From my Friend Steve Brant, REO Broker and Accidental Landlord!
Obama says “Fire, now get ready and aim” we need to protect tenants.
I attended the REOMAC dinner this last week in Denver. What’s REOMAC and why are they having dinners and what does this have to do with our current President, you might ask? Or better yet, why is it important to you? REOMAC stands for Real Estate Owned Managers Association of California. What started out as a small group in 1985 for California REO asset managers in now a national organization that serves over 5000 individuals nationwide.
REOMAC holds two big conferences each year and also smaller functions called “dinners” that take place in different cities across the US. As an REO Broker, I attend a good number of these functions, to learn (usually from other REO brokers), to educate others and to visit with current and new customers.
At each Dinner there is always a topic of discussion with a panel of “experts” that are charged with explaining the topic and their best practices. For this dinner in Denver the topic of discussion was evictions. There were four people on the panel, Tonya Willis an evictions specialist with LPS, Ty Miller a SVP at First American (a title company), Nelson Reed a real estate agent, and Cie Mathies a VP of Evictions for an Asset Management out sourcing company, IAS.
Their goal was to dissect the new pro-tenant law in regards to evictions called the PTAFA and how this affects the different players in the chain. This law is valid until December 21, 2012.
There was not a whole heck of a lot in regards to guidance on this new law. They did cover the basics such as.
• Leases survive the foreclosure – meaning that a tenant could stay at least until the end of the lease. They would have to pay the new owner the agreed upon rent.
• Month to Month leases entitle a tenant 90-days notice before eviction.
• Section 8 tenants can stay indefinitely.
Like most laws that are created from a reactionary perspective (think airport security) this law has ridiculous mandates that seem downright un-American. Let me provide an example.
Suppose you are a tenant occupying a property. You decided to stop paying rent because you saw that the mortgagor was going through foreclosure and thought, if he isn’t paying why should I? Seems reasonable, no? (As a tenant, you would find out the property is in foreclosure because it is mandated by foreclosure law that the foreclosed property receives no less than 3 written notices posted or delivered via certified mail up to 3 months prior to the trustee sale.) After a period of 9 months of rent free living (due to moratoriums and other delays) the day finally comes when your home is sold in a foreclosure auction and the lender who has been out payments for the last year is now the official owner.
They send a guy like me out to the property. I give you some documents that explain your options. Those options consist of:
1. Cash for Keys – Just like it says the owner (bank) will offer you the tenant cash (a large sum of money) for your keys (to vacate the property) in 30-45 days. This amount is usually 2 times the normal rent. I have personally offered an occupant as mandated by the bank “no less than $8800.”
2. Start paying your lease – start paying to the new owner the agreed upon amount in your rental agreement. You do not owe any back or unpaid rent.
3. Stay in the home rent free for the next 90 days and vacate at your own expense.
After a month of reviewing the information you decide you want to continue renting. I review your lease and see that it is valid for another 9 months. I put all the paperwork together and now the Bank is your landlord. In the meantime the property is going to be marketed for sale. Once sold, the new owner who buys the property is required to honor the lease if they don’t want to occupy the property themselves.
If they do choose to occupy the property themselves, guess what, you get to stay in this house rent free for another 90 days. All in all you were able to stay in your current rental for over a year without paying a dime in rent.
What is crazy about this new law particularly in California is that like most laws in regards to foreclosures, we look to blame the one entity that really doesn’t exercise their voice and just takes most of the punishment, the banks/investors.
I can see myself slowly digressing to reveal my anger at a system that encourages cheating, doesn’t hold people accountable and treats most Americans as if they are stupid, so before I go down that path let me just summarize.
There is a new Tenant law in place that offers relief to the 3% of tenants that deserve it and the 97% of tenants that don’t.
This law hurts real estate values because is forces the new owner, a guy like you and me that wants to buy this property, to follow these overly protective measures and lose at minimum 90 days but most likely 4 months of rent.
Now you may ask me; Steve what about the situation where the tenant is a 90 year old woman with frail health and limited options, doesn’t this law protect her? Protection is the wrong word; there are many stop gaps in place to prevent undue hardship to unsuspecting tenants particularly those that fall into a class like elderly or infirmed. But these measures were already in place. This new law protects the people that like to take advantage of the system.
What they should do is place a law that says if you are a landlord and you have received a notice of default for not paying your mortgage than collecting rent is a felony. This way unethical landlords aren’t making money, tenants get a little break and we don’t take another kick at the already wobbling bank that is kneeling in submission. But that’s just a thought.
Steve Brant, CEO
Designated REO power broker
NRBA national REO brokers association
REOMAC Attendee
RESNET member
REOTRANS member
888.654.7770
Thursday, August 27, 2009
Tuesday, August 11, 2009
Open Letter to Congressional Oversight Panel
Dear Ms. Warren,
Thank you for your efforts to report on the toxic asset issue in our nation.
First, let me say I believe you are fully aware of the risk that the toxic assets on (and off) the bank’s books pose to our economy. I am confident you have a “handle” on the scope and gravity of the situation. I also believe that you are able to communicate effectively with the institutions about this situation, allowing you to formulate your reports on this grave problem. Forgive my melodramatic tilt here, but it bears repeating. The situation is grave.
Please take a moment to listen to the problem of a little guy, with a small solution to a not so small part of the problem.
As a real estate agent in southern California, myself and a few of my bretheren across the country have taken on the task of helping homeowners out of their housing issues by way of short sale of their property. As you know, a short sale takes the bad paper off the books, resets the area market value, and gives a fresh start to all in a very short period of time. It does, however, discount the face value of the existing debt on the property. And herein lies the (monumental) rub…
Having done short sales for 14 years, I can tell you they are probably the most frustrating, no, infuriating, financial transaction that any real estate agent, homeowner, buyer, or affiliate professional will ever undertake. Some estimates indicate that 70-80 percent of the deals fail because of numerous factors which I will highlight here.
Lenders (a term I use to describle servicers, banks, MBS Investors, mortgage insurance companies) make it NEAR IMPOSSIBLE for the transaction to take place due to their policy of “stepping over dollars to pick up pennies”.
Here are a few of the deliberate manipulations of the little guy to extract a few more dollars:
• Insisting homeowner bring cash to the table to close the deal
• Insisting the homeowner sign a promissory note (with the obvious connotation of a future collections threat)
• Insisting on cutting real estate commissions
• Refusal to allow concessions in the transaction to settle all outstanding obligations (back taxes, HOA dues, local municipal costs)
• A systematic policy of stalling, delegating, and denying designed to take every deal to the brink so that those participants that do remain on board will agree to anything at the last minute to get the deal closed.
These policies are akin to an emergency room Doctor asking for the patients co-pay as he is about to apply the shock paddles to the patient’s heart.
While certainly there are manipulations of the system from the agent/homeowner side, I would contend that the medicine is definitely killing the patient. Again I point to the 70-80 percent transaction failure rate. These are above average agents with the intention of helping homeowners avoid foreclosure (albeit for a profit).
Ms. Warren, I implore you to recognize the potential to solve the toxic asset issue at the grass roots level. Please alert your contemporaries of this issue, and take the lenders to task on it. Here are some simple suggestions:
• Standardize the 2nd and subsequent lien holder percentage payoffs.
• Stop the policy of “going after the homeowner” with cash and promissory note threats
• Stop the policy of penalizing the professionals in the deal by cutting their commissions
• Insist on reasonable time lines for decisions. The industry is rife with stories of 10 month short sales due to lender uncooperativeness
It is my belief that if this particular problem, and the problems of those involved in it, were brought to light on a national, focused manner, and corrected, we could put a serious dent in the runaway toxic asset train. If the lenders would cooperate, in good faith, with this process, it would be a huge shot in the arm to the housing industry. We are all on the same team. Make the lenders realize that!
Thank you for your efforts to report on the toxic asset issue in our nation.
First, let me say I believe you are fully aware of the risk that the toxic assets on (and off) the bank’s books pose to our economy. I am confident you have a “handle” on the scope and gravity of the situation. I also believe that you are able to communicate effectively with the institutions about this situation, allowing you to formulate your reports on this grave problem. Forgive my melodramatic tilt here, but it bears repeating. The situation is grave.
Please take a moment to listen to the problem of a little guy, with a small solution to a not so small part of the problem.
As a real estate agent in southern California, myself and a few of my bretheren across the country have taken on the task of helping homeowners out of their housing issues by way of short sale of their property. As you know, a short sale takes the bad paper off the books, resets the area market value, and gives a fresh start to all in a very short period of time. It does, however, discount the face value of the existing debt on the property. And herein lies the (monumental) rub…
Having done short sales for 14 years, I can tell you they are probably the most frustrating, no, infuriating, financial transaction that any real estate agent, homeowner, buyer, or affiliate professional will ever undertake. Some estimates indicate that 70-80 percent of the deals fail because of numerous factors which I will highlight here.
Lenders (a term I use to describle servicers, banks, MBS Investors, mortgage insurance companies) make it NEAR IMPOSSIBLE for the transaction to take place due to their policy of “stepping over dollars to pick up pennies”.
Here are a few of the deliberate manipulations of the little guy to extract a few more dollars:
• Insisting homeowner bring cash to the table to close the deal
• Insisting the homeowner sign a promissory note (with the obvious connotation of a future collections threat)
• Insisting on cutting real estate commissions
• Refusal to allow concessions in the transaction to settle all outstanding obligations (back taxes, HOA dues, local municipal costs)
• A systematic policy of stalling, delegating, and denying designed to take every deal to the brink so that those participants that do remain on board will agree to anything at the last minute to get the deal closed.
These policies are akin to an emergency room Doctor asking for the patients co-pay as he is about to apply the shock paddles to the patient’s heart.
While certainly there are manipulations of the system from the agent/homeowner side, I would contend that the medicine is definitely killing the patient. Again I point to the 70-80 percent transaction failure rate. These are above average agents with the intention of helping homeowners avoid foreclosure (albeit for a profit).
Ms. Warren, I implore you to recognize the potential to solve the toxic asset issue at the grass roots level. Please alert your contemporaries of this issue, and take the lenders to task on it. Here are some simple suggestions:
• Standardize the 2nd and subsequent lien holder percentage payoffs.
• Stop the policy of “going after the homeowner” with cash and promissory note threats
• Stop the policy of penalizing the professionals in the deal by cutting their commissions
• Insist on reasonable time lines for decisions. The industry is rife with stories of 10 month short sales due to lender uncooperativeness
It is my belief that if this particular problem, and the problems of those involved in it, were brought to light on a national, focused manner, and corrected, we could put a serious dent in the runaway toxic asset train. If the lenders would cooperate, in good faith, with this process, it would be a huge shot in the arm to the housing industry. We are all on the same team. Make the lenders realize that!
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