Fannie Mae: Please Stop Trying To Help.

Recently, I was working on a search for a client when I came across a Fannie Mae owned property, the lister of which encouraged me to click on the "documents" tab in the MLS. For those of you not in the know, this is a folder that contains any extra disclosures or forms that are required to close the transaction. Lo and behold, what did I find on that day?
The latest folly to be foisted upon a weary industry trying desperately to recover. This form required a potential buyer to agree to pay Fannie-Mae $5,000 if they should have the temerity to re-sell their own home within a year. Note, not only if they sell it at a profit; just if they sell it at all! Where to begin. I understand that these people are trying to punish "investors". This is not the way to achieve that. What of some poor schmo who loses his job, or has to re-locate? Why should he be punished? If a so-called investor is able to make a sufficient profit, then the re-capture amount will best be another cost of doing business.
We do not need any new laws. We need to enforce the ones we already have. The last property boom and bust was fueled, in part, by an "investor's" ability to claim he was going to "owner occupy" each property he bought. Over and over again. To claim such on the purchase contract erroneously is a felony. How many prosecutions have you heard of? Exactly!
Mind you, this is the same Fannie Mae that was formerly run by Franklin Raines. Mr. Raines is famous for massively and fraudulently over-stating Fannie Mae profits in order to inflate share prices. That little boondoggle enriched him to the tune of some $90M. After investigation, he and his two co-conspirators reached a settlement. He surrendered his stock option, which is hilarious because his shenanigans had rendered them worthless, and was fined just under $3M. That, in itself, was particularly odious because the fine was paid by an insurance policy paid for by Fannie Mae. Which means you paid it.
To re-cap then: The same Fannie Mae that was largely responsible for the current melt-down, and that aided and abetted Mr. Raines in his criminal enterprise is now trying to pick our pockets one final time in the unlikely event our home should increase in value.
We are in the best of hands.

Home Affordable Foreclosure Alternatives Program (HAFA)

For those of us selling homes in the greater Phoenix metropolitan area, short sales are a simple fact of life. In some newer communities, homes built in 2006 for example, almost every single one has entered the re-sale market a distress sale of one kind or another.

We all know how frustrating it can be when banks take up to 7 months to respond to an offer, by which time the buyer has likely already purchased something else. Frustrating for seller, buyer and agent alike. Hopefully, that is about to change.

On April 5th 2010, the above mentioned program, known as HAFA, came into effect. On its face, it seems to be a step in the right direction. Participating banks, and that is almost all of them, agree to abide by established time frames for responding to offers and for determining the net proceeds they desire from a short sale. If they do not comply, they will be ousted from the program.

It is quite involved so I suggest you Google it, but here are some highlights. For the Realtor, it prohibits the bank from reducing the commission. For the seller, they will be absolved of the debt without any judgements or promissory notes allowed. The seller may also receive $1500 for re-location. (Quick translation; relocation= not trashing the joint.) The bank also receives a financial incentive for following the guide-lines.

All in all, it seems to be a win-win situation. So why am I concerned? I search the MLS every day for various clients, often in areas that are chock full of short sales. Since this program was announced, of all the short sales I have reviewed, only ONE has mentioned HAFA. This is tragic. This means that there are hundreds of agents out there who have the listings, but do not have the faintest idea of how to process them within the new frame work. It is tragic because what is, or was, an extremely difficult process no loner needs to be. If the agents don't know about it, do the banks? If a great idea fell in the forest, and no one was there to hear it...

I am curious to hear opinions on the from professionals across the country. Maybe it's just my area. What say you?

The Shame Is, That They Don't Really Have Any

In this short post, I am re-visiting a topic upon which I have ranted before. Realtors who negotiate commission rates in the "remarks" section. Firstly, it is in direct contravention of MLS rules to negotiate the commission in an MLS listing. I saw one today that said, and this is disappointingly typical, "commission to be 50% of whatever bank will pay." So if the bank offer $1.00 and a sandwich you are obliged to accept 50 cents and half a PB & J? Have you no pride in your work? Have you no self-esteem?

If your client were to see that type of verbiage, would they see you as a champion of their cause; fighting fearlessly for their last dollar? More than that, when I see that kind of defeatist phrasing in a listing I sit back and smile. Why? Because I know that if we were to pursue your listing, I would crush you in the negotiations.

If you are that agent, you need to consider another line of work. You most certainly are not benefiting your client, so you need to step aside and let us professionals take care of business.

Likewise to all you puppets who insist that buyers must qualify with your preferred lender. Grow a spine! The message you send is this, "I do not trust the loan status report (LSR) that your lender has provided because the lending business is so corrupt/malleable/unregulated (pick one), but I insist you blindly trust my random guy with all your most private and critical and secure information before we can proceed."

If you don't stand up to these banks, you will just end up under their complete control.

For the record, I have never allowed a client to qualify with another lender on the whim of a seller, and I never will.

A Disturbing Sign of the Times

There is an old adage regarding the "Golden Rule". Them with the gold, get to make the rule. We had an irritating example of this just last month. We had listed a property for our client and it had sold within days for full price, which in and of itself was quite a shock. We later discovered that the buyers had coveted the home years before so that when it came on the market they just snapped it up. Even though they were going with a large down payment, we still felt an appraisal at full price might be a stretch in this market, and advised our seller accordingly.

In the meantime, our seller also had a second shot at what he considered his dream home when a short sale that had dragged on for almost a year suddenly became available. Our offer was accepted, but it was contingent on the first sale. The appraisal came in at the desired price of $545,000 and it looked like two families were going to get their dream homes. Who was it who said "I love it when a plan comes together"?

Then, the waste product came into direct contact with the oscillating, rotating air-moving device. The day before drawing docs on the first sale, a loan processor arbitrarily and capriciously decided it did not like the appraisal. It then ordered a drive-by appraisal which came in at $470,000! The original appraiser was mortified by this lack of respect for her work and requested the opportunity to defend herself. This was duly granted. In the meantime, the processor ordered another drive-by, and this one came in at $400,000! Nobody told me there'd be days like these!

In the end, they completely ignored the official appraisal and said they would stick with the drive-by evaluation of $470,000. Everybody said "They can't do that!" But they did. Luckily, both buyer and seller were willing, and financially able, to reach a compromise. The seller came down $25,000 and the buyer was able to come up with the extra cash, so it closed, albeit a couple of days late.

Interestingly, when we came to an agreement with the bank on the short sale we were buying, they gave us 10 days to close it. This, after they had messed around the previous buyers for more than 9 months. The stones on these people. We closed it in 9 days. That night, Mrs K and I went out for frozen yogurt. It was good.

I'm From The Government, And I'm Here To Help

Recently, in the middle of April, we were working with a buyer looking to purchase a home in the $150-$160K range. With the $8000 tax credit about to expire, we thought there might be a spring in his step, but we were wrong. He was curiously detached about the credit and reasoned that prices might even go down upon it's expiration. We tend to agree with him. When the government introduced "cash for clunkers" to salvage the auto industry, its main effect was to drain all future sales from the pipeline in short order. Much the same will happen in the housing market. It makes sellers and buyers lazy when it comes to negotiating. If $8000 is on the table, the seller wants to get his "share" while the buyer is less motivated to haggle. I am not a fan of artificially supporting the market for anything, especially when the money involved does not exist and will have to be borrowed. All in all, another smoke-and-mirrors job by the ne-er-do-wells in D.C.

Talking of smoke, an agent called me for feedback on a house we had shown. I told her it positively reeked of cigarettes. To which she replied that they had repainted the house. Be that as it may, the place still stunk like an ashtray. Either have the place professionally deep-cleaned or throw out the carpets. To not do so is a sever dis-service to your client and frankly, is wasting the time of your fellow agents. No one will contemplate such a home without a deep discount.

FNMA, Corruption and Personal Responsibility. Where Have All The Grown-Ups Gone?

Many folks reading this article today are probably fellow Realtors who are well aware of the further eduction requirements that must be undertaken in order to remain licensed by the state. For those with real jobs, let me explain that we must complete eight 3 hour courses every two years here in Arizona. This morning was just such a course. Sometimes, the subject and the lecturer are so interesting that the time just flies by. At others, the subject matter is so dry that even the most entertaining speaker in the world, can not make it interesting. Today was such a day. However, in amongst the drudgery, a few nuggets came to light that make it worthwhile.

It wasn't the fact that Franklin Raines, after inflating the reports of FNMA's profitability, was able to enrich himself to the tune of $90 Million in unearned bonuses. Nor was it the fact that his lawyers negotiated the return of a paltry $5 million of his ill-gotten gains. Nor was it the fact that he voluntarily returned his stock options: never mind that they had been rendered worthless by his pitiful leadership. It wasn't even the fact that he was not imprisoned for his deeds. I've come to expect that from the denizens of Washington, D.C.. It was the fact that, despite all the shenanigans, the mis-management, the misguided rules and regulations imposed by a clueless congress; we have learned nothing.

Had a foreclosure? You can get a new home loan after three years. Bankruptcy? No Problem. Only a two year wait. The Fannie Mae Homestep program for their REO properties has a "no appraisal necessary" component. Most likely because none of their properties would actually appraise in the real world. Their solution, therefore, is to finance their over-priced turkeys in house so long as you are able to come up with a 3.5% down payment. Mind you 2% of that can be gifted. In reality, the buyers are in no way "buying" a home. They have not invested in anything. The are glorified renters. This is one of the many reasons people have walked away from their homes. They had no vested interest. Apparently, some genius thinks it's a good idea to do it all again to see if the results differ. And we all know what that is the definition of.

The culmination of the sorry times in which we live is demonstrated by an article that most of us have read. It is entitled "cash for keys". This is the latest fiasco in which lenders, prior to taking a property back, bribe the owners with cash to not trash the property on which they are delinquent. That's right. Rewarding people for doing exactly what any decent, upstanding citizen should do. It has come to this. It does not bode well for the future.

Banks Just Don't Get It

Recently, I railed about agents charging potential buyers for the costs of a "special" negotiation team in securing the debt forgiveness. This was over and above the traditional commission being earned and I felt very strongly that buyers were being gouged.

Later this week, I will have another tirade on how banks are abusing the very people they need, in order to extricate themselves from a mess, largely of their own making.

Meanwhile, I continue to be disappointed by the demands made of buyers by the banks themselves. Many have taken to requiring a potential buyer to qualify with a "preferred" lender. You don't have to use them, of course, but you are requested to at least pre-qualify. I saw one this week that required a buyer to fill out an attached form. Among the required information was not only your social security number, but also your mother's maiden name. All this to be faxed (how very secure) to "Joe's House-Painting, Pet-Sitting and Mortgaging Emporium". In the identity theft capital of the world, as Phoenix most certainly is, this is surely a recipe for disaster. This was not even a recognized bank, although that would hardly improve the situation, but a rinky dink mortgage broker that I had never ever heard of. I would add, that I have so far not allowed a client of mine to be blackmailed in such a fashion, and I have yet to lose a deal because of it. However, in the above example, the agent who "requested" that you comply, stated categorically that your offer would not be presented without it.

Essentially, today's buyer is not being treated with any respect, despite being an extremely valuable commodity and the only way out of this current quagmire.

Banks are sending a very clear message. Even though you have been through the trouble of getting yourself pre-approved, they do not care. They are telling you that they do not trust their "colleagues" in the lending industry. Yet, even while they are telegraphing their mistrust, they are insisting that you place all your trust, and financial information, in them. They are arrogant beyond belief and I suggest that we, as an industry, ride them as hard as possible until they learn better manners.

More to come, stay tuned!

Short Sales; Some Disturbing New Trends

As a Realtor, I am still astounded at how some neighborhoods remain awash in distressed properties, be they short sales or foreclosed homes. Of course, it's not too surprising, especially when you realize that pretty much any home built or sold after 2004 is worth less today, than it was then, at least in the Phoenix area. Many subdivisions that were built in 2006 and 2007 have virtually no original owners. Most have simply walked away, as prices halved, whether they could make the payments, or not. That is a subject for another day, although I will allow that the economy likely hurt many of them, while another large section of buyers took on debt they could not really afford, in the hope of continued appreciation that failed to materialize. All the while, aided and abetted by voracious bankers.

Recently, I was working with an elderly couple who were looking to downsize into a newer home. As usual, we ran into the problem that many homes on offer were short sales. They had neither the time, nor the inclination, to embark on what can be a lengthy process, so we concentrated on REOs and regular sales.

However, whilst skimming through some short sales, I was taken aback by the conditions of many sellers. I am used to a seller demanding the buyer qualify with a pre-selected lender, and I am used to not complying with that request. I see no benefit in my client divulging all their personal financial information to some lackey at a random bank. As I said, I was taken aback by a listing agent that disclosed that the short was being negotiated by a special company and that the buyer was required to pay the $4,000 fee associated with this service. This fee coming on top of the 6% listing fee that is customary in our market. Then, and at least they disclosed it, they revealed on their business affiliation disclosure, that the crack negotiating team was, in fact, a subsidiary of their own real estate company. All this on a $200,000 listing, which means the additional burden on the buyer was 2% of the asking price. Here's a newsflash! If you are unable to negotiate short sales, do not accept listings that require them!

In another short sale offering, the lister disclosed that the bank may, or may not, at its discretion, impose an extra 1% fee on the potential buyer. Genius! Punish the very person who is getting you out of the mess that you were, at the very least, partially responsible for creating. Some of these banks are as useful as a screen door on a submarine.

It will get worse. The ill-advised first time home buyers tax credit of $8,000 will be expiring at the end of June. Watch how many well-intentioned and eager would-be purchasers get entangled in the net of indecision that plagues most banks and their alleged decision makers.

Watch how eagerly our elected officials will scramble to re-fix the fix that they caused to be broken in the first place.

It's gonna be a bumpy ride.