‘seven inches, uncut, name might be Steve, Sean, or Sam’?” Bitterness that Jon usually kept well bottled leaked out.
“I think it’s Jack, but I can’t say for sure.” Ricky pulled up a pair of board shorts and came to enfold Jon in a hug. “You know he doesn’t mean anything to me. Not like you do. You know that.”
Almost against his will, Jon’s arms slipped around his wandering lover. “I don’t know that. What I know is that any man around you is either someone you’ve fucked, someone you’re going to fuck, or someone too straight or too contemptible to fuck, though they might do in a pinch.”
“Those aren’t bad categories. Jon, yeah, I like variety. But I keep coming back to you. Out I go, back I come.” Ricky stroked his fingers through Jon’s wet hair. “I always come back to you.”
“What if I did that?” Jon pulled away, but Ricky wasn’t letting go easily. “What if I had sex with someone else now and then?”
“You’d be entitled, I guess.” Ricky looked sideways into Jon’s eyes, confused. “But you haven’t. You wouldn’t.”
“Why? Why wouldn’t I?” Anger gave Jon the strength to jerk back, and knowing the answer made him want to pull more clothing on, to cover himself.
