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RISMEDIA, March 10, 2010—Pending home sales are down and additional declines are expected from abnormal weather conditions, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January 2010, fell 7.6% to 90.4 from an upwardly revised 97.8 in December, but remains 12.3% higher than January 2009 when it was 80.5.

Lawrence Yun, NAR chief economist, said weather is likely to impact housing data. “January pending sales, though still higher than one year ago, remain much lower than expected given that a large number of potential buyers are eligible for the expanded home buyer tax credit. Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February,” he said.

As such, abnormal swings are expected in housing data. “We will see weak near-term sales followed by a likely surge of existing-home sales in April, May and June,” Yun said. “The real question is what happens in the second half of the year. If there is sufficient job creation, housing can become self-sustaining with stable to modestly rising home prices because inventory has been trending downward.”

The PHSI in the Northeast fell 8.7% to 71.3 in January but is 20.5% higher than January 2009. In the Midwest the index dropped 8.9% to 81.2 but is 11.8% above a year ago. Pending home sales in the South slipped 2.1% to an index of 98.1, but the index is 18.0% higher than January 2009. In the West the index dropped 13.2% to 102.9 but is 1.4% above a year ago.

For more information, visit www.realtor.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

For more top headlines on RISMedia.com, don’t miss:
Home Buyers Rush to Take Advantage of Tax Credit Before It’s Gone
Homeowners Rent Out Rooms to Stave off Foreclosure

RISMEDIA, March 10, 2010—This week’s headlines from the NATIONAL ASSOCIATION OF REALTORS® include: 121 ways to market yourself from NAR’s Right Tools, Right Now initiative; save up to 40% on select rentals from REALTOR Benefits® Program Partner, Avis and be aware about the upcoming tax credit deadlines.

Right Tools, Right Now – 121 Ways to Market Yourself

Learn to systemize a consistent lead flow with this archived commercial webinar available for FREE thanks to Right Tools, Right Now. Visit http://realtor.org/RightToolsREALTOR.org/RightTools for details.

Save up to 40% on Select Rentals from Avis

Renting a car from Avis, a REALTOR Benefits® Program Partner is now more affordable than ever thanks to a special discount offer available to NAR Members. Now through March 31, 2010, members can save up to 40% at participating Avis locations on daily, weekly and weekend rentals. Restrictions apply so check the website for complete details and to get the required AWD code.

Inform Clients About Upcoming Tax Credit Deadline

Make sure your buyers are aware of the April 30 deadline for closings and contracts.

For more information, visit www.REALTOR.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

To see last week’s NAR Pulse, click here.

RISMEDIA, March 10, 2010—RISMedia’s 2010 Real Estate Leadership Conference—‘The Real Estate Social Media Summit’—will provide the perfect backdrop for real estate professionals who are looking to capitalize, even in today’s challenging market.

Industry experts Brett Billington, Anita Rich, Rosemary West, Stephanie Healy Cullum, Betty Hensal and Melanie Smith are among the top-producing agent panelists who will offer insight into the power of effective negotiating during the session titled: “Improving Your Negotiation Skills” at this year’s Leadership Conference. The session will take place on Thursday, June 10 from 10:10-11:10 a.m. at the Hilton Rye Town in Westchester County, New York.

Here’s a more in-depth look at some of the panelists. Look for more profiles in Friday’s edition of the news.

Brett BIllington, Associate Broker, RE/MAX Gateway
Brett Billington has been a consistent top producing agent since entering the real estate business in 2003. According to Billington, he attributes his success to having great marketing and communication skills, an up-to-date knowledge of the ever-changing market conditions, constant training and education, persuasive negotiating skills and a dedicated desire to exceed client expectations. Billington’s Diamond Award status with RE/MAX has earned him a position amongst the top real estate agents in the country.

Anita Rich, Broker, Keller Williams Realty
As the founder of the prestigious Rich Group at Keller Williams Realty, Anita Rich understands that “Success is more than just a name, it’s Rich with Results,” that matters. Rich is a Broker with the coveted designation of Certified Residential Specialist (CRS). Along with the Membership to the Luxury Home Institute, she is a Certified Buffini Mentor, on the board for WeSpark- a non profit Cancer Group- and Charter president for an Optimist Club. She was a panelist at the 2009 NAR Convention and she continues to excel and expand for her clients and for the industry in general.

Rosemary West, Realtor, RE/MAX of Joliet
Rosemary West from the Rosemary West Team of RE/MAX of Joliet is a Top 5 in Real Estate Charter Member. She is among the 2008 RE/MAX Circle of Legends and is in the Top 20 of RE/MAX of Northern Illinois. West specializes in corporate relocation and new construction and regularly appears on Top Producer panels as a motivational speaker.

It’s never been more important to stand out among the competition than in today’s challenging market. Don’t miss your exclusive opportunity to improve your negotiation skills from the best in the industry. This session is not to be missed!

This year’s Conference will also focus on Social Media and Mobile Strategies for both brokers and sales associates to help these professionals best meet the demands of today’s home buyers and sellers. There will also be a track dedicated specifically for brokers, and additional business development and marketing sessions.

For a complete list of sessions, visit http://rismedia.com/events/leadership-conference/sessions/.

Who Will Attend? Leaders of the real estate community, including Top 5 Members, other leading real estate sales associates, team leaders, leading brokerage owners, economists and a host of related industry visionaries from around the United States.

Register Now at http://events.rismedia.com!

Interested in Sponsoring and/or Exhibiting? Contact your Account Representative or e-mail advertising@rismedia.com.

Questions on the Conference? Visit http://rismedia.com/events/leadership-conference or contact Stephanie Andre at stephanie@rismedia.com or 203-855-1234 x141.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

RISMEDIA, March 10, 2010—Golden Gateway Financial, a financial resource for seniors and retirees, recently released new usage data from its online Reverse Mortgage Calculator that showed average home values for older Americans have halted their slide after remaining flat or declining for seven consecutive quarters. The national average self-reported home value of older Americans rose from $369,762 in the third quarter of 2009 to $381,895 in the fourth quarter of 2009.

Older Americans were one of the last segments of the population to see home prices rebound, but overall home values for seniors remain significantly lower than 2008 levels. Despite this rise in the national average, the report also showed significant decline in many large states, including Florida, Texas and New York.

This mixed recovery in terms of senior home values will likely continue as individual markets reduce inventory and regain their footing. Data from the most recent S&P/Case-Shiller Home Price Indices shows that many markets within these states continue to show improvement, and this should eventually contribute to an increase in home values for older Americans as well.

“Even a minimal gain in home value is a reassuring sign for older Americans because many of these individuals live on a fixed income and rely on their home to support their retirement lifestyle,” said Eric Bachman, founder and CEO of Golden Gateway Financial. “This is especially true for those considering a reverse mortgage because as their home increases in value, so does their potential for greater reverse mortgage proceeds.”

Additional observations from the data include:
-The average age of users remained roughly consistent
-Self-reported senior home values rose by a little more than 3%between the third and fourth quarter of 2009
-The average existing forward mortgage debt dropped slightly to $143,360
-Reverse mortgage average max up front proceeds available rose by roughly 3% while the average max monthly proceeds available dropped by 13%

For more information, visit www.goldengateway.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

For more real estate related headlines on RISMedia.com, don’t miss:
Fewer Home Sellers Cut Asking Prices for Homes in January 2010
Are You Afraid to be Successful?

RISMEDIA, March 10, 2010—Even in a difficult market, opportunities abound—real estate professionals simply need to know where to position themselves in order to best take advantage of them. Here, Roger Soderstrom, Owner, Stirling Sotheby’s International Realty discusses how he positions his company for success by staying positive.

Roger Soderstrom
Owner
Stirling Sotheby’s International Realty
Heathrow, Florida

Region served: Central Florida
Years in real estate: More than 30
Number of offices: 4
Number of agents: 140
Average sales price: $375,000
Time on market: Distressed properties: 90 days; retail side: 7-8 months
Key to staying profitable: Belt tightening and consolidation are both important and healthy exercises to go through in order to maintain profitability. It is also crucial to have the right people in place.

What have been some of your most effective strategies for working in the slower market?
Agents need to be focusing on the opportunities that are available, and these opportunities need to be a major part of their business. It is also crucial that agents stay in front of their database, and we have worked hard over the past year to provide our agents with the tools and resources they need to develop and stay in touch with their past and present clients. We believe in providing information with great content and every communication we send is telling a story.

What is your biggest challenge in today’s market and how is your company taking it on?
In 2009, 50-70% of all of our sales on a monthly basis were classified as distressed. When we first started to get into short sales and REOs, many of our agents were hesitant about dealing with distressed properties, so we are constantly teaching our agents the importance of how to fish all over…and in the right areas. Another challenge is working to understand the motivation of our sellers as it is difficult to help them through the process without first understanding what they are trying to achieve.

What are you doing to differentiate your company from the competition?
We have our own in-house advertising agency so we can create all of our own Web developments within the office. We also have an in-house videographer onboard and will soon have a social media manager. Differentiating our company from the competition also involves providing our agents with high-quality marketing tools that we have created in addition to those we receive through our Sotheby’s International Realty® affiliation.

What are some of your technology best practices?
We recently invested in a software technology that will enable us to convert all of our material to be read on both the Internet and through mobile devices. With today’s consumer operating virtually through mobile devices, it is important that we provide information through the context in which they are most comfortable. In addition, we have started filming certain communities throughout our marketplace and are producing videos that will be placed on our websites. We have also had a lot of success with our webinars that we use for training our agents as well as reaching out to clients.

What strategies have you applied toward working successfully in the luxury home market?
It is critical to have a sufficient marketing budget in order to have quality photography in addition to video, blogging and interactive e-brochures to successfully market luxury homes. You can’t rely on finding a buyer next door so you have to go to the world and in order to do that, you need to have the right resources and tools.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Don’t miss these headlines on RISMedia.com:
Will Baby Boomers Lead Housing Industry Toward Recovery?
How to Budget for Home Maintenance

RISMEDIA, March 10, 2010—Real estate brokerage firm, Baird & Warner launched a new interactive search tool that enhances the online experience of those looking for foreclosed property or houses, the company has announced.

According to the company, this new feature delivers to prospective buyers and investors the freshest foreclosure information available, and gives them valuable search capabilities developed to make the process easy and efficient. “We’re the only company to offer this kind of data in a consumer-friendly format,” says Charles Melidosian, chief information officer, “and since our soft launch of it last month, we’ve seen a 276% increase in usage.”

According to the company, visitors to bairdwarner.com will find the Foreclosure Search tool right on the home page. One-click launches the specialized interface that quickly enables users to search for foreclosures in their area and in other markets, via price, house size, etc., and they may also refine their search further with an extensive number of other parameters.

“The foreclosure transaction is vastly different today than it was five or ten years ago,” explained John D’Ambrogio, vice president, Strategic Development, Baird & Warner. “Years ago only a few people specialized in these transactions. Often buyers wouldn’t even see the property, they merely invested in its potential.” Juxtapose that to today, where D’Ambrogio says this has become an active part of business because there is such a large inventory of foreclosed properties on the market and today’s savvy consumers want easy and user-friendly ways to access it.

D’Ambrogio heads up the firm’s REO (Real Estate Owned) division that serves as intermediary to banks and others holding foreclosed properties–managing everything from marketing to utilities, repairs and improvements so they can be sold as soon as a buyer’s financing is in line. “These kinds of properties are priced to sell, involve less emotion than the typical residential transaction and in many cases we can move foreclosed sales along very quickly.” Baird & Warner is the only known Chicago firm with a dedicated REO staff specializing in this line of business.

For more information, visit www.bairdwarner.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

RISMEDIA, March 10, 2010—USA Cares has launched a new education course designed to provide loan officers with a clear understanding of how to work with military clients. Through the USA Cares Military Family Housing Lender Education Program-accessed online at www.usacares.org, the Participating Lender Course provides the tools and knowledge needed to effectively work with military borrowers, especially in a fast-paced and competitive market.

“This course aims to put greater numbers of military families into affordable homes through knowledgeable lenders who understand the unique circumstances brought about by military service,” says Bill Nelson, executive director, USA Cares.

The course makes sense of the military language, rank and pay system. It even outlines what happens when a service member is injured and explains how their pay will continue during hospitalization and treatment. Earning the Certificate of Completion for the Participating Lender Course indicates a significant knowledge base that active duty service members and veterans can rely on for prompt and accurate service of their housing needs. Certified Participating Lenders will adhere to specific Standards of Practice, representing a commitment to provide quality service to military borrowers.

USA Cares is no stranger to supporting the homeownership goals of military families. “We’ve paid out over one million dollars to save military family homes from foreclosure in the past three years,” says Jennifer Robinson, USA Cares director of assistance. “This new effort will help reduce the need for such assistance by supporting military borrowers and their lenders as they work together to make affordable and sustainable housing decisions.”

For more information, visit www.usacares.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

RISMEDIA, March 9, 2010—Online marketing is–in comparison to the business of selling real estate–a relatively new thing. Just 10 years ago, it was not an important part of any agent’s marketing for many reasons. Now, with a majority of North Americans having access to high-speed broadband Internet, online marketing is one of the most important parts of any agents marketing; after all, with more than 80% of all residential home sales beginning online, if you can’t make it work for you, you are missing out on 80% of the business.

What is SEO?
Please think of the Internet as a giant filing cabinet and think of each page on a website as a conventional manila file in alphabetical order. Currently, more than eleven billion pages of websites are indexed by search engines. That means that when a shopper types in what she wants to see, the search engine must find the proper file and show it as a choice in a fraction of a second. This can’t happen without proper SEO (search engine optimization), because even a computer has trouble indexing 11 billion different files; as the search engine goes to the “location” file and parses down to whatever is being searched for (homes, condos, real estate, real estate agent, etc.), wherever it is, there will be at least 500 real estate agents in the mix. SEO affects which 10 agents are shown first, and so on, with the goal of putting your site on that first page, where the prospect can choose it. You can see the problem: not only is the Internet one large filing cabinet, just getting to the right location in .3 seconds is a chancy thing—especially if your ‘file’ is misfiled. That’s the function of SEO: to put your site in the proper file where it can be found every time under what you sell—in as many different descriptions of what you sell as possible.

Non-agents are making it harder for agents to get onto that first page
These days, large corporations and portals are trying to elbow individual agents off those first pages. The biggest offenders are lead aggregators, who try to have anyone searching for a home anywhere end up at their central site so they can sell that name to their customers—sell it (in many cases) multiple times. These lead aggregators never brand to you, they brand only their own brand. They all have spent huge amounts getting their aggregator on as many different searches as they can—although they have no offices there. (Please note that proper organic search can still outperform the big entities, enabling an agent to be found on 500 or more search terms on the first pages. While that is a good thing for every agent, it is also a clear indicator that in years to come, getting found will continue to get harder and it will become–even more—the province of professionals).

The consumer, however, usually does not want to talk to a faceless corporation so in most cases, they skip those corporate sites and look for a local individual agent to work with, instead. They’ll click on those agents’ sites and if they like what greets them, maybe they’ll stick around. Of course, without SEO, those agents won’t be able to be found on that first page.

Just being on that page is not going to sell houses; more is needed today
Five years ago, if an agent could just get to that first page, success would follow. Today, it’s not enough. These days, it’s all about conversion—from random visitor into lead. Most individual websites do a poor job at converting visitors into leads partially because most websites are simply software templates designed by big software marketers. They sell the same page over and over again in the form of a website subscription and they can’t worry about optimization; standardization is their big concern and that is at odds with customization, which is needed to make the site “stickier,” i.e., to make people stay there and sign in.

Custom sites, on the other hand, have a whole separate set of issues as custom Web builders tend to be more expert in “pretty” than in “effective” and many of them will not “desecrate” their designs in order to implement things vital to success online, like lead capture. Online marketing is not about “pretty.” Forget trying to win that “most beautiful website” award. Try to convert 5% of your unique visitors to sign-ins, instead.

If you don’t have visitors you can’t convert them to sign-ins and without proper SEO, you probably won’t have enough visitors to matter. Even if you do have proper SEO you might not get enough visitors in some cases. You must have a minimum level of traffic; the better and more effective your site is, the less visitors you need and vice-versa. To the extent that your site is more effective, you can do with less traffic—when your site is effective you may find that even 100 visitors monthly produces a steady stream of good leads. Success in online marketing only begins when people register on your site—voluntarily—because they really do want more information.

SEO is getting more complicated and so is succeeding at online marketing
Google, Yahoo and Microsoft know the value of their search engines so they continually make it harder for folks to affect their placement on them. Blogs and social networking are developments to try to get more placement than the search engines algorithms would accord an ordinary site. For a while, that may help with SEO, but the engines are adjusting and will continue to do so.

What agent has the time and/or inclination to try to stay abreast of all these changes? That, dear readers, is why 90% of agents are unhappy with the production from their websites: it’s just too hard to keep on top of all these constantly changing factors for most people to do while trying to list and sell real estate.

SEO is but one part of a balanced approach
You could study SEO for years, only to find out that much of what you learned had been superseded by new developments and algorithms, making what you learned obsolete. You could blog until your fingers bleed and not sell one home online. You could drive yourself around the bend trying—and failing—to succeed online, just like 90% of all agents, until you just give up and admit defeat.

Here’s what you need to do:
-Maintain a good marketing platform with information available to the consumer upon request; get them to tell you what they want and give it to them;
-Make certain that people searching the Web for homes can find your site;
-Build traffic and convert visitors to your site into registrations;
-Learn the proper way to follow up these leads; the timing, the methods and the follow-up techniques.

Do that and the world of buyers will beat a path to your door. If you can’t do that all by yourself, you need to hire an entity or person to do it for you, or you will never get a shot at the 80+% of home sales that begin on the Internet.

Success online is becoming a specialty and you aren’t a specialist in online marketing
You could learn how to do this—but how long would it take and how much would it cost? The right way to evaluate the issue is to decide just what online success would be worth to you, and then decide whether it is worth your effort.

Here’s how you decide:
-How many homes did you sell last year?
-How many homes did you sell last year as a result of your online marketing?
-What was the average commission you made on each of those home sales?
-How many additional units would you need to sell to cover the costs and time necessary to learn how to do this or to hire experts to do it for you? (Hint: It’s less than ONE side in most cases).

The Internet is not going to lose market share
Buyers want to browse the Web and look at homes, but they want a real professional with them when they get down to buying one. That is the fundamental reason that real Internet leads are so valuable; 81% of the time, handled properly, that lead will stay with you all the way to purchasing a home. Life as an agent is so much more satisfying when you always have new people to call on and the Internet can provide those people for you to call on. More than 80% of all residential homes sales start online and that’s not going to decrease. Instead of trying to become a ‘master of the Internet,’ why not just stay a master of real estate sales and consider hiring professionals to do your Internet prospecting for you? Use the Web to prospect; you spend your time selling things to people.

It’s a radical idea to some people. But in reality, it’s the only way to guarantee success in online marketing. Let others worry about algorithms and changing search engine patterns; you hold them accountable to produce buyers for you. What could make more sense?

Mike Parker (mparker@theblackwatercg.com) is a well known authority on the subject of online marketing services for Realtors® and other real estate professionals. If you’d like a actual demonstration right there at your desk about how you can have strong internet prospecting done for you more cheaply and more effectively than you can do it yourself, click here and an actual live demo will be done for you at no cost or obligation—right at your desk.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

For more top headlines on RISMedia.com, be sure to see:
Mortgage Backed Securities and the Real Estate Market: Where Do We Go From Here?
Continued High Negative Equity and Home Value Declines Put a Damper on an Encouraging 2009

RISMEDIA, March 9, 2010—Prudential Real Estate & Relocation Services (PRERS) announced yesterday at its annual sales convention in Austin, Texas, the launch of a first-of-its-kind research and development laboratory designed to build a new generation of tools for real estate professionals.

With “Make it Happen” as the theme of its 2010 convention, PRERS Chairman Jim Mallozzi introduced the Prudential Real Estate Collaborative Innovation Partnership (PRECIP)—a program that will bring together the real-world knowledge of key Prudential Real Estate Network brokers and sales professionals with leaders in immersive world technologies, web 2.0 applications, mobile technologies and more.

“I want to talk to you today about change and innovation,” said Mallozzi from the stage of the Austin Convention Center, “but talk about change and innovation is cheap – we hear it every day. I’d like to borrow on the success of James Cameron (creator of the film “Avatar”), and invite you on a tour of another world…not really another world, but the future; a future that’s right around the corner. I’d like to welcome you into my imaginary home.”

With that, Mallozzi took attendees on a life-size virtual home tour that allows both real estate professionals and prospective buyers to interact by immersing themselves into the tour—no matter where their respective physical location happens to be. Serving as a preview of new technology to come from PRERS’ imminent relationship with Montreal-based Immersive Design Studio (IDS), these next-generation virtual home tours are designed to be as emotionally compelling as the real thing.

“This is a real house tour, not a power point or a video,” said Mallozzi. “This is something we can interact with. If we want to turn right, we turn right. If we want to go upstairs, we go upstairs. If the client doesn’t like the color of the walls, then snap—change it. IDS is the leading-edge innovator in the realm of immersive experience, responsible for building one of the top video game engines. Why not use this amazing technology for business? As I think about our business, I think we should be led by this simple, but powerful, phrase: why not?”

According to Mallozzi the immersive home tour technology will allow agents and clients “from opposite ends of the continent, from opposite ends of the world” to come together in the virtual home and exchange thoughts with each other in real time. “You can participate from your own PC or iPad…or real estate professionals can create their own interactive space within their office,” he added.

New technology, however, is nothing without the input and exchange of ideas from the Prudential Network, stressed Mallozzi, referring to the new R & D lab as a “collabrotory.”

“Our mandate is to take new ideas and technology and turn them into the types of tools we need to compete in the future. PRECIP is a network of thinkers and doers, including many of you.”

“It’s a new year, it’s a new time,” PRERS President Earl Lee told the audience. “Like you, we’re very confident of our destiny and it’s in our own hands. You all make it happen.”

According to Lee, in today’s challenging marketplace, embracing change and innovation is a must for the brand as well as its affiliates. “Fundamentals are more important than ever, but the most crucial aspect of our business is how we communicate with our customers. We must transform that ‘how.’”

As part of its innovations aimed at further enhancing communication with consumers, PRERS also announced the following online tools at the convention:

- Prudential Media Center: A centralized, online repository for presentations, videos, photos, etc., allowing agents to easily create and customize listing presentations.

- Rent-to-Own Calculator: A website tool enabling consumers to see how much home their current rent payments would allow them to buy. The calculator displays Prudential listings in the area whose estimated mortgage payments would match the buyer’s rent payments.

- Upgrades to the Online Seller Advantage (sm), including direct interface with more than 200 social media sites, allowing agents to share listings.

- Mobile solution: Allows consumers to receive Prudential Real Estate listings via their smartphones

RISMedia welcomes your comments and questions. Email realestatemagazinefeedback@rismedia.com.

RISMEDIA, March 9, 2010—Forget loan modifications, short sales, and “jingle mail”! If you are one of an estimated 50 to 60 million homeowners whose mortgage is part of a securitized pool, the law is on your side and everyday more and more people are deciding to exercise their rights with regard to the documents they signed.

There is much more contained within those documents and pooling and servicing agreements that govern the pools than just the borrowers promise to pay. And, there are laws that must be adhered to by the lender of the money.

As it turns out, virtually all of the securitized private label loans were part of a massive and ongoing fraud upon both the borrower and the investor. And, the fraud continues as the pretender lenders force more defaults, stop making payments to the pools, collect on the credit default swaps, and top it all off by seizing the underlying assets (only if they can make additional money on them) and keeping any proceeds for themselves.

What borrowers and investors agreed to and what they actually got are at odds, and these discrepancies raise serious legal issues including, but not limited to, Truth In Lending Violations, Real Estate Settlement Procedures Act Violations, Fraud, Bait and Switch, illegal kickbacks involving the borrower, and out right fraud and conversion upon the investor.

In the cases of loans such as a 2/28, pick-a-pay and option arm, their very existence is prima facie evidence of predatory lending and fraud upon the investors.

Nor are we talking about a small amount of money or a technicality. We are talking about a complex system of deceit by financial intermediaries that can turn a single modest home loan into millions of dollars in profit for them.

The Worse the Loan the More They Can Make

Suppose a buyer actually qualifies for a $300,000 fully amortized, fixed rate loan at 5%.

But, right at the end of the process the underwriter calls the loan officer and says something like this;

“We’ve just had a change to our underwriting guidelines and we aren’t going to fund the loan.”

This is really funny because the loan is already funded. Now, it’s time to kick up the profits. Of course, the loan officer’s emotions run the full range from disbelief to anger to fear. “Why?” She pleads.

Underwriter: “His ratios. He needs a lower monthly payment. Resubmit in our new super-duper, magical flex loan with the built in implosion feature.”

Now, before we run out and lynch a bunch of loan officers, this is what they were given to work with and trained to do. They were as indoctrinated into this as if they had drunk the cool aid. If it makes you feel better, they got pushed into these loans too. I get a lot of email from loan originators and real estate agents who often feel embarrassed about their choices, but back then we didn’t know that it was just a giant Ponzi scheme.

The loan product is determined by an underwriter. The perception is that the only purpose for underwriting is to determine the credit worthiness of the borrower and the value of the security. But, the underwriting process actually yields far more valuable information. It also reveals the borrower’s default probability and numerous details about their behavior. Knowledge of the borrower’s behavior combined with negative features in the loan allowed insiders to project when the loan would default.

Armed with this information, the underwriter is able to “tweak” the loan to increase the Yield Spread Premium and the Service Release Premium, as well as, increase the likelihood of collecting on the credit default swaps. That is the process of putting you into the most profitable loan possible. And, it is where the real predatory lending takes place.

Back to our borrower. By bumping our highly qualified borrower from 5% to 8%, they only increase the likelihood of default; they are able to extract an enormous undisclosed Service Release Premium and a Yield Spread Premium. The Yield Spread Premium is supposed to be disclosed, but often isn’t.

The Service Release Premium is where the real money is, and it’s hidden. The investor provides $480,000 to the financial intermediary in exchange for a five percent annual return of $24,000 plus a guaranteed return of principal.

The financial intermediary only loans our borrower $300,000, but when the rate adjusts to 8%, the investor has his $24,000 annual income, the financial intermediary pockets a $180,000 Service Release Premium, makes up the initial shortfall in the pool payments and buys credit default swaps.

So this is where we really are.

They are not banks. They call themselves banks, but they aren’t banks.

They did not lend you any money. They loaned you someone else’s money.

You don’t owe them any money. Maybe you owe a pension fund or something, maybe not.

You may not owe anyone any money. If the investors recouped their losses from TARP funds, you no longer owe them anything.

They may owe you money. If you were the victim of predatory lending, your damages could be into the hundreds of thousands of dollars, plus legal expenses

They may have no legal right to foreclose on you.

You have a legal right under the terms of your loan agreement and common law to raise the above issues with the true holder of the original note you signed.

Why? Because securitized loans presented an opportunity to commit fraud on both the true lender by skimming, and the borrower by convincing him he should accept a far more expensive loan than the one for which he qualified.

The financial intermediary wrote the pooling and servicing agreements and the credit default swaps. The terms of the pooling and servicing agreement allow the financial intermediary to stop making payments on all loans in the pool and keep the revenue stream from the performing loans when a default occurs within the pool. It also allows the financial intermediary to collect on the credit default swap on the entire pool which is multiples of the loan value of the entire pool.

The game was rigged, but they overlooked one little thing; The Uniform Commercial Code, Chapter 3, 47-3110. The Uniform Commercial Code is replicated in virtually every state, and this section governs who may enforce a note.

Look at this a different way. Suppose you wanted to pay off your loan, but you wanted to be absolutely certain that the money would go to the rightful party so that you would not be subject to someone showing up later claiming you never paid off your note. You have a legal right to know who that party is.

If they cannot satisfy this provision of the UCC, they cannot proceed to foreclose. If you wanted to take the fight to them and see if they can produce the note, this is the law you need to pursue.

For more, see my blog, http://www.realtown.com/gwmantor/blog.

George W. Mantor is known as “The Real Estate Professor” for his consumer education efforts including a long-running radio program, monthly workshop series, public appearances, and frequent articles.

During a career dating back to 1978, he has amassed experience in new home and resale residential real estate, resort marketing and commercial and investment property.

Prior to starting his own real estate and mortgage brokerage in 1992, he had been Director of Training and Customer Service for Great Western Real Estate. In addition, he has served on virtually every real estate committee, including a term as a Director of the California Association of REALTORS.

George is a nationally respected authority on all areas of real estate and is frequently quoted in a wide range of publications. He is an oft invited guest of Fox Business Network and for many years, he was the host of “Keepin’ It Real…Real talk about the real thing, real estate” on KCEO radio.

The Real Estate Professional includes him in “a directory of the Nation’s outstanding authors, columnists, and speakers. His articles have also recently appeared in Real Estate Finance, The Real Estate Professional, National Real Estate Investor, Broker Agent News, and Realty Times. His blog is  http://www.realtown.com/gwmantor/blog.

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