FHA Suspends Taylor, Bean & Whitaker

Posted on August 4, 2009 by Rhonda Porter

I feel like I’m one of the few mortgage originators who have never worked with mortgage giant TBW…many mortgage brokers and lenders do. FHA’s Press release states:

“TBW is the third largest direct endorsement lender of FHA-insured loans and the eighth largest issuer of Ginnie Mae mortgage-backed securities.”

They are a significant mortgage company and this will impact those brokers and lenders who rely on TBW for FHA financing. This suspension is temporary “pending the completion of an investigation by HUD’s Office of Inspector General, an ongoing review by the Department’s Office of Housing, and any legal proceedings that may ensue.”

From HUD’s News Release today:

FHA and Ginnie Mae are imposing these actions because TBW failed to submit a required annual financial report and misrepresented that there were no unresolved issues with its independent auditor even though the auditor ceased its financial examination after discovering certain irregular transactions that raised concerns of fraud. FHA’s suspension is also based on TBW’s failure to disclose, and its false certifications concealing, that it was the subject of two examinations into its business practices in the past year.

“Today, we suspend one company but there is a very clear message that should be heard throughout the FHA lending world – operate within our standards or we won’t do business with you,” said HUD Secretary Shaun Donovan.

TBW has the right to appeal, however HUD is not delaying their actions. In addition, HUD debarment of two top executives at TBW.

This must be leaving many borrowers and mortgage brokers scrambling for other sources to send their FHA transactions in process.

RCG: Now with Seattle listing goodness

Posted on August 4, 2009 by Dustin Luther

It may be late in the night as I start to write this post, but I’m so excited because I just flipped the switch on some pretty big changes to Rain City Guide. They include both a complete redesign as well as one of the coolest features I’ve ever added to RCG: A very, slick home search tool!

You know when you meet up with someone and you almost instantly bond with them… Well, a few months ago, I had one of those bonding experiences when I met with a broker out of Portland named Garron Selliken who gave me a demo of the custom home search tool he had built. Our conversations reminded me of the good ‘ol days when real estate search wasn’t nearly as stale and was actually pushing boundaries. Not surprisingly, we immediately started hatching a plan for launching his home search tool on RCG!

Hatching a plan to launch something interesting on RCG happens all the time, so I wasn’t too surprised. However, I became a bit concerned a few days later when I realized that Garron was serious and this idea had legs. And just a few weeks later, the new site has been launched!

It just so happens that Garron and I are meeting up this week in San Francisco (for only the 2nd time in person) and I’m positive I’m going to take some time aside with him to talk about why we’re so excited about the changes to RCG! As a broker and software developer, Garron really does rock. He has an awesome team and we have some interesting ideas for improving the site over the next few weeks and months.

But for now, it’s way too late for me to continue writing, so I’ll end the post by asking you to play with the revised site, kick the tires on the home search tool and let us know what you think. If you see anything that looks broken or just not working like you want it to, don’t hesitate to let us know!

Go Ahead, Make My Day

Posted on August 1, 2009 by Robbie

Dirty-Harry-Make-My-Day

You know, some days I can really relate to Inspector Harry Callahan. Some days, it feels like being an IDX vendor is a dirty job so unappreciated that only Dirty Harry could fully appreciate it.

Recently, I’ve heard that the NWMLS decided to enact a few more rule changes. Needless to say, I’m all broken up about the new NWMLS rules. The good news is that there will no longer be a 3 download agreement limit. This should allow members to more easily work with multiple vendors, and perhaps better allow members to easily find cost-effective solutions to their IT problems. I think it’s a good idea because it could create more demand for the services I can provide.

The bad news is that starting in October, the NWMLS will charge each entity downloading the IDX data (i.e. the consultant or the broker for an in-house data feed) $30 per month, per agreement. For example, if a vendor A has a download agreement with office A, B, and C, then the vendor will be charged $90 per month. Needles to say, this new rule will seriously hinder your vendor’s ability to inexpensively host web sites or otherwise develop applications w/ NWMLS listings on them.

Sometimes, I got to wonder what are the jive turkeys at the NWMLS are thinking? So now I either have to eat an unwanted (and probably unnecessary) cost or I have to pass on the increase in my costs to my customers? Neither scenario really appeals to me (and probably won’t appeal to my customers either). I’d rather increase my costs by buying more servers, going to Inman SF Connect, buying iPhone app development tools & books, or anything else that would ultimately improve end-user satisfaction with the applications I build. But now I have to pay a tax for merely trying to serve my clients? Gee, it isn’t like developing an Evernet XML download is already as much fun us as doing my taxes is.

My clients are hard working real estate professionals; they are not professional software engineers. They know about as much about creating Zillow XML feeds or developing Real Estate based Google Maps mash-up as I know about selling a home with a troublesome neighbor or if a property is next to a graveyard, does it lower the value because it’s creepy, or does it raise the value cause it’s quiet? Unfortunately, the nature of the world today requires real estate professionals partnering with vendors and/or consultants because real estate consumers increasingly demand high tech services from their agents & brokers and you can’t provide that service without high tech experts working on your behalf.

I’m not opposed to higher taxes if I know it’s going for a good cause. But what is this extra $30/month per agreement going to buy me or my clients? Is the NWMLS going to buy faster servers? Hire more IDX support staff? Throw a big party and spend the money on booze and strippers? Is the NWMLS running in the red and needs a bailout? Seriously, I’d like to know what I’m about to pay for.

Also, wouldn’t it make more sense to charge per vendor instead of per agreement? A vendor needs the same amount of NWMLS IT resources regardless if they serve only one member or ten members. Typically, a vendor only downloads the NWMLS data once, and uses the same copy of the NWMLS database for all their clients. It’s not like a vendor who has 10 clients incurs 10 times the CPU & bandwidth costs that a smaller vendor does.

Allowing multiple feed per broker could encourage more competition between vendors, but increasing vendor costs certainly won’t make things cheaper for members in the long run.

I can see a future phone call from the NWMLS enforcement division going something like this…

I know what you’re thinking, punk. You’re thinking “Did I sign six download agreements or only five?” Well to tell you the truth, in all this excitement I kind of lost track myself. But being as this is the NWMLS, the most powerful MLS in the greater Puget Sound area, and could blow your web site clean off, you’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk?

Has anybody else heard any details on these new policy changes? Do you know what the new IDX feed fees are for? Do you think the repeal of the download rule will help you? Do other MLS’s do this kind of thing? Why do I feel like I forgot my fortune cookie and it says I’m {bleep} out of luck?

Big Brokerages – how do they really work, and what’s changing?

Posted on July 30, 2009 by Chuck

We started getting into this a bit on my Disappointment Index post, but I think its worth a post and thread of its own. David Losh’s comment “Every Brokerage wants you to do it yourself so they can get rid of all the dead wood they have hanging around in the office. Real Estate is a numbers game. The more agents, the more money. With an online Brokerage all you need is a technical support staff” kind of triggered my decision. Read his whole comment; there is some interesting insight in there.

Is the business really changing? And do the different generations – Boomers, Gen X, Gen Y have different preferences that would favor one business model over another?

In 2006 we had a lot of discussion about new business models and the rise of the Internet, including an MIT Enterprise Forum program on the topic, and a post here on RCG by Robert Gray Smith. So now it is three years later, Redfin has declared its first profit (congratulations, Glenn), we are no longer in a bull market for real estate, transaction volumes are way down, and everybody is three years older and wiser 🙂 Has anything really changed in the real estate business? The core of the business is still appears to be the big traditional brokerages – RE/MAX, Coldwell Banker, Windermere and John L. Scott – some are national, some are regional; some offices are franchises, some are company owned. Some people will want to add others to the list, from Skyline to Realty Executives to …

My view of the big brokerages (I happen to be affiliated with RE/MAX, and formerly with John L. Scott) is they fundamentally are not in the real estate business; they are in the real estate services business. Their client is not the buyer or seller, it is their affiliated real estate agents. As a residential real estate agent in the state of Washington, I am licensed to facilitate the buying and selling of residential and condominium homes, under the direction of a licensed broker. In the traditional model, I am not an employee of that broker, I am a sub-licensee and an independent business person. My activities are not directed by the broker, I do not get benefits, and my earnings show up on a 1099.

For the privilege of being affiliated with that broker (i.e. sub-licensed, or ‘hanging my license’ there) I pay a fee – actually lots of fees. There are transaction fees and E&O fees and B&O fees and legal reserve fees and desk fees and non-desk fees and membership fees and advertising fees and website fees and commission splits. In general the big brokerages expect to collect about $20,000 to $25,000 per year from each agent; that is how they make their money. So I am their real client, and they are in the business of selling me real estate services. They certainly want me to be successful, and able to pay their fees. They will claim that being affiliated with their brand will help me attract more business, and they spend big money on institutional advertising, particularly their website. It is not clear how much of the advertising effort is aimed at attracting buyers and sellers to their agents, vs how much is aimed at attracting agents to their brand and fee services – the more agents, the more fee revenue for the broker, almost regardless of sales volume. They often say I will get a share of the institutional leads they get from their web site – but in practice for me, so far, no value. In fact, I have to do my own business development and establish my own reputation with things like newletters, seminars and blogs (and taking good care of my clients), and I have had to build my own web site to get what I consider to be a credible web presence. I am for all intents and purposes an independent business person who contracts for certain support services. The traditional model.

An alternate model is for the broker to hire the agents as employees. Then they are W-2 employees, probably get benefits, the company probably generates most of the leads – for example with a good website and some buyer/seller incentive programs, the agents probably do more transactions, and probably get a lower percentage of each transaction commission in exchange for the lead flow. But those agents will show higher in the transaction rankings, because they are basically on an assembly line instead of spending a lot of time doing their own marketing and business development. I think this is basically the Redfin model, but happy to have someone who knows it better chime in.

A third model that was tried by Redfin initially in 2006 was a model of generating the leads through the website, referring them out to a set of selected agents (sub-licensed to other brokers), and collecting a substantial referral fee if that agent was able to convert the lead into a transaction. During this time I was Redfin’s lead referral agent for the Eastside. That model did not generate enough revenue to support the Redfin business model, and it was abandoned in favor of the agent emplyee model above in mid-2007. During that period I served some wonderful clients who came to me from Redfin, and I am still in touch with them, but I agree that the “wanna see a house? – we’ll get an agent to show it to you” model didn’t have a very high success rate for either the referral agents or Redfin.

So how much do we really think the business is changing? Do we think the big brokerages would really like to migrate to the Redfin model? There is an implication that the Redfin model is a short-term relationship transaction model and that the traditional brokerage model is a personal referral and longer-term relationship model. Which model to consumers prefer? And does it vary by generations?

This seems worth exploring.

How About a ‘Disappointment Index’ for Real Estate

Posted on July 27, 2009 by Chuck

Tim just posted an interesting set of stats on Redfin, titled Biggest Discounts, and one of them particularly caught my eye. His primary topic was the difference between Final Listing Price and Sold Price and how that varies by area. But what caught my eye was the final chart that showed discounts from Original Listing Price to Final Sale Price. This hit right on a topic I have been thinking about for some time, that I had mentally labeled the Disappointment Index. In a very real sense, it represents the difference between what a Seller hoped to get for their home, and what they actually got after perhaps many months and many price reductions.

Presumably a Seller, in consultation with their agent, has consciously decided what they want to ask, and get, for the property, and has some expectation that that might happen. So to the extent that they start with that expectation, then a subsequent completed sale for less is a disappointment. And a 15% disappointment on a $500,000 house would be a big disappointment – $75,000 not showing up in your bank account would be a very big disappointment indeed.

So here’s the question: why are these discounts so big?

Are the agents not able to estimate market value and expected selling price any better than that? Or are the Sellers not listening to their agents and overriding them?

At what point does the listing agent walk away and let the Seller find a more compliant agent to list the house at a visibly above-market price? Or does the agent take the listing and hope to work it down over a span of time, perhaps several months.

Maybe this Disappointment Index is higher right now because both Sellers and agents are having trouble adjusting to current prices levels that are significantly lower than a year or so ago. But it certainly does impede sales by leading to longer times on market, and lower buyer confidence in what the price really should be.

Moving to Seattle – Bridges and Traffic

Posted on July 23, 2009 by ARDELL

Thinking about moving to Seattle? Wondering what the traffic is like around here? Before you look at homes on the internet, I strongly suggest you study the Transportation Layout of the Seattle Area.

Often where you live, involves which side of “the bridge” you work on. This Seattle Area Traffic map gives you an excellent broad overview of how you get to and from. Study the “black traffic clog points” on that map for a two week period at various times each day during that two week period. That will give you a pretty good idea of normal traffic patterns, except for the few times each year when the bridge is closed.

Take a long hard look at Lake Washington. It’s HUGE and worthy of due consideration as to how you are planning to get over or around it.

My perspective centers more around the 520 bridge, and around the north side of Lake Washington, with occasional travel over the 1-90 bridge. Locals always refer to this bridge as “The 520 Bridge”, but if you are looking for info on it, you will find it under “Evergreen Point Floating Bridge” in wikipedia, even though the name was officially changed to “The Governor Albert D. Rosselini Bridge-Evergreen Point” in 1988.

Sometimes people will simply say “the 520”, but more often they will say that when referring to the part of that road that is on The Eastside, vs the floating bridge portion of that “road” going over Lake Washington.

One of the reasons I decided to write on this today, is because I was reading updates to the Pontoon Construction Project posted on The Washington State Department of Transportation website. On a good day, travelling back and forth across the 520 Bridge is not a huge deal. On a bad day (when the bridge is closed or partially blocked by a stalled vehicle) one would have been wise to consider the alternative travel options, when deciding where to buy a home.

My general advice is to buy a home on the side of the bridge where you work, unless there is a really good reason not to do that. Very often my first question of someone who calls me about buying a home here in the Seattle Area, especially if they are moving here for a new job, is “Where are you going to be working?”

The Federal Reserve’s proposed changes to Regulation Z (Truth in Lending)

Posted on July 23, 2009 by Rhonda Porter

If you’ve been following Ben Bernanke’s testimony on the Hill this week, you may have noticed him hinting about significant proposed changes to Reg Z and changes in how mortgage originators are compensated, leaving many of us in the industry wondering “what now”. Don’t get me wrong, Reg Z could use some tweeking…it’s just that the mortgage industry is in a state of constant change (evolution?) with a deluge of new forms and/or regulations including MDIA, HVCC and the new Good Faith Estimate which goes into effect on January 1, 2010.

From this morning’s Press Release:

“Our goal is to ensure that consumers receive the information they need, whether they are applying for a fixed-rate mortgage with level payments for 30 years, or an adjustable-rate mortgage with low initial payments that can increase sharply,” said Governor Elizabeth A. Duke. “With this in mind, the disclosures would be revised to highlight potentially risky features such as adjustable rates, prepayment penalties, and negative amortization.”

Closed-end mortgage disclosures would be revised to highlight potentially risky features such as adjustable rates, prepayment penalties, and negative amortization. The Board’s proposal would:

Improve the disclosure of the annual percentage rate (APR) so it captures most fees and settlement costs paid by consumers;
Require lenders to show how the consumer’s APR compares to the average rate offered to borrowers with excellent credit;
Require lenders to provide final Truth in Lending Act (TILA) disclosures so that consumers receive them at least three business days before loan closing; and
Require lenders to show consumers how much their monthly payments might increase, for adjustable-rate mortgages.

The Board will also work with the Department of Housing and Urban Development to make the disclosures mandated by TILA, and HUD’s disclosures, required by the Real Estate Settlement Procedures Act, complementary; potentially developing a single disclosure form that creditors could use to satisfy both laws.

In developing the proposed amendments, the Board recognized that disclosures alone may not always be sufficient to protect consumers from unfair practices. To prevent mortgage loan originators from “steering” consumers to more expensive loans, the Board’s proposal would:

Prohibit payments to a mortgage broker or a loan officer that are based on the loan’s interest rate or other terms; and
Prohibit a mortgage broker or loan officer from “steering” consumers to transactions that are not in their interest in order to increase the mortgage broker’s or loan officer’s compensation.

Clarity and transparency for consumers is a must with the mortgage process. I’m not sure what to make of this line: “Prohibit payments to a mortgage broker or a loan officer that are based on the loan’s interest rate or other terms“. Mortgage rates are increased or decreased based off of paying points which includes the mortgage originators compensation. Perhaps the FOMC would like to see mortgage originators be paid hourly instead of based off of rate…I’m all for that! 🙂

Collaboration: The important DNA in any small business

Posted on July 22, 2009 by Tim

Collaboration: Do you have this DNA in your small business? Is it part of your mission statement or mantra?

This is not so much an insight into how a successful real estate transaction comes to fruition as much as it is a testimony of what makes any task, job, objective or goals conclude with a positive outcome. Whether you are in the military and command a small unit of soldiers or, what I commonly describe the role of a Realtor as, “the Conductor

Mukilteo Real Estate: #10 best community in America by Money Magazine

Posted on July 21, 2009 by Tim

This past week I retrieved my latest issue of Money Magazine from the mailbox and was pleasantly surprised to find that Money Magazine ranked the seaside community of Mukilteo as among the very best communities to live in. Ranked number ten in the country by the magazine, the town offers spectacular views of the Puget Sound, the Olympics, and the Cascades if your home is situated to look east. Among the reasons to consider living in Mukilteo were the good schools and lower property taxes when comparing to other communities in the study.

In today’s market, when you consider the housing price pullback, community, schools, employment and intangibles, Snohomish County offers some of the very best real estate in the Northwest.

I can certainly attest to the spectacular setting in Mukilteo. While waiting for the Ferry to sign some clients on Whidbey Island this past Spring (one of the perks of being in the escrow business is traveling to different communities) I took some pictures of the “glass-like” water scenery (can be very rough) in the morning. I’ve never seen any portion of the Puget Sound water so calm.

Loan Mod Firms: Attorney “Backed” or Attorney Representation

Posted on July 19, 2009 by Jillayne Schlicke

A story today in the NY Times contains interviews with salespeople who worked for an attorney-backed loan modification firm in California that is now under state investigation for defrauding desperate homeowners.

“Despite making promises of relief to homeowners desperate to keep their homes, FedMod and other profit making loan modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers, more than 650 complaints filed with the Better Business Bureau, and documents filed by the Federal Trade Commission in a lawsuit against the company. The suit, filed in California federal court, asserts that FedMod frequently exaggerated its rates of success, advised clients to stop making their mortgage payments, did little or nothing to modify loans and failed to promptly refund fees…For fees reaching $3,495, with most of the money collected upfront, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California. “We just changed the script and changed the product we were selling,