Frances Flynn Thorsen in an article that appeared on RealTown, has raised an issue that almost no one in the real estate industry has addressed. In our rush to become foreclosure experts and to close more short sales, we have neglected the most important role that we could play in resolving the heartbreaking tragedy of this situation--assisting homeowners in restoring their hope and providing them with a path to staying in their homes.
Fran knows what it's like to lose go through foreclosure. She was the victim of a predatory lending scheme, like many other homeowners in this country. When a family loses their home, children are often removed from the school they are attending, friendships are destroyed, and shame results. The family's credit is ruined which can result in even more serious problems if a family member becomes ill or faces any other type of drain on their finances.
As an industry, we have an obligation to help clean up this mess. Realtors are among the most generous people on the planet. We band together to build houses for Habitat, we assist disaster victims, and we give back to our communities on a regular basis.
What we can do now is get the word out that help is out there for troubled homeowners. Acorn.org is a non-profit organization that assists troubled homeowners in staying in their homes. Their success rate is 60 percent.
HopeNow, a consortium of lending institutions who are assisting troubled borrowers before they lose their property, reports a 67 percent success rate.
On March 6, 2008, the White House announced a new USA Freedom Corps Financial Literacy Initiative that seeks volunteers to counsel those who are facing issues connected with the subprime crisis. This new online resource helps to connect individuals with expertise in financial and housing services with volunteer opportunities designed to assist homeowners avoid foreclosure and remain in their homes.
If the lender is not being cooperative, there are several other strategies the homeowner can use. First, the homeowner needs to bypass the collections department. These people lack the authority to make modifications to loans. Instead, have them call the main number for the lender and ask for the "workout department."
Often times with big lenders, it's hard to get to the right person. Many local banks are stepping in and assisting borrowers in their communities with new financing.
A third option is to work with a consumer advocate attorney. Don't rely on a regular real estate attorney for this job. Often times there are errors in the loan documents that will give the borrower much needed leverage in negotiating a workout. You can locate a consumer advocate attorney at www.NACA.net. NACA also just announced a $6.5 Million in Legal-Aid Grants to Help Families Caught in the Foreclosure Crisis to keep their homes. They are have additional initiatives to assist consumers who believe that they are victims of predatory lending practices.
I can't imagine a more important call to action for our industry--it's time that we band together to help families across the country to save their homes.
The Wall Street Journal today notes that while Hillary Clinton has been holding up Countrywide Financial Corp. and CEO Angelo Mozilo as epitomizing misplaced priorities and values of lenders during the housing boom, one of her allies thinks she's wrong on that count.
Former HUD Secretary Henry Cisneros -- Hillary's husband gave him that job, and he's been campaigning for her in Texas -- tells the Journal that "Countrywide is not the Enron that some people have described it as."
Of course, Cisneros would have to say something to that effect, since he made more than $5 million sitting on Countrywide's board of directors before resigning in October, the Journal reports.
Another prominent Democrat, former California Treasurer Kathleen Brown (pictured), resigned from her seat on the Countrywide board last March (see previous post).
Kathleen Brown's brother, Jerry, is California's attorney general. So far, Jerry Brown hasn't made much of a fuss about mortgage lending practices during the boom -- at least not compared to his counterpart in New York, Andrew Cuomo, who's investigating just about everybody who's had anything to do with originating mortgages and packaging them into securities sold to Wall Street investors.
Countrywide Financial Corp.'s annual report, released today, provides some interesting stats going back five years. I've put some highlights into a single table. Click "continue reading" for table and discussion.
Groups tend to gather around common interests. We've always felt at Inman News that we see the best and brightest minds gather with us around a mutual passion for real estate.
It's why in the real world we called our San Francisco and New York events Connect, and it's why with this new site we wanted to encourage even more of those online connections.
Our vision for the new site was to create a virtual "watercooler" where
people can still get the daily news, but if they want, they can also comment on and have a conversation
around those stories too.
We also wanted to find ways to connect people around common interests (say internet marketing) and encourage a healthy sense of community.
We also realize that there's a serious case of social network fatigue setting into the industry now - so early on we decided against going too far down the social network road. It's also why we tiered many of the features so you can choose to participate only as much as you want.
If you want; to start, create a profile on our new site. Tell people a little about yourself. Show us who you are. Drop a comment or two on a story. Join a group. Share your knowledge in our wiki. Fill out an ad for your services in our marketplace. Have fun dipping your toes in the water.
If you like what you find; then upgrade to become an Inman Member. Become a leader. Start new groups. Have a greater presence on the site. Be recognized for your contributions.
We hope you have fun with the new Community features on the new Inman.com. That's what it's all about. Making productive business connections and having a good time doing it too.
There's a flood of new information and insight into the credit crunch at your fingertips this week, and most of it is quite troubling. Here's a list of recommended reading for those who prefer to get their information direct from the source:
Leveraged Losses: Lessons from the Mortgage Market Meltdown. Mortgage credit losses will hit $400 billion -- about half of that on the books of leveraged financial institutions including commercial banks, thrifts, hedge funds, and Fannie Mae and Freddie Mac. That will will lead to a contraction in domestic lending of $1 trillion, and trim economic growth by a staggering 1.3 percent, according to this authoritative paper by experts at Morgan Stanley, Goldman Sachs, the University of Chicago, and Princeton.
If you find the paper a bit of a slog, check out Federal Reserve Governor Frederic S. Mishkin's insightful -- and easy to understand -- critique of the study here.
On a related note, William Poole, president of the Federal Reserve Bank of St. Louis, talks about the possibility that Fannie Mae and Freddie Mac will require a bailout ("I do not have any information on the GSEs that the market does not also have," Poole says. "Nevertheless, in assessing the risk of further credit disruptions this year, I would put the GSEs at the top of my list of sources of potentially serious problems.")
Monetary Policy Report to the Congress. This is the annual report to Congress by the Board of Governors of the Federal Reserve System. Nothing you haven't heard about the housing sector before, but this report will help you step back and look at the big picture. Here are factors the Fed is thinking about when it makes monetary policy decisions -- including employment, inflation, corporate profits, financial markets, and consumer spending [check out the graph on the personal savings rate on page 9 (page 13 in Adobe Acrobat). Good luck coming up with that bigger downpayment, would-be homebuyers. ]
Testimony by Mark Zandi, chief economist for Moody's Economy.com, before the House Financial Services Committee this week. Check out Zandi's analysis of Equifax credit files, which leads him to conclude that first mortgages are defaulting at the rate of 2.2 million a year. Even if loan servicers step up the pace of loan modifications, Zandi projects "well over" 3 million mortgage defaults in 2008 and 2009. Two-thirds of those will end up going all the way through the foreclosure process, Zandi predicts. That's 2 million foreclosure sales, or 1 million a year (considerably more than my back-of-the-envelope estimate the other day of 648,000 which relied in part on an assumption by loan servicers that only one in three foreclosure starts will ultimately complete the process).
This was a two-day hearing. Check out all the testimony from day one here, and Fed chairman Ben Bernanke's testimony on day two here.
Real estate brokerage and franchise company Realogy Corp. is casting a very wide net on the 'Net these days, pumping its property listings out to many online sites. The company last year announced distribution agreements to share online property listings information with Google and Trulia, and more recently announced similar agreements to bring hundreds of thousands of property listings to Cyberhomes.com, Zillow.com, AOL, Homescape and FrontDoor, a real estate search site launched by HGTV operator Scripps Networks Interactive. Realogy brands include Century 21, Coldwell Banker, ERA and Sotheby's International Realty, among others.
The Internet is considered by some to be a great equalizer, with big and small companies competing side by side in cyberspace for the same consumers. And there is a movement to create data standards to assist brokers of all sizes in sending out real estate listings content to multiple sites, with online players such as Trulia, Zillow and Yahoo Real Estate on board with the effort. Some third-party companies are already serving as the go-between to assist brokers in dishing out content to a range of online sites.
But do all small real estate companies have the time and resources to supply updated data feeds to these various online sites -- or is this an easier feat for super-sized national brokerage companies? Are smaller companies at any disadvantage here as the larger companies push their real estate listings content out to any and all takers in massive data feeds?
Here's a freakish headline that helps explain why regulators have been pushing for a breakup of monoline bond insurers: "Mortgage meltdown costs Orlando airport $12 million."
The Orlando Business Journalreports that downgrades of the airport authority's bond insurer, FGIC, due to losses on mortgage-related investments, has raised interest rates on bonds that are related to an expansion of the airport 20 years ago. Airports in Jacksonville, Denver, Atlanta and Washington D.C. are facing the same issue, the Journal reports.
Why do we care? Because to protect cities and local governments that depend on bond issues from experiencing the same kind of problems, regulators want bond insurers like FGIC to reorganize, separating their staid muni bond business from more risky guarantees of securities like collateralized debt obligations (CDOs) with exposure to mortgages. That could force banks into another round of write downs on such investments, worsening the credit crunch.
So, in addition to a new logo and some exciting new benefits for our valued Members, we've gone and given Inman.com a whole new look which we'll be rolling out very soon. (You can can also click on the image for some highlights of the new home page)
But don't worry. We never lost sight of our primary goal in this redesign.
Our hard-hitting, independent real estate news still remains at the heart of our new site.
But along with our must-read daily headlines, we've brought together under one roof some of our popular new media initiatives; InmanTV, the InmanBlog, the InmanWiki as well as a brand new real estate blog network that's going to bring you even more top notch daily business intelligence.
We also realize we're not going to hit a home run coming out of the gates (how's that for a mixed metaphor?). Believe me, this is only version 1.0 and we fully expect to be constantly refining the site based on your feedback. We want to hear what you think. Inman.com is as much yours as it is ours.
Since we started down this path (and it's been nearly a year in the making) we've had an internal mantra that been guiding us. I wanted to share it with you today.
The Senate voted this evening NOT to bring the Foreclosure Prevention Act of 2008 to the floor for a vote. This is the bill that includes provisions to allow bankruptcy judges to modify the mortgages of troubled borrowers to help them avoid foreclosure (see previous post).
The 48-46 party line vote was a procedural matter, and we could see the bill come back in another form (it has a lot of other stuff in it, like giving state housing finance authorities the go ahead to issue $10 billion in additional mortgage revenue bonds to refinance subprime loans, that's not controversial).
But no way are Democrats who support cram downs going to get 67 votes to override a presidential veto. If the idea ever sees the light of day, it will be because a President Obama or McCain can live with it.
The Mortgage Bankers Association sent out a bulletin to members hailing the vote as a "major victory."
"Over the last several weeks, MBA has used all tools available to influence today's successful outcome - including the activation of MBA's grassroots network, the Mortgage Action Alliance," the bulletin said. "Our thanks to all MBA members who called or wrote their Senators and expressed in no uncertain terms the industry's opposition."
The Bush administration is staying on message today as it tries to put a lid on suggestions that the government take a more radical (and costly) approach to propping up housing markets. The White House is rejecting such plans as "bail outs" for "lenders and speculators."
Speaking in Chicago, Treasury Secretary Paulson said that "while some in Washington are proposing big interventions, most of the proposals I've seen would do more harm than good. I'm not interested in bailing out investors, lenders and speculators. I'm focused on solutions targeted at struggling homeowners who want to keep their homes."
Paulson seems to be trying to quell speculation that the administration might get behind Sen. Chris Dodd's proposal to create a Federal Homeownership Preservation Corp. to buy up mortgages at a discount from lenders. Bank of America has reportedly expressed support for the idea.
As noted here Tuesday, the Bush administration has vowed to veto Senate legislation that would allow bankruptcy judges to rewrite the terms of troubled borrowers' mortgage loans.
At a press conference today, the President elaborated on an earlier White House policy statement, saying the proposal would "do more to bail out lenders and speculators than to help American families keep their homes" and "prolong the time it takes for the housing market to adjust and recover and it would lead to higher interest rates."
Bush didn't go into details, but the administration also opposes, on pretty much the same grounds, another provision of the bill that would provide $4 billion in state and local assistance for redeveloping abandoned and foreclosed homes, and a proposal to triple funding for the Neighborhood Reinvestment Corp.
Pressed further about the economic slowdown in general, Bush said the tax rebates authorized in the recently approved stimulus package will soon be in the mail:
"I know there's a lot of -- here in Washington, people are trying to -- stimulus package two and all that stuff. Why don't we let stimulus package one, which seemed like a good idea at the time, have a chance to kick in?"
The administration's game plan for resuscitating the housing and mortgage markets continues to rest on voluntary workouts by loan servicers, and giving the Federal Housing Administration, Fannie Mae and Freddie Mac more leeway to guarantee and buy loans.
Problem is, FHA, Fannie and Freddie don't HAVE much leeway to do more than they're doing now. Congress has yet to pass an FHA modernization bill that would expand risk-based pricing, and Fannie and Freddie are actually shrinking their loan portfolios to meet regulatory capital requirements (which the administration could lift, but may be maintaining as a bargaining chip to get Congress to pass a GSE reform bill).
Jessica Swesey, Managing Editor of Inman News, will be participating in “Talk Real Estate” on KFNN 1510 in Phoenix Thursday morning from 12pm to 1pm MST (11am to 12pm PST). You can hear the broadcast stream live on www.kfnn.com.
(within the constraints of our OFHEO-directed 30 percent additional capital requirements)
So the big news in mortgage lending today was that federal regulators are lifting the growth caps on Fannie Mae and Freddie Mac's loan portfolios, which had limited the government-sponsored enterprises (GSEs) from holding more than about $1.5 trillion in loans and securities backed by loans (see Inman Newsstory).
So now Fannie and Freddie can buy all the loans they want and the credit crunch is over, right? Actually Fannie and Freddie haven't even been pushing up against the caps, which the Office of Federal Housing Enterprise Overisght (OFHEO) loosened back in September.
While the GSEs could each have grown their held-for-investment portfolios to $742 billion by the end of the year, they have actually been shrinking them in the last few months.
According to the latest numbers, Fannie's loan portfolio totaled $721 billion at the end of January, down from $732 billion in October. Freddie has also shrunk its retained investment portfolio from $732 billion last August to $717 billion in January.
What's going on? After noting that the porftolio cap has been lifted, the fine print in Fannie's monthly summary explains, "The size of our portfolio also may be constrained by market opportunities and regulatory capital requirements."
Thanks to consent orders put in place in 2004, in the wake of accounting and management scandals that forced both companies to restate several years of earnings, the GSEs are required to keep 30 percent more capital on hand for a rainy day than previously stipulated by law.
That means Fannie and Freddie have been struggling to scrape up additional capital to cover mounting losses on bad loans and other investments, including hedges against changing interest rates.
Those capital requirements may put the brakes on what is a much bigger business for Fannie and Freddie than buying up loans -- guarantees and securitizations. In addition to buying up loans, the GSEs provide liquidity to mortgage markets by bundling up loans that meet their underwriting standards and selling them as guaranteed securities to other investors.
Most of Fannie's $2.9 trillion "book of business" at the end of January consisted of $2.44 trillion in outstanding MBS and other guarantees. The story is much the same at Freddie Mac. While Fannie and Freddie both grew their book of business at an ambitious annual rate of around 25 percent in December, things slowed down considerably in January -- to 9 percent at Fannie and 5 percent at Freddie.
With Fannie reporting a $3.6 billion fourth quarter loss today and Freddie expected to have equally bad news tomorrow, don't expect OFHEO will hurry to lift the 30 percent additional capital requirements that are proving to be the real constraint on the GSEs' growth.
OFHEO director James Lockhart today sounded triumphant about the orders that put the requirements in place in 2006, saying that in retrospect, they have helped ensure Fannie and Freddie "are in a much better capital position to deal with today's difficult and volatile market conditions and their significant losses."
Or as The Boss says:
"In the day we sweat it out in the streets of a runaway American dream At night we ride through mansions of glory in suicide machines ... Cause tramps like us, baby we were born to run"
Our new web site (Inman News Beta Now Live!) is going to bring with it a host of new offerings for our valued Inman News members. We're really excited to share them with you - mainly because the brand new Inman.com brings them to you at no additional cost!
Extensive Special Reports library. We will have over $700 of downloadable industry special reports in both electronic and PDF format that help your
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Members. You'll be able to catch up on all the action you may have missed in New York
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Coldwell Banker's latest ad campaign lets its founders do the talking -- at least through voiceovers that accompany still portraits of the company's deceased originators, Benjamin Arthur Banker and Colbert Coldwell.
The campaign features a series of video ads with dialog between the founders' portraits. Perhaps following the lead of lawn gnome vacation photos, Coldwell Banker is taking these portraits on the road as part of the campaign -- the company unveiled some images of the portraits on a San Francisco cable car, at a rodeo, and at the Grand Canyon, as examples (see image).
The ads feature some chitchatty conversations between the company founders' portraits, such as mention of the 1947 company Christmas party or engaging in staring contests.
Some media folks who got a sneak peak at the marketing campaign questioned why the ad campaign seems to bypass mention of the current state of the housing market. Charlie Young, Coldwell Banker chief operating officer, explained that local housing markets vary widely, and some markets are faring much better than others. "We looked past the current situation in the real estate market, and what the press and the national media is propagating, and looked more at what consumer needs are," he said.
The lips on the founders' portraits do not move, and there are no plans to turn the founders into animated mascots, Young said, adding that the intent is to "keep the integrity of the portraits as is."
Before spending too much time debating whether Democrats can muster enough votes to change the bankruptcy code to allow judges to modify the terms of mortgage loans, I suppose we should all have kept in mind the obvious: the Bush administration would probably veto any such legislation in the blink of an eye. And while there might be enough votes to get a bill passed, there are enough Democrats with reservations about the idea that an override probably ain't in the cards.
"The Administration strongly opposes providing bankruptcy judges with power to modify the terms of mortgages for debtors in bankruptcy proceedings. Amending the bankruptcy code in this manner would undermine existing contracts, leading to contraction in mortgage credit availability and affordability. These and other bankruptcy-related provisions in the bill would rewrite long-standing tenets of bankruptcy law in ways that would fundamentally alter the expectations of parties to hundreds of thousands of home purchases after the fact. These provisions would also likely prolong the time it will take the market to recover from the current downturn." ...
"If S. 2636 were presented to the President, his senior advisors would recommend he veto the bill."
Frances Flynn Thorsen in an article that appeared on RealTown, has raised an issue that almost no one in the real estate industry has addressed. In our rush to become foreclosure experts and to close more short sales, we have neglected the most important role that we could play in resolving the heartbreaking tragedy of this situation--assisting homeowners in restoring their hope and providing them with a path to staying in their homes.
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