I'll never forget the day. It was early in June 2010.
I got up early, made the coffee, took a quick shower, and hit my computer to check e-mail. I had a class scheduled for CE so I only had an hour or so to review the e-mail and ActiveRain overnight posts.
I didn't get to the CE class. I was mesmorized by the News Headlines and the ActiveRain Blogs.
I REMEMBER THE DAY WELL. Taking a sip of coffee, while the e-mail was downloading, I logged onto ActiveRain and looked at the Blog Dashboard. Goodness, about every other word was BANKS, BANKS, BANKS. So, I clicked on a post by"AJ",always a good reporter of mortgage industry news and there it was, right at the top of his blog post
BANKS IN REAL ESTATE - CONGRESS APPROVES THE TAKEOVER OF SEVERAL GIANT REAL ESTATE COMPANIES BY A CONSORTIUM OF BANK HOLDING COMPANIES.
PRESIDENT OBAMA SIGNS SWEEPING LEGISLATION GIVING BANKS AUTHORITY TO BUY REAL ESTATE COMPANIES.
Congress, overwhelmed by the virtual demise of the real estate industry, has capitulated to the banking industry and approved legislation to permit banks in real estate on a federal and state level. The emergency legislation sponsored by Senator Schumer, D-NY and sent to Representative Frank was reconciled and sent to President Obama who signed the Bill in the Rose Garden while entertaining the recently pardoned Angelo Mozilo, former head of Countrywide Mortgage and Richard Wohl, former President of IndyMac.
Well, it was no surprise. We had all expected it. Real estate sales had fallen to about 10% of the volume for 2008. There was little opposition to the Bill. Although the President of the National Association of Realtors had attempted to meet with Senator Dodd, D-CT whose aide was overheard commenting "Hey, Sen. Dodd got a VIP sweetheard mortgage loan from Countrywide. He knows who butters his bread."
FORECLOSURE FOR SALE. The action was precipitated by the overwhelming number of homes on the market now selling, foreclosures offered for sale and short sale listings that were not being approved by the banks financing the homes with owners in financial distress or default. Fully 50% of the homes on the market nationwide were foreclosures or short sales, but the banks stopped approving any offers to buy in late 2008. Many suspected that the banks conspired to slow and finally cease approving contract offers that included a commission to real estate agents/brokers. Once the agents and brokers ceased listing activities, banks began listing properties in default on the Internet and invited prospective buyers to visit the homes. Names, addresses and phone numbers of the owners were listed. If the buyers were interested in buying, they were to contact their local bank member of the consortium banks authorized to handle the sales.
STREAMLINED REAL ESTATE CONTRACT. The banks offered online forms for buyers to complete and deliver to one of the banks on the "approved" financing resources list available at the local bank member of the consortium. Once the bank received a form from an interested buyer, they were advised to obtain the services of an attorney to prepare a Contract of Sale. All fees for credit review, appraisal, legal fees, surveys, etc. were paid in advance by the purchasers. Bank clerks were all advised to direct home buyers to obtain the services of an attorney and when the contract between the buyer and seller was completed, the bank would process a loan application through one of the bank consortium members.
There was little for real estate agents to do since most banks controlled over 50% of the existing properties in the country. Prices weren't published anywhere. While agents still maintained the MLSs, few sellers listed because buyers were all going to the banks for lists of foreclosures. Sellers found that their net was lower than they expected. However, they were happy because, as the bank clerk advised, "you won't have to pay a real estate commission".
COULD THIS BE WHY BANKS TAKE SO LONG TO APPROVE FORECLOSURES AND SHORT SALES
Top Contributors to Sen. Charles Schumer, D-NY, 2007-2008 Cycle
Citigroup Inc
$80,800
UBS Americas
$74,250
Paul, Weiss et al
$67,000
Kasowitz, Benson et al
$64,250
Metropolitan Life
$59,000
Goldman Sachs
$58,040
Morgan Stanley
$57,000
Guardsmark Inc
$54,000
Lehman Brothers
$53,750
Merrill Lynch
$50,250
JPMorgan Chase & Co
$47,800
Cantor Fitzgerald
$46,250
Milberg, Weiss et al
$46,250
News Corp
$46,250
Time Warner
$43,500
Newmark & Co Real Estate
$43,450
Cassidy & Assoc/Interpublic Group
$40,171
Deloitte Touche Tohmatsu
$39,999
Tudor Investment Corp
$39,250
Lazard Freres & Co
$39,000
Contributors to Representative Barney Frank, D-MA, 2007-2008 Cycle
Ace Cash Express
$5,000
American Bankers Assn
$8,000
Bank of America
$1,000
Bank of America
$2,000
Bank of New York Mellon
$2,000
Citigroup Inc
$2,500
Citizens Financial Group
$1,000
Fifth Third Bancorp
$2,000
Financial Services Roundtable
$5,000
Huntington Bancshares
$1,000
Independent Community Bankers of America
$10,000
JPMorgan Chase & Co
$4,500
JPMorgan Chase & Co
$2,500
KeyCorp
$1,000
LaSalle Bank
$5,000
Massachusetts Bankers Assn
$1,250
National Bankers Assn
$1,000
National City Corp
$1,000
US Bancorp
$2,500
Wachovia Corp
$3,000
Wells Fargo
$2,000
Top Contributors to Sen. Barak Obama, D-IL, 2008
Goldman Sachs
$658,430
University of California
$495,159
JPMorgan Chase & Co
$423,107
Citigroup Inc
$393,904
UBS AG
$377,600
University of Chicago
$375,829
Harvard University
$363,074
Lehman Brothers
$342,760
Kirkland & Ellis
$341,064
Skadden, Arps et al
$335,234
Sidley Austin LLP
$334,845
Google Inc
$327,964
Exelon Corp
$309,161
Morgan Stanley
$297,463
National Amusements Inc
$284,850
Jones Day
$251,250
Time Warner
$250,002
Jenner & Block
$236,899
Latham & Watkins
$230,276
Bank of America
$227,442
Top Contributors to Senator Christopher Dodd, D-Conn. 2008.
Lenn, you better cut that out! I understand that whatever a man can conceive can happen. Stop it! You're scaring me! I'm moving to Mexico while I have money in the bank! :-O
Lenn, we have a few local banks that 'list' their own properties. They are not on the MLS, but they are for sale. In fact, one bank lists pre-foreclosures and then update the listings as the properties convert to REO. The listings have multiple photos, visual tours, etc. Which, embarassingly, is more than many of the listings on our MLS.
Perhaps, what we should be doing is encouraging REALTORS® to support RPAC. At least that is one group in Washington that supports the effort to keep banks out of real estate.
There is no doubt from a previous post that I wrote that the banks ARE in the real estate business. For now they are hiding behind agents and I don't think it will take until 2010 for a few of them to take over the entire process themselves.
I never thought of that and you are brilliant! Is that why Obama has pretty much hushed up about foreclosures recently? During primary he was focused on it too much but not so much anymore.
Interesting also on why they are being difficult with REO and SS.
just b/c you are paranoid doesn't mean they are not out to get you. The banks are playing both sides and the middle of everything. This was a spooky post. That looking into the future can get a person into a lot of trouble. - good job cheryl
I never was an Obama man, but I was not fond of McCain (i.e....he wasn't my first choice), but I'm glad to see that we have some real reasons to seal the deal with M.C. Hamma!
I never was an Obama man, but I was not fond of McCain (i.e....he wasn't my first choice), but I'm glad to see that we have some real reasons to seal the deal with M.C. Hamma!
I never was an Obama man, but I was not fond of McCain (i.e....he wasn't my first choice), but I'm glad to see that we have some real reasons to seal the deal with M.C. Hamma!
Lenn this is a scary thought, but I do believe that financial institutions play both sides of the coin. If I were a poker player I'd use proper poker terminology.
Perhaps what we need to do is to gather this kind of information and forward it to the house finance committee, both presidential candidates as well as the television stations in each of our home towns - let's get some traction and make our voices heard.
Heres' a blog that I wrote regarding a similar issue....hhmmm, I feel a grass roots campaign coming on!!!
Lenn, Very interesting. It could happen! I don't think it will. I guess the banks could hire all the out-of-work real estate agents they would need to front the banks re-sale division in order to get the expertise, knowledge to sell homes. Scary. Very Scary. AJ
AJ. Indeed, the banks could hire the out of business real estate agents and create a 1/2 million part time jobs @ $16.82 hr. with no benefits. WAIT!! That's about what the average agent makes now.
Randy. That's probably where the think tank that dreamed up the scheme is located.
Larry. I'm not a fan of McCain for President either, although he is, IMO, an honest man. That puts him about 10 heads of the rest of the pack. Poor McCain, sad to say, just seems to be so 1970s. But, he is a free market man and he would, at least, try to curb the growth of government spending. Obama, OTOH, is downright scary. His vision of America is not mine.
I was glad to see Phil Gramm leave the McCain Campaign. Gramm was one of the politicians that was responsible for repealing Glass Steagall which kept commercial and investment banks apart. Once Gramm-Leach-Bliley Act, was inacted, the commercial and investment banks got into bed together and invented the super securitized MBSs that eventually brought down the real estate industry and has gone a long way to bringing down the banking industry too.
Kate. I did read that. It was wonderful and probably inspired this. I didn't reference your post because I took to my time machine to take a look into the future. But, you hit the nail right on the head. Actually, I started to write about how banks aren't in real estate because they don't know how to sell real estate. Then I realized that, to be in the real estate business, one doesn't really have to know what they're doing.
Deb. I hope this does get featured. A few laughs are in order after the angry posts I got for my post defending real estate agents. Some folks here just take themselves a tad seriously.
George. I suspect that you might want to wrap your mind around that possibility. I know a Juggernaut when I see one.
Cheryl. Get ready. If it weren't for my time machine, agents couldn't get fair warning to save your money, stay away from the mall . . . . . .
Renee. Obama was vociferous about foreclosures when soundbites were working. But, when it got so bad that something was going to happen, he realized that it was all above his pay grade so he clammed up to avoid future quotes of any statements he might make.
I believe that they are being so difficult with REOs and SSs because they don't know how to sell real estate.
Erik. Of course they do. Fannie and Freddie, FDIC and banks, et al have listed their owned properties for years. But, they are also listed with real estate agents and all are available through the MLSs in our market.
Deb. The US Dollar has fallen about 10% vs. the Mexican Peso in the past year. Back to the drawing board??
Veronica. After the past couple of years, nothing would surprise me.
Very creative post Lenn. I was just thinking the other day how easy it would be for BoA to open up a real estate division and start diectly selling all of the inherited CW REOs. They could, overnight, be one of the largest real estate companies on the country.
Lenn, BB's thoughts about BofA... Actually, I do not think it would be viable because most real estate offices are local. BofA probably would not want to open a national real estate division. The other thought is this market is not going to last forever. Lets get it turned around. AJ
Mary. Hollywood wouldn't want my stuff. I don't like blood and gore.
Alan. Goodness. BofA has branches all throughout my area. Since half of our foreclosures are Countrywide, they would already be the largest listing entity in our area. Eeeekkk.
Lenn, I just reread this and I think that I finally got what you are saying -
are you suggesting that the banks could be using this economic turn down as a way to win the ongoing battle to let them sell real estate?
I haven't really followed the discusson on the topic, but now that I've reread your post and fully digested it - I'm sickened by the thought!
Is our society really gotten so bad that it's become win at any cost - the more lives that you damage the better? If this is true, perhaps we deserve to go the way of the Roman Empire.
Kate. My post was inspired by another post that detailed the agonizing delays with getting the banks to process short sales and foreclosures, particularly short sales.
The banks' delays have created a bottleneck in some areas. Buyers are screaming. Agents are screaming. Banks are not listening.
Lenn- This is probably the first time you haven't responded to one of my comments. Is it because you feel that McCain is the least of two evils or is there some hidden agenda I should know about RPAC?
If the banks are as good at real estate as they are at banking God bless them. (they can't even get banking right anymore)
I remember when the banks wanted to sell insurance and equities all that "synergy" one-stop shopping....Turns out consumers don't want one stop shopping they want personal service. The banks will be selling real estate from India.
Lenn - I just got back from a month vacation so I'm a little fuzzy but it seems I recall reading that NAR has contributed 5 mil to Obama and 4 mil to McCain? Hopefully that at least buys us a seat at the table when we're being carved up.
Marilyn. I did respond to your comment. I must have moved on before getting it posted. But, I recall the comment:
"Touche'"
I just reviewed the NAR contributions this a.m. Want to get your dander up??? Take a look at some of the politicians that the NAR is giving our money to.
Mitchell. Indeed. I made an appointment with one of my banks to open a special retirement account. The "Investment Specialist" that they sent to "counsel" me kept trying to sell me an annuity. They wanted me to put $30,000 in an annuity that would mature in 5 years. Clearly I have no intrest in tying $30K up for 5 years. I never know if I'm going to last another 5 years. So, we settled on another type of account and when I ran it by my accountant, it was about $14K over the limit which means I would have been fined by the IRS for even putting the money in the accounty. All I wanted to do was reduce my current tax liability or defer it. But, if it isn't done correctly, you can get in real trouble.
The lady had absolutely no idea what she was doing. This was Chevy Chase Bank, one of the biggest in the area.
Hi Lenn- Interesting contribution list. Was that money given to Kucinich, before he dropped out of the presidential race (Jan'08), or do you think it was just to support his impeachment proceedings against Cheney and impeachment articles, introduced against Bush.
Lenn (and Jan Wood), I think most of these corporate "givers" are acting out of fear rather than beneficense. If they don't "pay up" they don't get anything. Apparently McCain has less to offer BofA than Obama or they fear Obama more.
The real estate industry is changing whether or not the banks come in. And their inventory won't last forever anyway. Fear not children, we shall overcome this as well.
Lenn: OMG we have been talking about how this could happen for months! I just love the way that you put it in story form. Girl you are dead on. Maybe the next one that you write could be about how we wake up to live in socialism or with a dictator. It could happen.
My business partner swears we are headed for Socialism, touching on what Sandy says. Interesting that Barney received more money than Obama from NAR-what the heck????
Scary that Obama was harping so much and now is almost silent on these issues. We have a bunch of properties that were scheduled for Sheriff's Sale from January thru last month that ended up being canceled, but will probably end up on as reo's eventually, flooding the market again. They were postponed I believe due to the moratorium that was so important that seems to have fallen off of Obama's urgent agenda.
IMO, these guys up on the hill and in the White House live in a caccoon. They aren't that tuned in to the country, only their individual agendas and the agendas of the entities that feed their coffers.
Power is their game and they are pathological about it. They are also ruthless. The extent to which Obama and his cabal is infiltrating our government and the banking, corporate, etc. systems is absolutely frightening.
Even if the masses could read through their rhetoric, stand up and vote them out, the government that will remain will not be what most believe it to be.
What a well written post. You should have been a reporter. Your facts and info are so clear and easy to follow. Why on earth would TREPAC give our money to each and every politician in the race? What is the point of that? Why not spend it on one candidate that actually has our interests at heart??? Wouldn't that make more sense?? Just my .02. Thanks!
Lenn, it's been a while since I've made a comment on AR - this is possibly the most prophetic posts ever written on AR. Sadly, I'm not sure that there is anything any of us can do about it.
Sandy. Sandy. Work is work. Perhaps you won't have to.
Kate. Thanks. This was written July 2006 but I saw the debacle coming back in Spring 2005. That's when I sold my house in Bethesda. The key for me was when average prices of real estate was higher than the average home buyers could qualify to buy.
I never dreamed at that time that the government would engage in policies so destructive to the average home owner, but as the market slowed, I realized early in 2006 that home owners were in trouble and it would seriously reflect in real estate activity. We lost the move-up buyers and that has traditionally been about 25% of our market. With that consumer out of the market, the market was dead.
Congress has not a clue. They simply do what their lobbys dictate. Of course, there was also the crooks who ran Fannie and Freddie that gave us false financials to inflate their own bonuses. They got off scott free and the Congresspersons who took bribes to save the banks got reelected. The final insult to the citizenry was the total power grab by the Obame admin. We haven't begun to see the harm to the country that will cause.
I think it could happen the way you are saying. However, the reality is I think the banks have shown exactly why they should not be in real estate. The government runs the banks, so what it will come down to is the Banks (Government) deciding what and if we can buy or rent and where.
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Interesting. Guess it could happen that way. Veronica