Rob's Blog

Here comes the windfall

2008-06-22T18:29:57Z

Over the past couple of years there has been a lot of speculation as to who was responsible for the mortgage meltdown. Was it the appraisers for over estimating the value on properties in order to make a mortgage broker happy? How about the Realtors and mortgage brokers who pushed higher price homes upon people who they new were approved but could not afford the homes that they were buying. Maybe the underwriters who turned a blind eye on the files that were incomplete and managers pushed the loans through anyway.

The mortgage lending industry has been under investigation for quite some time and finally arrests were made. 2 hedge fund managers from Bear Stearns were arrested and charged with securities fraud for not supplying correct information as to the performance of their subprime portfolios. Another four hundred plus mortgage industry and housing professionals were also arrested on various charges of mortgage fraud.

This is only the beginning of the mayhem to come. Thousands of lenders, Realtors and appraisers are currently being investigated in order to hold someone accountable. There is a lot of blame to go around and every industry is passing the buck to the next. Things are going to heat up fast so get ready for a wild ride.

Who should be bailed out of the housing crisis?

2008-06-22T12:52:45Z

As our country braces for the worst housing crisis in history, blame for the fiasco is shifting from one entity to the next. Estimates on foreclosed homes have eclipsed the million home mark. Foreclosures are on the rise and we still don't see an end or a solution to the problem. As I watch the nation's mortgage lenders go through their financial freefall, it makes me wonder. Who really is to blame and who, if anybody, should be bailed out?

On one front you have the mortgage bankers. These are the brilliant minds that force fed the people with interest only loans, low or no doc sub prime loans and 125% Loan to Value refi's. So why did they do it? That's easy. They saw the housing values on a steady rise and in some areas doubling and tripling values in only a year's time. So why not offer these types of loans. They knew that the houses would gain that value in no time. They could package their loans into a hedge fund, sell them on Wall Street and make a killing!

On another front you have the average citizen and a truck load of real estate speculators and investors. Joe homeowner is enticed by the prospect that his house has what seemed to be limitless rising equity so why not refinance, take some money out and go to Disney land! Right after buying a 54" flat screen T.V. and a Hummer H3.

Your typical real estate investors were eating it up as well. Buying, fixing up and building homes like there was no tomorrow. Home flippers were flipping, and home builders were building. It was all so easy and anyone could do it right? Well...

Let's not forget good ol' Uncle Sam who was loving the tax dollars that the new and upgraded housing brought into the local, state and national government. It was a boom time but that bubble that we used to hear about burst like a nuclear bomb.

Now that we have our volatile mixture of bleach and ammonia we can try to assign responsibility. The mortgage lenders claim that people should not have taken out the loan if they could not afford it and the investors made their own bed so lay in it.

Community organizations and advocates are screaming that the people were misled and enticed into accepting bad loans that they could not afford and did not understand. Both have valid points, now what is being done to stop the foreclosures?

Foreclosures have opened a gaping wound that affects the American people and our banking/lending system. The banks are all too willing to foreclose even though their stocks are collapsing and some lenders are going under. People who are facing foreclosure are just as willing to walk away and not look back.

What does this do for our future as a country? We will have millions of Americans who won't be able to get a loan on anything for years to come and banks that can't sell a mortgage backed security to anyone. No domestic or foreign investors will have any faith in these investments which translates into no money to loan to new home buyers. (We are already seeing this happen)

The FHA modernization bill that is being reviewed by congress has some highly controversial items attached with it. Many are referring to this as the Dodd-Countrywide bailout bill. If enacted, this will allow the banks with non-performing loans to dump them onto Fannie Mae to the tune of $300 billion dollars. This of course will be paid by the American people out of their taxes.

Why should the American people bailout a lender like countrywide who offered risky loans? It was a greedy investment decision with a lot of risk involved. Isn't that just a part of investing? You take the good with the bad right? You play you pay? In theory that is correct and private investors, builders, flippers and anyone else who made that investment mistake including people who invested in the mortgage backed securities are paying.

Now we have a big problem. If the big banks who offered these risky loans don't get some kind of a bailout, there will be no money to loan to homebuyers that are and will be in the marketplace looking to buy a house. When the Wall Street investors lose faith the money dries up. On that note, maybe the banks should have a bailout plan?

Hold on to that thought because here comes the flip side of the coin. If the MBA membership sees that the government will bail them out for their folly, won't they just do it again? It was only in the 1980's when the feds had to bail out the lenders from the savings and loan scandal. The people have a short memory but the banks... they know that in 15-20 years they can try another variation of subprime, no doc, 125% LTV loans, and they probably will.

Now let's get back to Joe homeowner. Should he have refinanced his house and cashed out with five grand. Probably not, but all of the pieces of the puzzle seemed intact. The appraisal came back with rising values. The neighbor down the street bought only a year ago and already sold it for a $100,000 profit. He can just refi in a year or two and get out of that ARM loan. At least that's what the mortgage broker told him. And, speculation about a housing bubble seemed completely unfounded. Bermuda, here we come!

POP! The bubble burst, Joe took a pay cut to keep his job and his house is now worth $80,000 less than what he refinanced it for and it is still dropping. He can barely make the payment and that great interest only loan is about to hit year three, which means his payment will almost double. All too familiar isn't it?

Right now there are over a million Joe's all of whom will not be able to get another loan for some time. Maybe they are paying their penance for being greedy, but what will this do to our economy? What if this turns into 3 million Joes who cannot get a loan for anything? Our free market economy depends upon goods being bought and sold in order to remain a thriving nation.

What are the answers that we are looking for? We all realize that foreclosures cannot continue at this rate. Banks are foreclosing at a record pace. Why don't they try harder to prevent foreclosure? Wouldn't it be in there best interest to turn there collections departments into home retention departments? Here is the simple answer. "It is not our policy or our job to seek a loss on our investment."

How about Joe homeowner? Why doesn't he try harder to get a loan remodification or work something out with the lender? The common response is equally as simple. "I called once or twice and they just told me to make the payment or lose the house."

As we all search for a reasonable answer to this problem the finger pointing continues. Maybe the government should give half of that 300 billion to try and offset foreclosure rather than just bail the banks out. What if communities get more involved with homeowner retention? Maybe the banks want to own these homes so that they can use it as leverage to weasel their way into the housing industry? They've tried before. Many people claim that this is just an effect of the market cycle and it will eventually right itself.

We are on a sinking ship that is listing heavily to starboard. If this ship sinks, it will create a whirl pool that will drag our country underwater for years. My opinion is that everyone needs to recognize this as a problem and work together to fix it. Everybody and nobody are at fault. The boom and bust are just a product of capitalism at its best and worst. It is part of the natural cycle that may only require a nudge in the right direction. In order to get the bilge pumps working, communities, lenders and the government all need to be involved in order to exact a fair and reasonable solution.

Experienced bloggers I need your advice

2008-06-06T21:29:00Z

Hello fellow rainers. I have been blogging here on active rain for about 4 months and I have to say that it has really opened my eyes to a great way of networking with and learning from one another. i keep coming across other blogging sites and because time is so vital in this business I have been holding back on joining another blogging/networking site.

My question to all of you experience bloggers is. Are there any other blogging/networking sites worth the time and effort to join and maintain a presence in? i started a presence on linkedin but it doesn't really do much for me. I know that I'm not using it properly but there is no interaction like active rain.

secondly, other than you tube is there a good video blogging site dedicated and least in part to real estate?

I look forward to your advice and comments.

Workin from home.

2008-05-20T21:36:43Z

So, I'm sitting here in my home office reading my emails, on hold with customer service at wells fargo and I hear this low rumbling in the distance. Very quickly the elevator music version of metallica's enter sandman gets completely drowned out by a thunderous roar. The hair on the back of my neck stands up in military order... I know what coming next.

CRASH!!! Three kids on roller blades come slamming through the french doors in my office. My 4 year old daughter is chasing my son and his friend playing kiss tag? As I turn around and yell STAY OUT OF MY OFFICE! An incomprehensible voice from a foreign land says "Tank U fo cowling Wels Fahgo, Mista Jackups, haw may I Hep U? I am of course on speaker phone so I yell in a nice tone; Hang On a minute, GET OUT OF MY OFFICE!!!! beep-beep-beep-dead line. and the mayhem rolls off into the sunset.

What do you mean you won't release the lien?

2008-05-05T22:49:43Z

I have to hand it to the wonderfully brilliant business plan of citi mortgage. My clients have a 2nd lien for 20,000 through them. The first is through a different lender. My client has discharged both loans through chapter 7 bankruptcy. So today i'm on the phone talking to them about releasing the lein for the usual couple of thousand. This should be a slam dunk. Both loans were wiped out in the BK. All that we need is a release of lien, they get two grand that they never would have had and the home gets sold.

Well guess what. The person assigned to the deal tells me that the only way that they will release the lien is if we pay them the entire $20,000. WOW. I was floored. What on earth would make this person do this. Well. she proceeds to tell me that the loan is going to be collected regardless of a bankruptcy and citi will not release the lien because they are going to pursue it? The last time I checked it was against the law for a creditor to attempt to collect after bankruptcy.

As I sit here scratching my head I wonder, what is wrong with these people? Why do the lenders continue to hire mitigators who have no clue about the concept of profit and loss to work their files. every time I turn on the news there is something regarding the foreclosure epidemic. What can we do to fix it? On the other hand. Every other time I pick up the phone to negotiate a short sale, I am reminded not only of why there is a problem but, where the problems are rooted from.

OOPS… I SHOULDN’T HAVE SAID THAT

2008-05-05T20:59:01Z

I recently posted onto a blog and left a basic blogesque comment. Unfortunately, there was another blogger on there posting their comments. One comment led to another and suddenly I was under attack. Why did this person take out a personal assault upon me? I don't know. After being shot at with a sniper rifle, I didn't even offer a rebuttal to prove my point. What I did, and what I should have done are two different things...

Instead of walking away from the blog and letting it be, I had to have the final word. My final word had very little to do with the content of the blog, but more of a retaliatory strike at this person who insulted me, and judging by my actions my ego as well. So, why did I do this? Maybe, I had a very long day and that person gave me an outlet that I couldn't resist. Maybe I disagreed with every fiber within me this person's opinion and the attack on me made it too easy to pass up. Either way you look at it. I was wrong.

Disagreeing on issues is how problems get solved. They bring to light different points of view that one or both parties may not have considered. In turn new ideas come to light and the process evolves. Some ideas turn into something much bigger, others die on the operating table.

I guess the point here is, choose a battle that is worth defending. As much as I believe in my position on the subject (which I never voiced) it just wasn't worth the trouble. If someone makes an irreverent comment toward you, walk away. It's not worth the time spent on the reply.

REALTORS BEWARE!!!

2008-04-28T15:00:46Z

With the new climate in the real estate world come the self proclaimed gurus and experts on Short sales and REO's. There are seminars popping up all over the country run by people that claim to the top authority on the subject. How is that only a year or two ago there were only a few people in the country that had the knowledge to train and sell short sales & REO,s and now everyone does?

Here is what is happening. Now that this is a hot item everybody is trying to make a buck off of writing a book, selling a video, doing a seminar, whatever is the quickest path to making money. I get bombarded with junk emails daily from people try to sell their phony baloney designations and how to succeed in this market strategy guides. Everyone has a Blog on the subject and its hard to filter out the right from the wrong.

I've done a considerable amount of research and what I'm finding is that many of the people who are now training others, have very little or no experience themselves. They have taken an online course or, a seminar on how to work REO"s and short sales .they see money that can be made by doing these themselves and launch their own training program. I have even seen national trainers who have hired enigmatic speakers with less than adequate credentials. There is only so much that you get out of a book. You're real training is in the marketplace.

How do you protect yourself from getting misinformation?

Ask questions.

•1.) What makes this person or company so knowledgeable or special that will prompt me to spend your valuable time attending it?

•2.) What are their credentials? Has this speaker been hired for his/her knowledge or personality? A fun speaker will not have relevant answers to your questions.

•3.) Can you substantiate the cost with the knowledge that you will receive?

•4.) What feedback have you heard from your peers? This needs to be taken lightly because everybody has a different level of knowledge going in. What's good for one person may be a complete waste of time for another.

•5.) When getting information from open sources such as Blogs and wikipedia, go with what you feel is right.

REO's have a solid track record with a more standardized system. It should be easier to get qualified information on this subject.

Short sales have been around a long time but, until recently have been an obscure part of the business. There are no hard and fast rules or standards set within the industry. Most agents and lenders are winging it and learning as they go. This is an exciting time to be involved but it also means that mistakes are being made. People are falling over themselves to try and become the number one source for information myself included! What makes me so special? Nothing! I do what I love and I believe that I have the experience and knowledge to back it up.

We are all setting the standards by how we do business in this volatile market. Eventually there will be an agreed way to handle REO's and Short sales. But don't listen to me, listen to your heart. If someone tells you something that just doesn't seem right? It's probably not.

Where is the help for homeowners in foreclosure?

2008-04-26T13:44:00Z

Where are the groups that are helping homeowners through this difficult time? I rarely hear advertisements geared toward helping homeowners through this crisis. What you do see on the news daily is how bad things are but, no options attached for a way out!?

I have made contact with many community groups within my home state of Michigan and guess what. These Non-profit groups are all under funded and really not geared toward this. Most of the groups that are in a position to help are the ones handling other issues such as domestic violence and things of that nature. They do their best but, without funding they have no options either. Most people that come to them are referred from people like me who want them to get help in keeping their home and not get scammed by a stop foreclosure for a fee company.

On a National level there are a few organizations making an effort. The one thing that I see across the board is that all of them are trying to keep people in their homes. But, why doesn't anyone know that they exist? Most homeowners that I talk with have no idea that other options are available to them.

The banks will say that they are doing their part by sending letters to the insolvent homeowners. You know what happens to these letters. It is a demand for payment with your options buried on page two or on the back. After these people get behind on their mortgages, they don't even open this mail anymore. What about the 10 phone calls per day from the bank demanding payment? By the time the lender is ready to try and help the homeowner, their phone is set to go straight to voicemail. I.E. Delete.

So what about HOPE NOW? Well, that organization is sponsored by the MBA?! Wait a minute. The Mortgage Bankers Association? Aren't they the ones that caused all of this? Isn't this the same as a cigarette company selling stop smoking chewing gum that coincidentally fosters the nicotine addiction? HOPE NOW is only there because the feds "Requested" that the MBA do something to help insolvent homeowners.

I think that the whole country could take a lesson from places like Cleveland. That is where the community rose up against the odds and effectively initiated change. The city sued 21 mortgage companies which eventually prompted the governor of Ohio to make an effort to stop the foreclosure fiasco. So far as many as 10 banks have contracts with the State of Ohio to try and solve the problems. None of this would have happened if the community organizations had not fought back.

These issues are not going to be resolved by the federal government or the banks. The bush administration has already made it clear that Joe homeowner is not going to get a bailout but, the banking world will. The small legislative steps are only helping a small minority of people. Communities need to get involved in order to make a difference.

I'd like to thank Lynn Pineda for writing the blog linked here for inspiring me to write about this subject which has been eating away at me for quite some time. Please leave your comments here and check out Lynn's blog on the subject as well.

Don’t Pass on a Short Sale! Pass it on to an agent that will work it.

2008-03-26T22:01:07Z

I've been hearing a lot of negative rants from agents regarding the short sale process. They take too long... the lender doesn't respond... why won't the bank call me... I'll never do another short sale again... Enough already! Sure, short sales are not for the agent that doesn't have the patience or intestinal fortitude to deal with all the work that goes into them. I do short sales because I really do want to help people in distress. There are Realtors in every market that are ready and willing to take on the challenge. Pass the deal along to them!

When a seller calls you with a desperate situation, that person is counting on you to guide them in the right direction. Remember, a short sale is the last chance they have of saving their butts from foreclosure. If you don't want it, send them to someone that can help. Often times these people are feeling the weight of their financial crisis and if you just flat out turn them down, you may be adding another foreclosure statistic into your market. Not to mention you have just taken a potential buyer for next year and sent them into the 3- 5 year category or longer.

Some of these people just may need guidance. There is free counseling for distressed homeowners. The homeownership Preservation Foundation has free counseling online and via phone 888-995-HOPE (4673) http://www.995hope.org/

Realtors are the frontlines of this housing crisis! It is necessary that everyone band together in order to do the right thing for the distressed homeowners. If it means passing the deal on to another agent or company than so be it. Otherwise, you may be selling that house to an investor at 50 cents on the dollar in 6 months. For all you know this could be the guy living around the corner from you. If you ignore his call for help, values will drop in your neighborhood too!

A short sale is a good thing. It helps maintain value in the area. It saves a homeowner from debt and bankruptcy. It helps stabilize the banks with an influx of cash. (I know, who wants to help them but, it is important). The buyer still gets a good deal. Both Realtors got paid. This is recycling back into your local economy so, don't give up. Pass it on.

Short sale tip Part 1: PRE-QUALIFY YOUR SHORT SALE LISTINGS!

2008-03-17T23:24:30Z

Short sales are a lot of work but, if you are like me, you get a lot of satisfaction from helping people who otherwise would end up in foreclosure. Even when you have a negotiator handle the bulk of the paperwork and phone calls, an unqualified or worse yet an unwilling seller can squash your work, your wallet and your closing.

If you are in a declining market (who isn't) you should probably begin adding a qualifier into your normal list presentation right now. I know a lot of Realtors who find out in the 11^th hour that Joe and Jane seller have not made a mortgage payment in three months and that the auction is looming. This throws your entire system out of whack. You now have to rev up you marketing, get with the lender, drop the price and call everyone you know to try and get an offer at the last minute. Chances are that without an offer on the table, the lender will not stop the sheriff sale. All your time, money and efforts are now wasted because you just didn't know.

So, what can be done to help these people in distress. The seller probably didn't tell you because they were embarrassed to tell a stranger their financial woes. In this current market, they need to spill their guts. Its not easy or comfortable to come right out and ask them if they are making their mortgage payments. That is why you need to know the qualifier questions that will lead them into the answers that will help you, to help them.

Start by asking questions that are not personal but opens up the seller to what needs to be said. Simple questions like "why do want to sell" can lead the conversation into where they are and what motivates them. "What do you think your house is worth" and "would you consider reducing the price to sell" are questions that will get you some interesting perspectives on what they perceive the market to be in your area. The great qualifier is "how quickly do you NEED to sell"? When the eyes shoot to ground or defense mechanisms come into play you know its time to dig in and find out if they've lost their job and they are prolonging the inevitable.

Another problem that I see a lot is that the seller calls the Realtor to list the property a week before the auction or, in redemption states after the auction has taken place! These are the sellers that you need to be very careful with. They waited until the last minute to sell their house and more times than not it is out of shear desperation. These people are the ones that can drain every bit of energy from you and walk away from the house without a care in the world.

First of all. Why didn't they call you when they were only a month or two behind? There are some legitimate reasons. maybe they thought that they would be back to work or, they knew that their house was not worth what they owe so why bother trying to sell it. These are the ones that you may be able to help.

The other ones.... Desperate people do desperate things and when you get caught in the middle of their indecisive behavior, you are asking for trouble. These are the people who care a whole lot today and not at all tomorrow. You will work 10 times harder for them and probably will not close the deal.

Common traits of these wishful sellers are:

they rarely return your phone calls and when they do it is when they believe that they will get your voice mail.
Troubles getting buyers into the home. I.E. No return phone call,
You get only portions of the paperwork needed to properly perform the short sale. There are many documents that the seller needs for the lender and if they don't have the initiative to do something as simple as write a hardship letter. Expect not to sell this house.
Overall bad attitude. Who needs it! You are trying to help them and if they can't get that through their thick skulls then you will not be appreciated enough to get it sold.
Misinformation- how someone forgot that they just got out of bankruptcy is beyond me? What? You didn't know that you had a tax lien on your home? I guess the IRS forgot to call them?
They vanish! That's right. I've seen many of these people just up and leave and take your sign with them. There's nothing worse then getting an offer and you excitedly call the seller who suddenly has disappeared with no forwarding number or address. (this happens far more often than you think).

Fortunately there are some ways that you can qualify these sellers. Now that you know some of the questions to ask, make them come to you. Nothing extraordinary but, asking them to bring some paperwork to your office is a simple request and it may weed out the unmotivated. My reasoning is that if they want your help, they will do a little extra to ensure the successful sale of their home. If they are resistant to simple requests, it is a red flag that you need to take seriously. Otherwise, you may find yourself going the extra mile for someone who has plans on leaving their worries behind, and that includes you!

Most people do not know that there are options open to them. Many lenders now offer workout deals for homeowners who are able to re-adjust their mortgage into a manageable rate. Some of these people may just need to refinance out of an ARM in order to save their home. There is no reason that you, their agent should not lay all of the options out for them. A short sale is the last option before foreclosure and there is no sense in marketing a home that should not be sold. Pre-qualifying your seller will save you lots of time, money and headaches.

Why are you afraid to do short sales?

2008-03-11T21:25:19Z

Trick question. I know exactly why agents are afraid to do short sales.

Where do I begin? One issue is a lack of the basic knowledge to properly list and sell a short sale home. This should not surprise anyone. Look at the facts. Short sales have been around forever. They got their beginnings from those savvy investors on Wall Street. (Probably the same ones that decided that everyone should have an Arm loan with a 3 year escalation clause). It's only recently that we have been subject to mass amounts of foreclosure and short sales. This new market is turning everything upside down. The tried and true methods of working with buyers and sellers are muddled by Absurd bank addendums, who is really the seller and how much of my commission will be siphoned out of my pocket on this deal as opposed to the last one?

Well I got news for you folks. We in the real estate community are the last line of defense. NAR has been fighting the banking industry forever to keep them out of real estate. Now they have found their back door entrance, and in some states, it looks like they will be around for quite some time. That's a whole other rant. Back to short sales.

EVERY AGENT SHOULD KNOW HOW TO DO A SHORT SALE!

They are a good thing in a bad market. If you don't believe me, ask any of my clients who have bought another home within a year or less from getting their approved sale.

Most of the problems that we are having with short sales is lack of education on the subject. Again, this is new territory to most of you. Every association should have education for selling short sales. It is really not that complicated when everyone involved understands the processes that go into it. Once you see the benefits, it won't be the eight hundred pound gorilla that everyone makes it out to be.

Lets weigh the pros and cons.

Pros

•1) Buyer gets a good deal on a home with disclosures.

•2) Seller gets the benefit of a favorable credit rating, no deficiency judgment and until 2010 no tax liability- keep in mind every case varies per the situation

•3) Lender gets more money and less loss helping the overall economy.

•4) Seller is a future buyer, possibly near future if you can help them in time

•5) One less foreclosure which helps the overall value of your market area.

Cons

•1.) The looong wait for the lender to respond while trying to keep the buyer happy and patient.

•2.) Keeping the other agent happy and patient

•3.) Keeping the seller happy and patient.

•4.) Bogus BPO's and appraisals that kill the approval.

•5.) Bickering over commissions that can usually be negotiated with the lender if you have any fight left in you once its approved.

It seems to me that the pros far outweigh the cons. I know, I know, there are other issues that always arise with these deals but guess what. Education is the answer for most of these problems.

Whether you like to do short sales or not, they are going to be around for a while, so buck up soldiers! You're on the frontlines of your marketplace. Your clients are counting on you to know, understand and evolve with the changing world of real estate and short sales have become an essential and vital part of it!