Tag Archives: housing crisis

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)

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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)

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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)

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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)

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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)

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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)

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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.