Job Recovery 1st, Housing Recovery 2nd….duh

And yet another round of articles espousing how the housing market just hasn’t restarted the economy….and for those who still don’t get it, it never will.

Since few have figured it out yet, we need to fix the actual (not reported) unemployment problem. Forty three percent of Americans over the age of 16 do not have a job. Over 20 millions jobs are gone due to outsourcing, off shoring, and down sizing.

Most people without jobs can buy a house, so it goes to figure that most home sales will be limited to the employed (rocket science). That means more renters (more rocket science).

Now with Wall Street (big banks, investment firms) trying so hard to make sure that local investors don’t profit from the sales of REO inventory by restricting offer periods to owner occupant only, deed restrictions, etc. More vacant homes are left sitting on the market, many becoming an eyesore to the local neighborhoods.

Here’s a couple of thoughts to solve our problems:

Increase home ownership by requiring ALL lenders offer FHA 203k or similar owner occupant rehab loans to first time buyers. That way, first timer’s can not only purchase some of the now dilapidated housing stock, but fix them up so that the value increases faster (aids local tax coffers, schools, businesses) and the new home owners have to hire local contractors (aids local contractors, increases employment, spending at local businesses, permit fees at local municipalities).

Second and equally important, allow local investors next dibs on purchasing the local housing stock. Local investors have a more hands on approach to the purchase, rehab as they are often locally grown, have roots in the area. They like to see home values stabilize and recover in “their” neighborhoods. They also are more likely to utilize local contractors, hire and shop locally. Rehabbing a home requires large quantities of manufactured goods and materials. (this creates jobs too, on a national level). Selling to local investors keeps more money “in state” or local. Selling homes to out of state or overseas investors draws money away from local communities and tends to concentrate it back to large investors.

The market is ready for the shadow inventory, the need is there. Mandate rehab loans and prioritize purchases from local buyer and investors. Lastly, promoting more rent to own programs will help many buyers who have lost their homes, ease back into the home ownership which further stabilizes local markets.

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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.