By Robert Freedman, Senior Editor, REALTOR® Magazine
There’s still a long way to go for NAR and the 44 other organizations in a coalition to get banking regulators to rethink their controversial qualified residential mortgage (QRM) rule, but a press conference held on Wednesday in a Senate hearing room shows how well lawmakers can work together when the issue is strongly bi-partisan, as home ownership issues are.
At that press conference, Sen. Johnny Isakson (R-Ga.) and Sen. Kay Hagan (D-N.C.) joined Rep. John Campbell (R-Calif.) and Rep. Brad Sherman (D-Calif.) to make a forceful call to banking regulators to go back to the drawing board on QRM. It’s not that the proposed rule is completely off the mark; it takes important steps toward strengthening underwriting requirements so lenders don’t make the same mistakes they made during the housing boom. But they need to go back to the drawing board on the proposed requirement that borrowers make a down payment of at least 20 percent to get the most affordable financing available for borrowers with solid credit. Continue reading »
By Robert Freedman, Senior Editor, REALTOR® Magazine
Bank of America has started requiring buyers and sellers to sign an addendum to its short-sale agreement. The addendum has raised some questions among real estate sales associates and brokers, so to learn more about what the bank is trying to accomplish with the form, REALTOR® Magazine spoke with David Sunlin, senior vice president and operations executive for short sales, deed in lieu, and real estate management for Bank of America.
David Sunlin
REALTOR® Magazine: What’s the reason you’re asking for this additional document as part of your short-sale approval process?
David Sunlin: It’s entirely about fraud prevention. We want to ensure that the transaction is at arm’s length and that the property isn’t immediately flipped for a higher price without there being any repairs or upgrades. It’s not punitive in any way and has nothing to do with deterring any part of the transaction, and certainly not the compensation that goes to the agent. We think they’ve earned every penny of that commission and we’re not trying to interfere with that.
Contract addendum
RM: Can you go into detail about the kinds of fraud the addendum is intended to curb?
Sunlin: There are two main categories. First, there’s flipping, and then there are schemes in which parties collude or otherwise try to keep the home owner in the home or else pass along some kind of benefit to the home owner from the sale of the property. For example, the parties find a buyer at current market value [which is considerably lower than what the owner originally paid] and that buyer flips the property back to the home owner, or they allow the owner to stay in the home, or they feed the owner some cash out of the deal so that the owner can stay in the home. When you have losses that are on average in the hundreds of thousands of dollars, and in the vast majority of these cases those deficiencies [losses] are being waived [by the investor] to allow the sale to happen, it’s reasonable for us to want to know if there is a hardship, and if the owners were to receive cash payments on the side, arguably that money should go to the investor as the debt that’s being forgiven. In every case, that amount [to the investor] would be much less than the total amount of debt owed, so the investor isn’t made whole by any means. But if someone is saying, “Hey, do this and we’ll throw you five grand,” [that’s not appropriate]. We’ve certainly got programs that will help home owners as they exit. In fact, we’re getting ready to roll out a really nice information packet that we’re going to mail to delinquent customers that advises them of their options to avoid foreclosure and can connect them to some of our social services network partners. We certainly recognize people are in default and experiencing hardship. They need help. We want to be able to connect them to that help, and provide it directly to them as much as we can, but we certainly don’t expect them to use a short sale as a means to walk away with more cash or to purchase the property back at current pricing.
By Robert Freedman, Senior Editor, REALTOR® Magazine
In a small but important development, banking regulators agree to push back the deadline for public comment on their controversial 20-percent minimum down payment proposal.
NAR has been talking a lot about the qualified residential mortgage (QRM) proposal in recent months. That’s because of its severe consequences to home sales if it gets carried out.
The proposal would require lenders to retain 5 percent of the value of loans they originate (for loans that are securitized, excluding Fannie and Freddie) unless the loans have at least 20 percent down. If they meet that down payment requirement and other stiff underwriting requirements, the 5 percent risk retention requirement is waived, so these loans will be far more affordable than loans for which the standards aren’t met. In fact, the pricing difference could be as high as 225 basis points, NAR Research estimates. Should interest rates rise later this year, think of how hard home sales could be hit if on top of these higher rates borrowers have to pay 225 basis points more. And the fact is, with a minimum 20 percent down required for loans to qualify for the 5-percent exemption, the vast majority of borrowers will have to go for the more expensive financing — assuming they can even afford that financing. Continue reading »
By Brian Summerfield, Online Editor, REALTOR® Magazine
At the RE BarCamp hosted at NAR’s Chicago headquarters this morning, participants discussed how the real estate business has changed in the past few years, and how it would continue to transform due to technology and consumer demographics. Here’s a rundown of what your peers say is changing, and what isn’t.
What’s Different
The typical real estate practitioner is getting older, not younger.
What’s the Same
Market corrections — such as the one we just went through — usually drive young people out of the industry. Real estate can be an expensive profession, and many young practitioners don’t make enough money to live comfortably and invest back into their business. So after trying to stick it out for a couple of years, they often opt for a salary job instead. More young people may enter the real estate business when conditions improve, but for the next few years, the average age of practitioners will either stay the same or go up.
What’s Different
Consumer expectations: In the age of Groupon and the clearance sale, they’re looking for price cuts, giveaways, and other incentives to sweeten the deal. Continue reading »
By Robert Freedman, Senior Editor, REALTOR® Magazine
The Wall Street Journal in its editorial this week (The Housing Illusion, June 2, 2011) makes a sensible call for an economic recovery built on capital investment in plant and equipment so the United States can grow in a healthy way by creating jobs. But instead of taking the next step in its argument by asking why our businesses and financial institutions aren’t deploying their resources to that end, the Journal points its finger at the housing market and says our country’s historic support for home ownership is holding the recovery back.
It’s reasonable to wonder how home ownership gets connected to the investment decisions of businesses and to the lending decisions of financial services companies. The Journal does it by tracing the connection back to the Federal Reserve’s accommodative interest rate policy in 2001, in the wake of the bursting technology bubble and the Sept. 11 attacks. That easy-money policy, the Journal says, prevented the economy from collapsing after those destabilizing events, but it did it by inflating another asset bubble, this one for housing. “Fueled by subsidies and easy credit, with mortgages guaranteed by taxpayers, we built McMansions and vacation condos,” the Journal says.
Hence, the housing boom. Then, after the boom went bust, the government tried to re-inflate housing prices by encouraging banks to modify bad loans, raising FHA and the conventional secondary mortgage market loan limits, and funding a temporary home buyer tax credit, among other things. Continue reading »
By Todd Carpenter, Director of Digital Engagement, National Association of REALTORS®
Mistakes. Everyone is bound to make them. (I have made more than a few of my own.)
When jumping into social media, many of the biggest gaffes people make are fueled by simple human nature. Here are some of the main ones:
Greed
We tend to obsess over numbers. More is always better, right? This attitude is especially true when it comes to how many friends, followers, and connections we have. There are even schemes to increase your follower counts by getting spambots to follow you. I believe less is more. Don’t waste your time trying to boost your numbers with meaningless connections.
Pride
Everyone likes to enjoy a day at the beach, or a round of golf. But think twice about bragging about how much fun you are having, especially in a down market. When your client’s house is not selling, or they are in limbo waiting for a short sale to go through, they won’t appreciate how much fun you are having. I think it’s fine to brag every so often, but make sure you have touched base with your clients before doing so. Continue reading »
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