For the third quarter of 2011 RealtyTrac reports that 20 percent of all existing home sales were bank owned or being foreclosed. This is down from 30 percent of all sales in the third quarter of 2010.

The latest RealtyTrac figures might be seen as good news were it not for the glum reality which makes such numbers correct: There are fewer foreclosures in large measure because lender paperwork is not accepted at face value in many courts as a result of robo-signing. Yes, courts will accept lender foreclosure claims, but in many cases only with additional assurances and reviews that delay the process — and protect homeowners from flawed foreclosure claims.

“While foreclosures continue to represent an excellent bargain-buying opportunity for many buyers and investors, foreclosure sales accounted for a smaller share of the total market in the third quarter. That trend is not too surprising given the continued ambiguity surrounding proper foreclosure procedures — and the ripple effect that has on sales of foreclosed properties that might have been improperly foreclosed,” said Brandon Moore, chief executive officer of RealtyTrac. “The sooner the market gets more clarity about accepted foreclosure procedures, primarily through the long-promised settlement between multiple states attorneys general and major lenders, the sooner the market can more efficiently dispose of these distressed properties.

“Even with the hurdles to selling foreclosures, foreclosure sales continue to represent a historically high percentage of all sales,” Moore continued. “In 2005 and 2006, foreclosure sales consistently accounted for less than 5 percent of all sales nationwide.”

Pricing

Buyers, says RealtyTrac, purchased 221,536 residential properties during the third quarter that were in some stage of foreclosure (NOD, LIS, NTS, NFS) or bank-ownship (REO) during the third quarter.

The average sales price of homes in foreclosure or bank owned was $165,322 in the third quarter, according to the company.

The average sales price of these foreclosure-related sales was 34 percent below the average sales price of homes not in foreclosure, matching the 34 percent foreclosure discount in the second quarter but below the 37 percent discount in the third quarter of 2010.

RealtyTrac also provides the following information:

Pre-foreclosure sales flat from year ago, REO sales down

A total of 92,824 pre-foreclosure homes — in default or scheduled for auction — sold to third parties in the third quarter, a decrease of 9 percent from the previous quarter and nearly identical to the 92,967 pre-foreclosure sales in the third quarter of 2010. Pre-foreclosure sales accounted for nearly 9 percent of all sales, the same as in the second quarter, but down from 12 percent of all sales in the third quarter of 2010.

Pre-foreclosure sales increased more than 30 percent on an annual basis in Michigan (up 68 percent), North Carolina (up 44 percent), Ohio (up 43 percent) and Georgia (up 35 percent). Pre-foreclosure sales outnumbered REO sales in several states in the third quarter, including Colorado, Florida, New Jersey and New York.

Pre-foreclosures, which are often sold via short sale, had an average sales price nationwide of $191,119, a discount of 24 percent below the average sales price of homes not in foreclosure. That was up from the 23 percent discount in the previous quarter and matched the 24 percent discount in the third quarter of 2010. Pre-foreclosures that sold in the third quarter took an average of 318 days to sell after receiving an initial foreclosure notice, up from an average of 245 days in the second quarter and average of 236 days in the third quarter of 2010.

A total of 128,712 bank-owned (REO) homes sold to third parties in the third quarter, down 13 percent from the second quarter and down nearly 8 percent from the third quarter of 2010. REO sales accounted for nearly 12 percent of all sales in the third quarter, down from 13 percent of all sales in the previous quarter and down from nearly 18 percent of all sales in the third quarter of 2010.

Nationally, REOs had an average sales price of $146,437 in the third quarter, a discount of nearly 42 percent below the average sales price of homes not in foreclosure. That matched a 42 percent discount on REOs in the second quarter, but was down from a 45 percent discount in the third quarter of 2010. REOs that sold in the third quarter took an average of 193 days to sell after being foreclosed on, up from 178 days in the second quarter and 161 days in the third quarter of 2010.

Nevada, California and Arizona post highest percentage of foreclosure sales

Foreclosure-related sales accounted for nearly 57 percent of all residential sales in Nevada during the third quarter, the highest percentage of any state. Third parties purchased a total of 13,992 homes in foreclosure or bank owned in Nevada during the third quarter, nearly identical to the 13,858 foreclosure-related sales in the previous quarter, but up 24 percent from the third quarter of 2010.

Third parties purchased a total of 62,583 homes in foreclosure or bank owned in California, representing nearly 44 percent of the state’s total residential property sales in the third quarter — the second highest percentage of any state. Foreclosure-related sales in California decreased nearly 7 percent from the previous quarter but were up 7 percent from the third quarter of 2010.

Arizona foreclosure-related sales accounted for 43 percent of all sales in the state, the third highest percentage of any state. Third parties purchased a total of 21,619 homes in foreclosure or bank owned in Arizona during the quarter, down nearly 14 percent from the previous quarter, but up 19 percent from the third quarter of 2010.

Other states where foreclosure-related sales accounted for at least 20 percent of all sales included Georgia (34 percent), Colorado (26 percent) and Michigan (23 percent).

Due to a nearly 30 percent decrease from the previous year, Florida foreclosure-related sales in the third quarter accounted for 19 percent of all sales in the state — down from 39 percent of all sales in the third quarter of 2010.

Metros with biggest foreclosure discounts

Among metropolitan statistical areas with at least 100 foreclosure-related sales during the third quarter, the Trenton-Ewing, N.J., metro area posted the biggest foreclosure discount. The average price of a foreclosure-related sale in the metro area was $108,302, nearly 68 percent below the average sales price of homes not in foreclosure. Foreclosure-related sales accounted for 8 percent of all sales in the Trenton-Ewing metro area during the third quarter.

Foreclosure-related sales accounted for nearly 13 percent of all sales in the St. Louis metro area during the third quarter and sold at an average price of $80,545, nearly 55 percent below the average price of non-foreclosure sales in the metro area — the second highest foreclosure discount among metro areas with at least 100 foreclosure-related sales.

The Milwaukee metro area documented the third highest foreclosure discount, with an average foreclosure-related sales price of $93,250 — nearly 53 percent below the average sales price of non-foreclosure properties. Foreclosure-related sales accounted for 17 percent of all sales in the Milwaukee metro area in the third quarter.

Other metro areas with a foreclosure discount of at least 50 percent were Springfield, Mass. (52 percent),Saginaw, Mich. (52 percent), New Haven-Milford, Conn. (51 percent), Memphis (51 percent), San Francisco (51 percent), Toledo, Ohio (50 percent), Bridgeport-Stamford-Norwalk, Conn. (50 percent), and Atlanta (50 percent).

Glossary of Terms

Foreclosure (FC) sale: a sale of a property that occurs while the property is actively in some stage of foreclosure (NOD, LIS, NTS, NFS or REO). This includes only sales to third-party buyers or investors not involved in the foreclosure process. It does not include property transfers from the owner in default to the foreclosing bank or lender.

REO sale: a sale of a property that occurs while the property is actively bank owned (REO).

Pre-foreclosure sale: a sale of a property that occurs while the property is actively in default (NOD, LIS) or scheduled for foreclosure auction (NTS, NFS).

Pct. of all sales: total number of Foreclosure Sales (or Pre-Foreclosure Sales or REO Sales) as a percentage of all residential sales during the quarter or year.

Avg. FC sales price: the average sales price of Foreclosure Sales (or Pre-Foreclosure Sales or REO Sales) during the quarter or year, excluding sales with no sales price.

Avg. FC discount: the percentage difference between the average sales price of foreclosure sales and the average sales price of non-foreclosure sales during the quarter or year.

Avg. REO discount: the percentage difference between the average sales price of REO sales and the average sales price of non-foreclosure sales during the quarter or year.

Avg. pre-foreclosure discount: the percentage difference between the average sales price of pre-foreclosure sales and the average sales price of non-foreclosure sales during the quarter or year.

1 in 5 Home Sales Distressed, Foreclosed or Bank Owned, Says RealtyTrac is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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But the new numbers tell only part of the story. What they really demonstrate is that millions of homes remain distressed and that the foreclosure process itself continues to be troubled.

It was late in 2010 that the robo-signing scandal came to light, the practice of signing foreclosure affidavits without actually verifying that the claims were true. The result is that while most foreclosures are justified by non-payment some are not. The judicial system must now figure out how to repair improper foreclosures and — going forward — how to assure that no family is thrown out of their home without cause.

“Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” said Brandon Moore, chief executive officer of RealtyTrac. “The lack of clarity regarding many of the documentation and legal issues plaguing the foreclosure industry means that we are continuing to see a highly dysfunctional foreclosure process that is inefficiently dealing with delinquent mortgages — particularly in states with a judicial foreclosure process.

“There were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets. We expect that trend to continue this year, boosting foreclosure activity for 2012 higher than it was in 2011, though still below the peak of 2010.”

Annual Results

There are two ways to view the market: properties impacted and foreclosure filings. Each measure has value as an index of marketplace activity.

Realtytrac says in 2011 that 1,887,777 U.S. properties faced foreclosure, a 34 percent decrease when compared with 2010. Foreclosure filings themselves — default notices, scheduled auctions and bank repossessions — fell almost 30 percent.

Going back to 2005, the annual foreclosure filing totals from RealtyTrac look like this:

In the past seven years almost 18 million foreclosure filings have been sent out. However, the actual number of impacted homes is substantially lower because borrowers often receive multiple notices for a single property.

December activity hits 49-month low, scheduled auctions up in fourth quarter

Foreclosure filings were reported on 205,024 U.S. properties in December, a decrease of 9 percent from the previous month and down 20 percent from December 2010. December’s total was the lowest monthly total since November 2007 — a 49-month low.

December Default notices (NOD, LIS) decreased 19 percent from the previous month and were down 23 percent from December 2010; Scheduled foreclosure auctions (NTS, NFS) decreased 12 percent from the previous month and were down 24 percent from December 2010; and bank repossessions (REO) increased 10 percent from the previous month but were still down 12 percent from December 2010.

Foreclosure filings were reported on 586,133 U.S. properties in the fourth quarter, a 4 percent decrease from the previous quarter and down 27 percent from the fourth quarter of 2010. Fourth quarter default notices were down 6 percent from the previous quarter and down 22 percent from the fourth quarter of 2010; scheduled foreclosure auctions increased 4 percent from the previous quarter but were still down 32 percent from the fourth quarter of 2010; and REOs decreased 11 percent from the previous quarter and were down 24 percent from the fourth quarter of 2010.

Nevada, Arizona, California post top state foreclosure rates for year

More than 6 percent of Nevada housing units (one in 16) had at least one foreclosure filing in 2011, giving it the nation’s highest state foreclosure rate for the fifth consecutive year despite a 31 percent decrease in foreclosure activity from 2010. Nevada foreclosure activity dropped 35 percent from the third quarter to the fourth quarter, driven primarily by a 70 percent decrease in default notices — the result of a new law (AB 284) that took effect in October requiring lenders to file an additional affidavit before starting the foreclosure process. The new law also increases the penalties for the use of fraudulent documents in foreclosure.

Despite a 28 percent drop in foreclosure activity from November to December — caused largely by a 41 percent drop in scheduled foreclosure auctions — Arizona registered the nation’s second highest state foreclosure rate for the third year in a row, with 4.14 percent of its housing units (one in 24) with at least one foreclosure filing in 2011.

California also experienced a substantial month-over-month drop in initial foreclosure notices in December — default notices there were down 38 percent from the previous month — but the state still registered the nation’s third highest foreclosure rate for all of 2011. One in every 31 California housing units (3.19 percent) had at least one foreclosure filing during the year, down from 4.08 percent in 2010 and 4.75 percent in 2009.

Georgia posted the nation’s fourth highest state foreclosure rate, with 2.71 percent of housing units (one in 37) with at least one foreclosure filing in 2011, and Utah posted the nation’s fifth highest state foreclosure rate, with 2.32 percent of its housing units (one in 43) with a foreclosure filing during the year.

Other states with 2011 foreclosure rates ranking among the nation’s 10 highest wereMichigan (2.21 percent), Florida (2.06 percent), Illinois (1.95 percent), Colorado (1.78 percent), and Idaho (1.77 percent).

Foreclosure processing timelines continue to increase

U.S. properties foreclosed in the fourth quarter took an average of 348 days to complete the foreclosure process, up from 336 days in the third quarter and up from 305 days in the fourth quarter of 2010. The length of the average foreclosure process has increased 24 percent from 281 days in the third quarter of 2010, when lenders began to re-evaluate foreclosure procedures in earnest as the result of the so-called robo-signing controversy.

The average foreclosure process in New York has increased 37 percent during the same time period, and New York properties foreclosed in the fourth quarter took an average of 1,019 days to complete the foreclosure process — the longest of any state.

New Jersey documented the nation’s second longest average foreclosure process, at 964 days, and Florida documented the nation’s third longest average foreclosure process, at 806 days. Foreclosure activity in both these states dropped more than 60 percent from 2010 to 2011. All three states with the longest foreclosure timelines employ the judicial foreclosure process.

Texas continued to register the shortest average foreclosure process of any state, at 90 days — still an increase from 86 days in the third quarter and from 81 days in the fourth quarter of 2010. Other states with average foreclosure process among the nation’s shortest in the fourth quarter were Delaware (106 days), Kentucky (108 days), Virginia(132 days), and Louisiana (134 days).

Top metro foreclosure rates

With 7.38 percent of its housing units (one in 14) with at least one foreclosure filing in 2011, Las Vegas posted the nation’s top foreclosure rate for the year among metropolitan statistical areas with a population of 200,000 or more.

Ten out of the top 20 metro foreclosure rates in 2011 were in California cities, led by Stockton at No. 2, with 5.43 percent of housing units (one in 18) with at least one foreclosure filing during the year. Other California cities in the top 10 were Modesto at No. 3 (5.29 percent), Vallejo-Fairfield at No. 4 (5.20 percent), Riverside-San Bernardino at No. 5 (5.16 percent), Merced at No. 7 (4.40 percent), Bakersfield at No. 9 (4.31 percent), Sacramento at No. 10 (4.17 percent), Fresno at No. 11 (3.82 percent), Visalia at No. 13 (3.67 percent), and Ventura at No. 16 (3.27 percent).

Other metro areas with foreclosure rates ranking among the top 20 were Phoenix at No. 6 (5.10 percent); Reno, Nev., at No. 8 (4.37 percent); Atlanta at No. 12 (3.69 percent); Prescott, Ariz., at No. 14 (3.50 percent); Cape Coral-Fort Myers, Fla., at No. 15 (3.29 percent); Greeley, Colo., at No. 17 (2.97 percent); Detroit at No. 18 (2.94 percent); Boise, Idaho, at No. 19 (2.85 percent); and Salt Lake City at No. 20 (2.81 percent).

All top 20 metro areas showed a decrease in foreclosure activity from 2010, and all butAtlanta posted a decrease from 2009. Atlanta metro foreclosure activity in 2011 was up 2 percent from 2009.

Foreclosure Filings Off Nearly 30%, RealtyTrac is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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The monthly figures should be seen as not especially meaningful as they can be impacted by factors as the weather, the length of the month and the number of federal holidays. The longer-term results dating back to 2007 give a more accurate presentation of national trends.

National trends, however, are themselves suspect — as are regional trends. The reason is that real estate is an intensely local commodity so what goes on regionally or nationally may not reflect local market patterns.

The December results by region look like this:

Pacific: +0.4 percent — Hawaii, Alaska, Washington, Oregon, California

Mountain: -1.3 percent — Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, New
Mexico

West North Central: -0.2 percent — North Dakota, South Dakota, Minnesota, Nebraska, Iowa, Kansas, Missouri

West South Central:+1.6 percent — Oklahoma, Arkansas, Texas, Louisiana

East North Central -0.8 percent — Michigan, Wisconsin, Illinois, Indiana, Ohio

East South Central: +0.4percent — Kentucky, Tennessee, Mississippi, Alabama

New England: -0.2 percent — Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut

Middle Atlantic: -0.6percent — New York, New Jersey, Pennsylvania

South Atlantic: -1.3 percent — Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida

US Home Prices Down 16.5% From Peak is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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According to Ohio State Attorney General Richard Cordray:

“Judge Charles Pater of the Butler County Court of Common Pleas issued an order denying GMAC’s motion to ratify a judgment because ‘neither the Ohio Civil Rules nor the local rules of this court provide a procedure for or authorize a court to “ratify” a final appealable order’ and stating that “the proper course of action would be for GMAC to first file a motion to set aside its judgment and then, once the court grants that motion, to refile its motion for summary judgment with a correctly executed affidavit in support.”

Cordray adds that “it is improper for the plaintiff to ask the court to ratify a foreclosure judgment based on a false affidavit after the fact by simply substituting or supplementing what plaintiff now claims is a proper affidavit.”

Instead, he argues that “vacating the judgment is the proper way to handle these cases, as it removes a judgment based on a false affidavit and gives the homeowner an opportunity to contest a new motion for default or summary judgment.”

Cordray and Judge Pater are saying that as a matter of law robo-signing lenders cannot just change the paperwork for past foreclosure cases when documents were improperly prepared — and neither can courts. Instead, everyone must start from scratch with entirely-new cases. This means — if Cordray’s approach becomes widespread — that tens of thousands of foreclosure cases will have to be unearthed, reviewed and tried again if the original paperwork was faked. Large numbers of people who sought nothing but the best mortgage rates will be watching the process with great interest.

Lender Worries

Not only would new trials on a mass scale be a huge expense to lenders, lenders are unlikely to bat 1,000 and win every case. In those cases where they do lose it will then be necessary to explain how someone was thrown out of their house on the basis of a false affidavit or other error. Given the damage done if a falsely foreclosed owner is found, awards worth millions await borrowers who unfairly lost their homes.

And it could get worse. Imagine if vacated judgments begin to appear in other courts and in other states. Suppose bar associations begin to sanction attorneys who submitted falsified documents to force people out of their homes? And imagine if courts in various states look at falsified affidavits and think in terms of mass perjury?

National Foreclosure Rules

But, most likely, these things won’t happen. There’s now a movement in Washington to “unify” foreclosure standards around the country in the name of efficiency. Instead of 50 sets of state rules there will be one single national foreclosure standard operated from Washington.

Sounds pretty enticing — until you realize that consumers have virtually no rights in Washington and that the federal regulation of loan originations by national banks did absolutely nothing to prevent or stop the widespread use of toxic mortgages.

The movement to remove state-foreclosure courts is now underway. If it happens that state courts are shut down, who do you think will win when the rules are tailored to one party or another? Name one borrower PAC that will contribute to congressional races or impact decisions on Capitol Hill? Just think about the way the bankruptcy process has been distorted by congressional action, much to the joy of credit card companies and student lenders.

The foreclosure story mortgage lenders fear most is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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The question has now been raised by the National Association of Exclusive Buyer Agents. NAEBA surveyed members about their closings during the past three years, then verified those findings with public records. Of the 1,849 closings, there were 15 foreclosures. President John Sullivan said “these survey results show what I have always known, NAEBA members take their fiduciary duties to their clients seriously. Troubled times have revealed that the higher standards provided by the Common Law of Agency provided better results for consumers.”

I first wrote about buyer brokerage in 1982 for the Washingtonian magazine. In 1986, attorney Douglas M. Bregman and I wrote Buyer’s Brokerage: A Practical Guide for Real Estate Buyers, Brokes and Investors. The reason to prefer buyer brokerage is very simple: If sellers can be represented by real estate brokers, then why not buyers? Seen the other way, buyers without representation are likely to be at a great disadvantage, yet even in 2008 according to the National Association of Realtors, only 42 percent of all buyers had written buyer brokerage agreements.

NAEBA says that its survey shows “a foreclosure rate of just 0.8%, compared to the nationwide rate of 1.84% in 2008 (the last year for which there are complete numbers). Clearly, respondents to this survey have found that transactions in which the buyer is adequately represented tend to result in much fewer foreclosures than are found in nationwide averages.”

But are the results really so clear? Are 1,849 closings over three years a big deal in the context of a marketplace with millions of annual transactions? Were the purchased properties in the study located in high foreclosure areas to the same extent as home sales generally? How do the NAEBA results compare with buyers who were represented by non-exclusive buyer brokers; that is, brokers who represent sellers in some transactions and buyers in others? What percentage of the 1,849 closings involved subprime loans and ALT-A financing?

The obvious question raised by the study, of course, is this: Could mortgage loan officers — not just real estate brokers — have prevented the mortgage meltdown if under federal rules they were required to represent the best interests of borrowers?

Real Estate: Could Realty Brokers Have Prevented the Mortgage Meltdown? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Let’s not go crazy here, the index is 10.7 percent below its April 2007 peak. That said, in an environment with lousy news followed by worse news, the latest HPI is decidely in the good-news column.

The FHFA data comes from the purchase prices of houses used to back mortgages which have been sold or guaranteed by Fannie Mae or Freddie Mac. Between them, the two companies hold more than 31 million loans.

The problem is that the higher April prices did not happen everywhere. There were significant differences in the nine regions tracked by the government — some of which are surprising. The regional results for April are below:

Pacific Census Division: Hawaii, Alaska, Washington, Oregon, California — up +2.7 percent.

Mountain Census Division: Montana, Idaho,
Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico — -0.2 percent.

West North Central: North Dakota, South Dakota, Minnesota, Nebraska, Iowa, Kansas, Missouri — up +0.6 percent.

West South Central: Oklahoma, Arkansas, Texas, Louisiana — up +0.5 percent.

East North Central: Michigan, Wisconsin, Illinois, Indiana, Ohio — up +1.5 percent.

East South Central: Kentucky, Tennessee, Mississippi, Alabama — down -0.5 percent.

New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut — down -2.0 percent.

Middle Atlantic: New York, New Jersey, Pennsylvania — down -0.1 percent.

South Atlantic: Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida — up +1.4 percent.

Home Prices Up — Can This Be Real? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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I wanted to study journalism because it gave me an opportunity to travel and to meet interesting people. I have been a correspondent on Capitol Hill and at the White House, I have lived on an offshore drilling rig in pursuit of a story, I have spoken to an endless number of business leaders, senators and representatives and I have traveled to just-about every state.

There is also another aspect to journalism, the idea that reporters, columnists and the media in general are uniquely equipped to watch the government, corporations and institutions at work — and to freely report when such entities do right or wrong. The usual expression is that journalists should comfort the afflicted…and afflict the comfortable.

Jon Stewart is generally referred to as a comedian. His “Daily Show” is typically seen as entertainment. So-called serious journalists often look down their noses at Mr. Stewart.

They’re fools.

Every journalism school in the country should be studying the conversation between Jon Stewart and Wall Street commentator Jim Cramer. And so should every borrower, investor, senator, representative, regulator, shareholder, saver, and homeowner.

The Interview

Steward did exactly what journalists are supposed to do, he asked tough questions, in public, based on research and common sense. He took Cramer and the financial network, CNBC, to task for failing to fully tell the public of the risks and follies being pursued on Wall Street. Stewart essentially said the business media in general had been handmaidens and enablers of the banks and brokerages, largely repeating the what they said, doing inadequate research and rarely giving time or attention to the red flags which were so obvious.

Cramer, who is loud, bright and often insightful, had an open opportunity to defend his position. Look at the uncensored video of the show and judge what he said for yourself.

Everyone Was Responsible

At this point the claim is usually made that “everybody” is responsible for the current financial meltdown. Lenders loaned too much, borrowers borrowed too much, regulators regulated too little and journalists could only cover current events which, for several years, saw little but rising home values and stock prices.

The unstated point, of course, is that if EVERYONE was responsible than no one was specifically responsible.

This is junk.

You didn’t have to be a soothsayer to see what was coming.

Most community banks and credit unions refused to offer so-called “affordability” mortgage products, the loans with negative amortization, huge prepayment penalties and high-cost back-ends. Most homebuyers bought responsibly and borrowed no more than they could afford. They fully documented their income.

Many states wanted to halt rapacious lenders but could not because the lenders acted under the authority of the federal government and the federal government said the states could not over-ride federal authority, an authority established by the National Bank Act and confirmed by the Supreme Court in the 2007 Watters case.

Oh, and when was the National Bank Act enacted? That would be 1864.

The Real Issues

The real issues are very simple:

First, without exception every loan is supposed to be underwritten according to baseline program standards. This is the lender’s responsibility and a lot of lenders either repeatedly and routinely got it wrong or purposely failed to stop loans that should never have been made, highly-profitable errors that produced large executive bonuses, fat paychecks for loan officers and grossly overvalued stock.

Second, the Federal Reserve, under the Home Ownership Equity Protection Act (HOEPA), legislation passed in 1994, has the right under Section 129 to ban “unfair and deceptive acts or practices (UDAP).” In other words, had the Fed simply said that option ARMs, interest-only loans and stated-income loan applications were “unfair” and “deceptive” we could have prevented the current mortgage meltdown. It doesn’t matter what any other branch of government did or did not do, the Federal Reserve had an opportunity to stop the financial crisis and it absolutely failed to do so.

Third, in 2003 five federal agencies announced that they had “a plan to identify and eliminate outdated, unnecessary or unduly burdensome regulations imposed on insured depository institutions.” An official from the Office of Thrift Supervision brought a chainsaw to rip through mounds government paperwork. Could anyone miss the symbolism? Could any lender not understand that the new government policy was hands off, anything goes?

On The Record

I have repeatedly told readers since as far back as 2004 that “nontraditional” loans and practices were dangerous. Not just for borrowers but also for lenders and their shareholders.

I wish I had been wrong.

Every time I have written about rip-off mortgages I have gotten numerous emails from lenders telling me I didn’t “understand” the system.

High credit scores, they said, were a substitute for the lack of documentation. But credit scores are history, they don’t tell us what happens when mortgage payments rise 50 or 100 percent. They also didn’t say that lenders and loan officers got more money when they sold a loan with a stated-income loan application.

“Nontraditional” loan products simply reflected a new understanding of financial instruments, they said. You have to know about the secondary market, derivatives and mortgage-backed securities, I was told. And you have to look at the rates and the ability to provide financing for just about any buyer. Of course, more loan volume means more commissions and profits, something not usually mentioned.

You can see the uncensored Jim Cramer interview on the Daily Show by pressing here.

And to Jon Stewart, my congratulations — journalists ought to be ashamed that you had to do their job for them.

Mortgages, Foreclosures & The Disgrace of Journalism is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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American Arbitration Association
Appraisal Institute
Association of Real Estate License Law Officials (ARELLO)
Building Owners and Managers Association (BOMA)
Commercial Investment Real Estate Institute (CCIM)

Community Associations Institute (CAI)
Council of Residential Specialists
Counselors of Real Estate (CRE)
Housing Authorities Association
Institute of Real Estate Management (IREM)

International Association of Assessing Officers
Mortgage Bankers Association of America
Mortgage Insurance Companies of America
National Association of Exclusive Buyer Agents (NAEBA)
National Association of Hispanic Real Estate Professionals

National Association of Home Builders (NAHB)
National Association of Housing Cooperatives
National Association of Real Estate Editors (NAREE News)
National Association of Mortgage Brokers(NAMB)
National Association of Real Estate Brokers (Realtists)

National Association of Realtors (Realtors)
National Association of Residential Property Managers (NARPM)
National Board of Certification for Community Association Managers
Real Estate Educators Association(REEA)
Society of Industrial and Office Realtors (SIOR)

Urban Land Institute (ULI)
UpFront Mortgage Brokers Association (Mortgage Brokers Who Represent Borrower Clients and Not Lenders)

National Real Estate & Mortgage Associations is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Real Estate Associations is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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I wondered about such issues when I got email the other day which really peeked my interest. The letter went something like this:

I wonder if the FSBO listings on the MLS are treated differently by brokers at large, even though the FSBO offers the same commission to the buyer’s broker? Would you think that brokers would boycott/avoid FSBO listings as a matter of solidarity? Is there any data on this topic that you might know of?

These are important questions and they implicitly raise several points. Let’s take ‘em one by one.

First, the term “FSBO” means “for sale by owner.” By definition, all homes listed on a broker-operated MLS are placed there by, er, brokers and not directly by owners. Thus such properties are not FSBOs, they are brokered listings complete with listing agreements and fees paid to brokers.

Listing agreements can vary enormously, the terms are not set in stone. The pantheon of listing options includes exclusive right to sell contracts, exclusive agency listings, listings with a flat fee and listings which reflect a menu of services. The terms and fees are negotiable.

Regardless of how a home is listed, if it’s listed it’s not a FSBO. With a listing, any listing, there’s a broker involved and there is an obligation to provide services which meet visible and established standards.

Second, our correspondent raises the matter of fees; to whit: All things being equal does the way a home is listed impact the interest of buyer brokers?

If the fee to a buyer broker is the same as the fee from any other property, and if we assume that brokers are lucid, then the buyer broker doesn’t care. But let’s say that broker Smith — if only for the sake of argument — will not show certain listings for philosophical reasons. In such a situation you can bet that broker Jones will be elated both to find a buyer and collect a fee. A seller, of course, needs just a single purchaser.

Buyer brokers can and do approach FSBOs — sellers without any broker representation or assistance — and make offers. The reason? Buyer brokers are still being paid, perhaps directly by the purchaser or indirectly by a credit to the buyer from the seller.

Third, the idea of brokers having “solidarity” is interesting. No doubt the brokerage community would like to see such cohesiveness.

Brokers compete with one another and often have very different ideas regarding policies and practices.

As evidence, consider that 1.3 million people now belong to the National Association of Realtors. Given this enormous membership, it’s not surprising that NAR has one of the largest political action committees in Washington. In the 2006 election cycle, the NAR PAC took in $9.4 million according to OpenSecrets.org. Of this amount, $3.6 million went to federal candidates.

No doubt these are big numbers, but think about it: This is an association with 1.3 million members — the PAC collected a hardly-mammoth $7.23 per member. Forty-eight percent of the NAR PAC money went to Democrats and 52 percent went to Republicans. Not an even split, but not evidence of political solidarity, either.

If the brokerage community has such solidarity, where’s the money? Of more than 1.3 million members, only 3,609 contributed at least $200.

When last I looked more than 2 million people had real estate licenses, which means that more than 700,000 licensees not only do not contribute to the NAR PAC, they don’t even belong to NAR.

The real question raised by our correspondent is whether a property entered into an MLS will get a fair shot at being sold regardless of how it’s listed or who does the listing. It’s a fair question.

Assuming the house represents a competitive property in the local marketplace, I think the logical answer goes like this: Brokers are entrepreneurs who earn their living representing others in the sale and purchase of real estate. Each buyer and seller, each sale and purchase, represents a business opportunity — and brokers who turn down such opportunities don’t eat.

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Published originally by Realty Times on January 23, 2007 and posted with permission.

Is Brokerage Solidarity A Real Estate Reality? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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