For What it's Worth!

Words that you shouldn't use

Ed Rybczynski (Jos. A. Bank Clothiers) — Mon, 04 May 2009 12:01:01 -0500

Last night, thanks to Twitter I found an interesting post on a previously unheard of site, at least for me. The post is named "10 Business Words to Ban," the site: Harvard Business Publishing.

Our choice of words in conversations does matter. Word selection becomes increasingly relevant as we present our views on-line in blogs and other forms of social media.

From the post, words to avoid include:

As well as
And/or
Value added
Net-net
Out of pocket

We might all agree that certain words, terms, and phrases, including those cited above, have been overused to the point of invoking a certain feeling of doubt or distrust when we hear them.

Simply said: the words we choose are determinants of real emotions felt be others based on their personal experiences. For example, I've learned to question the motives of anyone who offers a product or service for free, but then adds the words: a $ _ _ _ value.

Do you agree?

There are other words whose meanings have been diluted by overuse that aren't included on the list. The expression "Paradigm Shift" has been overused to the point of being ridiculous, as has"price point."

Why not say that something costs $ _ _ _ ? It's less stuffy and more direct than saying that it has a price point of $ _ _ _.

"Consultant" is another word that's been abused through overuse. By definition, a consultant is guaranteed a fee, not a commission, for rendering advise or judgment. The vast majority of self-proclaimed consultants are in fact salespeople.

Is that so bad?

I'm thinking that "social media strategy" and "google juice" are "on the path" (another overused expression) to becoming inappropriate due to excessive use.

Can you think of any other words that should be avoided because they've been spoken or written to the point of making others uncomfortable?

Dress for Success - Jos. A. Bank, Kenilworth

Ed Rybczynski (Jos. A. Bank Clothiers) — Sun, 08 Mar 2009 11:33:11 -0500

The Baltimore County Chamber of Commerce and Jos. A. Bank are co-hosting a "Dress for Success" seminar.

Place: Jos. A. Bank, 850 Kenilworth Drive (The Shops at Kenilworth) Towson, MD 21204

Date: March 13, 2009

Time: 7:30am - 9:30am

If you haven't attended one of these seminars, it's time you did. Dress in the workplace has become increasingly important as a competitive edge in uncertain times.

Let me know if you want to attend, if you would like schedule a seminar for your company, or if you want to discuss your professional wardrobe.

I work by appointment.

Mortgage Pro Week in Review - 3/3/08 through 3/9/08

Ed Rybczynski (Jos. A. Bank Clothiers) — Sun, 09 Mar 2008 18:57:44 -0500

My Mortgage Pro Week in Review:

Blogger: Bo Hunt
Post: Down Payment Assistance Programs...Saviors or Scoundrels?

Blogger: Janet Guilbault
Post: Mortgage Person, Take The Wheel (And Try NOT to Crash This Car)

Blogger: Kevin Fase
Post: Spend it or Save it? Your '08 Stimulus Tax Refund

Blogger: Jeff Belonger
Post: The credit crisis aka the Wheel of MisFortune

Marketer: Brian Brady
Post: What Should You Give Consumers? What They Want, Of Course

Blogger: Lenn Harley
Post: Can The Government Fix The Mortgage Mess?

Blogger: Don Draughn
Post: Applying for a Mortgage in 2008: A Primer for First Time Home Buyers

Blogger: Larry Morris
Post: Are You Commiting Fraud With Seller-Pait Concessions Pt 2

Blogger: Fran Gaspari
Post: Truth In Title Insurance...A Transparency Pledge!!!

Blogger: Scott Gormley
Post: The "Liquidity Crises", "Economic Stimulus Package" and my "Sleeping Tiger" Theories!

Thank you Active Rain for the opportunity to participate and contribute. It's been a pleasure.

The next two hosts of the review:

Jeff Belonger 03/10/08 - 03/16/08

Larry Bettag 03/17/2008 - 03/23/08

The raging Susquehanna

Ed Rybczynski (Jos. A. Bank Clothiers) — Fri, 07 Mar 2008 10:39:55 -0600

Last night, my son and I drove to the Conowingo Dam located just above Havre de Grace, the Maryland town in which we live. We were greeted by a crowd that included news teams and other curiosity seekers.

Storms in New York state have swelled the Susquehanna River to flood levels forcing authorities to open the flood gates at the dam.

I happen to live near the imaginary line where the river converges with the Chesapeake Bay. The river continues to rage this morning while water levels appear to climb slowly.

Havre de Grace is in no immediate danger, but I understand that a small town on the opposite shore, Port Deposit, has flooded.

Was President Clinton the cause of the housing meltdown?

Ed Rybczynski (Jos. A. Bank Clothiers) — Mon, 03 Mar 2008 08:35:51 -0600

This isn't intended as an opinion post, nor is it intended to inform. It's intended only to provoke thought and to draw attention to Gene Wunderlich's new group: Mortgage, Foreclosure & Elder Abuse Housing Fraud.

I plan on contributing a significant number of short posts featuring links to facts and opinions about mortgage fraud, foreclosure statistics, the housing meltdown, etc. that you won't find aggregated in any other place.

BusinessWeek had an article last week that bashed the Clinton administration for abusing public policy, visa vie HUD, to intentionally inflate domestic housing statistics.

It's an interesting perspective when you think about it. We know that the housing mess had it ugly origins in the mid 1990's. It's also safe to assume that failed public policy somehow initiated the mad rush to make every American a homeowner regardless of qualification or sustainability.

The article offers a plausible explanation that's not easy to discredit.

Checking in with my AR friends

Ed Rybczynski (Jos. A. Bank Clothiers) — Sun, 02 Mar 2008 09:25:50 -0600

The photos on the sideboard were taken at Loews Ventana Canyon Resort, located north of Tucson, where I spent several wonderful days this past week.

I was invited by my new friends at TitleServ National to give a presentation on leveraging the power of relationships. It was a great opportunity and a great time.

The use of photos in my blogging efforts is a new direction for me. I've noticed that Tom Peters does it and decided to experiment with the concept on Title-opoly. I'm thinking that photos from my travels might personalize the site making it more interesting for readers. We shall see!

I heard from Lola Audu, my friend from Grand Rapids, Michigan, who shared the link to her exciting new Squidoo Lens. Great job Lola! I hope that everyone is taking advantage of the tremendous opportunities offered by Squidoo. I'm assuming that Seth's newest project Mayor of your zip code is common knowledge to all of you. It's a powerful tool designed specifically for real estate agents.

Last week, I posted about title theft, an obviously growing category of crime that often targets the elderly. Long story short, fraudsters take title to vacant properties using forged deeds. The properties are then quickly resold or stripped of equity visa vie mortgages originated using falsified identity documents.

The reported cases are becoming to numerous to list, but a scenario presented in NapaValleyRegister.com serves as a representative example.

John and Anita Greerty used stolen identification documents to, in turn, steal the title to an 11 acre tract in California's lush and pricey wine country.

After entering into three separate sales agreements with legitimate buyers, the criminally motivated duo was able to successfully close on two of the deals before the scheme was revealed. Their take was roughly $745,000.

Scott Perry has been doing a tremendous job explaining the nexus between automated land records and the startling rise in crime statistics relating to real estate fraud that requires identity theft. Pay close attention to his message. Scott knows what he's talking about.

I've received and accepted a kind invitation from Gene Wunderlich to join a new group with an emphasis on mortgage fraud and real estate crimes that prey upon the elderly. I hope you'll consider joining Mortgage, Foreclosure & Elder Abuse Housing Fraud as well.

I have access to a lot of information that will be made available to the group as time permits.

Finally, this week will find me poking around Active Rain quite a bit. I'll be hosting the Mortgage Week in Review which is of course the brain-child of our very own FHA expert, Jeff Belonger.

Until next time ...

Fraudulent deed transfers: something to think about!

Ed Rybczynski (Jos. A. Bank Clothiers) — Sat, 23 Feb 2008 17:32:26 -0600

I spent the day fine tuning my talking points for a presentation that I'm giving in Tuscon next week. For the first time, I've decided to include fraudulent deed transfers to the ever growing categories of real estate fraud that I discuss with audiences.

The decision was based on information gathered from three different sources that I encountered this past week.

First, I received an e-mail from Dave Wirsching containing a link to a Philadelphia Daily News article portraying title theft as a minor epidemic in the City of Brotherly Love.

An alarming "122 stolen properties" were reported in Philly in 2006 and it's believed that many cases go unreported. Local authorities are concerned about having adequate staffing to handle the investigations and convictions.

Then, I noticed that Rachel Dollar touched upon the topic while testifying before a Senate Committee on behalf of the Mortgage Bankers Association.

Finally, my research uncovered an online service launched by McHenry County, Illinois to alert homeowners if documents containing their names are submitted to county clerks for recordation. Subscriptions are available for $12.99 for one year or $29.99 for three years.

The elderly are particularly vulnerable to this heinous form of fraud when their homes sit vacant. Using quitclaim deeds and forged signatures, fraudsters transfer title to properties into another name. The stolen properties are then quickly resold (flipped) or mortgaged to strip the rightful owner of any equity.

It's interesting to note that a number of accused offenders in Philadelphia were stupid enough to use their own names.

Fraudulent deed transfers are something to think about if you have elderly parents or loved ones whose homes are sitting vacant for any reason. You might consider asking your title company to periodically verify title or do it yourself using online records.

All in all, it's a frightening and sophisticated type of criminal activity that's best prevented by legislation that promises tough prosecution and lengthy prison sentences for offenders and accomplices. Think about it: a notary has to be part of the scheme.

One of our own in the news

Ed Rybczynski (Jos. A. Bank Clothiers) — Fri, 22 Feb 2008 06:56:02 -0600

That's right, a very popular contributer to Active Rain was interviewed and immortalized by the media.

Fran Gaspari of Patriot Land Title in Limerick, Pennsylvania was quoted on phillyBurbs.com (The Intelligencer) in an article about automated land records.

Needless to say, Fran dignified the title industry by commenting intelligently and honestly about a very complicated dilemma with far reaching implications.

I found this photo of Fran and myself taken roughly a year ago at the presentation where we met.

Fran is the good looking guy on the left.

A glimpse of Americana

Ed Rybczynski (Jos. A. Bank Clothiers) — Tue, 19 Feb 2008 18:00:05 -0600

The Library of Congress has generously made a collection of 3,100 photos available on Flickr. Photos were selected that "have long been popular with visitors to the Library." Best of all, the photos have no known copyright restrictions and can be copied and distributed at will.

Click here to view.

I spent several enjoyable hours viewing this remarkable photographic trek through history. My father, who died when I was a high school freshman, served on a Coast Guard transport during World War II. Some of my favorite childhood memories are of my father sharing his wartime experiences in the South Pacific. A fair number of the photos in the collection are from those ominous times during the 1940's when brave Americans risked their lives to preserve the freedoms that we cherish. Others represent the face of rugged determination. Others are simple representations of everyday life like the one below of a car leaving Romney, WV.

Hopefully, some aspect of this priceless historical compilation will spark a memory of something special from your past. Enjoy!

The credit for the link provided in this post belongs to Joe Ferrara of the Sellsius blog.

GoldMail - I really can't believe it

Ed Rybczynski (Jos. A. Bank Clothiers) — Sun, 10 Feb 2008 09:17:13 -0600

I work with visual presentations almost every day. I'm always on the prowl for innovative ways to deliver messages effectively. GoldMail is a product that you need to look at closely if you want to communicate with authority.

The presentation below was crafted (from scratch) using the free version of GoldMail. I didn't upload a previously prepared Powerpoint file. It represents my first experiment with the product and took roughly 30 minutes to complete. I'm now a believer. The presentation can be emailed to clients or seamlessly added to web-sites or blogs. GoldMail is downloaded to your computer with a thorough tutorial making it possible to immediately start making powerful slide shows.

Best of all, you get to add your own voice to the slide show and control the transition of images to coincide with your spoken message. GoldMail offers a remarkable opportunity to connect with others in a big way.

Make sure your computer's speakers are turned on.

GoldMail offers a professional package with enhanced features for $10 a month.

For now, I'm going to continue toying with the free version which seems a nearly perfect tool without any use restrictions or expiration date.

A follow up to Lenn's post

Ed Rybczynski (Jos. A. Bank Clothiers) — Fri, 08 Feb 2008 11:58:27 -0600

A special thank you to Lenn Harley for writing a stellar post about the offshoring of title searches. Check out Lenn's diagram. I love it! Thanks are also due to all of you who commented and showed concern. Offshored title searches are a particularly complicated matter that have become something of a personal cause for me and a rapidly growing number of others.

I've prepared a slide presentation highlighting the spirit of Lenn's post for Title-opoly and decided to give friends on Active Rain a sneak preview. Following Jeff's advise, I'm experimenting with eyejot and hope to embed a meaningful message in the Title-opoly post.

As a title company owner, I had two first hand experiences with costly litigation stemming from title claims. As an expert witness, I was retained once by a title insurer and another time by the insured's attorney who had filed suit against the title insurer. Homeowners involved in title claims often feel that they haven't been properly represented by title insurers and hire their own attorneys.

Claims council working for title insurers have a duty to protect the interests of corporate shareholders. I don't know of a singe instance where a homeowner was painlessly compensated for losses after notifying their title insurer of a pending claim. The terms of title policies, which are rarely explained or understood, give title insurers a significant number of advantageous rights including the latitude to thoroughly investigate any and all allegations, possible relationships, prior knowledge, etc. It's standard practice for insurers to conduct lengthy investigations to eliminate any possibility that parties to a claim might be in collusion. I once had a client who, as the defendant named in a title related cause and the seller of a Maryland property, was unable to consummate a contract of sale for well over year while a title insurer investigated the joint ownership of a boat in Florida. Sad but true: a pending sale means nothing to claims council who pursue their own agenda.

Title claims equate to litigation, depositions, court dates, piles of legal documents, subrogation of rights, etc. Consumers subjected to title claims couldn't possibly be compensated for the sleepless nights and emotional trauma they're forced to endure, nor do title policies allow for the payment of punitive damages.

I'm often asked why the offshoring of title searches remains an increasingly prevalent practice in light of the elevated claim's ratios reported by title insures. I don't have an answer.

I do know from experience that a thoroughly (locally) searched and examined title rarely results in a claim.

It's a matter of trust when you really think about it. Title companies are expected to act in the best interest of consumers. Offshored title searches raise serious questions about the integrity of companies that use them.

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An abstractor has been sighted on Active Rain

Ed Rybczynski (Jos. A. Bank Clothiers) — Tue, 05 Feb 2008 11:27:26 -0600

A Pennsylvania title abstractor named Scott Perry has launched an Active Rain blog named Bossman's Blog. The addition of an abstractor to our eclectic collection of professionals is an exciting development. I happen to be an abstractor by training even though circumstances kept me behind a desk more than I liked. Sadly, the public knows very little about the important work done by these intelligent, hardworking colleagues of ours who quietly spend the bulk of their time in local courthouses.

It needs to be said: an abstractors work-product is the solid foundation of a positive closing experience for buyers! Hopefully, we'll be able to convince Scott to share with us what he does and why it's so important. Personally, I'm of the opinion that a title insurance policy is only as good as the abstract that was used in its preparation.

In a recent post, Scott wrote about the plight of title insurers whose financial statements are suffering due to the cumulative effects of elevated claim's ratios and decreased business levels. Scott and I share a serious concern that land record integrity could potentially fail because underwriters are purposefully lowering abstracting standards to increase their bottom lines. The major players in the title insurance game have invested heavily in offshore abstracting plants located in India, the Philippines, Panama, Israel, etc. Aggregated ownership records are being acquired from local jurisdictions and resold overseas.

It's a complicated matter that raises any number of critical questions. Foreign abstractors lack the training and experiential judgment to properly search titles. It could be argued that foreign title plants aren't as complete as local land records and therefor shouldn't be used to produce title policies. Title searches prepared overseas aren't the technical equivalent of the searches prepared domestically and are therefor problematic.

Fran Gaspari, our resident title guru, would agree.

Unquestionably, underwriters are experiencing a significant increase in claims due to a short-sighted approach to title searching. Regrettably, a title claim, even one that's resolved quickly, is a nightmarish experience for consumers who often retain council to protect their perceived interests vs their legal interests as defined by their owner's title policy. Consider the emotional wear and tear of dealing with any litigation involving your home. A title claim could reflect poorly on you as a real estate professional, if you actively refer buyers to preferred title companies.

What do you really know about the internal practices employed by your title company?

Additionally, important security risks come into play. Some years back, the Feds required that social security numbers be included beneath borrower's signatures on certain mortgages (substitute deed of trust for mortgage as applicable). At the time, before we even heard of the internet, all records pertaining to homeownership were maintained by local clerks at local courthouses. An unscrupulous character could access this sensitive information which became public record when the mortgages were filed, but it required a certain amount of effort which is not the case any longer. If you signed a mortgage during the late 1980's or early 1990's, it's entirely possible that your legal name and associated SSN has been digitally transmitted to unsecured, questionable destinations around the globe.

It's not a good situation!

The debate over the appropriateness of bigness in real estate model design is far from resolved. Bill Roberts, my friend and AR nemeses, would argue that consumers benefit from the reduction of costs associated with economies of scale. I can't disagree in theory. At the same time, I strongly feel that certain aspects of the homeownership process are best left localized. You need to know that Bill and I have privately agreed that his home state of California lends itself to business models that wouldn't work in other parts of the country.

At best, the upside of an offshored title search is the savings of roughly $150.

The downside is an increased risk of involvement in litigation for homeowners.

If I were to become a real estate agent, my buyers would use only title companies that relied solely upon local abstractors.

Seriously, how could anyone argue otherwise?

Related post by Lenn Harley: Offshore Abstracts? Is That Anything Like Vicarious Sex??

Enjoy!

Ed Rybczynski (Jos. A. Bank Clothiers) — Sun, 03 Feb 2008 09:26:54 -0600

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Social innovation in housing markets

Ed Rybczynski (Jos. A. Bank Clothiers) — Mon, 28 Jan 2008 21:26:11 -0600

Blogger Carlos Gasca Yanez has proposed an innovative solution to this nation’s looming social blight: housing markets in crises. The idea championed in a post titled Subprime Crises calling for Social Entrepreneurs is to partner nonprofit initiative with corporate enterprise. Carlos envisions a real estate model that embraces a marriage of compassionate sensitivity to the profit motive. Essentially, cooperative education would occur at every level beginning with professional development and the implementation of best practices. Businesses and nonprofits would then endeavor to protect and inform borrowers likely to be victimized by predatory lenders.

A ridiculous proposition? I think not.

Years ago, I participated in a social experiment with a nonprofit named People’s Homesteading Group. To make a long story short: homes were awarded to participants based on an equation that favored need over financial qualifications. My company facilitated thirty or more closings and the quasi-governmental funding that served as the financial mantle of the project. While it might be said that corporate resources could have been used more profitably from the perspective of balance sheets, it could also be said that my horizons grew in ways that transcended dollars and cents. The homesteading project was successful overall.

Don’t miss the comment thread on Carlos’ post. Chris describes personal experiences with a radical and remarkable housing initiative unfolding in Scotland and Norway. Cheryl gives an incredible dissertation on the importance of teaching credit fundamentals.

I left the post with a realization that housing is possibly the paramount global issue.

Relevant quotes to ponder:

James P. Danky - It is ironic that virtually every Martin Luther King Jr. Boulevard in America is a street of abandoned buildings, abandoned businesses, abandoned people, abandoned dreams. Those who honor King's name need to think about fulfilling the promise of his dream to those who have been forsaken in our inner cities.

Carlos Gasca Yanez - Capital is mobile and has no heart; communities on the other hand are not mobile and are on their own when it comes to determining their future.

Myrlie Evers-Williams - It is you - if you will summon the courage - who will forge new initiatives in finance, technology, medicine, and management that will put all Americans back to work and the the same time give America a better shot at feeding the hungry, sheltering the homeless, healing the sick, and caring for the children.

Affiliated Business: What I should have said

Ed Rybczynski (Jos. A. Bank Clothiers) — Wed, 23 Jan 2008 11:49:27 -0600

Sometimes it's easier for me to write on my outside blog than on Active Rain. There are so many different personalities and diverse groups on this site now that I find myself holding back at times. While politeness is always a good thing, guarded restraint definitely is not.

Hopefully, none of us set out to intentionally harm other members of the community. I certainly do not.

A couple of days ago, I shared some of my thoughts about affiliated business. A fair number of you had asked me to so. One of my favorite outside blogs even boasted that the post had been made. There's a problem, though, that you need to know about. I confess to having altered the draft of the post by watering it down and shortening it considerably because I feared my words might inflame, or offend, some of you. I cheated you and I cheated myself. It won't happen again.

With that being said, the broad and general tone of my post obviously offended someone who was kind enough to read it. It wasn't my intent. In an email, I was accused of seeking approval rather than promoting dialog. The word "egotistical" was used to describe not only myself, but the community at large. Blogging, it seems to me, is inherently egotistical; as is all marketing; as is all selling. It's the nature of the beast; it is what it is! At the age of forty six, I've come to the realization that I'm more heretic than saint and that personal vices are part of the deal.

With tens of thousands of potential readers on this site, a blogger can no longer worry about what others might think. Those days are gone. It's detrimental to the creative process to try to cater to the whims of so many. Do me one favor: if you don't like what I have to say, move along without attacking me personally. I don't need it, or desire it, and you don't either. Life is too damn short, and too damn precious, to have to contend with the toxins spewed by others.

The truth about affiliated business: I despise it because it encourages bigness in an industry that's best left localized. Think of me as the greatest advocate of the Community Choice in Real Estate Act. While I fully embrace the spirit of the proposed federal bill, I wish that it would offer protection to mortgage brokers, title companies, abstractors, and appraisers, and well as real estate brokers. The NAR deserves credit for its lobbying efforts; the trade associations for the related industries should be ashamed of themselves.

I fully understand the importance of economies of scale in any industry. But, selling real estate is more closely related to a professional endeavor than it is a manufacturing operation. To be accomplished successfully, it requires a significant degree of skill, judgment, experience, compassion, and the time honored personal touch. Efficiency and effectiveness are best attained through training individuals not by outsourcing to centralized processing centers. Call me provincial, I don't care.

At some level, I don't blame real estate brokers for trying to improve profitability by offering "bundled services" as an ostensible convenience to consumers. It's important, however, to contemplate the long-term implications of opening that particular door. It represents the sunset of the reign of local real estate brokerages. Keep in mind: federally chartered banks are perfect candidates for affiliated business and it's a simple matter of congressional funding that keeps you from having to compete with them. Big banks have the ability to decimate your business in the same way that Wal-mart has virtually eliminated local merchants. They have an existing relationship with every consumer and a "point of contact" opportunity unlike any other.

I'm bothered by bigness in real estate because it "dehumanizes" a process that should remain fundamentally humane. Purchasing a home is innately different than buying a flannel shirt or a hammer. I really don't care that I have to spend a couple of extra dollars for proper representation when making the most important purchase of my life. Yes, homeownership is that important and that unique. It transcends the ordinary to touch the heart and the soul of those who embrace it.

I often tell audiences that acting as a fiduciary in a real estate transaction is tantamount to being a clergy person. Matters that inherently involve fiduciary responsibilities are best left in neighborhoods and communities. I rue the thought of a consumer having to call a customer service representative in India to find out how their home purchase is coming along. Can you image? But, affiliated business will follow that trajectory if left to its own volition.

Support the spirit of the Community Choice in Real Estate Act by supporting locally and independently owned mortgage brokers and title companies. Make certain that your title company is using only local abstractors. Ultimately, it's your chosen profession, and consumers' interests, that you're protecting.

Affiliated Business: The Nemesis of Reason

Ed Rybczynski (Jos. A. Bank Clothiers) — Mon, 21 Jan 2008 14:26:47 -0600

Normally, I have no problem sharing my thoughts about affiliated business, yet for some reason found it difficult to do in an Active Rain post. I have, in fact, relentlessly denounced affiliated business in the same manner as a preacher condemning sinful acts from the pulpit.

The concept of affiliated business in real estate transactions was born of the Reagan Bush brain-trust during the late 1980's. The federal mood and agenda at the time was one that encouraged bigness of business. It was thought that "deep pockets" paired with technology could create an environment that reduced costs and enhanced services for consumers who were purchasing or refinancing a home.

It all appears to be simple and reasonable enough. An affiliated business arrangement exists when a real estate brokerage and a title company share the ownership of a title company. By partnering in this way, real estate companies and agents are entitled to share in the profits of a captive operation.

Keep in mind, there are any number of possible variations to the theme including joint ventures with mortgage brokers. I'm trying to keep this post as straightforward as possible by dealing with only the title industry's perspective.

To be legal, and RESPA compliant, a lengthy laundry list of requirements must be strictly adhered to. The agent has to contribute capital to the venture in an amount equal to the agent's proportionate ownership interest. Any monies dispersed have to take the form of a legitimate distribution of profits. Also, the new company can't share space, staffing, or management with an existing title company. It has to be a free-standing business that supports itself by offering core title services. Establishing a legitimate affiliated business is an expensive and risky proposition that requires a great deal of planning, capital, and the involvement of an attorney familiar with RESPA implications.

It's patently illegal for a real estate agent to receive benefits, on a per deal basis, for doing nothing more than placing an order in an in-house pipeline. By benefits, I'm referring to checks, sometimes called "hard dollars," or "soft dollar" inducements that offset desk or advertising fees.

The experiment that is affiliated business has been successful only in limited parts of the country where ownership records are available in the form of highly automated title plants. Keep in mind: success is measured only in terms of benefits to consumers, not real estate professionals. For the most part, the project has proven a dismal failure due to the very nature of abstracting and examining titles. It's a process that's more closely akin to a professional practice, not a manufacturing operation that experiences economies of scale through increased volume.

In many instances, consumers are horribly overcharged and subjected to inferior service because the title company in a directed business situation has no incentive to be anything other than mediocre and has to share profitability. Restrained competition, never a good thing, inevitably results in complacency and exploitation. It also has a tendency to attract those who aren't the best or the brightest. Affiliated business doesn't have to produce stellar results or be the least expensive alternative, it just has to be good enough to pass for a close facsimile of the real thing.

Surely everyone acknowledges the benefits of competition:

Do we not encourage our children to engage in healthy competition to learn the value of superior performance?
Can you imaging sending your children to school with the expectation of being average academically, socially, or athletically?

Of most concern to real estate agents should be the contradiction between affiliated business and fiduciary obligation. Is it possible to remain completely impartial when referring service providers while the promise of additional income rests in one particular provider?

I highly recommend a blog hosted by Minnesota attorney Doug Miller. Ethical Practices in Real Estate offers practical advise that can't be found elsewhere.

In a recent post, Doug issued a relevant and timely warning:

Has your manager given you advice on how to address “objections” if your clients want to select their own title company?
When it's time to negotiate your commission split, does your manager or broker first look at how many files you’ve sent to the in-house title company?
Do you find that there is an unusual absence of marketing materials or presentations from outside title firms?

Doug suggests that you "find another broker to hold your license" and a "class action attorney" if you "answered yes to any of the questions."

I happen to fully agree with Doug. As attractive as affiliated business might appear at first blush, the business model offers numerous perils for real estate agents from a legal perspective and as a practical matter.

My other new favorite blog

Ed Rybczynski (Jos. A. Bank Clothiers) — Fri, 18 Jan 2008 07:17:59 -0600

Yesterday, I wrote that Presentation Zen is one of two blogs that I presently enjoy reading. The other is named Leading Blog - Building A Community of Leaders. Keep in mind that my taste in business blogs is constantly evolving.

While Presentation Zen inspires the unleashed creativity within, Leading Blog offers grounded advice on relating to others. Michael McKinney constructs a lofty monument to the importance of teamwork by convincing readers to elevate their own games and to bring others along for the mutual benefit of all.

The drive to improve personally coupled with a clear and defined goal of inspiring others is the undercurrent of stellar performance in business ... and in every aspect of life. It's clearly the foundation upon which the Active Rain community has been built.

In a recent post titled Are You Mature?, McKinney presents the following list of characteristics of mature decision makers:

They are able to keep long-term commitments.
They are unshaken by flattery or criticism.
The possess a spirit of humility.
Their decisions are based on character not feelings.
They express gratitude consistently.
They prioritize others before themselves.
They seek wisdom before acting.

Get my point? It's good stuff. I've only shared bullet-points, but in the actual post, the information is presented extremely well with a great deal of insight and direction.

Here's an excerpt from Leading Blog that really spoke to me:

"When we find ourselves merely trying to survive the pressures created by limited time, money, and people resources, we tend to take as much as we can. This survival mentality eventually isolates us from a community that could otherwise provide us with everything we want."

I'm sometimes guilty of gathering as much as possible in the now, instead of taking only that which is truly needed to sustain. The survival mentality is possibly core to the human condition, but nevertheless contrary to functioning within a community like Active Rain. The key is to give more than you take and to take only that which you need.

Communities, in a physical sense, have provided for the needs of man since the dawn of humanity.

Virtual communities have the potential of nourishing the human drive to excel, in a personal sense, while motivating others to soar to heights that were once unthinkable.

The ability to unlock the potential within ourselves, and within others, is the benchmark of leadership.

See: My new favorite blog.

My new favorite blog

Ed Rybczynski (Jos. A. Bank Clothiers) — Thu, 17 Jan 2008 15:26:22 -0600

Actually, I have two new favorite blogs, but I'm sharing only one of them today. It could be said that I've learned more from a blog named Presentation Zen than any other site. I've probably learned more from the blog than I did while in business school.

It's that good ... and informative ... and cool.

My presentation style is very important to me. So is the effectiveness of my PowerPoint presentations. They happen to be the tools that I use to craft a living.

I would think that real estate agents, particularly listing agents, are equally concerned about making powerful statements to prospective clients. After all, communication is everything.

Garr Reynolds, the host of Presentation Zen has recently published a book by the same name. Hopefully, my copy will arrive soon.

Seth Godin called the guy a guru and published a Squidoo Lens as a tribute to the new book. Click here to visit Seth's Lens.

Check out Garr's blog and let me know your thoughts.

See: My other new favorite blog.

Who's Watching the Watchers?

Ed Rybczynski (Jos. A. Bank Clothiers) — Wed, 16 Jan 2008 12:20:47 -0600

Last week, I suggested that real estate agents check up on title companies after closing to make sure that mortgages were paid off. Why? Title company executives have been known to "help themselves" to money held in escrow, particularly when business is bad.

See: Is Your Title Company Misbehaving?

Most people don't realize that the title industry is basically unregulated in most states. Unregulated as well, are the massive escrow accounts administered by the title companies. A preliminary federal study released in 2006 revealed a laundry list of startling truths about a misunderstood industry and its primary product, title insurance. Most startling: title agents are primarily responsible for auditing their own escrow accounts. It's tantamount to asking the fox to guard the hen house. The study also found that ridiculously relaxed licensing standards have possibly resulted in an industry of unqualified practitioners.

The truth about the title industry is frightening: licensing requirements are non-existent in 3 states plus the District of Columbia; 18 states and the District of Columbia do not require a title agent to pass a test to become licenses; only 20 states have an educational requirement as a pre-requisite to licensing.

For the preliminary federal study on the status of the title industry, click here. For the final report, click here.

An article published in the Springfield Business Journal paints a horrific tale of consumer suffering at the expense of title company malfeasance. Click here to read article. Guaranty Title conducted business in Missouri before being shut down last June by its underwriter, LandAmerica. The problem: there's more than $5,000,000 missing from escrow accounts. While LandAmerica is clearly on the hook for some of the missing funds, it's disputing liability for buyer's deposits held by Guaranty Title for a local developer named Branson Hills Development.

Based on an anonymous tip, Branson's attorney subpoenaed audit reports proving very harmful to LandAmerica.

The report indicates that a routine audit conducted by LandAmerica in April, 2006 found that $600,000 was missing from Guaranty Title escrow accounts at that time. Several months later, promissory notes were issued by Guaranty Title to LandAmerica to cover part of the missing money.

Why didn't LandAmerica close Guaranty Title's doors upon discovering that escrow funds were missing?

Because Guaranty Title was an enormous company that made a lot of money for its underwriter, LandAmerica, in the form of title insurance premiums.

Why didn't LandAmerica report Guaranty Title's criminal activity to the proper authorities?

That's the seminal question that casts a shadow of doubt on the integrity of LandAmerica, and possibly the title industry, in 2008.

It could be said that LandAmerica drove the getaway car used by Guaranty Title to rob a bank.

In defense of LandAmerica: the company has a good reputation overall and isn't normally associated with this type of reprehensible behavior. I hope the company has the courage to step to the plate and publicly dismiss every executive who was involved in the reckless decision making that permitted a rogue title company to continue raping the public.

I want to go a step farther and share my concerns about those of you who collect fees, or soft-dollar perks, for shipping title orders to affiliated title companies. Don't do it! It's a business model that's marginally legal, at best, when constructed correctly, but perilous all the same for real estate agents. In time, your affiliated title company will screw up, overcharge consumers, or steal money and you'll find yourself mortgaging your house to pay for expensive legal representation. You heard it here!

A special thanks to Diane Cipa for bringing the Springfield Business Journal article to my attention.

When Deals Go Bad: Baltimore's Foreclosure Debacle

Ed Rybczynski (Jos. A. Bank Clothiers) — Sun, 13 Jan 2008 16:07:22 -0600

Baltimore, sometimes called "Charm City," isn't all that charming beyond the inner harbor complex that's featured by media when the Ravens or Orioles are playing at home. Sheila Dixon, Baltimore's newly elected mayor, along with the city's council have filed suit against Wells Fargo Bank to recover alleged losses caused by a wave a foreclosures ravaging the city's neighborhoods. The complaint, filed in federal court, seeks damages for municipal expenditures, including fire and police protection and the loss of tax revenue, correlated to a stark escalation in the number of vacant homes.

The New York Times, in a related article written by Gretchen Morgenson, cites a study commissioned by a Minneapolis housing foundation that attributes a cost of $34,199 to local governments for each foreclosure. The long-term, societal costs occasioned by the current foreclosure crises will prove daunting before all is said and done.

The suit reveals disturbing patterns illuminated by Wells Fargo's modus operandi in subprime markets. Predominantly black communities are experiencing the statistical brunt of the onslaught of foreclosures. The bank allegedly charged higher commissions and interest rates than reasonably justified by borrowers' profiles. There's that damn yield spread premium again. The city also maintains that Wells Fargo intentionally relied on relaxed underwriting standards that positioned borrowers for inevitable failure. Between August 2006 and August 2007, the state of Maryland's foreclosure rate increased by 758 percent. That's not a typo. Since 2004, Wells Fargo was one of the most prolific mortgage lenders in Baltimore.

As an aside, a number of studies indicate that predatory lending is not only biased towards races, but gender as well. A study released in 2006 indicates that woman with above average incomes and credit scores almost always paid more for mortgage money than men with with less favorable credit profiles. Households headed by woman, particularly women of color, are unable to realize financial security through the traditional path of homeownership.

Baltimore's case against Wells Fargo is constructed on a slippery mantle of statistical innuendo. While I believe the allegations to be factually accurate, I don't think that they'll stand in a cause brought by a financially beleaguered municipality against a lending behemoth that most likely employed practices that were both legal and generally accepted by the mortgage industry, as disturbing as the truth is. Wells Fargo's attorneys will argue that Baltimore's government was at fault for failing to promulgate ordinances to better advocate the rights of consumers and lobbying, at the same time, for similar statutes at the state level. If Wells Fargo even hints that it might stop making mortgage loans in Baltimore City, the city will dismiss its claims amidst cries of righteous indignation. The case will spark briefly and fade into certain obscurity in spite of any media attention that it might receive.

Some of you might remember the highly publicized massacre of consumer advocacy that transpired during the spring of 2006 in Montgomery County, MD. Lawmakers in the upper scale suburb of DC passed an ordinance requiring mortgage lenders to act only in the best of interest of borrowers. Can you imagine such a scandalous thought? Ideology gave way to practicality when some forty odd subprime lenders threatened to stop funding the gorged pipeline of easy money spilling into the state's most affluent neighborhoods.

The Mayor of Baltimore along with the members of the City Council, past and present, are guilty of convenient blindness for political gain and therefor share culpability with Wells Fargo's executives. Three short years ago, it would have been career suicide for a politician, any politician, to predict the current crises that looms nationally. The tsunami of tax revenue, based on overinflated property values, fueled the rhetorical programs and projects of most, if not all, aspiring elected officials of the past decade. Two short years ago, the average stater home in Baltimore City sold for roughly $290,000. Give me a break! Someone needs to show me the local jobs that supported the incomes needed to purchase these overpriced row homes. The jobs didn't exist; neither did the incomes. Anyone sporting two functional brain cells and a fairly intact cranial cavity could have guessed that the orgasmic subprime frenzy would have to end sometime.

The real story lies in the class action litigation that's certain to follow in the wake of Baltimore's frontal attack on the mortgage industry. I predict that a broader cause will be brought by consumers against Wells Fargo, and other lenders, along with real estate brokers, real estate agents, title companies, and appraisers.

Could it be that a little publicized and seeming innocuous case filed last week in Baltimore's federal courthouse marks the beginning of a generation of seminal cases that will, in time, redefine the landscape of this nation's real estate industry?

You heard it here: the word "fiduciary" will echo in the hallowed halls of jurisprudence as crusading litigators "test the waters" of judicial interpretation in a perverted quest for deep pockets and social righteousness.

There's no question that subprime mortgages fueled the boom, the question: who ultimately will pay the price for the bust?

Closer to Home

Ed Rybczynski (Jos. A. Bank Clothiers) — Fri, 11 Jan 2008 19:23:02 -0600

I've been an avid reader my entire life. One of my resolutions for the new year is to devote at least an hour each day to reading as a recreational pursuit. Boring stuff I know, but humor me anyway. I've gone so far, this week, to put aside whatever I happened to be working on during the business day to open a book at my desk.

Presently, I'm about two thirds through Walter Isaacson's voluminous study of the life of Benjamin Franklin. The book, which shares the name of it's biographical character, is one that I highly recommend to everyone. Franklin was made of an energetic fiber that has fueled the imaginations of generations of Americans and mankind in general. His spirit, it seems to me, is destined to motivate eternally.

I didn't realize that Franklin was responsible for constructing the monument to democracy that is "Federalism." Because of him we enjoy a unique system of government that clearly defines the authority of the federal government versus that of individual states. It's a shinning tribute to our nation's ingenuity that's portrayed beautifully in Isaacson's book.

Most surprising to me was the revelation of Franklin's humanness. During the course of his lifetime, Franklin sparked unusual bonds of affection with any number of young woman, girls really, still in their teens. While the book clearly rejects any notion of physical impropriety, the scenario in general seems highly inappropriate to me. Let me put it this way: if Franklin were alive today, and I had a teenage daughter, she wouldn't be sitting on Uncle Benny's lap ... if you get my drift.

When finally finished with this book, I'm thinking about moving onto David McCullough's highly acclaimed Truman. I picked it up this summer at one of two used bookstores in Havre de Grace after it was suggested by Carole Cohen.

Until next time ....

Is Your Title Company Misbehaving?

Ed Rybczynski (Jos. A. Bank Clothiers) — Wed, 09 Jan 2008 19:02:42 -0600

Have you ever wondered about the integrity, or competency, of a title company after leaving the table? To say that an enormous amount of money is blindly entrusted for proper dispersement is a serious understatement. On a monthly basis, we could be talking about tens of millions of dollars gushing through the escrow accounts of average sized title companies. Who's keeping track of all the money? You'd be surprised to know the answer.

A question recently asked on Mortgage101.com, click here to read, describes the consequences of a title company screwup. A week after closing, a buyer was informed that his loan hadn't funded even though his title company had transmitted good funds to the seller. Oooops! While I disagree with the answer and explanation given by the industry expert on the site, I will say this: there's no possibility of a happy ending in such a case.

Even worse than instances highlighting stupidity are those involving outright theft. Title company executives have been known to dip into escrow funds to cover corporate loses. Defalcation, as it's commonly referred to, is more likely to happen when times are rough and business hard to come by.

Defalcation is a simple concept to understand. It occurs when money held in escrow accounts is spent inappropriately. Escrow accounts exist only to temporarily hold funds belonging to others. The money is intended to payoff mortgages and other liens. It’s used for seller’s proceeds and to pay taxes or fees when recording documents. Escrow money should never be used to benefit a title company or anyone working for a title company. Defalcation takes place when escrow funds are diverted for any unintended use.

There are a staggering number of cases involving mortgages remaining open after closing as someone within the title company continues to make payments ... and helps themselves to the payoff funds. The crime is typically called layering because the funds from new closings are used to cover the missing funds from earlier closings like a quilt used to hide stains on a bed sheet. You can guess the outcome when incoming orders slow down.

Many in the title industry established lavish life styles over the past decade due to the lure of an explosive real estate market. Everyone knew that it had to end, but few would admit it to themselves or others. There’s always someone with a need to maintain, at any cost, the payments on expensive homes, sport cars, vacation homes, plush office space, country clubs, and the other prestigious appendages of the not so distant past.

I personally know a title guy from Baltimore who helped himself to millions from an escrow account to flip a multi-site Dunkin' Donuts' franchise. He was caught, prosecuted, and incarcerated, but the infinitely wise state of Maryland opted to restore his title insurance license a few short years after his release.

These fools are always caught and the money almost always replaced by underwriters, but innocent consumers often suffer in the interim.

Some states regulate title company escrow accounts more stringently than others, but audit responsibility most often falls upon the shoulders of title underwriters. Long story short: title underwriters haven't done all that great a job policing their agents, particularly those remitting sizable premium checks. It's a patent case of "who's watching the watchers." Title companies typically police their own trust accounts with an occasional review by an outsider. It's a dysfunctional system in need of study and reformation

I hate to suggest expanded duties to your already prolific workloads, but I think it prudent for real estate agents to check up on title companies after closing.

As a seller's agent, I would request proof of payoff from the title company two or three days after closing. You could ask sellers to confirm mortgage payoffs on-line. As is often said: it's better to be safe than sorry.

As a buyer's agent, I would calender a phone call to the title company about six weeks after closing to make sure that mortgage releases have been recorded. The key word is "recorded." Your buyers could find themselves unable to refinance or sell their home should a reconveyance document not make it to the local courthouse.

Uncooperative title companies should be reported to state insurance commissioners.

A special thanks to Dave Wirsching for sharing the Mortgage101.com article referred to herein on his blog, Clearing Title.

Scandal, Corruption, and a "Click-Through"

Ed Rybczynski (Jos. A. Bank Clothiers) — Wed, 02 Jan 2008 18:46:56 -0600

Those of you who follow my posts know that I've yet to employ the ill regarded "click-through" to lure trusting souls to a remote site. While this particular post is intended only to divert your attention elsewhere, I don't intend to duplicate the tactic anytime soon. Allow me to explain my motives.

OpEdNews.com is a site that I hadn't even heard of three weeks ago. A couple of friends noticed that a writer for OpEdNews.com had quoted a number of my talking points from Title-opoly and brought the fact to my attention. The edgy, political tone of the written word on the site immediately appealed to me. I admire writers who stand their ground while tackling tough, timely issues. After a bit of soul searching, the average post on OpEdNews is extraordinarily well written, I decided to create a profile and submit a post to the editor.

My first article on OpEdNews, The Cult of Plausible Deniability, isn't for everyone. It's intended to spark contentious debate by dealing with the public policy implications of destabilized housing markets.

The article could be summarized in this way:

The current housing crises was precipitated by a breakdown in protocol by licensed real estate professionals nationally. The ostensible correction of housing markets as characterized by pundits isn't a correction at all. It's the collapse of an enormous business model that once served as the foundation of the social institution that is homeownership. Industry wide complacency is the crux of the problem.

Click here to read: The Cult of Plausible Deniability. Your thoughts are appreciated.

More Mortgage Industry Punditry ... and a loaded question

Ed Rybczynski (Jos. A. Bank Clothiers) — Sat, 15 Dec 2007 18:04:31 -0600

It was about eighteen months ago that a friend of a friend called to ask if I would glance at a settlement sheet. Chris, a busy woman executive, was scheduled to close a refinance loan the next day and sensed that something wasn't quite right after learning the amount of her new (proposed) monthly payment.

Chris, I later learned, had responded to a letter sent to her house by an industrious mortgage broker. Her intentions were to lower her interest rate while pulling out a little cash. It sounded reasonable enough considering Chris' lending profile. She is highly educated and a successful executive for an international spice company. I'd been to her waterfront home once, or twice, for parties and knew that it had to be worth more than a million dollars. A loan amount of $450,000 certainly seemed non-problematic to me. Also, Chris struck me as the type of person who would maintain an impeccable credit rating. As it turned out, I was right!

At first blush, the HUD-1 appeared heavily laden with fees. There were a couple of points showing along with a generous display of junk fees. Most disturbingly, the broker was walking away with a yield spread premium (YSP) that totaled $19,000. I asked Chris for permission to discuss her loan with the loan originator.

Initially, the woman was congenial and talkative. She became defensive only after I questioned the YSP. I suggested to Chris that she post phone closing until someone could explain why she was paying a premium spread. The next day, I heard from the loan originator's manager who accused me of trying to steal the deal. It was, of course, a ridiculous and unfounded accusation. I am nothing more than an unlicensed industry observer these days.

But, make no mistake, I've been around this business long enough to know when someone is being screwed.

A long story short, Chris settled about two weeks later with a different mortgage broker. The fees and charges came to $4,000 or so. The interest rate was much lower than that proposed by the original broker. There was no YSP charged.

Do I believe that mortgage professionals are deserving of their fees?

I do, but there are limitations to reason.

Repeated studies have concluded that women with above average incomes and credit scores are likely to pay more for mortgage money than men with less favorable lending profiles. Women of color are most likely to suffer lending abuses and least likely to realize financial security through the traditional path of homeownership.

The YSP is almost always a factor when predatory lending practices are at play.

I reluctantly accept the need for the YSP in residential transactions. It is of considerable value to homeowners when employed by honest, well-intended loan professionals. We know, regrettably, that this is not always the case and that the YSP is all too often used to victimize trusting consumers.

I'd like to make this post a bit more interesting by asking a hypothetical question!

Let's assume that I was still a title company owner and didn't know Chris personally.

Let's also assume that the loan was referred to my title company by the original mortgage broker that attempted to charge a $19,000 YSP.

As a licensed title professional: Did I have an obligation to the consumer to question the obviously exorbitant fees being charged?

Would it have been inappropriate for me to question the fees?

What's your professional opinion?

Note:

The original post read: Do I believe that real estate professionals are deserving of their fee?

I decided to make the question more specific by revising "real estate professionals" to read "mortgage professionals" because the generic nature of the phrase was questioned by a number of readers.

CE Courses Sponsored by Title Companies: We Need to Talk

Ed Rybczynski (Jos. A. Bank Clothiers) — Mon, 10 Dec 2007 21:43:40 -0600

I've noticed quite a bit of dialog concerning continuing education courses being sponsored by title companies. I'm talking about CE credits for real estate agents. Sound familiar? At first I thought it sounded like a great marketing idea for title companies, but then I got to thinking: are these courses provided for free?

I've asked a couple of friends if they thought it was a RESPA violation and they see a real problem with the practice. A RESPA exception for educational purposes would make sense, but I don't know of one.

RESPA offers a very limited window of opportunity for service providers to market real estate agents for their business. It's equal to $25 per year for each source of business. That's it, there is no more. Anything else is illegal and CE credits cost a great deal more than that.

Unless you know something that I don't know, it's a problem when title companies provide CE courses for free.
The problem exacerbates itself if lunch, valuable presents, etc. are provided. The same rule would apply to lenders providing classes.

I don't claim to be a RESPA expert. I'm just asking a question.

If you're attending CE classes provided by title companies and not paying for the credits: Are you violating RESPA?

I'd like to know your thoughts! Am I wrong?

Note made on December 11, 2007.

I apologize for not participating in this important discussion last night. I logged off after the initial flurry of interest had ended. While I'm glad this post was featured, I didn't expect it to be the case.