REO TRUTH: Where Are The Promised Waves Of REOs? | Is It Too Late To Become A REO Listing Agent?

 

Realtors, read this blog post in its entirety if you are planning on being in real estate over the next 12-24 months.

You are about to learn the answers to the two most heated topics in the real estate industry:

Topic 1: Is it too late for you to become an REO listing agent? AND….

Topic 2:  Where is the flood of REO listings we have been promised? In other words, when will the shadow inventory finally come out of the shadows?

To provide you with complete answers to these questions Julie and I have gone to the source..thats right, we went directly to the top…

We spoke directly to the actual Obama Officials in charge of Fannie Mae and Freddie Macs REO Departments.

The simple fact is that for most agents….YES, it is too late for them to become an REO listing agent.  WHY?

The days of Realtors being able to easily become REO agents are over.  (Obviously, the word is out that one of the greatest opportunities in real estate today is being an REO listing agent and doing BPOs.)

Fannie Mae Official with Tim and Julie Harris

Allow me to explain…..

Last Friday evening Julie and I attended an exclusive black-tie gala at the Nixon Library.  In attendance were the heads of Freddie Macs REO department and the official in charge of bulk sales for Fannie Mae. Both were generous enough to grant us exclusive an interview.

Of course, given this level of access our primary mission was to establish a direct relationship with the officials at the highest levels of Fannie Mae and Freddie Mac …for the benefit of our students.

…and that is exactly what we did.

We asked the Fannie and Freddie heads a series of questions..the first one being:

…”its it too late to become an REO listing agent?”  The following were their responses:

“No, It’s not too late for agents to become Fannie (or Freddie) REO listing agents. But, it is considerably more difficult without an edge. The days of agents just wondering into easy REO listings are over.”

Here are the 4 most important points discussed:

1) Experience. He told us that at this point with so many agents competing to be REO listing agents they look for agents who have experience. The interesting part is what he meant by experience…in other words…what specific experience  they look for. When asked, the response was:  ”Generally, any experience working for asset managers, working with foreclosures or even short sales”.

What other experience counts…what else do they consider to be experience?

Freddie Mac Official with Tim and Julie Harris

“Does your broker list REOs? Do agents in your office list REOs? Have you sold an REO representing the buyer? Have you listed a short sale? Have you sold a short sale? Have you done BPOs?”  The variety and type of experience can be broad.

Bottom line?  Most agents will just assume that if they have no previous experience being actual REO listing agents that they have no chance of getting REO assignments. In other words, they give up with the slightest obstacle vs thinking about their actual experience.  Who hasn’t shown an REO at this point?  Who hasn’t negotiated a short sale? And even if you haven’t, what about your office, your broker, etc.?

Additionally, the heads of Freddie and Fannie both made it clear that the professionalism they encounter is of the utmost importance:

2) “Ability to complete tasks on time and at the highest level.”  Lets be perfectly honest, having a boss isn’t always fun. When you work for the banks..or Fannie or Freddie, you have a boss.  That boss will fire you if you don’t do what they ask, or screw up even the smallest of tasks.  Why do you think they give you BPOs first?  If the BPO isn’t done correctly, why would they assign you an REO?

What else are they looking for…..?

3) Market knowledge.  Up to the second, accurate market knowledge, ability to price correctly, and expertise in making the home marketable.

Additionally, and the most important thing Freddie and Fannie are looking for, (like every asset manager, CEO or President of REO companies) have told us:

4) Specific education.  They want to know that you are still educating yourself, on an ongoing basis.  They commented that the days of patching together bits and pieces of education as needed are over.  As you know, asset managers prefer Harris Real Estate University trained, RSD students.  Why? Because we literally work directly with all the major asset management companies and platforms in developing our programs.  Res.net, Equator, Goodman Dean, Ocwen, Old Republic, Bank of America, Green River Capital, and dozens of others have all told us that they give preference to Harris Real Estate University students.

Agents, we didn’t design the Harris Real Estate University RSD (REO Specialist Designation) program…the banks did. More specifically, the asset managers told us exactly what they demanded from their asset listing Realtors. That is why the RSD Designation is the preferred designation for so many of the top asset management companies. Watch the free how-to list REOs video and download the free book.

Bottom line, its clearly not too late for you to become a REO listing agent.

Now, on to Part 2:  Where’s all the shadow inventory?  When will the foreclosure tsunami finally hit?

First, watch this video so you can understand how immense the problem truly is.

WATCH VIDEO NOW.

Agents, you need to watch that video so that you are clear that this is not a temporary problem. We will be in a market dominated by short sales and REOs for what some expect to be another decade.  

Lets get to the heart of it…where are the promised WAVES of foreclosures?

We turn to HREU friend, Sean O’Toole from Foreclosure Radar. We agree with Sean in his stance that the banks aren’t allowing the market to self correct for largely financial…and political reasons….

I spoke last week at a real estate investment club and shared with the audience my belief that foreclosures will trickle out over a very long time rather than come as a wave of foreclosures as others continue to inaccurately predict.

I do however, understand the nature of those predictions. Given the number of households that aren’t paying their mortgage (delinquencies) we should be seeing a massive wave of foreclosure notices, and ultimately foreclosure sales.

It’s a logical conclusion. But this has become a political problem in a world of financial fantasy, so I don’t believe that simple logic applies.

The reality is that through financial engineering (interest only, subprime, swaps, option ARMs, negative equity, stated income, etc.,) we created trillions in excess mortgage debt that has left millions of homeowners underwater, financial institutions on the brink of collapse, and the FDIC nearly insolvent. Back in September 2008 it became clear that financial collapse was imminent, and the federal government did what it does best – bailed out those who caused the crisis while leaving taxpayers holding the bag for the losses. Pulling this hat trick off required one simple ruse – getting everyone to believe that those losses ultimately wouldn’t be very big.

To do this the government changed the rules. The FDIC who previously forced banks to get bad assets off their books became a leading proponent of saving homeowners with loan modifications that likely just delay the inevitable. With a little government pressure, the supposedly independent Federal Accounting Standards Board was pressured into letting banks account for loans at theoretical values based on computer models rather than current market value.

Next they began rolling out an acronym soup of programs, which they promoted as being help for America’s homeowners – HAMP, HAFA, HARP, 2MP and more. But the reality is that to date these programs have resulted in little more than delays. The government and lenders say that these failures are due to complexities of implementation, difficulty reaching homeowners and a sundry other things. But what if these programs were never intended to succeed? What if they were simply intended to create delays, provide false hope, and maybe get the banks a bit more cash out of homeowners in the form of trial loan modification payments?

Sounds like a crazy conspiracy theory, I know, but hear me out.

The problem faced by both lenders and the government is that they can neither afford to kick homeowners out, or bail them out. For lenders, either scenario forces losses to be recognized, while thanks to mark-to-model accounting rules, and little or no pressure to foreclose from the FDIC, they can instead leave non-paying homeowner in place and push those losses into the future. Many believe that most major corporations manage earnings, what could be more perfect than getting to choose when, and if, they recognize mortgage related losses.

For the U.S. government either scenario is political death. Politicians have no appetite for allowing banks to put families on the street en masse through foreclosure, nor forcing banks to deal with the problem through bankruptcy cram-downs or other means. At the same time they realize their constituents who do pay their mortgage (or rent) simply won’t stand for a taxpayer funded bailout of their upside down neighbor. Instead, it seems they believe bailouts should be saved for the truly deserving like the executives and corporate shareholders of banks, AIG, GM, etc.

If we aren’t willing to either kick non-paying homeowners out of their homes, or bail them out, what other option is there? The answer is clear.

It’s the same thing we’ve done with national deficits for years. Trade tomorrow for today, with a policy of extend and pretend. I have no doubt this is the present policy, and that this will be the policy for years to come as we work through wiping out the trillions in excess negative equity that was created during the bubble.

A member of the audience during my talk asked if this policy was really possible, after all we can’t just let non-paying homeowners stay in their homes forever. If paying homeowners figured that out, everyone would stop paying, and then our financial system would crumble. I agree, and it’s clear the banks realize this too. But it is a problem that is easily solved by the diabolical game of Russian roulette. So long as lenders continue to foreclose on at least a handful of homeowners each month, in what from all appearances is a completely random game of chance, they’ll keep those willing and able to pay their mortgage doing so. Those who decide not to pay their mortgage will find themselves playing today’s update on the Russian game, Foreclosure Roulette, wondering each month whether they’ll get another free month in their prison of debt, or finally be shot and forced to move.