CAR OPPOSES AG’s Homeowner Bill of Rights.

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.

Background

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.

 

 

NEWS RELEASE

June 27, 2012

FOR IMMEDIATE RELEASE
(415) 703-5837

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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
protections eligible homeowners deserve, while helping to stabilize the foreclosure crisis that has thwarted California’s economic recovery. The Legislature has studied, listened and engaged Californians and
industry to find a solution that is fair and effective to mitigate this crisis. I look forward to the full support of the Legislature and Governor in implementing this package.”

“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.

# # #

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

 

Gov. signs Realtor Bill for short sale relief.

New law gives added protection to short-sale hopefuls On Friday, Gov. Jerry Brown signed Senate Bill 458 (Corbett) into law.  The new law, which contained an urgency clause and became effective upon signing, protects homeowners pursuing short sales by barring first and secondary lien holders from going after sellers for money owed after the short sales close.

Making sense of the story

*     A short sale – a transaction in which the homeowner sells the property for less than is owed on the mortgage – must be approved by the lien holder or lien holders, if there is more than one.

*     Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short-sale payment as full payment for the outstanding balance of the loan, but the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

*     The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) sponsored the bill and urged lawmakers to pass this much-needed legislation.

*     “The signing of this bill is a victory for California homeowners who have been forced to short sell their home, only to find that the lender will pursue them after the short sale closes and demand an additional payment to subsidize the difference,” said C.A.R. President Beth L. Peerce.  “SB 458 brings closure and certainty to the short-sale process and ensures that once a lender has agreed to accept a short-sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full, and the homeowner will not be held responsible for any additional payments on the property.”

Read the full story <http://www2.realtoractioncenter.com/site/R?i=Y7pJy-rwyTJMoTmgvOXhDA..>

Wells Fargo Allows Foreclosure Postponements for Short Sales in Certain Situations

Conventional Residential Lending Report

In November 2010, Wells Fargo advised NAR that it has modified its existing guidelines to allow the postponement of a scheduled foreclosure in connection with a short sale, but only in limited situations. For loans owned by Wells Fargo (including Wachovia) and other loans serviced by Wells Fargo but owned by an investor, the policy allows for one foreclosure postponement, but only if: (1) Wells Fargo has a short sale sales contract in hand that has been approved (including approvals from junior lien holders and mortgage insurers, if applicable), (2) the buyer has proof of funds or financing approved, and (3) the short sale can close within 30 days of the scheduled foreclosure sale. Not all investors allow for such postponements. In jurisdictions where the courts will not approve the delay, the postponement policy will not apply. Wells Fargo is willing to address situations that do not qualify under these guidelines on a case-by-case basis.

New anti-deficiency law for short sellers hits the state 1/1/11

A ray of good news for homeowners in California. Lame-Duck Arnie actually signed a bill that provides some relief for short-sellers.

Existing law prohibits a deficiency judgment by the holder of a first trust deed on a property that has sold through foreclosure. SB931 extends that protection to short-sellers of a property as well. If the holder of a first trust deed or mortgage gives written consent to a short sale, that lender is obligated to accept the sale proceeds and discharge the remaining amount owed (the deficiency). Prior to this law, lenders could pursue a homeowner even after approving a short sale for the balance of the deficiency. It still allows the holder to pursue the seller in the event they determine there was fraud or waste by the borrower and it does not apply to holders of second or subsequent notes.

The California Association of Realtors was optimistic that the Gov. would also sign our sponsored bill SB1178 that would have extended anti-deficiency protection to owners who had refi-ed their homes only to the extent that the subsequent loan was used to pay debt or costs incurred in the purchase of the home. In other words, if you refi-ed only to get a better interest rate but took no  money out, your original anti-deficiency protections would still accrue.

We all know that during the boom years, banks were quick to offer refi-s but slow to disclose that you were giving up a valuable protection by taking them up on the offer. You sacrificed your anti-deficiency protection when you refi-ed. Arnie sided with the banking lobby and declared that SB1178 would interfere with the contract between the bank and the borrower. No matter that there was no disclosure or explanation of the ramifications. CAR will be looking to again sponsor this bill in the upcoming legislative session in hopes that a new Governor will have a better grasp of the issues.

Governor Schwarzenegger holds the distinction of vetoing more real estate friendly and CA sponsored bills than any previous governor of our state. But he talked such a good line when he came to talk with us – we thought he really meant all his accolades about real estate making him the man he is today. Oh well, he turned out to be much less of a man than we all hoped. Some people light up a room when they enter, others when they leave. Don’t let the door hit ya in the bum on the way out.

Wells Fargo Nixes Extensions on Residential Short Sales

By Kate Berry/American BankerOctober 1, 2010

Wells Fargo has stopped granting extensions for distressed homeowners to complete short sales, a move that will expedite foreclosures.

In a short sale, a home is sold for less than the amount owed on the mortgage and the lender accepts a discounted payoff. The loss to the lender can be smaller than if it had to foreclose and liquidate the property.

But in a memo emailed to short sale vendors last month and obtained by American Banker, Wells said it will no longer postpone foreclosure or trustee sales for those who do not close short sales by the date in their approval letter from the company. Only extension letters dated Sept. 14 or earlier would be honored, Wells said.

The change comes after Fannie Mae told servicers early last month that they needed to stop unnecessarily delaying foreclosures. The GSE said it would hold servicers responsible for unexplained delays to foreclosures by issuing fines and conducting on-site reviews of a servicer’s operations.

Mary Berg, a spokeswoman for Wells, said its new policy on short sales was put in place “over the past couple of months … in response to various investor changes.”

Those investors, she said, “would include the GSEs, Department of Housing and Urban Development (HUD) and those investing in private-label” MBS.

Yet Wells’ decision also follows efforts by the Obama administration to encourage short sales for borrowers who do not qualify for loan modifications.

“It makes no business sense why they are doing this, since it’s wrong for the borrowers and for the government,” said Eli Tene, chief executive of IShortSale, a Woodland Hills, Calif., firm that advises distressed borrowers.

Wells said it will make an exception to the new policy for loans in its own portfolio, which includes those it acquired with Wachovia Corp. in 2008. For these loans, Berg said, Wells allows for one foreclosure postponement, provided the following: it has an approved short sale in hand that includes approvals from junior lienholders and mortgage insurers; the buyer has proof of funds or approved financing; and the short sale can close within 30 days of the scheduled foreclosure sale.

Experts on short sales said that in recent months servicers have been reluctant to approve such transactions out of concern that the buyer will not get financing, or that the buyer’s lender will not be ready to close, causing the buyer to lose patience and walk away from the deal and further prolonging the process.

Wells’ move preceded the recent revelations of faulty paperwork at two major servicers — JPMorgan Chase & Co. and Ally Financial Inc. — which said they had suspended thousands of foreclosure actions to review their processes.

On Thursday, Acting Comptroller of the Currency John Walsh said he had told seven major servicers, including Wells, to review their processes. Another Wells Fargo spokeswoman, Vickee J. Adams, said the company’s “policies, procedures and practices satisfy us that the affidavits we sign are accurate.”

Read the full article here

FHA Announces Short Refinance Program for Non-FHA Borrowers

On August 6, 2010, the U.S. Department of Housing and Urban Development (HUD) announced details for its new refinancing program to assist homeowners who owe more on their non-FHA mortgages than their home is worth. HUD originally announced the program in March. Beginning September 7, 2010, the Federal Housing Administration (FHA) will offer qualified non-FHA borrowers the opportunity to refinance with a FHA-insured mortgage on their primary residence. Borrowers must be current on their existing mortgage, qualify under FHA underwriting requirements, and have a credit score of at least 500. The first lien holder must agree to write off at least 10% of the remaining amount owed under the mortgage bringing the combined loan-to-value ratio (LTV) of all mortgages to 115% or less. The LTV for the new FHA mortgage may not exceed 97.75%. The Treasury Department will provide incentives to second lien holders who agree to forgive all or part of their liens. Additional information and guidelines can be found on the HUD website.

HUD Press Release
HUD Mortgagee Letter 2010-23, FHA Refinance of Borrowers in Negative Equity Positions

NAR Creates New Email Address to Collect Data on the Experience of REALTORS® with Short Sales

To learn more about the difficulties that REALTORS® continue to face with shorts sales and the Home Affordable Foreclosure Avoidance Program (HAFA), NAR has created an online mailbox for members to report their experiences and provide specific examples of the problems they are facing with lenders. These e-mails will be collected and used by NAR in its ongoing discussions with lenders and the Treasury Department.

Please note, this mailbox is for data collection purposes only and not all submissions will receive a response. You may send an e-mail detailing your experiences to HAFA@realtors.org.

NAR’s Short Sale Web Page (including the new email address)

B of A & Chase release HAFA Guidelines. Thanks NAR?

A couple weeks ago at our GAD Institute, NAR President Vicki Cox-Golder discussed how she and Ron Phipps have been meeting with banking executives around the country in an effort to get some uniformity in short-sale practices and to find out what problems are preventing these large institutions from doing short-sales expeditiously in the best interest of our entire industry. They had met with B of A exec’s just prior to her visit with us and said that in addition to B of A promising to work on the problems, they had also extracted a promise to reduce the time to transact a short sale by nearly half – from about 112 days to just 57 days.

Well, I know we’ve all had smoke blown up our nether regions repeatedly by the big banks about releasing REO’s,  loan mod’s and short sales, (to name but a few) but maybe – just maybe, we are making some progress. Our leaders are meeting, or have met, with B of A, Chase, Wells Fargo and two more, who slip my mind right now. Maybe as a result of these meetings – or maybe just because they felt like it, both B of A and Chase have recently released guidelines that Realtors® will find  helpful to comply with each banks HAFA programs.

Will they work and will the process be as easy-cheesy, lemon squeezy as they claim? Only your Realtor® will know for sure – but it’s a start.

Click here for the 10 page B of A ‘Home Affordable Foreclosure Alternative (HAFA)  Short Sale Program & Guide for Agents

Or click here for a one page synopsis of Chase Bank Home Affordable Foreclosure Alternatives (HAFA) Program.

Short Sale Fraud on the Rise

Brown Issues Warning about Rise of Short Sale Fraud

LOS ANGELES – Attorney General Edmund G. Brown Jr. today joined the California Department of Real Estate and the State Bar of California to warn homeowners about an alarming rise in short sale fraud across California in a field “rife with scam artists”.

A short sale is an arrangement in which a homeowner sells his or her home for less than the outstanding mortgage, with the consent of the lender.

“While short sales can provide homeowners with a last-ditch alternative to foreclosure, this market is rife with scam artists,” Brown said. “Homeowners and buyers, agents, and lenders should beware of short sale negotiators who operate without licenses, use straw buyers or charge illegal fees.”

With so many homeowners now considering short sales, an entire industry of so-called short sale negotiators has emerged. These individuals solicit homeowners by promising to expedite the process and help coax lenders into taking part in the transaction.

The Department of Real Estate is investigating more than 40 complaints of short sale fraud, up from “virtually zero” cases only three months ago, a spokesman said.

In April, the Obama administration launched a new initiative called the Home Affordable Foreclosure Alternatives Program, which encourages homeowners in financial distress — especially those who have failed to complete a trial modification or qualify for a loan modification — to consider a short sale as an alternative to foreclosure.

Before working with — or paying — any short sale negotiator, homeowners should consider the following red flags:

No license
With limited exceptions, only licensed real estate agents or attorneys can engage in short sale negotiations with a homeowner’s lender.

Up-front fees
Licensed real estate agents wishing to collect up-front fees from homeowners for short sale transactions must first submit an advance fee contract to the Department of Real Estate and receive a no-objection letter.

Surcharges
With many distressed properties listed well below market value, negotiators and agents are charging potential buyers thousands of dollars in surcharges and hidden fees just to place an offer on a home. These illegal fees are frequently not disclosed and are paid outside escrow.

Straw buyers and house flipping
In this scheme, short sale negotiators misrepresent the market value of a property to a homeowner’s lender by only submitting offers on the property from an affiliated straw buyer. After the home is purchased below market value, the fraudsters immediately flip it and pocket the difference.

Short sale negotiators and agents use a number of titles including debt negotiator, debt resolution expert, loss mitigation practitioner, foreclosure rescue negotiator, short sale processor, short sale coordinator and short sale expeditor.

If you are a homeowner who has been scammed, contact Brown’s office at 1-800-952-5225 or file a complaint online at: www.ag.ca.gov/consumers/general.php.

Homeowners can also learn more about avoiding mortgage and real estate fraud by visiting the Department of Real Estate website at: http://www.dre.ca.gov/cons_alerts.html. A complaint form can be accessed online at: http://www.dre.ca.gov/frm_consumer.html.

“Short sale fraud appears to be the fraud of the moment, and it is proliferating statewide,” according to Real Estate Commissioner Jeff Davi. “Consumers, licensees and lenders must all arm themselves with the tools necessary to avoid such scams.”

Homeowners can file a complaint against a lawyer, a legal specialist or a company purporting to operate as a law firm with the State Bar by calling 1-800-843-9053 or visiting: www.calbar.ca.gov.

Homeowners can learn more about the federal government’s Home Affordable Foreclosure Alternatives Program by visiting: http://makinghomeaffordable.gov/hafa.html.

Non-profit housing counselors certified by the U.S. Department of Housing and Urban Development are also available to provide free help to homeowners. To find a counselor in your area, call 1-800-569-4287.

Short-sellers Take It In The Shorts on Taxes

California short sellers to pay tax on mortgage debt
Governor Schwarzenegger last week vetoed a bill that would have prevented California homeowners who sold their homes via short sales or received loan modifications in 2009 from being taxed on the forgiven mortgage debt.  Schwarzenegger vetoed the bill, which would have aligned much of the state’s tax code with that of the federal government’s, because it contained an unrelated provision regarding tax refunds for the state’s largest businesses.  Although the governor vetoed this particular bill, he expressed his support for banning taxation of forgiven mortgage debt, and immediately called for the legislature to send him a bill to provide tax forgiveness prior to the April 15 tax-filing deadline.

C.A.R. currently is supporting two stand-alone measures, AB 1779 (Niello) and SB 14 (R. Calderon and L. Correa) of the Sixth Extraordinary Session, that would fully conform to the federal rule extending “phantom” income debt forgiveness through December 31, 2012.

Short Sales and Foreclosures: What Real Estate Professionals Need to Know

Short Sales and Foreclosures – The New “Traditional” Transaction

For many real estate professionals, short sales and foreclosures are the new “traditional” real estate transaction. Knowing how to help sellers maneuver the complexities of short sales as well as help buyers pursue short sale and foreclosure opportunities are not merely good skills to have in today’s market – they are critical. And while short sales and foreclosures are not for the faint of heart, agents with the proper tools and training can use these specialty areas to guild their business for the long term.

Designed for real estate professionals at all experience levels, the National Association of REALTORS® (NAR) Short Sales & Foreclosure Resource certification, or SFR for short, gives you a framework for understanding how to:

  • Direct distressed sellers to finance, tax, and legal professionals
  • Qualify sellers for short sales
  • Develop a short-sale package
  • Negotiate with lenders
  • Tap into buyer demand
  • Safeguard your commission
  • Limit risk
  • Protect buyers

As many agents can attest, your ability to close short sales and foreclosures depends in part on your confidence in seeing these transactions through. Begin building your confidence today with SFR!

Benefits:

  • Training on both the buyer and seller side of short sale and foreclosure transactions
  • Free webinars that you can download anytime, anywhere
  • SFR logo and marketing materials
  • Access to SFR members-only online community
  • Differentiation as an SFR at www.realtor.org and www.realtor.com

How to become SFR Certified:

  • Be a member in good standing of the National Association of REALTORS®
  • Complete REBAC’s Short Sales and Foreclosures course, available online or in classrooms (visit www.coursecalendar.com for locations)
  • Complete 3 one-hour free webinars (find links at www.realtorsfr.org)
  • Submit application (download at www.realtorsfr.org)
    • Send application to SFR@realtors.org
    • $175 application fee waived through March 31, 2010

For complete information and how to add this course to your tool bag, go to:

NAR Short Sale Course

NAR Economic Summit – Commercial Loans & Short Sales

Much of the afternoon was devoted to the commercial market and banks. The commercial market is a great source of concern right now. Commercial defaults could freeze the housing rebound while its impact on the credit market could drive even more banks out of business – including some that are starting to turn around today. The triple whammy of housing defaults, followed by commercial defaults, followed by credit card defaults is not a good combination for recovery – did I mention unemployment? But that’s worst case and hopes are high (if not the actual hopers) that we may be on our way out of the first and the stimulus may moderate the others.

Jerry HowardCommercial transaction are down 80% from a year ago and values have dropped 25% – 35% in some markets. This is at least partially due to significant overbuilding during the past decade. Given that commercial loans are typically in the 5-7-10 year cycles, these loans are comeing due and lenders simply aren’t extending additional credit even to loans that are performing. Commercial construction has virtually ground to a halt during the past year with only about 70 million SqFt being permitted and developed. While this may sound like a lot, compared to the billions of feet available out there, it’s a drop in the bucket.

The future of banks as we know them was also mentioned. It was posited that the recent downturn was actually more of a lending bubble rather than a housing bubble. The public was responding to the rampant availability of funds. From the EVP of Wells Fargo Mortgage, ‘Bad loans are made in the good times – it’s counter-cyclical and created this bubble.’ Banks also need to work smarter. NAR announced new regulations making short sales a priority to lenders. That system is broke all across the country – not just where you are. Partly because banks are severely overburdened right now, partly because many experienced staff have been replaced in cost reduction efforts, partly because…

tim sandosThere is a new incentive that may tip the scales for enhanced short sale procedures – allowing short sales or deed-in-lieu to proceed without requiring delinquency on the part of the owner. Aside from the unfortunate habit of dinging people’s credit for trying to do the right thing, it is also having a real impact on our soldiers. One member from Hawaii quoted the high percentage of foreclosures in Honolulu in and around Pearl Harbor. Soldiers posted there years ago purchased homes or condos anticipating a lengthy stay or a rising market. Now many of those same soldiers are being transferred and are having their credit wrecked at the same time all thanks to their employer (US Government) & the banks. Even returning  veterans, some wounded, returning from duty are transferred stateside and are forced into credit hell. That’s not right.

sheila bairIt was also pointed out that 90% of sub-prime borrowers were already homeowners – the incentive for banks was on the gamble, not the product. Banks must get back to the business of being banks – back to basics. Making fewer but higher quality loans to qualified homebuyers – without excessive and onerous over-regulation.Home buyers are also being encouraged to buy a house as a home – not as a stock certificate or an investment. Over the long term housing remains the greatest builder of wealth for the average American. The short term laughs at the long term.

We finished out the afternoon with FDIC Chair Sheila Bair. Her opening statement was “It’s been a tough 18 months but I’m definitely feeling better this year than last year”. She closed by saying that ‘Housing led us into this downturn, housing must lead us back out. But,” she noted,” it’ll be a slog, not a sprint.”

t. But,” she noted,” it’ll be a slog, not a sprint.”