Jul/Aug 2007 (9 MB)

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Jul/Aug 2007 (9 MB)

  1. 1. REOMAC® 2007 Fall Conference REOMAC® is dedicated to advancing the careers of professionals in the default industry through education, networking and teambuilding. October 10-12, 2007 Westin Diplomat Hotel Hollywood Florida 3555 South Ocean Drive Hollywood, FL 33019 (954) 602-6000 www.westin.com/diplomat REOMAC® Rate $239.00 SAVE THE DATE
  2. 2. July / August 2007 REOMAC® 2007 Board of Directors OffiCERs Mary Best-Brill, President Chase Home Finance Shelley Kaye, Vice President Option One Mortgage Corp. Ralph Barone, Secretary NJ REO Asset Management & Realty Features Bob Siegmeth, Treasurer IndyMac Bank When Being #1 Isn’t a Good Thing – Matt Huffine . . . . . . . . . . . . . 8 Julie Randall, Just What Is Going On With HB4050? – Thomas Anselmo, Esq. . . 10 Immediate Past President Union Bank of California At What Point is a Property Vacant to Exclude Insurance Coverage? – T. Robert Finlay, Esq. . . . . . . . 1 BOARD MEMBERs Art Acosta Disposing of Bankruptcy Cases Under BAPCPA: Regency Realtors To Strike or Not to Strike? – Thomas C. Frost, Esq. . . . . . . . . . . . . .17 Kathy Jeffers-Volk Northwest Market Update Coldwell Banker Corporate REO Div. Greater Seattle-Portland – Keith Brown Andrea Johnson . . . . 20 Donna La Porte Wright, Finlay Zak, LLP March 1st REOMAC® Dinner Meeting – Valencia Walker. . . . . . . . . .21 Bradlee Marick The Future Is Now’ Was Celebrated Through Education, Fidelity National Asset Networking and Teambuilding with REOMAC®’s Management Solutions Most Successful Spring Conference! – Diana Kendall . . . . . . . . 25 Tom Moon Pacific Moon Real Estate • Economic Forecast – Ronald S. Deutsch, Esq. . . . . . . . . . . . . . . . 26 Mia Semo • Alternatives Rock! – Gary Weglarz . . . . . . . . . . . . . . . . . . . . . . . . . 28 National Default Servicing, LLC • Town Hall – Changing Markets – Beatrice Davis-Williams . . . . 29 Sara Waite • Get Smart Before Your Deal Fails – Jim Conway . . . . . . . . . . . .1 GMAC Mortgage • Technology – Joel Wilmouth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Connie White • Mergers Acquisitions – Cynthia A. Nierer, Esq. . . . . . . . . . . . . 5 Option One Mortgage Corp. • Valuations – Kevin Alaimo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 • Energized Lender/Outsourcer Sessions – Connie White . . . . 7 REOMAC® HEADquARtERs • Lender-Only Session – Benton Neese . . . . . . . . . . . . . . . . . . . . . 9 Jennifer Blevins, CMP • Broker-Only Session – Tom Moon . . . . . . . . . . . . . . . . . . . . . . . . 40 Account Executive Thanks and Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 John Berkowitz Publications Director Joseph Davis Account Executive Departments Kim Ingersoll President’s Message – Mary Best-Brill . . . . . . . . . . . . . . . . . . . . . . . . . 4 Account Administrator / Advertising Administrator Editor’s Message – Kathy Jeffers-Volk . . . . . . . . . . . . . . . . . . . . . . . . . .5 Melissa Piano Headquarters Happenings – Joseph Davis . . . . . . . . . . . . . . . . . . . . 6 Account Administrator Stephanie Schoen BuyBankHomes Default Industry – Bradlee Marick . . . . . . . . . . . 54 Special Projects Copyright 2007© by the Association of Real Estate Owned Managers. The membership includes lenders and servicers; attorneys and Tricia Schrum, CPA No portion of this magazine may be printed without express written vendors; and real estate brokers from across the country. REOMAC® Accountant consent of REOMAC®. The writings within these pages do not members are dedicated to improving the quality of service they necessarily reflect opinions of REOMAC®. provide each other and the industry at large. REOMAC® 2520 Venture Oaks Way, Suite 150 REOMAC® is a not-for-profit corporation dedicated to the professional With the exception of products or services, or articles specifically Sacramento, CA 95833 advancement of its Regular, Affiliate and Associate members under REOMAC® control and supervision, it is the policy of REOMAC®, 916-239-4090 • 916-924-7323 fax nationwide. REOMAC® provides resources to anyone whose career its Officers and board of directors and the Editor of this publication, interest revolves around pre- and post-foreclosure, loss mitigation NOT TO ENdORSE ANY PROdUCTS, SERVICES, OR OPINIONS www.reomac.com • info@reomac.com and the management and disposition of distressed assets. EXPRESSEd IN THIS PERIOdICAL. REOMAC® updatetm July / August 2007
  3. 3. Mary Best-Brill 2007 REOMAC® President t HE FUTURE IS NOW Day t wo began with our $44,500 for our Scholarship in New Orleans in May and – a succinct theme to “Only” Sessions and there was fund. Thank you for your Philadelphia in June. In fact, wrap around a conference something relevant for each generous donations and those some of the folks we met in which held so much promise of our attendees. The wisdom of you who were sponsors. You these cities will be bringing for all who attended. …all 1359 of our Education Committee and your families will be the their market knowledge to of us. This was arguably the knew no bounds as they created recipients of the scholarships Florida to share with you there. most important REOMAC® exclusive sessions for Lenders, from this fund as a Members Our dinner meetings will be Conference to date. The sharing Outsourcers, Brokers, Attorneys Only benefit. Watch for a covered in the September issue of information by the industry and Title Officers. Each of us section in a later issue of our of “REOMAC® Update” so you leaders who participated in this facing a myriad of unique “Update” in which scholarship won’t miss anything either! By conference was beneficial to the challenges in the marketplace recipients share their stories visiting your markets around success of all who attended. had the rare opportunity to with REOMAC® on the benefits the country, with your feedback brainstorm with our peers in they received from their and interaction, we expect to Our program opened with these “Only” sessions. REOMAC® scholarships. keep REOMAC spot on the Bob Hirschfeld’s candid and market trends nationally humorous view of the world Mergers and Acquisitions, Thanks a mi l lion to our of Technology. All too true Technology, Valuations, Blighted Foundation Sponsors: Platinum October in Florida will be a and offered some of us a few and Distressed Properties Sponsor: NRBA, Gold Sponsor: continuation of the FUTURE moments of levity which were – where to go next? With First American Title Insurance is NOW – Market Updates sorely needed after months concurrent sessions running Company, Silver Sponsor: – Christopher Thornberg will in “the trenches”! Keeping – there was just too much in Adams AMI, Bronze Sponsor: be bringing us his economic us abreast with the state of day two to see it all. Then the McCurdy Candler, LLC, as perspective. We will have a the market, Dr. Lawrence close of the day, saving what well as our Golf Sponsors: speaker from one of our dinner Yun presented us with the some feel is the best for last Grand Platinum Golf Sponsor: meetings that I will refer to economics of our industry – the Lender Roundtables. This McCabe, Weisberg Conway, as a “CSI kind of Guy” and from his perspective as Senior session has been expanded to PC, Grand Gold Golf Sponsor: many other surprises from Economist of the National include outsourcers. Connie Steve King, The King of Homes. our Education Committee Association of Realtors. His White once again encouraged I know that I have said it probably who is hard at work to bring review of where we have been, our Lender and Outsourcer a million times – but REOMAC® you another very essential how we got here, and where we members to bring their latest is a not-for profit organization conference. may be going was especially initiatives to the session and without your support, the enlightening and offered some attendees. Connie succeeded conference couldn’t be what it I so much appreciate your insight into what we have in signing up 33 lenders and is today. participation in REOMAC®’s to look forward to for the outsourcers for this session. It events, whether it be our balance of 2007. Sessions for is one of the favorite sessions In keeping with REOMAC®’s conferences or dinners, and the balance of the day included, for our attendees. mission this year, the Board look forward to seeing you soon! Alternative Disposition of of Directors has scheduled a I welcome your comments and Properties, Bob Norrell’s Town The Gala Dinner Monday night dinner meeting almost every suggestions as we continue to Hall, the innovative “Get Smart was “Out of this World” and the month around the United build your organization. Before Your Deal Fails”.... Day auctions once again, under the States, with the exception one looked like a true “Who’s guidance of our Conference and of April and October – our Who” of the Default Industry. Scholarship Committee, raised conference months. We were 4 July / August 2007 REOMAC® updatetm
  4. 4. Kathy Jeffers-Volk Editor A s usua l – it was offers numerous solutions to Equity Group of Beaverton, Joel Wilmoth – Super wonderful seeing each the default problem. OR. Their article gives us an Session A – Technology of you at the Spring overview of the current market Conference. It is an honor Tom Anselmo, Esq., Freedman, condition in the Northwest. Cynthia Nierer, Esq. – Super being a part of an organizing Anselmo, Lindbert Rappe, Session B – Mergers and team that consistently produces submitted the article, Just Thanks go out to Valencia Acquisitions the premiere default servicing W hat is Going on w it h Walker for providing a write Kevin Alaimo – Super conference year after year. HB4050? Here is the Status. up on the March 1 dinner Session C – Valuations Once again the sessions were HB 4050, as you may remember, meeting held in Hollywood, timely and informative, the is Illinois’ answer to predatory Florida. Not only was it an Benton Neese – Lender Only networking opportunities lending practices. Tom brings informative meeting, but it Session abundant and the camaraderie us up to date on the changes that offered us an opportunity to and interactions among the have occurred to this Bill since see the beautiful facility where Tom Moon – Broker Only attendees endless. first being implemented. our Fall 2007 Conference will Session. be held. Specia l t ha n k s need s to At What Point is a Property Our next issue of REOMAC® go out to our Foundation Vacant to Exclude Insurance The recent Spring Conference Update will have important Sponsors – their financial Coverage? by Robert Finlay, was a success with over 1,300 coverage of the recent dinner support allows us to put on Esq., Wright, Finlay Zak, people in attendance and the meeting held in New Orleans. the quality conference you LLP, was first published in the sessions were filled, some Look to receive the Update in have all come to expect from UTA Quarterly. The article only with standing room early September. REOMAC®. So thanks goes to: has relevance especially when available. I would like to take Platinum Sponsor – NRBA; trying to decide whether to this opportunity to thank Gold Sponsor – First American place force order insurance on my “reporters” who wrote Title Insurance Company; your vacant REO properties. summaries on the sessions. Silver Sponsor – Adams AMI; The reporters and the sessions Bronze Sponsor – McCurdy Thomas C. Frost, Esq., Rosicki, they covered are: Candler, LLC. Rosicki Associates, P.C., reviews the importance of Ron Deutsch, Esq. – We have a variety of topics ensuring the credit counseling Economic Forecast with NAR in the Update this month requirement in bankruptcy economist, Dr. Lawrence Yun starting with When Being #1 proceedings is met in the Isn’t a Good Thing by Matt emphasis of the article titled Gary Weglarz – Alternative Huffine, Marketing Manager Disposing of Bankruptcy Disposition of REO – Royal Title Service. Matt Cases under BAPCPA: To Properties examines the causes for the Strike or not to Strike? Beatrice Davis-Williams high number of foreclosures – Town Hall in the Mid-West, particularly Northwest Market Update in Indiana. But Matt does not Greater Seattle-Portland was Jim Conway – Get Smart stop with listing the cause of written jointly by Keith Brown, Before Your Deal Fails most of the defaults, he also CREO, SeattleREO.com Andrea Johnson, CREO, ReMax REOMAC® updatetm July / August 2007 5
  5. 5. Joseph Davis Account Executive R EOMAC® momentum We would like to thank all the We would like to thank all continues to grow and sponsors who have signed up those members who have many changes have already for the Fall Conference. returned their membership taken place. If you have not I f you a re i nterested i n data verification form for the Jennifer visited REOMAC®’s new Web sponsoring an event for the directory. This information will Blevins, CMP Account site, you should. The new Fall Conference, please visit help ensure the membership Executive Web site has been designed our Web site at www.reomac. directory contains your most to bring REOMAC® into the com. Click on the calendar current information. You future. The new Web site is just link on the left hand side of the can expect to receive your the beginning of REOMAC®’s home page and there you will membership directory by the John rebranding. There has been find the link to the Exhibitor/ end of July. Berkowitz Publications a change to the logo and Sponsorship brochure. Director REOMAC®’s materials are also With all the growth that is being updated to match the You will notice some changes occurring, I am excited to new feel and strength of this in the registration process announce that Melissa Piano great association. for the Fall Conference. We will be taking over the duties Joseph Davis are bringing back online of membership. Melissa will Account This new strength was definitely registration so you can register be processing new membership Executive felt at the Spring Conference at online with a credit card. If applications and answering the Esmeralda in Indian Wells, you are paying by check, you potential member inquires. California. Attendance for will still need to mail in your As a member of REOMAC®, if the Spring Conference was registration form with your you have a question regarding Kim Ingersoll close to 1,300 attendees – the check. Registrations will your membership, please give Account largest conference REOMAC® not be processed unless they Melissa a call at (916) 239-4090 Administrator has ever had. We expect are received with the correct and she will be happy to assist this energy and enthusiasm payment amount. The second you. to continue into the Fall change will be in making your Melissa Conference to be held October hotel reservations. You will not Thank you for your continued Piano 10-12th in Hollywood, Florida. be able to receive the REOMAC® support of REOMAC®. If Account The education committee is discounted guest room rate you have a ny com ment s Administrator working hard to assemble an until your registration has or questions, please do not educational program that will been processed. Once your hesitate to contact us. excite all the attendees. At registration has been processed, Stephanie the same time the conference you will receive a confirmation Schoen committee is planning all the code for the hotel that will allow Special details to make sure your time you to make your reservation Projects at the conference is not only in the REOMAC® room block. educational, but fun. This will help assure conference attendees who wish to stay at the host hotel get a room at our Tricia discounted rate. Schrum, CPA Accountant 6 July / August 2007 REOMAC® updatetm
  6. 6. When Being #1 isn’t a Good thing By Matt Huffine i ndiana was #1 in foreclosures – Why? These increased payments resulted from they can get loan approval. There have What a loaded question this is! Why real estate taxes being re-assessed to been a number of appraisers who appraised have foreclosures soared throughout include the new improvements on the properties at a level higher than their actual the country and especially in the Midwest? land. Also, many of these buyers started value, so that the borrowers could qualify It’s safe to say that a myriad of variables with an adjustable rate loan or a loan with for a specific loan amount. If the borrower have contributed. some sort of “teaser rate” that increased became unable to pay their mortgage, the over time. property was often “upside down” in loan Contributing factors: to value, which made the properties more Predatory Lending – Predatory lending difficult to sell unless the price was deeply Change in Available Jobs – As the United causes families to suffer because of discounted. Naturally, this can affect the States trends from a factory to a service abusive practices in the lending world. pricing of the whole market. economy, there have been many changes These practices strip borrowers of home in the jobs available. Often the skills in equity and ultimately cause families to go Title Company Closers – Someone has one job don’t transfer to other job options into foreclosure, which destabilizes the to facilitate these transactions. Often the and opportunities. Also, layoffs from community in which they live. Sometimes closer at a title company was colluding with high paying factory jobs, especially in individuals were persuaded to make false the mortgage broker to fraudulently close the car industry, have made it difficult statements or were convinced to borrow the transactions. Some of the possible for homeowners to keep current on their more money than they knew they could scenarios included “straw” buyers. Once mortgage payments. afford to repay. People are now being the over inflated appraisal was performed encouraged to read everything more and the “borrower” was approved, a closing Interest Rates and High-Risk Loans carefully and ask questions to avoid this. was held. At the closing, the settlement – Rates have been fairly steady and are statement had the buyer “cashing out,” to some of the lowest in U.S. history. Many Lending Standards – In a nationwide make “repairs” to the property. Since the borrowers have had adjustable rate effort to make home ownership more buyer didn’t really exist (someone else’s loans and haven’t been able to make the available, new loan programs have been credit is used), the person at the closing adjustment with the payment increases developed. Many of these programs make acting as the buyer would skate off with they have experienced. Additionally, an effort to qualify borrowers with less the money. Obviously, these are fraudulent some borrowers were pressured to accept stringent standards. Sometimes these transactions, but lead to foreclosures, high-risk loans such as a balloon loan or standards have been miscalculated and because no one was around to make the an interest only loan, some of which had the borrowers have ultimately had an mortgage payments. steep pre-payment penalties. inability to pay. Long term amortization schedules and 125% LTV mortgages may Trusting Culture and Speed of Transac- Newly Constructed Homes – As more look attractive in the short term, but in tions – Midwesterners, in particular, new homes have been built, many of the the long run, they may cause the borrower are generally very trusting and probably buyers have been first time homebuyers. some hurdles they are unable to handle. used to make the assumption that all of Along with the newness of homeownership, the real estate professionals involved in often comes the inability to foresee that Appraisals – As with all industries, their transaction are looking out for the the future mortgage payments could there are some bad apples. Lenders will increase past the buyer’s ability to pay. sometimes push for higher appraisals, so continued on page 8 July / August 2007 REOMAC® updatetm
  7. 7. When Being #1 Isn’t a Good Thing – continued from page seller’s or buyer’s best interests. Try as and Appraisal Associations have started of enforcing them, as necessary, to protect we might, since the speed of closings has communication, networking, and training homeowners. An example in Indiana is increased dramatically, it’s difficult for within and among themselves. REOMAC® the recent creation of the Title Insurance each respective party to keep track of their is one platform that allows organizations Enforcement Fund (TIEF). A $5.00 fee is own interests and those of the seller and to have greater information flow. added to every owner’s mortgage policy borrower. Also, in certain situations, the issued. The funds will be used to increase responsibility of who should be watching Standards – Standards can be created for the enforcement of improper real estate out for whom gets blurred and sometimes each industry to help select the business transactions (http://www.indianalandtitle. people loose sight of the fact that we are all partners that know and understand the org/insurance_enforcement.cfm). ultimately here to serve the customer. local laws and regulations. The selection process for our business partners needs Conclusion: Industry Expertise – With the advent further scrutiny. Ask how long a company of various refinance booms, this invited has been in business, ask for references, We will never completely eliminate many untrained individuals to join in the check out the references, and check the foreclosures. With that being said, as an real estate process. Even though many had ownership. industry, we can hone our skills to reduce little to no industry expertise, they received the probability of future foreclosures where little or no training and had to “wing it.” Governmental Oversight, Regulation, possible. We will all need to identify and This often resulted in misjudgment and and Enforcement Action – Much of the learn to better recognize various portions errors in decision-making. industry is regulated by the Department of the process that we can improve, so as of Insurance, Department of Financial to minimize and mitigate lender losses. solutions – Institutions, or by similar State and Federal By working together, we can continue to Where Do We Go from Here? Departments. Increasing foreclosures improve the process! have precipitated taking a pro-active Consumer Education – In an effort to stance in trying to identify weaknesses help homeowners plan and not get in over and take action. Some actions include Matt Huffine is the Marketing Manager their head, they need to understand the developing an “oversight” group to help for Royal Title Services – Statewide in true costs of homeownership. They should monitor activity. Regulations have been Indiana. learn how to anticipate and budget for rainy put in place where needed, with the goal days and variations in mortgage payments. This includes reviewing scenarios of looking at monthly payments that show possible increases in real estate taxes, possible property repairs, and general maintenance that goes along with home ownership. Also, many homeowners run into unforeseen financial difficulties such as medical bills, car repairs and loss of a job. Use of the Internet to get information about prices for property, services, and proper budgeting are also great tools to educate the consumer. Industry Education – Nationwide industry professionals have been required to take more structured continuing education, so that we can further assist our clients. The goal is to balance the need for vigorous consumer protection with vibrant business competition, which should result in a healthy marketplace for consumers and the industry alike. Communication – With all of the foreclosures taking place throughout the nation, many professional organizations like the State Banking, Title, Realtor REOMAC® updatetm July / August 2007 9
  8. 8. Just What is Going On With HB4050? Here is the status By thomas Anselmo, Esq. i f you are involved in real estate or University of Illinois at Urbana Champaign lender must report whether the proposed mortgage lending, it is hard to imagine in which sales volumes were monitored in loan permits interest-only payments, that you haven’t heard of HB4050 by the 10 designated zip codes and compared whether the loan can result in a negative now, as it has been a controversial law with a control group of zip codes. The amortization and whether the overall to say the least. Officially known as the result showed a 50% drop in home sales in package is an “80/20” (100% financed) loan. “Illinois Predatory Lending Database Act,” the affected zip codes compared with a 20% Additional information is also required commonly referred to as HB4050, the law drop in the control group. By all reports, about the borrower, such as whether the was signed by Governor Blagojevich in community and civic leaders from the borrower is a first-time home buyer. 2005 and took effect January 1, 2006. affected zip codes also weighed in against the Act as initially implemented. In addition to the creation of a database, The Act confers upon the Department of the Act is also designed to require Professional Regulation, Banking Division So the initial regulations that implemented counseling for certain borrowers who (“Banking Division”) the responsibility of the Act died a quick death when on January are considered to be vulnerable to unfair implementing the Act. This initially took 19 of this year Governor Blagojevich lending practices. Under the initial place on September 1, 2006. By its terms, directed the Banking Division to suspend implementing regulations, the counseling the Act is a four-year “pilot program.” them by changing the designated area from provisions applied where borrowers’ FICO By regulation, its initial implementation 10 zip codes to no zip codes at all. scores fell below a certain level and where applied only to ten zip codes located mostly the proposed loan contained features in the Southwest quarter of Cook County. However, at the end of March the considered to be risky, such as interest However, as just about everyone knows by Governor’s Office announced a second try. only loans, negatively amortized loans, and now, the initial implementation of the Act This time the Act will apply to all of Cook the like. The proposed new regulations was abruptly suspended in January of this County. But the proposed new rules also represent a substantial revision. year and changes are afoot. substantially change the circumstances under which the Act applies. Under the new regulations, the emphasis Af ter the Act was implemented in is on the lender rather than the borrower, September, 2006, the Banking Division The Act still requires the Banking Division and there is no reference to the borrower’s took steps to monitor its effect. The to create a “Predatory Lending Database.” FICO score. The new regulations would feedback was not positive. In a public As before, all mortgage brokers and loan require a counseling referral for borrowers hearing held at the Thompson Center originators licensed by the Banking who are either first-time home buyers or on November 27, 2006, comment was Division must enter mortgage loan who are refinancing, if the proposed loan decidedly negative. In addition, a January application information into the Database. contains any of the following features: 19 press release from the Office of the The proposed new regulations expand the Governor referenced a study from the required information. For example, the continued on page 11 10 July / August 2007 REOMAC® updatetm
  9. 9. HB4050 – continued from page 10 a) interest only payments are those provisions are not affected by Administrative Rules can ask the Banking permitted; administrative rule changes. For example, Division for clarification or additional deeds for transactions within the effected information. b) negative amortization is possible; area must still be recorded with an accompanying certificate of compliance If the second notice period expires c) points and fees exceed 5%; with the Act or a certificate of exemption without legislative action, the new rules from the Act. Further, in the event of a will become permanent. However, at this d) the loan relies on stated income; foreclosure of an affected mortgage, the time there is still no official designation of lis pendens must still be recorded with a the area in which the pilot program will e) the loan is part of an 80/20 loan; statement that the lis pendens was served take effect. Governor Blagojevich has upon the mortgagee, or it is of no effect. announced that he will direct the Banking f) pre-payment penalties apply, or Failure to comply with the Act remains, Division to designate all of Cook County as by definition, a violation of the Illinois the pilot program area, upon the proposed g) the interest rate is adjustable. Consumer Fraud Act. new rules taking affect. Yet, that official act must still be formally completed before As before, the counseling must be The proposed new regulations have yet the law again takes effect. conducted by a “HUD-certified” counselor. to take effect. They were published in However, the new regulations state that the Illinois Register on April 6, 2007, counseling can be done by phone where whereupon a 45-day first notice period Thomas Anselmo, Esq. is a partner with an in-person counseling session would began, during which the public can submit the Naperville, IL law firm of Freedman, create a hardship for the borrower. comment. When the first notice period Anselmo, Lindbert Rappe. expires, a second 45-day notice period Many of the Acts provisions are statutory begins in which a legislative committee rather than regulatory, and obviously known as the Joint Committee on REOMAC® updatetm July / August 2007 11
  10. 10. At What Point is a Property Vacant to Exclude insurance Coverage? (Reprinted with approval from UTA Quarterly) By t. Robert finlay, Esq. “Do most of our lending clients even *600 ‘If loss or damage occurs to a After the original tenant left the property, it know that they might be uninsured if building that has been vacant for sat vacant for more than 60 days, triggering the property is vacant?” more than 60 consecutive days the Vacancy Exclusion. However, TRB prior to the occurrence of that then rented the property to a new tenant W hen I was first asked to write loss or damage, we will: with the understanding that the new an article on the recent TRB tenant would not take possession until Investments case,1 I struggled to a. not pay for any loss of damage after TRB completed a substantial remodel. find the relevance of it to the majority of caused by: In the middle of the remodel process, the REOMAC’s members and clients. The TRB 1. Vandalism; construction crew returned to work one Investments case holds that damage to the 2. Sprinkler leakage, unless you morning, discovering that a water heater secured real property could be excluded have protected the system or waterline had burst, causing over from insurance coverage if the damage against freezing; $1,250,000.00 of damage. Yes, million! occurs while the property is undergoing a 3. Building glass breakage; remodel. The court’s logic is that, unless 4. Water damage; TRB submitted a claim to Fireman’s the remodel requires the “substantial and 5. Theft, or Fund. Fireman’s Fund rejected the claim, continuing presence of workers at the 6. Attempted theft. citing the Vacancy Exclusion. Specifically, premises,” the property could be deemed Fireman’s Fund argued that a remodel is vacant, which is an exclusion to many b. Reduce the amount we would not “construction” under the policy and insurance policies. The real relevance of pay for the loss or damage by therefore, because there was not a tenant this case then dawned on me -- do most 15%. in the property, the Vacancy Exclusion of our lending clients even know that applies and the claim is not covered. After they might be uninsured if the property A building is vacant when it does attempts to informally resolve this matter is vacant? After polling some clients, I not contain enough business failed, TRB filed suit. realized the answer is no. The problem is personal property to conduct that the TRB Investment case confirms it customary operations. Fireman’s Fund prevailed at the trial court is a very important question. Why, will and Court of Appeals levels. In upholding be answered below. Buildings under construction summary judgment in the insurer’s favor, are not considered vacant.’” the Court of Appeals reasoned that the In 1999, TRB purchased an insurance [Emphasis added.] definition of “construction” involved “the policy for a commercial building from creation of something new …” and that Fireman’s Fund Insurance Company. The The rationale behind the Vacancy Exclusion because a remodel did not create a new policy included a “vacancy” exclusion that is that a vacant property carries a greater building, it did not qualify under the provides as follows: risk of damage because no one is there “construction” exception to the Vacancy to deter vandalism and promptly report Exclusion. “8. Vacancy damage. continued on page 14 REOMAC® updatetm July / August 2007 1
  11. 11. At What Point is a Property Vacant? – continued from page 13 In a matter of “first impression” the that of an occupied building, thus giving course of foreclosure that the property is California Supreme Court granted review the insurer the benefit of its prior risk either vacant or undergoing a substantial and reversed the Court of Appeal’s decision. assessment.” remodel, it should disclose this information The Supreme Court held that insurance to the client so that the client can review coverage must be “interpreted broadly so The Supreme Court then remanded their insurance policy to see if they are as to afford the greatest possible protection the matter to the trial court for further covered. Trustees should keep in mind to the insured, [whereas] … exclusionary presentation of evidence on whether the that, when disclosing this information, clauses are interpreted narrowly against remodel met the Supreme Court’s standard you may have to educate the lenders as to the insurer.” Using this rule, the Supreme of “substantial and continuing presence of why the information is important. Court reasoned that a liberal reading workers.” In time, we will learn whether of the term “construction” includes TRB’s contractors met this standard. But, What the lenders must do if they learn from a substantial remodel. The Supreme for purposes of our lender clients, the rule their trustee or otherwise, that the property Court added that the additional risk that and the risk is set -- a remodel may exclude is vacant or in the middle of a substantial the Vacancy Exclusion was intended to insurance coverage. And, perhaps more remodel, is a more complicated. address, i.e., “to prevent vandalism and important, it highlights to our clients ensure the prompt discovery of damage,” that a vacant property may not be insured • First, the lender should check to would be satisfied so long as the remodel against certain types of losses. see if there is force-placed coverage. required the “substantial and continuing Fortunately, many force-placed presence of workers at the premises.” In What does this mean for our Trustees, policies anticipate that the property essence, the regular presence of workers lenders and clients? For the Trustee, it is on the property is “roughly equivalent to simple - if the Trustee discovers during the continued on page 15 14 July / August 2007 REOMAC® updatetm
  12. 12. At What Point is a Property Vacant? – continued from page 14 may be vacant and cover such a situation. But the lender should ask their force-placed carrier to be sure. • Second, if insurance has not been force- placed, the lender should review the What’s borrower's insurance policy to see if there is a similar Vacancy Exclusion as in the TRB Investments case. (Commercial policies are probably Up at more likely to have the Vacancy Exclusion than residential policies. But, the lender should check in both instances.) REOMAC ?® • Third, the lender should check its Standard Loss Payee Clause to see if it removes or adds a Vacancy Exclusion. • Fourth, if the combined effect of the policy and the Loss Payee Clause provide for a Vacancy Exclusion, or if the lender cannot tell, the lender should either force-place its own insurance, or, in the case of a remodel, verify that the remodel requires a save the Dates substantial and continuing presence of workers on the premises. July 19, 2007 REOMAC® / united trustees • Fifth, to determine whether a particular Association Joint Meeting remodel meets this standard, the Marriott Hotel lender should consult its in-house or Del Mar, CA outside counsel. August 9, 2007 Dinner Meeting The ultimate lesson to be learned from the Denver, CO TRB decision is that a vacant property or one being remodeled could be uninsured september 20, 2007 Dinner Meeting against certain losses. To protect itself, Waterfront Marriott the lender must familiarize itself with Portland, OR the particular insurance policy and loss payee clause involved in each case. Our October 10-12, 2007 fall 2007 Conference role as counsel is to educate your lender Westin Diplomat Hotel clients on this potential risk as we suspect Hollywood, FL many lenders are unaware that they may be uninsured. December 6, 2007 Dinner Meeting Westin Bonaventure Hotel Los Angeles, CA (Endnotes) 1 TRB Investments v. Fireman’s Fund Ins. April 5-8, 2008 spring 2008 Conference Co., 2006 WL 3257848; 6.06 Cal. Daily Renaissance Esmeralda Op. Serv. 10,461 (Nov. 13, 2006) 145 Indian Wells, CA P.3d 472. T. Robert Finlay, Esq., is a Partner in the 2520 Venture Oaks Way, #150, Sacramento, CA 95833 Newport Beach, California law firm of 916.239.4090 – phone • 916.924.7323 – fax Wright, Finlay Zak, LLP. info@reomac.com • www.reomac.com REOMAC® updatetm July / August 2007 15
  13. 13. Disposing of Bankruptcy Cases under BAPCPA: to strike or Not to strike? By thomas C. frost, Esq. O ne of the requirements of the protections of the automatic stay and, in case docket pursuant to 11 U.S.C. 105(a) Bankruptcy Abuse Prevention her discretion, ordered the case stricken. and struck the bankruptcy case presented and Consumer Protection Act before it. Id. of 2005 (hereinafter “BAPCPA”) is that The Court reasoned that “Section 109(h) debtors must undergo credit counseling provides that an individual may not be a Some have argued that by striking a as a prerequisite to filing for bankruptcy debtor unless credit counseling is obtained bankruptcy case, the Court is allowing the protection. See 11 U.S.C. 109(h) While pre-petition, or the bankruptcy court debtor, in effect, another bite at the apple this seems clear enough, the Courts have grants an extension.” In Re Elmendorf, 345 since this stricken filing will not count as a not uniformly decided what should happen B.R. at 497. Further, the Court determined prior bankruptcy case pending within the to debtors who fail to obtain the requisite that no automatic stay can exist for debtors prior year under an analysis of 11 U.S.C. credit briefing within the 180 days prior who fail to obtain the required credit 362 (c)(3)(4). This analysis is necessary to filing a petition. counseling. when determining whether a limited automatic stay or any stay is in effect as Courts have ruled that a failure to meet The credit counseling requirement was a result of a subsequent filing. There are the credit counseling requirements could enacted presumably with the intention numerous bankruptcy Courts which have result either in the case being dismissed, of allowing “debtors to make informed decided that cases should be dismissed if OR in the alternative, stricken. The choices before filing for bankruptcy.” Id. the credit counseling requirement is not effect of striking a defective bankruptcy at 502. Although many Courts have held satisfied. See In re Seaman, 340 B.R. 698, filing extends far beyond the instant case that ineligibility to be a debtor is a basis 707-09 (Bankr. E.D.N.Y. 2006)(dismissing pending before the Court. It can have a for dismissal of the case, Judge Morris the case for failure to satisfy Section 109(h) significant impact on the rights of both the concluded that: and citing thirty one cases where the Court debtor and their creditors in the event of dismissed the case instead of striking it.); a subsequent bankruptcy filing. “Congress explicitly made failure See also In re Hedquist, 432 B.R. 295, 297 to file certain documents pursuant (8th Cir. BAP 2006)(bankruptcy courts have An important case of note in which the to Section 521(a)(1) and (2) cause no discretion but to dismiss a case when Court argues that the case should be to dismiss; but did not explicitly the debtor does not comply with Section stricken is In re Elmendorf, 345 B.R. 486 include credit counseling certificate 109(h).); In re Ross, 338 B.R. 134 (Bankr. (Bankr. S.D.N.Y. 2006). In this decision, among the enumerated causes.” Id. N.D. Ga. 2006). Judge Cecelia G. Morris ruled that a debtor at 503. who does not satisfy the credit counseling The provisions of BAPCPA providing for requirement is not eligible to be a debtor Thus, in the absence of an explicit direction limited or no protection via the automatic under the Code thus rendering the filing from Congress, the Court held it could act as void ab initio failing to invoke the within its own discretion in managing its continued on page 1 REOMAC® updatetm July / August 2007 17
  14. 14. Bankruptcy Cases Under BAPCPA – continued from page 17 stay for repeat or serial bankruptcy filers (See 11 U.S.C. 362 (c)(3 (4)) were enacted to deter the practice of some debtors from utilizing the bankruptcy system as a delay tactic to thwart the collection attempts of creditors. If a case is stricken instead of dismissed, the case will be deemed void ab initio and will not count against the debtor as a past bankruptcy filing. Thus, they will gain additional protections afforded by the automatic stay than if the prior case was dismissed by the Court since the prior case will not be held as a prior mark against the debtor. There has been much case law generated on this issue throughout the country, and even in New York State, the various Bankruptcy Courts are not in agreement on whether striking is the appropriate option. What is clear, however, is that creditors and their attorneys must carefully analyze the manner in which prior cases have been disposed. The distinction between a case being dismissed or stricken makes an enormous difference in the rights of both debtors and creditors and the strategies to be considered to protect each party’s interests in future cases. Thomas C. Frost, Esq. is an attorney with the New York law firm of Rosicki, Rosicki Associates, P.C. 18 July / August 2007 REOMAC® updatetm
  15. 15. Northwest Market update Greater seattle-Portland NWMLs (Greater seattle, Washingon) Available Listings Apr ’07 (8,408) Apr ’06 (25,215):  52% Pending Sales Apr ’07 (9,156) Apr ’07 (9,702):  6% Median Sale Price Apr ’07 (28,000) Apr ’06 (299,500):  10% Average Days on Market Apr ’07 (87) Apr ’06 (72):  21% Months of Available Supply Apr ’07 (4 .1) Apr ’06 (2.6):  58% RMLs (Greater Portland, Oregon) By Keith New Listings Apr ’07 (5,541) Brown Apr ’06 (4,429):  25% Pending Sales Apr ’07 (2,998) Apr ’07 (3,321):  8% Median Sale Price Apr ’07 (285,000) Apr ’06 (269,500):  6% Average Days on Market Apr ’07 (58) Apr ’06 (41):  41% Months of Available Supply Apr ’07 (4 .4) By Andrea Apr ’06 (2.4):  83% Johnson t he Seattle and Portland markets of long-term basic economics, median a major challenge in Seattle as our traffic continue to weather the foreclosure sale prices continue to rise at a healthy, problems are already well-known and storm remarkably well heading into if unspectacular 6% clip. But then, with worsening despite a lot of hot air from the the summer. Although both markets all of current weakness throughout the political class about the latest and greatest are beginning to show signs of weakness, country, who needs “spectacular” right “solution”). healthy appreciation rates continue (at now, right? least for now!) Tightening lending requirements will The biggest challenge currently in both continue to have an effect as we are already Seattle: inventory continues to build markets is convincing buyers that the seeing a decline in the number of 80/20 considerably over a year ago, up 52% in Seattle and Portland markets are different ARM offers and a modest resurgence in April, while sales were down 9%. Despite than most of the rest of the U.S. with all FHA financing (almost unheard of locally this trend (that has been building all the breathlessness in the media about for the past several years). Early signs of year thus far), median prices are up 10%. the national housing slowdown. Buyers further weakness have appeared in May as However, this level of appreciation cannot continue to move to the Northwest from the number of new listings continues to continue if inventory continues to rise other parts of the country, some for relative explode while daily price reductions (a sure with sales falling: it simply defies basic affordability and others for lifestyle, not to sign of weakness) are also skyrocketing. economics. Predictably, market time and mention the more modest climate. Should be an interesting summer. months of available supply have also risen sharply compared to this period in 2006. Both Portland and Klamath Falls earned spots in the annual list of top 100 places Keith Brown is Broker/Owner of SeattleREO. Portland: at the risk of sounding like a to live which only attracts more in- com (Brown Real Estate Group) in Seattle, broken record, inventory is also up with migration, provided local services and WA and Andrea Johnson is Broker/Owner sales down, with 25% more new listings infrastructure can be bolstered to support of ReMax Equity Group in Beaverton, but 8% fewer sales. Again, in defiance the additional population (this is currently OR. 20 July / August 2007 REOMAC® updatetm
  16. 16. March 1st REOMAC® Dinner Meeting Alternative Marketing strategies (Hollywood, fL) By sponsored By: Coldwell Banker Corporate REO Valencia Division and RealtyBid.com Walker t he March REOMAC® meeting was mortgage fraud, and their predictions for was to offer the Seller an additional held at the site for the 2007 Fall 2007. Audience participation was included method for the sale of REO properties. Conference – the beach front Westin with participants discussing the changes Normally viewed as a resource for aged Diplomat Resort Spa in Hollywood, in their respective markets. asset disposition, the panelists noted Florida. The pre-dinner workshop “A they are receiving assets earlier in the Florida and Georgia Market Update” was Mike Keracher, RealtyBid.com; Elsa REO process, many coming as new REO an informative overview of the REO market Louis, Williams Williams; and Louis properties. Louis Amaya discussed the in the Atlanta MSA and Florida. The panel Amaya, National Asset Direct were the advantage and process of disposing of was made up of REO agents: Joe Doher panelists for the dinner meeting on assets via bulk sale. of the Doher, Perry St. Gordon Team, “Alternative Marketing Strategies” which who presided as moderator, Jose Fente was moderated by Jay Baker of Coldwell With the increase in REO properties reported on the Miami area; Bob Roche Banker Corporate REO Division. The anticipated in 2007, alternative methods for who provided a presentation on the Tampa meeting started with all panelists reviewing marketing and disposing of assets will work market, and myself who expounded on alternative methods for disposing of REO in conjunction with the more traditional the Georgia marketplace. Each panelist properties. Mike discussed his on-line methods of sales and marketing. provided a detailed analysis of the market auction process, while Elsa described the in their respective market areas. The on-site and ballroom types of auctions. discussion included the trend in the Although the auctioning methods differed, Valencia Walker is a real estate agent with marketing areas, i.e., the increase in REO the resounding message was the ability Exquisite Realty, LLC located in Decatur, properties, the decrease in the buyer pool, and the need to dispose of the increasing GA the impact of adjustable rate mortgages, number of assets. The common thread Mike Keracher Michael Coen REO Division 225 Rainbow Drive, Suite 248 7100 West Commercial Boulevard Rainbow City, AL 5906 Fort Lauderdale, FL 19 (256) 549-14 (800) 711-1258 (256) 549-1885 - Fax (754) 747-8256 – Fax REOMAC® updatetm July / August 2007 21
  17. 17. LEAPFROG – BACK BY POPULAR DEMAND If you missed it last time, you have a golden opportunity to Leap Frog off the agent/broker wait list. The program was a huge success last time and your REOMAC® Board of Directors has brought the program back for a limited time. HOW DO YOU QUALIFY? To be added to the REOMAC® Associate waitlist, you must submit the REOMAC® membership application, a copy of your license, a copy of your business card, and a reference letter from a current REOMAC® lender member; OR two letters from financial institutions in the business of REO disposition. HOW DO YOU LEAP FROG FROM THE WAIT LIST INTO REOMAC® MEMBERSHIP? Refer two new lender members to REOMAC®. When we receive the lender member’s application stating you as the referring broker, you will be ratified at the following Board meeting as a new REOMAC® member. To speed up the process, mail your application with your two new lender members, so you can all be ratified at the same Board meeting. The two lender members will be connected to your membership for two years. As the Associate member, you will be responsible to make sure your lender members renew their membership one time. If they do not renew, you will be responsible for finding another lender to take the non-renewing lender’s place. Please e-mail any questions you may have concerning this limited time promotion to the e- mail address below: ❏ Melissa Piano at melissa@camgmt.com ❏ or contact the REOMAC office, (916) 239-4090 ® Don’t miss this great opportunity to become a REOMAC® member! 22 July / August 2007 REOMAC® updatetm
  18. 18. REOMAC® updatetm July / August 2007 2
  19. 19. WELCOME NEW MEMBERS REgulAR Jennifer Bell T . Franklin Brent MacIntosh Linda Schwinn Wachovia - West Paces Wells Fargo Home Mortgage Countrywide Home Loans AMC Mortgage Services Sara Blicharz Paul Fredinburg Vernon McDaniell Ronald Smith Bank of Stockton Washington Mutual Bank Aegis Mortgage Corporation Fremont Investment Loan Aaron Boneau Evelyn Garth Michael Moore Cary Sternberg Nationstar Mortgage Westerra Credit Union Washington Mutual IndyMac Bank, F.S.B. Stephanie Boykins Becki Gooch Joseph Moschetto Jacqueline Szykowny Wachovia Mortgage Sun Trust Mortgage, Inc. Sun Trust Mortgage, Inc. AMC Mortgage Services Karen Carrillo Mike Grace Richard Ohl Laffaira Taylor First Option Asset Management Services Wells Fargo Home Mortgage California Bank Trust ABN AMRO Mortgage Group Shelly Chapuis Kelly Hinerman Patrick O’Rourke Jacqueline Tuchtenhagen AMC Mortgage Services, Inc. Fannie Mae Bank of Stockton Bank of Stockton Anne Connors Laura Hylton Lee Pederson Penda Tyson Compass Bank AIG United Guaranty Countrywide Home Loans Wachovia Mortgage Will Cousey Trowell Jernigan Ron Penir Jamie Van Parys Novastar Mortgage Wells Fargo Home Mortgage Countrywide Home Loans Countrywide Home Loans Meredith Dinkel Tim Kearney Alyson Popa Colette Vaughn First Option Asset Management Services Countrywide First Option Asset Management Services Washington Mutual Paul Douglas Curt Knowles Pier Price Greg Wayer Select Portfolio Servicing Bank of America Ocwen Federal Bank F.S.B. Countrywide Home Loans Michael Eckhart Nancy Lehmbeck Ann Reff Christopher Woodford Countrywide Home Loans ABN AMRO Mortgage Group HSBC Mortgage Corporation Select Portfolio Servicing Irene Fernandez Ben Lerner Drew Rubic Pacific State Bank Countrywide Home Loans First Option Asset Management Services Jeanette Francis Angela Links Estela Samson Wells Fargo Home Mortgage Homecomings Financial US Bank AFFIlIATE Scott Akerley Ted Disabato Stuart Kessler Tom Pilkington Glen Oak Escrow Bankers and Lenders Title Stuart M. Kessler, PC Spectrum Field Services, Inc. Stephen Andrews Patricia Doll Jeffrey Kosterich Charles Rogers Bleecker, Brodey Andrews First Preston Management Jeffrey A. Kosterich Associates Bleecker, Brodey Andrews Julia Andrews David Duffy Scott Levine Bobby Ryan Bleecker, Brodey Andrews Seattle Specialty Insurance Services SourceMedia Burke Associates Bob Aulgur Steve George Iris McLane Christopher Smalling Whittington Aulgur Field Asset Services, Inc. East Coast Settlement Services Advantage Closing Escrow Company Wendy Catron Ananias Granger O . Dale McPherson David Tiberio Whittington Aulgur A D Property Services, Inc. Field Asset Services, Inc. eAppraiseIT, LLC Bonnie Crabb Annette Hamilton Teresa Miller Joshua Krom Goodman Dean, Inc. Hudson and Marshall of Texas, Inc. Lerner, Sampson Rothfuss Realty Asset Management AssOCIATE – lEAPFROg Gary Lustic Carla Carter Tanya Endicott Alex Saab, Esq . Terra Realty Development CCarter Realty Group, Inc. Dallas Home Team Quantum Realtors Tony Bartos Steve De Vre’ Diane Mahan Debbie Scheitlin Coldwell Banker Previews International Laguna Country Real Estate, Inc. Brady Mahan Real Estate Starck Realtors Dan Brady James Dienes Marili Nielson Zoritha Thompson Brady Mahan Real Estate Today Realty Investments RE/MAX Equity Group, Inc. Goree Thompson Real Estate Barry Britt Gayle Edwards Nelson Reed Ed Watts REO Proformance Systems/Coldwell Banker Watson Realty Corp Colorado 4 Homes Property 1st RMR 24 July / August 2007 REOMAC® updatetm
  20. 20. ‘the future is Now’ Was Celebrated through Education, Networking and teambuilding with REOMAC®’s Most successful spring Conference! By Diana Kendall Conference task force Chair t he Welcome Reception opened the danced for hours to the fabulous band. All We would all like to thank Kathy Jeffers- Conference in the Exhibit Hall with participants hailed Kathy Jeffers-Volk and Volk for her work organizing volunteers 34 Exhibitors. This year’s Silent Anngel Benoun for the fabulous auction and the Silent Auction. We also thank Auction opened at the Welcome Reception. items. We are so excited to have already all our volunteers for their help in making Exhibitors, Sponsors and Silent Auction raised a record-breaking amount toward this the best conference ever. I was so donors all received excellent recognition REOMAC®’s 2007 Scholarship Program. honored to work with these people as the for their support. Thank you to Shelley Thank you also to Dee Chillson for her Task Force Chairperson for this years’ Kaye for coordinating the Exhibit Booths help on the Silent Auction. Spring Conference. and Sponsorships. Monday’s programs included a Lenders/ We all thank Joe Doher and the Education Servicers Only Session, Attorney and Title Please contact me if you would like to be Committee for planning an outstanding Agent Only Session, Broker Only Session involved in planning REOMAC®’s Fall program! We gained knowledge on and Outsourcer Only Session. Today’s Conference in Hollywood, Florida: the state of the economy, alternative Technology, Legal Updates, To Repair or Diana Kendall disposition, technology, mergers and Not to Repair, Vendor Management and 714-271-7135 Cell or acquisitions and current trends in the Valuations. Once again, the highlight of diana@dianakendall.com. industry. the program for Brokers was clearly the Lender REOMAC® President, Mary Best-Brill, Rou ndt able S e s sion s held a special reception in her elegant organized by Connie Presidential Suite for all sponsors and White and Dee Chillson. exhibitors. Without the support each Philip Boroda of Coldwell of the sponsors and exhibitors provide Banker Real Estate in we would not be able to put on such a Los Angeles once again wonderful conference. donated the $5,000 Grand Prize which was awarded Monday Night was our Gala Dinner Dance at the Lender Appreciation with the culmination of the Silent Auction Reception to close the and the competitive Live Auction hosted by Conference. Williams Williams. Members and guests REOMAC® updatetm July / August 2007 25
  21. 21. Economic forecast By Ronald s. Speaker: Dr . Lawrence Yun, Managing Director Deutsch, Senior Economist – National Association of Realtors Esq. O n a date in which over 1,200 the great depression. He predicted the strong with Phoenix adding 90,000 new individuals from across the nation worst is over and sales are now stabilizing jobs alone in the past twelve months. He were in attendance, Lawrence Yun, and inventories of unsold homes are believes the current economic situation PhD addressed the audience, providing declining. Some of this stabilization he replicates the 1990s before the large insightful industr y information. A noted is caused by builders reducing increase in pricing occurred. respected industry leader, Dr. Yun has their production. On the other hand he been quoted in the Wall Street Journal, stressed that current economic factors He also suggested that reports of declining the New York Times and the Washington are quite strong. numbers of realtors should also be Post and regularly appears on CNBC and discounted. Many realtors are not active Bloomberg Television. That said, he noted sub prime loan with 15% of California realtors reporting delinquencies have been increasing since zero transactions during the past year. Dr. Yun, stated that real estate is subject 2001 but that the real estate market He also noted the numbers of contract to normal cycles. That the industry was value boom in 2003 caused it to decline purchasers failing to complete closing is in a boom and now, to no one’s surprise, for a period. Prime loan delinquencies stabilizing too and most weaknesses can is currently in a slump. However, his have remained stable but sub-prime be found only in specific localized markets. analysis of the slump and its causes, elicited delinquencies are still increasing, which Although, he stated that a few additional audience surprise. will cause foreclosures to increase. Dr. Yun months of new data needs to be analyzed noted that $500 Billion in adjustable rate to gain certainty. The premise that Dr. Yun advanced was mortgage re-sets will occur in 2007 and market conditions are generally good 2008. As a result, he expects delinquencies Dr. Yun also noted that local condominium but that the media’s negative stories may to increase for six months before again markets in Miami, Las Vegas and areas of partially be the cause of the slump. He declining. However, he noted foreclosures California remain weak. In those markets, noted that negative news makes headlines. are a lagging indicator and the media will further price declines will bring in buyers On October 25, 2006, he relayed that all report increasing foreclosures for at least and create stabilization. Currently, he major networks picked up the report that twelve more months. Foreclosures will stated, that buyers as a result of media home prices had declined for the three also add 5% to unsold inventory of existing stories, are taking a wait approach. This past months. Housing has a major impact homes and serve to continue negative news. is causing sellers to reduce prices, which on the economy with approximately 70% He stated that pain will be limited to those increases affordability. At the same time, of Americans owning homes. As such, who purchased at the top of the market, he notes, income is rising in this country housing can drag the economy and cause or in the last eighteen months. which also helps to increase affordability. GNP to decline. He noted that for the past These factors all portend to a robust 18 months that both sales and construction Analyzing various positive economic housing market returning. Dr. Yun expects employment have been falling. He also factors, Dr. Yun relayed that current after these markets experience price noted that there has been a 1% price interest rates are historically low. Declines declines of 5-7%, buyers will also return decline nationwide, which is the first that have occurred in pricing have caused time real estate prices have fallen since improved affordability. Job markets are continued on page 27 26 July / August 2007 REOMAC® updatetm
  22. 22. Economic Forecast – continued from page 26 in numbers. Thereafter, once the media to 2005-2006, he noted there has only have withdrawn from the market. With reports the advent of the buyers return, been a 9% decline which has fueled the respect to the West, he believes properties housing psychology will change, causing negative news. became unaffordable, which drove price even more buyers to return. declines which are continuing. He noted Dr. Yun also examined the existing home that in San Diego 45% of a buyers income Dr. Yun noted that in past real estate supply. He noted that in the late 1970s is required to pay a mortgage. This is cycles, weakness arose after job declines. there was a twelve month supply of existing pricing buyers out of the market. Detroit He contrasted that factor to the current homes for sale. In the late 1980s there was is experiencing population declines and unemployment rates being at historic a nine month supply. In contract there large unemployment rates. A turnaround lows today. The lack of buyers is merely is only a seven month supply of existing in that market may take time. a symptom of media induced psychology. homes today. Yet that statistic is also Citing as evidence of this psychological driving many negative news stories. Over the long term, homebuyers who factor, he noted the rise of interest rates lose confidence and decide to rent, will caused buyers to withdraw in high priced Finally he noted that all real estate is local. cause rents to increase. As rents increase, areas. Since interest rates have declined In order to reach particular conclusions the property values will also eventually again to 5.8%, a rate that is at an almost local market must be studied. He reviewed increase. The children of baby boomers, 45 year low, buyers have not returned. Nevada which experienced a 40% decline in the second largest population group will Fueling this state of fear are pundits such existing home sales. Dr. Yun now believes soon be entering the market which will as Robert Schuler who has predicted a that the situation is currently stabilizing. fuel further demand. High immigration 40% decline in pricing during the next Next he reviewed Florida, which also rates also spur demand. If interest rates decade. He also sited that during the experienced a similar 30% decline. With decline in 2008, demand should return. 1970s and 1980s a 48% decline in existing respect to Florida, he believes increased In short, Dr. Yun is quite optimistic and home sales occurred during a weak period. property values as well as home insurance expects the return of a robust real estate Subsequently in the 1980s and early 1990s, and tax costs are helping to cause declines. market in the near future. existing home sales declined 18% during He also believes that 50% of home sales in weak demand. Contrasting those rates Florida were to international buyers, who REOMAC® updatetm July / August 2007 27
  23. 23. Alternatives Rock! Panelists: Cheryl Crawford – Freddie Mac, Annette Hamilton – Hudson Marshall Auctioneers, Mike Keracher – RealtyBid .com, Elsa Lewis – Williams Williams By Gary Moderator: Kathy Jeffers-Volk – Coldwell Banker Corporate REO Division Weglarz t hese days “alternative” most often blighted areas. They also hold home listings on line. This on line service has refers to rock music enjoyed by a ownership seminars and Home Fairs to been extremely effective in marketing somewhat stranger breed. REO itself educate buyers. These procedures save homes of all types. can be considered a strange breed which is neighborhoods and additionally they may constantly changing. The sudden burst of place dislocated families in some of the Annette Hamilton from Hudson and inventory has forced lenders and servicers refurbished housing. This great internal Marshall had several interesting auction to look for alternative methods to dispose policy works well, but what happens to ideas. Music or live entertainment creates of growing inventories. Inventory holding the inventory that doesn’t fit the program a relaxing competitive atmosphere which and market times are increasing so many or are in remote areas? produces the highest and best price for the lenders and servicers are reaching out for assets. They will also do on site auctions efficient methods of marketing properties, Elsa Lewis had the solution! Williams and on-line bidding. A huge 65% of the reducing hold time and generating higher Williams conducts on-site auctions which sales are generated from buyer agents and returns. are successfully completed in front of the the listing brokers stay actively involved home. They also have a successful on-line until closing. The REOMAC® Alternative Disposition auction system for properties valued Panel explored and proficiently discussed under $30,000. Interestingly, they have What are the criteria for a property that is marketing alternatives – auctions discovered a substantial 50% share of the identified as an auction property? Are they in particular. A panel of industry buyers were from out of state. To keep only the “beaters”? Cheryl says you must professionals – Cheryl Crawford (Freddie deals in tact, Williams Williams has look at the neighborhood and try not to Mac), Elsa Lewis (Williams Williams stringent guidelines for the lower priced damage the current values. Freddie knows Auctioneers), Annette Hamilton (Hudson properties. Their seller driven philosophy they will have additional properties in the and Marshall Auctioneers) and Mike has been successful nationwide in assistingsame areas and they need to preserve the Keracher (RealtyBid.com) was moderated lenders with the disposition of their REO integrity of the community. However, by Kathy Jeffers-Volk. properties. aged properties with long market time are prime candidates. Often, they are not Cheryl Crawford provided data indicating Mike Keracher stated RealtyBid.com has a “beaters” but they are worn in the MLS…. the huge influx of REO inventory, especially total “on-line” approach. For seven years, the properties are not getting any action. in certain states. The Freddie philosophy Mike has involved the listing broker with The auction procedure is an alternative is to keep neighborhoods in tact by fourteen day auctions that have been an marketing source that enables the seller working business partnerships with the effective means to liquidate homes. The communities; they help rebuild blocks, interaction with the brokers has also provide affordable housing and stabilize allowed RealtyBid.com to market retail continued on page 2 28 July / August 2007 REOMAC® updatetm
  24. 24. Alternatives Rock! – continued from page 2 to preserve the values by securing the rate is high as the buyers are effectively the prime focus of these professional panel highest prices. screened and must bring a substantial members. Their interest in community deposit to bid. preservation, creative ideas and the use According to the panel, lowering prices of high tech marketing has made them has not been an effective tool to preserving It is certain that the increasing national leaders in the alternative marketing values. Price reductions tend to leave inventory is driving prices down and industry. Alternatives rock when it comes money on the table, especially in today’s forcing alternative sales methods to to blending the communities, the REO buyers market. The auction alternative has increase returns and lower market times. industry and the professionals that make produced higher returns and the deal close Current market issues and solutions are it happen! town Hall – Changing Markets, Yesterday, today and tomorrow Panel: Chris McCormick – First American REO Servicing, Danny Harvey – Coldwell Banker, Frank Marshall – Premiere Asset Services By Beatrice Moderator: Bob Norrell – Litton Loan Servicing Davis-Williams W ith an interesting and informative Frank Marshall of Premiere Asset Services, the future by giving us some thoughts to discussion among some of the presented a number of challenges we ponder on the challenges we are facing top leaders in the industry, this are facing in Today’s market along with in “Tomorrow’s” market. What if “the panel brought to the forefront the issues the causes and effects. The recent wave Fed raises rates, unemployment increase, that have Yesterday heavily affected the of subprime defaults has caught the the sub-prime market disappears and oil industry that we Today represent, live and attention of Congress, More than two prices decline? What needs to happen? work in, while looking at what Tomorrow million people are facing foreclosure Eliminate bad press, go back to basic holds. this year, and subprime lenders are filing lending, reduce current interest rates, build bankruptcy. A few of the causes: relaxed buyer confidence, accountability, tighter According to Danny Harvey of Coldwell underwriting guidelines; little to no State and Federal requirements, prosecute Banker Yesterday did us in. Shaky loans, oversight of the vendor; mortgage fraud; fraud perpetrators, and stabilize housing a change in tax laws, Defense cutbacks false appreciation; and interest rates. The pricing. The Servicer’s Core Objectives and the Stock Market Crash were just a effects were increased defaults, including include Quality Customer Care, Increased few of the reasons that closed the SL’s foreclosure REO volume, and increased Loss Mitigation, a change in Foreclosure and affected the market. Interest rates loss severity and scrutiny from Capital Attorney’s focus to act as a Default were at a high of 11.5% in 1986 compared Markets, Investors and Servicers. Resolution Specialist (with an incentive to 6.25% in 2006. The median price for a program), and a best practice to employ home was $92,000 compared to $221,000 We don’t have a crystal ball but Chris the BEST Brokers. in 2006 and the Oil price per barrel was McCormick of First American REO $9.00 compared to $62.00 in 2006. came pretty close and brought us into REOMAC® updatetm July / August 2007 29
  25. 25. “SOUTH JERSEY REO” Real Estate Brokerage Management Company Exclusive REO/Foreclosure Service Sales 609-383-9220 GUARANTEED CLIENT SATISFACTION - ASSET MANAGERS WORK MADE EASY OVER 20 YEARS OF “REO” PROFESSIONALISM SUCCESS RESIDENTIAL, COMMERCIAL AND LAND SALES LOSS MITIGATION, MANAGEMENT AND PROPERTY PRESERVATION PROUD MEMBER OF REOMAC® Servicing South Jersey Counties Atlantic, Cape May, Cumberland Salem, Gloucester, Camden Burlington, Ocean ADAM PALMISCIANO Broker/Owner Please visit our website: adam@southjerseyreo.com www.southjerseyreo.com 0 July / August 2007 REOMAC® updatetm

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