I am referencing the Saturday Washington Post article titled, “What Might be Hurting Home Values” on page one of the Real Estate Section.

 

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/26/AR2009032604074.html

 

After an alert call from a realtor today asking if I was aware of the article and its ramifications to the market I was forced to find it and read it.  I always find humor in what the press reports.  The article pin points BPO’s or otherwise referred to as Broker Price Opinions as an alleged cause for declining home values.  The humor for me comes from the last paragraph where it states that the use of BPO’s by lenders are costing the Real Estate Appraisers lost revenue and that National Appraisal Groups, including the Appraisal Institute, are “UP IN ARMS”. 

 

Ok, let’s have some fun and learn from an insider as we go so we can stamp out the misinformation that is rampant in the press.  I would first like to note that the reporter never defines what a BPO actually is and why they even exist.  I am going to do that for you so nobody sheds any unnecessary tears on behalf of the poor humble appraisers.

 

What is a BPO or Brokers Price Opinion?  This is simply a report that provides property valuation support for lenders based on the 3-6 most recent relative comparable sales and listing trends in the general proximity to the property.  Some reports are more detailed than others.  Many will even provide guidance on 30 day, 60 day, or 90 day pricing suggestions for a given property.  The BPO is also a quick way to assess value on a property whereby the lender is considering issuing a loan or for an existing property in REO inventory.

 

Why do we have BPO’s and how did there prevalence really come about?  BPO’s are used by lenders in many instances prior to funding loans because frankly the lenders do not trust the paper the appraisal reports are written on.  The lenders need an independent third party method of validation so they know the appraisal report has validity.  This is part of a qualified quality control plan that lenders may choose to utilize.  BPO’s are also conversely used in Bank REO properties to assess the collateral on the books.  The lenders don’t want to hear more lies form the appraisers. They want value quickly that can be supported with credible market data and this can be achieved efficiently & accurately for a very low cost with a BPO.

 

The appraisers with their lobby and licensing are now crying that they are “UP IN ARMS”.  They are losing revenue and suffering as we all are in the greatest housing crisis since 1932.  Should we feel sorry for them and make BPO’s illegal?  Hold that thought.  What did the lenders normally do when their underwriting department discovered a fraudulent appraisal or an over zealous appraiser that clearly had their own agenda when it came to assessing value for the purpose of a loan?  This is a key question before we render the decision to pass laws to protect the appraisers or justly force them to feel the double edged sword of the housing crisis.  The answer is that underwriting departments simply took that appraiser off the eligibility list and refused to accept appraisal reports from that person in the future.  There was no accountability.  The states and the licensing department rarely did anything to appraisers.  It was the lender and the loan underwriting department’s job to verify the integrity of the appraisers work as a supporting vendor.  I think the fact that appraisers have to have a license is laughable.  Without enforcement of guidelines and ethics we can chalk all those allegations of fault up to appraiser discretion.  Everybody knows appraisers have 8-10% discretion when spoofing, I mean assigning, a value. 

 

Now that that game has run its course the appraisers as yelping because the housing crisis, where we all share blame, is unleashing pain from the back side of the sword.  The front side was very devastating as the speculative spiral up in values eventually devastated Wall Street market makers and effectively our entire banking system.  Appraisers played a roll as did realtors, lenders, homeowners, etc.  Everybody is to blame and we are in the wash out period where we all must repent and pay for the excesses.  I say let the appraisers bleed.  If they are worth their salt they will rise to the top and earn business or reinvent themselves.  If not they will die a failed capitalist.

 

Heavy stuff, I know.  I have personally witnessed a lot of garbage and deceit from appraisers on properties across forty states that I have no compassion for them.  Appraisers share their portion of the blame game for the housing crisis.  I have seen hundreds of inflated and flat out bogus appraisals that came from licensed so called reputable appraisers through my wholesale division.  The lenders must have a fast and efficient means of valuing their collateral and providing for 3^rd party integrity checks as needed with BPO’s.  The allegation that BPO’s are depressing values is nonsense and unsupported.  The primary driver of the gap down in property values and the continued declines is related to demand and the evisceration of available credit.  There is an abundance of housing inventory and the demand for this inventory has been restricted by the type and availability of credit.  Anyone that took an Econ 101 course in college knows that this means lower prices until demand and supply finds an equilibrium point.

 

If you find yourself at wits end with your lender turn to “The Negotiated Solution” and investigate a Real Estate Short Sale.

 

Blogging from the front lines of the housing crisis.

 

GHunter.

I have read article upon article in major publications and I listen to the people get advice from the pundits on CNBC.  Why are so many people so lost and distraught over the housing crisis?  I can tell you that I probably don’t need to mention that there is an awful lot of misinformation on potential solutions circling and a lot of people are very confused.

 

Here is a link to a recent Washington Post article titled “House Trap” http://www.washingtonpost.com/wp-dyn/content/article/2009/03/07/AR2009030700172.html

 

This article is representative to exactly what I am talking about.  The article focuses on people that are underwater on their homes.  Many people are finding out that they simply do not qualify for any government programs.  Even the folks with FNMA loans that exceed 105% Loan to Value may find they are also stuck.  People are facing the decision of default and subsequent foreclosure.  Others in the article are listed as going to bankruptcy as a solution.  Lastly, professed experts are suggesting people hoard cash so they can pay down the loans if they go the rout of a short sale. Why is the real solution hardly ever represented or even mentioned?  I don’t have the exact answer but I am somewhat sickened that so many people are prey to the housing crisis.  Families are being hurt and so many pundits and Wharton Professors and the likes can’t provide credible guidance towards a real solution.  The answer is that this is your problem and, if you are in trouble, nobody really cares a rat’s tail about you.  What is the incentive for them to take on your troubles?  Frankly there is none.

 

Let’s look at the details of the newest government programs and find the real positive that can help you if you are in trouble with a property.  The general program highlights were touched on in a recent blog dated March 4^th.  Now that many of the details are out you should recognize that it is time to take action and simply review your credible options.  Here are your extreme options:

 

1)      Do nothing. Continue to make what payments you can on the property and eventually go into default and suffer the ramifications of a foreclosure.  I term the time surrounding the inaction to the date of foreclosure as the “waffling period”.  This is the period where you waffle and dissipate assets with no real means of a solution.

2)      Pay everything to make your lender whole.  This is almost never financially feasible but it needs to be noted as an option.  If you want to empty out every assets including your retirement and your children’s college fund to make the lender whole regardless of the selling price and associated expenses you have that option.  This is just plain stupid but it is an option for those caught in the good moral character and willing to sacrifice all for their lender.

 

Both of these options are at extreme ends of the spectrum and make little sense for anyone.

 

What are the more realistic options?

 

1)      Bankruptcy.  Be a quitter and bail into the refuge of bankruptcy.  There is a significant price for this and we don’t recommend it but you can certainly take this path.  I can’t stop you from jumping off a tall building either so it’s all about what makes sense to you and personal choice.  Attorneys will take your money to help you do this just about every day of the week.

2)      Government program.  Seek the assistance of a governmental program to help you stay in your home.  Many of you will find out that based on your gainful employment and income that you simply do not qualify for any program.  It will soon become clear to you that you are ultimately responsible for the adverse financial effects of being stuck upside down with a property. 

3)      Loan modification.  See what you can accomplish with a loan modification.  You will save a couple hundred bucks per month that will be tacked onto the back of your mortgage note and you will find out where you stand with your lender.  You will not be able to stay in your home and have all the debt forgiven by your lender.  It is best I tell you this so you don’t sweat sleepless nights over the details.  There is a very high probability that you will not be satisfied with the results of this option. A big problem here is you need to have a job to qualify in the majority of cases. 

4)      Deed in Lieu.  You can hand the keys over to your lender and dump your problem in their lap.  This again is something we do not recommend given it has many of the same ramifications of a foreclosure.

5)      Short Sale. This is the only option where you can achieve a fair and level playing field with your lender and obtain significant forgiven mortgage debt.  Think of it like rebooting your computer when it is completely stuck.  When it comes back on you get a fresh start.  I am not going to go into too much detail because I have been promoting this on the blog since September and the course is on our site a www.thenegotiatedsolution.com .  Investigate when you have the time for more details.

 

The real positive is that most of the details on the governmental programs since the Spring of 2008 are out in the open. We now have much more clarity.  Now is the time for you to evaluate a real solution to your problem by a simple process of elimination.  Stop with the denial and the false hope. If you have a good job, but you have significant paper losses on real estate, you are not going to get a free ride from the government.  My recommendation is for you to sit with your family and pass your own legislation to the housing crisis today.  Name it “My Personal Financial Freedom Act”.  From the great halls of your kitchen you can objectively determine where you are and where your collective objectives lie.  If you are really having difficulty and want to stay in your current home at all costs the most realistic options are government program or loan modifications.  I am not endorsing these options nor do I think you will be happy with them but this is where to start if you must. If you otherwise like to outsmart your lender and mitigate the majority of this housing crisis from your credit and finances for years to come, by providing your lender a solution with real substance, then you need to follow me down the free market road of “The Real Estate Short Sale”.  Stop foreclosure and/or Avoid Foreclosure all together with a well planned short sale.

 

Denial and good moral character are ok as long as your eventually address the problem and don’t allow it to completely ruin you financially.  Take your time if you so choose but investigate credible options towards a solution or conversely pay the missed cost of opportunity.    The blog is free and we have a No Risk 7 Day Free Trial for The Negotiated Solution.  Its free so don’t be a fool.  The papers and the pundits are not helping the people. Legislate today from your kitchen and win!

 

Blogging from the front line of the housing crisis.

 

GHunter

The Mortgage Cramdown movement really starts with changes to the Bankruptcy laws to allow Bankruptcy judges to modify interest and payment rates.  Does this mean you are going to have all your miserable residual mortgage above market value forgiven?   I have the answer but I want to wait and let you find out for yourself.  To help you understand the most realistic vision of what is to come I would like to share with you the comments from a prominent member of Congress just last Friday evening.

 

When asked by the press if the Mortgage Cramdown Legislation was going to forgive debt here is what the Congressman had to say.  He said the program was designed to incentivize lenders to reduce interest rates and payments in an effort to avoid foreclosure and bolster negotiation.  Put a different way that means to help stabilize housing and once again address saving the free market.  He further went on to say that there would be virtually no forgiven mortgage debt. 

 

He explained that only in very extreme circumstances would there be any forgiven mortgage debt.  The program has been designed to pressure more lenders to the negotiation table with the threat of bankruptcy.  Whether it works is one thing but the real question you must ask yourself as a homeowner or investor is completely another thing. Tomorrow is a big day.  Many people are waiting for the details on more legislation with the expectations that the Obama Administration will be sending out checks for thousands to millions of distressed homeowners that made bad decisions.  The issuance of handouts in the form of checks is not real, but the expectations of saving people that currently find themselves in an upside down equity predicament with a property is real to them, and is the same as a check from Uncle Sam.  I am telling you for the record that there are people in trouble with their primary residences, second homes, investment properties, and many people significantly overexposed with multiple investment properties.  Thousands upon thousands of people have high hope and expectations for mercy and bailout. Dependent on what category you fall into, do you feel worthy of a bailout, and can you handle the scrutiny and rejection if you clearly are not eligible?

 

Are you planning to go to bankruptcy to essentially achieve a rotten loan modification?  You can’t lie or hide assets in Bankruptcy.  Uncle Sam frowns upon this.  If you are considering Bankruptcy as a solution are you aware of the overall credit and financial ramifications of this declaration.  Even if you file and decide not to go through with Bankruptcy you will be hurt severely.  Before you choose such a radical move you should understand all your options.

 

The only real way you can literally take advantage of the macro environment and be eligible for significant forgiven debt without breaking any federal laws or subjecting your self to incrimination is a Short Sale.  I stifle at the though and expectation of all the people in trouble that expect debt forgiveness with no sacrifice or solution to the lender.  Does anyone have any conceptual opinion of contract law?  All of the mortgages that are tied to the collateral, your problem homes, have investors and they have binding investment contracts.  Obama may have charisma and be a smooth talker at speech time but he does not have the money to make everyone whole or take on capitalism and the contact law that binds it into a machine.  You, me, Obama, and the commander of the mighty Sixth Fleet can not sustain the death knell to capitalism and our country without free markets and private capital.

 

Private capital has a life of its own.  If you take away the incentive of gain or pull the rug out from under the platform that supports it then private capital chooses not to participate.  We all say what happed to liquidity and markets worldwide after the demise of Lehman.

 

Now I ask you the question once again.  Is the mortgage Cramdown legislation and all the bells and whistles Obama throws at us tomorrow going to save all the distressed homeowners with the nirvana of forgiven mortgage debt?  I don’t definitively have the answer.  Knowing the client profiles, and the money and jobs most have, I would venture to say the many will simply not be eligible for any of the programs.  This is exactly what we have seen to date over the past year.  Where does that leave the vast majority of you? 

 

Frankly it leaves you with the financial incentive to investigate a Real Estate Short Sale to get out of a bad situation with any property.  Whether you truly have an affordability issue, or you are just an over exposed investor, please do not waffle around and go broke by taking no action or initiating any investigation.  I am going to give you an absolutely free opportunity to learn and help yourself and your family.

 

Today we are offering a 7 Day Free Trial of our online video program The Negotiated Solution available at www.thenegotiatedsolution.com The free part is the very intense and informative two hour video portion.  Obviously if you want unlimited access and all the other information you will have to upgrade and pay some money. However, I am offering you a credible presentation of the Real Estate Short Sale Solution with No Risk and No Credit card.  I want people to understand their options.  I give you my personal guarantee that the program will be well worth your time.  I would like everyone to be part of their own solution and so we can let the government take care of the real desperate folks and eventually get our country and economy back on track.

 

Let’s face it, this is America, but when you look at the stocks and companies that have virtually gone to nothing there is little to be proud of.  I beg for normalcy and I would like to see everyone win but that is not realistic.  There will be winners and there will be unfortunate circumstances with many more foreclosures and hardships to come.  I want you to be a winner. 

 

Blogging from the front line of the housing crisis.

 

GHunter