In response to a recent request for information from several government entities for “proposals for how best to deal with the large inventory of foreclosed homes” currently held by the government-controlled GSEs Fannie Mae and Freddie Mac and the Federal Housing Administration (FHA), at least one real estate data firm is urging caution. Radar Logic announced plans to publish a response to government proposals to sell pools of foreclosed homes to investors to rent out with urging to be cautious, expressing concerns that such a move could “negatively affect home prices in the broader market”[1]. Given that the pools of foreclosures would sell at deep discounts, the data firm warned that this would negatively affect properties in the area if these distressed properties were factored into home appraisals. “Even if local appraisers do not use the bulk-sale properties as comps, there are many automated valuation models (AVMs) that would likely incorporate the prices of those homes,” the report stated.
The firm will present its own two-step strategy for reducing federal REO inventory in September. While the details of the plan are not yet public, Radar Logic has announced that as the first step, all distressed mortgages would be restructured. This step would not involve a foreclosure process at all. Then the bundles of debt and equity securities could be distributed to investors, and remaining REO properties would be rented out by GSEs through private-sector property managers[2]. This would remove the direct impact of the foreclosure pools’ sales on the surrounding markets.
Do you think that these plans should factor in whether or not they affect the overall home prices in the country, or should the main focus be to clear out the shadow and foreclosure markets quickly? Is it really realistic to try to “protect” housing prices when there are so many distressed properties on the market?
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[1] http://www.dsnews.com/articles/radar-logic-to-propose-plan-address-government-reos-2011-08-26
[2] http://www.eurekarealtynetwork.com/2011/08/27/radar-logic-comes-up-with-a-plan-to-address-government-reos
Investors drove up the prices of real estate properties by paying unrealustically high prices at foreclosure sales. They purchased properties that needed thousands of dollars in repairs and sold them for hundreds of thousands if dollars in profit without doing any repairs. Loans were easy to come by as the banks played their part and sales were driven by crooked, wouldbe property owners lying about their ability to oay, investors, appraisers and the whole mortgage industry. Prices kept being driven up and, since that meant more profits and higher equity for everyine, everybody was happy until the economy slid and the artificial value of real estate was revealed like dirty linen hung out on an outdoors clothesline. Prices have to get back to what they should. We don’t have a housing depression with people loding the value of their homes. What we have is the market trying to regularize itself by adjusting values and prices while foolish people connected with the real estate industry, from the government to the homeowner keep trying to “preserve” the artificially high prices. It.s not goung to happen.
But we could hurt the economy even more by allowing investors to start their crap all over again. Some form of governmental oversight to ensure that ethical standards are strictly adhered to. All it takes is one house being overvalued for comps to be affected.
The system is overdue for a proper accounting. Just looking at the Case-Schiller composite 10 or 20 shows this as obvious. We are still one standard deviation above normal. Get the price revisions into the system, hard and fast NOW, take the pain NOW. Further delay will only make it worse.
Here is how I see the whole situation,the game is the game and I personally feel that investor is the ones whom can pull us out of this mess.Honest,investor because they know the market,finance and community.They know all of this because this is our lively hood,sure people went crazy with fees and all that,but investors are willing to take the risk to buy,rehab,and sell a property that will give in community an up lift.Loan officer,processor,underwriter and mortgage broker just do there job,if you do not know that a home is an investment and not just a place to have a party or BBQ then you should not own a home,not just bad credit and down payment. All these people I stated early only did what the market allow,the banks are going to have to trust again and then everything will be ok.Just my opinion peace
It seems like a good stratagy for the most part as the property will never be shown as a foreclosure. Additionally no investor is going to buy anything unless there is a profit thus the discount has to be in it. (Keep in mind rent or resale is the only real option and alot of cash is sitting with no return until one or the other happens, you know, holding costs) If the investor spikes the interest rate in order to carry the property he/she may also ask a bit more than market or at least full pop.
The market price is all that will happen. No one is going to overpay.
I read this stuff and just go crazy. You do not fix the home problem with special programs to make a few rich. You fix the housing market with JOBS. When a family has a job or two they can BUY a house and fix it up to live in it or rent it. They can buy a house and pay for it. The market will adjust to the correct price. This is America not Russia..
I agree with the first step of the plan. And yes, we should do what we can to minimize the effect on the over all market. First, re-structure all distressed mortgages, good idea. I do not, however, believe the government ought to own property and be a landlord. The properties owned by the GSEs should be listed for sale with Real Estate Professionals! This should be taken out of the hands of the banks. They are acting like idiot children. Put people in charge who are experts in REAL ESTATE! And let ordinary citizens purchase a home, or let investors purchase rental properties, whatever, but it is the BANKS that created this mess, they have proven they do not know HOW to fix it and it ought to be taken out of their incompetent hands!
FREE MARKET? Not since Superman died. The US real estate business has
not had a free market since WWII. Government “programs” have done nothing but skew the markets toward higher prices. Why because the perception,as in stock markets that higher prices mean good things. Shallow thinking yes. IN ANOTHER ARTICLE I POSED IDEA..
“INFLATION IS GOOD FOR THE HAVES..DEFLATION IS GOOD FOR HAVE NOTS”
Some examples of Govt skewing:
End of WWII .. GI Vet Loans, Cal Vet etc.. hard to criticise ,, well deserved but the slippery slope..
Then… FNMA, FHMC, GNMA, ETC.. GOVT PROGS..TO FLOOD the real estate mkt
with easy money and again hard to criticize … its for the families..
DONT FORGET IRS… the home loan interest deduction … i forget when that started..
AND.. i dont know how many more “programs” , “plans” etc that over my lifetime..have deflated the dollar….and inflated the price of homes…
REMEMBER.. the ‘VALUE” OF the homes have not gone up… the “price” has
but only because the “VALUE OF THE DOLLAR” HAS GONE DOWN… BEEN DILUTED by more and more dollars created by
“The Creature From Jeckyl Island” …. the U.S. FEd Reserve.
Then in the 1960s another beast engaged his fangs into the real estate market .. the NAR.. National Assn of Realtors… and have lent the appearance of legitimacy to the gorging of property “values”
(remember the values have not gone up … the price has…because …
the “value: of the dollar has gone down..decade after decade..)
NAR and the local boards have become almost a bureau of the Federal Govt.
and has participated heartily in the brainwashing of their agents, brokers , and the public that higher prices are “good”.
But .. it aint necessarilty so. Well somebody stop me before i harm someone… not enough space to deal with the whole issue here.
but i hope maybe a few of you get the idea…
NO FREE MARKET.. IRS, FNMA ETAL. NRA ET AL..ETC
MONSTER BRAINWASHING..GROUPTHINK. HIGHER IS NOT BETTER (*another chapter)
GET THE GOVT OUT OF REAL ESTATE … LET THE PRICES FALL TO WHEREVER..
LOW PRICES.. LOWEST INCOME PEOPLE CAN AFFORD…
THEN WATCH THE “PURSUIT OF HAPPINESS”… AS FAMILIES BUY THE HOMES.
OUR DOLLAR HAS ALREADY BEEN DESTROYED IN MY LIFETIME …IVE SEEN IT..
CANT FIX THAT… RON PAUL IS RIGHT ..F888 THE FED…
RETURN US TO THE GOLD STANDARD.. GOVT OUT OF RE
LET THE PRICES FALL …THE FASTER THE BETTER… GET IT OVER WITH SO
WE CAN BEGIN TO SELL THOSE HOMES TO NEEDING FAMILIES (not needy)
STOP WASTING TIME ON STUPID STUFF… READ SOMETHING DIFFICULT..
“THE CREATURE FROM JECKYL ISLAND” EDWARD G GRIFFIN.. GOOGLE IT
BUY IT ..READ IT …THEN LETS DISCUSS IT.. ITS NOT AN EASY READ
CHALLENGE YOURSELVES.. DEFEAT THE “GROUPTHINK” IM OUT…LTP
“Radar Logic has announced that as the first step, all distressed mortgages would be restructured”.
That’s what I’ve been saying for years. Imagine if they would have done this at the beginning instead of handing out billions to the same people that got us into this mess in the first place because they were “too big to fail”. Our housing market would have stabilized by now. A stable housing market equals jobs as builders fire back up. Like it or not machines have taken over agriculture. Many of our manufacturing jobs have gone overseas and south of the border. Our telecommunications jobs have gone to India and Pakistan. They cannot ship away Real Estate. Cost of freight is too high.
Let’s face it the bank/investor has to mark things to market. Either voluntarily or involuntarily through foreclosure (of course many question this since the banks get reimbursed by PMI, the taxpayers, and credit default swaps and actually make more to foreclose than modify many time – oh yeah plus a tax write-off). Why not make these guys swallow their pill without kicking the homeowner to the curb and destroying the market in the process?
The best thing for the bank, the people, and our United States is to mark these loans to market now and let people stay in their home. The bank/investors are being bailed out anyway so it ends up being the taxpayers money in the end anyway. When the market recovers where the money came from will become a non-issue (plus the FED can print more if it needs it to bribe/force the banks to do the right thing).
And another thing why are they trying to qualify people to modify the loan on a house they are going to take back anyway? It is not uncommon to see a loan of 130K on a house that is worth 20K. Get the home appraised, bring the loan to market value giving the borrower fair rates and terms, refresh the note, and if they still can’t make the payment then foreclose. Those that say that is not fair are not thinking. What does fair have to do with our banking system and bringing our country out of recession? A rising tide raises all ships. Do they really want the bank to foreclose on their neighbor knowing it is costing them 20%-60% in the value of their property? Is that smart? Kind?
Just kinda rambling. That’s my .02. Thanks for the soapbox Bryan.
As the owner of a property management company this would help increase our portfolio. On the other hand all of our owners will be hurt with the possibility of the rental rates being driven down lower than they are. Our first priority is to watch over our owners investments which is to increase rents not allow them to be driven down. We have a wide range of owners some investors and others “Accidental Landlords”, some break even and others come out of pocket each month. The thought of growing our company on the backs of the tax payers and not a honest sale is not the reason we started our company.
This whole mess would be solved over nite, if it was not for the banks and the powers that be were not in bed together. Their plan to displace the American public and cheat them out of their American dream to fatten up their bottom line by unholy amounts of cash is underway.
And the answer is:???
Lower all properties to market value with a fixed rate of 4.5% and its all over.
Now as for the people who are not in trouble this will start their property values to go upward instead of flat, or backwards for that matter. This mess is far from over.
DO YOU EVEN HAVE A CLUE. There were a few scammers out there, and I would not call them investors. MOST investors buy a house, and fix it up VERY nicely, and provide a good product to the end user, and yes, they make a profit, but I forget, profit is a 4 letter wiord these days with this Socialistic president and Congress we have. Would you rather have the government decideing who can an can’t make money, that would really solve the problem. You know, those bad bad investors you claim are making houndreds of thousands per house in profit are paying more in taxes and generate more good for the economy than you can possibly imagine in your narrow minded view of things. You don’t have much education on how a free market economy works, do you?
If it was not for the investors in this market right now, there would be nothing selling, maybe we should stop even the slighest bright lite in this mess. It is not the investor that has caused the problem, it is the banks, the lenders, the loan servicers, and the government looking the other way when these “bankers, many of which should be in jail right now for massive acts of fraud that they committed against the American public.
I would like to ask what you do for a living? Do you work for free, or do you just collect welfare. I mean if you had the slighest bit of sense about how the economy works and the importance of a strong investor group to keep houses in good condition and in the hands of people who need quality housing. You take the investor incentive out of the process and you are going to see just how many house there are that are just sitting and falling apart.
Know you facts and how the real world works before you open your mouth with some half baked, stupid comment. You had better thank your lucky stars that there are good investors out there, or we would be in even worse shape than we are. But then again, the way things are today, people that don’t have a clue and are not smart enough to uinderstand, have to have someone to blame. When people invest their time, knowledge, sweat and efforts, they have the right to make a profit, at least in the America I was raised in. The only people that don’t think they have that right are ones that think there is a free lunch, that the governement can do no wrong, and that Barack Obama is the savior to all peole that don’t have as much as they think they should, but don’t want to work to get it.
I make these comments as an experienced investor and realtor, and an ethical one, like most of the ones I know.
I am a realtor and investor. Most of my clients are investors. Without them, this real estate market would be even more of a mess! I believe if anyone should get help from the government, it should be the investor! Give tax breaks, or renovation assistance for low-income housing or something to encourage them to buy and renovate homes. Investors are taking a big risk and should make a profit.
Think about all the jobs that will be created or jobs become more stable when an investor buys a home and renovates it. Here’s the people who benefit: attorney, real estate agents, insurance agent, title company, home depot employee, contractors like plumbers, electricians, sheetrock installers, carpet installers, painters, and all the places they buy their materials. If they are buying materials people like truck drivers, warehouse employees, order takers, phone companies, etc stay in business. What about the companies that provide the materials? kitchen cabinet companies, flooring, granite, light fixtures, lumber, roofing, etc. You get my point! Investors create jobs!
Here we go, let’s play the blame game..bad bad investor. Everyone played into this fiasco, the goverment, the lenders, wall street and the non deserving buyer, so why pick on the investor. The investor did not make home ownership a political cause, the goverment did. The investor did not lend money to unqualified buyers, the lender did. The Investor did not create derivatives and fault swaps, wall street did. The Investor did not tell someone making $100,000 that they could afford a million dollar house, the buyer wanted the million dollar house and everybody was there to make it happen. An Investor does not drive price, buyers do. All the investor did was to make a profit from a business venture, I think they call that capitalism.