Burn Your Mortgage?
January 27th, 2010 categories: Market Trends, Real Estate News
Recently, I came across an article on AOL’s Real Estate page highlighting an article in the blog DailyKos. For those not familiar with the ‘Kos, it is devoted mainly to political and social commentary, along liberal lines. In the article AOL cited, the ‘Kos urged those homeowners struggling with their mortgage to, walk away from their unpaid mortgages. In their words:
“The real risk to the banks and investors is that the people in those homes might just decide to walk away. And that’s what we must do. Doesn’t have to be everybody, of course; but anyone who finds themselves seriously underwater with no hope of ever recouping their investment….just walk away Renee. Morality has nothing to do with it. You are a cog in the wheel of a machine that is killing this country and if you remain a cog you enable it. Remove your cog and the machine will not keep running. Remove millions of cogs and the machine gets replaced.”
In other words, the Kos is advocating mortgage debt anarchy; a revolution of sorts. It then cites Realtors from across the U.S. who seemingly justify the action. Why? In the words of one agent, since the economic and housing recovery is projected to take perhaps as long as a decade, “Isn’t it better to just cut the losses up front”?
According to a recent report by First American CoreLogic, nearly one in four are underwater or upside down with their home mortgage. In other words, they owe more for the property than it is worth. According to the N.Y. Times, the housing collapse left 10.7 million families owing more than their homes are worth. Is that a problem? Of course it is. Will walking away from a mortgage solve that problem? Not hardly. Have the Administration’s loan modification measures worked as fast or as well as hoped? No, they haven’t. Nonetheless, the programs were enacted for the affected homeowners to use. I have yet to hear of a homeowner not being able to remain in their home as they attempt to modify their payments.
How about you? If you know of a friend, relative, or client that has been forced out of their property despite the fact they’ve continued to make a payment, or partial payment, please let me know.
Is walking away from a mortgage debt justified? While its track record isn’t perfect, the short sale is getting its act together. Perhaps, for both the lender and the those upside down, it is a better alternative than burning the mortgage.
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Is a 31 Percent Failure Rate Acceptable?
December 28th, 2009 categories: Market Trends, Real Estate News
“Incompetents invariably make trouble for people other than themselves.”
Larry McMurtry
Did you see the news? Yesterday’s New York Times carried an article detailing the results of recent federal mandated licensing exams for loan officers around the country. The results thus far are anything but encouraging. According the Times article, ”31 percent of the roughly 10,000 people who took the national test from July 30 to Nov 30 failed it, and about 27 percent did not pass the state-specific component.”
While there are those (you can trust that the dissenters aren’t those depending on the expertise of their lender) who question the industry’s testing, many others appreciate the attempt at accountability. Is it odd to expect those who provide you a service, especially one you pay for, to know what they’re doing? One would hope not.
In the effort to clean up the mortgage industry and answer critics’ claims of of its ”poorly qualified” loans officers, the testing mandate includes both a federal and state national exam that covers federal laws, general mortgage knowledge, the loan-origination process and ethics. While I have to applaud the “after the fact” efforts to ”fix” a disfunctional mortgage loan process, why did it take a crisis to prompt such measures?
The question that leadership in any industry or profession needs to ask itself, is, what are the minimal acceptable standards required by those licensed to perform or practice? Would I want them (the practitioner) to provide that service for me? What if had to pay them for their service? Would I trust them to provide me, or a relative or friend, advice? As we’ve all heard, “many people will only do what’s required.” Let’s hope, when it comes to your trusted advisor, you’re getting at least what you’ve paid for. And, if not, who will pay for their neglect?
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Cracking the Code
June 3rd, 2009 categories: Real Estate News, Relocating
“It is not only what we do, but also what we do not do, for which we are accountable.“
Moliere
Have you ever tried to improve something? Put something together? Assemble an item? Did you remember to follow the directions? Frequently, the directions are more of an afterthought instead of the “how to” they’re meant to be.
Unfortunately, failure is an important part of the road to success. But, if you’re like me, one of your first lessons in failure occurred while attempting to assemble that store bought item you or someone in the family had to have. Probably, in the rush to put together the item, directions were NOT followed. (Who needs them – right?)
Real estate practice carries with it a professional responsibility. Our responsibilities are outlined in the Code of Ethics which serves as the “golden thread” binding us together as a profession. They are our “directions.” In Betty Jasmund’s estimation, they’re more than that, they are a gift.
As the National Association of Realtors publication, Professionalism in Real Estate Practice specifies, the Code outlines our ethical obligations, based upon moral integrity and competent service to clients and customers, and dedication to the public interest and welfare. While the Code of Ethics provides an excellent set of rules or guidelines, what are they worth if they aren’t followed, or Code violations not reported? Or, in some cases, for various reasons, not punished?
Ms. Jasmund, the Fredericksburg Area Assocation of Realtors, Professional Standards Co-Chairman (and one of the wisest Realtors I know), recently authored an article, Why Filing a Complaint Against an Agent is Good for Everyone’s Business, on the value of the Code, in the Association’s latest quarterly publication, FAAR Side. While the entire commentary was instructive, perhaps Ms. Jasmund’s most significant words were:
“….in 1978 by William North, EVP and General Counsel of NAR, he stated that “the integrity of the Code and the value of its vision of the real estate industry depends utimately upon its use.” So if we don’t use it we diminish our ability to monitor our industry. By using the Code of Ethics we present a vision of our profession as it could be and should be.”
The Code of Ethics has had a few changes since its origination in 1913, but its purpose has been the same; to provide clear and conspicuous guidance to Realtors about how their profession should be conducted. Its 17 Articles leave no doubt as to the Do’s and Don’ts of how the profession should be practiced. But, if you were to ask a Realtor you met on the street to cite any one of the Articles, they probably couldn’t. They might be able to tell you the intent of the Code (well, at least, I hope they could), which to them would probably mean “to act in the best interest of the client, and to act with integrity”. But, other than that, who knows what they’d say.
That begs the question, “Should agents have better than a faint idea of what their operating guidelines are?” And, if so, how well should they know the Code? Well enough to know a Code violation if they witnessed one?
More importantly, as it relates to Ms. Jasmund’s point, how can we use the Code more effectively to police our profession? In our efforts to improve real estate practice by improving pre-licensing requirements and establishing a mentoring program, shouldn’t we begin by using the one valuable resource we already have, our Code of Ethics? It is our blanket of accountability. In Stephen Covey’s words, “Accountability breeds response-ability.” And that is exactly what we’re looking for.
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A Modest Proposal (On Improving the Practice of Real Estate)
May 18th, 2009 categories: Military Installations, Relocating
Previously, I focused on the #1 complaint voiced by Realtors about their profession of Real Estate, that being, other Realtors. After discussing the most prevalent complaints voiced by them, the article concluded by asking, “How do we improve the way we do business”? Since licensing requirements and/or standards vary by state, I’ll focus, specifically, on improving the standards of practice in Virginia.
If agents aren’t performing up to the standards our profession requires, how do we ensure they do? Is it a matter of better preparation? Better oversight? And, more importantly, how do we fundamentally change the way we do business? If the current standards used to conduct business aren’t getting the job done, if it isn’t compelling the type of professional behavior we want from our practitioners, what changes are needed?
Believe it or not, the National Association of Realtors(NAR) established professional standards for real estate practice nearly 100 years ago, outlined in their Realtor Code of Ethics. But, the Code is not law. For Realtors, the Code defines duties and obligations required in the public interest, which are beyond the capacity and power of the law to mandate, and supplements the law by requiring a higher sensitivity to the duties and obligations which it imposes. The Code’s “bottom line” rests upon putting the client’s interest first in the transaction.
While the Code of Ethics provides an excellent set of rules or guidelines, what are they worth if they aren’t followed, or Code violations not reported? Or, in some cases, for various reasons, not punished?
While few doubt the Code’s intent, many of my peers have voiced concerns over how well or closely those in our profession practice the Code. And, remember, adhering to to the Code is not optional. But, the Code is supposed to be a starting point. And, if the Code is a simply a beginning, what other preparation or training is needed to develop the standards we need to more effectively professionalize our business. Let me propose three steps:
1. Dramatically increase required Pre-licensing course work, to 60 college semester credit hours of only real estate coursework.
2. Mandatory, Standardized Mentoring Program for New Agents.
3. More Effective Use of Grievance and Professional Standards Processes.
Each of these recommendations will be examined in articles to follow. While these proposals aren’t new, the need for each hasn’t disappeared. Instead, according to anecdotal data, they’re needed now, more than ever.
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