It's true. Now that VAR has a great new blog at http://varbuzz.com/, I'm doing away with this Real Reading blog. You'll find the kind of news stories I've been posting here at the varbuzz site....plus a whole lot more. Subscribing to VARBuzz is simple. You can add it to your RSS feed, or simoply subscribe to receive a daily email digest of posts. You'll find those subscription buttons at the top right on VARBuzz. Hope you'll subscribe there...ASAP!
Regards,
Scott
Wednesday, February 27, 2008
Friday, December 28, 2007
A Real Estate Niche Profits From Rise in Foreclosures
A Real Estate Niche Profits From Rise in Foreclosures
By Dina ElBoghdady
Washington Post Staff Writer
Friday, December 28, 2007; D01
Longtime real estate agents Barbara and James Newcomb decided three years ago to focus on selling homes that had been repossessed by lenders, certain that the housing market would falter and they could cash in.
The decision paid off. Today, the couple is handling the sale of 50 foreclosed houses in Maryland -- up from about 15 a year ago, said Barbara Newcomb of Don Gurney GMAC Real Estate in Glen Burnie. "We've hired three people to work for us since September."
As the number of foreclosures rises, the niche industry devoted to helping lenders quickly offload these properties is flourishing, fueled by an influx of traditional real estate agents looking to supplement their income during a protracted housing slump.
The homes, known as REOs for "real estate owned," are those that lenders failed to auction at the courthouse after borrowers defaulted. Subprime borrowers in Virginia, Maryland and the District lost 8,000 of these homes to lenders in the year ended September, up from 842 the previous year, according to estimates by First American LoanPerformance.
The more of these houses lenders dump on the market, the more lucrative the REO industry gets and the more players it attracts, including title lawyers, cleaning specialists, appraisers and information technology firms that help lenders track their properties.
"Everybody right now is trying to get into REOs or they're trying to make a buck off of someone trying to get into REOs," said Michael P. Krein, president of the National REO Brokers Association, a 10-year-old trade group. "It's a cycle we've seen before."
When the market is thriving and foreclosures are few, the REO industry shrinks. When the market sours and foreclosures soar, the industry expands because of a lender-driven hiring spree.
The hiring starts in-house. When foreclosures rise, lenders beef up their teams of asset managers. Those managers hire people to handle the logistics of selling those homes.
"The lenders need people on the ground to do the grunt work, to make sure that no one took all the toilets out of a house," said Guy Cecala, publisher of the trade publication Inside Mortgage Finance.
That demand inspired Ronnie Ory to get out of the home building business and concentrate on cleaning and preserving foreclosures back in the 1990s, when Florida's housing market tanked.
Today, Cyprexx Services, based in Tampa, taps into a network of subcontractors nationally, including in the District, Maryland and Virginia. In this region, the firm has about six times the number of foreclosures as last year, Ory said.
"We stuck with this business because there will always be some foreclosures," Ory said. "We make it work just by basic business planning. We stay light on our feet and use subcontractors all over."
Others keep finding new niches. More than a year ago, Maryland real estate broker Kevin Goodnight launched REO Hotshots, a Web site where lenders can search for real estate agents his firm says it has vetted.
The members-only site -- which also lists appraisers, title lawyers and contractors -- charges lenders $249 a year. Agents and contractors pay $999 annually to get their names in front of these lenders.
The Web site and others like it hope to profit from the lenders' need to offload foreclosures as quickly as they can. The longer they hold these properties, the more money they lose.
"Many of these lenders are completely overwhelmed right now," Goodnight said. "They don't want to waste lots of time looking for agents or contractors, and they don't want to take anyone by the hand when they're this busy and teach them how to get the job done."
The premium on experience helps the Newcombs.
The couple eased into the foreclosure business at the height of the housing boom, when many borrowers were refinancing their homes. At the time, lenders needed to quickly determine the value of those homes and a handful of them hired the Newcombs to do "broker pricing opinions" at $35 to $150 each.
Those contacts came in handy when foreclosures rates surged this year. They completed 2,500 broker pricing opinions for a dozen of their lender clients -- up from 1,300 in 2006.
"That line of work gave us a chance to prove ourselves to the banks and develop a rapport," Barbara Newcomb said. "That's why we managed to get so many foreclosure listings when the market went bad."
These agents, like others, make their money in commissions.
The larger their inventory of homes, the more they are likely to sell. And the higher their prices, the better the commission.
The Newcombs say selling one or two houses a month keeps them going. They have eight under contract that are scheduled to close this month or next, including one that's selling for $575,000. Their most expensive home is listed for $769,000.
"We're going to be looking at a good January and February," Barbara Newcomb said. "I'm sure we'll be seeing more sales in March and April, but if we don't, what we've got so far is enough to tide us over."
But the foreclosure business isn't for everyone, said Krein, head of the National REO Brokers Association. "Think about it. It takes a certain type of person to clean a crack house. It takes a severe Type A personality. About 40 percent of our members are ex-military in some form or another. They understand that you have to follow rules and do what you're told."
The other thing these real estate agents need: deep pockets. Agents typically pay upfront for cleaning and repairs, homeowners association dues, lawn maintenance, lockboxes and snow removal, Krein said. They also take on the water, gas and electric bills.
The Newcombs said lenders owed them as much as $60,000 at one point. The couple pays about $5,500 a month in gas and electric bills alone.
Bob Norrell, a senior vice president at Litton Loan Servicing, said he marvels at how complex this niche market has become. Norrell, whose firm collects payments on thousands of mortgages, said that he managed all his bank-owned properties on a single Excel spreadsheet for 20 years.
"Now the brokers and Realtors are uptight about all the information that's required of them," he said.
Norrell cites the vendors who set up booths at a recent conference he attended in Dallas, where more than 2,000 rookies and industry veterans gathered. Some offered software that banks can buy to track their homes and assign homes to agents. One offered a network of foreclosure-prevention gurus that lenders could hire to negotiate with borrowers.
The complexity of the market is why Cary Sternberg, a vice president at IndyMac Bank, wants to hire agents with at least two years of REO experience.
At the Dallas conference, Sternberg held workshops in the ballroom of the Hilton Anatole and told the crowd that just about everyone he knows in turn knows someone in the real estate business who wants to sell foreclosures.
Most of those wannabes are agents who sold plenty of homes during the boom years and think that experience will translate to the foreclosure business, he said.
"I've got to weed out those people because they do not understand the REO business," Sternberg told the crowd. "They're just looking to supplement their income."
The speech did not discourage Deirdre Glascoe, a self-described "newbie" who's not shy about wanting whatever extra money Sternberg can bring her way. Glascoe, an agent at Murchison-John Realty in the District, said she worked on government contracts in a previous career and understands that it takes patience to win a client.
"If [Sternberg] needs a job done in a certain market and the only one available is the newbie he does not want, guess who he's going to hire?" Glascoe said. "He's not going to come to XYZ street in Bowie from Austin to do his business."
With that, she grabbed one of Sternberg's business cards -- contact information printed on a fake $1 million bill.
By Dina ElBoghdady
Washington Post Staff Writer
Friday, December 28, 2007; D01
Longtime real estate agents Barbara and James Newcomb decided three years ago to focus on selling homes that had been repossessed by lenders, certain that the housing market would falter and they could cash in.
The decision paid off. Today, the couple is handling the sale of 50 foreclosed houses in Maryland -- up from about 15 a year ago, said Barbara Newcomb of Don Gurney GMAC Real Estate in Glen Burnie. "We've hired three people to work for us since September."
As the number of foreclosures rises, the niche industry devoted to helping lenders quickly offload these properties is flourishing, fueled by an influx of traditional real estate agents looking to supplement their income during a protracted housing slump.
The homes, known as REOs for "real estate owned," are those that lenders failed to auction at the courthouse after borrowers defaulted. Subprime borrowers in Virginia, Maryland and the District lost 8,000 of these homes to lenders in the year ended September, up from 842 the previous year, according to estimates by First American LoanPerformance.
The more of these houses lenders dump on the market, the more lucrative the REO industry gets and the more players it attracts, including title lawyers, cleaning specialists, appraisers and information technology firms that help lenders track their properties.
"Everybody right now is trying to get into REOs or they're trying to make a buck off of someone trying to get into REOs," said Michael P. Krein, president of the National REO Brokers Association, a 10-year-old trade group. "It's a cycle we've seen before."
When the market is thriving and foreclosures are few, the REO industry shrinks. When the market sours and foreclosures soar, the industry expands because of a lender-driven hiring spree.
The hiring starts in-house. When foreclosures rise, lenders beef up their teams of asset managers. Those managers hire people to handle the logistics of selling those homes.
"The lenders need people on the ground to do the grunt work, to make sure that no one took all the toilets out of a house," said Guy Cecala, publisher of the trade publication Inside Mortgage Finance.
That demand inspired Ronnie Ory to get out of the home building business and concentrate on cleaning and preserving foreclosures back in the 1990s, when Florida's housing market tanked.
Today, Cyprexx Services, based in Tampa, taps into a network of subcontractors nationally, including in the District, Maryland and Virginia. In this region, the firm has about six times the number of foreclosures as last year, Ory said.
"We stuck with this business because there will always be some foreclosures," Ory said. "We make it work just by basic business planning. We stay light on our feet and use subcontractors all over."
Others keep finding new niches. More than a year ago, Maryland real estate broker Kevin Goodnight launched REO Hotshots, a Web site where lenders can search for real estate agents his firm says it has vetted.
The members-only site -- which also lists appraisers, title lawyers and contractors -- charges lenders $249 a year. Agents and contractors pay $999 annually to get their names in front of these lenders.
The Web site and others like it hope to profit from the lenders' need to offload foreclosures as quickly as they can. The longer they hold these properties, the more money they lose.
"Many of these lenders are completely overwhelmed right now," Goodnight said. "They don't want to waste lots of time looking for agents or contractors, and they don't want to take anyone by the hand when they're this busy and teach them how to get the job done."
The premium on experience helps the Newcombs.
The couple eased into the foreclosure business at the height of the housing boom, when many borrowers were refinancing their homes. At the time, lenders needed to quickly determine the value of those homes and a handful of them hired the Newcombs to do "broker pricing opinions" at $35 to $150 each.
Those contacts came in handy when foreclosures rates surged this year. They completed 2,500 broker pricing opinions for a dozen of their lender clients -- up from 1,300 in 2006.
"That line of work gave us a chance to prove ourselves to the banks and develop a rapport," Barbara Newcomb said. "That's why we managed to get so many foreclosure listings when the market went bad."
These agents, like others, make their money in commissions.
The larger their inventory of homes, the more they are likely to sell. And the higher their prices, the better the commission.
The Newcombs say selling one or two houses a month keeps them going. They have eight under contract that are scheduled to close this month or next, including one that's selling for $575,000. Their most expensive home is listed for $769,000.
"We're going to be looking at a good January and February," Barbara Newcomb said. "I'm sure we'll be seeing more sales in March and April, but if we don't, what we've got so far is enough to tide us over."
But the foreclosure business isn't for everyone, said Krein, head of the National REO Brokers Association. "Think about it. It takes a certain type of person to clean a crack house. It takes a severe Type A personality. About 40 percent of our members are ex-military in some form or another. They understand that you have to follow rules and do what you're told."
The other thing these real estate agents need: deep pockets. Agents typically pay upfront for cleaning and repairs, homeowners association dues, lawn maintenance, lockboxes and snow removal, Krein said. They also take on the water, gas and electric bills.
The Newcombs said lenders owed them as much as $60,000 at one point. The couple pays about $5,500 a month in gas and electric bills alone.
Bob Norrell, a senior vice president at Litton Loan Servicing, said he marvels at how complex this niche market has become. Norrell, whose firm collects payments on thousands of mortgages, said that he managed all his bank-owned properties on a single Excel spreadsheet for 20 years.
"Now the brokers and Realtors are uptight about all the information that's required of them," he said.
Norrell cites the vendors who set up booths at a recent conference he attended in Dallas, where more than 2,000 rookies and industry veterans gathered. Some offered software that banks can buy to track their homes and assign homes to agents. One offered a network of foreclosure-prevention gurus that lenders could hire to negotiate with borrowers.
The complexity of the market is why Cary Sternberg, a vice president at IndyMac Bank, wants to hire agents with at least two years of REO experience.
At the Dallas conference, Sternberg held workshops in the ballroom of the Hilton Anatole and told the crowd that just about everyone he knows in turn knows someone in the real estate business who wants to sell foreclosures.
Most of those wannabes are agents who sold plenty of homes during the boom years and think that experience will translate to the foreclosure business, he said.
"I've got to weed out those people because they do not understand the REO business," Sternberg told the crowd. "They're just looking to supplement their income."
The speech did not discourage Deirdre Glascoe, a self-described "newbie" who's not shy about wanting whatever extra money Sternberg can bring her way. Glascoe, an agent at Murchison-John Realty in the District, said she worked on government contracts in a previous career and understands that it takes patience to win a client.
"If [Sternberg] needs a job done in a certain market and the only one available is the newbie he does not want, guess who he's going to hire?" Glascoe said. "He's not going to come to XYZ street in Bowie from Austin to do his business."
With that, she grabbed one of Sternberg's business cards -- contact information printed on a fake $1 million bill.
Tuesday, December 11, 2007
For years he said he was going out of business. Then one day he did.
In my childhood, Ronnie Marchant owned the discount furniture store that anchored a major avenue in my hometown. It was an emporium of pressed wood and naugahyde whose collective style could only be described as blue-collar kitsch.
(Not to put too fine a point on it, but let’s just say Elvis would have felt right at home at Ronnie Marchant’s.)
Practically everyone in town got their dinette, their sconces, their swag lamps there; mattress and box springs, too, many of us, fearing that each time Marchant advertised another sale, he might be closing his doors, and those rock-bottom prices would be gone for good.
That’s because Ronnie Marchant had the unfortunate habit of “losing his lease,” resulting in a continual, decades-long string of gaudy going-out-of-business sales.
I never saw Marchant’s business plan, but from appearances, I’m convinced that going out of business must have been a central component of it, supported by an ample budget for homemade TV commercials.
In his 1970s TV spots, he’d stand there, hang-dog and morose in his best plaid polyester sports coat, amid a veritable orgy of home furnishings, and he’d tell us he’d lost his lease, this was the end, everything must go.
By the 1980s, Marchant had devolved into campy theatrics. He’d appear in his TV commercials wearing nothing but a barrel with shoulder straps, as if to demonstrate the depth of penury driving his latest liquidation.
“Ronnie Marchant has lost his lease,” he’d wheeze, referring to his piteous self in the third person. “Ronnie Marchant Furni-tew-er is goin’ outta business.” He’d run a big sale for few weeks, then pack up what was left and move it all to yet another storefront in the degenerating downtown area, finally reduced to sharing billing with assorted bail bondsmen, wig shops and pool halls.
By the 90s, Marchant had achieved cult status in the local pantheon of advertising gimmicks. But he’d also commoditized himself into oblivion. His cheap-goods-at-fire-sale-prices couldn’t compete with Walmart’s everyday low prices, enhanced selection and superior quality. Marchant lost his last lease and closed his doors.
••••
Okay, so it’s hardly a Harvard Business Review case study, but it may just be a fitting cautionary tale for REALTORS® today, too many of whom have been reduced to competing on the basis of what you charge, rather than on the value you can deliver. And just like ‘ol Ronnie, you risk…ahem...losing your lease.
How?
• By hanging your competitive hats on access to MLS rather than on superior service and smarts. Nowadays, listing info is ubiquitous, from the web to the bulletin board at the local health club. Clients no longer need you for data. They need you for expertise.
• By answering the challenge to differentiate yourself in today’s crowded marketplace simply by advertising more. Advertising can’t create differentiation; it can only illustrate it. Differentiation means demonstrating something you can do for a client that the licensee down the street can’t or won’t. Without differentiation, you’re reduced to competing based on the fee you charge (which may explain why we’re seeing your commissions structure so fervidly attacked by the media).
• By forgetting who calls the shots. In this market of excess supply – and face it, we have an abundance of REALTORS® these days – the customer is king. If you won’t do for him what he wants for a fee he’s willing to pay, – or deliver value in excess of the fee you charge, – there’s are at least 39,000 other Virginia licensees someone else out there who can and will.
• By continuing to do what you’ve always done with the same meager tools you’ve always used. If you think those magnetic car signs and branded recipe postcards you use for farming are going to keep you in business, think again…about social media, about emerging technologies, and about clients who are quickly becoming savvier than you are when it comes to locating properties and marketing their homes.
••••
That’s how Mr. Marchant finally went out of business: Wheezing about low prices in a world that had come to expect something more.
Unless REALTORS® transition from info gatekeeper to trusted advisor, from advertising to differentiation, from commodity to premium service provider, and from know-enough to career-long learner, I fear some may lose their lease the same way.
(Not to put too fine a point on it, but let’s just say Elvis would have felt right at home at Ronnie Marchant’s.)
Practically everyone in town got their dinette, their sconces, their swag lamps there; mattress and box springs, too, many of us, fearing that each time Marchant advertised another sale, he might be closing his doors, and those rock-bottom prices would be gone for good.
That’s because Ronnie Marchant had the unfortunate habit of “losing his lease,” resulting in a continual, decades-long string of gaudy going-out-of-business sales.
I never saw Marchant’s business plan, but from appearances, I’m convinced that going out of business must have been a central component of it, supported by an ample budget for homemade TV commercials.
In his 1970s TV spots, he’d stand there, hang-dog and morose in his best plaid polyester sports coat, amid a veritable orgy of home furnishings, and he’d tell us he’d lost his lease, this was the end, everything must go.
By the 1980s, Marchant had devolved into campy theatrics. He’d appear in his TV commercials wearing nothing but a barrel with shoulder straps, as if to demonstrate the depth of penury driving his latest liquidation.
“Ronnie Marchant has lost his lease,” he’d wheeze, referring to his piteous self in the third person. “Ronnie Marchant Furni-tew-er is goin’ outta business.” He’d run a big sale for few weeks, then pack up what was left and move it all to yet another storefront in the degenerating downtown area, finally reduced to sharing billing with assorted bail bondsmen, wig shops and pool halls.
By the 90s, Marchant had achieved cult status in the local pantheon of advertising gimmicks. But he’d also commoditized himself into oblivion. His cheap-goods-at-fire-sale-prices couldn’t compete with Walmart’s everyday low prices, enhanced selection and superior quality. Marchant lost his last lease and closed his doors.
••••
Okay, so it’s hardly a Harvard Business Review case study, but it may just be a fitting cautionary tale for REALTORS® today, too many of whom have been reduced to competing on the basis of what you charge, rather than on the value you can deliver. And just like ‘ol Ronnie, you risk…ahem...losing your lease.
How?
• By hanging your competitive hats on access to MLS rather than on superior service and smarts. Nowadays, listing info is ubiquitous, from the web to the bulletin board at the local health club. Clients no longer need you for data. They need you for expertise.
• By answering the challenge to differentiate yourself in today’s crowded marketplace simply by advertising more. Advertising can’t create differentiation; it can only illustrate it. Differentiation means demonstrating something you can do for a client that the licensee down the street can’t or won’t. Without differentiation, you’re reduced to competing based on the fee you charge (which may explain why we’re seeing your commissions structure so fervidly attacked by the media).
• By forgetting who calls the shots. In this market of excess supply – and face it, we have an abundance of REALTORS® these days – the customer is king. If you won’t do for him what he wants for a fee he’s willing to pay, – or deliver value in excess of the fee you charge, – there’s are at least 39,000 other Virginia licensees someone else out there who can and will.
• By continuing to do what you’ve always done with the same meager tools you’ve always used. If you think those magnetic car signs and branded recipe postcards you use for farming are going to keep you in business, think again…about social media, about emerging technologies, and about clients who are quickly becoming savvier than you are when it comes to locating properties and marketing their homes.
••••
That’s how Mr. Marchant finally went out of business: Wheezing about low prices in a world that had come to expect something more.
Unless REALTORS® transition from info gatekeeper to trusted advisor, from advertising to differentiation, from commodity to premium service provider, and from know-enough to career-long learner, I fear some may lose their lease the same way.
Monday, December 10, 2007
"'Merry Christmas' is one thing, but do I disclose all these lights?"
An emerging holiday tradition in our family is Richmond's Tacky Lights Tour (our first time was last year...). So last night after church, to get us in the holiday spirit, we decided to catch a couple of nearby megawatt spectacles that were not far off our beaten path toward home (but far enough away, mind you, not to be considered "our" neighborhood...thankfully).
I won't try to describe the place except to say that it's something akin to what you'd expect to see if Radio City Music Hall were to vomit its Holiday Spectacular into some otherwise quiet, middle-class neighborhood – a jumble of more lights and spangles and kitsch than any human being can survey in a single glance without glowing like Moses in the presence of the Lord.
Traffic (yes, there was traffic, including a couple of limos) crawled by, drawn to the lot's brilliance like mosquitoes to one of those blue-ish bug-zappers. Neighbors stood stunned, transfixed, in their adjoining yards, wondering, no doubt, how they missed this in the covenants.
All of which got my wife (real estate license status: inactive) to thinking about the possible disclosure implications such an extravaganza might pose for a real estate licensee who lists a nearby property. Would a prospective buyer deserve to know that every twelve months, a redneck version of the North Pole, Macy's Parade, the Aurora Borealis and the Little Town of Bethlehem -- all rolled into a single, extremely bright half-acre -- would be setting up shop across the street? What would/should a buyer's or seller's agent do?
And I heard her exclaim, ere we drove out of sight, "'Merry Christmas' is one thing, but do I disclose all these lights?"
-- Scott Brunner
I won't try to describe the place except to say that it's something akin to what you'd expect to see if Radio City Music Hall were to vomit its Holiday Spectacular into some otherwise quiet, middle-class neighborhood – a jumble of more lights and spangles and kitsch than any human being can survey in a single glance without glowing like Moses in the presence of the Lord.
Traffic (yes, there was traffic, including a couple of limos) crawled by, drawn to the lot's brilliance like mosquitoes to one of those blue-ish bug-zappers. Neighbors stood stunned, transfixed, in their adjoining yards, wondering, no doubt, how they missed this in the covenants.
All of which got my wife (real estate license status: inactive) to thinking about the possible disclosure implications such an extravaganza might pose for a real estate licensee who lists a nearby property. Would a prospective buyer deserve to know that every twelve months, a redneck version of the North Pole, Macy's Parade, the Aurora Borealis and the Little Town of Bethlehem -- all rolled into a single, extremely bright half-acre -- would be setting up shop across the street? What would/should a buyer's or seller's agent do?
And I heard her exclaim, ere we drove out of sight, "'Merry Christmas' is one thing, but do I disclose all these lights?"
-- Scott Brunner
On the Phone With the Home in The Balance
By Elizabeth Razzi
Washington Post
Sunday, December 9, 2007; F01
From Faith Etheridge's tidy office in Frederick, you can see the national foreclosure crisis unfold. And, sometimes, you can see a particular foreclosure stopped.
Etheridge works with troubled borrowers who ask for help from the nonprofit Consumer Credit Counseling Services. Last week, she allowed me to sit in one of those sessions.
The Arizona homeowner, whose permission I had to listen in on the call and whose identity I promised to keep confidential, doesn't have an exotic mortgage. It's a 30-year, fixed-rate loan through the Federal Housing Administration on a modest home. She has a government job, but her husband has been out of work since late October. "They told him that due to the housing industry they had to lay him off," the woman told Etheridge. "I've just been finding it difficult to catch up on my mortgage payment."
She's already incurred a late fee in November, and it's going to be another couple of weeks before she makes the December payment. Together, that will be $120 wasted on penalties. That's how a budget problem can balloon into a lost home. Late fees will kick in if you don't pay by mid-month. Once a new month starts, the loan will officially be delinquent. It becomes all too easy to start missing payments entirely.
President Bush announced a plan Thursday that would allow some adjustable-rate borrowers to ask for a five-year interest-rate freeze. That plan may help settle financial markets, but it won't help homeowners who are still trying to come up with the mortgage payment that was due Dec. 1. In fact, those who have missed payments won't be eligible for that relief.
However, some struggling homeowners in a number of states, including Maryland and Virginia, may be eligible for a cash grant of up to $5,000 that can help them avoid foreclosure. The PHASES program, which stands for Preserving Homeownership and Savings Education Strategy, has no income restriction and is not limited any particular lender. The first step toward getting such a grant is a conversation with someone like Etheridge.
Etheridge asked the Arizona borrower if she was behind on any credit cards. "No, I'm not behind on those yet," the woman said. "One of my main goals is not to get behind on them."
When Etheridge asked what other financial goals the woman had, the woman told her she wants to save about two months' worth of expenses. "Absolutely, that's an excellent goal," Etheridge said. Her tone remained quiet, professional and positive throughout the conversation.
After reciting some boilerplate language about confidentiality and the need to talk to a lawyer for advice about things such as bankruptcy, Etheridge began building a picture of the woman's finances. First, Etheridge asked about income. Including her husband's unemployment benefits, which started just a few weeks ago, the woman said they're bringing in a net income of $2,693 per month.
Then came a far longer series of questions about expenses. The biggest bill, the mortgage, costs $857 per month. The payment includes property taxes and homeowners insurance. They don't pay a homeowners association fee.
One by one, Etheridge asked for monthly spending estimates. Car payment, workday lunches, oil changes, medical co-pays, cellphones, pet care, haircuts and even hair-styling products. The two women matter-of-factly made a budget. Etheridge probed for areas where expenses might be cut. Did she plan family meals before grocery shopping? Did she shop with a list? Did the family eat out often?
Etheridge asked the woman to estimate the value of her home and car. Then she asked the woman's permission to pull a credit report, without charge.
The report showed several debts, including a $61 balance that had recently been paid off. There were two store credit cards with balances. The biggest debt, aside from the mortgage, was a personal loan for about $13,000.
Etheridge tallied up the monthly income and obligations and concluded that with unemployment benefits, the couple are bringing in $170 more each month than they pay out on bills. "Now that you're getting the unemployment, you're sort of back on track," Etheridge told her.
Etheridge told the woman she may qualify for the grant program, and how to apply online. If she receives a grant, which would be paid directly to her creditors, she would be expected to follow up with quarterly counseling sessions for a year.
Etheridge also gave the woman some homework. "I definitely, definitely, definitely want you to pull your credit report," she said. She told her to tell her mortgage servicer about the layoff. "Let them know what's going on; keep them updated. Also write down the day and time of that call, and who you talked to. You never know if the information might be valuable to you a month from now."
Etheridge explained some other options that would be available should the woman get more seriously behind on her mortgage. Because she has an FHA mortgage, she is eligible for a special FHA program that allows borrowers to take a second mortgage for their missed payments. That debt incurs no interest and does not have to be paid back until they sell the home. "That's something to think about if your husband doesn't find work or his unemployment runs out," Etheridge said.
Not all sessions are as calm as this one was. Some borrowers get emotional; some get angry. Some resist advice that they don't want to hear, such as that they need to ask a spouse to take a paying job. "You make suggestions; they have to be willing to do it," she said.
Just in the past few weeks, she's noticed a big increase in the number of clients who work in the real estate brokerage or lending business. "Sometimes I tell them, 'You should sell your home and downsize,' but they say that in the spring the market's going to change," Etheridge said. "They've been living on credit cards."
The PHASES program is available to borrowers who seek credit counseling from the counseling service or its parent organization, Money Management International. The money is available to people who are in temporary financial trouble because of problems such as unemployment, medical expenses or divorce. A realistic review of their budget must show that they're running in the black, even if just barely. The idea is that this one-time gift will be enough to get them back on track.
The cash comes from a $1 million grant given in July by HSBC North America, one of the biggest banking companies issuing consumer credit cards and other forms of consumer credit, including subprime mortgages.
* * *
Homeowners living in the following states are eligible for the PHASES program : Arizona, California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, Ohio, Pennsylvania, Texas and Virginia .
To request counseling from Consumer Credit Counseling Services/Money Management International, call 866-889-9347, toll-free.
Homeowners worried about foreclosure should call the Homeownership Preservation Foundation at 888-995-HOPE.
E-mail Elizabeth Razzi atrazzie@washpost.com.
Washington Post
Sunday, December 9, 2007; F01
From Faith Etheridge's tidy office in Frederick, you can see the national foreclosure crisis unfold. And, sometimes, you can see a particular foreclosure stopped.
Etheridge works with troubled borrowers who ask for help from the nonprofit Consumer Credit Counseling Services. Last week, she allowed me to sit in one of those sessions.
The Arizona homeowner, whose permission I had to listen in on the call and whose identity I promised to keep confidential, doesn't have an exotic mortgage. It's a 30-year, fixed-rate loan through the Federal Housing Administration on a modest home. She has a government job, but her husband has been out of work since late October. "They told him that due to the housing industry they had to lay him off," the woman told Etheridge. "I've just been finding it difficult to catch up on my mortgage payment."
She's already incurred a late fee in November, and it's going to be another couple of weeks before she makes the December payment. Together, that will be $120 wasted on penalties. That's how a budget problem can balloon into a lost home. Late fees will kick in if you don't pay by mid-month. Once a new month starts, the loan will officially be delinquent. It becomes all too easy to start missing payments entirely.
President Bush announced a plan Thursday that would allow some adjustable-rate borrowers to ask for a five-year interest-rate freeze. That plan may help settle financial markets, but it won't help homeowners who are still trying to come up with the mortgage payment that was due Dec. 1. In fact, those who have missed payments won't be eligible for that relief.
However, some struggling homeowners in a number of states, including Maryland and Virginia, may be eligible for a cash grant of up to $5,000 that can help them avoid foreclosure. The PHASES program, which stands for Preserving Homeownership and Savings Education Strategy, has no income restriction and is not limited any particular lender. The first step toward getting such a grant is a conversation with someone like Etheridge.
Etheridge asked the Arizona borrower if she was behind on any credit cards. "No, I'm not behind on those yet," the woman said. "One of my main goals is not to get behind on them."
When Etheridge asked what other financial goals the woman had, the woman told her she wants to save about two months' worth of expenses. "Absolutely, that's an excellent goal," Etheridge said. Her tone remained quiet, professional and positive throughout the conversation.
After reciting some boilerplate language about confidentiality and the need to talk to a lawyer for advice about things such as bankruptcy, Etheridge began building a picture of the woman's finances. First, Etheridge asked about income. Including her husband's unemployment benefits, which started just a few weeks ago, the woman said they're bringing in a net income of $2,693 per month.
Then came a far longer series of questions about expenses. The biggest bill, the mortgage, costs $857 per month. The payment includes property taxes and homeowners insurance. They don't pay a homeowners association fee.
One by one, Etheridge asked for monthly spending estimates. Car payment, workday lunches, oil changes, medical co-pays, cellphones, pet care, haircuts and even hair-styling products. The two women matter-of-factly made a budget. Etheridge probed for areas where expenses might be cut. Did she plan family meals before grocery shopping? Did she shop with a list? Did the family eat out often?
Etheridge asked the woman to estimate the value of her home and car. Then she asked the woman's permission to pull a credit report, without charge.
The report showed several debts, including a $61 balance that had recently been paid off. There were two store credit cards with balances. The biggest debt, aside from the mortgage, was a personal loan for about $13,000.
Etheridge tallied up the monthly income and obligations and concluded that with unemployment benefits, the couple are bringing in $170 more each month than they pay out on bills. "Now that you're getting the unemployment, you're sort of back on track," Etheridge told her.
Etheridge told the woman she may qualify for the grant program, and how to apply online. If she receives a grant, which would be paid directly to her creditors, she would be expected to follow up with quarterly counseling sessions for a year.
Etheridge also gave the woman some homework. "I definitely, definitely, definitely want you to pull your credit report," she said. She told her to tell her mortgage servicer about the layoff. "Let them know what's going on; keep them updated. Also write down the day and time of that call, and who you talked to. You never know if the information might be valuable to you a month from now."
Etheridge explained some other options that would be available should the woman get more seriously behind on her mortgage. Because she has an FHA mortgage, she is eligible for a special FHA program that allows borrowers to take a second mortgage for their missed payments. That debt incurs no interest and does not have to be paid back until they sell the home. "That's something to think about if your husband doesn't find work or his unemployment runs out," Etheridge said.
Not all sessions are as calm as this one was. Some borrowers get emotional; some get angry. Some resist advice that they don't want to hear, such as that they need to ask a spouse to take a paying job. "You make suggestions; they have to be willing to do it," she said.
Just in the past few weeks, she's noticed a big increase in the number of clients who work in the real estate brokerage or lending business. "Sometimes I tell them, 'You should sell your home and downsize,' but they say that in the spring the market's going to change," Etheridge said. "They've been living on credit cards."
The PHASES program is available to borrowers who seek credit counseling from the counseling service or its parent organization, Money Management International. The money is available to people who are in temporary financial trouble because of problems such as unemployment, medical expenses or divorce. A realistic review of their budget must show that they're running in the black, even if just barely. The idea is that this one-time gift will be enough to get them back on track.
The cash comes from a $1 million grant given in July by HSBC North America, one of the biggest banking companies issuing consumer credit cards and other forms of consumer credit, including subprime mortgages.
* * *
Homeowners living in the following states are eligible for the PHASES program : Arizona, California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, Ohio, Pennsylvania, Texas and Virginia .
To request counseling from Consumer Credit Counseling Services/Money Management International, call 866-889-9347, toll-free.
Homeowners worried about foreclosure should call the Homeownership Preservation Foundation at 888-995-HOPE.
E-mail Elizabeth Razzi atrazzie@washpost.com.
Wednesday, December 5, 2007
Home Economics
This is one of the best summaries I've seen on the current situation in the housing market...and the causes....
The Times-Dispatch
Sunday, Dec 02, 2007
http://www.inrich.com/cva/ric/search.apx.-content-articles-RTD-2007-12-02-0091.html
Reports from the housing sector have been bleak, to say the least: rising foreclosures; falling home prices; dramatic drops in construction and sales; financial firms writing off billions in losses due to bad mortgage loans; top Wall Street executives losing their jobs; stock prices tumbling; credit markets locking up; people losing their homes. The combination of weak housing and tighter credit have increased the risk that the six-year economic expansion could end soon, though a recession is not a sure thing -- especially as export growth, wage increases, and job creation remain relatively healthy in spite of a downturn in housing entering its third year. Conventional wisdom maintains the situation will not improve overnight -- which is almost certainly true -- and that it's likely to deteriorate significantly before it improves, which is less certain.
It's worth mentioning at the start that the housing bust has hit Richmond with far less force than it has much of the country. The latest figures show that while local home sales are dropping, prices here are holding up well. The average price of an existing home in the Richmond area in 2007 is actually 4.3 percent higher than a year before, according to real estate reporter Carol Hazard. Through the first half of this year, the Richmond region had the lowest number of foreclosures -- 213 -- among the nation's 100 largest metropolitan areas. Virginia, despite some troubles in northern parts of the state, boasts the country's third-lowest foreclosure rate, affecting about 1 in 200 homeowners. The state's steady economy has helped spare us the worst, as has the Richmond area's stable real-estate market, which produced healthy growth through most of this decade. Other places that enjoyed a more robust real-estate boom than the Richmond area are now experiencing far more painful busts.
Still, Central Virginia is not immune from the national trend, and it is important to understand the dynamics that created the housing slump and mortgage mess -- as well as the conditions and policy choices that could help spur a rebound or make matters worse.
. . .
The foundation of the current housing slump -- and accompanying mortgage difficulties -- was laid by a confluence of very positive trends in the U.S. economy. Strong job creation and steady income growth, combined with low interest rates, made it easy for a large majority of Americans to own their homes. The federal tax subsidy for housing (in the form of generous tax deductions for mortgage interest and real-estate taxes) produced an added incentive for Americans to buy more -- and bigger -- houses. In addition, mortgage lenders had for years been under pressure from advocates and the government to ensure that lowerand moderate-income Americans could gain access to credit that would enable them to purchase a home. Subprime mortgages, variable-rate loans, and low-down-payment purchases helped accomplish this goal. The availability of mortgages was also expanded by the rapid growth of securitization -- a process of bundling mortgages into bonds and similar instruments that can be sold to investors. Securitization spread risk among many lenders and allowed more cash to be pumped into the mortgage business.
The immediate result of these trends was a steady increase in the number of Americans owning homes. As the housing boom approached its crest in 2005, nearly seven out of 10 U.S. households owned their own homes. These Americans became stakeholders in their community -- and possessors of an asset that not only provides warmth, shelter, and a great place to watch 72-inch HD plasma TVs in comfort and privacy, but also boasts a long history of steady if unspectacular increases in value.
So far, so good. But as is the case with most good things -- and virtually all market booms -- the housing miracle climbed to unsustainable peaks. A number of culprits contributed to the euphoria, which saw housing prices catapult higher, creating great opportunities for homeowners, builders, investors, banks, and lenders but also serious challenges for people in the market for that first, affordable home. And as we all should know by now, great opportunities are usually accompanied by considerable risks, though the risks are sometimes hidden or ignored when everyone's getting rich and moving into their dream homes.
. . .
Though Alan Greenspan recently went to some lengths to defend the Federal Reserve under his leadership, it seems clear that much of the astonishing growth in housing and housing prices was fueled by an extended period of low short-term interest rates dictated by the Fed. The 1-percent rate may well have been necessary to help pull the larger economy out of its doldrums, but it encouraged speculation and sloppy lending standards in the housing market, which stoked demand for housing, which pushed prices higher, which in turn spurred even more speculation and unwise decisions by lenders and borrowers. The cycle continued until escalating prices began pricing too many potential buyers out of the market. Then the unraveling began.
Borrowing at 1 percent and lending at 5 or 6 percent -- or even higher in the case of lower quality Alt-A and subprime mortgages -- enticed many, though not all, banks and mortgage companies to put profit before prudence. And how many borrowers are going to say no to the loan that lets them buy a home? Ignoring the evidence of all human history, many borrowers and lenders assumed that nothing would ever change -- that housing prices would keep soaring, interest rates would stay low, and investors would scoop up every mortgage-backed security the bankers tossed their way. Then the Fed started raising interest rates. And everything changed -- just like it always does.
. . .
The changes have been painful for many. Economic growth has slowed as homebuilding dropped by more than 20 percent. Nationwide, about 1.4 percent of mortgages are in foreclosure. Investors and lenders are now reluctant to touch anything that bears the M-word, so the financing that is essential to a functioning housing market is harder to find. Tighter credit might work its way into the wider economy. The toll has been particularly heavy among subprime mortgages -- loans made to buyers with less-than-stellar credit rating who are often, but not always, from loweror moderate-income households. Next year, as higher interest rates continue to kick in, another $360 billion in adjustable-rate subprime mortgages will reset -- creating higher monthly payments for borrowers and almost certainly pushing more of them into foreclosure. (To put the number in some perspective, the U.S. stock market loses about that much value in one bad, but not unusual, day of trading.)
The pain will continue for a while longer. But the markets are working. RealtyTrac reported on Thursday that default notices in October declined almost 9 percent nationally from a year ago, though foreclosure filings were up 94 percent -- but were just 2 percent higher than in September. More lenders appear to be working with troubled borrowers to avoid foreclosure. And lower home prices, for all the difficulties they cause, are beginning to make houses more affordable for many. Once the credit markets settle down, demand for homes should begin to recover. Price appreciation is likely to remain muted for a good while, so income growth and job creation should play catch-up, allowing more buyers into the market. The decline in construction will eventually let the market work its way through the big inventory of unsold houses that has pulled prices down.
The punishing financial markets have already ensured it will be a long time before lenders again apply the lax standards that prevailed in the past few years. Lenders have an incentive to find ways to help clients avoid foreclosure, which creates heavy costs for everyone. In many cases that won't be possible, but the government should encourage settlements that keep people in their homes whenever that's a reasonable possibility. Reasonable is the key word. Government must avoid bailing out everyone's bad decisions, both as a matter of basic fairness and to avoid a repetition of the current decline.
Over the past few years, many homebuyers opted to use fixed-rate mortgages. They realized it was the prudent move, even though the costs in the first few years of the loan would be higher than if they had selected a riskier -- but cheaper in the short term -- adjustable-rate loan. Now that the adjustable-rate crowd is facing higher payments -- after enjoying lower ones for a couple of years even though they took on more risk -- it makes little sense to bail them out en masse, essentially punishing fixed-rate borrowers for their prudence and sound decisions. In addition, removing the cost of poor judgment and excessive risk-taking increases the chances those behaviors will be repeated next time the housing market -- or any other market, for that matter -- starts to boom.
The government must also be careful in placing restrictions on subprime loans. Lenders will be shying away from them for a while anyway, and punitive government regulations could kill the market altogether. By all means prosecute the crooks -- easy money always draws scoundrels out of the residential woodwork -- but avoid destroying the incentive for banks and mortgage companies to take on reasonable risks in making mortgages to lowerand moderate-income families. So-called predatory lending may have played a role in the current housing problems, but that role appears to have been at the margins. Powerful macro-economic forces drove the housing market up and then slammed it down. The path likely would have been almost identical if not a single unscrupulous loan had been made.
. . .
So where do we stand now? According to the Census Bureau, the typical American home in September was worth about $238,000. That's 63 percent higher than 10 years before -- more than twice the 30-percent increase in inflation over that time. So homeowners have seen real appreciation, even after the recent fall. And the much-maligned subprime mortgage business has accomplished considerably more good than harm, despite the recent setbacks. According to the Mortgage Bankers Association, 92 percent of homeowners with subprime mortgages were not facing foreclosure in the second quarter. In Virginia, the figure was nearly 96 percent. The vast majority of these Americans are living -- and paying for -- their dream. Those figures almost certainly will get worse before they get better. Some government assistance or guarantees might be appropriate in cases where the owners have a reasonable chance to begin making monthly payments on a regular basis. And lenders will want to work with some clients to renegotiate terms. Rate cuts by the Fed earlier this year should also help, and it's possible more cuts are on the way. Communities will want to continue to work to find ways to encourage affordable housing.
The housing slump may still pull the U.S. into recession. Additional mortgage-related losses might send the stock market skidding lower. Some Americans will lose their homes. Many bought homes they never really could afford in the first place. These people deserve our attention and compassion. They are not, however, entitled to a government handout to undo their own poor choices. Neither are the Wall Street bankers who decided to make the risky loans. Nor are the investors who chose to boost their return on investment by buying bonds backed by risky mortgages. The markets are working. The process may be slow and painful, but it is impossible to undo the mistakes already made. The biggest risk today may be that misguided federal government policies will slow the healing process -- or even reverse it.
The Times-Dispatch
Sunday, Dec 02, 2007
http://www.inrich.com/cva/ric/search.apx.-content-articles-RTD-2007-12-02-0091.html
Reports from the housing sector have been bleak, to say the least: rising foreclosures; falling home prices; dramatic drops in construction and sales; financial firms writing off billions in losses due to bad mortgage loans; top Wall Street executives losing their jobs; stock prices tumbling; credit markets locking up; people losing their homes. The combination of weak housing and tighter credit have increased the risk that the six-year economic expansion could end soon, though a recession is not a sure thing -- especially as export growth, wage increases, and job creation remain relatively healthy in spite of a downturn in housing entering its third year. Conventional wisdom maintains the situation will not improve overnight -- which is almost certainly true -- and that it's likely to deteriorate significantly before it improves, which is less certain.
It's worth mentioning at the start that the housing bust has hit Richmond with far less force than it has much of the country. The latest figures show that while local home sales are dropping, prices here are holding up well. The average price of an existing home in the Richmond area in 2007 is actually 4.3 percent higher than a year before, according to real estate reporter Carol Hazard. Through the first half of this year, the Richmond region had the lowest number of foreclosures -- 213 -- among the nation's 100 largest metropolitan areas. Virginia, despite some troubles in northern parts of the state, boasts the country's third-lowest foreclosure rate, affecting about 1 in 200 homeowners. The state's steady economy has helped spare us the worst, as has the Richmond area's stable real-estate market, which produced healthy growth through most of this decade. Other places that enjoyed a more robust real-estate boom than the Richmond area are now experiencing far more painful busts.
Still, Central Virginia is not immune from the national trend, and it is important to understand the dynamics that created the housing slump and mortgage mess -- as well as the conditions and policy choices that could help spur a rebound or make matters worse.
. . .
The foundation of the current housing slump -- and accompanying mortgage difficulties -- was laid by a confluence of very positive trends in the U.S. economy. Strong job creation and steady income growth, combined with low interest rates, made it easy for a large majority of Americans to own their homes. The federal tax subsidy for housing (in the form of generous tax deductions for mortgage interest and real-estate taxes) produced an added incentive for Americans to buy more -- and bigger -- houses. In addition, mortgage lenders had for years been under pressure from advocates and the government to ensure that lowerand moderate-income Americans could gain access to credit that would enable them to purchase a home. Subprime mortgages, variable-rate loans, and low-down-payment purchases helped accomplish this goal. The availability of mortgages was also expanded by the rapid growth of securitization -- a process of bundling mortgages into bonds and similar instruments that can be sold to investors. Securitization spread risk among many lenders and allowed more cash to be pumped into the mortgage business.
The immediate result of these trends was a steady increase in the number of Americans owning homes. As the housing boom approached its crest in 2005, nearly seven out of 10 U.S. households owned their own homes. These Americans became stakeholders in their community -- and possessors of an asset that not only provides warmth, shelter, and a great place to watch 72-inch HD plasma TVs in comfort and privacy, but also boasts a long history of steady if unspectacular increases in value.
So far, so good. But as is the case with most good things -- and virtually all market booms -- the housing miracle climbed to unsustainable peaks. A number of culprits contributed to the euphoria, which saw housing prices catapult higher, creating great opportunities for homeowners, builders, investors, banks, and lenders but also serious challenges for people in the market for that first, affordable home. And as we all should know by now, great opportunities are usually accompanied by considerable risks, though the risks are sometimes hidden or ignored when everyone's getting rich and moving into their dream homes.
. . .
Though Alan Greenspan recently went to some lengths to defend the Federal Reserve under his leadership, it seems clear that much of the astonishing growth in housing and housing prices was fueled by an extended period of low short-term interest rates dictated by the Fed. The 1-percent rate may well have been necessary to help pull the larger economy out of its doldrums, but it encouraged speculation and sloppy lending standards in the housing market, which stoked demand for housing, which pushed prices higher, which in turn spurred even more speculation and unwise decisions by lenders and borrowers. The cycle continued until escalating prices began pricing too many potential buyers out of the market. Then the unraveling began.
Borrowing at 1 percent and lending at 5 or 6 percent -- or even higher in the case of lower quality Alt-A and subprime mortgages -- enticed many, though not all, banks and mortgage companies to put profit before prudence. And how many borrowers are going to say no to the loan that lets them buy a home? Ignoring the evidence of all human history, many borrowers and lenders assumed that nothing would ever change -- that housing prices would keep soaring, interest rates would stay low, and investors would scoop up every mortgage-backed security the bankers tossed their way. Then the Fed started raising interest rates. And everything changed -- just like it always does.
. . .
The changes have been painful for many. Economic growth has slowed as homebuilding dropped by more than 20 percent. Nationwide, about 1.4 percent of mortgages are in foreclosure. Investors and lenders are now reluctant to touch anything that bears the M-word, so the financing that is essential to a functioning housing market is harder to find. Tighter credit might work its way into the wider economy. The toll has been particularly heavy among subprime mortgages -- loans made to buyers with less-than-stellar credit rating who are often, but not always, from loweror moderate-income households. Next year, as higher interest rates continue to kick in, another $360 billion in adjustable-rate subprime mortgages will reset -- creating higher monthly payments for borrowers and almost certainly pushing more of them into foreclosure. (To put the number in some perspective, the U.S. stock market loses about that much value in one bad, but not unusual, day of trading.)
The pain will continue for a while longer. But the markets are working. RealtyTrac reported on Thursday that default notices in October declined almost 9 percent nationally from a year ago, though foreclosure filings were up 94 percent -- but were just 2 percent higher than in September. More lenders appear to be working with troubled borrowers to avoid foreclosure. And lower home prices, for all the difficulties they cause, are beginning to make houses more affordable for many. Once the credit markets settle down, demand for homes should begin to recover. Price appreciation is likely to remain muted for a good while, so income growth and job creation should play catch-up, allowing more buyers into the market. The decline in construction will eventually let the market work its way through the big inventory of unsold houses that has pulled prices down.
The punishing financial markets have already ensured it will be a long time before lenders again apply the lax standards that prevailed in the past few years. Lenders have an incentive to find ways to help clients avoid foreclosure, which creates heavy costs for everyone. In many cases that won't be possible, but the government should encourage settlements that keep people in their homes whenever that's a reasonable possibility. Reasonable is the key word. Government must avoid bailing out everyone's bad decisions, both as a matter of basic fairness and to avoid a repetition of the current decline.
Over the past few years, many homebuyers opted to use fixed-rate mortgages. They realized it was the prudent move, even though the costs in the first few years of the loan would be higher than if they had selected a riskier -- but cheaper in the short term -- adjustable-rate loan. Now that the adjustable-rate crowd is facing higher payments -- after enjoying lower ones for a couple of years even though they took on more risk -- it makes little sense to bail them out en masse, essentially punishing fixed-rate borrowers for their prudence and sound decisions. In addition, removing the cost of poor judgment and excessive risk-taking increases the chances those behaviors will be repeated next time the housing market -- or any other market, for that matter -- starts to boom.
The government must also be careful in placing restrictions on subprime loans. Lenders will be shying away from them for a while anyway, and punitive government regulations could kill the market altogether. By all means prosecute the crooks -- easy money always draws scoundrels out of the residential woodwork -- but avoid destroying the incentive for banks and mortgage companies to take on reasonable risks in making mortgages to lowerand moderate-income families. So-called predatory lending may have played a role in the current housing problems, but that role appears to have been at the margins. Powerful macro-economic forces drove the housing market up and then slammed it down. The path likely would have been almost identical if not a single unscrupulous loan had been made.
. . .
So where do we stand now? According to the Census Bureau, the typical American home in September was worth about $238,000. That's 63 percent higher than 10 years before -- more than twice the 30-percent increase in inflation over that time. So homeowners have seen real appreciation, even after the recent fall. And the much-maligned subprime mortgage business has accomplished considerably more good than harm, despite the recent setbacks. According to the Mortgage Bankers Association, 92 percent of homeowners with subprime mortgages were not facing foreclosure in the second quarter. In Virginia, the figure was nearly 96 percent. The vast majority of these Americans are living -- and paying for -- their dream. Those figures almost certainly will get worse before they get better. Some government assistance or guarantees might be appropriate in cases where the owners have a reasonable chance to begin making monthly payments on a regular basis. And lenders will want to work with some clients to renegotiate terms. Rate cuts by the Fed earlier this year should also help, and it's possible more cuts are on the way. Communities will want to continue to work to find ways to encourage affordable housing.
The housing slump may still pull the U.S. into recession. Additional mortgage-related losses might send the stock market skidding lower. Some Americans will lose their homes. Many bought homes they never really could afford in the first place. These people deserve our attention and compassion. They are not, however, entitled to a government handout to undo their own poor choices. Neither are the Wall Street bankers who decided to make the risky loans. Nor are the investors who chose to boost their return on investment by buying bonds backed by risky mortgages. The markets are working. The process may be slow and painful, but it is impossible to undo the mistakes already made. The biggest risk today may be that misguided federal government policies will slow the healing process -- or even reverse it.
Sunday, November 11, 2007
Your Home Can Be the Star of an Online Show
November 11, 2007
The New York Times
By ANNE EISENBERG
http://www.nytimes.com/2007/11/11/technology/11novel.html?th&emc=th
IF you’re shopping for a new home, it’s easy to take a virtual stroll through the ranch house at 640 Hobart Avenue, San Mateo, Calif., asking price $1,049,000. The house has its own Web site, complete with a soundtrack (www.640hobart.com). Click on it and a real estate agent welcomes you in the voiceover, as crisp digital photographs of the sunny rooms flow past on the screen, with each photo neatly dovetailed to the narration.
The commercial may make you want to move in instantly. But, too bad, that house is sold. Joanne Norris, an agent at Alain Pinel Realtors in Burlingame, Calif., who created and narrated the commercial, found a buyer within a week of advertising it that way. She sold another house, too, within a few days of posting a Web commercial, despite an overall slowdown in the local housing market.
To make the commercials, Mrs. Norris used a new Web-based service, VizzVox (www.vizzvox.com). For $149 a year, VizzVox offers a package that includes domain name registration for the property, hosting of the commercial on the Web site for a year, and the use of the Web-based software that lets real estate agents create the presentation.
“It’s an affordable way to make and distribute commercials,” said Robert W. Beth, co-founder and chief executive of VizzVox. “We think this is an opportunity for individuals to create ads and level the playing field with big companies.”
Real estate agents who use the service upload digital photographs and video clips to the VizzVox site, turn on a microphone and talk about the selling points of the home and the neighborhood. After they describe each visual, software smoothly stitches together the images and narrative. The program has a remix feature, so that agents can create variations on each commercial, including views of dog parks for one prospective buyer, and local schools for another. The presentations can be made and viewed both on Macs and PCs, preferably with broadband connections. Traffic is driven to the site with signs, ads and real estate listings.
Drew Neisser, chief executive of Renegade Marketing in Manhattan, who is in the business of inventive online marketing and Web site development himself, was intrigued with the service. “It’s extremely cost effective,” he said. He looked at two VizzVox commercials and liked them: “They told a lovely story about each home — I was ready at the end to call my wife and tell her we were moving to San Mateo.”
The service may provide an attractive alternative to more complicated and expensive approaches used to sell homes, like high-definition video or 360-degree panoramic photos. Creating a high-quality video is fairly expensive. Mike Raspatello, director of marketing at Richter Studios in Chicago, which does videos for real estate brokers, said the cost for a three-minute high-definition video of a single home typically ran $6,000 to $15,000.
Mr. Neisser says the VizzVox commercials “are a convenient way to get a quick and reasonably accurate tour.” But however attractive some of the commercials may be, he said, he doesn’t think do-it-yourself programs like VizzVox are a threat to more traditional marketing services.
“The problem with a technology like this is that you are putting semiprofessional tools in the hands of an amateur,” he said. “One of the reasons folks like us are still in business is that we are professional storytellers. I can’t imagine that your average real estate agent has the quality of voice and ability to draft a narrative that is compelling and interesting.”
To meet that challenge, VizzVox offers professional production assistance. For example, real estate agents can provide images and notes on a property, and VizzVox will produce a script and a voiceover artist to read it for $120.
In additional to real estate programs, VizzVox also sells a general service for $149 a year that lets individuals create presentations, store them on a company server and display them by way of a link. Parents, for example, might use the service to create a narrative celebrating the birth of a child. Artists might show off their portfolios, and business owners might create commercials about their products. Links to the presentations can be placed anywhere on the Web, pasted into a MySpace page, for instance, or at the end of e-mail messages.
Another VizzVox service lets individuals create up to 10 presentations free at its site, but their creations will be shown with ads: after the slide show, for instance, there may be an ad asking viewers to shop at an online retailer.
ANOTHER new San Francisco company, Goldmail, at www.goldmail.com, also hopes to increase the value of e-mail and Web pages by adding a soundtrack to them. “This is a simple way to bring messages to life by adding your voice to anything you send or post to the Internet,” said Guy Longworth, the chief executive.
Goldmail programs can be created on PCs but not on Macs. Both types of machines, however, can be used for viewing. Users must install Goldmail software.
Goldmail is intended to be easy to use, Mr. Longworth said: “It’s meant to be as simple as e-mail — but your voice adds another dimension to the message.”
E-mail: novelties@nytimes.com.
The New York Times
By ANNE EISENBERG
http://www.nytimes.com/2007/11/11/technology/11novel.html?th&emc=th
IF you’re shopping for a new home, it’s easy to take a virtual stroll through the ranch house at 640 Hobart Avenue, San Mateo, Calif., asking price $1,049,000. The house has its own Web site, complete with a soundtrack (www.640hobart.com). Click on it and a real estate agent welcomes you in the voiceover, as crisp digital photographs of the sunny rooms flow past on the screen, with each photo neatly dovetailed to the narration.
The commercial may make you want to move in instantly. But, too bad, that house is sold. Joanne Norris, an agent at Alain Pinel Realtors in Burlingame, Calif., who created and narrated the commercial, found a buyer within a week of advertising it that way. She sold another house, too, within a few days of posting a Web commercial, despite an overall slowdown in the local housing market.
To make the commercials, Mrs. Norris used a new Web-based service, VizzVox (www.vizzvox.com). For $149 a year, VizzVox offers a package that includes domain name registration for the property, hosting of the commercial on the Web site for a year, and the use of the Web-based software that lets real estate agents create the presentation.
“It’s an affordable way to make and distribute commercials,” said Robert W. Beth, co-founder and chief executive of VizzVox. “We think this is an opportunity for individuals to create ads and level the playing field with big companies.”
Real estate agents who use the service upload digital photographs and video clips to the VizzVox site, turn on a microphone and talk about the selling points of the home and the neighborhood. After they describe each visual, software smoothly stitches together the images and narrative. The program has a remix feature, so that agents can create variations on each commercial, including views of dog parks for one prospective buyer, and local schools for another. The presentations can be made and viewed both on Macs and PCs, preferably with broadband connections. Traffic is driven to the site with signs, ads and real estate listings.
Drew Neisser, chief executive of Renegade Marketing in Manhattan, who is in the business of inventive online marketing and Web site development himself, was intrigued with the service. “It’s extremely cost effective,” he said. He looked at two VizzVox commercials and liked them: “They told a lovely story about each home — I was ready at the end to call my wife and tell her we were moving to San Mateo.”
The service may provide an attractive alternative to more complicated and expensive approaches used to sell homes, like high-definition video or 360-degree panoramic photos. Creating a high-quality video is fairly expensive. Mike Raspatello, director of marketing at Richter Studios in Chicago, which does videos for real estate brokers, said the cost for a three-minute high-definition video of a single home typically ran $6,000 to $15,000.
Mr. Neisser says the VizzVox commercials “are a convenient way to get a quick and reasonably accurate tour.” But however attractive some of the commercials may be, he said, he doesn’t think do-it-yourself programs like VizzVox are a threat to more traditional marketing services.
“The problem with a technology like this is that you are putting semiprofessional tools in the hands of an amateur,” he said. “One of the reasons folks like us are still in business is that we are professional storytellers. I can’t imagine that your average real estate agent has the quality of voice and ability to draft a narrative that is compelling and interesting.”
To meet that challenge, VizzVox offers professional production assistance. For example, real estate agents can provide images and notes on a property, and VizzVox will produce a script and a voiceover artist to read it for $120.
In additional to real estate programs, VizzVox also sells a general service for $149 a year that lets individuals create presentations, store them on a company server and display them by way of a link. Parents, for example, might use the service to create a narrative celebrating the birth of a child. Artists might show off their portfolios, and business owners might create commercials about their products. Links to the presentations can be placed anywhere on the Web, pasted into a MySpace page, for instance, or at the end of e-mail messages.
Another VizzVox service lets individuals create up to 10 presentations free at its site, but their creations will be shown with ads: after the slide show, for instance, there may be an ad asking viewers to shop at an online retailer.
ANOTHER new San Francisco company, Goldmail, at www.goldmail.com, also hopes to increase the value of e-mail and Web pages by adding a soundtrack to them. “This is a simple way to bring messages to life by adding your voice to anything you send or post to the Internet,” said Guy Longworth, the chief executive.
Goldmail programs can be created on PCs but not on Macs. Both types of machines, however, can be used for viewing. Users must install Goldmail software.
Goldmail is intended to be easy to use, Mr. Longworth said: “It’s meant to be as simple as e-mail — but your voice adds another dimension to the message.”
E-mail: novelties@nytimes.com.
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