Revisiting An Appeal for Credit Amnesty
September 8th, 2008 Categories: Real Estate News, San Diego Communities, San Diego Foreclosures, San Diego Real Estate
by Roberta Murphy
I wrote this article a year ago for Luxury Home Digest, and thought it might be time to revisit the idea (see below)–especially since this past weekend’s announcement that the Feds are rescuing Fannie Mae and Freddie Mac.
If those organizations get a reprieve (at the expense of common stockholders and the American taxpayer), why not San Diego’s battered homeowners?
Since publication of this original article, home values in the San Diego real estate market have plummeted (some neighborhoods more than others, of course). And just a couple of months ago, San Diego’s City Attorney Michael Aguirre grandstanded pushed to make San Diego a foreclosure sanctuary, and has sued Bank of America, trying to stop them from exercising that right.
Instead, some wonder, why not provide some protection to homeowners who have fallen victim to short sales and foreclosures in San Diego?
The original article:
There is a tsunami of wrecked credit that has only begun to hit the credit reporting bureaus.
Many of the victims are those whose FICO and credit scores have been demolished by short sales and foreclosures. With the short sales, or short pays as they are sometimes called, the mortgage lender has agreed to accept less than what is owed on the home–and where more is owed on the home than what it is worth. In the case of foreclosure, the home is auctioned off for non-payment. In both scenarios, credit scores of the former homeowners are generally ruined, which will likely prohibit them from purchasing another home anytime in the near future–or perhaps for years to come.
Many will argue against the idea, but perhaps it is time to consider credit amnesty for those who have lost their homes to foreclosure and short sales. Sure, there were those homeowners who were greedy, who used their homes as ATM machines, who foolishly thought the crazed real estate market would continue forever–or at least until they managed to sell at the top of the market.
We have even met a few of those people. They are among the legions who followed real estate flipping shows and late night television gurus. They followed the promises of big and easy money.
But most of the defaulted clients we counsel have a history of home ownership, pay their bills on time, and were lured into mortgage financing that was so easy to obtain and which offered irresistible terms. Most relied on the counsel of a loan broker or real estate agent (often one person who wore both hats), who assured them of the wisdom of such loans.
It was a diabolical match: Gullible and sometimes greedy homeowners paired with greedy and sometimes crooked mortgage and real estate professionals.
The finger pointing can go on for years, but very soon there will be tens of thousands of people who will no longer be able to purchase homes. Add these numbers to the huge pool of buyers who are already afraid to enter the burgeoning real estate market and we have an economic problem of near-Biblical proportions.
I’m not sure how the details of a credit amnesty plan might work (and the devil always lurks in the details), but something need to be done quickly to help bolster buyer capability in this market. To disenfranchise such a large group of home buyers will only magnify the expanding real estate market glut and lengthen its recovery.
And as with any amnesty plan, there will be a percentage of borderline criminals who are more deserving of jail than being forgiven.
But with tougher mortgage loan underwriting, better oversight and raising the bar on real estate and mortgage lending professional standards, the rotten borrowers would be weeded out. This would also encourage the discouraged to stay current with their other debt obligations instead of giving up entirely on their FICO scores and future home buying opportunities.
It might be a solution that could help our markets recover–and credit amnesty just might offer hope to the hopeless. Might not the rewards outweigh the costs?
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Market Bottom and a Radical Resolution
September 1st, 2008 Categories: Real Estate News
by Roberta Murphy
This is a continuation of last week’s discussion with Bob Dyson, who has a radical proposal that is being quickly embraced by Realtors, lenders and local Real Estate Boards.
Why resort to radical resolutions?
Because, says Dyson “This is a real estate depression–a serious, serious issue.”
He sees an immediate need to stabilize real estate markets and neighborhood values. He also believes the motgage lending industry needs to get out of the “asset management” business, and instead focus attention on new loan originations.
So what to do with all those defaulted loans and pre-foreclosures?
That’s where Dyson’s proposed “American Incentive Resolution” saves the day.
How would it work?
1. The American Incentive Resolution Corporation (as a government entity) would buy defaulted loans from lenders at 50 percent of face value.
2. Re-market these homes through Realtors at retail market value.
3. Offer these homes to first time buyers and those whose credit and FICO scores have been damaged by short sales and foreclosures the last couple of years. The initial terms would be a 12-month lease-purchase, with all payments accruing to a down payment as long as payments are made on time. Lease payments would equal what loan principle, interest, taxes and insurance would be under normal loan terms at 5 percent interest. Initial move-in would entail first and last months’ payments.
4. At the end of 12 months, the lease would become a purchase with all payments made under terms of the lease being applied to the full down payment.
The first video below details Bob Dyson’s assessment of the real estate market bottom, while the second deals with the American Incentive Resolution:
American Incentive Resolution part Two
American Incentive Resolution part Three
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A Most Unorthodox Market: Bob Dyson
September 1st, 2008 Categories: At Home in Del Mar, Real Estate News, San Diego Foreclosures, San Diego Market Trends, San Diego Real Estate
by Roberta Murphy
Last Thursday, I had the opportunity to sit across from Bob Dyson at his office in Del Mar and listen to this real estate legend discuss today’s real estate market. We were also fortunate to have Chris Dyson videotaping much of the discussion, which we have divided into four segments.
At the start of our interview, Bob Dyson said these are the worst conditions he has seen during his 40 years in the real estate business–citing symptoms such as lack of buyer confidence and the drastic deflation in certain real estate markets–including San Diego, of course, along with the rest of California, Nevada, Arizona and Florida.
The causes stem from irresponsible mortgage lending practices from 2003 to 2007 and the resultant and reactionary tightening of mortgage funds. Dyson simply calls it a “lending debacle.”
At the same time,he says, there is a large and growing backlog of buyers who want to buy–and are just waiting for reassurance that the real estate market has really bottomed, or is at least close to that point.
See below (and stay tuned for a radical solution):
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San Diego Disaster? Use Twitter
August 18th, 2008 Categories: Carlsbad Real Estate, Encinitas, Rancho Santa Fe, Real Estate News, San Diego
I started using Twitter a few months ago, and at first had trouble understanding how it could be of benefit to me or my family.This online site allows a maximum of 140 characters for users or “Twitterers” to post their ideas, activities and breaking news. Based on relationship, the value of their Twitters–or simple curiosity, just about anyone can “follow” anyone.
At first it mostly seemed like social chatter, with some interesting links to stories and photos. But when an earthquake rumbled through Southern California a few weeks ago, there were immediate Twitter reports. Those following Twitter probably had a better handle on what was happening than the news media. A couple of San Diego Realtors were reporting via Twitter the gentle shaking, while reports from Long Beach and Los Angeles reported something stronger.
We knew within minutes that there was likely no real damage from this quake, this time.
But what if this were the big one? What if a major hurricane hits the Southern coasts? What about tornadoes? Or terrorist attacks?
Experience has shown that in times of regional disasters, cell and telephone networks often break down from everyone calling at once. This leaves anguished families and friends worrying about the safety of their loved ones.
It might be wise to now go set up a Twitter account and encourage your friends and family to do the same. That way, you will be able to instantly check on each other via cell phone texting (dial 40404) or the internet. If you do sign up, be sure and follow me on Twitter at: RobertaMurphy
This YouTube video by David Stephenson explains how Twitter could work if San Diego were to be hit with a major disaster–and it occurs to me that we should also ask our fire, police and safety officials to set up their own Twitter accounts so that we could get official reports and updates.
–Roberta Murphy
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Michael Aguirre: San Diego a Foreclosure Sanctuary?
August 4th, 2008 Categories: Real Estate News, San Diego, San Diego Real Estate
by Roberta Murphy
I maintain a few Google Alerts, and one of them is for embattled San Diego City Attorney Michael Aguirre and his positively stupid amazing idea of turning San Diego into a Foreclosure Sanctuary.
He intends to stop foreclosures in San Diego, and to prove the power of his convictions has sued Bank of America–and has other banks in his myopic sights.
I was in San Francisco at a real estate conference when the news hit, and even Golden Gate liberals there were rolling their eyes. All tongues were wagging about San Diego real estate falling off the edge of the earth if Aguirre prevails in halting foreclosures in San Diego.
Imagine the possible consequences if such political grandstanding succeeds:
1. What lender would even consider offering home loans in San Diego, without at least a 50 percent down payment (perhaps)?
2. What incentive would any homeowner in San Diego have for keeping their payments current? Foreclosures would be outlawed in San Diego, remember?
3. If you think San Diego real estate and homes are a bargain today, just wait–at least if you are a cash buyer. Prices would fall through the floorboards for sure if lenders are blocked from securing their investments, and abandon the San Diego real estate market entirely.
This is a scenario ripe with possibilities and consequences. We can only hope that courts throw out Aguirre’s folly quickly and that San Diego finds a replacement for City Attorney even faster.
All just my opinion, of course….
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