Peter Wayman Senior REO Sales Director for Freddie Mac (Full Bio)

September 17^th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate Investors Association and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, Claudia Buys Houses, The Business Press, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by Peter Wayman. Peter is the Senior REO Sales Director for Freddie Mac. He oversees the design of sales strategies and how those strategies are applied across the REO portfolio. His group oversees the retail sales process, auctions and investor sales. Peter is responsible for the Affordable Housing Strategy: selling homes to organizations engaged in neighborhood stabilization. Peter came to Freddie Mac with 32 years of executive relocation experience. In that position, he has won national awards and is in the hall of fame.

The major product offered by the relocation industry has been the purchase of the transferee’s home. Peter is accustomed to valuing and selling on a cost plus basis. He does not have to foreclose and evict transferees, but he does have to call executives of companies and tell them the value of their homes. The relocation industry operates globally.

Freddie Mac’s primary method for selling homes is to put them in the hands of great brokers. Also, special incentives are offered to owner occupants to encourage purchasing. Freddie Mac’s focus is to make home buying possible, and to do that by positioning their homes fairly for owner occupants. To effectively use this strategy, homes must be conditioned for financing, buyer’s closing costs must be addressed, and home warrantee programs are offered as well. Freddie is biased towards getting owner occupants into homes.

History shows that if an owner occupant lives in a house, their occupancy improves their neighborhood. Freddie Mac is concerned with neighborhood stabilization. When owner occupants invest their money into a house, they connect more with the community and have more pride in their community.

In 2009, Freddie Mac ended the year with 71% of its homes going to owner occupants. This year, we are slightly under that percentage. We are in a prime selling season now, and Freddie Mac is finishing one of their special programs for owner occupants.

The ratio of 70:30 for owner occupants to other types of owners is considered acceptable by Freddie Mac. Freddie realizes that some of their properties are not currently suitable for occupants. Freddie puts the Neighborhood Stabilization funds into the hands of an NSP grantee for properties in bad condition. The NSP grantee uses the funds to renovate the home, add green energy options to it, and then sell it to an affordable buyer. These homes often receive $30,000 in renovations, which is not something that many private investors can do. Most of these funds are targeting extremely hard hit areas and some homes are even being considered for tear down.

Not all investors do a bad job of renovating properties, but Freddie Mac has to deal with a wide scope of investors. Freddie Mac considers responsible investors to be a viable option for getting rid of inventory.

NSP funds are delivered from a city or county. The largest portions of the funds come from the federal government, but state governments, land banks, and non-profit associations are also engaged in neighborhood stabilization. Freddie Mac is open to working with all of these companies.

Companies with NSP funds have an advantage when looking for properties owned by Freddie Mac. Freddie Mac uses an NCST (National Community Stabilization Trust), which provides access to grantees with NSP funds. The NCST works with a large number of grantees and servicers. It creates an interchange which shows all of the servicer’s properties on a google-type map. The grantees may then look to see if there are properties being offered in their designated census tracks for neighborhood stabilization. They then immediately have the opportunity to ask the servicer for a home’s price. All of this happens during the pre-list phase of moving REO inventory, so grantees have the opportunity to view properties while Freddie Mac is still valuing the properties.

Some cities have had trouble spending their funds for damaged properties. This may be due to the difference in reaction time when compared to a private investor. Some of the NSP-1 funds had to be committed as of today, but there are also NSP-2 and NSP-3 funds. Each grantee takes a different approach on assembling their programs. Some of them got started more quickly than others.

Freddie Mac has been heavily involved in the modification process and in foreclosure alternatives. Peter believes those two tools are becoming much more effective, because the servicers and Freddie Mac are developing more effective automation. Also, staff training has improved, and the real estate community is becoming more educated. All of these things have helped make modifications and foreclosure alternatives more effective.

Banks are beginning to address serious delinquencies. At the end of the 4^th quarter of 2009, serious delinquencies peaked at 4.13 percent of all mortgages. This percentage has been coming down for 5 months in a row.

We are also seeing the REO inventory increasing. In January 2009, we had 21,000 REO homes, and in January 2010, we had 45,000. At the end of July 1^st, we had 62,000 REOs. That 62,000 represents inventory in redemption, eviction, pre-list, listed, sold and going into closing. Generally speaking, over 50 percent of REO inventory is in redemption, eviction, and pre-list. That number is currently closer to 55 percent.

Peter believes it has been proven that losses are lessened by modifications. The sooner you address the problem, the lower the costs are in the process. A foreclosure should be considered a last resort.

Modifications had a 60 percent failure rate. Peter believes that as the modification process has gone to using written verification and careful coaching, the failure rate has gone down.

In September, Peter will be a part of the I Survived Real Estate 2010 panel. He will be speaking in front of about 400 eager investors, who will be trying to figure out how to get their share of Freddie Mac’s properties, and possibly even get a chance at a bulk purchase.

Peter is very excited to work with this charity program. Freddie Mac has to be primarily concerned with getting rid of properties at the lowest cost to the tax payer. Freddie Mac has discovered that nothing works better than listing properties with a great real estate broker, exposing it to the entire market, having a property priced and conditioned right, and allowing that exposure to drive a retail sale within 90 to 120 days. This focus tends to work extremely well. There are some assets that do not sell within that time frame. When assests don’t sell well, Freddie Mac turns to ballroom auctions and online auctions, and finally to bulk sales for investors. Investor bulk sales are not perceived as having the highest potential recovery rate. Less than 0.5 percent goes through bulk investor sales. Freddie Mac is currently developing a better strategy for bulk sales. There should be more bulk sale activity in the future.

Some states have different real estate problems, and there are some problems that necessitate different solutions. In Florida, Freddie Mac has a waver on REO condo requirements, so Florida condos make great candidates for bulk sales. Properties with Chinese drywall, low values, no insurance options, no occupancy certificates, or environmental problems will be more likely to end up in a bulk sale. Lots of investors contact Freddie Mac asking to buy all the $200,000 properties in California and Arizona. Peter responds to those investors saying, “You mean all those properties that I get multiple offers on within the first two weeks of being listed on the market?” Freddie Mac does not need investors to buy those properties.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Adrenaline Athletics, Benton Investment Group, Community RE-Invest Group, Delmae Properties, Elite Auctions, Entrust California, Everlast Photography, Inland Empire Investors Forum, Keystone CPA, Landwood Title, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Rick and LeeAnne Rossiter, San Jose Real Estate Investor Association, Starz Photography, Summit Solutions, Tony Alvarez, Wealth Point, and Westin South Coast Plaza.

Sean O’Toole Founder and CEO of ForeclosureRadar (Full Bio)

September 17^th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate InvestorsAssociation and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, San Jose Real Estate Investors Association and Geraldine Barry, Claudia Buys Houses, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by Sean O’Toole. Sean is the Founder and CEO of ForeclosureRadar.com. ForeclosureRadar is the only company that tracks every foreclosure in California, Arizona, Nevada, Washington and Oregon. It makes updates daily on all foreclosure auctions. Prior to ForeclosureRadar, Sean spent 15 years building and launching software companies. In 2002, Sean entered the foreclosure business, and bought and sold over 150 properties.

Bruce thinks everyone who is a trustee sale buyer should be a member of ForeclosureRadar. When Sean started Foreclosure Radar, there were only about 40 trustee sale buyers who bought the majority of the deals within the state, but now there are thousands. The invention of the lower bid has created activity. We wish they would drop their opening bids even lower.

5 to 10 billion dollars worth in properties go to the courthouse steps every month. 80 percent of those properties go back to the bank as REOs. The number of REOs have decreased 50 percent from July 2008. However, there are still a huge number of properties being taken back by banks. From a historical perspective, we still have an outrageously high number of REOs.

People tend to have this mentality that nothing bad can happen from here on out, because they don’t think the lenders will unload a bunch of inventory into the market. However, in 2007 and 2008, that is exactly what they did. Up until the end of 2008, regulations required you to file a notice of default after 60 to 90 days of delinquency. In September of 2008, Paulson changed the rules, and since then, they have changed the rules to mark to market. Lenders now have this mentality that discourages them from foreclosing so long as there is some hope of receiving payment at some point in the future.

People are wondering when all the shadow inventory is going to show up and ruin everyone’s day. Shadow inventory has a few different holding tanks. The banks are holding it and not releasing it. In 2008, there was growing evidence that banks had inventory that were not being listed. In 2009, banks started selling more foreclosures than they were taking back. In the mean time, we had delinquencies that were over 90 days delinquent and were not going into foreclosure. Some properties are as much as 180 days delinquent. We have 1 million homeowners in California that are not making payment, but only 200,000 in foreclosure, and only 15,000 to 20,000 being foreclosed on per month.

There is a report claiming that “once a person is behind, the odds of them making that payment current again without a loan modification is 1%”. Sean thinks that may be true historically, but right now, the situation is worse than that. In the past, people went delinquent because of job problems, but this time, they are going late because we had a massive credit bubble that doubled home prices fictitiously. We have now corrected those prices, but we have 4 trillion dollars in excess mortgage debt. People are realizing that they are never going to get that money back, and paying the interest doesn’t help them.

ForeclosureRadar noticed an increase in investor activity in 2009. Subscriptions increased slightly around that time. Right now, people are concerned that the economy and housing might double-dip. Bruce thinks that a double-dip will probably occur.

A lot of ForeclosureRadar’s growth has come from builders and commercial real estate brokers. The court house steps have become much more competitive because of these two groups. They can’t just stop working because their niche isn’t doing well.

From 2002 to 2006, good investors could get a 50 to 75 percent return on capital. In 2007, the market went away because the banks weren’t dropping the bids. In 2008 and 2009, Sean heard plenty of stories about investors getting an 80 percent return on capital. It got really good for a little while, but over the past six months, the market got a lot more competitive. There are plenty of risks with buying at auctions. Bruce believes that someone makes a mistake every day at the courthouse that alters their financial life for a while.

The government has decided that it is better to avoid taking a property back to the lender. ForeclosureRadar is tracking the lenders who are willing to work problems out. Investor short sales concern Sean, especially if the deal is being bought to be flipped. Some people are claiming you can make a lot of money by doing a short sale through a double escrow. Sean thinks people who do that are going to get themselves into trouble. Bruce interviewed the FBI on this subject, and the FBI described the people who do double escrows as perpetrators. There are short sale opportunities out there, but there is a lot of risk involved. It can be difficult to convince lenders that you have added a significant amount of value to a recent short sale.

Lenders understand that auctioned properties are being sold at a discount. On a short sale, lenders believe that a market sale is being made, and they will not like the idea of selling a short sale at $100,000 below market.

Deutsche Bank recently made a report on mortgage servicers and how long it takes to do a short sale. With prime mortgages, GMAC took six months on average, CitiGroup took 7.5 months, Wells Fargo took 8 months, and Countrywide took 13 months. There is a buyer attached to the end of these deals, and no one is going to wait 13 months.

People involved with HAFA brag about their ability to sell within six months, and Bruce thinks that is ridiculous. The problem is that people are not coming to terms with the losses they are going to take. The government also has a few policies that are affecting speed. If Bruce was attached to that business, he would be very frustrated.

Mortgage insurance companies know they will have a better income and have less of a loss with a short sale, but if they have that loss right now, then they’ve got a payout to make. If they do not approve a short sale, and force a property into foreclosure, they may not have to payout for 8 or 9 months.

Sean believes that companies are moving away from principal reductions. Freddie claimed that they are not going to do principal reductions, because they have been tasked with protecting tax payer funds and they cannot just give out principal. If GSEs, who hold a lot of the mortgage debt, start giving out principal reductions, then that comes directly at the cost of the taxpayers. Freddie has a deed-in-lieu lease back program with a lease option. If someone does a deed-in-lieu under this program, they have a two year waiting period before they get to buy a property, and Bruce has the feeling that the property they will buy is that same property they were previously in. That would cause less volatility in the market, because it would discourage buyers from moving around.

Sean recently did some research for American Banker Magazine on jumbo loans. Loans under $417,000 are the fastest to be foreclosed on. Mini jumbos, which range from $417,000 to $729,000, take 30 days longer to foreclose on, and it takes even longer to foreclose on big jumbos. If lenders are struggling to deal with reality anywhere, it is at the high end of the market. Lenders sometimes try to aggressively foreclose with the hope of scaring the borrower into paying, but when they don’t get scared, the borrowers will simply vacate and move, and then the foreclosure gets cancelled. When lenders do not foreclose because they do not want the house, they are usually cancelling foreclosure by the masses. These lenders are often working to get people into the HAFA program, so that they can get a short sale or deed-in-lieu. Sean thinks the HAFA program is just like HAMP last year. It is not meant to conclude a bunch of short sales, it is meant to put people through another six months of delay only to tell them that they do not qualify.

Sean O’Toole’s website is www.foreclosureradar.com

Sean will be on the I Survived Real Estate 2010 panel in September.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Delmae Properties, Elite Auctions, Entrust California, Inland Empire Investors Forum, Keystone CPA, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Tony Alvarez, and Westin South Coast Plaza.

Freddie Mac’s claims the average rate for 30-year fixed loans this week fell to 4.44 percent. RealtyTrac reports that national foreclosures increased 3.6% from last month. Initial unemployment insurance claims increased this week by 2,000 to 484,000, according to the Department of Labor. Foreclosure Radar announced notices of default filings in California slipped 4.8% from June, and notices of trustee sale fell 18.9%.

In The News:

NAHB - “Active Adult Home Builder Activity, Confidence Drop” (8-12-10)

“Builder confidence in the mature-housing market retreated during this year’s second quarter, according to data from the National Association of Home Builders’ 55+ Housing Market Index (55+ HMI) – a quarterly survey of the association’s builder members engaged in the production of mature-market housing. This past quarter’s index values dropped for all areas surveyed, compared to the previous year’s second quarter.”

Associated Press – “Mortgage rates hit low of 4.44 pct.” (8-12-10)

“Mortgage buyer Freddie Mac says the average rate for 30-year fixed loans this week was 4.44 percent, down from 4.49 percent last week. That’s the lowest since Freddie Mac began tracking rates in 1971.”

Inman - “FHA premium changes pushed to Oct. 4″ (8-12-10)

“FHA Commissioner David Stevens announced last week that upfront premiums for FHA mortgage insurance would be rolled back from 2.25 percent to 1 percent on Sept. 7, while annual premiums would nearly double. FHA had raised upfront premiums from 1.75 percent to 2.25 percent in April, to cope with rising losses on FHA-guaranteed loans. The Obama administration promised to reduce upfront premiums if Congress gave it the authority to raise annual premiums beyond their statutory limit of 0.55 percent.”

CNN - “Foreclosures rise in July” (8-12-10)

“The latest foreclosure numbers carried a mixed message: They’re up 3.6% from the month before but down 9.7% from 12 months earlier. In July there were more than 325,000 foreclosure filings — including notices of default, auctions notices and bank repossessions. That is the 17th month in a row total filings exceeded 300,000, said RealtyTrac’s CEO, James Saccacio.”

Sacramento Bee – “42,000 of California’s jobless will get help with mortgages” (8-12-10)

“More than 42,000 laid-off California homeowners are about to get a break. Starting Nov. 1, the government will help them make mortgage payments while they look for another job. Wednesday, the U.S. Treasury Department added $476.2 million to a $64 million state program that will pay jobless homeowners up to $1,500 a month.”

Housing Wire – “Weekly Jobless Claims Swell to 484,000″ (8-12-10)

“The number of initial unemployment insurance claims grew by 2,000 to 484,000 in the week ending August 7, swelling more than expected after last week’s initial figure was revised upward. The four-week moving average rose to 473,500, from the previous week’s revised average of 459,250, according to new data today from the US Department of Labor (DOL).”

Housing Wire - “California Foreclosure Activity Remains Mixed in July” (8-12-10)

“California mortgage defaults and foreclosure activity remained mixed in July, according to ForeclosureRadar, which tracks filings across the state. Foreclosure filings and cancellations dropped in July after rising in June while foreclosure sales rose after dropping last month. Notices of default filings slipped 4.8% from June and 47% from the same month last year. Notices of trustee sale fell 18.9% from June and 30.5% from July 2009″

Housing Wire – “Freddie Mac Economist Finds Growing Investor Preference for Hard Cash” (8-12-10)

“In Freddie Mac’s report, ‘Where Have All the Originations Gone?’ released Wednesday, the government sponsored entity (GSE) said that 25% of 2010 existing home sales are all-cash transactions. This proves to be a growing trend in home buying as the percentage of cash transactions was between 5% and 10% just a few years ago.”

Wall Street Journal - “Foreclosed On—By the U.S.” (8-12-10)

“The Federal Reserve Bank of New York is facing the prospect of foreclosing on a number of properties in the coming months, from homes to commercial buildings, a result of a souring mortgage portfolio it took over when it helped bail out Bear Stearns in 2008.”

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Tommy Williams 2008 President of The National Auctioneers Association Co-Founder Williams and Williams Auctions (Full Bio)

September 17^th, 2010, The Norris Group returns with its award winning event I Survived Real Estate 2010. The Norris Group has assembled an incredible line up of industry experts to discuss the state of REO from the inside. Topics will include regulatory intervention and aftermath, bulk buying, myths and facts, and opportunities emerging for real estate professionals. 100 percent of the proceeds support the Orange County affiliate of Susan G. Komen for the Cure. This event would not be possible without generous help from the following platinum partners: Foreclosure Radar and Sean O’Toole, the San Diego Creative Real Estate InvestorsAssociation and Bill Tan, Investors Workshops and Shawn Watkins and Angel Bronsgeest, Invest Club for Women and Iris Veneracion and Bobby Alexander, San Jose Real Estate Investors Association and Geraldine Barry, Claudia Buys Houses, Frye Wiles, MVT Productions, and White House Catering.

This week Bruce is joined by Tommy Williams. Tommy is the past president of the National Auctioneers Association and cofounder of Williams and Williams Auctions. He has conducted over 10,000 auctions in 48 states and Canada. He is an advisor to auctions conducted in Western Europe, South Africa and New Zealand.

The auction business extends to almost any category. The world’s largest takes place every day in New York, and we call it the New York Stock Exchange. Buyers and sellers meet there and someone is conducting the price.

There are different acceptance levels in different countries toward auctions and different industries. If Tommy was planning to sell livestock, he would sell it through auction. Auctions are the accepted method for selling livestock of any kind. Used cars and used heavy equipment are also commonly sold through auction. Rare collectible items are sold through auctions too. The problem is that people developed a negative mentality of real estate auctions after the Great Depression when foreclosure Sheriff sales were occurring. This has caused people to perceive auctioned real estate as depressed, but in reality, auctioning is one of the best way to determine market value for real estate too.

Bruce read an article about an auction for Pete Rose’s baseball bat. It sold for $156,000 and the auctioneers thought that was too little. You sometimes cannot know what something will sell for, and that is the purpose of an auction; it reveals what a buyer is willing to pay. Tommy believes we get ourselves into trouble when we try to twist the market place, and we need the natural market to determine true value. We tried twisting real estate and we got disastrous results. Bruce feels like we are in the phoniest market he has ever experienced in his life. The government is trying to artificially influence the market.

Six years ago, Tommy started selling homes in the bad areas of Detroit. Those homes were selling for $10,000 to $16,000. The sellers were angry and said that Tommy should not have sold their properties. The city officials even threatened to stop auctions. If you go back to those homes today, you will notice that they have all been bulldozed, because there was no demand to meet the supply. It is difficult for sellers to accept that their homes are no longer as valuable as they once were. If those homes were bulldozed, then that tells Bruce that the value of those homes was not even $10,000 fifteen years later, it was zero.

Tommy has many stories about investors who bought properties at a discount, and then sold through an auction for more than double what they bought those properties for just 90 days before.

Not all auctions are created equal. There is a company in California that buys homes in ballroom auctions, and then re-auctions those homes for a profit. Tommy auctions properties right in front of the house. History has proven to him that this method brings in the greatest net value. All real estate is local. The people within walking distance of your home are the biggest supporters you can have for that neighborhood. When people discover that you can walk down to a property and buy it for what you are willing to give, they become happy bidders. When you move a property to a ballroom auction, the auction may take place hundreds of miles from where the property is. This discourages local buyers, which are the best buyers, from coming.

The real estate market place changes very fast. An auction company as big as Williams and Williams is able to quickly look at trends in different states. Every month, Tommy’s company sells over 1,000 homes throughout the United States. These auctions allow him to determine when a disaster or boom is coming.

If a builder auctions a track of houses, the public will think the builder is in trouble. However, Tommy feels this is irrelevant. Auctioning might still be the best business decision they will ever make. They should go ahead with the auction, and allow their buyers to pay what they are willing to. Bruce can guarantee that in 2005-2006 builders never got full price for a house. The builders could not build fast enough, so they gave their 20 buyers a lottery number and then allowed the winner to buy for full price. If the builders had put those 20 buyers up against each other at an auction, who knows how much more those homes would have sold for. Auctions are incredibly value in an increasing market, because they allow you to see how much people think your house is worth at that moment. If you interfere, you put a sealing on your home value, which could be very low.

Tommy believes buyers often feel that auction results are manipulated. Tommy would blame the auction industry for that buyer mentality, because in the past, auctions have not been conducted in the right manner. If you are going to hire an auction company, check how long they have been in that location, and check their references. Talk to other people who used the company to sell in the past.

Online auctions are becoming more popular, and it can reduce the level of trust that a buyer will have in the auction company, especially if that auction company has a bad history.

Tommy auctions off a lot of privately owned properties. He did not start selling bank owned properties until about six years ago. His company is built around selling private property.

Too many people look at life in the short term. The auction profession has an unlimited amount of potential, and he would encourage any of his children to get into it. However, you have to enter this business with a long term plan. Before this year ends, Williams and Williams will begin to broadcast their auctions live, so anyone in the world can bid. This technology may cause some bidders to feel like they are being tricked, because they will not be able to see all the bidders making offers. Tommy is trying to obtain technology that will allow the bidders at the auction site to see the activity of the online bidders.

Bruce feels it is unfortunate that auction companies too often view each other as nothing more than competitors. Tommy believes there are many ethical auction companies out there, which he is willing to refer people to. We need to have a spirit of good will towards other people. When you are trying to tear down your competitor, you tear down yourself.

Lenders have come to the conclusion that they do not want to take a property back as an REO. These people would make a great team member with an auction company. Lenders are becoming more willing to accept the value given to them at an auction.

Tommy is now getting involved in the Assisted Sales Auction Program. This process involves a person who still owns and occupies a property, but is trying to accomplish a short sale. Bruce thinks that is a trend that makes a lot of sense. Bruce was on a panel with someone who was touting that they could get a sell done within six months through the HAFA program. This made Bruce laugh on the inside, because he wanted to say that he knew someone who could get the job done quicker.

Thank you Tommy for participating in The Norris Group’s radio show. Tommy will be on the panel for I Survived 2010.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

Thank you for being a Gold Sponsor for I Survived Real Estate 2010: Delmae Properties, Elite Auctions, Entrust California, Inland Empire Investors Forum, Keystone CPA, Las Brisas Escrow, Leivas Financial Services, Mike Cantu, North San Diego Real Estate Investors Association, Northern California Real Estate Investors Association, Personal Real Estate Investor Magazine, Realty 411 Magazine, San Jose Real Estate Investor Association, Starz Photography, Tony Alvarez, and Westin South Coast Plaza.

According to the NAHB, both demand and production of apartments increased from Q1 2009. Freddie Mac reports rates on 30-year fixed mortgages fell to 4.72 percent this week. RealtyTrac claims U.S. foreclosure activity decreased by 3 percent in May. Household net worth rose by 2.1 percent in the first quarter.

In The News:

NAHB - “Multifamily Builders Less Pessimistic” (6-10-10)

“The multifamily market showed signs of moving back toward stability in the first quarter of 2010, according to the latest NAHB’s Multifamily Market Index (MMI).  The current production index for market-rent apartments jumped to 30.6, 14 points higher than a year earlier, while future demand expectations for Class A apartments rose to 49.6 from 34 and for Class B to 53.1 from 43.9.  For lower-rent units and for-sale condominiums, the current production indexes rose to 38.2 and 25.0, respectively, more than 10 points higher than in the first quarter of 2009.”

Freddie Mac – “Freddie Mac: Mortgage rates hit low for year” (6-10-10)

“Rates on 30-year fixed mortgages fell this week to the lowest level of the year and were barely shy of the all-time low. Mortgage finance company Freddie Mac says the average rate sank to 4.72 percent, down from 4.79 percent last week. It was just above the record of 4.71 set last December.”

Wall Street Journal – “KB Home Buys in Inland Empire” (6-10-10)

“Builder KB Home snapped up 664 partially finished lots in California’s Inland Empire, a sign that one of the nation’s biggest boom-to-bust markets is coming back to life.”

Los Angeles Times – “Foreclosure filings decline 3% in May” (6-10-10)

“Foreclosure activity in the U.S. continued to level off in May with the number of homes caught up in some stage of the process falling 3% from April, a real estate firm said. A total of 322,920 properties received some kind of foreclosure filing last month — either default notices, scheduled auctions or bank repossessions — a 3% drop from April and an increase of less than 1% from May 2009, according to RealtyTrac in Irvine.”

San Francisco Chronicle – “Americans’ wealth rises for 4th straight quarter” (6-10-10)

“The Federal Reserve reported Thursday that household net worth rose by 2.1 percent in the first three months of this year to $54.6 trillion. It marked the fourth consecutive quarter that Americans’ wealth grew.”

Housing Wire – “RealtyTrac: Most Foreclosure Properties Not Underwater” (6-10-10)

“Of all of the foreclosures in the RealtyTrac online database, less than 50% have mortgages worth less than what is owed, said Rick Sharga, senior vice president at RealtyTrac, during a session at REO Expo, which concludes in Dallas Wednesday.”

Housing Wire – “Congress to Consider FHA Reform, Mortgage Insurance Hike” (6-10-10)

“House Resolution (HR) 5072, the FHA Reform Act of 2010, was reported to the House of Representatives Tuesday and could begin facing votes as early as this week. The FHA reform bill would raise the annual mortgage insurance premium to 1.55% from 0.55%.”

Bloomberg - “Subprime Delinquencies Show Clear ‘Positive Shift,’ RBS Says” (6-10-10)

“The proportion of U.S. homeowners turning delinquent on mortgages backing the securities that roiled the global financial system has tumbled in the past three months, even after accounting for a typical seasonal improvement, according to RBS Securities Inc. Of borrowers with subprime loans in 2007-issued bonds who had never missed payments, an average of 2.6 percent fell behind each month, a drop from 3.7 percent in February, representing a 15 percent decline after seasonal adjustments, according to RBS analysts.”

Bloomberg - “Banks Face Short-Sale Fraud as Home ‘Flopping’ Rises” (6-10-10)

“Sergio Natera and Anna McElaney are scheduled to be sentenced in Hartford’s federal court in August after pleading guilty to fraud. Their crime involved persuading lenders to approve the sale of homes for less than the balance owed –known as a short sale — without disclosing that there were better offers. They then flipped the houses for a profit. The Federal Bureau of Investigation, the California Department of Real Estate and mortgage finance company Freddie Mac have warned that such schemes may be spreading after a plunge in values left homeowners owing more than their properties are worth. The scams threaten to deepen losses for lenders that are increasingly agreeing to short sales as an alternative to more costly foreclosures.”

Looking Back:

One year ago, 2,771 new homes and condominiums were sold within one month in the subdivisions tracked by Costa Mesa-based HWMI. The MBA reported that mortgage application volume decreased by 7.2 percent in one week. Steven Kandarian said commercial mortgage defaults will rise in 2011 to 2012.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

A survey from the NFCC shows that only 23 percent of Americans consider strategic default to be acceptable when underwater on a mortgage. Starting today, Real Estate Disposition is auctioning more than 350 bank-owned foreclosures in California. According to IAS, national home prices were up 0.9% in April from March. An executive from RealtyTrac believes U.S. foreclosure activity will not stabilize until late 2011.

In The News:

Inman - “Builders’ incentives to buyers under scrutiny” (6-8-10)

“Federal regulators are once again scrutinizing incentives tied to the use of homebuilders’ affiliated mortgage and title companies, looking for evidence that they cost consumers more than they’re worth, help inflate appraisals, and lower underwriting standards. The Department of Housing and Urban Development (HUD) in 2008 proposed a ban on such incentives, but backed down last year after homebuilders sued over the proposed rule change”

Housing Wire – “Strike Strategic Default: Survey Finds Mortgage Payments Remain Borrower Priority” (6-8-10)

“Less than one-quarter, or 23%, of consumers recently polled indicated that opting for foreclosure is justifiable when a borrower is underwater, owing more on a home than its worth, according to the National Foundation for Credit Counseling (NFCC). This idea of strategic default, when a borrower with the ability to pay chooses not to remain current on payments, was unacceptable to another 15% of survey respondents who said no circumstances justify walking away from the financial obligation.”

Housing Wire – “CoreLogic Adds Foreclosure Data to Distressed Property-Listing Web Site” (6-8-10)

“Data analytics provider CoreLogic (CLGX: 19.68 -1.01%), recently spun off by First American Financial (FAF: 13.51 -0.44%), will provide foreclosure data and property information to the Yahoo! Real Estate foreclosure service, the company said. The partnership adds listings of various stages of foreclosure and real-estate-owned (REO) properties to Yahoo! Real Estate’s online database of distressed properties including foreclosure and pre-foreclosure listings.”

Housing Wire - “REDC to Auction 350 Bank-Owned Foreclosures” (6-8-10)

“Beginning today, Real Estate Disposition (REDC) is auctioning more than 350 bank-owned foreclosures in Northern and Southern California, including 76 properties. Through June 12, REDC will auction more than 70 Northern California properties, including 34 occupied homes. An online-only auction, the offering ends at noon Central.”

Housing Wire – “Despite Narrow Monthly Gain, House Prices Fall 2.8% from 2009: IAS” (6-8-10)

“National house prices were up 0.9% in April from March, narrowed from the previous monthly gain of 1.1%, according to the latest data from Integrated Asset Services (IAS). The IAS house price index remains 2.8% below levels seen in the same time last year — widened from the 1.9% yearly depreciation in March. Additionally, the index is down 23.9% from its July 2007 peak.”

Bloomberg - “Four Seasons Sees Rates Returning to Peak Levels in Some Areas” (6-8-10)

“Four Seasons Hotels Inc. expects nightly rates at some of its properties will climb to the peak levels of 2008 by the end of this year as demand for luxury accommodation picks up, President Kathleen Taylor said.”

Orange County Register – “Foreclosures to be high for 18 more months” (6-8-10)

“Foreclosure activity in America won’t stabilize until late 2011, an executive for Irvine-based Realty Trac told a group of real estate writers. And with only three out of eight bank-owned homes on the market, and two-thirds of those under-valued homes yet to hit, the U.S. housing market still faces years of low prices.”

Orange County Register - “Where housing zip lives: Aliso to Yorba” (6-8-10)

“Newport Beach communities had the most housing ZIP in the first quarter. Santa Ana neighborhoods the least homebuying momentum. Our Zippy rankings weigh pricing and sales momentum — plus foreclosure frequency — as measured by DataQuick stats.”

Orange County Register – “3 charged in foreclosure ‘rescue’ case” (6-8-10)

“Gregory Flores, who managed All Fund Mortgage branches in Anaheim Hills and Murietta, was arrested in Roswell, N.M. last week. Also facing wire fraud charges charges in the case are Sheri Gale, who was a loan officer for All Fund, and Amy Hall, a former loan processor for the company. They have not been arrested but are expected to turn themselves in shortly, Assistant U.S. Attorney Sean Lokey says.”

Realty Times – “Mortgage Rates Touched New Low Friday” (6-8-10)

“The decline in mortgage rates stemmed from a big increase in mortgage-backed securities prices Friday. MBS prices, which drive mortgage rates in the opposite direction, gained +21/32 (FNMA 30-yr 4.5 at 102.23) on less than spectacular jobs numbers and more European debt concerns, this time in Hungary. Typically when we see significant declines in stocks as we have lately, mortgage rates improve.”

Wall Street Journal – “Baker: Turn Fannie, Freddie Into Government-Owned Corporations” (6-8-10)

“Want an easy, simple solution to Fannie Mae and Freddie Mac? Take the mortgage-finance giants, which have been effectively nationalized, and turn them into government-owned corporations, says Dean Baker, the co-director of the Center for Economic and Policy Research, a liberal think tank. In an op-ed in USA Today, Mr. Baker makes the case that nationalizing Fannie and Freddie isn’t as radical as it sounds. For one, both companies are effectively owned and operated by the government today.”

Looking Back:

One year ago, an AP test showed that recession “stress” decreased 5 percent from March to April. Robert Shiller estimated that home prices would likely continue to decline for years to come. JP Morgan estimated that U.S. home foreclosures would probably total 6.4 million by mid-2011.

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

The NAR reports that pending home sales increased during October by 3.7 percent. The California Board of Equalization claims that most homeowners will see a decline in property tax after a deflation of 0.237 percent.  According to Real Estate Econometrics LLC, the commercial mortgage default rate on loans held by U.S. banks increased to 3.4 percent in the third quarter.

In The News:

NAR - “Nine Consecutive Gains for Pending Home Sales” (12-1-09)

“The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 3.7 percent to 114.1 from 110.0 in September, and is 31.8 percent above October 2008 when it was 86.6. The rise from a year ago is the biggest annual increase ever recorded for the index, which is at the highest level since March 2006 when it was 115.2.”

Sacramento Bee – “Most California property tax bills will fall slightly in 2010″ (12-1-09)

“The Board of Equalization said Monday that most California homeowners will see a slight decline in property tax bills, based on the board’s preliminary estimates of deflation at 0.237 percent.”

Housing Wire – “$1trn in Commercial Real Estate Equity Lost, Say Analysts” (12-1-09)

“Property values are down 40% and about $1trn commercial real estate (CRE) equity was lost since the sector peaked in 2007, according to research by Keefe, Bruyette & Woods.”

Housing Wire – “Lend America Out of Business” (12-1-09)

“The FHA’s action prevents Lend America and Ideal from originating and underwriting FHA-insured mortgages or participating in FHA’s single-family insurance program. FHA also charged $512,500 in civil money penalties in the wake of a civil lawsuit that HousingWire previously reported reveals a pattern of mortgage fraud spanning more than 20 years across a number of mortgage firms.”

Housing Wire – “Short Sale Incentives Coming in 2010, Treasury Says” (12-1-09)

“HAFA allows the borrower to receive pre-approved short sale terms before the property is listed and frees them from future liability for the debt. Also, servicers utilizing the program are prohibited from requiring a reduction in the real estate commission agreed to in the listing agreement. The borrower also receives a $1,500 incentive for relocation after the transaction. The servicer receives a $1,000 incentive to cover administration and processing costs, and investors will be paid a maximum of $1,000 for allowing up to $3,000 in short-sale proceeds to be paid out to subordinate lien holders. In total, each transaction under HAFA will cost the Treasury up to $3,500 of incentive payments.”

Housing Wire – “RealtyBid.com Discounts Fees in December” (12-1-09)

“RealtyBid.com, online home auction company, discounted its standard listing fee from $150 to $25 through the end of December. Real estate agents looking to market property listings through an online auction can take advantage of the offer. If the property sells, RealtyBid.com will cut its sales fee, or the buyer’s fee, from 1% to a flat fee of $500.”

Bloomberg - “Commercial Mortgage Defaults at U.S. Banks Reach 3.4%” (12-1-09)

“The commercial mortgage default rate on loans held by U.S. banks more than doubled to 3.4 percent in the third quarter as vacancies rose and rents declined, Real Estate Econometrics LLC said.”

Bloomberg - “Construction Spending in U.S. Unchanged After Falling in Sept.” (12-1-09)

“Construction spending in the U.S. was unchanged in October after declining five straight months as rising office and retail vacancies deterred the building of commercial projects. Spending in September, previously reported as an increase, fell 1.6 percent, according to Commerce Department data released today in Washington. Construction spending declined on office buildings and commercial projects, while homebuilding increased.”

Looking Back:

One year ago, the government announced its plans to spend $800 billion dollars on mortgage-backed securities and consumer-debt securities.  Treasury yields dropped to record lows. Bernanke announced that the federal reserve was considering lowering interest rates.

The CBIA report shows that September sales for new-home communities have decreased by 11 percent from 2008. Foreclosure activity increased by 5 percent from August to September. According to Trulia, nearly 26 percent of homes were decreased in price from the previous month, and the total value of those price reductions is $28.1 billion.

In The News:

CBIA - “California New-Home Sales Down Again in September, CBIA Announces” (11-11-09)

“The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New-Home Sales and Pricing Report showed that sales in new-home communities of 10 units or more were 11 percent below September 2008, an improvement from the 13 percent year-over-year decline last month and the much higher declines in previous months. During September, 2,310 new homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 2,580 in September 2008. Sales of single-family homes were down by 17 percent, while sales of townhomes and ‘plexes’ – duplexes, triplexes, etc. – were down 11 percent and sales of condominiums were 12 percent higher than a year ago.”

Orange County Register – “Foreclosure notices hit record 8,800″ (11-11-09)

“September’s total was up 5% from August and 90% from a year ago. The chart (click for larger image) shows outstanding auction notices going back to January 2007. Auction notices, also known as notices of trustee’s sale, are a warning that a property will be offered for sale, usually at a local courthouse.”

Los Angeles Times – “Existing-home prices slide in most metropolitan areas” (11-11-09)

“The U.S. median sale price for an existing single-family home was $177,900, an 11.2% drop from the same period a year earlier, according to the National Assn. of Realtors in Washington. Distressed sales continued to weigh on prices despite a popular tax credit fueling the volume of deals. Still, the median was higher than in the second quarter of this year, when it was $174,200.”

Housing Wire – “CMBS TALF May Bring New Issue in November: Sources” (11-11-09)

“Industry reports indicate a number of firms are gearing up to sell the first round of debt under the Fed’s CMBS TALF program for new issuance. The firms include Developers Diversified Realty Corp. (DDR: 9.02 +5.99%), which in October said it obtained new first mortgage financing of $400m from Goldman Sachs Commercial Mortgage Capital, an affiliate of Goldman Sachs & Co.”

Housing Wire – “Loss Severity May Reverse Recent Stability: Amherst” (11-11-09)

“the firm sees ‘temporary’ stabilization of house prices, as 7.5m units or 13.5% of US homeowners are in non-payment status. Amherst previously explained its reasoning for calculating 7m of those are ‘destined’ to liquidate, which hangs a shadow of distressed inventory over the positive signs seen in the US housing market.”

Housing Wire – “Refinancing Interest Boosts MBA’s Weekly Mortgage Apps” (11-11-09)

“MBA’s refinance index increased 14.5% from the previous week. The association’s purchase index decreased 1.8%. Refinance applications took a 66.1% share of all applications, up from 62.3% in the previous week. The adjustable-rate mortgage (ARM) share of all applications decreased to 6.1% from 6.9%.”

Bloomberg - “U.S. Home Sellers Slash Prices by $28.1 Billion, Trulia Says” (11-11-09)

“The average discount was 10 percent, little changed from a month earlier, the San Francisco-based real estate data provider said today. Almost 26 percent of homes for sale were reduced at least once. Luxury properties — those costing $2 million or more — accounted for 25 percent of the dollar value of reductions and less than 2 percent of listings, Trulia said. ”

Inman - “Realogy in the black for Q3″ (11-11-09)

“Real estate franchisor and brokerage Realogy Corp. said it turned a $58 million profit in the third quarter, thanks in part to a debt restructuring that allowed the company to claim a $75 million gain and stay in compliance with agreements governing nearly $3 billion in loans.”

Inman - “GMAC Real Estate unites with Real Living” (11-11-09)

“A major real estate brokerage company merger gives GMAC Real Estate a new name while expanding the Real Living real estate brand and growing the U.S. operations of Canada-based Brookfield Residential Property Services. The merger of GMAC Real Estate and Real Living, which will operate under the Real Living name and under parent company Brookfield, represents the second sizable U.S. expansion of Brookfield operations in the past two years.”

Tommy Williams 2008 President of The National Auctioneers Association (Full Bio)

This week Bruce is joined by Tommy Williams. Tommy is certified by the Auctioneers Institute. He is the founding partner of Williams and Williams Auction Company. He served as president between 1986 and 2000, and he became board chairman in 2001. He has conducted over 10,000 auctions all over the world. Tommy is also part of our I Survived Real Estate 2009 expert panel.

Tommy Williams has done auctions in multiple countries such as Puerto Rico, Canada, and his company is working with companies in South Africa. Bruce thinks that bank owned properties are probably very prevalent in other countries as well so their auction business has probably picked up. What has occurred in the United States has occurred all over the world. Tommy thinks that it is amazing that a country so far removed from the United States, like South Africa, has gone through the same economic swing. The entire world is experiencing the real estate bubble bust.

The United States auctioning business has gotten better. The number of auctions have increased, and auction popularity has increased for many years as well. However, the auctions are not making as much money because the real estate market prices are not doing well.

In 2003-2008, the business for residential real estate went from $11.5 billion to $17 billion. The volume has gone up, but the pricing has gone down very far, so auctioneers have to sell larger numbers of units to achieve the same profit. In many areas of the United States, home prices are down 75 percent from their peak. Bruce recently bought two properties, from a lender, for 15 percent of the owed amount. This is not an unusual occurrence. In many of these cases, the original buyer had a very bad loan. Fraud is involved in many of these cases. A property that may have never been worth 10,000 to begin with may have been given a mortgage of 100,000.

It was common in the lower end of Moreno Valley to have a neighborhood in which each property was selling for $300,000, but now the price for those homes is generally around 100,000. The buyer and lending mindset was very different in 2005.

Bruce asks if the auction business has shifted to making the multi-property owner to be its main customer rather than the individual property owner. Tommy says that he hopes this is not true. He believes that if you want to build a successful auction company then you need to deal specifically with normal “end-user” buyer and seller. The focus of an auction company should always be to deal with private owners/investors. There are very few companies that deal with REOs, and that is not a long range way to build a business.

Deutsche Bank recently said that by 2010 or 2011, 50 percent of the owners in the United States will be upside down. That would have a profound effect on the amount of inventory that would be able to sign up for a one house auction. The most important thing about a house that is upside down is that the seller needs to sell their house. Either they cannot afford their house any more, or they have had a change in lifestyle such as a job transfer or a divorce. People need to sell their properties at the time they become a liability. If they go through a long foreclosure process then their property will deteriorate, and their neighborhood may deteriorate, and they will end up selling a property for less than they could have.

A Campbell Report that came out in which 1,000 agents responded to a questionnaire. These agents claimed that the biggest problem they were dealing with was a lender’s slow response to a short sale offer. It takes months. The auction business could help the lender decide what the value of a property is. Auctions can identity, with nearly absolute certainty, what the market place thinks a property is worth. If multiple people bid on a property, and the highest bid is $100,000 dollars, then you have discovered what the market value for that property is. It is frustrating to see lenders take such a long route to discovering the truth about the value of their property, and take a huge price hit in the process. Lenders have dealt with the problem of over valued homes in the worst way possible. Tommy had a neighbor who went through a divorce and had other life changes. This neighbor bought his property for about $650,000, and he started going delinquent on his payments. Tommy told him his house would sell for about $450 to $500,000 at that time. This neighbor believed Tommy to be correct, but his lender would not negotiate with him, so he went through the foreclosure process, and he eventually walked away from it. This home recently closed for about $370,000 and Tommy could have sold it for much more. Tommy has been trying to tell this story to congressmen and senators, so that these problems may be fixed in the future, but they will not listen.

This is one of the reasons why I Survived Real Estate 2009 is so important to Bruce. Every industry affects other industries. Fortunately for Tommy Williams, he has not had trouble with appraisers arguing with the price that homes have sold for at his auctions, because the value is proven by the market place. One of his colleagues sold their home, and their lender told them that they would not lend money on a home bought at an auction. The National Auctioneers Association immediately contacted them and asked them to explain this policy, but they would not. This problem did not occur with a small lending company.

The word “auction” has a bad meaning in the United States. Here, it means that you have a desperate seller. In 2004 to 2006, Bruce was receiving multiple offers on each of his “for sale” properties. If Bruce had thought to offer those homes in an auction, which would put each of those buyers in direct competition with each other, his selling prices would have definitely been higher. When the market is really over heated, that is when you want to have an auction for sure. Under desperate times, such as right now, the reason why you have an auction is because buyers will not show up if you use any other method.

On September 11, the builders will be attending the real estate event. Bruce thinks it would be a perfect partnership if builders started selling with auctioneers. Tommy has had this opportunity on two different occasions. At the time, everybody thought this was crazy, but the auctions were very successful. If Tommy was in the building business, he would launch his selling process with an auction. Bruce is planning on getting involved in building soon, and he plans on using auctions for selling his houses.

When you participate in the boom market, it is easy to sell, so you do not think about auctioning your home. Also, auctions are typically seen as an option that is only used in a tough market. The auction is viewed different ways in different countries. In New Zealand, auctions are one of the first options used for selling homes. Views towards auctions also vary in different states. States like Tennessee, Ohio, and Missouri have a much more positive view towards auctions than states like California.

Tommy has found it difficult to buy bulk properties within the last six months. There are opportunities out there, but good businessmen would not go after those opportunities.

We look forward to seeing Tommy Williams September 11th at I Survived Real Estate 2009.

Tommy served as President of the National Auctioneers Association in 2008 and is current Chairman of the Board. Tommy also graciously took part in I Survived Real Estate 2008 last year and will also appear on the I Survived Real Estate 2009 panel.

Thomas L. Williams is a graduate of Penn State University (B.S. Animal Science) and the Certified Auctioneers Institute (CAI). Representing the third generation of Williams family auctioneers dating back to the mid-1800s, Williams is also a graduate of the historic Reppert School of Auctioneering. He has over 40 years experience in real estate auctions, land development and real estate investment. He currently serves as President of the National Auctioneers Association.

A founding partner of Williams & Williams, Williams served as president from 1986-2000, and became board chairman in 2001. He also co-founded and served as managing partner of Lowderman & Williams Auctioneers from 1965-85. He has conducted over 10,000 auctions in all 48 of the contiguous United States and Canada, and is an advisor to auctions conducted throughout Western Europe, South Africa, Australia and New Zealand.

An avid cattleman, Williams also owned and operated Bradmar Angus Farms from 1965-85, after which he continued to serve as a herd and genetics consultant for many of the nation’s premier Angus cattle breeders.

Williams is a licensed auctioneer and real estate broker in over 20 states, and an active member of the National Association of Realtors.

Shelley Kaye 2009 President, REOMac (Full Bio)

This week Bruce is joined once again by Shelley Kaye, the president of REOMAC. She also works with InSource Financial Services where she handles bulk sale purchases.

Bruce first asks Shelley if lenders generally fix the properties when they sell them. Shelley says that it depends on the market and the lender but usually fixes her properties. She does not want to bring the prices of a neighborhood down; she wants to enhance a neighborhood. She knows a large number of other agents who work with lenders to fix properties and they make a lot of profit that way. When you support the value of a neighborhood, you also enable some people to get a refi instead of losing a property. Everybody wins when people fix properties.

Bruce asks Shelley how REO agents feel about auction companies. For the most part, the auction companies and agents are working in a partnership, and in many cases, the agents are still earning a commission. In the past, if a property went to an auctioneer then an agent would not be paid. The agents do open houses for auction companies, and they bring in buyers. In the 1990s, the agents didn’t make a commission so this time is much better. The auction company couldn’t function as successfully if it weren’t for the agents who are also bringing the buyers.

Bruce asks Shelley how REO agents feel about investors. Most good REO agents have a pool of investors that they work with. The problem that agents have is determining who is an investor and who is not. Real investors are easier to work with because they understand the market place, and they are not unrealistic about property values. Agents like working with investors because they know what they want and they understand how lenders do business. Most investors will close quickly. One of the dilemmas that agents have with wannabe investors is that they do not check up on their properties, they do not understand what it takes to buy an REO from a lender, and they do not understand what they are planning to do with a property. Investors must need to know what they are doing and they must do their homework.

In today’s market, an investor needs to be able to look at a property and quickly determine the repair cost and the appraisal to be competitive, because many properties have multiple offers. They must understand so many facets of the business from how much prices are declining to how much the house will rent for.

Bruce asks Shelley if she thinks that short sales will be more attractive to the lenders now than they were in the past. Shelley thinks that they will be more attracted to short sales, because there is a lot of cost in processing a foreclosure. The biggest problem she sees with this is that loss mitigators are not experienced enough to understand what is occurring in the market place. Time is their biggest enemy.

Bruce asks if loss mitgators, asset managers, and ever really talk before something goes to trustee sale. When Shelley worked at Option 1, she would talk to the loss mitigation department. They had formulas to determine how much they would lose in specific deals. Unfortunately, many of the people who work with loss mitigation do not understand the market.

Bruce says The Norris Group has noticed a big change in opening bids at the trustee sales. They are making more sense. Bruce asks if people often communicate with REO agents, prior to trustee sales, to determine accurate prices before the trustee sale. Shelley says that lenders are always getting a broker price opinion. The biggest problem is that they do not get to see the property, so sometimes people give high bids. Lenders always consult with agents and get a BPO (broker price opinion) of some sort.

Lenders pay around $45 to $50 for a drive by broker price opinion and $75 to $100 for an interior BPO. When agents do drive by BPOs they are determining the price by just looking at the outside of the house, so they do not know what damage there might be inside. Bruce says the paperwork is very much similar to that of an appraiser’s.

Bruce asks Shelley if she has people in her company that are being affected by the new appraisal rules and the Home Valuation Code of Conduct. Shelley says that she does not know if agents are being severely affected by this new rule, but she does know that the closings are taking longer. They are also getting paid half as much for the appraisals when dealing with the new management companies. Shelley is glad that steps are being taken to prevent fraud but she thinks that these new rules are hurting appraisers. It’s important to have arms lengths transactions but the Realtors can sometimes point out subtleties in the market that appraisers wouldn’t get to on their own. Agents can actually help arrive at the proper price. Bruce feels that same about the appraisal issues and how they are affecting investors in the market. Bruce feels that these new rules are unfair because they assume that people who make deals quickly are looking for trouble. In reality, over 90 percent of the people who do their business quickly are doing so simply because they are trying to be efficient and helpful. Shelley agrees with Bruce’s feelings on this.

Bruce saw a chart that showed that 35 percent of Option ARM borrowers are behind in payments, 72 percent of Option ARM owners owe more than their house is worth, and California has 58 percent of all those loans. Shelley says it is astonishing and there are also statistics say that those in loan modification plans often go back into default. Our government really hasn’t considered the whole picture. Bruce feels that there are many homeowners that are making their payment because that’s what they signed up for. But it will be important for prices to be supported within a reasonable amount of time and we won’t be saving everyone. We have had a 70 percent home ownership percentage, but historically that percentage has been around 62 percent. Bruce thinks that the home ownership percentage will go down to 62 percent which will leave a lot of vacant homes. Shelley thinks that we need to turn these empty homes into affordable rental units. If investors are buying these properties then they need to be careful not to raise rent. Bruce says that the market usually controls rental prices. If there are enough rentals then the price will come down, and that is occurring in some areas in California.

Bruce asks Shelley what she thinks about shadow inventory. Shelley says that there is a lot of unlisted inventory out there. A lot of lenders have been told by their management that the burst of the bubble is coming within the next 60 days. She doesn’t know if they have been holding that much of the inventory or if the moratorium has caused the problem. The next 60 days she says she is hearing it’s going to explode.

Bruce says in San Bernardino County, there were 40,000 trustee sales in 2008, and there were about 22,000 sales. Bruce asks if other states are looking at California’s situation and wondering why Californians are so worried. Shelley says that there are some states that have been hit less than others, but for the most part, everyone is feeling the same pain. Bruce asks if California is going to experience more trouble within the next 18 months, and if higher priced inventory will be affected. Shelley says that is true and that some of the higher priced inventory is going into the foreclosure market, and more prime inventory is going into default.

Bruce says he hears advertisements for attorneys every day for loan fraud and workouts. Bruce asks Shelley if lenders are having trouble with people looking for loopholes. She does not know if there are many attorneys looking for loopholes, but there are attorneys looking to stop specific attorneys from doing this.

Bruce asks Shelley if she was president for a year, what national policies she would implement to help housing recover. She would focus on creating jobs so that people can pay for their homes. She thinks that principalities and municipalities need to cooperate with buyers and lenders. Programs need to be set up so that people can work on properties and fix them up. More 40 year mortgages need to be put in place, so that payments become more affordable. She would also want less moratoriums being placed on the market so that the problems can fix themselves. Some people should have never been in homeownership to begin with. More incentives need to given to lenders who work with home owners.

Bruce asks Shelley if it might be good to create a short term policy that would forgive foreclosures faster than before since this scenario got so out of hand. Shelley thinks that would be a good idea because people are losing their good credit. The government should really talk to the industry that’s at work so they understand what’s happening the in marketplace. For more information visit www.reomac.com.

Shelley Kaye recently joined InSource Financial Services, LLC as a Portfolio Acquisitions Specialist, handling bulk sale purchases of REO properties. Prior to joining InSource she was a Servicing Oversight Specialist with ECC Capital and for 11 years a Senior Asset Manager for First Option Asset Management Services, managing a team of associates as well as a multi-state REO portfolio. Before working at FOAMS, she spent seven years at First Central Bank where she was the assistant to the VP of the Servicing Department. She has been a licensed Realtor for over 20 years and sold properties in Southern California prior to entering the mortgage banking field.

Shelley has served on the REOMAC® Board for the past 8 years and participates as a speaker on a variety of panels for many industry events. She has held the offices of Sponsor Chair, Treasurer, Secretary, and Vice President , prior to becoming REOMAC President in 2008.