CAR just presented an hour webinar on the subject of ‘Pocket Listings’. It becoming a problem the way the market is right now. And agents who are not following the letter of the law will come under increasing scrutiny from the DRE and other regulators. That’s what the rest of us need – more regulations to curb the avarice of a few. Ain’t that the way it goes?
REALTORS® marketing a property for which they have obtained a listing will generally place that listing on the Multiple Listing Service (MLS). At times, however, listings are not placed into the MLS. Listings not placed on the MLS are commonly referred to as “pocket listings”. This article will discuss the various legal issues and risks of pocket listings. Please note that this article references the California Model Multiple Listing Services Rules (Amended February 2013). REALTORS®, however, must comply with their own local MLS rules. Many local MLSs adopt the Model MLS Rules in its entirety, whereas other MLSs may have slight variations and may have different numbering systems.
II. Pocket Listings
Q 1. What is a pocket listing?
A A pocket or off-MLS listing generally refers to a listing agreement that an agent has obtained but does not place on the MLS. A “pocket listing” is not a legally-defined term, and can have other meanings as discussed below.
Q 2. Is a pocket listing legal?
A Yes, a pocket listing can be legal. However, a pocket listing raises a number of legal and practical issues that agents should consider and address as discussed below.
For more information on ‘Pocket Listings’, the legality, the ethics, the fiduciary, get the answers from CAR Legal:
Over the years I’ve written a lot about real estate fraud. Real estate fraud had only just come to our region in a big way back in 2005/2005 and Realtors® were trying to grapple with this new issue. Problem was, nobody else thought it was an issue. Banks didn’t care, law enforcement wasn’t interested, our DA, the Dept. of Real Estate, FBI – you name it, nobody cared.
And over the years I’ve written a lot about the Stonewood Case – a house kiting scheme with some investment undertones. By the time the law finally got on the case, the perp’s were indicted for $143 MILLION dollars. Yeah, not exactly chump change. It really jump started our foreclosure market back in 2006-2007 as these places started to dump back onto the market in ever increasing numbers.
It’s been a 9 year effort led by local Realtors®, some tenacious reporters, our board attorney and a bunch of victims who weren’t afraid to stand up.
Yesterday the last two perp’s were found guilty. Hendrix Montecastro and his mother Helen Padrino. There were 9 people indicted, the others were so guilty they all plead guilty. These two decided to test it in court and act as their own counsel. Yeah, that worked well. So instead of the few or tens of years their cohorts were dealt, Padrino is up for 30+ and Hendrix is down for 100.
All I can say is, he looks a lot better in his orange jumpsuit than he did in the 3 piece Armani’s he used to sport when he’d come into the office to try to intimidate us. Sentencing comes in a couple weeks.
You can read some of the history and testimony here:
The new California Homeowner Bill of Rights becomes law today. If you’re not familiar with this measure, it was a bill carried on behalf of California Attorney General Kamala Harris last year that sought to codify some of the measures set forth in the national mortgage settlement deal struck in early 2012.
Initially opposed by the California Association of Realtors as well as the California Bankers Association and the California Mortgage Bankers Association, the bill was pushed through the legislature by a closed joint committee of both houses so when the bill eventually reached the floor, it was voted on immediately and passed to the Governor. Total time in committee, floor and signature was measured in hours rather than days, months or years, as is typical for most bills.
Due to the secretive nature of the committee structure, there was little opportunity for interest groups to provide input and there was great concern that what emerged would be a very flawed effort reflecting an over reaction to purported lender wrongdoing. However, CAR did have an opportunity to work with the committee to effect some modifications to the final version that removed our opposition to the bill. CAR was not supportive of the bill in its final version but adopted a neutral position, although banking groups remained steadfast in their opposition due to to concerns about meritless litigation that the bill opens up for aggreaved homeowners.
Here’s what the bill does:
- Stops dual tracking. Once the process has started for either a loan modification or short sale by the lender, the foreclosure process must be stopped. This is in response to cases where the property proceeds along multiple courses at the same time only to have the foreclosure process conclude days ahead of a short sale approval by another arm of the bank. As pointed out, this frequently resulted in the bank taking the property back and ultimately receiving thousands less in the foreclosure sale than they would have in a short sale. Of course we know the banks are covered either way and really don’t care but ultimately this should result in more short sales and fewer foreclosures, which is better for the recovering market.
- Under the dual tracking provisions, banks must give an applicant a response to their loan modification before they can start the foreclosure process. If a homeowner has not applied for a loan modification, the bank must inform them of their right to do so before starting the foreclosure process.
- No more robo signing.
- Banks must provide a single point of contact to borrowers trying for a loan modification or short sale. Homeowners and Realtors are often frustrated by multiple points of contact and the handoff fr5om one agent to another within a bank frequently resulting in the loss of paperwork sending the process back to square one while the foreclosure process continues apace in another department.
- Allows the borrower to sue loan servicers if the borrower thinks they have violated any foreclosure laws. This is one of the most worrisome components of the bill in that it may open the door to frivolous lawsuits resulting in increased costs and unnecessary delays in an already costly and time consuming process.
With nearly 1 million foreclosures recorded in the state since 2007, California remains one of the hardest hit areas of the country. However, foreclosures are down in most areas by 30% or more in the past year and with prices starting to climb across the state, the hope is that fewer and fewer people will be pushed into foreclosure anyway. Some 30% of state homeowners remain underwater in their loans but the combination of improving employment statistics and home price increases has decreased that by more than 5% in the past year.
The Homeowners Bill of Rights may well provide some relief for harried homeowners and produce further delays to the process, but it will do little to change the underlying ability of a homeowner to ultimately afford their home and will, in most cases, only delay the inevitable. If Sacramento and DC don’t screw it up, an improving economy will do more to aid homeowners than the HBR will ever accomplish – and ultimately that’s the best news for everybody.
Another question hanging about our heads this year-end involves extension of Mortgage Debt Forgiveness, that measure that allows lenders not to 1099 you for the mortgage debt relief sellers who have gone through a short sale or foreclosure receive.
At this point with all eyes focused on the fiscal cliff, it is unlikely anything specific to this measure will be passed this year. If there is a continuing resolution (kick the can down the road for 90 days and let the new Congress deal with it), debt forgiveness could/would likely be a part of that. Otherwise we just get to wait until after the first of the year. NAR is pushing very hard for this – it was the subject of a recent call to action for Realtors nationwide, and we are moderately optimistic it will be extended by the new congress but by no means assured. Join the club with all the other individuals, businesses, charities, military members and others awaiting their fate at the whim of the administration and the able hands of Congress.
You can let Congress know how you feel about this by clicking here:
CoreLogic® has just published their most recent Home Price Index showing a 3.8% rise in home prices for July marking the 5th consecutive month of year-over-year increases. They are forecasting an increase of 4.6% in August and are now anticipating that we will see a gain for the full year.
In this month’s Realtor® Report, you’ll find that housing activity in Southwest California is running slightly ahead of these national numbers with year-over-year increases of 6% in both July and August putting us ahead of 2011 median price by 5% year to date. Temecula posted its 6th consecutive monthly median over $300,000 and its highest month since April 2008 ($347,985).
Sales were down somewhat in August, at least in part due to our increasingly severe inventory shortage. Demand activity remains strong and if we had more homes to sell, they would be selling. Year-to-date sales are 9% ahead of 2011 (4,963/5,454) and still running 4% ahead of 2010 (5,228/5,454) keeping us on pace to set a new high water mark for the region, but our inventory is down 62% since January.
Back in June, I updated you on a bill H.R. 5823. Authored by California Congressman Gary Miller, the “Saving Taxpayers from Unnecessary GSE Bulk Sales Act of 2012” follows months of direct lobbying to the FHFA and others to carve California out of their proposed pilot program to remove hundreds of homes from our inventory and convert them to rentals for 5 years in an ‘effort to stabilize the market’.
The bill is still languishing in committee. Meanwhile the FHFA has announced its intention to proceed with the program and remove 500 for-sale homes in LA and Riverside County to fire-sale to an investor as rentals by year-end. Even if we knew how they were selecting these homes, where they were located and who they were going to sell them to, this would still be a bad program. The fact that we don’t know any of those things only makes it worse.
I would like to thank the Riverside County Board of Supervisors, the Southwest California Legislative Council and the Cities of Temecula and Murrieta (so far) for joining Realtors® in SUPPORTING H.R. 5823 and opposing this FHFA program. Simply stated, the goal of this program is to stabilize the market by removing ‘excess inventory’. But our region has no excess inventory, there is strong demand for the properties we have and our prices have been stable for 3+ years and have recently started to appreciate. This program would make it even more difficult for qualified buyers to find a home in our communities while exposing our neighborhoods to numerous rentals owned by an absentee landlord (hedge fund) just waiting out their 5 years to dump them back onto the market.
To get all the numbers behind the local real estate market as well as more information on how you can join the coalition supporting HR 5823, visit: http://www.slideshare.net/genewunderlich/9-realtor-report
If you’re waiting for mortgage rates or house prices to hit bottom, you may have delayed too long.
Among the housing trends you can expect to see this spring: Potential homebuyers will find increased competition when shopping for a home this spring, as more bargain hunters get off the fence. Investors also will continue to take advantage of the opportunity to buy low.
Rising mortgage rates will serve as a warning to borrowers who thought the low rates would last forever. More bad news: Some mortgages will cost more this spring because of higher loan fees.
Most of the good news goes to refinancers and underwater homeowners. Millions of borrowers will have the opportunity to refinance their mortgages through two government programs that make the refinancing process easier and cheaper.
The Federal Housing Administration, or FHA, reduced loan fees for these borrowers, and Fannie Mae and Freddie Mac removed many of the obstacles that prevented borrowers who were upside down from refinancing.
Here are some of the housing trends you should expect to see for spring 2012.
Mortgage rates rise but won’t skyrocket
Many borrowers missed the record-low mortgage rates seen earlier this year, but they still have a chance to grab low rates this spring.
Mortgage rates have bounced from the bottom, and it’s unlikely they’ll drop back to record lows, but there’s no need to panic. Mortgage experts don’t expect rates to skyrocket anytime soon.
The Mortgage Bankers Association’s latest forecast indicates that the rate on the 30-year fixed mortgage will average about 4.3 percent in the second quarter. That’s up from the first quarter’s average of 4.16 percent in Bankrate’s weekly survey. But 4.3 percent would still be low, especially when you compare it to the 6 percent or 7 percent borrowers paid at the height of the housing boom.
The recent jump in rates comes as investors become more confident. Still, the picture is far from rosy, as nearly 13 million people remain unemployed.
“It takes a paycheck to pay a mortgage,” says Jay Brinkmann, chief economist and senior vice president of research for the MBA. “Mortgages aren’t paid with percentage points on (gross domestic product).”
Until the labor market improves, it is unlikely mortgage rates will spike, Brinkmann says.
Buyers face fierce competition with investors
Attractive mortgage rates, low home prices and rising rents make the current housing market the perfect opportunity for investors. When looking for bargains, homebuyers will continue to compete with investors.
“This is true particularly at the lower end of the market and with first-time homebuyers” says Jed Smith, managing director of quantitative research for the National Association of Realtors.
One of the strongest recent housing trends: Many investors pay cash. These cash offers are an obstacle for buyers who need mortgages because sellers prefer buyers who can pay cash to close quickly, Smith says.
Investors bought about 23 percent of the homes sold in January, according to the NAR’s latest numbers. That’s up from 21 percent in December, and that trend is not expected to shift this spring.
“Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest,” Smith says.
Homebuyers are expected to get off the fence
Homebuyers waiting for prices to hit bottom may soon get off the sidelines, industry experts say.
“We’re starting to pick up on the purchase side,” says Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, Ill. “I don’t think you’ll go back to (the home purchase activity we had in) ’06 anytime soon, but this is the best that we have seen in a while.”
The price gap is closing between what sellers expect to get for their homes and what buyers pay, Brinkmann says. That’s one reason home sales are improving.
As consumer confidence and rents rise, more renters will want to become homeowners, Smith says.
The trend already has started, according to a recent study by Kingsley Associates, a San Francisco-based real estate research and consulting firm. About 59.5 percent of the tenants surveyed in the study said they intend to renew their leases this year. That is the lowest rate since early 2009 on renters’ intention to renew leases. The rate was 63.7 in the fourth quarter of 2010.
“We still have a slow recovery, but I think we’ll start to see additional sales,” Smith says.
Refinances get easier, cheaper
Homeowners who have FHA-insured mortgages and who are current on their payments will be able to refinance with lower fees through the FHA streamline refinance program starting in June. Only loans that closed before June 2009 are eligible to be refinanced in the program.
The FHA will reduce loan fees by more than half on streamline refis. As of June 11, borrowers who refinance through the FHA streamline program will pay only 0.01 percent of the loan in upfront insurance fees and 0.55 percent in annual mortgage fees.
Another government program, known as HARP 2.0, will make it easier for thousands of borrowers to refinance their mortgages this spring.
The revamped version of the Home Affordable Refinance Program allows borrowers to refinance regardless of how underwater they are on their mortgages. Some lenders say they are focused on refinancing mortgages on loans they currently service, for now, but others accept any applicant who qualifies for HARP 2.0. To qualify, your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac, your payments must be current, and your mortgage must have closed by June 2009.
Some will have to pay more for mortgages
Unless you get a HARP or FHA streamline refi, you will likely pay more for a mortgage this spring because Fannie Mae, Freddie Mac and the FHA increased their loan fees in April.
Homebuyers with small down payments will pay significantly more for FHA mortgage insurance premiums.
“Those who don’t have credit scores in the high 600s, low 700s may be forced to go the FHA route,” Conarchy says. “And will be stuck with the higher fees.”
A borrower who takes out a $200,000 FHA loan should expect to pay about $3,500 upfront for mortgage insurance. The fee is 1.75 percent of the loan total. Before the increase, the borrower would have paid a $2,000 fee for the same loan.
Annual insurance premiums went up, too. For a $200,000 loan, the monthly premium is about $208 per month. That’s about $17 more per month than what it would have cost before the increase.
In June, the FHA increased the annual insurance for loans greater than $625,500. A borrower who lives in a high-cost area and takes out the maximum $729,750 (which is the FHA limit for high-cost areas) will pay $912 each month in mortgage insurance alone.
It’s all in the perspective. A recent media article featured data from a report by RealtyTrac showing that the Riverside-San Bernardino area remains #3 in the nation for foreclosure activity. I cringe when I see these kinds of articles. Because while the underlying report data is accurate, a reporter, who typically knows little about real estate, has no idea what the data means. They have no perspective, thus their summaries are often misleading to their readers causing unwarranted confusion and concern.
For example, data shows that Murrieta has 1 home in every 149 in foreclosure for a total of 264 ‘foreclosures’. Temecula was close behind with 258 ‘foreclosures’ and 1 in 152 households, Lake Elsinore had 147 ‘foreclosures’ with 1 in 151 households. They then compared our region with the national average of 1 in 686, making us sound pretty bad off.
But while the data is accurate – the media interpretation is not, or at least incomplete.
So, as Paul Harvey used to say, “Now, the rest of the story…” I’ll use Murrieta’s numbers, since that’s what the article used, but the statistics and comparables are very similar across all markets in Southwest California.
First, it’s not surprising that our area still ranks high on the foreclosure scale – after all it was just a few years back that we were among the top three in the nation with Sacramento and Stockton (which still rank #1 & #2). But rather than 264 homes going back to the bank as the article intimated, there were just 140 in June for Murrieta, down 43% from last June. And only 25 of those are actively on the market for sale. Bank-owned homes as a percentage of our market has continued to decline to just 7% of our active market in July. The number of both REO and Short Sales on the market has dropped by half since January.
Pre–foreclosure delinquencies are down 8% for the region, and Notices of Sales (NOS) are down 28%. The only number that bumped up slightly in June was Notices of Default (NOD), which were up 3% (68 to 70). The rest are in some stage of the foreclosure process but may never revert to the bank. Homes actually going back to the bank are down 68% from last June, 3rd party (courthouse step) sales are down 22% and cancellations of foreclosure sales by banks are up 17%.
Two additional trends are affecting our market right now. First, after long delays and numerous moratoriums, banks may finally be starting to move more aggressively on properties that have been in foreclosure for 1, 2 or 3+ years. This ‘shadow inventory’ concern has been hampering a sustainable recovery in housing. It’s past time for an honest accounting – by the banks and by delinquent sellers. We’re also seeing a slight up-tick in foreclosure activity on homes that were granted loan modification 2 – 3 years ago but have subsequently fallen back into foreclosure.
Second, counteracting the increased foreclosure activity is an apparent willingness and/or ability of banks to successfully complete short sales. Maybe they finally figured out they make more money on a short sale and that it’s less deleterious to the market. Rising median prices also means fewer people under water which means more people able to refinance at today’s record low rates into more affordable mortgages.
So there you have it. Yes we are still #3 in the country for ‘foreclosure activity’ and with 1 in 150 homeowners still being affected that’s not great. Compared to North Dakota with just 3 foreclosures in the whole state and a ration of 1 in 105,833 homeowners in default, we look pretty dismal. It’s all in your perspective.
But we’re still selling homes at a record pace this year and our prices are inching up. Compared to where we were four years ago, or even a year ago, we’re headed in the right direction. They didn’t tell you that.
RealtyTrac, a trusted source of foreclosure information, publishes a nifty little ‘Heat Map’ showing foreclosure activity by zip code for any area of the country. If you’re curious, it’s a great way to spend a little time when you’re not on facebook. Here’s the data http://www.realtytrac.com/trendcenter/trend.html & here’s the local numbers: Perspective. http://www.slideshare.net/genewunderlich/8-realtor-report-13973332.
The Southwest Riverside County Association of Realtors recently held their 3rd annual ‘Breakfast with the City Managers’ event and featuring Bob Johnson (Temecula), Rick Dudley (Murrieta), Frank Oviedo (Wildomar), Bill Rawlings (Menifee) and Tom Evans (Lake Elsinore). The event is one of the highlights of the year for many members and this year was no different.
City Managers reminded us how fortunate we are to be living and working in our communities. Our cities may not exactly be thriving during these challenging times but they are all doing way better than most. Despite last year’s pilferage of redevelopment funds and the added insult of stripping VLF funds equaling 22% of Wildomar’s budget and 18% of Menifee’s, infrastructure improvements, job attraction and parks continue to figure prominently in each city’s action plan.
Every city is also experiencing some degree of revitalization as well. Unemployment rates are lower in our region than the national average and significantly lower than the rest of Riverside County. There are new apartment buildings going up in Temecula and 5 new housing tracts under development in Wildomar. New restaurants, shops and businesses are starting to fill in some of those shuttered buildings that have populated our region for the past few years. Public safety in our cities is among the best in the nation as is our education system. While there have been some municipal lay-offs, our cities have been able to negotiate with their employees and service providers to maintain a high level of service to residents within the economic realities of our times.
All acknowledge that there are still challenges ahead for our region. One manager opined that it might be 20 years before the cities see a return to the level of property tax revenue they enjoyed just four years ago. But as the cities diversify their base that becomes less significant. Temecula currently gets only about 10% of its budget from property taxes while Menifee, one of our newest cities, relies on property taxes for nearly 50% of their budget. An aggressive business attraction plan aims to reduce that dependency over the next few years.
Both Murrieta and Temecula have held discussion about the merits of becoming a charter city and you’ll be hearing more about that. The managers also shared the challenges and frustrations of dealing with some aspects of our state and federal government. One recent example was the state’s last minute decision to recalibrate the way they assess the cities and gave cities a three day payment window or be assessed penalties. Two of our cities took hits of nearly $2 million dollars, the others lost lesser amounts. It can be vexing to be a pro-business region in California.
Should you have an opportunity to visit with any of our local City Managers, you will find them most helpful and ready to expound on the positive things happening in our region. While each city strives to maintain its own identity and be the best for its own residents, there is a great sense of shared community among the cities acknowledging that a business gain in Lake Elsinore benefits Menifee, a new overpass in Temecula is good for Murrieta traffic and a new brewpub in Wildomar would be good for me. Talk to your City Managers. They are good folks and eager to keep our cities moving in the right direction.
There’s no doubt the Temecula Valley is one of the nicest, safest and most affordable places to live in Southern California. The climate is terrific, the schools are great, we have sports parks and dog parks and a duck pond, wineries, golf courses & a casino and our city is well run with a budget surplus. From Temecula you can be skiing Big Bear in the morning, surfing La Jolla in the afternoon and be home in time to enjoy a jazz concert at a winery in the evening. There’s something here to fit every lifestyle – unless you want to live in a high rise in a big city and take the subway to work. We don’t have that.
We do offer a wide range of housing opportunities from condo’s for first time homebuyers to retirement villages; avocado groves & equestrian estates to vineyards; Mediterranean to New England style single family homes; homes on a golf course to homes on a lake – Temecula has something for every prospective homeowner.
So how do you find out more about this amazing market? Start by finding a Realtor® that can guide you through the process. Oh, you can start by looking at home on-line. Today about 70% of you will start there. But there are so many beautiful homes you’ll soon find yourself trying to narrow that search to specific areas. Maybe the school district is important to your growing family, or being close to medical facilities is important for special needs, or you need room for your horses or you’ve always dreamed of living on a golf course. Your Realtor® can guide you to those neighborhoods that fit your lifestyle best.
Some of you will start by talking to a lender to find out how much home you can afford. That’s a great idea too. It’s a good idea to start with a lender that already knows you – or at least a bank that you’ve done business with. But if you’re new to the area you probably don’t know a lender and picking one out of the phone book might not be your best place to start.
A good Realtor® can direct you to good lenders, ones they know from experience can get the job done for you with a minimum of hassle. Some lenders have better programs than others depending on your situation – everything from no-down or low-down government backed loans, to loans with extremely low interest rates for well qualified buyers with large down payments. There are different options for 1st time buyers, investors, military personnel, move-up buyers and seniors and your Realtor® and lender will work together on the best deal for you and your family.
To find a Realtor®, start with the Chamber of Commerce. By being a member of the Chamber, a business owner has already demonstrated their interest in and commitment to the community. Don’t be afraid to talk to more than one Realtor® – because just like you, we’re all different too. Some are all business – cut to the chase kind of folks, others are more touchy-feely warm & fuzzy, others you don’t know what the heck they are.
You’re going to be working with this person for the next few weeks or months on the biggest investment most of you will ever make. Having a good Realtor® on your team is the difference between a pleasant and profitable experience, and one that will have you gnashing your teeth living in a cave.
A couple final thoughts… As with much of the country, we’ve just come through the worst real estate market in years. You’ll be looking at homes that were selling for double their current asking price just a few years ago. But our prices have been stable for three years now and have started to increase again. You’re buying at, or close to, the bottom of this cycle. Last time prices started to boom our housing appreciated 155% in just 5 years. We’re not looking for, in fact not hoping for, a repeat of that cycle but long term appreciation in California real estate is inevitable.
We also have about 1/3 of the inventory we had just last year so finding your dream home might take a little longer. There are many beautiful properties out there at terrific prices. When you find the one you love, don’t be surprised if several other folks love it as well. Multiple bids are not unusual in this market so don’t make the mistake of thinking you can steal your dream home. Lowball bids today will almost assure that you will lose the first two or three homes you bid on. On the other hand, if you’re an investor looking for bargain prices on fixers or rentals, those are out there too. Again, your Realtor® can guide you along the most prosperous path for you.
The Temecula Valley lifestyle – your piece of history looking to the future. Start enjoying it today. Call your Realtor® to find out how.
That was the message delivered at our California Association of Realtors Mid-year Legislative meetings as well as our National Association of Realtors Legislative Conference held last month. The focus is shifting from looking over our shoulder at ‘how we got here’ to looking forward to ‘where we go from here’. There is an undercurrent of cautious optimism about the housing market borne out by strong sales results in our local market and in a growing number of markets across the country.
In weeklong conferences with legislative and regulatory leaders in Sacramento and Washington DC, Realtors stressed the critical role of homeownership as a lynchpin in the economic recovery of this country. At a May 17th Rally where nearly 14,000 Realtors gathered at the Washington Monument, we reminded them that in 6 of the past 8 recessions, the recovery has been lead by an emergent housing market. The other 2 were lifted out by massive war spending, so unless they want to start another war they should probably focus on housing at this juncture. Homeownership matters!
We talked with lenders about their foreclosure efforts, about streamlining the shortsale process, about helping homeowners who were honest victims of their housing manipulations and about getting back into the lending business by sharing some of the bail-out money we lavished on them.
We discussed the importance of mortgage availability and secondary market liquidity with leaders from Freddie Mac, Fannie Mae and the FHA. In both Sacramento and DC we demonstrated the critical lack of housing inventory in California and cautioned against the widespread implementation of the poorly conceived FHFA Bulk Sale Program (detailed here last month).
Three years ago we were treated to a discussion of the ’emerging green shoots’ by former FED Chair Allan Greenspan, shoots that were subsequently scorched by over-reaching and reactionary regulatory policies. The opportunity still exists for the current optimism to be quashed by knee-jerk decisions, lack of action in some arenas – over-reaction in others.
Elimination of the homeowners mortgage interest deduction is one example. Not extending deficiency judgment protection for underwater homeowners, not renewing the national flood insurance program and wholesale dismantling of Fannie & Freddie are still more examples of misguided efforts on the part of legislators and regulators who 1) don’t understand housing and job creation, and 2) have not considered the unintended consequences of their actions.
The events that brought us here are behind us. Most of the perpetrators will never suffer the consequences of their actions and, in fact, continue to prosper under the current regulatory regime. Time to move on. We endured a near perfect storm of events that brought us to the brink of fiscal disaster as a nation but we are entering a brief window of opportunity right now to keep the nascent recovery moving. The fits and starts of the past 4 years notwithstanding, we have an opportunity to move the housing market forward and with it our national economy.
Being an election year, we are probably assured that no really good or bad bills will emanate from Congress before November (Sacramento may still deliver up a few clinkers). Similarly, the lame-ducks in Sacramento and DC will accomplish little before the new year. Whether or not the recovery proceeds and strengthens will depend on the decisions you make in November. If you are a homeowner or aspire to home ownership, and especially if you consider homeownership to be a legacy you want for your children, please make an informed decision when you vote this fall. So much depends on it.
In response to the ongoing depression in our country’s housing market, the federal government has proposed yet another one-size-fits-all band-aid solution to a highly localized problem. As with most of the knee-jerk proposals they have attempted during the past 4 years, this program will not resolve the underlying issue and, in some cases, will make it substantially worse. I’m talking about the Federal Housing Finance Agency’s (FHFA) ‘REO Initiative’ pilot program destined for implementation in Los Angeles and Riverside Counties.
What the program proposes to do is effect a ‘bulk sale’ of REO (bank-owned) properties in select areas in order to ‘remove this overburden of inventory’ from the housing market and convert it to rental units for 5 years. Currently designated in Riverside County – more than 2,500 REO units.
Here’s the problem with that. Contrary to what the government tells us we are experiencing, we actually have a significant shortage of housing units for sale to begin with. There are areas of the country where this program might be effective in accomplishing what the government claims to want to fix, but our area is not one of them. There are areas of the county with a 2 year inventory of homes for sale, prices are continuing their precipitous slide and consumes are not buying homes at any price. Our area is not one of those.
It’s been nearly four years since our market had an inventory in excess of 12 months. Following a record sales year in 2010 and continued strong demand in 2011 and so far in 2012, our inventory of homes for sale is less than four months. For much of that time it has actually been between 2 and 3 months and, as I have written before, if you back out the higher end homes (over $1,000,000) that are selling very slowly, our local inventory of salable homes in Murrieta and Temecula stands at just 1.7 months. A ‘healthy’ inventory is considered to be 6-7 months and we are waaaay under that. Taking a large chunk of properties off the market would only further reduce the opportunities for home buyers to find a home and may well result in further price erosion and market deterioration.
But how about the government’s second argument that we are suffering from a severe shortage of rental units and that by releasing these units to large investor groups we would replenish that stock? Again, not true. Nearly 60% of current single family purchases are by individuals or small local investors who are buying the properties to either A) fix up and re-sell to qualified buyers, or B) keep as rental units.
Local individuals and small investors would be eliminated from the equation as the government program would only sell large blocks of homes to institutional investors far removed from our community. In addition to eliminating opportunities for home buyers and investors, the program would also exclude local property managers, as the properties would be handled by new departments of these institutional giants, and it would remove local Realtors® from the equation either as selling or rental agents in the transaction.
And what is the logical consequence of some far removed institutional investor buying a group of 100 or 200 properties in Temecula? Well, they’d probably want to rent them out as quickly as possible so they would rent them out at the cheapest rate possible. After all, they’d be buying them for pennies on the dollar so any income stream is better than a continuing vacant property. While this may result in some short-term advantage for local renters, long-term it would result in another round of foreclosures as current owners who are barely covering their cost would no longer be able to do that and would lose those properties.
Finally, in what may be the crowning insult, the primary groups that would stand to benefit from these bulk sales are many of the self-same industrial investors whose bad practices enabled the housing implosion to begin with. So they would now be able to purchase the same properties they made bad loans on for a fraction of their original price and they’d be buying them with the bail-out money the government (read: you and me) gave them.
As I initially stated, there are areas of the country where removing properties from the market and converting them to rentals might be good policy. We don’t happen to live in an area that, by definition, would benefit and could see substantial harm to our fragile recovery. The National Association of Realtors® has submitted a letter signed by most of our local Congressional delegates to Edward Demarco, acting head of FHFA, along with a bevy of other federal functionaries requesting that this ‘solution’ be applied only to carefully targeted areas of the country and to cancel any proposed sales in Los Angeles and Riverside Counties, and indeed in the whole state. We don’t want it. We certainly don’t need it – but when has that ever stopped the federal government from giving it to us anyway? Remember Ronald Reagan’s 9 scariest words – ‘We’re from the government and we’re here to help’. He was undoubtedly thinking about a program exactly like this.
On Friday, August 30, the legislature passed AB 1098, a bill that would reinstate VLF funds to the four newest cities in California, including Menifee and Wildomar. We encourage you to download the attached letter of support and email it to the following people. The Governor could make a decision on this measure at any time so time is of the essence.
Thanks to Senators Anderson and Emmerson and to Assemblymen Jeffries and Nestande for their affirmative votes to move this bill forward.
It was another rough month for the families and taxpayers of California, as the legislature completed this year’s budget this week. I don’t know if there is anyone who is actually happy about the budget, as even the majority party who crafted it in its entirety would certainly rather be growing rather than cutting and eliminating programs. But there are bad ways to deal with a deficit of this size, and there are worse ways, and make no mistake about it-they have chosen some of the very worst ways to do it.
A few of the worst elements of this budget plan (in no particular order):
- Once again, the process was done largely in secret behind closed doors. Hearings were held only on the most general concepts (when they existed at all), and witnesses were unable to say how specific programs might be affected or how much would be spent or cut. Groups who were affected by the cuts (like local governments) were not allowed to see the final language until it was too late to organize against it, and promises that had been made in negotiations before the budget were absent when the bills were passed on the floor.
- The budget is based on the assumption that California’s voters will pass an $8 billion tax increase in November, despite the fact that voters have rejected the last 8 taxes to appear on state-wide ballots, including the tobacco tax that just failed in June. If voters are unwilling to support a relatively small tax that doesn’t affect most of them to cure cancer, are they really likely to pass a massive tax increase that will affect everyone and be spent by our dysfunctional state government?
- The relatively successful Healthy Families Program that covers medical and dental care for poor children was scrapped, putting them into the state’s Medi-Cal program instead. Healthy Families is administered by a private group for $50 per client, Medi-Cal is run by state employees for $395 per client.
- Roughly $16 million was budgeted for administration and collection of the problematic and likely illegal fire tax. It is likely that no net revenues will ever be recovered from this tax before it is struck down, and we will pay $16 million for nothing.
- It is expected that next week the Legislature will approve the $2.7 billion in bond sales that the governor wants for initial construction of the High Speed Rail Program, which will cost the state general fund roughly $180 million annually for 30 years-enough to keep all the State Parks open, fully fund the UCR Medical School, and restore funding to the cities in Riverside County who were victimized in last year’s budget-and still leave tens of millions of dollars to restore other cuts in critical programs or schools.
- The Governor has targeted massive and unnecessary cuts at education if his tax increase fails as expected in November. I supported a budget alternative that would have protected schools and higher education from budget cuts, but it never even received a hearing. Holding a figurative gun to the head of schools to force voters to pass his tax increase is a cynical move that exposes his true priorities.
- Pension reform has been cast aside again. Rather than including the billions in potential savings from legitimate reform in the state budget, votes on the Governor’s plan (a good one, actually) have been rejected, and all discussion of reform has taken place in private. Rumor has it there may be a vote on some sort of reform next week, but once again, nobody but the legislative leadership and the government union leaders who elected them know what will be in it.
- Local governments were once again victimized in multiple ways that attack their authority, their flexibility, their budgets, and the safety of their residents.
I am asked regularly what can be done to fix the problems in Sacramento, and there are no easy answers. With the passage of Proposition 25 two years ago, only a simple majority is required to pass a budget, so the party in charge in Sacramento has free reign and can now make decisions based on whatever priorities they want. The only way to change what is happening in the Capitol is to change the folks who are running the State Capitol.
Another option is through the initiative system, which allows citizens to go around those who control state government. There is an initiative which just qualified for the November ballot that does put some restraints on how your government operates, including a requirement that bills be in print and publicly available for 72 hours prior to a vote. I haven’t had a chance to review all the reforms contained in this measure, and this should not be considered an endorsement of the “Government Performance and Accountability Act”, but it is increasingly clear that the legislature is not willing to reform itself, and change will likely have to be forced upon them.
Because I am leaving the Assembly at the end of the year, this was my last budget fight in Sacramento, and I can guarantee I will not miss it one bit!
Effective July 1, 2012, pursuant to Business and Professions Code (B&P) Section 10164, an employing real estate broker or corporate designated broker officer may (but is not required to) appoint a licensee as a manager of a branch office or division of the employing broker’s or employing corporate designated broker officer’s real estate business and delegate to that manager responsibility to oversee and supervise operations and licensed activities. The appointed manager will share with the employing broker or corporate designated broker officer the liability of potential license discipline should violations of the Real Estate Law occur at the branch or division location.
While the appointment of a branch or division manager is completely voluntary under B&P §10164, a broker or designated broker choosing to appoint a branch or division manager must follow the guidelines set forth by B&P §10164. A licensee cannot be appointed as a manager if the licensee holds a restricted license or has ever been subject to a bar order. If the branch or division manager is a salesperson, the salesperson must have at least two years of full-time real estate experience within five years preceding the appointment. Whenever an appointment of a branch or division manager is terminated or changed, brokers or corporate designated broker officers should immediately notify the DRE in writing.
DRE’s Licensing Unit has developed a new form titled, “Branch or Division Manager Appointment” (RE 242), which will be used by a broker or corporate designated broker officer to appoint or terminate branch or division managers. This new form will be available no later than July 1, 2012. Licensees wishing to add or cancel branch offices should continue to use the Branch Office Application (RE 203).
California Homeowners Bill of Rights:
A Lesson in Political Expediency & Unintended Consequences.
California Attorney General Kamala Harris announced in a much heralded press release today that her ‘California Homeowners Bill of Rights’ has ‘taken a key step toward passage’. Here’s the key step – she bypassed every preliminary opportunity for the bill to be discussed, debated or voted on in either the Assembly or the Senate. What she did, or had her minions in the Legislature do for her, was have the bill introduced to a ‘two-house conference committee’ that voted this morning to pass the bill. That means tomorrow or, more probably Monday, the full Senate and Assembly will vote on the bills – SB 900 & AB 278 with no discussion.
You’ve heard me discuss the measures previously as the Nevada Suite of bills, so named for the deleterious results Nevada experienced after passing similar legislation last year. Did I mention the ‘special committee’ was made up of 4 Democrats and 2 Republicans? Now guess what the vote was? That’s called a ‘procedural matter’ in Sacramento. Roughly translated it means ‘bend over’.
Here’s C.A.R.’s take on the issue:
C.A.R. is OPPOSING conference report, AB 278, containing anti-foreclosure legislation sponsored by the state Attorney General. C.A.R. opposes provisions in this measure which will allow anyone to stop the foreclosure process by filing a lawsuit, merited or not, C.A.R. agrees that careful and balanced reforms to the foreclosure process are necessary. However, C.A.R. opposes this conference report because it will further delay the housing recovery by inviting bad-faith lawsuits and defaults, and making it difficult for even well qualified borrowers to obtain financing. Financing is already very difficult to get. This conference report will only make a difficult situation worse.
Initially the Attorney General had sponsored a package of bills; the so-called the “Homeowners Bill of Rights.” For procedural reasons, the majority of these bills have been under consideration by a Conference Committee made up of six legislators. REALTORS® had the opportunity to educate these legislators about C.A.R.’s concerns as part of Legislative Day and since then C.A.R. lobbyists have been working directly with the conferees and legislative staff to make them aware of the unintended consequences of some of these proposals. The Conference Committee has now issued its final report and it must be passed by both Houses of the legislature. These votes may occur as early as Monday, July 2nd.
The Attorney General has sponsored a package of bills to place into California law an expanded version of the national settlement between major banks and state attorneys general. The contents of some of these bills have been under consideration by a Conference Committee comprised of six members who have just approved a conference report on a party-line vote. Some provisions will have the unintended effect of drying up mortgage loans for anyone but the most well-qualified borrowers, and increasing the costs of all mortgages.
One provision allows any borrower, no matter what the circumstances, to file a lawsuit. This will encourage opportunistic lawyers to pursue frivolous lawsuits, bringing unnecessary and unjustifiable delays to an already difficult and time consuming process. The language is so vaguely written that the borrower doesn’t even have to show that they have been harmed to file suit and be awarded damages.
One-sided attorneys fees may still be awarded only to plaintiffs based on the very broad definition of a “prevailing party” in the report. And, of course, if lenders don’t have the remedy of foreclosure to ensure they can recover their security in appropriate situations, they will be less likely to lend, credit will be less available and the housing market recovery will limp along even more slowly.
C.A.R. is OPPOSED to the conference report because:
- The housing market recovery is still fragile. About half of all sales are of distressed properties. By restricting a lender’s ability to foreclose and exposing them to unnecessary liability, this report will dry up inventory, and it will further discourage lending other than to the most highly qualified borrowers. Additionally, these bills will artificially slow down the foreclosure process, keeping properties off the market that are legitimately in foreclosure. Finally, by removing the threat of foreclosure, the bill erodes the incentive for short sales as well.
- The bill invites bad-faith defaults and lawsuits. By broadly defining under what circumstances a lawsuit can be filed, even those legitimately in foreclosure can “game” the system. Additionally, the bill creates an incentive for plaintiffs’ attorneys to file frivolous lawsuits even if no harm has been done to the borrower. The courts are already overwhelmed. This bill, by inviting frivolous lawsuits puts an additional strain on the already underfunded courts
- Lending is already tight. Even the most well-qualified borrowers are finding it difficult to obtain financing. By stopping legitimate foreclosures, banks will be forced to further tighten lending standards at the expense of homebuyers.
We’re not intimating that everything contained in the bills is bad and we have been supportive of some of the issues. We also have a competing dual-tracking bill in play that we feel is more balanced and less vague. But this is a take-it-or-leave-it kind of bill – you have to eat the whole enchilada and there are no amendments allowed at this point. All the bad will be with us as law along with the few good things it might accomplish. Sound familiar?
This is also what is referred to as a ‘gut & amend’ bill. For 1 1/2 years some bills have been floating around the Legislature knowing full well they weren’t going anywhere. They were being held for just such a vehicle as this to rise from the ashes and require a last minute vote – often with only minutes of notice.
So this bill will pass UNLESS you can convince your Democratic Legislator to vote against it. Otherwise it’s a simple exercise in vote counting (53 – 27) to ascertain that our housing market will take another hit – a victim of increased frivolous lawsuits, further restrictions on foreclosures and tightened lending standards.
So now you know the proverbial ‘other side of the story’ and it’s not pretty. I encourage you to read the bill at AB 278 and then read the AG’s release below. While the release summarizes a much glossed over purview of the bills, the devil is in the details. So go to work on your Democratic Legislators and let them know how Realtors® feel, and every homeowner and landlord who doesn’t feel like paying the price this bill will cost.
June 27, 2012
FOR IMMEDIATE RELEASE
California Homeowner Bill of Rights Takes Key Step to Passage
SACRAMENTO — Attorney General Kamala D. Harris today announced the passage of two central elements of the California Homeowner Bill of Rights through a special two-house conference committee. The 4 to 1 vote sends the bills to an expected vote next week in both the Assembly and Senate.
The two bills approved by the conference committee are the Foreclosure Reduction Act, which restricts the process of “dual-tracked” foreclosures and the Due Process Rights Act, which guarantees a reliable contact for struggling homeowners to discuss their loan with and which for the first time imposes civil penalties on the practice of fraudulently signing foreclosure documents without verifying their accuracy, a practice commonly known as “robo-signing.” The proposed legislation also includes meaningful enforcement for borrowers whose rights are violated.
The full Homeowner Bill of Rights includes additional provisions to reduce blight, ensure appropriate law enforcement response to mortgage fraud and crime, and protect tenants. The bills containing these protections are also advancing through the Legislature.
“I am gratified by this vote, which represents one more step toward our goal of achieving a Homeowner Bill of Rights for California,” said Attorney General Harris. “The mortgage and foreclosure crisis in our state demands urgent efforts to help Californians keep their homes. The legislature will now have the opportunity to cast a vote on behalf of California’s struggling homeowners.”
The California Homeowner Bill of Rights was introduced February 29, 2012 at a press conference featuring Assembly Speaker John A. Perez and Senate President pro Tem Darrell Steinberg and bill authors from the Assembly and Senate. The goal of the Homeowner Bill of Rights is to take many of the mortgage reforms extracted from banks in a national mortgage settlement and write them into California law so they could apply to all mortgage-holders in the state.
“The mortgage and foreclosure abuse in California ends here,” said Noreen Evans (D-Santa Rosa), co-chair of the Joint Conference Committee. “This committee has passed historic legislation that codifies the
“This bill is the result of a long and difficult process in which we received input from all interested parties; including homeowners and the banks and found that foreclosures benefit no one,” said Assemblymember Mike Eng (D-Alhambra). “We ended such dubious practices as having a bank foreclose while a homeowner is in the process of modifying a loan and cut through confusion by making sure that there is a ‘single point of contact’ with mortgage servicers. With half a million California homes at risk of foreclosure, this action was urgently needed.”
The California Homeowner Bill of Rights extends Attorney General Harris’ response to the state’s foreclosure and mortgage crisis. Attorney General Harris created a Mortgage Fraud Strike Force in March, 2011 to investigate and prosecute misconduct related to mortgages and foreclosures. In February 2012 Attorney General Harris extracted a commitment from the nation’s five largest banks of an estimated $18 billion for California borrowers.
More details about the California Homeowner Bill of Rights are found on the attached fact sheet. To learn more about how the bills impact California homeowners, review the slideshow at: www.oag.ca.gov.
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You may view the full account of this posting, including possible attachments, in the News & Alerts section of our website at: http://oag.ca.gov/news/press-releases/california-homeowner-bill-rights-takes-key-step-passage
President Obama’s plan to give mortgage relief to responsible homeowners boils down to one important principle. He wants to simplify the refinancing process.
And the very first step is to let people know if they would benefit from the President’s proposal — so we’ve built a tool to help answer that question.
Just enter a few basic facts about your mortgage, and this tool will help you figure out if you currently qualify for easy, low-cost refinancing — or whether, like millions of families, you need Congress to act to help you lower your interest rate.
As tens of thousands of people have spoken up and written in to the White House, we’ve heard one message loud and clear: The refinancing process is anything but easy to navigate.
Even homeowners who have done everything right and made all their payments on time are getting caught up in unnecessary red tape. Sitting down and reading through some of these stories is a powerful reminder of why it’s so important that we get this done right away.
One mom in Maryland, raising two teenage boys by herself, wrote in to say that she’s working 15 hour days to make her mortgage payments and keep current on her bills. Another family from Illinois is hoping to lower their mortgage payments so they can help pay for college for their kids. One woman in Arkansas called the President’s plan a “no brainer” and talked about how much good it would do for the broader economy.
So if you are like these people and think that both you and our economy could stand to benefit from the President’s refinancing plan, give the tool a try, then take a moment to share it with your friends:
Changes to 2nd Lien Deficiency Waiver Guidelines
Bank of America has extended additional support to homeowners by agreeing to enhanced 2nd lien deficiency waiver guidelines.
- The short sale must be initiated on or after June 1, 2012.
- The 2nd lien must be attached to a 1st lien mortgage owned by Bank of America.
If you determine that the homeowner qualifies for this waiver, contact your short sale specialist to establish the amount to request for the 2nd lien.
This waiver enhancement, based on the Department of Justice settlement, went into effect on June 1.
- Use Equator messaging as your primary way to communicate with your short sale specialist.
- Contact Short Sale Customer Care at 1.866.880.1232 for status updates and answers to immediate questions.
For Immediate Release Contact: Corinne Russell (202) 649-3032 June 15, 2012 Stefanie Johnson (202) 649-3030 FHFA Proposes Rule for PACE Programs
Washington, DC –As required by a preliminary injunction issued by the Northern District Court of California, the Federal Housing Finance Agency (FHFA) has sent to the Federal Register for publication and public comment a Notice of Proposed Rulemaking (NPR) concerning certain state and local energy retrofit financing arrangements also known as Property Assessed Clean Energy or PACE. The U.S. Court of Appeals for the Ninth Circuit has stayed any obligation required by the preliminary injunction for FHFA to publish a final rule. FHFA, as conservator, has directed Fannie Mae and Freddie Mac not to purchase any mortgage where PACE financing with a priority lien was placed on the underlying property. Such financing moves ahead of the pre-existing first mortgage in lien priority, and thereby subordinates Fannie Mae and Freddie Mac security interests in the property. FHFA took this action based on its determination that PACE financing arrangements present a safety and soundness concern by transferring financial risks to the regulated entities and lacking in adequate consumer protections and standards for energy retrofitting.
The NPR seeks comments on FHFA’s proposed rule as well as on potential alternatives. The comment period is 45 days from the June 15, 2012 date of publication. FHFA welcomes comments on all aspects of the NPR. Link to Rule as Proposed in the Federal Register ### The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.