Category Archives: Business

Government Driven Innovation: Will it Work in Mortgage Servicing?

March 27, 2012 – 2:51 am

I recently attended the Mortgage Bankers Association’s Annual National Servicing Conference in Orlando, Florida. The conference was at a massive Marriott – the largest in the world apparently – and was well attended by mortgage lenders, loan Servicers, 3rd party service providers, real estate companies, lawyers, government officials, and other stakeholders in the mortgage servicing industry. As I take a step back and think about what really stood out at this conference relative to 2010 and 2011, I realized that this was the moment where it became clear that real change and resource allocation in the (residential) mortgage servicing industry is currently owned and driven primarily by the government – and not the private, for-profit sector.

Now, I am an entrepreneur and innovator – and one who grew up in pre-economic liberalization India as the daughter of a 35+ year public servant. Coming to America where I studied and learned economics, public policy, and business; and watching India’s economic growth since liberalization started in 1991, has left me believing that capitalism is surely the best way to maximize the size of the economic pie available to society. However, I have also seen how capitalistic and market based systems can be manipulated and abused by those controlling them for their personal benefit – to the detriment, sometimes, of the majority. So I am a capitalist, but one with a healthy appreciation for the role of government in markets and market economies…especially in the arena of consumer protection.

This realization regarding the government’s pre-eminent role in mortgage servicing innovation left me wondering whether there is any precedent for the government getting change and innovation right in market economies…here in the US or elsewhere? This is the million dollar question in the mortgage servicing industry…and time should certainly tell.

Love to hear about any examples of industries that successfully underwent transformation with government leading the way.

Tags government intervention, housing market, innovation, mortgage servicing, residential housing | Comment (0)

Business Life Public Policy Real Estate

Origination News: “New Role Suggested for RE Agents”

March 21, 2011 – 1:02 am

My Utah presentation (subject of the ‘Elephant in the Python’ blog) was quoted/picked up by this reporter for Origination News. Instead of just talking about this though, I am getting involved in leveraging real estate agents as the ‘enlightened self interested party’ in helping us solve this housing crisis by preventing foreclosures. ray

“Origination News: New Role Suggested for RE Agents”
Monday, March 7, 2011
By Lew Sichelman

PARK CITY, UT—Among the numerous and often futile efforts to keep troubled borrowers in their homes, a former IndyMac Bank executive believes real estate agents represent a largely untapped resource.Not agents who list and sell foreclosed properties, said Ray Mathoda, who now bills herself as a housing industry social entrepreneur.

Those professionals are “bank-facing” agents who work for investors.

Rather, consumer-centric agents who have much more to benefit by helping buyers and sellers, Mathoda said at the Midwinter Housing Conference here earlier this month.

Noting that borrower outreach has been pretty much a failure—even today, two out of every five owners who fall into foreclosure claim to have had no contact with their servicers—and that consumers are often poorly informed about their options, Mathoda said realty agents stand a good chance of reaching borrowers who are often “bombarded by a barrage” of confusing, uncoordinated array letters and phone calls.

At the very least, she added, agents can be used by servicers and investors to augment the efforts of overworked, understaffed housing counseling agencies.

Mathoda, who was chief administrative officer at IndyMac, has founded two socially responsible minority-owned businesses—AssetPlanUSA, a national provider of training and education solutions to the housing industry, and HausAngeles, a real estate management consulting firm and brokerage located in the Los Angeles area.

She has been an advocate for standardized, pro-consumer and pro-investor short sales since the start of the housing crisis, arguing that the primary goal of everyone should be financial stability, not home retention.

But noting that short sales aren’t the only viable option, for either the borrower or the investor, Mathoda said no one is in a better position to explain their choices to consumers than real estate agents.

She admitted that realty agents don’t always have the best reputations.

But she said that operating under their brokers’ supervision and an honor code of ethics, agents have the “good business sense” to help people decide what’s best for them.

In return, she added, an agent gets a referral source, if not a client, for life.

And perhaps even a listing or two along the way.

“Real estate agents are our only professional with a fiduciary obligation, yet we’re not taking advantage of that,” Mathoda said.

see the rest here: http://www.originationnews.com/on_features/new-role-suggested-1023709-1.html

Tags foreclosure prevention, hafa, housing crisis, real estate agents, short sales | Comment (1)

Business Politics Public Policy Real Estate World Affairs

Strategies to address the elephant in the python: housing market stability we all want

February 12, 2011 – 8:07 pm

I spoke yesterday in Utah at the mid-Winter Housing Finance Conference on the subject of loan Servicing (what’s wrong and how to fix it). The focus of my presentation was on outlining a new vision for default management – the business of Banks (loan servicers and investor) working with consumers in default on their mortgage. Here is the document I shared with the audience.

Implementing the ideas shared in the presentation is possible – I know of others or am personally involved in implementing several of these approaches myself. The end result of adopting these approaches would be much higher success in preventing residential real estate foreclosures than the default industry is achieving today PLUS significant reductions in investor mortgage loan loss severity relative to current approaches.

Strategies to Address the Elephant in the Python: Housing Market Stability We All Want

Tags default, distressed consumers, foreclosure alternatives, foreclosure prevention, foreclosures, housing market, housing policy, housing stability, housing strategy, loan modifications, short sales | Comment (0)

Business Life People Public Policy Real Estate

492 Days “Free Rent” For Those Choosing Foreclosure

November 30, 2010 – 2:08 am

For those of you who don’t think there’s additional downside risk in the housing market, here is a number that is a shock to almost any reasonable reader: 492.

This is a number that was reported in a Wall Street Journal blog from yesterday…and represents “the number of days since the average borrower in foreclosure last made a mortgage payment”.

I am an ardent advocate that the government and Banks can and should be doing a lot more (more efficiently than current approaches) to help distressed homeowners get educated about their realistic options, avoid foreclosure, and get a fresh start so they can move on to get jobs, stabilize themselves financially, and buy a home again…if they so desire, and if their credit behavior supports the opportunity. However, the housing crisis will not be solved and private mortgage investors will not lend again freely (as they need to in order to support overall economic growth) unless some common sense standards are set for the foreclosure process across the 50 states.

During extraordinary times such as the ones we are living in currently, I am a proponent of a 12 month maximum standard transition timeframe for borrowers with documented financial distress to transition from their properties through either a foreclosure alternative or through foreclosure. I think 12 months is enough time for a family to come to terms with their financial problems, develop a plan to get back on track, and start to implement on that plan including moving out of the home they couldn’t afford.

Here’s some more information from and a link to the relevant blog:

Number of the Week: 492 Days From Default to Foreclosure

492: The number of days since the average borrower in foreclosure last made a mortgage payment.

Banks can’t foreclose fast enough to keep up with all the people defaulting on their mortgage loans. That’s a problem, because it could make stiffing the bank even more attractive to struggling borrowers.

In recent months, the number of borrowers entering severe delinquency — meaning they missed their third monthly mortgage payment — has been on the decline, falling to about 700,000 in October, according to mortgage-data provider LPS Applied Analytics. But it’s still more than double the number of foreclosure processes started.

As a result, banks are taking progressively longer to foreclose. The average borrower in the foreclosure process hadn’t made a payment in 492 days as of the end of October, according to LPS. That compares to 382 days a year ago and a low of 244 days in August 2007. Here’s a link to the full blog: http://tinyurl.com/36ghafg

Tags borrower, distressed borrower, foreclosure, foreclosure process, foreclosure timeline, free rent | Comment (0)

Business Life People Public Policy Real Estate

HAFA Short Sales: A Much Needed “Fresh Start” Program For Troubled Borrowers

November 27, 2010 – 7:14 pm

A recently implemented foreclosure alternatives program created by federal officials is reflective of what many real estate professionals know already: for those experiencing significant loss of household income, financial stability and a job are more important than short term retention of home ownership.

The Home Affordable Foreclosure Alternatives – or HAFA program – designed by the Treasury Department and implemented by Fannie Mae, Freddie Mac, and loan servicers representing more than 90 percent of all loans outstanding offers short sale and deed-in-lieu opportunities to millions of distressed homeowners who are struggling to make their mortgage payments due to labor market issues.

Short sales are the primary foreclosure alternative offered under the HAFA program. With its mandatory implementation in the non-GSE market starting April 5, 2010 and its adoption by both Fannie Mae and Freddie Mac on August 1^st, 2010, HAFA becomes the only standardized nationwide short sale program offered by multiple loan servicers with mandated debt forgiveness by all lien holders and $3000 in relocation support to help families move to affordable housing and regain their financial footing.

Until now, debt forgiveness for qualifying families has been a critical missing ingredient in the short sale industry – affecting homeowners as well as the real estate professionals supporting them during their time of need. Loan servicers – who represent the interests of loan investors (not consumers) – have been reluctant to promise debt forgiveness when approving short sale transactions due to fear of potential lawsuits from loan investors aiming to maximize their collections on bad debt.

Now, the HAFA program has set a clear and much needed market standard – for qualifying families with unaffordable mortgages on their primary residence – debt forgiveness should be the norm. Finally, we can offer distressed borrowers a respectful exit and fresh start outside the foreclosure process.

Tags debt forgiveness, distressed borrower, foreclosure alternatives, foreclosure prevention, hafa, home affordable foreclosure alternatives, mortgage relief, short sales, treasury | Comment (0)

Business Life People Politics Public Policy Real Estate World World Affairs

Responsible 2nd Chances: Loan Modifications Addressing the Issue of Negative Equity and (Borrower) Moral Hazard

January 9, 2010 – 11:46 pm

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.

On the other hand, given constrained resources this almost exclusive focus on home retention, which has come thus far at the expense of those that could not afford to keep ownership of their home, has been a little confusing to me, a former Chief People Officer who had to layoff over 7000 people between mid-2007 and mid-2008 due to the mortgage crisis. Most of these above mentioned responsible employees of my former mortgage bank employer, unfortunately fall into the latter category of families who would not be able to afford homes they once could, and I think we have missed the boat thus far on properly providing and supporting home and life transitions for these families.

My issue with the focus of government and bank programs thus far is not that they shouldn’t focus on helping every family in trouble first try to keep their home if they want…but on the public message and conversation we are having.

America is undergoing a fundamental shift in consumer behavior and economic activity today, and as Charles Darwin said, ‘It’s not the strongest species that survive, nor the most intelligent. It’s the ones most adaptable to change’.

Americans (myself included) need to adapt to the new economy…and if this means they need to sell their home and move…so be it. (Family), jobs and financial stability are more important, in my view, than holding onto a home one cannot afford.

Notwithstanding the above gap in proactive bank and government programs till date, let’s circle back to the issue of home retention first. Early results are in on government and bank home retention efforts…and performance thus far is viewed as below expectations. Only about 20% of the families in trouble have been provided a temporary modification (mod) yet…and conversion rates of these temporary mods to permanent mods are very low thus far. 2 things should be noted before one judge’s the above too soon:

1. The number of loan modifications attempted (this is where progress starts – with a step in the right direction) is significantly larger than in the previous year/s and under the previous administration/team

2. In some ways, the problem isn’t the number of people in trial mods. While lots of effort is and will be put on solving the current problem (hopefully successfully) of converting the 75% or so performing trial mods into permanent ones (except where there was mis-statement of income, which is not kosher in my view), the real issue is improperly set expectations…and lack of enough alternate modification programs (addressing the diversity in situation among those in trouble right now).

A key flaw in most loan modifications offered today including HAMP is highlighted by the article I am including below on a recent by the New York Federal Reserve Bank: they do not address the issue of negative equity.

Since 25% of US homeowners have negative equity today, and since our national goal is to do more to help those in trouble who want to retain their home, I thought I’d resurface a simple loan modification proposal I first introduced in an April 2009 blog….which I believe could significantly expand the success of our home retention efforts.

Responsible Second Chances: A break today in exchange for some of tomorrow’s upside

For every American family who is unable to afford the payment on their primary residence, I would offer them a one page loan modification with the following terms:

1.    Reduction in loan principal down to current market value.
2.    30 year fixed mortgage at current historically low market rates.
3.    25% of any equity appreciation from the written down loan principal (the remaining 75% would go back to the investor taking the loss on the principal write-down today)…thereby reducing the bite of the loss of principal taken today.

4. Requirement that if the borrower misses more than 3 mortgage payments again and is unable to reinstate their loan, they would voluntarily exit the property within 6 months of falling behind…either via a Short Sale or Voluntary Foreclosure.

Why do I think the program above would help many not being helped today? Here’s why:

1.    It addresses the issue of negative equity…which is critical, per the article and study mentioned below
2.    It is ‘economically’ the right answer (in effect, any family that can afford their home today at current values and mortgage rates, gets to keep it)
3.    It addresses the issue of moral hazard: there’s no free lunch in America (at least not for long). The family gives up 75% future equity appreciation in exchange for the investor taking a significant loss on the loan today (via the principal write-down). This should largely eliminate, in my view, the need to collect financial hardship documentation…which is a key reason many mods are not becoming permanent today.
4.    It is simple to understand, unlike the HAMP program…which does not result in a principal reduction, as many borrowers applying for HAMP mistakenly believe it does.

5. It addresses the issue of what happens if the loan goes bad again…which is important for the investor who is making a big compromise today.

Implementability

It is likely my proposal is not implementable in many parts of the private market…particularly the securitized loan market. However, it could be implemented for government sponsored and owned enterprises…Fannie Mae, Freddie Mac and FHA…which represent a large part of the market.

Article from DSNews.com: Fed Study Finds Principal Writedowns Minimize Risk of Redefault

Servicers who lower distressed homeowners’ mortgage payments by reducing the principal balance, as opposed to just making interest rate adjustments, are much more likely to see the payments keep coming in and ward off a redefault, according to a new study published by the Federal Reserve Bank of New York.

The economists found a definite pattern among modifications made since December 2005 that suggests “an intention among servicers to make the loans more affordable, while not losing any of the underlying principle.” However, their analysis shows that modifications that trim off some of the loan balance have higher rates of success and “can double the reduction in re-default rates.”

While principal writedowns essentially mean the lender or investor must eat a loss, many analysts argue that it’s a smaller loss than comes with the eventual foreclosure and the price tag of a nonperforming asset in today’s housing market, already swollen with REO inventories and vacant properties.

According to the New York Fed’s economists, when a borrower’s monthly mortgage payment is cut by 25 percent by reducing the interest rate only, the borrower is 11 percent less likely to default within one year.
But, if the monthly payment is lowered by the same 25 percent, this time by shaving 25 percent off of the outstanding loan balance, coupled with a small interest rate cut, the chances that the borrower will defaulting again within one year drops by nearly 27 percent.

The report’s authors also concluded that borrowers who have a loan-to-value (LTV) ratio of 115 percent or higher – meaning they owe 15 percent or more than their homes are worth – pose a 51 percent higher risk of redefaulting after a modification.

According to a blog by Wall Street Journal reporter Nick Timiraos, the findings of the New York Fed paper could have big implications on the administration’s Home Affordable Modification Program (HAMP). Timiraos explained that while the program doesn’t preclude principal forgiveness on the part of lenders, HAMP’s primary push is on lowering interest rates and extending the loan term to bring monthly payments down – exactly the types of modifications that the Fed report says have a higher chance of becoming delinquent again.

The Congressional Oversight Panel and the special inspector general for the Troubled Asset Relief Program (TARP) have criticized the government’s mortgage modification efforts on numerous occasions for not addressing the issue of negative equity, which would ultimately involve trimming LTV ratios by shaving off outstanding mortgage balances.

A growing number of mortgage experts and foreclosure counselors agree with the federal watchdogs and the New York Fed economists that principal reduction is a powerful incentive for borrowers to keep up with their restructured payments, particularly now, when such a large number of mortgages are underwater.
First American CoreLogic says that nearly 10.7 million, or 23 percent, of the residential mortgages in the United States had negative equity at the end of the third quarter of 2009, with the homeowner owing more on the home than it was worth.

A modification is only worthwhile if it induces borrowers who would otherwise default to continue paying, the New York Fed’s economists noted, and they argue in their analysis that borrowers with positive equity in their properties have a strong incentive to keep current on their mortgage, since delinquency and foreclosure will ultimately lead to a loss of the asset.

“In fact,” they wrote, “borrowers with positive equity (that is, borrowers whose house is worth more than the balance on their mortgage) should rarely default, since refinancing the mortgage or selling the property are better options than foreclosure, which may cause the borrower to lose [their] equity.”

Tags foreclosure prevention, HAMP, home retention, loan modification, Making Home Affordable, negative equity, principal writedowns | Comment (0)

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Who should get to keep their home and who shouldn’t? Simplicity is key for success

April 23, 2009 – 1:54 am

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.

So who – of the large number of people that aren’t able to make their currently monthly housing payments – should get to keep their home and who shouldn’t? This is more than a million dollar question and we’re having a helluva time as a nation trying to answer this question, in policy and in practice, fairly, systematically and timely.

There are currently a myriad home retention programs implemented across dozens of servicers nationwide, and if I had to pick one word to describe the current landscape of options made available to troubled borrowers, I would pick “complicated”.

I think if we could come up with a simple common sense rule of thumb to answer this key question, we would be much further ahead in stabilizing our housing market. So in the spirit of proposing solutions instead of criticizing current approaches, here’s my simple solution to this problem:

If you can afford the home you currently live in at its current market price with loan terms based on current (historically low) market housing rates….you should get to keep it. If you can’t, you should move on and find rental housing that you can afford based on your current financial reality.

How would I achieve the above if I were designing our national housing programs? I’d keep it pretty simple (although I acknowledge that making it so would be rather complicated and time consuming…with no guarantee of success):

1. Do principle write-downs to current market value for all troubled borrowers who can afford their home on current market terms…but in return for this (massive) accommodation…require them to give up 75% of future home equity appreciation back to the investors who took the loss resulting from the initial principal write-down…until the investors are made whole. After that point, allow the homeowner to keep any remaining equity upside.

2. Allow every other owner occupied troubled borrower to sell their property via a servicer offered short sale accompanied by a cash payment to help the family move to affordable rental housing. Forgive the “deficiency” for these borrowers including any tax that might be owed on the amount forgiven (most families in trouble can’t afford a hefty tax payment anyways, so this would only push them further into the hole)

3. Allow every other non-owner occupied borrower to sell their property via a servicer offered short sale, but with no cash payment and no automatic forgiveness of deficiency

Would we likely require a new governmental entity/group to track the details on the principal write-downs and resulting future home equity appreciation share on behalf of impacted investors? Yes.

Is this simple proposal difficult to gain agreement on? Yes…very difficult. But no more difficult than it will be to deal with the millions of avoidable foreclosures that we will experience otherwise.

Tags foreclosure crisis, foreclosure prevention policies, housing crisis, short sales, systematic short sales, US housing market | Comment (0)

Business Los angeles Public Policy Real Estate

REOMAC Update: REO Brokers Are Hungry For A Better Way

April 9, 2009 – 11:01 pm

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.

The panel included 2 experienced industry leading REO brokers Patrick Bartolic and Earl Gervais, Ron Garber from Short Sale Plan, Todd Wilson from Prospect Mortgage and myself, was moderated by Art Acosta (another top REO agent and REO industry leader), and was a big success. The room – which was packed with 500+ of the (real estate) professionals most familiar with the emotional and practical human toll of foreclosures – was inspired by the vision of the panel and hungry for a foreclosure alternative that works!

While the panelists started by lauding the efforts of the Obama administration to try to help as many people as possible retain ownership of their homes via loan modifications that reduce their monthly housing costs significantly, they also acknowledged the practical reality on the ground: that many if not most families in trouble have experienced a significant reduction in their income and are unlikely to be able to continue to afford the homes they once thought they could.

The focus of the panel was on this segment of consumers who don’t qualify for or fail a loan modification and the solution presented was systematic, lender offered short sales. Such short sales are very different from the typical borrower-requested short sale seen in the market today, and most everyone in the room agreed this systematic emerging solution should be THE preferred alternative for troubled borrowers living in homes they cannot continue to afford.

As an ardent advocate for systematic short sales (As previously discussed on this very blog, I believe this program is THE missing loss mitigation and foreclosure prevention initiative in our current national approach to the housing crisis), I admit I was pleased to see how unanimously the room agreed this solution is necessary and likely inevitable.

There just aren’t a lot of practical housing crisis solutions available that can simultaneously benefit consumers, the US housing market, investors and servicers, and which don’t come with a heavy taxpayer price tag….except systematic short sales!

Systematic short sales like the ones described by the panel (i.e., those offered to all owner occupied borrowers who fail to qualify for or succeed at a loan modification right when the loan modification decision is made) reduce the emotional and credit impact for borrowers by preventing foreclosure while providing the borrower significant (non-taxpayer funded) financial assistance to help move to rental housing. By accelerating the timing of asset sale in a declining home price environment in a manner that is amicable for the borrower, such short sales help stabilize the housing market faster and at higher levels than foreclosures would. And finally, systematic short sales significantly reduce investor losses and servicer advances…..positively affecting a key pain point in the housing and financial markets today.

So why isn’t this ‘no-brainer’ solution already widespread in the industry? The panel discussed two key reasons. One, this is the first time in the nation’s history that circumstances (including tax law) have collided to make this a no-brainer solution for all involved including the consumer (e.g., prior to some 2007 amendments to tax law, consumers owed taxes on any deficiency forgiven by the lender in a short sale). Second, practically speaking servicers just aren’t set up (yet) to execute on this key opportunity from an organizational, process/techology, and policy/guideline standpoint.

So what’s next? It seemed pretty clear to all in the room that systematic short sales are the right answer. Key panel members – including me – stated they considered this a big policy and business opportunity and were working to help key servicers develop and implement systems, policies and procedures to implement this alternative. So stay tuned for more on that front.

The bottom-line for now, though, is good news in my view. Key REO industry leaders believe it is just a matter of time before systematic, lender offered short sales become a viable foreclosure alternative for borrowers in trouble who currently have no option but foreclosure…..and the REO realtors who deal with foreclosures every day are standing first in line hungry for this solution.

DISCLAIMER
This blog is intended to be a general discussion only and should not be considered legal or tax advice. Your use of it does not create an attorney-client relationship. Any liability that might arise from your use or reliance on this article or any of its links is expressly disclaimed. This blog is not legal, accounting or tax advice, is not to be acted on as such, it may not be current, and is subject to change without notice.

Tags certified short sales, foreclosure prevention, foreclosures, housing crisis, lender assisted short sales, pre-approved short sales, REO, REOMAC, short sale panel, short sales, systematic short sales | Comment (0)

Business Los angeles Real Estate

Second shoe to drop for CA single family home prices?

March 9, 2009 – 5:36 pm

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.

On the surface, the article might lead one to believe that the CA single family real estate market is stabilizing and the rate of home price declines should begin to slow down. However, the unfortunate fact is that there has been no improvement in CA’s real economy during the last year.

Instead the situation has gotten significantly worse, as evidenced by company layoff announcements which are now ubiquitous and reflected in the increased and increasing CA state unemployment rate. This leads me to a hypothesis that “reality” is likely different than one would think based on the CAR home sales and unsold inventory level data.

California’s single family real estate unsold inventory levels are likely artificially low right now, as inventory has been held on Bank/Investor balance sheets for 2 reasons:

1. The moratorium on foreclosures at several large Banks/Servicers including Fannie Mae and Freddie Mac

2. A general slowdown in property disposition activity as Servicers first waited to learn the details of the Obama housing plan (announced about a week ago) and now start the process of assessing borrower’s eligibility for loan modification or refinance under the expanded set of guidelines under the Obama plan. It is only after this process is completed that Servicer’s will start to move forward with alternate plans (including possible foreclosure) on those borrowers who didn’t qualify for a loan modification or refinance.

The truth is the Obama plan (both on loan modifications and refinances) – which only applies to mortgages that have a conforming loan balance – is less likely to help CA home owners than those in states where home prices were lower (i.e., more conforming) during the boom period.

As a result, a large percentage of the assets held on balance sheet will likely need to be sold in the future. While it’s impossible to really know where the CA real estate market will go (as this will be impacted by many yet unknown factors)….my gut instincts tell me there is likely another leg down to come for CA home prices.

PS: Here’s the article I mentioned:

CA Home SalesDouble in Jan.
By Jennifer Harmon

LOS ANGELES-Statewide home sales in January edged past 600,000, double the year before, signifying that the market is gradually working its way through the large numbers of distressed sales caused by the mortgage crisis, according to the president of the California Association of Realtors.
While the median price of a home fell 40.5% in California in January, single-family home sales increased 100.8% with a total of 624,940 homes, according to CAR. The resale activity was up from the revised 311,160 sales pace recorded in January 2008. Sales in January 2009 increased 14% compared with December.

Click here for the full article: NMN Article

Tags CA home prices, CA real estate inventory, california home prices, California housing market, CAR, foreclosure, foreclosures | Comments (2)

Business Life Los angeles Politics Public Policy Real Estate

One Key Missing Piece: Early Thoughts on the Obama Plan for At-Risk Homeowners

March 6, 2009 – 1:00 am

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:

1. A clear stated definition of who the plan is not designed to help: Speculators. This is important because the American taxpayer cannot afford to help everyone, and everyone – particularly speculators – doesn’t deserve help. If anything, I wish the administration had made a further differentiation in treating homeowners who used their homes as a piggybank (by taking out cash and spending it) vs. those who didn’t (these latter borrowers are the most responsible group of at-risk homeowners)

2. Focus on a key practical issue – the lack of standardization (across Banks) on both the loan modification program guidelines (which the Obama plan says they will standardize) as well as documentation/forms (which I assume they will standardize consistent with the new standard guidelines). I cannot emphasize how important an issue this is and will continue to be from an execution standpoint. Just last week, I was in a discussion with a Los Angeles non-profit focused on foreclosure prevention, whose employees were telling me what a barrier to success it is to have different documentation requirements at each Bank.

I don’t know how well the programs the administration is trying to get implemented will work, but I know attempting this is absolutely the right thing to do…and if the administration and others involved in execution remain focused and flexible, they will learn and adapt from early experiences to re-design or enhance the programs to be most successful.

The above being said, I think the Obama plan as announced thus far fails to address what would happen to a critical, real and very large number of at-risk responsible borrowers: those that don’t qualify for a loan modification for their primary residence even under the expanded framework.

This set of borrowers would be particularly heavily concentrated in high cost regions such as California where I live, where the market (in the boom days) was heavily non-conforming and where as a result, refinance options will continue to be scarce despite the Obama plan. Also, there are just a lot of people, particularly from the financial services, real estate and mortgage industries who will just not make the kind of money they used to make during the boom days…anytime soon.

The right answer for these borrowers is not foreclosure; nor is it to keep them in homes they cannot afford anymore. We can and should help these borrowers avoid foreclosure and adapt their housing costs/reality to their new economic reality in a manner that is respectful and graceful – by aggressively implementing short sales programs that work (the short sales process currently practiced is broken and must be fixed).

In order to work, a short sale program must be systematic (just like loan modification programs are)…with clear guidelines, documentation requirements and approval/execution timeframes. Designed right, these programs save the Banks enough money (relative to the foreclosure option) that the Banks should be able to give the homeowner a helping hand (cash) to help them with their move and new rental.

And the best part? There’s no need for additional bailout money needed to “bridge the gap” and help prevent foreclosures even for those responsible homeowners that didn’t qualify for a loan modification or refinance.

Tags foreclosure prevention, lender assisted short sales, loan modification, making homes affordable, obama housing plan, obama making homes affordable plan, short sales, systematic short sales | Comment (1)

Business Life Los angeles People Public Policy Real Estate

Why it Never Makes Business Sense For a Bank to Foreclose on an Owner Occupied Home

February 26, 2009 – 4:47 pm

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.

A foreclosure should only be necessary if and when the borrower (individual or family) doesn’t return the Bank’s phone calls or respond to the Bank’s letters and is otherwise uncooperative on the issue of how to address their housing costs and reality in a way that is sustainable for them and the Bank longer term. This in my mind is a key concept: the goal of all foreclosure prevention initiatives should be to adapt the borrowers economic reality with their housing reality.

In simple terms, here’s how we can avoid foreclosures in a way that is consistent with good business and good policy:

1. Loan modifications to make housing costs affordable: Maximize the number of borrowers whose loan is modified such that their housing costs are consistent, on a go forward term basis, with their go forward monthly income. The Obama administration has announced several initiatives to expand current loan modification programs to help achieve this goal.

However, loan modification cannot work for everyone. If an individual’s earnings are down a lot with no immediate prospect of returning to previous higher levels (which is the case for many people in the housing, real estate and mortgage sectors)…then they really cannot afford to stay where they currently are. For example, if a realtor previously earned $500,000 per year and is living in a $3 million dollar home but is now only making $100,000 per year then loan modification just isn’t an option for them. A different solution is required.

2. Servicer assisted short sales: For every individual who does not qualify for a loan modification, a servicer assisted short sale should be pursued right at the point the loan modification decision is made. In a servicer assisted short sale, the (troubled) borrower works with the servicer as a partner instead of adversary. The home is sold for market value, the difference between the amount of the home sale proceeds and the loan amount is forgiven (and current law waives any tax liability associated with this forgiven amount), and the servicer can even afford to pay the borrower to help make their move to more affordable housing smooth, graceful and respectful.

This type of short sale program is and should be the industry standard – and I and HausAngeles are enthusiastically working with a leading servicer to pilot and refine this program in Los Angeles (so it can quickly be rolled out nationwide).

The above foreclosure prevention strategy – implemented in a coordinated and well communicated manner – can effectively eliminate foreclosures for all cooperative troubled borrowers while actually reducing servicer/Bank losses on these troubled assets.

Can doing the right thing be good business? On the issue of owner occupied foreclosures I believe the answer is yes – as long as all parties are polite, respectful and realistic.

Disclaimer: This blog is not intended to provide legal or tax advice to anyone and merely reflects my personal understanding and opinions on this issue. Individuals should consult with their tax advisor before taking any action based on the above.

Tags foreclosure moratorium, lender assisted short sales, loan modifications, los angeles foreclosures, los angeles short sales, loss mitigation programs, loss mitigation strategies, preventing foreclosures, servicer assisted short sales, short sales | Comment (0)

Business Life Los angeles People Real Estate spirituality

The Silver Lining of The Crisis: Affordability and Humility

February 23, 2009 – 7:42 pm

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.

First, as a result of the housing crisis and the tremendous (and at least for now, continuing) declines in the prices of residential real estate, home or condo ownership is suddenly becoming a viable possibility for many lower income families. As an example, please check out the press release below from the California Association of Realtors (a trade organization) which discusses the massive improvements in housing affordability in California over the past 12 months. The analysis below is grounded in Q4 08 vs. Q4 07 data and will continue to “improve” (from a lower income family standpoint) in the coming months. This information is a far cry from conversations I remember just a few years ago regarding how housing had become a “luxury product” in California. Given the tremendous and well acknowledged familial and social benefits of home ownership, this significant improvement in housing affordability is great news for California and for Los Angeles.

Second, one of my least favorite aspects of the boom days was the massive inflation of ego’s all around me. Many people made much easy money during the boom, and in too many cases this financial success was accompanied by an increased sense of relative self-importance (for reasons discussed by both Nassim Nicholas Taleb and Malcolm Gladwell in recent books). The current crisis is quickly downsizing people’s ego’s and I, for one, think a humbler, gentler us will be a better us as a whole.

Entry-level housing affordability increases to 59 percent
Click here for the full article: Full Article

Wednesday, Feb. 18, 2009

C.A.R. reports entry-level housing affordability increases to 59 percent

LOS ANGELES (Feb. 18) The percentage of households that could afford to buy an entry-level home in California stood at 59 percent in the fourth quarter of 2008, compared with 33 percent for the same period a year ago, according to a report released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

C.A.R.’s First Time Buyer Housing Affordability Index (FTB-HAI) measures the percentage of households that can afford to purchase an entry-level home in California. C.A.R. also reports first-time buyer indexes for regions and select counties within the state. The Index is the most fundamental measure of housing well-being for first-time buyers in the state.

The minimum household income needed to purchase an entry-level home at $248,030 in California in the fourth quarter of 2008 was $48,900, based on an adjustable interest rate of 6.02 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,630 for the fourth quarter of 2008.

At $48,900, the minimum qualifying income was 42 percent lower than a year earlier when households needed $83,700 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California households, where the median household income is $59,160.

At 76 percent, the High Desert region was the most affordable area in the state. The San Luis Obispo County region was the least affordable in the state at 44 percent, followed by the Los Angeles County region at 46 percent.

The First-Time Buyer Housing Affordability Index also rose 6 percentage points in the fourth quarter of this year compared with the third quarter of 2008, due to a 14.1 percent decrease in the entry-level median home price.

Historical affordability data can be found at: historic data.

Tags affordable housing, CAR, economic crisis, ego, housing affordability, housing crisis, humility, silver lining in crisis, silver lining in economic crisis | Comment (0)

Business Education Life People

Announcing the creation of “HR Helping Hands”: An All Volunteer HR Professionals Mentor Network

February 19, 2009 – 10:07 pm

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”.

It is with this spirit that I have founded “Human Resources (HR) Helping Hands”: an all volunteer, free network of professionals with HR experience who want to donate their time and talents to help fellow Americans (e.g., those that have lost a job recently) in need of advice and support with respect to their job and career transitions.

As a former Chief People Officer for a 10,000+ employee organization, I have worked with many Human Resources professionals and know that “HR people” are helpers and empathizers by nature. Many HR professionals really want to help those impacted by this crisis, particularly given the large number of people experiencing job loss right now, but don’t have an easy way to get connected with these individuals in need. Enabling this “connection” is what HR Helping Hands is all about.

In the few days since I made the decision to create this network, I am already inspired by the enthusiasm and response from my HR colleagues and friends. Susan Cline, my former (fabulous) assistant at Indymac Bank, has agreed to be the “administrator” of this network…purely in her “free time” (i.e., during the evenings after she comes home from work). Key current and former Indymac HR leaders – Annissa Deshpande, Jennifer Pikoos and Marie Therese Wynne – have also joined the network, as well as agreed to be part of the core team that helps to build and manage this network (again, all in their personal time).

The network is “live” so if you are an HR professional (or know one) who would like to join and help, please email Susan at susanmc50@gmail.com. Alternatively, if you have a friend or acquaintance who could use an HR mentor…connect them with Susan to help them get an HR professional mentor assigned.

In order to keep the process simple (since this is an all-volunteer initiative), we are asking the HR professionals for the following minimum support for each mentee: an email or phone resume consultation/feedback session, and a 30m or more job and career advice session. Mentors can decide to do more and mentee’s can ask for more help…but we will leave this up to them to discuss and resolve.

I will keep you blog updated as this initiative progresses….and hope you will share this with anyone you think might be either a potential mentor or mentee. ray

Tags citizens helping citizens, hausangeles, helping laid off people, helping others, hr helping hands, HR professional, HR professional mentor, HR professional support, human resources, job dislocation | Comment (0)

Business Life Los angeles Public Policy Real Estate World Affairs

Foreclosure Prevention & Housing Market Stabilization: Thoughts from the Ground Level

February 5, 2009 – 6:30 pm

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.

Preventing Foreclosures, Helping Consumers and Accelerating the Stabilization of the US Housing Market

Background and Context

I am the former Chief People/Administrative Officer and CEO Chief of Staff of Indymac Bank, who found herself at the epicenter of the mortgage and housing crisis since mid-2007. I resigned from Indymac after the FDIC placed the company into conservatorship, but decided to continue to focus on the housing/real estate sector where I saw and continue to see tremendous opportunity for positive impact, both personal and professional.

As I have gotten deeper into the real estate market and understood the reality on the ground on foreclosures[1], I have discovered numerous untapped and under-tapped opportunities to better help consumers manage their financial issues/life transitions, prevent foreclosures, reduce lender/investor losses, and help the housing market “find its bottom”. I strongly believe the housing market reaching bottom (or close to it) will mark a crucial turning point in our economic recovery.

Two interesting and important characteristics that I believe many of these opportunities share are:

1. Many (if not most) of the proposed initiatives actually help consumers, lenders/investors and the US economy. This alignment of interests is historic as these stakeholders often have competing objectives, especially in times of crisis;
2. Many of these opportunities require government coordination and support to work effectively and expediently, as key implementation challenges are common across industry players and/or require government support/regulatory changes.

Untapped and Under-tapped Opportunities to Help Consumers, Reduce Loan Losses and Accelerate the Bottoming of the Housing Market:

1. Ensure every homeowner in trouble who can realistically afford to continue to own their home with a modified loan, gets one as soon as possible

* One of the big reasons a large percentage of borrowers in trouble currently don’t get timely help via a loan modification is literally because they don’t respond to letters from their Bank. It’s not difficult to understand this behavior: consumers delinquent on payments are scared to open/respond to letters from the very organization that they owe money to (which they are not sure they can pay back as promised).
* On the other hand, there are thousands (likely millions) of licensed professionals (e.g., realtors, financial advisors/planners) already living in the same communities as the borrowers in trouble…who are not being leveraged to solve this communication problem.
* So let’s leverage these licensed professionals on the ground to ensure we have evaluated every borrower who is behind on their mortgage to see if there’s a way to realistically help them retain ownership of their home[2].

2. Turn more owners into renters:

* In times of crisis, it’s critical to prioritize what’s most important. My belief is that safety and family are more important for homeowners in trouble than ownership, given the seriousness of the crisis we are facing.
* As a result, I believe we should implement programs that turn some current homeowners into renters without making them move e.g., by transferring ownership of the homes they are living in and love to investors who are looking for income earning assets.

3. Implement systematic, lender supported short sales:

* Where it is not possible for the current homeowner to continue to own their home, we should avoid the foreclosure process (which is painful, time consuming and expensive) and instead facilitate the sale of the home with the borrower and lender working as partners instead of adversaries.
* As someone in the real estate business I can tell you that getting a short sale executed right now is nightmarish. There are no industry standards and most lenders are not set up internally to properly approve/manage short sales. Yet short sales nip the foreclosure process in the bud and are better for homeowners (who would have the opportunity to adjust their housing reality to their economic reality and prospects with greater dignity and respect), lenders and the US economy[3].
* Since systematic, lender assisted short sales are a lower cost option to foreclosure, it may be possible to divert some of the cost savings back to consumers to help them with their life transition (e.g., for relocation and/or other expenses related to their move/life change)

4. Implement rent to own programs to expand demand
* For families who do not have enough saved to make a down payment or qualify for a conventional mortgage but who have jobs/steady monthly income there is an opportunity to create future home ownership opportunities through creative rent to own program designs

5. Expand the nation’s affordable housing stock:
* In many cities across the country there is currently an acute shortage of affordable housing and the existing affordable housing stock is in poor condition. In Los Angeles (where I am personally involved), as an example, we are embarking on a 25 year plan to redevelop our ~10,000 public housing units. Such redevelopment and development programs will take decades and cost billions.
* Why embark on that costly and time consuming process, when we have an excess supply of housing nationwide already? Instead, let’s turn some of these currently empty/lender owned properties into affordable housing and bring hope to those that sit at the bottom rung of the economic ladder in our society.
* I believe Fannie Mae and Freddie Mac REO’s (which are currently being held on these entities’ balance sheets due to recent foreclosure moratoriums), or a significant portion of them, are likely best suited for this purpose. Some of this newly created affordable housing could be transferred to public housing authorities across the nation for management/administration, while some could be sold to investors as income-earning Section 8 or other affordable housing.[4]

Thoughts on Implementation

Given the seriousness of the current housing and economic crisis and my view that housing reaching a bottom will mark a crucial turning point in our economic recovery, I believe a cross-functional, multi-agency, multi-lender task force/team should be put together with a goal of clearing the market of the current total inventory of bank/lender/investor owned single family properties over the next 12 months.

In other words, let’s do whatever we can (after agreeing on some basic principles and philosophies) to try to have the housing market bottom by the end of 2009/early 2010. Once the current inventory has been cleared, we can focus on efficiently clearing the market only of new inventory (which should hopefully be at lower levels with the help of the President’s job creation plan and the effect of some of the above described programs).

Concluding Thoughts

I believe there are 2 key flaws in our current approaches on foreclosure prevention and clearing the market of troubled real estate inventory. First, foreclosure moratoriums, although well intentioned, only “push the ball down the road” to be dealt with at a later time i.e., these moratoriums are reducing supply today and are likely to prolong the duration of home price declines. Second, I believe there is an excessive focus on home ownership as a primary goal, whereas I believe we are ‘beyond ownership’ as a country. Dealing with the housing crisis should be about safety and family, and about reflecting American families’ actual economic reality in their housing reality (as gracefully and kindly as possible). These core principles are a foundation of this proposal.

[1] My views/ideas on foreclosures, REO’s and the real estate market reflect key input and insights from: Tony Ebers, Chief Operating Officer (Indymac), Eric Friedman, SVP Default Management (Indymac), John Olinski, EVP (Indymac), Ron Bergum (CEO, Prospect Mortgage), and Ron Garber, CEO, shortsaleplan.com

[2] Note: The Hope Now alliance does not include individuals including licensed professionals

[3]For example: Short sales result in an ~2year credit impact for homeowners in CA vs. ~5 years for a foreclosure. Also, short sales are significantly less expensive than foreclosures (e.g., legal fees, home damage) and don’t have the reputational stain of foreclosures. Finally, short sales in a declining home price environment result in significantly less loan losses by accelerating the timing of asset sale

[4] I should note that I believe any new affordable housing created should come “with strings” i.e., individuals and families should be committed to learning and earning their way out of government subsidized housing within a defined period of 3-5 years to be eligible to move into the new housing.

Tags foreclosure prevention, foreclosures, housing bottom, housing crisis, housing market crisis, housing market stabilization, loan modifications, short sales | Comments (4)

Business Life Los angeles Real Estate

Introducing HausAngeles

January 27, 2009 – 12:24 am

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.

I saw and continue to see tremendous opportunity for impact and value creation in the real estate market and am inspired by the immensity of the opportunities in front of us. In the weeks and months since the decision was made, I have co-founded a company we have called “HausAngeles”.

Here is a link to our first newsletter for 2009….which introduces the company:

http://www.hausangeles.com/newsletters/HA_011909.html

Tags avantika, avantika shahi, hausangeles, los angeles real estate, ray mathoda, rayman mathoda | Comment (0)

Business Life Los angeles People Public Policy Real Estate World World Affairs

A Roof Over Every American’s Head: Addressing the Core of our Current Crisis of Confidence

January 12, 2009 – 4:50 pm

What is the #1 worry that most Americans have when they get laid off? I believe it is that they might lose the roof over their and their families’ heads in a worst case scenario (i.e., if they are unable to find adequate alternate sources of income).

Now imagine if the government of this country was able to promise all of its lawful citizens this: “No matter what, you and your family will always have a roof over your head. We know we are in the middle of the greatest economic downturn since the 1930’s and we also know that there has been overbuilding in the housing sector. We have put these two realities together to make a unique promise to all Americans today so that you may feel secure and confident about their family’s safety.”

Do you think the above promise would help the nation stabilize (and possibly even start an economic recovery)? I believe it might because it addresses the very heart of the problem in America today: a lack of confidence in our future and a deep worry (almost and actually a panic in many people) about what this future will bring.

Now, I am not one who believes that every American can and should own a home (even though I do strongly believe in the societal and familial benefits of home ownership). Nor do I believe that we should subsidize home ownership for current home owners any more than we would subsidize it for new homeowners. But we do have plenty of housing available in America today….and the government can and should do more to help those Americans who suddenly find themselves in an economically precarious situation.

The US government already provides rent subsidy at varying levels to the lowest income in our society…primarily through the Section 8 and public housing programs (Disclosure: I am on the Board of the Los Angeles Public Housing Authority, which owns/administers both programs in Los Angeles). So why not expand this concept to stabilize our families in a manner that is sensible, fair and proactive? This might just be the type of bold action we need given the times we are experiencing currently.

Tags crisis of confidence, economic crisis, economic recovery, foreclosures, housing crisis | Comment (1)

Business Health care Life Public Policy World World Affairs

Transparency and Tradeoffs: The Missing T’s in The Healthcare Industry

December 23, 2008 – 10:30 pm

AV’s recent inpatient surgery experience – she had a cervical dystectomy (relatively common neck surgery) – reminded of how fundamentally flawed our US healthcare system is. Almost every industry/market that’s “efficient” functions on some basic common principles/dynamics: Customers make purchasing decisions based on cost, quality and service and producers/companies compete on the basis of these 3 core product/service “differentiation” dimensions.

Let’s take the retail industry as an example. Walmart is all about being low cost and has build a business model that continuously wrings cost out of the entire supply chain for the goods they sell. A store like Nordstrom on the other hand tries to be more upscale, so it competes on service and to a lesser extent quality (by carrying brands perceived to be higher quality). And Louis Vitton, Tiffany, and other luxury brands compete largely on quality only (with quality being defined as a combination of style/perception, brand value, material, cut, etc.).

The key to the above tradeoffs occuring, of course, is information (transparency) about the 3 differentiating dimensions, particularly quality and cost….to enable consumers to evaluate different companies and make their decision based on what matters most to them. But none of this is possible in healthcare – an industry that is almost a fifth of US GDP!

In healthcare, you make a decision with no idea of what it will cost you and really no way/system of getting such a cost estimate without significant effort. And quality is an entirely different matter. Where cost is difficult but not impossible to assess, quality is. There is absolutely no data available to consumers to help them understand the experience level and output/performance (aka “outcomes” in healthcare) of the doctor they choose to go with. And did I mention there’s no systematic way of finding a doctor that meets your needs? The whole system of finding a doctor is primitive – you ask around to see if anyone you know (including other doctors one might know) have a recommendation (which is again, largely based on perception/reputation and not facts).

I am definitely a believer that government led investment in infrastucture is a key tool to help get the US out of the current economic crisis (while making sensible investments which will pay off and are required for our long term health). I would love to see the Obama administration address some of the issues above to help get the US healthcare industry more nimble, competitive and no doubt efficient.

Tags health outcomes, healthcare, healthcare cost, healthcare efficiency, healthcare quality, tradeoffs | Comment (0)

Business Life People Public Policy Real Estate

Untapped and Under-tapped Foreclosure Prevention Strategies: “Let a Hundred Flowers Bloom”

December 16, 2008 – 8:39 pm

There is widespread agreement among key national political, economic and housing stakeholders (the government and regulators, consumers and Banks among others) on the need to help prevent foreclosures, keep as many people as possible in their homes, and “clear the housing market” of troubled assets quickly and fairly. This would help the housing market find a bottom more quickly – which housing market bottom will mark a turning point in our nations’ economic recovery.

In the spirit of Barney Frank’s statement “Let a Hundred Flowers Bloom”, I have put together this foreclosure prevention vision (including feedback and insight from Ron Garber, CEO of Short Sale Plan and Eric Friedman, SVP of Loss MItigation at Indymac Bank).

The housing market and economy are facing problems larger than any individual or organization….and it is in this spirit that I am publicly sharing this vision. I would welcome feedback from anyone who has experience in foreclosure prevention and any of the related strategies/areas.

I will be pursuing some or all of these strategies for Los Angeles and perhaps nationally in my capacity as CEO of HausAngeles, and in partnership with Ron Garber, who has spent the last 2 years developing and refining systematic short sales knowledge, education/training, processes/documentation and infrastructure….believing that they are the preferred alternative to foreclosures for all parties involved.

Tags foreclosure prevention, foreclosures, housing crisis, housing market bottom, rent to own, short sales | Comment (0)

Capital and Risk-Sharing: Smart Crisis Fighting Tools That Should Be Used Much More

November 30, 2008 – 10:23 pm

I’m glad to see the government is finally using 2 “smart” tools – capital and risk sharing – to help address the financial institution panic and resulting failures we have seen since earlier in 2008 which have seriously escalated the financial and economic crisis facing the US and global economies today. While these tools don’t comprehensively address the myriad of financial and economic issues facing the US or the world today, they:

· Help stabilize Banks when no other 3^rd party can/will do so: this is critical to stabilizing consumer sentiment, the markets and economy

· Are leveraged in their impact to the real economy: Because Banks typically lend $10 to $20 for every dollar in capital they hold

· Help minimize the tax-payer bill from all this government investing and intervention: by acknowledging the uncertainty around where the housing and credit/financial markets will bottom out, and putting a “cap” on the maximum losses a private investor can incur on an investment

· Help establish a floor for asset values (by limiting downside risk for investors): and therefore support and encourage the return of private investors into the capital markets

The need for government provided capital was obvious to me months ago at Indymac since such a significant capital infusion would likely have prevented the Bank’s failure and no private capital was available for the job. Every investor who had invested capital into any financial institution in the 12 months leading up to Indymac’s failure had lost all or a big portion of their money by the summer of 2008, so this lack of private capital was a rational market outcome. And risk sharing can and should reduce the size of the loss the government creates by selling Indymac’s assets as it will help mitigate the negative financial impact of the fact that Indymac’s assets are being sold by the government into the worst housing asset market since the Great Depression.

A wise man once said it was possible to “transform a breakdown into a breakthrough” and I think the tools above can be powerfully applied to the global economy today. After all, no large company is just a “US” company today. All major American companies are generally global in the markets they serve, the organizations they work with, and the workforces they leverage (even “little Indymac” which only operated in the US supported over 1000 employees in India). So by supporting US Banks and Financial Institutions the US government is already supporting the global economy (not just the US economy).

Why not do this more directly and on a bigger scale worldwide? As someone who is optimistic about the global economy’s long term prospects, I think we should. The US taking an ownership stake in a wide array of businesses all over the world could indeed help turn this breakdown into a breakthrough.

Tags economic crisis, financial crisis, government capital, government risk sharing, indymac | Comment (0)

Business Real Estate

Real Estate Construction Costs: Deflated in LA

November 9, 2008 – 11:59 pm

There has been a constant ‘inflation’ in real estate construction costs over the past few years driven by the usual suspects: high commodity prices and a tight labor/talent market (with high demand for construction labor driving labor costs higher and higher over time).

So recently, I was pleasantly surprised to hear one of our clients (who is involved with redeveloping 2 properties they recently purchased) tell us about their ongoing experience with construction costs. 2 key points to note:

1. The price of development was great i.e., lower than expectations! They had a solid bid to get their work done for about $80 per square foot. Note that the numbers one generally sees for construction costs are in the $150-$250 (or higher) per square foot range. So this is amazing…and the key reason this was possible was due to the really slow labor market right now. People have lost jobs and can’t find work as real estate development has slowed tremendously…so they are taking whatever work they can get, and reducing their rates to “win work”.

2. They actually got a fixed bid on their project! Wow….just a few years ago, no contractor would take on that risk.

I guess in some ways the above should be no surprise. This is how the market works. In a down cycle, things get cheaper…and in some cases much cheaper. However, I don’t think most people realize what a great time it is to construct right now. Good time to buy a fixer-upper (which is already much cheaper than it was a few years ago) and then further add value by improving the property.

PS: I’m talking Los Angeles

Tags construction, construction costs, fixer upper, Los angeles, property construction, property development, real estate | Comment (0)

rayman mathoda

Category Archives: Business

Government Driven Innovation: Will it Work in Mortgage Servicing?

Origination News: “New Role Suggested for RE Agents”

Strategies to address the elephant in the python: housing market stability we all want

492 Days “Free Rent” For Those Choosing Foreclosure

HAFA Short Sales: A Much Needed “Fresh Start” Program For Troubled Borrowers

Responsible 2nd Chances: Loan Modifications Addressing the Issue of Negative Equity and (Borrower) Moral Hazard

Who should get to keep their home and who shouldn’t? Simplicity is key for success

REOMAC Update: REO Brokers Are Hungry For A Better Way

Second shoe to drop for CA single family home prices?

One Key Missing Piece: Early Thoughts on the Obama Plan for At-Risk Homeowners

Why it Never Makes Business Sense For a Bank to Foreclose on an Owner Occupied Home

The Silver Lining of The Crisis: Affordability and Humility

Announcing the creation of “HR Helping Hands”: An All Volunteer HR Professionals Mentor Network

Foreclosure Prevention & Housing Market Stabilization: Thoughts from the Ground Level

Introducing HausAngeles

A Roof Over Every American’s Head: Addressing the Core of our Current Crisis of Confidence

Transparency and Tradeoffs: The Missing T’s in The Healthcare Industry

Untapped and Under-tapped Foreclosure Prevention Strategies: “Let a Hundred Flowers Bloom”

Real Estate Construction Costs: Deflated in LA

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