Enough Blame to Go Around

As we all watch the sub-prime market crash and burn, we need to recognize that there is enough blame to go around. More than enough. The federal government is in the process of dreaming up ways to help solve this problem, but a big part of this problem is unadulterated greed, followed by stupidity and laziness, although not necessarily in that order. Let's start with greed. The predatory lenders had more than enough of this to last a lifetime. Many consumers, and agents, were blissfully unaware of predatory loan practices such as yield spread premiums. This is a practice where the loan originator gets a bonus for selling the consumer a product with a greater yield to the investor--good for the investor, bad for the consumer. There are some fine, upstanding mortgage brokers out there. There are some bad ones, as well. Some of the companies that have failed, like Ameriquest, deserved to. Ameriquest, after all, entered into a huge consent agreement in my state (Pennsylvania) as well as other states when their predatory lending practices, including pressuring appraisers, were revealed.

Then we have the investors on Wall St. The underwriters packaging mortgage backed securities for resale were greedy also. Per the Wall Street Journal, back in 2000, Standard and Poor decided that 'piggyback mortgages' --80/20 loans where the consumer has none of his own money in the deal were no riskier than regular loans. What were they thinking? In 2006, some genius at S & P finally decided to check it out, and found that the foreclosure rate was actually much higher on these loans. DUH! At this point, they changed the rating, but the damage was done. Then, there's the consumer. Did none of these people ever hear the expression that begins: "If it sounds too good to be true..."??? Instead, we had lots of consumers who blithely took loans out with teaser ARM payments who never asked "How high can my payment go? How soon? What's the worst case scenario? Is there a pre-payment penalty on this loan? How much is it?" Finally, there is blame enough for the agents to join in. There was a time in this industry when agents were much more hands-on with respect to their client's financing. Real estate agents actually pre-qualified buyers themselves, running their income and debts through a worksheet, applying the appropriate ratios (different ones for FNMA, FHA and VA) and told the buyer what he could afford. The agents also recommended lenders, and were knowledgeable enough to compare products. We've gotten lazy. We hand them over to lenders and say: "Call us back when you have a loan." Instead, we should be doing our own pre-qualification, giving the buyer questions to ask, and helping them to compare loan products. Should the Feds bail us out? On the one hand, we have hapless consumers who may lose their homes. On the other hand, you can't fix stupid. I'm in favor of very limited support--options that would help homeowners refinance, but would not make other taxpayers essentially pay off their ill advised mortgages for them. As far as the predatory lenders go, they are getting what they deserve. In many states, no license is needed to be a mortgage broker. That's something the Feds should fix. The FBI has gone on record as saying that the reason we have so many predatory lenders out there is that a business that generates as many billions of dollars a year as the mortgage business does has, and is, attracting career criminals. You know--former drug dealers. After all, rarely do mortgage brokers get shot when a deal goes bad. The sophisticated Wall Street crowd certainly knew they were blowing smoke when they decided 80/20 loans weren't risky. They deserve to go without their six or seven figure year end bonuses. Sadly, some investors at the end of the food chain are already being affected--those securities were bought for them and put into portfolios. And, as far as the agents go, we're due for a correction in our ranks. There are a lot of agents out there who are going to leave the business--and many of them should. They aren't competent; they aren't prepared for the market we are in, and it's way too much like work for them. Bye-bye--this is a serious business, and be in it to not only succeed, but to serve the consumer. If you can't take the time to learn about financing, or learn to qualify buyers, then leave now. Let's strive to get our industry back on track from the inside out. We need to be competent, and we need to identify competent lenders we can honestly recommend to our clients. We need to understand that not all consumers can be home owners, and some that can be someday can't be today. We need to take charge of our business, and move forward.

Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com

September Musings

September is almost gone, and it has been a wonderful month. My daughter and I started the month by going to NYC to see "Wicked"-- a belated birthday gift for my Leo daughter. Super show! That was Labor Day Weekend, and since then, I'm 'back in the saddle again'--or, in my case, back on the road.   I got the chance to teach the RSPS (Resort and Second Property Specialist) course in Georgetown, DE (near Lewes and Rehobeth Beaches). My husband went with me to take the course--this is one of his specialties--and we enjoyed a day at the beach. We sure missed the boat--back when our kids weren't in school, we should have done the September beach trip--the water was warm and the weather was great--not too hot. The kids are pretty much out of the house, so we'll probably become dedicated September beach goers. Met some great Realtors at that class with terrific ideas. Since then, I've been to Butler PA, Wilkes-Barre PA, Allentown, PA, New Kensington PA, ...etc. October brings Nashville! In the meantime, I am collaborating with my good friend and colleague, Amy Chorew (aka The Tech Goddess) to re-write the REBAC eBuyer course. Life is good! Finally, the seasons are changing here in Pennsylvania--the days are shorter, the mornings are crisp. When I walk my yellow Lab, Sandy, across the farmer's fields we see fog in the morning. The farmers are bringing in the field corn and soybeans. Some days, the tractors have disturbed the soil enough that we find a neat fossil or arrowhead.  The leaves are changing color, and my rose bushes are doing their last hurrah! My fall blooming clematis has the pergola covered with tiny, white, fragrant blossoms. Penn State is playing football again, with Joe Paterno at the helm--just like its been forever.  This blog, by design, has lots of musings in it--I'll be using it at the PAR meetings next week to show my friends at the CRB meeting how neat blogging is and how it works.

Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com

Back to School!

Melanie J. McLane, ABR, CRB, CRS, ePRO, GRI, RAA, SRES, 32 year veteran of the real estate industry. Offering training, speaking and consulting throughout the industry, I teach everything from ABR to USPAP. Certified ePRO Instructor. To contact me, email me at: melanie@TheMelanieGroup.com or visit my website: www.TheMelanieGroup.com

It's September, and the kids are all back in school. Real Estate Agents typically start thinking about education this month as well; my teaching schedule is full through December. If you are a real estate agent, and you are thinking of either taking courses because you want to, or taking courses because you have to for CE, I would urge you to get the most 'bang for your buck'. In my state, some courses are 'three fers'--they count for broker license credit, CE, and count toward a designation. If you have to put in 7 or 14 or 28 hours of time, for heaven's sake, make it count. Take courses that will make you better at your job. Take courses because you will learn something that will help you make more money, or serve your clients better. Don't select a course because it is the cheapest, or you hope the instructor will let you out early. My top suggestions for agents: decent agency courses, like ABR and SRS. In this market, clients deserve the best representation you can provide. A decent financing course--we've handed over financing details to the mortgage brokers for too long. You need to understand the process, from qualifying through closing, and you need to be able to help your client evaluate the mortgage possibilities they have. Anything on how to value property, whether it is a beginning  appraisal course or a valuation course for agents. It's tough to value property in a declining market--go learn how. Finally--it's September--get back to school!