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In March 2008, Fannie Mae, following an investigation by New York Attorney General Andrew Cuomo and the Federal Housing Finance Agency (FHFA), developed the Home Valuation Code of Conduct. The code, which went into effect on May 1, 2009, requires the use of an independent appraiser to determine real market value of a home before a mortgage is written on it. It is currently being used by beleaguered mortgage giants Fannie Mae and Freddie Mac and the details of how that will affect others are still a little unclear. Let me try to dispel some of the rumors and give you some of the facts. 

As of the May 1^st effective date brokers will no longer be allowed to use independent appraisers or even choose their own appraisers. This decision will be left up to the lender now and they may only use AMC’s (Appraisal Management Companies) and not independent appraisers. The rationale behind this is that anyone who will be rewarded with a commission when a deal closes needs to be eliminated from the appraisal process. The reasoning is sound, eliminating potential for abuse, but the side effects on the industry as a result of this ruling could be catastrophic. 

The first area of impact will be on the consumer. Requiring the lender to initiate the appraisal increases the waiting period for the consumer when they are attempting to close on a new home. It also means that if you change lenders you will require a whole new appraisal, something that will consume more time and cost money for the buyer. The broker is also affected by the requirements because they no longer have any control in the appraisal process. They’ve been placed at the mercy of the lender. 

Another area of concern is for the appraiser. Many feel that the HVCC will put many independent appraisers out of business. They are required to join an AMC and that will cost them 40% of their income. They have no choice but to raise their fees or go under. The increased costs to them will be absorbed by the consumer and certainly not covered by the mortgage lender. Under the new guidelines, appraisers are also not allowed to have any communications with mortgage brokers, loan officers, agents or any others who are in a position to earn a commission from the close of a deal. This renders meaningless any client relationships that appraisers have built over the years. 

My take on this is the same as it has been for most of the other crazy pieces of news and legislation I have seen come out of the mortgage industry. How does this make sense and why was it put in place with little or no opposition? It hurts so many people across the board that it can’t possibly last. The good news is that right now the HVCC is only being used by Fannie Mae and Freddie Mac, but the bad news is that many brokers have adopted its guidelines for FHA loans as well, assuming that the change will eventually be universal. Honestly, I think we need to take another look at it before it gets out of hand and make sure reasoning like this doesn’t become widespread in the real estate industry.

Banks and lending institutions make poor decisions and the average consumer has to pay the price. That seems to be the theme of what is going on in America right now. Homes are being foreclosed on because average consumers can’t pay the adjusted rates imposed on them by mortgage companies that presented them as a good deal for lower credit score buyers. Freezes in the credit market resulting from the high number of defaulted loans and mortgages have forced manufacturers to cut production and lay off workers, putting tens of thousands out of work. And now credit card companies are raising interest rates on customers with good credit to help them pay for the losses they’re getting on defaulted cards they issued to those with poor credit. Does any of this make any sense at all?

There was once a time in this country when if you paid your bills on time you were rewarded by your creditors with lower rates and easier access to loans and financing. It was the way that the credit system was designed and it made perfect sense to everyone because it was the right way to do business. Loan applications were screened thoroughly and houses were sold to people who could afford to pay for them. Credit cards were issued to those who had good credit scores and paid on time by those who wanted to maintain those scores. Low income people applied for government help instead of being scammed by private market gimmicks. It sounds like a fairy tale in this day and age but being rewarded for paying your bills on time was once a standard practice in America.

In a recent article published in the business section of the LA Times, a consumer writes that despite paying their credit card bills on time for twelve years, their credit card company chose to raise their annual percentage rate from 8.9% to 14.65%. That’s an increase of 5.75%. The credit card companies claim that this helps to offset their losses from defaulted credit cards and loans but the question remains. Why should the consumer who pays their bills on time have to pay for those who don’t pay at all? More importantly, why aren’t these lending institutions taking the loss themselves? It was they who approved credit cards for people at risk of default in the first place. I’m sure if you look at their list of outstanding balances there won’t be a whole lot of surprises on who wasn’t able to pay.

The Federal Reserve has already issued new rules that limit rate hikes, but those rules don’t go into effect until 2010. Many consumers are already suffering under high interest rates and are having difficulty paying off existing balances in an already difficult financial environment. President Obama has met with leaders in the credit and banking industry and has made it clear that he will pursue further legislation that prohibits random rate hikes and hidden fees by lenders. Members of Congress and the Senate have also re-introduced the “Credit Cardholder’s Bill of Rights”, a piece of legislation that would ensure that any new regulations go into effect ninety days from the day they are signed into law, not one year later as the current system allows. Another measure being reviewed is putting limitations on advertising fixed rates without specifically stating a time frame those rates will be available.

All of these steps being taken to protect the consumer now are great to see but many people are still going to be in the same boat for some time to come. Credit scores will drop when cardholders drop their high rate credit cards and transfer balances to lower rate cards. Banks will threaten to restrict credit access or charge higher fees but they will have to conform eventually if they want to stay in business. When the smoke finally clears and the dust settles we might actually see something we haven’t seen in over three decades: consumers paying cash and not maxing out credit cards they can’t afford to make the payments on.

* Be Patient: There are many foreclosures to buy and another wave is expected this summer now that Fannie Mae, Freddie Mac, FHA and other banks have lifted their moratoriums.

* Pick the right Realtor: There are a lot of great agents out there, but there are a lot of agents who just fire off emails of listings, with no knowledge of the real estate they are trying to sell. In order to buy real estate today, you and you’re agent need to work as a team, and be able to identify all the properties coming back from the banks in your area. Is you’re agent subscribing to tools like Realty Trac, Redloc and Foreclosure radar? All of these services provide information on pre-foreclosures and can give you the edge over other buyers as to when the bank has completed its foreclosure process and owns the property. Is the agent representing you in contact with the banks taking back these properties? Does your agent have relationships with other realtors getting the listings? These strategies will could help you in getting the property of you’re dreams.

* Get pre-qualified: Find a reputable mortgage broker, or bank that is making home loans. This is extremely important and will make your offer stronger. Get a discount if you can buy all cash. All cash offers move to the top of the pile since banks prefer all cash buyers to those higher prices with loan contingencies.

* Get familiar with the property: Many homes for sale today are sitting empty. Go to the open houses. Sometimes there is no open house. If you can’t get into the house then walk around it and get a feeling as the condition of the property. I look in the windows to see what the condition of the kitchen, living areas, and bedrooms. Sometimes I will shorten my inspection period to 3 days, which often trumps out my competition who are looking a longer period. Minimize contingencies. Most banks automatically give you 10 days anyway.

* Ask you realtor to pull all the sold sales comparables, and a list of on-market properties so that you can position your offer properly. In some cases, the banks are listing the properties below the market value to create more interest and a bidding war.

* Keep an eye out for those deals that fall out of escrow: A solid realtor is tracking every deal he or she missed for their client and should be ready to pounce on the deal when it falls out of escrow. I have found some of my best deals this way. Often, a bank is willing to take less than the property was tied up and in escrow for in return for an quick all-cash transaction. If your loan is lined up and your bank understands the circumstances they may be willing to close the transaction quickly.

So, to summarize, there are a lot of deals in this marketplace and I think there will continue to be over the next year or longer.

Be smart, patient, choose a realtor you work well with, get qualified by a bank early on and you will find that dream home or investment.

There is a feeding frenzy in the home sector that I haven’t seen in a long time. Yes, competition is always fierce for a good deal, but today we are seeing up to 30 or more offers on a foreclosed home. Real estate agents tell me that people are bidding up the prices and in some cases paying up to 20% more than the bank is asking. Is it possible that the same buyers are all bidding on the same house? As an example, let’s say you are bidding on a home in Los Felix, Ca or it could be Any City in the USA that has an abundance of foreclosures. More than likely you are bidding on other houses in that same area right? I know I am. As an investor, I have offers on several houses because I plan on buying a lot of them. So if there is 15-20 and in some cases many more foreclosures in you’re market then you and other buyers (you’re competition) are probably bidding on all of them? And who benefits, the realtors, and the banks that are selling these foreclosed properties. Also, the banks are dispensing their inventory of foreclosed properties at an even steady pace to avoid flooding the market, which is keeping the prices high. After all, it’s in their best interest to keep prices high. The banks are already taking huge losses on these foreclosures. And is it bad for prices to stay high? What is high? Prices are already down 50-75% over the height of the market depending on the area. I read one article that indicated that prices in an upscale area have fallen 50%. Any way you cut it, you’re getting a tremendous buy. The banks holding back properties and releasing them slowly helps create stability in the markets. It goes back to supply and demand. Market Value is defined as what a buyer and seller are willing to agree too. I am sure the homeowners in the neighborhoods where foreclosed homes are being sold at rock bottom prices are very happy to hear about the bidding wars. The prices that are set in the sale of a purchase create a “Sale Comparable”. The Sales Comparable is what Banks, Realtors, Buyers and Investors look at when they come up with respective value. The higher the property sells for the higher the future comparables, which establishes the future prices.

Property values are falling. If you read my blog regularly you know that I see this as an opportunity for investors and I encourage them to make a move now before they miss out on a golden opportunity. For those of you familiar with my views this article may come as a surprise because I am going to encourage caution, not too much, but enough to recognize a potential pitfall and plan accordingly. I am talking of course about unemployment and how it affects property values.  

As a real investor myself, I see two things happening right now: 

1. Foreclosures are on the rise
2. Buyers are lining up to buy these foreclosed properties

I also know the following from doing a little bit of research:  

• Between January 2008 and February 2009 the state of California lost 637,400 jobs
• The national unemployment rate is currently 8.5%
• The national commercial office vacancy rate is 15.2%
• 43% of all jobs created since 2001 are connected to the building and housing industries

How is it possible that statement number two in my first list can be accurate while all of the statistics in my second list are true also? The answer is government intervention. The Obama administration put a moratorium on foreclosures from Freddie Mac and Fannie Mae and they are keeping interest rates artificially low to give everyone a chance at the “American Dream” of owning their own home. The only problem is that with rising unemployment homeowners will still not be able to pay their mortgages and the foreclosure rates will go up even further. 

Unemployment in the state of California in the month of March was a staggering 10.1%, and that wasn’t even the highest in the country. That distinction belongs to the state of Michigan, coming in with a mind-boggling 11.6% unemployment rate. The top four is rounded out by South Carolina at 10.4% and Rhode Island at 10.3%. Puerto Rico, an American territory, has a 13% unemployment rate. In the month of February alone the United States lost almost 700,000 jobs. Those numbers are leaving thousands of homeowners without the financial means to pay their mortgages. As the trend continues, and it appears that it will for a while, properties go into foreclosure or are abandoned and property values go down even further. 

All of this makes it currently a great time to buy real estate because of extremely low prices, tax credits and record low interest rates but erosion of jobs and rising unemployment rates will make those property values continue to plummet. The good news is that it will turn around, but it will most likely take a lot longer than any of us imagined. Vice President Joe Biden recently told Americans while being interviewed on Sixty Minutes to not expect economic recovery until 2011. 

From 2001 up until the crash in 2008 there was a building boom in the United States unlike any we have seen since immediately after World War II. The result of it was the creation of thousands of jobs in the construction and real estate industries that are now becoming statistics not unlike the positions being lost in the auto industry. A good portion of the jobs lost in California are the result of the building boom coming to a crashing halt. Much of the commercial office vacancy rate can be attributed to this also. 

The Obama administration has taken some steps to create new jobs and stem the tide of foreclosures but it is too little too late for many homeowners. Even with the moratorium on foreclosures by lenders like Fannie Mae and Freddie Mac debt to credit ratios and the inability by unemployed property owners to pay their mortgages will lead to more foreclosures and lower property values before we start to see any type of economic revival. When the moratoriums are lifted there will be a surplus of properties up for sale. The sale prices and the value of these properties will be extremely low, making them prime investments for those who can withstand the lean years ahead.  

If you are an investor then my advice to you is the same as always, take action now but proceed cautiously and be patient. There is a lot of real estate coming back and even though things look bleak now, they will eventually turn around. If you are out there buying real estate make sure you have adequate funds-reserves because unemployment can affect you like the rest of Americans.

On April 9, 2009, Yahoo Real Estate posted an article written by Maha Atal at Forbes.com (http://realestate.yahoo.com/promo/riskiest-places-for-us-homeowners.html) that was titled “Riskiest Places for US Homeowners”. It was another one of those very informative “gloom and doom” articles about the rising rate of foreclosures in the United States. Did you know that the national foreclosure average was 3% and that it could be as high as 13.9% for sub-prime mortgages that will reset this year? If you didn’t then you haven’t been paying attention. These statistics are coming out in headline articles all over the country every day. 

Let’s try something a little different. Homeowner foreclosures are a terrible thing if you’re the homeowner and many of the sub-prime mortgages were given to people with less than perfect credit so buying another home could be difficult, at least for right now. If you are an investor these numbers that seem so horrible to many are actually great news. Areas where foreclosures are high mean that there are blocks of property just waiting to be bought up for the lowest prices in decades. Property values may be low right now but they’re not going to stay that way.  

The “risky” areas targeted in Yahoo’s article include cities in California, Florida, Texas, and Michigan. Mission, Texas leads the list due to the number of lay-offs in the oil industry and Detroit, Michigan is running a close second because of the turmoil in the American auto industry. The California cities on the list are Vallejo, Fresno, Modesto, Stockton, Visalia, Bakersfield, Lancaster, Palmdale, San Bernardino, Riverside. These are areas where investment opportunities abound, quality properties that were sold to non-qualified home buyers using sub-prime adjustable mortgages. Many of those mortgages are being foreclosed on, the property values are plummeting, and the upside for the investor is huge right now.

In Florida the situation is a little different. Foreclosure rates are rising rapidly but most of them are on second homes that were bought with the intention of “flipping” them for a profit. With property values now decreasing, many investors are walking away from these second homes, even some who can still afford to pay them. The sale of these properties for rock bottom prices is causing other property values in the state to decline even faster. Once again, it’s a nightmare for the homeowner but a tremendous opportunity for the investor.

There’s a silver lining in every cloud. Read and watch the news everyday and you’ll see the cloud clearly enough. Bad news always makes headlines. If you read between the lines and see the opportunities that this economic crisis presents, then you could come out of it with a healthy bank account and some real estate that you got for a steal because you saw the upside when no one else did. The time to buy is now. Don’t hesitate and wonder later why you didn’t make a move when the opportunity was there. 

For all of you who are hoping to buy up an REO before the well runs dry you can relax just a bit. The latest numbers reported by Fannie Mae and Freddie Mac show that the number of foreclosed and pre-foreclosed properties is likely to go up despite the new Home Affordable Refinance and Modification program that is part of the economic stimulus bill passed by Congress earlier this year. Some homeowners are just too far behind for any kind of assistance to matter at this point.

Fannie Mae reported at the end of January that the number of single family homeowners over ninety days delinquent is up to 2.77% from just 2.42% in December. Freddie Mac reported a similar rise between January and February this year from 1.98% to 2.13%. In January of 2008 both of these mortgage giants had serious delinquencies at or less than 1%. Between these two government-sponsored entities there are currently over five trillion dollars in mortgages written for nine million homeowners.

If you do the math you can clearly see that there will be plenty of opportunities to buy REO properties at rock bottom prices, but that doesn’t mean you should put off getting a good deal right now. There are thousands of foreclosed and pre-foreclosed properties available today that are already being sold for far below what their market value will be in just a few years. An investment right now could lead to a huge profit in a relatively short period of time.

These new numbers will pressure mortgage companies holding real estate to sell as quickly as possible. Finance companies need liquid capitol, not property, if they are going to survive. Fannie Mae and Freddie Mac may be under government supervision but they still have to do business as usual. Their need to be solvent leads to an opportunity for you, the investor, to get a better deal.

The number of seriously delinquent mortgages and foreclosures is directly related to the rise in the unemployment rate, currently at 8.5%. Neither number looks like it will improve anytime soon but there are indicators that the recession is over. As Wall Street begins to make steady gains and sales of new homes and hard goods increase your window of opportunity as an investor begins to slowly close. The upside if you buy now is about as high as it’s going to be, so don’t wait.

In addition to the numbers reported by Fannie Mae and Freddie Mac, there are also over 1.5 million sub-prime mortgages that will reset to higher rates this year. These mortgages, typically targeted to people with less than perfect credit, will no doubt increase the number of REO properties that become available. Property values are still dropping in many areas of the country so the prices you can buy these homes for are getting lower, but not for long. Make your move now and you’ll be sitting pretty in a few years.

According to www.wikipedia.com, the term mentor is defined as a trusted friend, counselor or teacher, usually a more experienced person. Some professions have “ mentoringprograms” in which newcomers are paired with more experienced people in order to obtain good examples and advice as they advance.  Many schools have mentoring programs for new students or for those individuals who are having difficulties with their studies.  

Today, mentoring programs are offered in an assortment of circles and industries primarily because it’s been proven that working with the right mentor can bring about many valuable lessons. This blog is intended in part to assist participants interested in choosing a mentor by providing experiences, tools and techniques that have proven to work both for myself as well as for others.   

Throughout my years of experience, I have been fortunate to study under a number of qualified mentors, each of which has contributed to my success and financial independence.  In addition, I myself have acted as a mentor to many aspiring individuals both in my own field as well as other areas of personal growth. Because of my positive experiences, I am a strong proponent of mentoring, especially since I believe in learning from those who have achieved great success. It’s hugely beneficial to accept wisdom from the tried and true, as it keeps us from making unnecessary mistakes.  

So, how do we know what to look for when seeking out a mentor? If you’re new to mentorship, there are some things clues to watch for that will keep you from choosing incorrectly.  First and foremost, when considering a mentor you should choose a person that you’re certain can really help you progress.  While many people claim to be mentors, one of the most important qualifications to look for in a mentor is that he or she has a successful track record of success.  In other words, you have gained confidence in the person and their ability to deliver the qualities and qualifications you are seeking.  Therefore, don’t be afraid to approach someone that you think would be an ideal mentor.  Even if they’ve not mentored previously, for many people, the idea of sharing their path to success is an exciting experience.   

One of the keys to selecting a good mentor is looking at how this potential relationship ties in with your personal vision and core values.  It would do you no good if the mentor you’re working with sees life from a totally different perspective and doesn’t mesh well with your vision and values.  Another aspect of choosing a mentor is considering your intuition. By paying careful attention to your instincts and past experiences you can tell a great deal about a potential candidate.  So trust your own inner guidance. You also want to be sure that your mentor has time to teach and evaluate your performance because feedback is critical to your success.  Therefore finding a mentor that works well with you is a two-way street.    

When choosing a mentor it’s also important to remember that in order for you to create value for your company, be a member of a team and contribute your particular set of skills such as organization, getting tasks done effectively, analyzing situations, preparing summaries and reports, it’s important that you do whatever it takes to accommodate your mentor. When building this important relationship, it is your job to find ways to communicate effectively with your mentor.  A good way to resolve the issue of communication is by putting your agreement in writing.  When things are written down, it keeps both of you focused and in alignment and above all holds each to their commitment.  To build credible trust, it’s important when negotiating your arrangement with your mentor that you make sure you have clear expectations of each other  

After about 30 days, review your agreement and determine whether things are working out as agreed upon. If not, it’s time to discuss what’s working and what needs to change.  Be open and available to make these changes.   If after a period of time you find everything is working out well between you and your mentor, from that point forward, periodic review sessions are a good rule of thumb.   

The Rule of Thumb for Picking a Mentor

• Choose a person that you’re certain can really help you progress
• Don’t be afraid to approach someone that you think would be an ideal mentor.
• Consider how this potential relationship ties in with your personal vision and core values.
• Make sure your mentor has time to teach and evaluate your performance
• Whatever agreement you make with your mentor, make sure to put it in writing.
• Always have clear expectations of each other
• Be sure you can count on confidentiality

At some point, you will wind down and end the formal aspect of your mentor arrangement.  For the mentor to gain insight into his or her mentoring capabilities, they need to have feedback from you. Therefore, finding concrete ways to show your acknowledgement and appreciation for his or her valuable mentoring is an aspect of this special partnership that should definitely be recognized.  

Finally, many go on to do other things with their mentors involving business and in some cases forming partnerships as these type of relationships open up the opportunity for other types of bonds to begin.