ray mathoda

Proactive government and bank efforts to help distressed borrowers have largely, if not exclusively, been focused on ‘home retention’ programs in 2009. On the one hand this focus makes sense: the first question that should be asked and answered when a family stops making their mortgage payment due to financial hardship is whether an change to the loan terms would make the home affordable for the same borrower (thereby avoiding all the negative effects of a pre or post foreclosure home sale) while being acceptable to the investor.

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There are a lot of people who have gotten “unlucky” recently, in one way or another, and are finding themselves unable to make payments on their debt because their income and expense equation is no longer what it used to be (i.e., their income is down, or their expenses are up). Of the millions of homeowners currently not making their full monthly mortgage payments, it’s hard to tell which ones were unlucky, who got defrauded or lied to, and who just plain made a stupid (intentional or unintentional) mistake and bought something they couldn’t really afford.

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I had the privilege of participating on an exciting panel on the future of short sales at the REOMAC semi-annual conference in Palm Springs this week. REOMAC is the non-profit trade organization for REO industry participants – realtors, servicers, lenders, asset managers and other service providers –who focus on the (tough) job of helping Banks manage and sell properties they have acquired through the foreclosure process.

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The article included below from this weekend’s National Mortgage News talks about how the number of single family home sales in CA doubled between January 2009 and January 2008….while the median home price dropped over 40% (during the same period). The article also mentions that the CAR unsold inventory index dropped to 6.7 months in January 2009, from 16.6 months for the same period a year ago….indicating supply is decreasing.

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I am pleased to see the Obama administration attempting – much more aggressively than the Bush administration ever did – to help (3-4 million) at-risk homeowners stay in their homes through a variety of loan modification initiatives and incentives which are designed to lower the at-risk homeowners’ payments to levels they can afford to sustain going forward. Creative and aggressive loan modifications are absolutely a critical part of any well designed foreclosure prevention and housing market stabilization program, and the Obama team’s plan included 2 additional elements I liked:

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I believe that in the current housing and economic environment (with declining home values nationwide) it never makes economic sense for a Bank/Servicer to foreclosure on an owner occupied home. In a declining home price environment, a foreclosure is always the least attractive option for a Bank economically, as the time and cost of foreclosure result in lower economic returns compared to other pre-foreclosure options. As a result, I believe we can successfully and rightfully place a temporary nationwide foreclosure moratorium on homes occupied by cooperative owners/borrowers - if we design such a moratorium right and support it with appropriate private sector initiatives.

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It’s hard to find much good news nowadays, surrounded as we are by doom and gloom attitudes and news at work, in the media and in conversations. However, I see at least 2 important areas where the current trend is positive for us as a society: Housing Affordability and Humility.

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Every American can and should be a part of the solution to the historic housing and economic crisis our country and people are currently grappling with. This is my strong personal view as well as a key founding principle behind my real estate company HausAngeles, and is a view that is shared by most everyone around me both at work and at home. The truth is that until America is back on its feet and stronger economically, there will be millions of Americans (possibly up to 5 or 10% of our population) who need different types of help….but this number will be far smaller than the number of Americans (likely 90 to 95% of our population) who are in a position to help…in some way, big or small, monetary or non-monetary. So if we can help connect those with the ability and willingness to help with those that need this help….we can accelerate the path to economic recovery in a manner that isn’t dependent on the government “bailing everyone out”.

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Please find below a brief proposal I have put together on the issue of foreclosure prevention and housing market stabilization based on what I and the team at HausAngeles as well as our colleagues, clients and strategic partners are actually seeing (and not seeing) on the ground in Los Angeles/Southern California. I and we do not claim to have all the answers on this “massive issue”. Nor do we claim all of the ideas below are mine or ours (please see footnote 1: acknowledgements). However, refining and executing on some or all of these ideas will be a key focus for me and the team at HausAngeles for the foreseeable future and until the housing market stabilizes. Our primary geographic focus is Los Angeles, but we plan to share learnings and information widely and freely to maximize impact at the ground level.

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On November 2, 2008 (which was Diwali, an important national festival in India), I officially decided to “double down” into the real estate market as an entrepreneur. I have wanted to be an entrepreneur for a long time (I even studied Entrepreneurship as an MBA student at Northwestern University in the late 1990’s), and decided if I was ever going to “take the plunge”, the time was now.

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