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November 13, 2007

HR 3915: Why Federally-Chartered Banks Get The Pass

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Big banks have a HUGE advantage over mortgage brokerage firms; they have the money. Federally-chartered banks also are regulated differently than mortgage brokers; they are overseen by the Office of Thrift Supervision, a successor regulator to the Federal Home Loan Bank Board. Federally-chartered banks also subscribe to FDIC insurance which imposes another layer of oversight to them. In the interest of simplification, the OTS regulates banking activity while the FDIC monitors the bank’s investments.

Big banks have a lot to lose if they have a rogue originator among their ranks. That’s not to say it doesn’t happen; rogue originators infest every business model, including the big banks. What is apparent, however, is that the big banks have greater systems in place to supervise the actions of their employees than do mortgage brokerage and correspondent lending firms. They also have more stake in the origination process- the authority to borrow and lend money with the legislated blanket of a government guarantee (FDIC insurance).

Banks have exploited this unfair advantage, too. They systematically engaged in a scheme to inflate profits by using mortgage brokers and correspondent lenders to do the dirty work for them. Internal policies at the big banks limit how much “overage” (the bank term for yield spread premium) a bank-employed originator can charge under the guise of “responsible lending”. Their wholesale business channels were able to “bribe” the brokers to originate higher rate product with the temptation of obscene yield spread premiums. They removed themselves from the “dirty retail” work to claim plausible deniability when the shit hit the fan. Today, we have a feces-covered fan. The mortgage brokers have dirty, smelly hands and the big bankers are emerging from the washroom looking like a smartly starched altar boy.

Big banks are always going to have an unfair advantage with regulators because they know the golden rule of finance. A watered-down version of HR 3915 will eventually become law. The political pressures of an election year make it virtually impossible for ambitious politicians to ignore a chance to enable Read more

November 12, 2007

Day of the delay of The Odysseus Medal . . .

by

Suburban Phoenix Real Estate Broker

Author website

I’m getting ready for the BloggerCon event at the NAR Convention and I’ve run myself out of time. I’ll post the judging for The Odysseus Medal tomorrow morning. I’ll leave the voting open for The People’s Choice Award until I’m ready to post.

In the mean time, although I’ve shown this before, Cathy thought I should post it again. This is going on all around you, and, if, like certain hide-bound centenarians, you want to pretend you can avoid this fate — think again.


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November 12, 2007

Working from within the NAR

by

Realtor, Real Estate Ethicist

Author website

There are two premises to this post:

1. We accept that the National Association of Realtors is going to exist for the foreseeable future.
2. They have an existing infrastructure, including its 1.4 million members, that could potentially be leveraged to do great things.

First, we need much more than a “massive media campaign,” as stated by Dale Stinton, CEO of NAR. Not once does he mention improving the product (the Realtors) – all the technology in the world will not improve the competence of the professional.

Greg and I disagree on this – rather than supplant the various associations, I argue that working from within, in tandem with efforts from outside (read: the RE.net), may prove to be an even more effective strategy. Many in the RE.net recognize the opportunity to effect change; there may be great value in working, not necessarily with, but on parallel paths with, some components of the NAR. I mentioned in the inaugural Bloodhound.TV effort that the NAR clearly does recognize the impact and influence that the RE.net has on the industry – by choosing to assist in the BloggerCon, the NAR is reaching out to the bloggers. From my experience, the leadership of the NAR and the local and state associations, wants to be led, but often don’t know where to begin.

To lead, sometimes you just need to ask – or be asked.

With some prodding by some people whom I respect greatly, I am going to put my money/time where my mouth is and try to gain a seat on the Professional Standards committee (requires login) within the NAR, which may be tasked with evaluating blogging. This is the committee’s charge:

To advise and make recommendations to the Board of Directors on matters relating to the Code of Ethics; upon request, the Committee advises member boards on interpretations on the Code; upon receiving notice of lack of enforcement thereof by member boards, the Committee inquires into the situation, seeks remedial action and, if necessary, brings to the attention of the Board of Directors or the proper official of the Association in case of failure or refusal to enforce the Read more

November 12, 2007

Stifle those yawns: CyberHomes is coming out of beta

by

Suburban Phoenix Real Estate Broker

Author website

Q: Is there room in the Realty.bot business for a third major player?

A: What business?

Joel Burslem came to Phoenix last week, and I had a chance to spend a few hours with him before he flew back to Portland. Because I live and breathe real estate and because I’m casually cruel in a thoughtless kind of way, I punished him with real estate tour — major commercial developments with side trips into residential neighborhoods. Joel’s observation: “There sure are a lot of ranch houses.”

It’s one of my life’s goals to be a kinder, more thoughtful person, but dramatic differences may require a reincarnation or two. Even so, I didn’t just make Joel look at houses. We had plenty of opportunities to talk as we meandered. One of the topics I wanted to discuss was the profit potential for Realty.bots like Zillow.com and Trulia.com. Zillow has firmly embraced the Google.com business model of delivering advertising based on targeted search. Trulia had just moved to a business model pioneered by Realtor.com — milk the listers.

My question is this: Taking account that I myself am impervious to advertising, how is any of this going to play out in the long run? People will pay for clicks for a while, but sooner or later they’re going to try to account for those clicks in converted sales. If the impact of advertising is not demonstrably cost-efficient, then why do it? I’m not saying this will happen, but as media consumers become more and more like me, it seems to me to be more and more likely.

Into that steaming cow-pie steps CyberHomes, about to emerge from a year-long beta period:

That’s not auspicious, but who know what tomorrow will bring.

But, more importantly: Who cares?

For now, CyberHomes is Yet Another Map-Based Automated Valuation Model. Punch in your address and you get a wild-eyed pricing guess based on tax records and statistics and having no material connection to the actual house, which, as I have demonstrated in the past, may not actually even be there. So far: Big yawn.

CyberHomes hopes to dominate the hugely unprofitable free-AVM market by having access Read more

November 12, 2007

Dear Billion Dollar Agent,

by

Mega-Producing Realtor

Author website

Yes, that is exactly the salutation Steve Kantor used to write to me. Steve is offering a free copy of the book he is about to release to anyone who will complete BDALogoThumba short survey. Here is the link to that survey. Below is the full text of that email.

__

From: Steve Kantor [mailto:steve.kantor@gmail.com]

Sent: Monday, November 12, 2007 12:09 AM
To: Steve Kantor
Subject: Agent needs help – all of us in 2008 – share ideas for 2008 – Billion Dollar Agent

Dear Billion Dollar Agent,Time for another book – take 5 minutes to quickly reply on MONDAY – book published within a week. Highly valuable to you, all Billion Dollar Agents and hundreds of other agents already involved with this instant book project. I will be at NAR Las Vegas on Tue-Fri – if you are attending, please tell me so we can meet.

A group of 20 top agents have started an instant effort to gather hundreds of ideas from agents around the country of how to succeed in the coming 2008 market. If you reply to survey below and share ideas you will receive a free copy of the ebook PDF by Thanksgiving. This effort is being organized by Best Agent Business (www.bestagentbusiness), the publishers of Billion Dollar Agent:

Lessons Learned to help top agents.
Please take 5 minutes, complete survey below, and forward to fellow agents:
Survey link: http://www.zoomerang.com/survey.zgi?p=WEB2275H36JR5S

Thank you!
Keep in touch,
Steve
—

Steve Kantor
President
Best Agent Business
www.bestagentbusiness.comCell: 202-297-2393

Fax: 240-751-4247

November 11, 2007

BloodhoundBlog.TV — Not quite ready for prime time…

by

Suburban Phoenix Real Estate Broker

Author website

So Jim Duncan, Dan Green and I took a very informative first swing at Studio BloodhoundBlog tonight, a multi-party video discussion show about real estate. Dan talked about lending and high finance. Jim talked about green real estate and real estate opportunities in a college town. We all talked about the upcoming NAR convention.

There was only one problem. I reengineered our on-line audio solution without rethinking the means by which I was recording the audio.

The result? A fairly nice-looking 37 minute film with audio on my end only — and even that’s out of phase.

This is not tragic. We’re inventing something new, and it’s understood there will be kinks to be worked out. I understood my mistake while the film was still being written down to disk from RAM. I know what I did wrong and I know how to fix it.

But this was a very god first attempt, and I’m sorry we lost it. Moreover, I wanted for this episode to spark interest among folks going to the NAR convention. I want to talk to people all week by webcam when you get back to your rooms.

The short video attached is a salvaged portion of tonight’s failed effort making that appeal. If you’re going to the NAR convention, take your webcam — and send me an email. I’ll email instructions on how we can do video interviews — essentially video podcasts.

We’ll try Studio BHB again next week, but we can go ahead and build a whole lot of BHB.TV content this week.

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November 11, 2007

The Odysseus Medal competition — Voting for the People’s Choice Award is open

by

Suburban Phoenix Real Estate Broker

Author website

Fifteen nominees this week, although ten are from BloodhoundBlog contributors, writing either at BHB or at their home weblogs. I don’t know what to do about this. I don’t think I’m being biased. The one thing I could suggest is that y’all nominate more posts from a broader range of sources.

Vote for the People’s Choice Award here. You can use the voting interface to see each nominated post, so comparison is easy.

Voting runs through to 12 Noon MST Monday. I’ll announce the winners of this week’s awards soon thereafter.

Here is this week’s short-list of Odysseus Medal nominees:

< ?PHP $AltEntries = array ( "Dan Green -- Flux capacitor Happy Anniversary, Flux Capacitor”,
“Kris Berg — Boomerang Warning: Boomerang may cause injury to others“,
“Geno Petro — Big, hungry beast Big, Hungry Beast“,
“Kris Berg — Trulia Make checks payable to Trulia.com“,
“Jim Watkins — True equity True Equity – In the Real Estate Sense“,
“Joel Burslem — Facebook Advertising Your Real Estate Business on Facebook“,
“Jillayne Schlicke — HR 3915 Mortgage Brokers and Loan Originators Should Support HR3915“,
“Steve Leung — Reverse offer Considering the Reverse Offer“,
“Kevin Boer — Curbed Curbed.com = HomeGain Redux; Is History Repeating Itself? Will Curbed.com Start Selling Leads?“,
“Sean Broderick — Rubik’s Cube Reasons Come First“,
“Brian Brady — HR 3915 HR 3915: Open Letter to Senator Dodd from a Veteran Mortgage Originator“,
“Kris Berg — SEO Chasing My Long Tail – My Truth About SEO“,
“Geno Petro — First in, last out First In, Last Out“,
“Jim Duncan — Green building Green building will soon be invisible“,
“Kris Berg — Snowboarding I may see you on the way down”
);
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    Deadline for next week’s competition is Sunday at 12 Noon MST. You can nominate your own weblog entry or any post you admire here.

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    • November 11, 2007

    A consumer’s guide to the divorced real estate commission: Undermining the arguments in support of the status quo

    by

    Suburban Phoenix Real Estate Broker

    Author website

    Part V: Why arguments for the current method of compensating real estate agents and against divorcing the real estate commissions must fail

    As I write this, the National Association of Realtors is preparing for its annual convention, to be held this year in America’s playground, Las Vegas, Nevada. This year marks the 100th anniversary of the founding of the NAR, so that milestone will be part of this year’s festivities. Can you guess what won’t be on the program?

    You guessed it. Not one session or event will be devoted to an earnest discussion of divorcing the real estate commissions, reconfiguring the way we account for funds at Close of Escrow so that sellers pay only their own agents and buyers pay for their own representation. I think it would be accurate to say that the NAR likes things the way they are, but it would probably be still more accurate to say that divorcing the commissions is not even on the NAR’s radar.

    Why not? That’s for you to decide, but the most common “yeah, but” objection you will hear to divorcing the commissions, among real estate professionals, is, “Yeah, but buyers don’t even care who pays the commission.”

    I wrote this series of essays so you would know why it is important for the real estate commissions to be divorced. But assuming I have failed in this objective, let me endeavor now to help you understand why this matters:

    In our current buyer’s market, some sellers are offering 4%, 5%, even 6% buyer’s agent’s commissions. Some new home builders are offering 8%, 12%, 16%. The highest buyer’s agent’s commission I have heard so far is 20%.

    You as the buyer bring or borrow every dollar that gets paid to anyone in a normal real estate transaction, so it is possible that you could end up writing a mortgage check every month with twenty cents of every dollar going to cover what you unwittingly paid for “your” agent. That’s twenty cents of every dollar of principal payment, but also twenty cents of every dollar of interest — and taxes, and insurance and private mortgage insurance.

    If buyer Read more

    November 10, 2007

    Agents Using the term “MLS” in Their URL

    by

    Mega-Producing Realtor

    Author website

    The following email was sent to me by Steve Westmark. I posted about Steve and the Minneapolis MLS back in April. Seems the Chicago MLS got the same Stupid Factoryidea but has now changed their mind. Or should that be “minds”? Or “numb skulls”?

    I really do not understand how any association that is supposed to have been formed for the benefit of Realtors can possibly come up with some of the retarded gibberish that some of them do come up with. I fully understand that it isn’t polite to poke fun at retarded people but in cases like this I just can’t help it. What tortured logic makes it alright for Homegain – and others like them – to use the term MLS in their URLs but not alright for an agent to do it? Is it that the dimwits who sat on that board thought it might be a lot easier to push those local agents around than it would be to push the attorneys who work for Homegain around? Homegain would have been willing to litigate until they won, the local agents were not.

    I would also have been willing to litigate and I would not have just fired a few emails back and forth. In addition, I would have waged a local and national PR battle (for starters, naming all the names of the spineless and mindless dolts that passed such a ruling) that would have had them playing defense – not me.

    (why yes, I do write this sort of post to make good friends with the various boards of directors around the country:-)

    _________

    —– Original Message —–

    From: Bryan VantHof

    To: steve@stevewestmark.com

    Sent: Monday, October 15, 2007 3:45 PM
    Subject: Fwd: Update on Chicago area use of MLS in URL’s

    Steve,
    Thought you might find this interesting. Thanks. Bryan Vant Hof – fishMLS Realty

    ———- Forwarded message ———-
    From: Gene Carey < Gene@view-mls-homes.com>
    Date: Oct 15, 2007 4:11 PM
    Subject: Update on Chicago area use of MLS in URL’s
    To: bvanthof@fishmls.com

    Bryan,

    Just wanted to give you an update on Chicago areas plans to start fining agents who use MLS in their domain names. After sending them some very extensive emails threatening lawsuits Read more

    November 10, 2007

    Reasons Come First

    by

    Commercial Real Estate Broker

    Author website

    Imagine your 6 year old daughter playing with a Rubik’s Cube fresh out of the box on her birthday. She notices the six completed, colored sides in perfect visual harmony, whites across from yellows, reds from oranges, blues from greens. She rotates the cube, studies it, and then, slowly, begins to turn it, first the top counterclockwise, then the left side clockwise, then the right and bottom. She finds it fun to rotate and manipulate with her tiny hands, and it’s cool how she notices the changing patterns of colors on each side. You wonder if she’s recognizing how challenging the puzzle has become, because you notice as she begins to slow down. As she stops and looks at you, you realize that the fun “flashback” gift (given to her by someone in your family) will become your challenge for the next several hours or days, because she wants you to fix it.

    FILO! (my new word around the kids, thanks Geno), now what? It’s my fault for not noticing what she was doing in the beginning. I can’t reverse the steps. And, I wasn’t one of those genius kids 20 years ago that could finish it blindfolded, with one arm behind my back, or in a taxi, as portrayed by Will Smith’s character in In the Pursuit of Happiness. You’re probably thinking, most 6 year olds can rationalize to some extent that you can’t fix it, so they get bored and move on. Then, you bury the cube in the toy box and hope they don’t find it again, at least when you’re not around. But, imagine this scenario and that your 6 year old daughter, as mine is, being afflicted with autism.

    There is no rationalization, no cute distraction that moves her focus away from the problem at hand, right now. It’s now my problem. And, I can either, throw the damn thing away, endure the hours of endless tantrums and hope that she never sees another Rubik’s cube ever again in her life, or I can solve it. I recall the line from the original Die Hard movie, “I eat Read more

    November 10, 2007

    Want Garlic On That Ice Cream? You Don’t Want Cash Flow On Your Capital Growth Either

    by

    Real Estate Investments Broker

    Author website

    Dad, when he was poor, survived on peanut butter and onion sandwiches — no lie, as I couldn’t make that up. 🙂

    Though not nearly as weird, I like spinach salads with olive oil and malt vinegar. garlic ice creamI’ve not run into anyone else who likes it. They usually put balsamic vinegar on instead. Go figure. 🙂

    I love garlic in my stir fry, onions too. The malt vinegar on my spinach salads might be a little quirky, but not up to the level of garlic on ice cream, know what I mean, Verne? Not even if it was free. 🙂

    The same goes with cash flow. It goes well with retirement. In fact, surveys show it’s #1 on retirees’ wish list — more of it, that is. 🙂

    You’re invited to my place, for a short weekend read on the subject of how cash flow can actually significantly reduce your ultimate retirement income.

    The misuse, or rather, poorly timed pursuit of cash flow is maybe the most misunderstood factor in real estate investing.

    While you’re there, try listening to a podcast or two. By far, the two most popular are Purposeful Planning and Grandpa Economics.

    Enjoy your weekend.

    November 10, 2007

    A consumer’s guide to the divorced real estate commission: Cataloging benefits — starting with a complete catalog of available homes

    by

    Suburban Phoenix Real Estate Broker

    Author website

    Part IV: Divorcing the real estate commissions will result in benefits not just for buyers but also for their agents and for the real estate market as a whole

    The National Association of Realtors is embroiled right now in a protracted anti-trust suit brought by the United States Department of Justice and the Federal Trade Commission. The case in a nutshell: The NAR has been attempting to use MLS rules to stifle lower-priced competition.

    Recall that the NAR is a conspiracy against consumers. Its purpose is artificially to limit access to real estate representation, so that consumers will have to pay more than they might otherwise for real estate advice. The cause of action in the DOJ/FTC suit is a move by old-line brokers against young-turk brokers within the NAR. The trade organization stands accused of deliberately frustrating the objectives of its own members.

    What is the essential data field in an MLS system — do you remember? It’s the co-broke. Everything else is just details. Every true MLS system exists so that real estate brokers can communicate — in presumptive secrecy — how much they will pay when a co-operating broker procures a buyer for a particular listing.

    Can you think of one simple thing the NAR could do to make the DOJ/FTC anti-trust suit go away in an instant?

    How about… divorcing the real estate commissions…?

    Do you think that might work?

    Remember that the MLS system is a vestigial engine of sub-agency, designed from the outset to advance the home seller’s interests — at the expense of the home buyer’s interests.

    If we were to divorce the real estate commissions, the co-broke field would go away and with it the entire edifice of the top-secret MLS system.

    Does this mean homes would no longer be listed? Of course not. But home listing would become a free-market business — with no anti-consumer rules on what material facts can and cannot be disclosed to buyers.

    Without doubt there will be a shake-out period, with conflicts among vendors, errors of judgement, etc. — just as in any competitive marketplace. This will occasion much lamentation — before, during and after — starting Read more

    November 10, 2007

    HR 3915: Open Letter to Senator Dodd from a Veteran Mortgage Originator

    by

    Commercial Real Estate Finance Expert
    Structured Debt and Equity
    Licensed Real Estate Broker in AL, CA, and FL

    Author website

    The Hon. Senator Christopher Dodd
    Chairman- US Senate Committee on Banking, Housing, and Urban Affairs
    534 Dirksen Senate Office Building
    Washington, D.C. 20510

    Dear Chairman Dodd:

    Soon, HR 3915 will be endorsed by the House of Representatives and most likely referred to the Senate. The committee you chair, will have an opportunity to read, discuss, debate, and amend this bill before recommending it to the general Senate for vote. I am a 20 year veteran of consumer financial services with the last 14 years in mortgage lending. I have helped over 700 families finance their homes and closed some 1700 loan transactions. I humbly submit my expert opinion to you for consideration.

    The Libertarian in me begs you to do absolutely nothing; it’s the borrowers’ cavalier attitude towards financial planning that caused this mess. While my statement is true, it is but a component of the underlying malaise in the residential real estate industry; we adopted an even more cavalier approach to loan approvals and that irresponsibility is being felt by the investors who trusted us to perform adequate due diligence. Failure is a costly but cogent instructor; to discourage failure on both the borrower and investing lender sides of the equation might be more costly in the long run.

    I oppose individual originator licensing in its proposed form. It doesn’t demonstrate true expertise and might induce a false sense of security to the consumer. This very act may very well damage the consumer by perpetuating the adolescent approach to financial planning the average American exhibits. It transfers the responsibility of prudent money management from the consumer to the license issuing body; sadly, those bodies are not up to the task.

    I am a pragmatist so I know that my remarks about licensing, while philosophically pure, are impractical from a political view. Inasmuch, I recommend that the licensing requirements be strengthened to include any and all participants in the origination process: originators, processors, and underwriters. I further recommend that the license be national in scope so it is more consistent with the standardization mortgage securitizations induced. Read more

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    Inventing Real Estate 2.0

    Welcome to BloodhoundBlog, the national real estate industry marketing and technology weblog written by, for and about real estate professionals. Better yet, welcome to the wired world of real estate. We are busily inventing Real Estate 2.0 – technology, marketing, service and salesmanship. Like all Bloodhounds, we are smart, frisky and fiercely independent. We've built a spot on the earth – beloved over all – where each one of us can be who we are, no matter who that might be. We are committed to an idea of excellence that will flush the bums, the con-men and the crybabies out of the real estate industry. If you yearn to have your failures excused, your moral lapses absolved or your boo-boos kissed, seek elsewhere. But if you are sick to death of mediocrity – welcome home. Read all about us, subscribe to our feed and steel yourself for the hunt. We work hard, we play hard, we learn everything we can – and we bow to no one.

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