Lots of sensational press around the temporary foreclosure moratorium thats being implemented by some, soon to be all banks across the country.  Some people are crying fraud while others are pressing random panic buttons calling for someones head…yet most really don’t know why.

I guess it just sounds like the right thing to do since banks and ‘Wall Street’ are behind this, and they’re all greedy evil sons-a-bitches so they must be trying to rip someone off.

This situation is really about A. The process of paperwork, specifically establishing proper chain of title to property, and B. Having a human being actually review documents they represented they have through notarization.

In regards to A. it is vital to establish a clear chain of title when a property changes hands to insure the claims against it (in this case a mortgage evidenced by a promissory note) are properly released or transferred.  If a clear chain of title cannot be established (or is broken) claims may be rendered void, or in the alternative a property may seem to have a clear title when in fact someone has a legitimate claim against it.

The chain of title issue at hand revolves around a system called MERS, which for all practical purposes electronically facilitates the recording of title transfers. Back in May, some clever individual filed a lawsuit on behalf of the Government in California against MERS and some very large banks like Bank of America, JPMorgan Chase and GMAC, alleging they bypassed local recording requirements and prohibited borrowers from knowing who really owned their mortgage.  Because of this procedural defect, any subsequent actions like foreclosure would be initiated using ‘fraudulent’ documents and thus should be thrown out.  This is called following black letter law… if you didn’t do X then the consequences are Y, period.

In regards to B… At the same time, there has been such a crush of new foreclosures entering the system that banks were essentially having notaries rubber stamping foreclosure files as fast as they could without reviewing the files to insure they contained the actual documents and figures they were supposed to.  One lender was using 7 or 8 notaries to notarize over 18000 files per month, obviously they couldn’t be thoughtfully reviewing that many files.

A bunch of attorneys who smell blood have since played pile on to the above lawsuits and in certain cases they are prevailing, thus the reason for the foreclosure pause.

Banks are going to take a month (or two) to clean up what amounts to procedural defects in their processing of foreclosures or there will be substantive precedent setting lawsuits that completely sack the housing market.  If banks were to lose their interest in properties and the ability to foreclose they would go belly up, all of them, and fast.  Our economy would implode.

This isn’t going to happen… so what will?

IMHO- Delays, Long Delays.  Then business as usual.  I for one was convinced that the market was being primed to have copious amounts of distressed property pumped into it, this puts a damper on that prediction.

Title companies are refusing to insure title on a home that was recently foreclosed on by lenders who used the MERS system or are in some way implicated in the procedural processing defects, at least until they have an acceptable remedy.  Insurance companies aren’t in the business of actually paying claims and don’t want the unnecessary risk that they may have to, so this is an issue.  Banks will not lend on a property that does not have title insurance… so the sales cycle grinds to a halt on any property thats been through the foreclosure process as the legality of such is called into question.  The real question is how far back do you go?  3 months, 6 months, 3 years?  (Looks like the groundwork to getting this issue resolved is being laid)

Being a service provider like a Realtor or mortgage professional is hard enough in the current environment, their sales cycles just got longer.

A common question I hear involves whether foreclosed properties that reside in a judicial or non-judicial state are more or less effected.  It really doesn’t matter, however judicial states are likely to act quicker to remedy the issues since a judge must sign off on foreclosures.

The average time to foreclose from date of first default is already over 400 days, expect this to increase.

The main reason this mess must be relatively temporary is that the housing market simply cannot afford to slow down anymore than it already has.  A protracted ‘foreclosure freeze’ would be very bad for the overall housing market as it would further stagnate inventory thats already stuck in a quagmire.  It would also negatively effect insurance companies, pension funds and other private investors.  The cost of credit would rise as well, as banks and investors pass on the costs of holding inventory to new buyers.   Unfortunately political agendas will surely play a part in all of this, what politician wouldn’t like to stand up to the voting public around election time and represent he/she is ‘helping to stop foreclosures’.

Common sense dictates that the consumers who are going through foreclosure did not pay their mortgage for 1 of a 1000 reasons.  Improper procedure of this sort, even if it is black letter law, cannot and ultimately will not be a remedy to a creditors claims.  If it were to be, there is no amount of money that could bail out these financial institutions, as stated, they and our economy would crash hard and fast…there aren’t enough printing presses in the world to foster a bailout of that size.

Meanwhile, enjoy the conjecture laced fireworks around this topic…It’ll be bulletin board material until people have a chance to wrap their heads around it.

Originally posted at The Xbroker on 10.12.12

Much speculation regarding the Future of Housing Finance and the overall housing market around the news lately.  I penned a couple articles for HousingWatch (here and here) on the conference of the same name that took place at The Treasury last month, they’re good prerequisites to whats written below.

While there were many threads of thought that could turn into policy when Congress is presented a proposal in January 2011, I rub my Conjecture Ball and foresee:

The Government sponsored artists currently known as Fannie and Freddie shift from hybrid private/Government controlled entities to straight up Government controlled.  OK, it’s not really speculation when Timmay Geithner states: “We’re not going with a system where private gains are subsidized by taxpayer losses.”  Anyway, they abandon the practice of implicitly guaranteeing (~90% of all) mortgages today in favor of an explicit guarantee that reads like an insurance policy.  So, the Government will provide mortgage insurance for a fee instead of the Freemium model currently enjoyed by financial institutions.  That model didn’t work out real well for anyone except big ass banks.  Our Government hasn’t been real savvy when it comes to financial engineering…free really shouldn’t be the new business model, with all due respect to Chris Anderson.

Government Sponsored Mortgage Insurance (GSMI).  This is interesting, really.  The premiums for something like GSMI would be paid by the individual mortgage holder and the policy would insure the actual asset, not the business entities that hold them…suitably addressing Mr. Geithner’s statement above.  Fannie and/or/nor Freddie can thus go back to performing the duties they were essentially created to carry out: To create affordable housing for the masses and mitigate risk on their behalf.  They could still maintain, even increase their influence on the market whilst scaling back on the actual buying of mortgages…insuring parts thereof instead.  

Theoretically this shift would provide enough incentive and security for the private sector to gradually re-enter the mortgage space and fill any vacuum created by the Governments very, very gradual decrease in purchasing mortgages.  A new fee like GSMI means other fees and current tax deductible benefits currently innate to a mortgage take a hair cut…like the mortgage interest deduction.

The powers that be are also focused on providing suitable, affordable housing…just not necessarily through home ownership.  As such, rental market dynamics are being primed for adjustments. Multi-family housing loans made accessible and desirable due to favorable GSMI terms seems highly plausible.  There are likely to be other subsidies into the rental market from initiatives like PETRA to help shore up this sector of affordable housing.

If you continue to listen closely and look closer, the landscape is being primed for The Ultimate Fix…

“The only way to fix it is to flush it all away...” - Tool

So- Over the next six or so months the housing market will continue to tank as financial institutions release huge amounts of distressed (shadow) inventory into the market creating supply that far exceeds the ability to consume.  This will exert extreme downward pressure on property values.  The number of banks will continue to contract.  Homeowners will continue walk away from their houses.  The National Association of Realtors will continue to tell anyone who is listening that its a great time to buy.

These sour conditions will be amplified with the seasonal slowdown to such a point where everyone is clamoring for additional Government ‘intervention’ or stimulus or Print More Money!!  Except I don’t think there will be much, if any, of that.  There really isn’t much left to be done except to allow the existing system to flush itself and prepare for what comes out the other side.

Whats on the other side of this economic enema?  Explicit Government guarantees via the artists formerly known as Fannie and Freddie to keep the cost of credit within reach of the qualified rather than the entitled, increasing private money participation, and a retooled rental market system to support all the displaced homeowners.  Dead inventory will be channeled off through a series of initiatives like HomePath.  The housing market and property values drop below this ‘double dipped’, false floor we’ve been dancing on for almost 2 years…and there is no where to go except up.  Which equates to a real recovery and sustainable growth which will lead to inflation and all those other problems that we can worry about that sometime post 2012, assuming that whole Mayan prophecy thing doesn’t absolve us of any future responsibilities.

This painful process constitutes a necessary de-leveraging of an economic system thats based on a debtor society which has been taught to borrow/spend beyond it’s means.  While it may hurt and otherwise cramp our very American style, its really not the end of the world as we know it.

Haven’t been permeating self promotion through the typical social mediums very much lately, but I have been sporadically writing/blogging/’content creating’ over at HousingWatch.  So, for the 4 people who’ve asked me if I still type my opinions into a keyboard…

John Paulson was an interesting figure in the whole SEC vs Goldman Sachs stink-eye contest, which ultimately ended up with Goldman getting slapped on the wrist with a fine and restitution to damaged investors for ‘making a mistake‘.  Looks like J-Paul managed to stay out of range of any collateral damage and made billions by helping build the elegant piece of financial engineering that enabled Goldman to make their ‘mistake’…directly contributing to the housing bubble and subsequent *pop*.

Former Treasury secretary and Goldman Sachs exec Henry ‘Hank’ Paulson (of no relation to John) donned his 20/20 hindsight glasses for the Financial Crisis Inquiry Commission.  Too bad he didn’t practice what he preached while he was in the middle of it all…

Ben Bernanke the Federal Reserve Chairman warned about warning of pending warnings as to what the Feds future economic policy changes may look like.  This ‘no surprises’ strategy is intended not to spook investors and/or cause knee jerk reactions.  Unfortunately well prepped domestic policy changes wont do much to reduce the anxiety of investors as global headline news continues to cause such spooky, knee-jerk reactions…but thanks for the warning ahead of the warnings about your read and react strategy Ben.

More in line with the real estate (and mortgage) markets proper, I started a series about how some realinnovation was required in the aspects of business and cost modeling for the industry’s to change in meaningful ways.  New sexy search UI’s and social media are fun and all but they do little to address the core problems at hand.  Beauty is only skin deep and the insides of these industries are nothing short of fugly.

Politics tend to get in the way of meaningful change when it comes to the real estate industry, evidenced by the strong aversion from real estate professionals to offering consumers a peek into their professional track records or ‘report card‘.  The Houston Association of Realtors (HAR) launched an Agent match product that was by most accounts very benign in regards to the information being displayed for public consumption.  Nonetheless they had to take the product down within 48 hours of its official launch because inmates run the asylum in real estate-land.  Thats sad.  I applaud Bob Hale of HAR for having the guts to push for this type of initiative and believe he is 100% correct when stating: ‘It will happen outside of the industry, and everybody will be mad’.

Another Captain Obvious moment- Alan Greenspan.  The former Fed Chairman really stepped out on a limb recently by prognosticating that another dip in home prices could cause a double-dip in the overall economy.  Never mind that no one can agree on what really constitues a double dip recession, outside of the notion that the economy shrinks, then grows, then shrinks again, then…doesn’t the economy do this all the time?  Double dip, W-shaped, recession, depression, correction…all economic semantics for:  Our economy is going nowhere fast with long term issues like high unemployment, shadow inventory and mortgage underwriting standards so tight you couldn’t pull a pin out of a lenders ass with a John Deere tractor…

This post has been amended from its original version, which was deemed to have contained 'hate speech' directed toward women.  Sorry if I offended anyone, people who know me know this was never the intent as I have an immense respect for people regardless of sex, race, religion, sexual orientation, political views, affinity for certain animals, foods, fonts, music, clothing, etcetera etcetera etcetera...

On with the new post...

Once upon a time there were some pretty reliable indicators when it came to forecasting the near future trends of mortgage rates.  Non-farm payroll, unemployment, housing starts, the Consumer Price Index and other such macro view reports we’re accurate arrows in a mortgage professionals quiver when it came to ‘predicting’ mortgage rate movements.  Stocks, their indices and mortgage rates moved in opposite directions.  A bad day for stocks usually meant mortgages rates fell and vice-versa.

Well you can throw all that logical stuff out the window.

There are days when stocks rise and rates fall.  There are days when rates rise and stocks fall.

I pride myself on staying pretty up to date with what goes on in the financial markets, particularly their actions subsequent effects on prevailing mortgage rates…and I have no freaking clue where mortgage rates are going on a daily or weekly basis, no one does.  Anyone who says they do is guesstimating at best, and my guess is that even the best market prognosticators are maybe 50% correct 50% of the time.  This transcends predicting mortgage rates and into all financial market forecasting...

Its pretty safe to say rates are going to trend upward at some point because they can’t get any lower.  Like any other instapundit I can tell you why they moved the way they did after the fact.  When money en masse moves into Mortgage Backed Securities, rates go down.  When money moves out of MBS positions en masse, rates go up.  Outside of that, there are so many variables effectuating the market, I hereby deem predicting the short-mid term direction of mortgage rates with any sort of consistent accuracy logically impossible.

During a time when most market analysts had interest rates rising due to the Fed's ceasing to backstop the MBS market and looming inflation from printing a trillion or twos worth of new Benjamins, the Euro has been getting its behind kicked all around the world because its connected to the troubled economies of PIIG countries (specifically Greece), subsequently strengthening the dollar causing investors to move to the relative safety of US backed Treasuries.  Couple that with the new Cowboy of Europe (Germany) banning naked short selling due in part because certain financial institutions were creating mortgage investments that are (secretly) designed to fail...and you have market conditions to keep mortgage rates low.  

Yeah, I saw all that coming too...and my great great great great etc. grandfather was Nostradamus.  

FTW!

Today's markets are emotionally supercharged and unpredictable, akin to a cat-nipped infused kitty cat with a gun, effected by wide ranging global events and as such there is simply no logical way to predict if rates are going to rise or fall on the short and mid term.  Rational economics left with the industrial age and technical investing is quickly following.  Floors, ceilings and other traditional technical investment indicators are being shattered and/or crushed.  These are the days of behavioral economics where cognitive biases rule over rational decisions.  When emotions run high, there’s no telling what happens 4 minutes from now let alone 4 weeks.

If I were in the market for a mortgage, I'd be far less concerned with timing it and just worry about closing the dang loan with rates where they are today...

Disclaimer:  If you are a 'cat nipped infused kitty cat', please do not take offense to my analogy, write a follow up post accusing me of slandering the Felis Catus Order or report me to the management of AR and request to remove my post without contacting me directly first...Im sure we can work it out.

If you would like to read the original, unabridged version of this article it can be found here

I’ve been writing a bit over at Housingwatch about the recent news surrounding reasons behind housing market crash, viewed through the 20/20 hindsight lenses we all posses.  While this article was originally published on April 24th 2010 on my site at TheXbroker, I wanted to bring it to Active Rain too because I enjoy the comments and subsequent engagement so much.  I even stripped out all the 'colorful' language a.k.a. 'swear/cuss' words and any analogies that could be misconstrued as sexist, ageist, religiously biased, insensitive to animals or otherwise...so as not to incite any raucous exchanges, be they in the comments or in follow-up posts, between members who may be offended by such (at least for one post).  I would like people to focus on the relevant content of the entire article and links within, not just 4-5 words...call me an idealist.  Anyway- on with the article...

You can’t make this stuff up:

Magnetar Capital, a Chicago based hedge fund with an epically ironic name , went into business in 2005 at about the time that Sub-Prime mortgages were recognized as being ‘toxic’ in the sense that they don’t perform, as in- Homeowners don’t make their payments and investors don’t get paid.  Nonetheless, they started buying up these toxic loans (through various conduits) and bundling them up in Collateralized Debt Obligations (CDO’s), creating huge demand and liquidity for 'toxic' mortgages to put people in.

All Magnetar CDO’s contained the worst kind of mortgages…the No Income No Asset, No Job, Low FICO, short term ARM variety located in states with the highest appreciation mortgages…the mortgages that default like the consumers they gave them to had no income or jobs with a poor track record of paying debts back.

Magnetar subsequently bought Credit Default Swaps (CDS’s) or insurance policies against the 'toxic' CDO’s (they created) just in case they defaulted.  CDS’s cost money in the form of premiums, just like you pay on your car insurance.  Magnetar used the higher yields from the CDO’s they created to pay the CDS insurance premiums…until the CDO’s defaulted that is…then they collected the insurance policies payout.  These insurance policies paid out far more to the hedge fund than any  loss they would incur if, err, when the CDO defaulted.

This became known as ‘The Magnetar Trade’ as is being pegged as the primary reason the US Housing market crashed so hard and pulled the world economy down with it.

For review:  The Magnetar Trade strategy was to fuel the marketplace by purchasing 'toxic' mortgage securities (creating liquidity and loans) bundle them up into CDO’s, achieve a AAA rating from the relative agencies, sell them to investors as such, then bet Big Money on the fact the CDO would default and collect said Big Money when they did.  It was simple, even an elegant piece of financial engineering...and legal.

Almost every major institution on Wall Street played this game, executing ‘Magnetar Trades’…Merrill Lynch, JP Morgan, Lehman Brothers even The Streets most prestigious firm: Goldman Sachs.  John Paulson of Paulson and Co. created the Abacus Fund for Goldman.  Abacus was architected after the Magnetar blueprint.

Recently the SEC decided to bring a lawsuit against Goldman Sachs alleging fraud around the Paulson created Abacus hoo-ha.  The core of the suit alleges Goldman deceived and sold investors on a security that Paulson helped design to fail, and made a bunch of money because of it.

Regardless of lawsuits and agendas, there is no getting around the fact that these sort of ‘investment strategies by ‘Wall Street’ negatively effected millions of homeowners…never mind the investors and investment banks.  It’s not hard to draw a pretty straight line between Wall Street greed and the implosion of the US Housing market.

I don’t think the lawsuit sticks but it raises an incredible amount of awareness in the public arena around a sophisticated and ethically challenged Wall Street play that negatively effected millions of homeowners.  That’s great for pushing an agenda, especially a political one as the timing of all this is obviously politically motivated…but this isn’t a political post- I pro-actively filibuster this article from political based arguments so it doesn’t turn into a 300 comment finger pointing contest.

Consumers were either unwitting pawns or consumed by greed and subsidized this game of sophisticated capitalism…at least that’s whats going to be played out in the press on on TV.

So, will a public growing more weary by the day of Big Government side favorably with Big Government in having its way with Wall Street?

According to various polls, from local associations to the widely distributed Harris variety, public/consumer perception of the greater real estate industry and the agents that serve it is in the toilet.  This is nothing new.

In the spirit of taking action to reverse the negative stigma around the industry, there has been a spike in conversation recently around the cause of ‘Raising The Bar’ (#RTB) by real estate professionals, including an REBarcamp session before Inman Connect NYC, Twitter-speak, blog posts, podcasts and blog talk radio shows.

With lots of conversation comes lots of ideas, including:

• Raise the barrier to entry (Keep out the stupid, poor agents)
• Kill the barrier to entry (Increase competition)
• Increase continuing education requirements and ethics standards (Create smarter, more ethical agents)
• Only hire honest, empathetic, generally good people who have a strong work ethic (Make the consumer LIKE me into doing business)
• Acquire pretty technologies and engage in Social Media best practices (Apply the Laws of Attraction)

All of these ideas focus on the top of the industry funnel – marketing, messaging, advertising, massaging, allure, the ‘easy to manipulate’ aspect of reputation management…they are too far removed from solving the real issues at hand.

The common thread I’ve heard is that the industry must increase its ‘Professionalism.”

My Notorious partner posed ‘The Single Question to Rule Them All‘, all Lord of The Rings style:

“Is professionalism a competitive advantage in real estate or not?”

In short, Rob says if this is the case, the riff-raff will eventually be driven out.  If it isn’t the whole RTB exercise is anti-competitive in nature and generally deceptive.

Robs logic is sound, but there is very little context to the question, so it’s just that…logically correct with alot of ambiguous conjecture and talking heads spewing esoteric, self-serving opinion around the definition of professionalism and how to raise That.

Rewind— REBarCamp San Francisco 2009.  Sitting in a group of well respected real estate ‘thinkers’, Rob Hahn asks:  ’What is the next big thing in real estate?’  With my head focused on the cornucopia of tech related products and services, I didn’t have an answer and admitted to such.

Today–- My answer is pulling the veil back around performance related metrics relative to market baselines for practicing real estate agents.  Establish a Bar, establish accountability, demand greater transparency and Raise The Bar along the way.

So, I propose ‘The Single Question To Rule Them All’ then becomes:

‘Is Performance a competitive advantage in real estate or not?’

Rob’s logic applies to this question and fits like a rubber glove.

If Performance is a competitive advantage, the riff-raff will eventually be driven out.  If its not, then the whole RTB exercise is anti-competitive in nature and generally deceptive.

Performance is a competitive advantage.  I trust I don’t have to write 400 words to explain why.

I’m not sure that the greater industry is ready to RTB…it can be done in pretty straight forward fashion but there are substantial ramifications.

Lets begin…

Social Media Can Help Raise The Bar.

Generally speaking, Social Media provides a two-way conversation medium that ideally compels some level of engagement between two parties.  There is an emotional connection that Social Media taps into for people and it works (very well) when implemented thoughtfully and engaged consistently…a good strategy herewill drive potential clients.

Social Media should not be postured as a chronic popularity contest where thou with the most ‘friends’ wins.  The term friend has a diminished meaning in the world of  5000 Twitter and FaceBook ‘followers’. Being named to ‘influential’ lists and the such amounts to little more than superficial ‘pat on the back’ contests amongst inter-industry professionals and is of little value to a consumer…I digress.

Where Social Media really stands to help RTB is rooted in the caveat of the medium:   If you don’t follow up your dynamic online persona with performance driven results, consumers are likely to wield Social Media against you…As stated, its a two way street and bad news travels fast.

Set The Bar With Transparent Access to Relative Performance Metrics.

Open the MLS data vaults to establish a baseline (or bar) around local market performance metrics such as:

• What is the average Days on Market for a $Xk to $Xk house in my market?
• What is the average List to Sales Price difference for similar homes in my market?
• How many sides did an average agent close in the last 6 mos, 12 mos, 24 mos?
• What is the average # times a listing re-priced or re-listed in a given market?
• What is the average final Sales to List price ratio?
• What is the average commission charged on a property within my search criteria?
• How do REO’s and Foreclosures affect a property in a given area?

Once I have a flavor for how my market is performing on average and a Bar has been set, the second and more important question is:

Which Agents/Offices/Brokerages/Franchises Outperform These Averages and by How Much?

You can’t argue with real, empirical data.  You can’t fake the grades on your bell curved report card.

Allowing consumers to evaluate which real estate professionals outperform local averages (Baselines or Bars) that are important to the specific consumer would go a long way toward increasing the likelihood of a positive experience, as well as aid in improving consumer perceptions and expectations.

In addition, consumer access to performance based information (currently locked under MLS data use Rules and Regulations) would:

• Drive out the under-performers or force them to do what it takes to raise themselves above the Bar
• Spur innovation in the sector of commission reform <–A big deal to consumers
• Increase good competition

I can hear the arguments:

‘Just because Sally transacted more sides, doesn’t mean she’s a better agent.’    Very true.  Johnny could have sold 4 properties to Sally’s 20 over the past 12 months, but Johnny sold each one in far less time than the market average.

‘Billy took, on average, 30 more days to sell a property.’  Yes, but he did so at a List to Sales price that was well above market averages.

‘My consumer wouldn’t listen to me and insisted I list the price way above market value, thats why I had to reduce the price 3x and it sat on the market for 462 days.’   Well, you should have passed on taking that consumer as a client.

There are many such what if scenarios.  Performance based data isn’t of much value when analyzed in a vacuum.  It becomes very valuable when compared and contrasted against market averages and considered in conjunction with a unique consumers wants and needs.  Throw in consumer ratings, other forms of feedback on some level and now you’re serving steak instead of sizzle.

Evolve The Traditional Real Estate Commission Model

I know, its not supposed to exist, ‘there is no set commission model’- humor me.

The fundamental issue in the ongoing consumer vs. real estate professional beef is the gross misalignment of performance for consideration.  Consumers generally have a negative opinion of real estate professionals because they believe they overpaid for services compared to the value received.  This is likely because the agent they ended up retaining had poor performance metrics or their positive metrics didn’t align with the consumers wants/needs.

Access to such transparent performance metrics relative to a baseline would blow a hole in the bow of the traditional real estate commission model. Underperforming, inexperienced agents could no longer ride the coat tails of top performing seasoned agents.  Top performing agents could set new pricing models, justify a retainer for services, charge for services using a ‘cost plus’ model…they could make MORE money instead of subsidizing Ron the part time Realtor who botched his last three listings, yet scored a listing that would have otherwise been yours because his college friend Bill said something about needing a real estate professional on FaceBook.

I can’t think of another industry that pays entry level employees on the same scale as long standing executives.  Consumer confidence and perception could rise substantially if they knew who they were paying for up front rather than after the transaction closed, didn’t or worse.

If you’ve followed along to this point I’m sure many are screaming that something like this will never happen, because…:

MLS’s are funded by and thus beholden to the agents they serve.

If an MLS decided to adopt some crazy cavalier attitude and turn this performance based data consumer facing, many agents would likely get upset…read: violent rebellion amongst natives, loss of revenue, mass firings at Cowboy MLS.

Since MLS’s are generally for profit enterprises and the people that run them probably like the fact they have a job, this type of a mass public outing is a non-starter.

So, what about a version that displays all the pertinent individual performance metrics and how they rank against the given baseline/bar, but leaves the agents personal information anonymous?  The only time an agents personal information becomes available is when a consumer pays for the privilege.  Unlimited access to all agent profiles wouldn’t be prudent for obvious reasons…rather a set amount, say 5 profiles per subscription. Those below The Bar remain anonymous and left to think about how to raise their Bar.

In the alternative, Stan finds a real estate professional on Facebook, Blogsite, Zilow, Trulia, IDX, ActiveRain…pick your Social Media outlet.  They like the personality and now want to check how deep the beauty runs.  Dial up the agents performance related data and get a holistic view of who you might retain to handle the largest transaction of your life.  Think Carfax for real estate professionals.

Shame on the agent or broker that would threaten to pull out of an MLS for offering this anonymous data for public consumption, that would be like saying you want the industry to remain in the gallows of consumer perception, deceptive beasts of no prestige.  And if shame isn’t enough, I’m sure there are other incentives to keep everyone submitting their data…

In the ugly and very likely circumstance that agents and/or brokers still balk at the idea, make it opt-in only.  No personal information available unless you as an agent give the MLS the express right to do so.  Pay agents to opt-in, every time their personal profile is requested.  Share the wealth a little.

The big question is always:  Where is the money?  I’d be willing to bet that (ALOT of) consumers would pay for access to such information presented in an intuitive UI-sortable and searchable by what metrics are important to their situation (much like Diverse Solutions did).

This isn’t some pipe dream that would take millions of dollars in development or years to implement.  It could be done quickly and at relatively little expense.  In fact, the primary reason this data isn’t already available is due to simple economics and complex politics…there is alot of money in keeping the data under lock and key…economics rules politics, so where there’s a bigger dollar there is a way.

There are Agent ranking systems out there.  Most allow the agent control over what information is displayed and/or claimed…rendering the system and information skewed at best.  This type of agent rating system must have a very complete set of market data and be maintained by 3rd party providers that simply maintain its purity and integrity.

Diverse Solutions has created the closest product I’ve seen to a tangible, working model using MLS direct data.  Agent Scouting Report was the result of a 48-hour developer competition at the Inman Connect conference in San Francisco last summer.  In its current edition Agent Scouting Report doesn’t work because it shows every agents stats…effectively ostracizing those that happen to fall below the Bar.  I don’t think they’re far off, their product was well thought out given the limited time they had to develop it..a few turns of the dial and some thoughtful considerations in how the data is displayed (see above), and..?

As an agent or broker would you be adverse to this?  Why?  :)

The Broker/Franchise Perspective.

I own a brokerage or franchise and want to fill my office with agents who exceed certain performance metrics for certain property types in certain areas of town.  My brokerage is conducive for these types of agents to excel.  As a broker/owner, I would pay to know who these agents are.  This would be an immensely valuable tool in analyzing my own brokerage as well as my competition on key performance indicators.  I could derive all sorts of actionable data to use as a recruitment and retention tool.

So is everyone ready to Raise The Bar?

It depends on if those who talk the talk about Raising The Bar are indeed serious about doing so and walk the talk.  It will take open minded professionals from MLS directors, their boards as well as the brokers and agents they serve.  I’ve laid out some top level ideas on how economics could cut through the politics, there are more.

The upside for the industry is huge from customer service, commission model and perception standpoints.  It risks shaking the long standing economic model right down to its core, which is a good thing.  In the right hands this very well could and should be the next big thing in real estate.

The Fed will stop buying mortgages beginning at end of March 2010.

Uh-oh.  This is kind of a big deal.

Lets reflect back for a minute…

Back in September 2008 the bottom fell out of the mortgage and housing industry, the pillar of our economy at the time, as the MBS market was more or less exposed as a fraud and subsequently deemed toxic rather than the AAA rated investments they were being pimped out as.   Former Wall Street stalwarts like Bear Stearns and Lehman Brothers were heavily invested in such securities and subsequently imploded almost overnight.  Banks, lenders and the credit (mortgages) they offered disappeared like a David Blaine magic trick- *poof*

Crisis ensues and the government steps in to cauterize the gaping wound, funding the market to the tune of some trillion or so dollars in lieu of risking a catastrophic ceasing of our (and the worlds) economic engines.

Fast forward to January 2010.

The trillion dollar capital infusion coupled with keeping the overnight funds rate at or near zero has kept interest rates low and market volatility in relative check.  Well this is about to change.

First, you can’t print a trillion new dollars and not expect inflation at some point on a relative level.  Apart from the inflation dynamic, the Fed has decided that its time to cease backstopping the MBS market, and as a direct result, the housing market…preferring to hand things back off to the private sector.

Wait a minute…What private sector??  Who has an appetite for MBS’s and more importantly at what yields?

You can bet as sure as the sun will rise in the east tomorrow that the private funds, banks, lenders and their managers who do play in this sandbox will buffer margins to mitigate perceived risk in such securities, which all but guarantees higher interest rates.

The remaining banks are well capitalized for the most part (compared to late 2008, early ‘09), though they are still very gun-shy to lend except under the most pristine personal credit and financial conditions.  Ask any mortgage originator about perpetually moving underwriting guidelines.

Pundits have warned of a ‘false bottom’ when it comes to the housing market for some time.   Feel the floor shaking yet?  As interest rates rise, housing affordability decreases subsequently exerting downward pressure on housing values…again.

What happens if the bottom does fall out?

I’m sure President Obama and his staff aren’t keen on sending the economy back into a tailspin.  Surely the Fed has thought through the potential ramifications of their pending actions.  They could simply step back in at anytime to shore up the market if things got too volatile, using Fannie Mae and Freddie Mac as the primary vehicles to do so…alas there are calls to abolish these GSE’s all together.

As stated, inflation has to be a big concern here too.  How does the Fed pull all the ‘new capital’ out of the market to avoid hyper-inflation in a way that doesn’t send the economy back towards a protracted recession?  One way is something called a ‘reverse REPO‘, where they sell their stockpile of MBS’s with a guarantee to buy them back in the future at a profit for the purchaser.  Seems that this obscure company called ‘Google’ (among others) may be interested in this play…

Interesting times to say the least…the stakes are HUGE and not for the faint of heart.

Originally posted at TheXBroker on 1/27/10

There has been much buzz about Indexable IDX plug-ins for real estate blogsites…

First things first…Why is this a big deal to begin with?  IDX solutions are typically framed in to web/blogsites and offer little to no SEO value.  An indexable IDX effectively creates separate posts for every listing, thus creating GOBS of real estate and general property related content that the Search Engines can’t help but crawl all over and index.

In theory, indexable IDX’s should subsequently send copious relevant organic traffic to a site that has implemented such a plug-in.

As far as I can tell Jason Benesch from The Real Estate Tomato pioneered an open source WordPress plug-in (ListingPress) that spurred further development by a handful of other tech vendors that I also highly respect, like Diverse SolutionsdsIDXpress (Press Release).

The idea seems great in theory…as said, plug it in and instantly create a ton of crawlable property data for your real estate web/blogsite.  If you are first in your market with one of these churning inside your site, there would appear to be a distinct SEM advantage.

So, I was having a conversation with some Housechick and this subject of Indexable IDX’s came up.  Being she knows a thing or three about IDX’s and SEM, the obvious question was thrown out:

‘What happens when multiple people/sites in the same market implement such a tool?’

• Does the SEO value evaporate, since everyone will effectively have the same content?
• Do the mysterious Duplicate Content theories come into play, and as a result does Google and the other Search portals penalize sites for such?
• Which site running the same Indexable IDX ranks better? Is this where a higher PageRank becomes more than a bragging right and effectuates results for higher ranking on SERP’s?
• Is there a way to differentiate the content via novel implementation methods, result formats, or other such tweakery?
• Is one Indexable IDX different from another (not from a functionality standpoint, rather strictly from an SEO perspective)?

Kelley and I speculated for a bit with no real conclusions, just educated guesses…so I called Google and am still on hold.

While I’m waiting, I ask the rest of the community: As adoption of indexable IDX’s reaches a certain saturation point by market, does the current innate SEO value diminish, evaporate, or worse?  Thoughts?

Originally posted on TheXBroker 1/26/10

Originally posted at TheXBroker on 1/19/10

Lots of buzz regarding the lawsuit Lending Tree has initiated versus Mortech, producer of mortgage rate pricing software, for apparently licensing their technology to Google for a service that will compete with Lending Tree…from Yahoo Finance:

LendingTree filed a lawsuit yesterday against Mortech, Inc., a technology provider, for violating its contract with LendingTree. According to the lawsuit, Mortech, whose technology helps automate lender offer pricing, violated its contractual covenants by partnering with Google to launch an online mortgage loan aggregator service similar to LendingTree.

So, apparently Google is going to enter the public mortgage quote comparison arena and soon, some sources indicate as early as next week.

Google Merchant Search (old news) looks to be the initial model.  Screen shot of UK Google Merchant Search provided by rustybrick on Flickr h/t to Search Engine Land

The screen shot shows some very basic mortgage search and comparison factors, using very limited data sets and range values.  Nothing all that sexy, mainly an advertising play for participating lenders not unlike the Bankrate’s of the world. Google has stated in response to the lawsuit (From the NYT):

We’re constantly looking for new ways to help people find what they are looking for on the Internet. As part of that effort, we are currently working on a small ad unit test that will run against a limited number of mortgage-related search queries in the U.S.

Meh.  Actions speak louder than spin.  As Lending Tree and Mortech go through their legal gymnastics, lets ponder the ramifications of the 1000 pound gorilla entering the room…

Google tends to enter sectors of business on the light side (see Google Base for real estate), choosing to keep things very simple (at first).  Nonetheless Google has the power to alter the way industries function, especially when it comes to information exchange and spook the hell out of the targeted sector along the way.  Real estate as a business and listing syndication propose far more complex issues and requires a relatively high level of human interaction (physical inspection of properties, local area knowledge, property is not a commodity etc) compared to mortgage rate quoting and pricing.  Mortgage rates are commodities whose price can be accurately be delivered to a consumer entering accurate information using some relatively simple algorithms and a database…something Google is pretty good at.

So, Google is looking to license some pretty robust rate pricing software, the type which mortgage brokers and bankers use and depend on in their day to day business.  Does Google offer indigenous rate pricing software to loan originators using their service?  It makes a ton of sense as it would increase the accuracy and thus the validity of the service.  How much control they allow loan originators over the mortgage pricing data being displayed to consumers is the big question in my mind.  I have my opinions…can you hear me in Mountain View?  Give me a call, I’d love to chat

It would seem that  Zillow Mortgage Marketplace (ZMM) would have the most heartburn over this news since the similarities are obvious.   ZMM is primarily a niche advertising/publishing/search platform that allows consumers to anonymously get mortgage quotes based on financial and credit risk factors from participating loan officers.  Approved pricing engines tie into ZMM’s API to generate automated quotes on behalf of the mortgage professional using one of these systems to automatically respond to consumers.  ZMM’s auto-quoting platform is mostly a convenience/efficiency perk for participating loan officers trying to deal with thousands of voyeuristic consumer rate quote requests.

Is there a benefit in hosting your own pricing engine over tying in APIs from third party services?  I think so.  Rather than being beholden to third party data aggregators and maintaining these multiple information pipes pulling from essentially the same resources for hundreds of loan officers, why not streamline things even further and eliminate what is an unnecessary information middle man?  I’m marginally surprised ZMM hasn’t done this yet…who knows, maybe they will. Maybe they should. Yes, they should…like right now.

Lending Tree’s primary revenue stream comes from the origination of mortgages, something that wouldn’t appear to be in Google’s wheelhouse, yet as stated, Lending Tree is maintaining via the lawsuit against Mortech that Google will directly compete with them.

Maybe this has something to do with Lending Tree’s heartburn:  Google is hiring a Mortgage Backed Security analyst.

If Google is looking to invest their cash reserves in MBS’s for internal returns, will they also look to move the market?

Originally posted on The XBroker 10/27/09