This could be a long convoluted series of articles, but I’ll try to summarize what’s occurring in the appraisal industry.

Yes, we all know of the fallout with subprime loans & homes being grossly overvalued.

Short history… Lenders used to work very closely with certain appraisers. As everything was going crazy they told their appraisers to appraise a property for the value that the lender wanted otherwise they would use someone else. This was the appraisers’ lifeline, so they had to do such. And therefore, values went up and up and in many cases at astronomical rates.

We know what happened with most of those loans and are seeing the fallout of such. Unfortunately, in their efforts to correct a wrong, those in charge are going too far and after the incorrect parties. Andrew Cuomo, Attorney General of New York, helped push us to HVCC (Home Valuation Code of Conduct) which went into effect May 1.

Update… Now lenders have to go through a management company who in turn mete out appraisals. The problem here is that this company takes a portion (40% or more) of the cost of the appraisal. You have to understand that the management company is profit oriented, so you can only gather that they choose the lowest bidder. Now seriously, think of this. How do you expect to get quality work for minimum bid? I’m not saying it can’t happen, but …

Many of these appraisals are being performed by appraisers who are outside of the market. Therefore, they are most likely not as well informed on those current market conditions and nuances that affect each individual market.

To further complicate matters, I cannot talk to the appraiser, nor can the lender or anyone else who’s considered ‘an interested party’ in the transaction. So if I want the appraiser to take into consideration other comparables, I would have to contact the management company with this information.

Now, there is a way around this, go VA or FHA. You see, HVCC only applies to loans of 1 – 4 family residential units that are sold by Fannie Mae & Freddie Mac.

The use of HVCC is affecting all of us, not only the lender, appraisers and Realtors, but also YOU – the buyers, sellers and homeowners.

The market has been correcting itself. Sales have risen, the inventory is dropping and median and average sales prices are in many cases progressing in an upward trend. With the use of HVCC we are seeing many homes being undervalued and therefore the ensuing loss of value to the community and in many instances prospective sales that are not coming to fruition.

There is a move about for an 18-month moratorium to HVCC. This is necessary for the market to continue to correct itself. This is also necessary for HVCC to be corrected itself. Our legislators need to do the right thing to help us protect our home values.

Till next time….Marc It Sold!

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The bill is not a freebie, but would force lenders to renegotiate loans of owner-occupied properties that have been devalued. The way it would work is that homeowner and lender would renegotiate the loan at the property’s present value with the difference from the original loan to the new loan being tacked on at the end of the loan. Basically, we’re talking about a 30-year fixed rate loan with a balloon payment.

To get to this point the lender and homeowner would be forced to mediate. This unfortunately, would further burden a legal system that is already overburdened.

This would allow many to be able to stay in their homes and afford them, especially during our current economic situation. Of course, the homeowner would have to qualify for the new loan, otherwise it would be for naught and just an even more costly mess.

According to Rep. Soto, “What we are trying to do is stabilize the market, we want these people to stay in there homes.”

If this legislation passes both the House & Senate, it would take effect on July 1, 2009.  It’ll be interesting to see how our legislators react to the bill.

Until next time….Marc It Sold!

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In a previous post, The Bail-Out – Who’s Being Bailed Out & Who’s Bailing Out!?!, the $700B government bailout of financial institutions was discussed. Unfortunately as expected, this has proven to be a fiasco.

The Emergency Economic Stabilization Act of 2008 was supposed to buy up distressed assets of financial institutions with the overall effect of banks having more liquidity to therefore originate mortgage loans.

There were also several other provisions of this bill which have failed miserably. Many financial institutions have been given money under The Bailout Plan, but instead of seeing this money enter the mortgage market, we’re seeing them purchasing other financial institutions. In the long-term what this is creating are mega financial institutions that we will have to bailout in the future, because if any of them failed it would be devastating to the economy. Even insurance companies are trying to get a piece of the pie by purchasing financial institutions (Insurers find path to bailout billions). This is not in the best interest of us – the people.

The Hope for Homeowners Program was supposed to assist at risk homeowners avoid default and therefore foreclosure. The program is voluntary to the lending institutions and has also proved to be a miserable failure.

One other aspect of the bill that needs to be discussed is the grant money being given to cities to purchase properties; fix them up and then resell them under the Neighborhood Stabilization Program. The City of Orlando is getting $6.7M and is planning on purchasing 20 homes to be resold and then be a landlord for another 11 homes. As nice as this appears, how much dent do you think this will put in a market where there are a total of 11,414 residential properties for sale with 4,557 in some stage of foreclosure?

bank and drive-thru

Again, all this money could have been better spent. Is it increasing Consumer Confidence? Most likely with very little if any effect. So is this $700B bailout assisting you and I – the taxpayers? Unfortunately, not!!

This brings me to the Automaker’s Bailout that is being bantered around Congress. You may at this point think that I am against a bailout of sorts for the auto industry. Don’t get me wrong, they dug their way into this mess, but the overall implications of failure for the American auto industry are quite far reaching.

The Unemployment Rate has been rising consistently and currently numbers over 10 million people out of work. A collapse of the auto industry will add several more million to those roles. Presently, we are fighting a recession. With a failure of the auto industry we would surely be pushing ourselves toward a longer induced depression. We simply can’t afford this. We’d only be cutting off our nose to spite our face.

Hopefully, our government is learning its lessons by the failure of the Emergency Economic Stabilization Act of 2008. Unfortunately, I’m concerned that they won’t help the auto industry due to that fiasco that they created. If they would only learn that you just can’t throw money at a problem and expect it to resolve itself. There needs to be safeguards in place. There need to be concessions made by all parties. There needs to be simple common sense.

automobile dealership sales lot

I believe in labor unions as they took very good care of my family while growing up. But when the UAW (United Auto Workers) comes out and states that they oppose concessions, then I have a major issue with that. Let’s go back to the Chrysler rescue of 1979 – that worked!! The reason that worked is because there were concessions on all sides – labor, management and investors.

Again, I am not denying what the auto industry did, but so did the financial institutions as well. These fiascos didn’t just happen. They occurred because of greed and mismanagement.

We are dealing with a faltering economy that is teetering on the brink of disaster. We need level heads and sound judgment to bring us out of this miasma.

Till next time…Marc It Sold!

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Theoretically the government will not have the ability or power to run these corporations. But I don’t believe for one minute that an organization as large as our government will not have influence over these institutions. Here’s a scenario. The government wants the institution to do something and they balk at it. All the government has to do is to say that they’ll dump the stock if they don’t follow through!

This is already in addition to the $700B package in which we’re already buying distressed assets to remove them off the financial institutions books. That process makes the firms appear healthier and better able to resume what they are calling a ‘normal’ lending operation.

One question is, should the government be getting into the business of purchasing stocks in financial institutions? What does this overall mean to us? We’re already sometimes equated to second class citizens with lobbyists and big business winning out over us. Will this further mean that the financial well-being of these industry giants outweigh that of Joe Schmoe on the street?

This is all happening too fast and it’s being pushed down our throats. We’re being told that this needs to be done and also has to be done quickly. Yes, we’re supposed to believe that our legislators are looking out for our best interest, but we’ve seen enough of big businesses and lobbyists influence on them and the ensuing corruption. I apologize if I appear cynical – I’m just very concerned for us and our well being. Neither do I have the answer either!

The more I learn of these matters, I keep on having the concept of Socialism roaming around in my head. I know, that’s a scary situation in and of itself. Yes, we are far away from such, but doesn’t this concept push us more and more closer to it?

Would love to hear your thoughts.

See you next time at Marc’s Corner…..

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So which is it? Last evening, 10/1/08, the US Senate voted to approve a new version of the $700B Bail-Out bill for Wall Street. I’m not impressed. Yes, they would like you to think that this bail-out is for Main Street, but that is just simply not the case. If it were truly for Main Street, the people, then there would be more in the way of benefits for the consumers.

While the Senate’s bill is slightly better than the House’s proposal, it doesn’t do enough. As a Realtor®, I’m supposed to be thrilled and support this bill. I simply can’t do so in all honesty. While this bill might be helpful in the short term for us, there are long term effects that need to be addressed and taken into account. I’m not going to go into those for the sake of this article.

This bill is a bail-out of Wall Street – of the lenders, of the investment houses! If it were for the people, then there would be more safeguards imposed and more consumer benefits. There are just not enough provisions for such in this bill. There are too many homeowners losing their homes, but the lobbyists work for big business not the small consumer. Of course, that’s what we thought our legislators are supposed to be doing, but maybe you should check and see whose financing their campaigns. (Campaign Contributions – Who’s in Whose Pocket?)

The main reason that the bill did not pass the House of Representatives the first time around is because too many of them are up for reelection and the public view of these bills has been somewhat negative. Probably for two reasons: 1) There is too much information to swallow in just a short period of time; and, 2) The American public is not as stupid as they would like you to believe.

No matter how you slice it, the trouble that we’ve gotten into is due to corporate greed. Yes, you’ll hear the argument that people made bad decisions. I won’t deny that many did, but on the other hand, many were given erroneous information and basically sold a bill of goods.

But Corporate American saw the income potential with risky subprime loans – it was like manna from heaven. But it wasn’t – it was pure and excessive greed! The American Heritage Dictionary definition of the word “greed” is “An excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth.”

I think there is no doubt in anyone’s mind in regard to this. That’s why you are seeing an uproar to our bailing out Corporate America at the American taxpayers expense. Now don’t get me wrong, I do believe that something needs to be done. We need to stop this cycle. We need to not put a bandage on the problem, but to find a solution to what ails us. And, yes, we need more regulation of our banking system, something that was systematically eliminated during the 80’s. Remember, the Savings and Loan Debacle? Well, we’ve stepped into a major pile and it stinks!! But hey, let’s bail out corporate America!

And when you talk about deregulation, let’s not forget that our government allowed these financial conglomerates. There used to be laws separating savings and loans, investment banks, commercial banks and insurance, but these were torn down. Why did this occur? Oh let’s see – LOBBYISTS!?! Oh yes, and Corporate Greed!!

The arguments are vast in that this is the cure-all, but all we’re doing is subsidizing our financial institutions. Will this effect mortgages – probably not. But it will effect investors with the buying of mortgage baked securities. Oh geez, that really helps the family losing their home!

We need to help the people who are losing or have lost their primary residences. The financial institutions should be required to renegotiate mortgage terms instead of allowing them to just ‘voluntarily’ do so. $700B will go a longer way in helping consumers as opposed to the institutional giants.

We need to alter our bankruptcy laws allow judges to be able to alter loan terms. This is surely not something new, since they had this available to them pre-1978 when the laws were changed.

Yes, I know the argument in regard to why should all of these people that have paid their mortgages on time, etc. be responsible and pay for this? I’ll be honest, I don’t know the answer to that question. But something has to be done. The financial institutions will and should work this out as the housing market will do the same. Government is intervening in the wrong areas, as it unfortunately does all too often. But then again we have to go back to what I said earlier – looking at whose financing these campaigns.

We can’t just hope for a better system, we have to make sure that happens! We can’t be apathetic to what’s going on, otherwise you have no right to complain. It is up to us to work this out. It is up to us to make this a better place for future generations, because the legacy that we’re leaving them right now is not all that rosy.

See you next time around at Marc’s Corner!

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Before we go into that, I’ve read many articles and posts critical of the fact that First Time Homebuyers are being offered a tax credit as opposed to a tax deduction. The difference being that the credit will have to be paid back interest-free, mind you, over a 15 year period; while a deduction would basically just be a freebie. What I also think is good about this measure is that they, our leaders legislators, did not limit this to vacant homes as had been anticipated.

The fact that this loan has to be paid back is only fair because by doing otherwise you’re penalizing others who bought prior to this enactment or afterwards. Mind you this is only for first-time homebuyers, which includes those who haven’t owned a primary residence in 3 years, and the home has to have been bought between 4/9/08 and 7/1/09.

Anyway, will this stimulate the purchasing of homes? I think it will have little effect in that you still have to qualify for a loan with stiffer requirements and down payments.

One of the main concerns that I see with this bill is the Fannie Mae and Freddie Mac bailouts. Let me clarify, not the fact that they are being bailed out, but the basically unlimited funds that they are being given access to. All we’ve been hearing about is the estimated costs this bailout will be. But they are only talking in the short-term, there is no way to accurately estimate the costs over the long haul.

A good portion of this bill is aimed at those with at-risk mortgages at possibly having the ability to refinance at a fixed rate and that the new mortgage will be government backed by the FHA. Firstly, the lender has to be willing to go this route since it is totally voluntary. Some surely will in that they’d rather have their money than your property. But more than likely the mortgagee is not going to get such a great deal. Do you think that the lenders are going to go out of their way to give you, the borrower, a better deal? Seriously!

But on the other hand if they do go this route, it is most likely cheaper than going through a foreclosure. The other problem I see is that who’s to say that the borrower won’t go into foreclosure with the new mortgage. Again, more loses and costs to the taxpayers.

What really gets me is why is there a need for a federal database of personal data and fingerprints of anyone who basically has anything to do with the originating of a loan? Loan originators are licensed in Florida, where I’m located, and I gather most states in the union. This is just abhorrent in that it appears that the government wants more information on its citizens and they’re utilizing this fiasco to weasel their way to getting such.

To further the indignity, one part of the bill requires banks to report information on all debit and credit card transactions. Excuse me, but when did my spending habits become the government’s business? The more and more that I’ve learned about this bill, the more I kept on hearing George Orwell’s Big Brother in 1984 in my head. OK, so there are other things running around in my head as well – go figure!! I believe in rules and regulations, but this is just going too far.

Lastly, I want to leave you with this tidbit. It appears that a provision in the bill is to assist Chrysler (even though they aren’t mentioned directly) to benefit from a corporate tax incentive even though they are only a LLC, a partnership. Huh, and this has what to do with the topic? All I can say is good lobbyists and whoever else they have on the payroll or campaign donation list.

So what do you think? Is the Housing Bill a panacea, a fiasco or even somewhere in the middle?

See you next time at Marc’s Corner!

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As I’d mentioned in my previous post, we are going to discuss the American Housing Rescue and Foreclosure Prevention Act, which in some circles is know as the Bank and Builder Bailout Act. Hmmm, imagine that!

There are many aspects to this bill and for our purposes we will only touch on a few major ones and they’ll be discussed in no particular order. The supposed major gist of the bill is to help alleviate foreclosure to many homeowners. The numbers are pegged by the House at 400,000, but this is skeptical at best considering that this is a voluntary measure on behalf of the lenders.

How it would work is that the Mortgage Lender would have to agree to take a loss on the existing mortgage. They would have to reduce the loan balance to 85 percent of the home’s current value. A new mortgage would then be written at a lower interest rate and insured by the FHA (Federal Housing Administration). This is all considering that the homeowner will be able to afford this new loan.

Now, this may seem great for the homeowner and I’m all for keeping them in their homes. But, the lender in many cases could be able to recover more money than they would in a costly foreclosure. So here we are possibly helping the lenders who helped create this mess save some money and not penalize them more. Does anyone else have an issue with this concept?

One of the supposed purposes for this bill is to shore up housing prices because they have declined quite a bit in most of the country. This just cannot be the case. The market will correct itself as it has done so in the past. Pricing, as anyone who took Economics 101 knows, is matter of supply and demand. Governmental action can do nothing to change that unless it can reduce supply or increase demand. Just like the Economic Stimulus package could do little to infuse life into the economy.

Another aspect of the bill is to give a tax credit of up to $8,000 for first-time homebuyers who buy a vacant home in the next year. While this is good for our neighborhoods in that a vacant home will now be occupied, I think it creates a great inequity to the home seller who has taken care of their home and paid all of their bills on time. Why should they be made to suffer any more than necessary? The drop in prices, so-called short sales and foreclosures all around them are enough, they need not incur more hardship.

One other item in regard to these proposed tax credits. The bill itself creates a shortfall of over $2B, thus adding more to our deficit.

There are definitely some good things that are coming out of this and some ensuing bills. One is for the establishment of an independent regulator to oversee Fannie Mae and Freddie Mac in addition to their overhaul as well as that of the FHA. It would also provide $4 billion in grants for states and municipalities for rehabilitating foreclosed properties to be used for affordable housing.

Now, this is not all for free to the rescued homeowner, and that is rightly so. They will have to pay a 1½% annual insurance premium and if the home’s value increased and they decided to sell or refinance, then they would have to share the profits with the government. This is a concept that was proposed by John Vogel, Jr, a professor at the Tuck School of Business at Dartmouth, that I wrote about in the post, Foreclosure Plan – Is this a Panacea or a Step in the Right Direction?

While this bill may help some, it is not a cure all.

I would like to think that our legislators are doing this to help our fellow man and neighbors, but it’s more than likely not and that they are going this route to save their rear ends in an election year. Sad to say but true for too many of them. But then that’s a horse of another color.

See you next time at Marc’s Corner.

Marc It Sold!

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