Housing market does NOT drive the economy, Jobs do

I gotta tell you not a day goes by without some very educated political, economic, government advisor/official talking about how the weak housing market is holding back the economic recovery.

Okay, let me explain it to you educated types…. JOBS, more specifically, US JOBS are the controlling factor in the economic recovery. 21 million manufacturing jobs outsourced, downsized and off-shored has created an economic black hole in the US economy.

And of course the government version of “seasonally adjusted” unemployment figures is not anywhere near accurate in reflecting the actual unemployment level.  And I don’t want to hear how people who have been unemployed for more than a year don’t count.  Stop looking at/blaming the housing industry and look at the real issue. No job = No mortgage, no re-finance, no new car loan, no old car loan, no appliances, no new computers, no season tickets to the Detroit Lions (joking of course). People with jobs spend money, lot’s more money than people than people without jobs.

And by the way, maybe we should building new homes and start re-building/renovating/greening the existing housing stock so that we save energy, and bring the current housing stock up to current building and safety code. Tax credits/rebates to start up companies that create real jobs and builders who green up the existing housing stock is a great place to start.

2011 REO Business Forecast – 4.5 Million Foreclosures

If 2010 was the year for market balance…(short sales catching up to or surpassing REO sales), then 2011 should be known as REO Wave 2.0.

Realistically, any homeowner with a job, who was going to try to qualify to modify their mortgage(s) has tried.  The banks don’t really want to do shorts sales as they go against the nature of earning revenue by collecting a debt.  Two years (Nov 1st 2008) of on and off moratoriums have created a backlog of “shadow” REO’s and a lot of very frustrated REO brokers/agents, contractors, title company’s, and eviction attorneys.  “When is the inventory coming back?” is all you hear for the past 24 months.  Well the time has come and indications from both the increase in new assignments while still in redemption, and from people on the inside of the banks and outsourcers are saying that once the latest round of moratoriums expire in January 2011, it’s on.

Everyone know that the banks reviewed and alter their “robo stamping” procedures, which is the only reason that the number of monthly foreclosures started fell below 300,000 for the first time.  As the new procedures are streamlined, I expect you will see the number of new foreclosures start to reach, over even exceed 400,000 a month.

My best guess is that by the 3rd week of January and say March 15th, the trickle of REO property assignments will resume to a flow.  Fannie Mae is telling their LLB’s to stock up on flyers and sign riders now while they are still in inventory.  Wells Fargo and BoA began outsourcing their BPO’s to a series of valuation providers in order to handle the increase.  JP Morgan Chase, BoA and Fannie Mae have added as many as 15 outsourcers each to handle the expected increase in business.  (mind you some of the outsourcing is due to major internal downsizing over the past 2 years)

What does this mean for REO Broker/Agents?  First of all, once the flow of REO’s returns, the banks and outsourcers are going to draw from experienced REO Broker/Agents because they really don’t have time to train new ones.  Most all of the Banks and outsourcers closed off new Broker/Agent registration over the past two years, although several LSO’s used new Broker/Agent registrations to generate money off of REO agent “wannabees”.  Something to keep in mind, your previous Broker/Agent registration expire, and so will your file if you don’t keep it updated.  Many of your past Lender, Servicer, Outsourcer (LSO) contacts are long gone, so newly created vendor managers are doing most of the hiring of new Broker/Agents, as well as, new property assignments.  Even for the “old timers”, these vendor managers don’t know who you are, and in most cases, you won’t know who they are either (by design) so you’re going to have to keep on your toes, market yourself effectively and make friends who can make recommendations for you.

By the way, it doesn’t matter how many different web portals or zip codes you sign up for,  if you aren’t signed up (certified and approved) with the LSO’s directly, you won’t be getting (m)any REO assignments.

Starting in summer of 2009, I had to trim back both my office space, and staff by 2/3′s in order to maintain our team in the black.  I anticipate that we should be back to full staff again by 3rd quarter 2011 and that we should hit 2008 sales levels by year-end 2011 (423 closed transactions).

REO’s vs. Economic and Housing recovery in the US

REO vs. Economic and Housing recovery in the US
Back in 2006, I was having discussions with a number of agents and brokers about the the impending wave of foreclosure’s that was on it’s way, and many scoffed at the time saying I was a “negative nancy”.  I was predicting that withing a couple of years, at least 2/3 of all real estate sales would involve distressed (REO and Short Sale) properties.

Well as of mid 2009, that came to pass as predicted.

Problem: Due to six years of inappropriate mortgage approvals, millions of home buyers bought WAY more than they could afford, which in turn drove up home prices in double digit annual increases. This can not continue if some 20 to 30 million jobs have been down sized and outsourced off shore. Buyers can’t buy, and homeowners can’t make monthly payment with no jobs. So in 2006, lenders realizing they had a HUGE problem, tighten the lending requirements back to where they really should have stayed to begin with, and suddenly, no more 125%, “0″ down below market rate refi’s. Homeowners suddenly had to make the newly adjusted payments and trouble began. In an effort to “SOLVE” the problem, the government suggested that the banks as a gesture of goodwill, conduct a “Holiday moratorium” for the sake of the poor American people starting in November of 2008 under the guise that foreclosures would resume come January. This did not happen. Meanwhile, back at the ranch, the banks were negotiating with the folks on Capitol Hill to secure a change in accounting rules which would allow them to use a “mark to market” system to lessen the impact of the foreclosure losses on their bottom line, which in turn would save their butts with the not so friendly people on Wall Street. So the moratoriums were extended first to Feb, them March and onward until the stream of REO inventory literally dried up. Home values plummeted, and all the folks who had refied or bought a home in the past six years were suddenly upside down on their mortgage. Short sales, long hidden from day to day view, began to arise and with the onslaught of continued job loses, REO’s began to build.

Solution: Some two years later, despite the misguided efforts of those Capitol Hill with $800 billion bail outs, $8,000 tax credits for new home buyers, HAMP, HAFA and TARP. The real problem stems all the way back to JOBS. Fix the job situation and people can BUY houses, and home owner can MAKE their house payments. Those folks on Capitol Hill should have used the $800 billion dollars to create jobs, and offer $8,000 tax credit to business for each new permanent full time employee. Because everyone knows, you can get a mortgage without a job. Furthermore, if you want to speed up the economic recovery, you need to speed up the foreclosure process to flush as many as possible out of the system.

What? Speed them up you say? Why that will further drive prices down.

The answer is 100% Correct. Prices are still 20 to 30% over valued from where they should be when looking a 100 year graph. Dump the houses fast. Get values in line with norm and see what happens. Having sold houses for 20 years now, and having owned a few personally, the first thing I do after buying a new house is fix it up. I buy and install, new kitchens, bathrooms, paint, carpet, furniture, light fixtures, up grade plumbing, furnaces, air conditioners, etc. And the funny thing is, is that ALL of those items are made buy Americans in manufacturing jobs. So in essence, if we speed up the foreclosures, we actually put more Americans back to work? Yes, not only do we increase the number of manufacturing jobs, but also restart the local contractor trades, most of whom are suffering since most home owners stopped updating their homes several years ago. Contractors pull permits, permit fees help fund municipalities, who in turn can hire more employees. All these newly hired people now can spend money and pay taxes, both of which, in turn, further assist the economic recovery.

Want to take a look at the next two to three years?  The longer the moratoriums continue, the longer (and I mean decades) until the recovery occurs.  If the status quo continues, the REO’s should trail off by the end of 2012, or 2013.  Expect a  stagnant US economy for a decade VERY slow recovery of values (think 2025 or so).  If you want a quicker recovery, get a hold of those on Capitol Hill and DEMAND that the foreclosures moratoriums come to an end and that the system get flushed as quickly as possible.

Creating the Perfect REO Team for Local Listing Brokers (agents)

After a LOT of trial and error over the past 10 years, I’ve found that there are 4 CORE positions needed to successfully close between 250 to 350 REO transactions per year consistently. In 2009, my team clsed 637 REO and Short Sale transaction sides, which was up form 423 in 2008.

I am somewhat dyslexic and I have ADD, I very much dislike typing reports, so I hired people who are excellent at skills based on my own shortcomings.

Valuation Coordinator – Manages, processes and types all BPO’s, MMR’s and MSR’s (consider hiring an appraiser)

Property & Billing Coordinator – Manages, processes all New Assignment Tasks, Water & Tax Bills, HOA Bills, OSR’s, Repairs, CFK-EVICT and Billing

Transaction-Closing Coordinator – Manages, processes all offers, pending deals and closings. (Consider hiring a title closer)

Listing-Marketing Coordinator – Manages, processes all new listings, price changes, back on market (everything MLS related) and all positng to webstites, signs, flyer boxes, open houses etc.

If you want to exceed 400 closed transactions a year, you will need to add at least two more positions:

* Sales Coordinator – Assists both on-staff and co-op broker/agents in getting their offers submitted to us correctly, handles addendums, counter offers, delivering documents, and assisting agents having problems.

* Valuation Coordinator – Assists Valuation Manager in coordinating all MSR’s and MMR’s, so the primary Valuation Manager can focus solely on BPO deadlines and quality control.

Each Team members runs all their indvidual Status Reports every morning in REOEDGE™ and then give me a copy so we can see whats going on. We also print a screen shot of each web portal (Equator, Dispo, iAgent, ISIS, Servicelink, LPS, Quandis, etc.) and send it around to all staff in order to review pending tasks and to go over any escalated issues. We review what occured yesterday, what is happening today, and what is coming due tomorrow daily.

We also utilize a Field Inspector/Photographer to take Initial and updates photos, follow up on repair completion, perform quality control inspections on contractors, vendors, deliver special financing flyers, etc.

Regarding buyer leads from sign calls and the various internet websites. I divided up the Metro Detroit area into several geographic zones, and assign all calls in each zone to a particular buyer’s agent. I also have one buyer’s agent who specifically deal with out of state and foreign investors. Up until last year, we had a sales coordinator manage all the incoming leads. Now I handle it myself each morning.

Where to go to keep up on the REO Business

If you want to stay in the know of what’s going on in the REO business, then you should be keeping an eye on the following websites, and REO information sources:

#1) http://mortgageservicingnews.com/ for daily email updates and the paper subscription. This is the BEST source of what going on with the Lenders/Servicers/Outsourcers. It gives the lastest in what’s what, who’s where, and what portfolies got sold or transferred to which other LSO.

#2) http://www.managingreo.com/ for daily updates and monthly eMagazine. Good for learning the how to’s.

#3) http://www.dsnews.com/cat/reo Another good source of REO info.

#4) http://thereoinsider.com/ New kid on the REO block. We shall see.

#5) http://www.agentsonline.net/forums/ubbthreads.php/forums/8/1/BPO_REO_Foreclosures.html this place has the dirt on all the LSO’s and AM’s. Who’s paying for BPO’s and who not.

#6) http://www.inman.com/ This site has good general real estate news.

#7) http://online.wsj.com/public/page/news-real-estate-homes.html Gives good US real estate market news adn updates.

#8) http://www.ft.com/personal-finance/property

#9) http://www.fdic.gov/bank/individual/failed/banklist.html This site tells you who failed and who’s going to assume the loans.

#10) http://bankimplode.com/ This site tells you which banks are floundering before they fail.

Getting more REO listings

I repeatedly get requests by many agents, trying to break into the REO business, or for existing agents, who are trying to get more REO business. All of them want to know the same thing. “How do the get more business?”

This is how I do it.

1): Research and identify which banks/servicers/capital firms/credit unions have the most foreclosures in your area. Rank them based on total number of assets in default.

2) Research each bank/servicer/capital firms/credit union and ask them in person if necessary ” Who handles your REO properties”? If they outsource, then get a list of all the companies they utilize.

3) Develop a database of REO contacts, and actively maintain it. Get a Dymo label maker and 5,000 mailing labels and go to town.

4) Create a logo for your team, and then compile a marketing package including your resume, zip code coverage map, contact info, brochure, desk calendar, wall calendar, several business cards, past 90 sales stats by county, and any other items deemed necessary.

5) Send a complete copy of the marketing package with a nifty cover letter to the VP of REO for each bank/servicer/credit union & outsourcer (they use Vendor Managers). BTW, this costs money, postage, envelopes and TIME.

6) Then send them postcards and updated county sales stats on a frequent basis (remember farming your old neighborhood). Continue this as long as you want to get business.

7) Sign up for the main portals, EQUATOR and RES.NET, as well as, the banks/servicers/capital firms/credit unions & outsourcers.

8) Stop whining about not getting any business handed to you. What did you do before foreclosures became prevalent? Did you whine when homeowners decided to list their homes with other agents?

9) Don’t pester the REO contacts with whining, crying, bribes, or general harassment. Send them useful things like information, zip code coverage areas, updates on new laws affecting REO properties, ordinance changes, pre-sale inspections, mandatory city registrations for vacant homes, upcoming tax sales, demolition issues, etc.

10) Do something to market yourself every single day for at least an hour, or better yet, four hours a day, or more. And then keep it up.

PS. They usually don’t like getting emails and phone calls because they are busy dealing with REO properties. Don’t antagonize them.

Oh, one last thing. If you can’t do this, then hire a person to do it for you. pay them a performance bonus based on how successful they are at marketing your team. You will know how successful they are based on your activity.

So once upon a time, the bank called and asked for a drive by BPO

Once upon a time, I heard about a guy that somebody knows, who had a friend, who’s cousin, was an REO Specialist. And that REO Specialist signed up with an REO company, and he got a BPO assignment. Athough that BPO was for no fee, because if the lender decides to list the REO property, then the original agent who did the BPO for free would get the listing assignment.

So the REO Company gave him the listing assignment, but he only got the listing for 30 days, because rather than list the REO property at the as-is value that the REO Specialist recommended, the REO Company listed the property 20% over repaired value.

The REO Company then requested three repair bids by licensed contractors. But before the repair bids could even be approved, the REO Company decided to send the property to an online auction at which point the listing commission was reduced from 3% to 1% and the listing agent had to hold the house open for two consecutive weekends and hand out multilingual flyers.

But of course the property had to be listed on the MLS for 15 days first before any offers could be considered by the seller and of course all buyers (even cash buyers) had to be pre-approved by the lender’s cousin’s girlfriend’s mortgage company located in another state in a different timezone.

And since it was now an auction property, all potential buyers had to be pre-registered by their buyer’s agents or the auction company got to keep the selling side commission along with 2/3′s of the listing side commission.

No really, I heard it really did happen to a guy once.

Ideas for fixing the US Economy

Food for thought:

#1) Eliminate Fannie Mae and Freddie Mac. Let the US Treasury buy all mortgages from lenders and collect the resulting interest, which could theoretically fund all (or at least offset the cost of) government programs including universal health. Go figure. A lot less layers, less corruption, and would help reduce the cost of government.

#2) Must work for unemployment. Volunteer work that is, for the State, County and City in which you live. In order to collect, you must put in at least 35 hours a week helping assist in the areas where you live. Picking up trash, serving food to the poor, the Humane Society, the elderly, local schools. No voulnteer work, no unemployment checks. This would quickly get many unemployed back to work, and help out so many others.  Must assist existing and recognixed non-profits or government entities only.

#3) Speed up the short sale and foreclosure processes which will invigorate the economy by increasing the number of manufacturing and construction jobs which drive the US economy. Every sale of a new house causes a chain reaction of spending on both goods and services by the new owner which increases productivity and demand. The continued delay of short sales and foreclosures is actually dragging out the economic recovery and risks pushing the economy into a second recession of much larger proportion.

Fixing the US Economy by speeding up the foreclosure process

Okay, it’s soapbox time again. This is a condensed reiteration of my past 2 years advice in letters I’ve sent to our government leaders.

First of all, giving the banks $800 Billion dollars saved or created approximately 31,000 jobs. But wait, the economy it no better than before…so saving a few firms on Wall Street wasn’t the magic silver bullet after all. All those banking big shots still get to collect their $26 Million dollar bonuses, despite the fact that they improper loans and securitization devastated the US and world economies. Sooo you ask, what should be done? Several things. Now pay attention.

$800 Billion dollars, used correctly, could have been used to create up to 10 Million manufacturing jobs, because as we all know, manufacturing jobs are GREAT for the economy. 10, 15, 20, 25 Million manufacturing jobs have been lost, outsourced, disappeared into thin air while the Wall Streeters are still employed. The $800 Billion should have been used to provide an $8,000 tax credit for each permanent full-time new hire thus creating as many as 10 Million jobs.

Secondly, speed up the foreclosure process. Stop with the moratoriums, reduce or eliminate redemption periods. Most of the home owners never really could afford the loans to begin with. So lets speed things up, it’s not like they are going to get great new jobs in the near future making $150,000 per year and suddenly bring all their bills current.

You see when someone buys a new house, especially a foreclosed home, they have a strange tendency to rehab, redecorate, upgrade the new home and all the materials they use are manufactured goods. That means that if they speed up foreclosures, it will increase the demand for manufactured goods, which are made by people with manufacturing jobs, and thus re-employ the unemployed.

I know from personal first hand experience as a home buyer, new house means, new furniture, appliances, carpet, paint, window treatments, deck, hot tub, new kitchen, bathroom, windows, furnace, A/C. Gosh and all those things are created by people in manufacturing jobs. Now all those newly employed people with the manufacturing jobs can now qualify for loan and buy the now reasonably priced housing inventory, thus creating a cycle of more jobs.

In addition, many new homebuyers hire local contractors for the labor (increased job demand for skilled trades), pull permits (money for local governments), and increase tax based for the updated homes (increased tax base).

Stop bailing out the banks, and create permanent manufacturing jobs. Let the gov’t take over the banks and remove all those people getting $26 Million in bonuses.  Fix the economy the old-fashioned way. Jobs are good for the economy. Reduce unemployment and the continuous drain on social services at the state, local and federal budgets.

Rebuild the US economy by speeding up the foreclosures.

REO Business 2010 February Update

In the past six weeks, I have received several hundred emails from agents all over the country trying to get into the REO business or from existing REO agents trying to get more REO business.

First of all, most if not all lenders/servicers/outsourcers (LSO’s) are low on inventory and will be until the end of 2nd QTR of 2010. This is because of the change in accounting rules and Mark to Market valuation allowing future date values. They have to hold the REO’s for a period in order to use the future date values. This will lead to a controlled release of inventory.

Signing up over and over with the same LSO’s, or harassing various asset managers isn’t going to work and will actually diminish your chances of getting business.
The LSO’s already have more than enough experienced agents in their systems to dispose of the upcoming REO inventory. This is allowing them to trim off many non-performing agents at will.

While BPO’s are an incremental source of revenue. Short sales will more than compensate for the decrease in REO revenue due to the current shortage of REO’s. Short sale properties are in better condition that REO’s and will earn both higher sale prices and higher commission rates.

Your carrying costs for short sales is lower than REO’s and help reduce your overhead. You need smaller staffs, less office space, fewer PC’s as well.

Paying lots of fees in order to sign up for a bunch of agent directories and vendor firms is making them rich, but they don’t have any REO listings to give you. REO listings come from LSO’s.

You will have to sign up with the major online portals if you want to list REO’s, but you must also sign up directly with the banks. Now go back and re-read the 3rd paragraph. They already have enough agents.

So what to do? Go old school. List homes (short sales), re-learn how to work with first time buyers (all buyers actually have to qualify for a loan the hard way, and so will the house, FHA 203K anyone?). Go back to marketing your inner circles, your farms, previous clients, personal contacts.