a | r | e Spring 2011

WHAT IS THE

HOME MADE OF? Why we need to defend the value of

homeownership

for the Asian American and immigrant communities

SPRING 2011

A New Era of Real Estate Financing Exclusive Interview with Senator Harry Reid International Transactions and more...

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SPRING 2011 VOLUME 3, ISSUE 1 ON THE COVER:

Photos by Aperture Life Photography / Oliver Yu, Choice Photography / Rodney Choice and Praveen Sharma

FEATURES 26

A New Era of Real Estate Financing

A new law designed to protect consumers will make it harder for buyers to get mortgage financing

By Haley M. Hwang

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Harry Reid Isn’t Afraid to Speak His Mind - But He Isn’t Afraid to Listen Either The Senate Majority Leader discusses homeownership and the legislative change sweeping the industry Interview by John Fukuda

36

14

Tapping into the International Market

Pointing out the opportunities and pitfalls of international business by reviewing a common residential real estate purchase in Hong Kong

By JC Mike Calder

36

AR E A A’S UN SU NG H E ROES 42

CONTENTS 12

Serving the Asian Real Estate Market Based on Integrity and Ability

A candid account of a bank executive’s experience as a “foreclosure punching bag” and the plight of the multicultural real estate professional

By Ivan Choi

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23

Stepping Up to the Call for Action

It’s time for young real estate professionals to get active and involved in the legislative process

By Thai Hung Nguyen

Traditional Scoring Models May Miss Creditworthy Consumers Using more accurate credit scoring models to help more creditworthy consumers achieve homeownership

By Barrett Burns

32

The Legal Perspective of Multilingual Issues on Your Transactions

Following legal news that impacts professionals who serve clients with limited English proficiency

By Gary Sanders

20

D E PA R T M E N T S

42

6

From the Editor

8

Ask Dr. AREAA

10

Chair’s Message

A Dose of Hermanity

Herman Chan dishes on video marketing, trends in the Asian American market and his message for the next generation of homeowners

AREAA’s Unsung Heroes Achieving AREAA’s mission requires the commitment of title, escrow, lending and supporting services. Meet some of your friendly AREAA non-Realtor chapter leaders

Why we need to defend the value of homeownership for the Asian American and immigrant communities

Our multi-talented real estate expert answers readers’ questions about reduced commissions, “flat fee” listings and how to build a loyal client base

Kenneth Li discusses his American Dream

“Like” AREAA on

facebook.com/areaa.national

FROM THE EDITOR Wealth, Immigrants and the Defense of Homeownership What would you do if you lost 18 months of your salary?

That is essentially what happened to the Asian American homeowners from the start of 2007 through the end of 2008.

The property value loss in those two years amounted to approximately $43,000 for Asian American homeowners nationwide. This is almost five times the average equity loss for the general population (which amounted to $9,100). And it is one and a half times the average annual per capita income in America, which stands at around $28,000.

Losing your home and rebuilding your life is certainly devastating and difficult. Yet we face another subtle crisis – the loss of wealth and opportunity that emanates from the family’s home. Losing home equity, an extension of personal wealth, can have a long-term impact on a family’s well-being.

Just consider the family’s ability to finance a college education for their children or the foundation needed to start a business. For Asian American families, home equity has been a primary tool for making those important hopes a reality and contributing to the fabric of America. Indeed, home equity has been the fuel for economic opportunity for many Americans.

And if one was to consider the impact of opportunities lost from the equity loss, it could have a long-term impact on America’s competitiveness. Consider the nexus between the high-tech sector, higher education and the contributions of the Asian American and immigrant community in the US economy. While about 12% of the US population is foreign born, 40% of technology firms and 52% of Silicon Valley companies were founded by foreign-born Americans. Also consider the small business community. Asian Americans have some of the highest small business ownership rates in the country. And nearly half of all Americans are employed by small businesses today. The question is “will the loss of equity impact our community’s ability to obtain higher education and start businesses?” It is not clear what the long-term impact will be from that loss of wealth, but it will certainly affect decisions of families today and tomorrow.

Wouldn’t you make different choices today about your future if you lost 18 months of your salary?

This issue of a | r | e magazine is dedicated to public policy and the impact that various new regulatory changes will have

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on the real estate market. With so much change in Washington, DC and our States’ capitals, it is critical that AREAA members stay abreast of issues impacting our businesses and our community. As you engage your legislators and policymakers, you must root your positions and proposals on how they will affect the policymaker’s constituents and your local market. Give them tangible examples and data to support your positions. And give them a reason to act now.

With so much uncertainty in the market and change in the policy environment, our collective well-being as a community and nation depends on your active engagement on policy issues.

For the first time in recent history, many are suggesting that homeownership has been oversold. Renting is a more practical option, they say. While Americans have lost significant equity during this crisis, the home still represents the greatest portion of their wealth. That wealth is what builds opportunity in America, and it is worth defending.

SPRING 2011 VOLUME 3, ISSUE 1 EDITOR-IN-CHIEF Jim J. Park

CREATIVE DIRECTOR Praveen K. Sharma A S S O C I AT E EDITOR Meredith Magee

EDITOR Dan T. Shanyfelt EDITORIAL BOARD Shen-Yi Michelle Chang Ivan Choi John Fukuda

is a publication of the Asian Real Estate Association of America (AREAA), a national nonprofit trade organization dedicated to increasing sustainable homeownership in the Asian American community.

For more information visit: http://areaa.org.

Jim Park Editor-in-Chief a | r | e magazine

©2011 by the Asian Real Estate Association of America.

Reproduction in whole or part without permission is prohibited. Opinions expressed by individual authors are not necessarily the opinions held by AREAA. Direct article submissions and advertising inquiries to: Praveen Sharma | psharma@areaa.org Office: Asian Real Estate Association of America 5963 La Place Court, Suite 312 Carlsbad, California 92008 760-918-9162 Phone 760-918-6924 Fax Previous issues available online at: http:areaa.org/a-r-e

ASK

DR. AREAA O U R M U LT I -TA L E N T E D EXPERT ANSWERS YOUR R E A L E S TAT E Q U E S T I O N S

Dr. AREAA,

Dear Full Service Frank,

I just received a call from a fellow Realtor saying that he would not show my listing due to the fact that we were offering a reduced commission rate. I was

“Flat Fee” service usually refers to the practice of a seller entering into a "limited service agreement" with a real estate agent who usually lists the property for sale in the local Multiple Listing Services (MLS) for a set dollar amount. It is recommended that a cooperative commission is paid out in addition to the "flat fee" but not required. There are two distinctions between a "flat fee" listing and "full service" listing that should be noted: first, the flat fee agent is usually acting in a limited capacity on behalf of the seller; and second, the "flat fee" is generally paid upfront as opposed to a commission paid at closing based on the sales price of the property. You should definitely speak to your broker about explaining the cost to your seller in the long run when choosing between “flat fee” and “full service” agreements.

offended that someone would actually tell me that they would not show my listing because of a reduced commission rate. My sellers were only willing to pay 4% after interviewing three other agents who said they would take the listing at the same rate. Should I consider asking my clients to pay more to increase the selling agentʼs commission?

- Co-op Concerned (San Gabriel, California) Dear Co-op Concerned, I'm sure there are some agents who look at commission rate and choose not to show homes that have lower commission rates. I suppose I understand the motivation (as short-sighted as it may be), but agents have an obligation to act in their client’s best interest, not their own. If a home is right for a client, and an agent refuses to show it because they won't get paid as much, they have ceased acting in their client's best interest and are now thinking only of themselves. If, as you describe, the seller is only willing to pay 4% in your listing agreement and you're splitting according to the agreement, then this should be a non-issue for anyone with any sense of duty to their client.

I am a new agent just getting started in this business. I have been working with clients, mainly buyers and creating loyalty seems to be one of my biggest challenges. There are so many agents to compete against, and I am afraid that my clients will be here one day and gone to the next agent tomorrow. Are there any tips you can offer to help

keep my clients loyal to me?

- Newbie (Gaithersburg, Maryland)

Dear Dr. AREAA,

Dear Newbie,

my client asked me if I offered a “flat fee” listing. How does that

Always remember that as a real estate agent you are in the business of selling your services. What all agents have in common are the houses that are available for sale so the key to your success will be differentiating the level of service you provide to your clients. In today’s market, the competition is stiffer than ever as inventory is up and buyers are scarce.

I just went on a listing appointment and differ from a “full service” listing?

- Full Service Frank (Eugene, Oregon)

8

Dear Dr. AREAA,

When you provide unforgettable service and support, your clients will stay with you and come screaming back for more.

Below you’ll find a few tips to turn your clients into fans for life!

Always go the extra mile. Why do people love shopping at Nordstrom’s and paying Nordstrom prices? Because they know they will always receive “above and beyond” service and a great shopping experience. Surprise your clients and customers by always going the extra mile and giving them the “Nordstrom” experience and they will keep coming back for more.

Give them something to talk about. To get your clients to go wild about you, you have to give them something to talk about; something that is just a little more exciting than what your competition is doing. Give them a reason and they will keep coming back.

ills of th market e you dow got n your qu ? send f o r D r. e s t i o n s AR dr@are EAA to aa.org

Choose high-touch over high-tech. As technology has taken hold, it is so much easier to choose high-tech communication over high-touch communication, don’t forget how valuable the human connection can be and make sure to incorporate your personal touches into the entire buyer experience.

Create your fan club. Why do you cheer for your favorite

sports team? Maybe it was because you watched the games as a child with friends or family, or maybe because attending a game with thousands of other fans is like going to one big family reunion. Think about how you can tap into these feelings to build loyalty with your clients. Consider throwing client appreciation events to create your real estate family and let your fans do the cheering for you. The power of your clients’ referrals and words of praise is priceless.

Central California Investment Properties Dan T. Shanyfelt

Broker (License #0186-6121)

DUPLEX - 10.5% CAP* - $89,000

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Fully rented duplex in Bakersfield, CA. Professionally managed. $12k gross income, 7.4 GRM. 2+1 in front, 1+1 in back. New roof on back unit. Large lot. Long Term Tenants. Possible seller carry.

Fully rented triplex in Bakersfield, CA. Professionally managed. $18,600 gross income, 7.5 GRM. Three 2-bedroom units. New 1-year leases on all units. Low vacancy area.

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MIXED USE RETAIL + TRIPLEX - 6.8% CAP - $299,000

Fourplex in strong rental market. All units are 2+1. Needs $18k in rehab costs. Projected rents of $575/unit. Professional property and project management available.

1000 ft2 retail space (3 units) on heavy traffic arterial street. Triplex in rear with one 2-bed, and two 1-bed units and covered parking. Fully Rented. Professionally managed. Close to freeway. Adjacent to new construction shopping complex with multiple national anchor tenants.

www.CentralCalCashFlow.com dan@CentralCalCashFlow.com Phone: (661) 679-7698

* All calculations are based on 5% vacancy and 18% expense ratio. Seller to pay 3% cooperating broker commission on successful close.

AMERICAN DREAM

I

bought my first home in Houston, Texas upon graduation from college while holding my first full-time job in a grocery store. The year was 1985. It was a bank-foreclosed property, a great single-story starter home with 1,400 square feet, three bedrooms, two full baths with an attached two-car garage. I paid $48,000 with a minimal down payment thanks to the help of an Asian REALTOR referred by my uncle. I was so excited to buy my first home even though I was single and did not plan to settle down. It also became my first real estate investment after I repaired the house and eventually rented it.

I was fascinated by the whole process of buying and selling real estate. The REALTOR who helped me in the purchase became my first mentor in the real estate business. I started the process to obtain my real estate license while working part-time in a franchised brokerage firm. Two years later, I opened my own real estate company to serve the Chinese community in Houston. The timing was perfect, but the market was challenging. As oil prices went down and the Savings and Loan institutions collapsed, thousands of homes and commercial properties were foreclosed. I remember one instance where my client was shocked to see that ALL the houses on the street which he was looking were for sale. Later, I introduced those bargain-priced properties to out of town buyers and sold many of them despite being in the middle of one of the worst real estate markets in Houston. Many smart investors bought shopping centers, apartments, warehouses

and land around the grocery store where I originally worked and developed a new Chinatown in Houston.

My American Dream really helped me to start my real estate career as well as my investments and success in the United States as a foreign student, an immigrant, and a citizen. I am always thankful to the generosity and opportunities this great country has provided. I look forward to helping others achieve their own American Dream.

Kenneth Li AREAA Chairman

a | r | e is the official publication of the Asian Real Estate Association of America. AREAA’s national leadership includes:

10

Executive Board of Directors

Board of Directors

Kenneth Li, Chairman Kathy Tsao, Chair-Elect John Fukuda, Immediate Past Chair Allen Okamoto, Founding Chair John Yen Wong, Founding Chair Jim Park, President Shen-Yi Michelle Chang, Treasurer Lidia Yun, Secretary

Allen Chiang Ivan Choi Louis Gonzalez Eva Hom Song Hutchins Paul Imura Christine Kim Mark Kitabayashi John M. Lee

Andrew Lee Cindy Lui Allyson Powers Charlie Suh Dawn Tsien Fred Underwood Maria Valentin Sandy Wood

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©2010 Prudential Financial, Inc. and its related entities. Prudential Real Estate brokerage services are offered through the independently owned and operated franchisees of Prudential Real Estate Affiliates, Inc., a Prudential Financial company. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, used under license. Equal Housing 1Prudential Real Estate Affiliates, Inc. received the highest numerical score among full service real estate firms for home Opportunity. sellers in the proprietary J.D. Power and Associates 2010 Home Buyer/Seller StudySM. Study based on 3,096 total evaluations measuring five firms and measures opinions of individuals who sold a home between March 2009 and April 2010. Proprietary study results are based on experiences and perceptions of consumers surveyed March-May 2010. Your experiences may vary. Visit jdpower.com. 2Average Sales Price is based on an analysis of transaction sides and sales volume data of the largest independently owned brokers in the U.S. for franchise networks recording at least 25,000 closed transaction sides in 2009, as reported in the 2010 Real Trends 500.

Serving the Asian Real Estate Market Segment Based on Integrity and Ability

By Ivan Choi

F

rom 2005 through 2009 I traveled to a few hundred real estate communities all over the United States on behalf of one of the major mortgage banking institutions. Despite the fact that the city would always change from one day to the next, the situation was always the same: I found myself on a podium with a microphone, in a town hall setting with anywhere between 200 – 1,000 angry real estate professionals.

They were angry

about the big banks’ handling of the foreclosure crisis – and as someone representing a large bank, I was the punching bag for their frustrations. The venting session would inevitably revolve around loan modifications, short sale, REO, and the big banks’ seemingly inhuman process for resolving foreclosure issues in the aftermath of the biggest financial and real estate market meltdown in U.S. history.

Why were loan modifications unsuccessful?

Why were short sales so difficult to achieve? Why were REOs being assigned to and handled by real estate brokers

12

that seemed to have a monopoly on these listings? Didn’t the banks want to avoid foreclosure in the first place? In the broad spectrum of foreclosure cases and issues, why were the banks so damn slow to respond? Why was it so difficult to reach a live bank representative to explain a distressed borrower’s unfortunate predicament? How could the banks not know that all of their “loose lending” during the real estate boom would result in today’s foreclosure morass? These were all questions that real estate professionals across the country asked in unison through the blur of cities I visited.

Alone on stage,

all I could do was earnestly listen to Realtor frustrations and questions. Where appropriate I would explain the general issues of foreclosure and REO management from a mortgage servicing perspective. I personally evaluated countless borrower situations, loan scenarios, and transaction details. And when I returned home to the office I did my best to orchestrate bank personnel, systems and resources to respond to all of these issues with a

human touch, rather than a corporate one.

While the bankexecutive-asforeclosurepunching-bag experience at times took an emotional or personal toll, one

topic hit me especially hard as an Asian American: the plight of the multicultural real estate professional. I will never forget a Realtor town hall session in Los Angeles, CA in early 2007. In this town hall the topic turned to REO, and how a Realtor might handle REOs for the big banks. One Asian American Realtor stood and said the following to me: “Your bank uses only few out of area agent [sic] in my market for REO listings.

It is mostly [an Asian American] neighborhood. I called your company so many times handle [sic] REO listings. Why doesn’t your company use me? It makes no sense.”

A week later, a Hispanic real estate broker in Las Vegas, NV raised this same sentiment. It happened again a few weeks later in a Dallas session, except this time it was an AfricanAmerican agent. AsianAmerican – and multicultural – real estate professionals seemingly played the “race card”. This went beyond

Realtors. By the end of that year, I had to coordinate responses on behalf of the bank to two prominent congressmen who served multicultural communities and constituents. As a minority myself, I was uniquely

qualified at that time to coordinate the responses.

Whether real estate professional, congressman, or a member of the general public, I believe it is inappropriate to cite our multicultural background as a principal qualification. For all of us as multicultural real estate practitioners, we must earn our seat at the table on the basis of integrity, exceptional business ability, and verifiable results. For the long-term benefit of all Asian American and multicultural professionals, we cannot expect to be handed opportunity with anything less than merit – and not on the use of our heritage as a pawn to weasel our way into business opportunities. Our

nonprofit Asian Real Estate Association of America (AREAA) is “dedicated to creating a powerful voice for housing and real estate professionals� that

serve the Asian American segment. We must inherently do it with integrity and ability.

Currently AREAA does in fact have a powerful voice.

While the road is still long, to date AREAA has been successful in bringing together exceptional real estate and mortgage professionals in metropolitan markets across the country. With that grassroots base of practitioners, AREAA has been able to garner the attention of the major banking institutions, housing agencies, and elected officials in both state and federal government. The end result is real estate opportunity for Asian Americans, and a chance to turbocharge sustainable homeownership rates for our market segment.

We must be mindful that Asian Americans still make up less than 5% of the overall population in the U.S. If we do not continue to represent ourselves with clean integrity and pure business ability, we will quickly lose the status that we enjoy. This would not be just an immediate loss, but a setback for years while we try to repair our collective reputation. We cannot afford to have mainstream America perceive that Asian Americans are using our minority status and multicultural background as a gambit for advantage in real estate.

Ivan Choi Ivan Choi is a 15-year mortgage banking executive, and serves as a regional production manager for Primary Residential Mortgage, Inc. (PRMI). Choi serves as a national board director for the Asian Real Estate Association of America (AREAA), as well as president and board member of REOMAC, a national non-profit association of default industry professionals.

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H A R RY R E I D I S N ' T A F R A I D TO S P E A K HIS MIND - BUT HE I S N ' T A F R A I D TO LI S TE N , E ITH E R

BY J OH N FU KU DA P H OTO S B Y K E N J AC Q U E S

H

arry Reid is the Majority Leader in the United States Senate, a man who commands the respect of colleagues from both sides of the aisle, and a powerful advocate for America's middle-class families. Having recently survived a close and sometimes acrimonious re-election battle, Reid is poised to serve his fifth term in the U.S. Senate. A graduate of Utah State University and George Washington University Law School, he previously served in Nevada local and state government as city attorney of Henderson, a state legislator, Lieutenant Governor, and chairman of the Nevada Gaming Commission. Reid, who began serving in the U.S. Senate in 1987, is a member of the Democratic Party and has been the Senate Majority Leader since January 2007, having previously been chosen by his colleagues to serve as Minority Leader and Minority and Majority Whip.

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Harry Reid was born in tiny Searchlight, Nevada in 1939 where his father was a hard rock miner. The single teacher, two-room school that provided his early educational foundation stopped at the eighth grade and Reid was forced to live with local families in Henderson 40 miles away to attend high school. Basic High School in Henderson is where he met his future wife, but Searchlight is where Reid lives today, still rooted in the values he learned there as a small child: hard work, perseverance and the value of homeownership.

The Senior United States Senator from Nevada supported the Asian Real Estate Association of America (AREAA) and the National Association of Hispanic Real Estate Professionals (NAHREP) at their 2010 Real Estate and Marketing Conference in Las Vegas by serving as a keynote speaker during one of the well-attended general sessions and continues to call on local AREAA and NAHREP leadership

in Nevada for advice and perspectives on the struggling local housing market. Several roundtable meetings have resulted in substantive solutions that the Senator has championed into practice, leading to much-needed assistance for first-time homebuyers and owner occupants in Nevada. Nevada and its diverse communities have a powerful and well-respected voice on Capitol Hill.

We recently sat down for a frank conversation about the current state of the U.S. Housing market, the circumstances that lead to this catastrophic crisis and the Senator's perspective on the future. The Senator's candor and willingness to be part of the solution are evident.

Thank you for your time Senator. We've talked previously about your humble upbringing in Searchlight, a rural town in southern Nevada. Can you tell our readers how your upbringing impacted your view of the importance of homeownership in America?

I was raised in a small cabin in Searchlight that had no indoor plumbing. My home wasn't in the best neighborhood and my community didn't even have a high school. I saw how hard my parents worked to keep a roof over our heads. It was tough, but we did it. It's those memories that drive me to do more to help expand the dream of homeownership to all Americans and to help those who are in danger of losing their home get the assistance that they need.

I saw how hard my parents worked to ke ep a roof over our heads.

It was tough, but we did it.

It 's those memories that drive me to do more to help expand the dream of home ownership to all A mericans...

Fixing the current housing finance system is one of the most consequential and complicated economic policy problems we have ever faced as a country. Can you give us your perspective of what went wrong over the past 5-7 years? And what are the most significant flaws in the system that must be rectified to ensure that future generations have a viable and healthy financial system?

Unfortunately, this crisis can be attributed to a host of factors, including loose regulation of mortgage lenders and brokers, unethical appraisal practices, and mortgage securitization that separated mortgage risk from mortgage underwriters and investment banks, to name a few. That is why I worked hard to shepherd passage of the most comprehensive financial regulatory reform in decades. The Dodd-Frank Wall Street Reform and Consumer Protections Act will rein in the reckless gambling that brought our economy to the brink of collapse. Most importantly, this bill created the Consumer Financial Protection Bureau, an independently funded agency whose sole focus will be empowering consumers with the information they need to make appropriate decisions about credit and financial products. Our nation's economic recovery is based on confidence 単 confidence in the financial system that investments will be safeguarded and credit will be available for short-term needs and long-term investments, and more importantly, confidence in the ability of public officials to ensure that our free markets work to the benefit of us all.

Nevada is ground zero of the housing crisis.

Since the beginning of this crisis I have been working in Washington to confront this enormous challenge, from supporting federal foreclosure prevention programs like Hope for Homeowners and the Obama Administration's Making Home Affordable Program, to amending the tax code so refinanced borrowers would avoid an additional tax, and providing billions of dollars in resources to housing counselors and local communities to help keep families in their homes and stabilize communities. I also shepherded passage of

15

Senate Majority Leader Harry Reid (left) with 2010 AREAA Chair John Fukuda

important housing legislation to improve loan modification programs and prevent rampant mortgage fraud, and continue to urge the Obama Administration and mortgage servicers to take more aggressive steps towards foreclosure mitigation. I was also pleased to secure almost $200 million for Nevada through the Administration's Hardest Hit Fund (HHF).

Furthermore, my local offices are assisting struggling homeowners facilitate their modification process on a daily basis. I am committed to fighting for Nevada and the country to make sure that we stabilize our economy, create jobs, and keep Americans in their homes.

their homes. I'm very concerned that many Americans are simply unaware of the foreclosure mitigation programs that could help them find a solution. Even worse, too many families have fallen prey to foreclosure rescue scams in the hopes of saving their home. That is why we must work to ensure that every struggling homeowner is well aware of the legitimate resources available to them.

The two most prominent issues of the owner-occupant housing crisis are on opposite ends of the spectrum: one challenge is to help current homeowners facing foreclosure stay in their homes and the other to introduce new qualified buyers into the marketplace to absorb some of the existing housing inventory.

First, what more can be done to keep people in their homes?

To help increase demand in the housing market, I lead the passage of the first and second "First Time Homebuyer Tax Credit".

Thanks to that credit, thousands of new Americans are now first time homeowners. I am also committed to grant programs that allow states and localities to revitalize communities that have been littered with foreclosed properties in order to attract new homebuyers.

We must not ignore the issue. We must continue to work with all parties involved in the housing market to make sure that we are doing everything we can to keep families in

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And just as importantly, what more can be done to introduce qualified new buyers to the market and start the process of revitalizing the housing industry in 2011 and beyond?

Senator Harry Reid spent some of his formative years as a crafty amateur boxer, and when it comes to fixing the current housing marketing in America, he’s still up for a fight for what’s right.

the L e g a l Per sp ectiv e of M u l t i l i ng u al Issu es on Yo u r Tr an sactions

by Gary Sander s

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n past issues of a | r | e , summaries of new laws and regulations protecting the rights of awho are “Limited English Proficient” (LEP) have been presented and are updated below. Most noteworthy, the frequency and volume of lawsuits involving LEP homebuyers throughout 2010 did not subside. In most, but not all situations, homebuyers’ claims have been supported by the courts if the laws have been violated.

However, there are exceptional situations to acknowledge.

According to Adria Cheng, Real Estate attorney/partner at Manatt, Phelps, and Phillips, LLP in San Francisco, there are several examples of state and federal laws in which a strong protection is provided for non-English speakers during consumer finance transactions.

Two trends emerged in the past two years – more states are enacting laws and those laws are being used as the basis for lawsuits, especially by homebuyers who claim they did not fully

understand their real estate transaction.

Under such cases, no single entity in the real estate industry is consistently the defendant, nor is any group immune from the lawsuits whether it’s lenders, Realtors, title companies or loan servicers.

The states whose laws should be noted:

California §1632 of the Civil Code

covering Truth-in-Lending requires companies entering into credit agreements to deliver to consumers a translated copy of a contract if a lender “negotiates” the terms of the loan in Spanish, Chinese, Tagalog, Vietnamese or Korean. An amendment to the law became effective in 2010 which directs the California Department of Corporations and Department of Financial Institutions to create model forms for “supervised financial organizations” to summarize the terms of a mortgage loan in the same five languages mentioned above.

Over the past 18 months, dozens of lawsuits have been filed by homeowners arguing for relief behind §1632, claiming they did not understand their transaction, even when the negotiations were handled in their native language. In many cases, the homebuyers were not offered a translated version of the mortgage loan documents or the translated documents did not match the English version of the mortgage loan documents.

In general, the courts have supported the homebuyers’ claims, but there have been exceptions. The US District Court for Southern California dismissed two cases in 2010 when the plaintiffs filed their lawsuits far after the expiration of the Statute of Limitations.

In Ausano vs. BAC Home Loans Servicing, Case No. 10cv4 BTM (WVG), the case was decided for the defendant bank because the

Adria Cheng Statute of Limitations had tolled on his Truth in Lending Act claim since the claim was filed over four years after the loan was consummated.

The bank’s motion to dismiss was granted since the plaintiff failed to present a plausible argument in support of their other claims.

In Ortega vs. Wells Fargo Bank, Case No. 09 CV 1531 JM (NLS), the Spanish speaking plaintiff negotiated his loan in Spanish, but only received an English version of the mortgage documents. The case was not filed until nearly two years after the plaintiff received his loan.

The case was dismissed by the court.

Oregon The statute dealing with

Translations of Mortgage disclosures (HB 2188) took effect in 2010.

Mortgage brokers, bankers and originators that advertise, negotiate or receive applications in a language other than English must provide the GFE, TIL disclosures and a notice advising the borrower to find a translator in English and the other language. Oregon’s Division of Finance and Corporate Securities has copies of these documents posted at its website in Vietnamese, Russian and Spanish.

Florida Advertisements in

languages other than in English must also have limitations and/or disclosures required to be contained in the advertisement, made in the language of the advertisement.

Texas, Nevada, Kansas and A rizona require Spanish language

versions of loan documents for certain, limited products such as second-lien loans and high interest loans.

Another area of government regulations to note is at the federal level.

Ensure your organization is compliant with the revised RESPA guidelines which became effective in 2010. Most importantly, be aware of how the guidelines dealing with the HUD-1 Settlement Statement and the Good Faith Estimate documents affect your daily transactions.

L o ok ing A he ad

If your client is not fluent in English, their rights and expectations to understand their real estate transaction are well supported by the law. Note your state’s law on this issue. Most importantly, do the right thing and offer language support for the homebuyer if there is a question about their English fluency.

Companies and public agencies today are zealous about providing assistance to LEP homebuyers – be an advocate for your client, find the right resources and your efforts will be rewarded with loyal, satisfied clients.

Ms. Cheng’s practice focuses on real estate and complex financial transactions. She has represented major banks, insurance companies and other financial institutions in all aspects of asset-based and mortgage financings, mezzanine financings, participation loans, bond financings and capital market transactions, including extensive experience in the origination of commercial mortgage loans throughout the United States for institutional lenders (both for their own account and for sale into the capital markets), secured by all real estate product types.

She has also represented developer and governmental agencies in acquisition and disposition transactions, development activities, community redevelopment, public-private partnerships, financing transactions and leasing activities, as well as landlords and tenants in both commercial and agricultural leasing and ground lease transactions.

Additional Questions?

LEGAL Adria Cheng acheng@manatt.com Manatt, Phelps, Philips LLP www.manatt.com MULTICULTURAL PROGRAM PLANNING & EXECUTION Gary Sanders The Language Factor gsanders@thelanguagefactor.com www.thelanguagefactor.com TRANSLATIONS COURTESY OF: thebigwordGroup www.thebigword.com Translate Central www.translatecentral.com

By Thai Hung Nguyen theEDGE, AREAA Young Professionals

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s part of the real estate professional community, all agents should be aware of, and active in, the voice and the health of the real estate industry.

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National Association of Realtors created the Realtors Political Action Committee (RPAC) in 1969 to be the voice of Realtors to legislators.

RPAC represents over 400,000 Realtors and is the only political group in the country that is organized and run by Realtors in order to further issues important to Realtors. This committee is one of the most influential lobbyist organizations on Capitol Hill.

It is easy as a young professional to overlook the actions

that active Realtors and RPAC have contributed to the legislative process.

As newcomers to the industry, we are often blinded by the desire to break into the business and establish the basis of our careers. However, we must remind ourselves and others that becoming a politically active Realtor brings strength in numbers towards legislators. There are

numerous issues ranging from local to national that we, as members, need to get involved in and support.

Restriction on signage is a common local issue in the Realtor community. Some counties assign workers to collect all signs on the street daily, including weekends.

Imagine that you were having an open house in that county, and could not put any directional signs on the street to lead to your listing. This poses a huge problem to the open house, which is vital to our business.

eventually be swallowed by those mega-bank-brokers.

This was a true threat to our industry, but RPAC stepped up and prevented it.

homes with values of more than $500,000. In those small towns/states, you could get a castle with $500,000; yet, in most major metropolitan areas (where Asian real estate practitioners mainly reside) that is an average price.

All of us must remember how the Asian Real Estate Association of America (AREAA) contributed to the ...there was a proposal in their community key decision made to hold Realtors responsible for a seller's

by HUD to accept alternative credit zoning or building code violations. Isn't this versus traditional ridiculous? credit. This will help many Asian homebuyers who traditionally are not creditThat would result in an friendly, allowing them to automatic decrease of Northern Virginia Associaobtain a mortgage for their 15% in home value, not tion of Realtors RPAC first homes. This is yet counting the domino effect reported that there was a another key example of the afterwards. proposal in their community power we as practitioners to hold Realtors responsible hold when we come Understanding the value of for a seller's zoning or together and let our voices our voice and our involvebuilding code violations. be heard. ment, young Asian real Isn't this ridiculous? I guess estate professionals need that we, Realtors, will have Let's reflect on an issue that to be more active in the to purchase a set of lie hit very close to home legislative process. We detectors to bring along to recently: the mortgage should be aware of and listing appointments. interest deduction question. responsible for the real Mortgage Interest Deducestate industry. We, young The national challenges are tion (MID) has seldom been professionals, are known even larger. A few years discussed before. It has for having fun, being cool, ago, there was a real been a great incentive for and being technology homebuy- driven. We should also be ers. Now, well known for our active it is on the and daring involvement in As our parents taught us, if we don't table for the industry. We also plant the seeds, water the field, or legislators should not think that this is to discuss. somebody else's responnurture the paddies, we won't get any Fortusibility. It is our own rice. This involvement is for "our bowl nately, it responsibility to step up of rice". has been and help our "brothers", voted off. "sisters", "uncles", "aunts", However, "fathers", or "mothers" to attempt by big banks to let's not forget the threat take care of the health of enter the real estate that some legislators may the real estate industry. brokerage business, which attempt to adjust/amend would have been devastatthis proposal. For example, As our parents taught us, ing to the real estate some legislators from if we don't plant the industry. The small brokersmaller towns/states would seeds, water the field, or ages (a lot of them owned attempt to propose that nurture the paddies, we

by Asian brokers) would MID should not exist for won't get any rice. This

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It's time to get active and involved in the legislative process, just one small step forward is a step in the right direction. It is never too early or too late to let your voice be heard. involvement is for "our bowl of rice". It's time to get active and involved in the legislative process, just one small step forward is a step in the right direction. It is never too early or too late to let your voice be heard. Let your voice be heard and your actions contribute to the long-term health and viability of the real estate industry.

Every one of us is busy with our lives, our business, and our day-to-day challenges.

Yet, we must contribute our time, money,

resources, and efforts to keep the real estate industry in its healthy condition. We are all responsible for that. Our involvement in the legislative process can be as simple as paying our fair-share contribution towards RPAC, or joining an RPAC group to visit local legislators, or actively responding to the Call to Action by RPAC. Think about it, a fair-share contribution is just about equal to skipping one Starbucks Venti Latte per month.

That's right, that little! We can all do that.

theEDGE inspires, empowers, educates and connects the young AREAA real estate professional community by combining leading industry practices with innovative technology and social media in order to develop the next generation of AREAA leaders and to better serve the Asian home buying community.

theEDGE online: http://areaa.org/EDGE

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To get involved or to contribute to RPAC or theEDGE, AREAA Young Professionals, please visit the links below, and get active in the future of our industry‌today!

Realtors Political Action Committee http://www.realtor.org/government_affairs/rpac

Traditional Scoring Models May Miss Creditworthy Consumers

By BARRETT BURNS

ccording to the Center for Financial Services Innovation (CFSI), an estimated 40 million Americans are not part of the mainstream national credit pool and are excluded from credit opportunities because they do not have adequate credit histories.

This large and diverse group consists mainly of newly arrived immigrants, young adults just starting their careers, recently divorced or widowed individuals with little or no credit in their own names and people who shun the traditional banking system by choice.

As a result of being labeled “unscorable,” this significant block of consumers may be prevented from accessing mainstream credit or may receive credit that carries a higher price because lenders are unable to leverage their standard decisioning strategies, leaving these consumers to be perceived as either not creditworthy or incorrectly assessed as being subprime risk.

Some borrowers who had been considered subprime by traditional credit scoring models may actually be quite creditworthy and deserving of prime or near-prime loans. According to a study conducted by Experian, 21% of 11.9 million sub-prime consumers analyzed were reclassified in higher score intervals when VantageScore was used.

The concept of “adequate credit history” has largely been defined by the specifications of traditional credit score models that do not fully consider predictive data already residing in the consumers’ credit file with the bureaus, rather than by actual consumer behavioral patterns.

Marketplace demand for a more accurate model led to the development of VantageScore and its introduction in

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2006. The VantageScore credit scoring model recognizes that a sparse credit history and/or its lack of alignment with data specifications of common scoring models are not necessarily a reflection of poor debt management behavior.

rate, and government organizations that assists and educates individuals about saving, show that home equity represents more than four-fifths of a typical family’s wealth.

And despite the recent upheaval in the By using predictive data in new ways, Vantagemortgage lending markets, a recent Fannie Score is able to score more people. For Mae survey discovered that 51% of responexample, unlike other generic consumer credit dents said it has not affected their overall scoring models, VantageScore utilizes data in willingness to buy a home. Overall, the poll the credit files of people showed that 89 percent who may have been of homeowners and “out of the credit market” 49 percent of renters Renters with “thin” for up to two years and believe they would be credit files should whose oldest trade is better off owning a benefit from the less than six months home in the current old. economy. inclusion of positive

rent data because

VantageScore’s ability Importantly, positive rental payments are to better distinguish berental payment histomost likely their tween consumers with ries are beginning to largest obligation. a clear track record of make their way into the unfavorable credit becalculation of credit haviors from those with scores. Until now, nontraditional credit histories is a significant typically only missed rental payment informaadvantage. More accurate credit scoring that tion was housed in credit files. Experian scores more people will benefit the financial recently announced that it acquired RentBuinstitutions that make homeownership possible, reau, a credit bureau for the multifamily housas the pool of qualified applicants will greatly ing industry. Experian will incorporate on-time expand. rent payment data from RentBureau into its consumer credit files, opening a new avenue This means more creditworthy consumers can for renters to build credit with continuous achieve their dreams of homeownership if on-time rental payments. While some lenders use a credit score that relies on credit traditional credit score models, including FICO, data applied in new analytical ways. do not include rental data in the calculation of a consumer credit score, VantageScore does.

But many lenders are understandably wary of In fact, Experian’s research shows more than issuing credit as the aftershocks of the one in three consumers in the highest risk economic crisis are still rocking the housing VantageScore score band will improve to at sector and U.S. homeownership is dipping. least the next score band with the addition of According to Census Bureau data, the homethis new data. Renters with “thin” credit files ownership rate fell to 66.9% during the third should benefit from the inclusion of positive quarter of 2010; a level not seen since late rent data because rental payments are most 1999. likely their largest obligation. This means more people will have an opportunity to access Reversing this decline is important, because mainstream credit. owning a home is both a major contributor to building wealth and is often credited with Scoring rent data will be beneficial to many adding to community stability. Statistics from first time homebuyer mortgage applicants.

America Saves, a coalition of nonprofit, corpoWhy shouldn’t they have the benefit of using

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their rent payments as an indicator of how they will handle future mortgage payments?

Without a credit score, homeownership is a dream deferred, if not denied completely.

Finding a way to score potential homeowners who are overlooked by traditional credit scoring models is a worthy endeavor and there are ways it can be done.

It’s important to note, however, that while credit scoring can serve as the first test of consumer creditworthiness, it should always be part of a comprehensive and detailed process, not the sole criteria for evaluating loan applications.

We know that consumers who borrow infrequently or are new entrants to credit use credit differently than others and may often be tagged as “unscorable”, but are still, in many cases, creditworthy. Therefore, reliable, accurate scoring of these consumers is one way to help reopen the capital markets. Access to the capital markets drives down the cost of credit

and increases availability of affordable credit for all consumers, which in turn stimulates the economy.

With the ability to obtain a credit score and support from initiatives like the AREAA Foundation’s Consumer Outreach and Homeownership Education Program, more minority and immigrant households will likely be able to achieve the dream of homeownership, and with it, the ability to build a more secure future for themselves and their families.

Barrett Burns is president and

chief executive officer of Stamford, Conn.-based VantageScore Solutions, LLC, an independently managed company that holds the intellectual property rights to VantageScore - a generic scoring model introduced in March 2006.

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t’s the kind of heart-breaking failed transaction that happens too often – but appears to be happening a little more frequently in the current real estate market.

Rocio Duty, a sales associate with Keller Williams RealtyAlexandria/Kingstowne in Virginia, represented a buyer to purchase a foreclosed property. The contract was fully executed last August, and then for 90 days, her buyer went back and forth with mortgage underwriters providing additional information and documentation. A week before closing in November, the lender rejected the loan application and told the buyer she no longer qualified for a mortgage due to some technical issues surrounding her individual tax return.

“What I’m seeing more of in the past year is that the loan officer gets buyers pre-qualified, then it turns out the loan officer did a minimum amount of work and they don’t follow the same guidelines or have the same amount of extensive training that underwriters have,” says Duty, a member of the AREAA-DC Metro Chapter. “That disconnect is a huge problem, and I see loans falling apart.”

What Duty and other real estate professionals across the country have come to realize in recent months is that it’s getting a whole lot harder to get deals closed. And some experts say it’s about to get tougher.

What is contributing to a changing real estate landscape is a massive new law – the bulk of which will not be interpreted and implemented for months or years to come – called the Dodd-Frank Wall Street Reform and Consumer Protection Act. The 2,300-page bill that was signed into law by President Obama on July 21, 2010, is intended to overhaul the financial services industry and protect consumers against unfair lending practices and prevent another financial meltdown of the past three years. It has been heralded as the most far-reaching financial reform since the Great Depression.

While the intention of this new law is good, real estate experts say some of the new

requirements placed on the mortgage industry may have the opposite effect of restricting mortgage capital, which means fewer buyers will be able to get loans to purchase property.

If you haven’t heard about this new law, you need to become familiar with it, experts say. It will require real estate practitioners to work smarter and be more proactive with their clients to ensure that transactions are able to close.

HOW THE NEW LAW AFFECTS R E A L E S TAT E The bulk of the new law deals with the back-end dealings of Wall Street and aims to prevent another financial crisis, but portions of the law affect mortgages and appraisals, which in turn will affect real estate transactions. These include provisions that deal with: Mortgage Minimum Standards: Requires creditors to make a “good faith determination” at the time that a residential mortgage loan is made, through verified and documented information, that the borrower has “reasonable ability to repay” the loan and all applicable taxes, insurance and assessments.

Loan Origination: Prohibits mortgage originators from steering borrowers to certain mortgage products that vary compensation to the originators on loan terms other than the amount of the principal, or products that are discriminatory or have predatory characteristics or effects, such as equity stripping, excessive fees or abusive terms. Also defines what kinds of compensation is permitted and restricted for originators and sets steep penalties for violating these rules. Requires all mortgage originators to be “qualified and licensed and registered.”

Credit Risk Retention: Requires lenders that package loans into securities to retain at least 5 percent of credit risk. Loans classified as “Qualified Residential Mortgages” (QRM), which are considered less risky mortgage products than “nonqualified” mortgages, will be exempt from this risk retention requirement. However, regulators are still working to define what constitutes a QRM, and there is a lot of

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discussion among regulators, housing advocates and lenders (e.g., a 30-year fixed-rate mortgage with a certain percentage down payment). The discussions are extremely contentious because a mortgage product that falls outside of this “safe harbor” will cost consumers more due to the required capital retention requirements that the lenders must meet.

Appraisals: Prohibits the coercion of appraisers and tasks various federal agencies to establish rules on appraiser independence. New rules replace the Home Valuation Code of Conduct (HVCC) and require a physical appraisal for all subprime mortgages and two appraisals for subprime mortgages on properties that have been sold within 180 days at a lower price (properties being flipped).

Consumer Financial Protection Bureau: Establishes an independent office within the Federal Reserve Board and gives it broad new authority to create rules to protect consumers from unfair, deceptive and abusive financial products and practices. Responsibility for existing consumer protection laws like the Real Estate Settlement Procedures Act (RESPA); Truth in Lending Act (TILA); Home Ownership and Equity Protection Act (HOEPA); and Secure and Fair Enforcement for Mortgage Licensing Act (SAFE) will transfer to this new agency.

W H AT T H E L A W MEANS TO R E A L E S TAT E PRACTITIONERS “The Dodd-Frank [law] is good because it protects consumers against unscrupulous mortgage lending practices,” says Peyton Norville III, GRIsm, CRBsm, CRS®, associate broker at LAH Real Estate in Birmingham, Ala., and chair of the National Association of REALTORS® Conventional Finance and Lending Committee. “But what I’m concerned about is the tighter underwriting standards, which will make it really tough for qualified buyers to get loans. We have a very depressed real estate market now, and it might get slower.”

Tony Hutchinson, a financial services policy analyst for NAR, agrees.

“There’s trepidation in the marketplace about what the full implementation of these rules will be,” Hutchinson says.

What is already known is that with the more stringent requirements, disclosure responsibilities, and liabilities placed on mortgage originators and lenders by DoddFrank, underwriting standards and mortgage capital available to potential buyers will tighten even more in the coming years.

“Five years ago, the mortgage pendulum was wide where anything went,” Hutchinson says. “Now, the mortgage pendulum has swung all the way to the other side. Even those people with pristine credit are having problems.”

I M PAC T O N MINORITY BUYERS Tougher underwriting standards can adversely affect Asian American home buyers, Hutchinson says. Some Asian American consumers like to pay for things in cash and do not participate in the credit market. Both AREAA and other real estate leaders are pushing for more flexibility in how credit scoring agencies derive credit scores and how lenders evaluate them.

“You’re going to see credit standards that will potentially push out those who don’t have

TIPS FOR WORKING SMARTER WITH BUYERS Experts say real estate professionals need to be much more diligent and proactive in working with buyers. Here are some tips from Peyton Norville III, associate broker at LAH Real Estate in Birmingham, Ala., and chair of NAR’s Conventional Finance and Lending Committee.

Qualify all buyers before you even start working with them. “Before spending any time with a buyer showing houses, take them to a mortgage loan officer and get them qualified,” Norville says. “Because if there’s a problem, we need to know now before we show them 50 houses, write 10 offers, and finally have one go through. We need to be proactive to make sure they will be qualified under the new underwriting standards.”

Learn as much as you can about mortgage underwriting rules in your local market. “You don’t have to be an expert, but you should know in general terms what it takes to get somebody approved for a conventional loan now,” Norville says. Norville cited a recent example in his local market where a qualified high-income attorney couldn’t get underwriting approval because he had changed jobs in the past 12 months.

Get closing documents ahead of time and give unsophisticated borrowers time to review them.

By “unsophisticated,” Norville means first-time buyers or buyers whose first language may not be English. The closing table is not the time for these buyers to be shown the settlement statement, promissory note and mortgage documents for the first time, Norville says. He tries to provide them two to three days before closings so that these buyers can have time to read them over or get help interpreting the documents if they need it.

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R

How

E is

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Addressing the Changes AREAA’s Policy Committee is actively monitoring developments and new guidelines resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act. The 13-member committee – comprising real estate practitioners, National Association of REALTORS®, national lenders, mortgage insurance companies, and AREAA executive leadership – provides an industry-wide perspective to AREAA’s Board of Directors and is working to recommend new policies that would best prepare its members to succeed in the changing marketplace.

“The benefit of good housing policy is that we can collectively prevent major market crises from reoccurring,” says Paul Imura, a member of the AREAA National Board of Directors and co-chair of the Policy Committee with Jeff Woo, President-Elect of the San Francisco Association of REALTORS®.

Last year, a few committee members participated in an NAR presidential advisory group meeting – along with leaders representing the National Association of Hispanic Real Estate Professionals and the National Association of

much of a credit score or have negative credit scores or a lack of participation in the credit market,” Hutchinson says.

Duty, who primarily works with minority buyers in the Washington, D.C., area, agrees with Hutchinson. She has seen how many of her clients who work in the service industry and don’t have “W2 jobs” can’t get

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Real Estate Brokers – to provide input for NAR’s new Credit Policy. The policy encourages industry groups and regulators to not over-correct for past mistakes by excessively tightening underwriting guidelines that choke the availability of mortgage loans to qualified home buyers, including low- and moderate-income families and first-time buyers.

“As we all have a vested interest in helping the market recover, we need to put safeguards in place to better serve our members and their clients,” Woo says.

past today’s tighter underwriting standards. They also are being victimized by mortgage scams or losing their homes because they don’t know about short sales and other options available to them.

When she first went into real estate in 2003, Duty says she could call a mortgage broker on her cell phone and just provide her buyer’s name and social security

number. “And while I’m on hold, they would give the number of what the buyer qualified for, and it was a crazy high number.”

Now, even with a pre-approval, more of her buyers are being rejected during underwriting. Duty says that starting this year, she’s asking all of her buyers to get pre-approved by two different lenders before she starts working with them. She hopes that will prevent some of the pain and emotional suffering for her buyers.

“On the one hand, I understand what the government is trying to do so that [the financial meltdown] won’t happen again,” Duty says. “But on the other hand, banks are not loaning out money and they have made it so hard to get a loan now. There has to be something in the middle.”

Some experts believe that in addition to making it tougher for buyers to get a loan, some provisions of the new law also will increase closing costs and undercut housing prices.

Francois “Frank” Gregoire, RAAsm, a licensed real estate broker, certified residential appraiser in St. Petersburg, Fla., and chair of NAR’s Appraisal Committee, says the appraisal industry has been hurting from the implementation in March 2009 of the HVCC, which he says has cut appraiser compensation and driven many experienced appraisers out of the market and oftentimes resulted in less-qualified appraisers analyzing properties that are outside of their market area.

final rules set to go into effect on April 1. The new rules also allow for “reasonable and customary fees” to be paid to appraisers, which are typically paid by buyer upfront as part of their mortgage application or paid at closing.

“Expect higher closings costs for your buyers,” Gregoire says.

Gregoire says that he also has heard anecdotal stories about how some lenders are now abusing the use of appraisals by shopping around for the lowest appraisal on a property to keep mortgage loan amounts as low as possible.

“If a lender feels an appraisal is too high, some will keep ordering appraisals until one is delivered low enough for the lender to feel comfortable to make the loan,” Gregoire says. This results in prices staying low in an already depressed real estate market.

Hutchinson says the Dodd-Frank law is a work in progress, and real estate leaders are actively working with regulators to ensure that the mortgage industry doesn’t over-correct and unduly restrict real estate activity.

“We have to let our elected officials know that housing is a priority for people” Hutchinson says.

“It’s not just a business activity. It’s a pillar of society.

People who want the opportunity to purchase should have access to the capital to do that.”

The Dodd-Frank law, which calls for the sunsetting of the HVCC, took the same appraiser independence guidelines and codified them into federal law in the

Haley M. Hwang, e-PRO®, SFR, AHWD®, CNS, ASP®,

is a sales associate and corporate trainer for Coldwell Banker Residential Brokerage in Glenview, Ill. She also is a real estate writer and speaker. She can be reached at Home@HaleyHwang.com.

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Real estate personality and broker Herman Chan shares tips and perspective on serving the Asian American and firsttime homebuyer markets, with his trademark sense of humor

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ideo is being hailed as the new thing in real estate, do you think this is a useful tool for agents who serve Asian American clients?

Absolutely! For many clients, even accepting an initial meeting with an agent is a you, they don't end up using you, they feel they are being impolite or wasting your time. Culturally, they may want to save face and avoid

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social awkwardness. Many clients in general do not want to spend time with an video of yourself online that a potential client can view at home in their fuzzy slippers and robe, you are giving them a chance to “interview� you without actually meeting three-dimensional sense of simple one minute video introduction of yourself. If you are telegenic enough, try to videoblog or do a series of clips that establishes your

niche and your personality. If they call you after watching your video, they have pretty much decided to give you a shot at that point.

They feel like they know you! Plus, many of us serving the Asian community are bilingual.

Show off all those hours you spent in Saturday Chinese School!

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s an Asian American agent, and also working in an area with a high concentration of Asian Americans, what kind of trends have you noticed in the this market over the last year?

Cash, cash and more cash! That is the most salient trend in my experience. When the market fell off a cliff, my most active group of clients were Asian American. They had the big down payments, be it hard earned savings, money wired from abroad or gifted from relatives, to qualify for the stringent underwriting guidelines. Even now as the market recovers at a snail's pace, cash is still king with Asian American clients. True story: A Caucasian client of mine and I walked into an open house and he turned to me and joked, “There's no way I can compete with an all cash offer!” I said, “How do you know there's an all cash offer?” He slightly cocked his head towards the kitchen where a young Asian couple stood flanked by both sets of their parents. I screamed to my client, “Run!” It's the perfect Asian American family, ugh!” Just kidding. We did find out later that the property sold for all cash. Ai-ya!

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s there any segmentation within your Asian clientele?

Contrary to popular belief, Asian Americans are not a homogenous group. As with any group, there is bound to be segmentation. And thank goodness for that, because how boring would that be!? My clients span a wide range, from recent immigrants who don’t speak any English and are looking for their slice of the American Dream to all cash investors from Asia who couldn't care less about the American Dream and just want a property with positive cash flow. Then, there are Asian Americans such as myself who have lived here for all or a large part of our lives. That group tends to be more lifestyle driven with aspirational desires...although snagging a good deal doesn't hurt either!

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here is a new generation that has witnessed the foreclosure epidemic firsthand and may no longer view homeownership as the American Dream. What is your advice to them about homeownership?

What? You want to live in your parents’ basement forever? That's cute after college but not so cute when you hit your 30's. If the foreclosure crisis has taught us anything, it's that diving blindly into homeownership is bad.

We need to make our home buying decisions with more deliberation. It doesn't mean we give up on ever owning our own home. Plus, just because someone else got foreclosed on doesn't mean it will happen to you. Keep your expectations grounded. Don’t expect to have double-digit appreciation in a year! Owning real estate over the long run still is a sound investment. Besides, per Trulia's recent quarterly, “Rent vs. Buy Index”, in most big cities after factoring the mortgage principal, interest, taxes and insurance, it is still cheaper to own than rent a two bedroom home.

W

hat is your favorite website to share with clients who are searching for their first home?

As with many diverse cultures, academic performance is ultra important for Asian Americans...just ask any “Tiger Mother”! www.GreatSchools.net ranks schools based on test scores and parent reviews. Even if buyers do not have a family, it is always a good idea to check out academic scores. There is a direct correlation between property values and academic performance. Typically, neighborhoods with prime school districts have stronger demographics and retain property values better.

H

ow do you deal with clients who may be misled by independently researching home prices online?

Let's be real here. It's 2011. You can't stop clients from trolling around online. The average buyer nowadays combs the Internet for months before even contacting an agent.

Clients often come to us knowing more than we do. Get over it! Realtors are not the

33

gatekeepers of information anymore. I don't care how much money you spent installing an IDX feed on your website, there is no way you can compete with the behemoth real estate search sites. Instead of denying other resources out there, I encourage clients to share their findings with me. It keeps me in the loop and it is also an excuse to discuss what is on their mind. It is not uncommon for a client to initially shoot me listings from Zillow, for example. What usually happens is that some of the homes are sold already, off the market or have a catch, which is a big blow to the site's credibility, and a big boost for me because I present the correct and updated data. It soon becomes clear to the clients that some of those online sites are primarily interested in accumulating as many listings (active or not) as possible in order to drive traffic up and sell advertising. You are still a real person, and not some anonymous website. Keep the lines of communications open with your client about what they are seeing online. By providing accurate and current information in the right context, you become the authority on home prices.

W

hat’s your advice for agents who are inexperienced with Asian American clients and wish to become more knowledgeable about serving this demographic of home buyers in their community?

When dealing with Asian American clientele, there tends to be an emphasis on the numbers...which is really ironic since I am really bad at math. Whereas my other clients

will have heated debates about aesthetics (“No, darn it! That accent wall is NOT emerald green. It's sea foam green!”), my Asian American clients’ foremost concern is the numbers. I once pointed out a designer imported Italian granite backsplash, and my Asian American buyer muttered, “They could have gotten that for half the price from China.”

So, here are my tips for you newbies courting Asian clientele: 1

2

3

4

5 6

Be familiar with the local test scores for the school district. Impress that Tiger Mother!

Be prepared to discuss return on investment or rental potential, even if the property is a primary residence.

They just wanna know!

AREAA has a course titled, “Effectively Serving the Asian Pacific American Housing Markets” that is being taught around the country through its local chapters. I highly recommend this course as a way to get familiar with some of the nuances of the Asian American cultures.

Will an Asian American client be impressed or turned off that a street dead ends straight into the house you're showing them? If you don't know, brush up on your feng-shui basics.

Find out where the nearest Asianoriented Supermarket is located!

Be ready to bargain, er, I mean, negotiate, lower even if the price is rock bottom.

Herman is a real estate personality, writer, speaker & broker who believes his industry takes itself way too seriously. His flair for satire can be seen on his show www.HabitatForHermanity.com, where Herman shows viewers that behind the glitz & glam of real estate, it’s a hot mess…and so is he!

Opinions expressed by individual authors are not necessarily the opinions held by AREAA.

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TAPPING

INTO

THE

INTERNATIONAL MARKET

B y JC Mi ke C a l der The following article is for informational purposes only and is not and may not be construed as legal advice. First American is not a law firm and does not offer legal services of any kind. You may not rely upon anything contained herein when making legal and/or other determinations regarding title practices. You should consult with an attorney prior to embarking upon any specific course of action.

A number of years ago a colleague of mine moved from the United Kingdom to the United States for a two year temporary assignment.

As he was settling into his new office, he was visited by a supply clerk to make sure he had all the office supplies he

36

would need. They had nearly concluded their discussion when my colleague suddenly remembered one more thing. “Oh,” he asked, “can you also get me a rubber?” He realized by the speed at which the clerk left the office and the deep shade of red on her face that something was amiss. I explained to him that the word used in the United States for what he was requesting is “eraser.” Once everyone realized the reason for the confusion,

the embarrassment was resolved and all was well with the world, but it took a bit of discomfort to work through the misunderstanding.

With the Age of Globalization upon us the risk for miscommunication, misunderstanding and possible embarrassment on many different levels has magnified. No longer do we wait for the day when interaction between nations becomes common. It is already here. Every day we

encounter more and more business with and from other countries. That business brings both the opportunity to expand and grow well beyond your local area and the risk of cultural and communication misunderstanding eroding your efforts to expand.

Language is the key to communication. Challenges

exist in translating from one language to another, but sometimes confusion can exist even within the same language. Consider the English language word “boot”. An American using

the word would likely be referring to footwear, while an Englishman would be referring to the storage area usually found in the rear of an automobile (what an American would call a “trunk”). HSBC has had several variations of an advertising campaign emphasizing the importance of local knowledge. If you have traveled internationally in the past 10 years you have probably seen the ads lining the jet bridges at various airports. One of the ads showed the same English word, “football”, with labels for the United States, England and Australia showing respec-

tively a U.S.-style football, a soccer ball and an Australian rules football.

These examples show the challenges in communication from one country to another even if they speak the same language. The challenge is magnified if the languages are different. Being able to communicate effectively with your client is an important skill not only to serve the client for the current transaction but to enhance the opportunity for future repeat business.

This article will review one example of a residential real estate purchase

37

outside the United States and contrast some of the different practices and terminology used there to what is common in the United States. The objective is not to make you an expert in foreign conveyancing practices but to help point out how knowledge of other practices can better prepare you to serve clients from other countries buying or selling property in the United States and be better able to manage expectations and avoid pitfalls in communication.

Toronto or almost anywhere outside the United States, in all likelihood you would not have a title company to turn to for such assistance. While some title companies have operations outside the United States, their role and function tends to be very different than in the United States. Generally, title companies outside the United States do not have title plants, research title or conduct closings, although they do provide insurance for the purchaser’s title.

could not believe that no lawyer was involved in the transaction and was sure that some of the contacts he had made were trying to pull a fast one on him. We were able to assure him that the practice in Northern California rarely involved a lawyer for a residential purchase transaction.

Depending on your state, you rely on them to assist you with background information for preparing listings, researching title, obtaining loan payoffs, preparing documentation, conducting the closing, recording the documents, and insuring the purchaser on the ownership of her new home. If you were suddenly transformed into a real estate professional in Bangkok, Tokyo, Seoul, Sydney, London,

fears and concerns if you understand better what may be familiar to your client and can translate how the roles of other real estate professionals in the United States might fill the perceived void in the absence of a lawyer. First American recently found itself faced with hand-holding a confused investor client from Hong Kong targeting properties in the San Francisco Bay Area for purchase. The client

States, but at this point it deviates. Within two weeks of the provisional contract, a formal contract, the Sale and Purchase Agreement, is prepared by the seller’s solicitor (lawyer), approved by the buyer’s solicitor and signed by the buyer and seller.

To better understand that client’s confusion, we will outline a typical Hong Kong resipurchase.

So who would dential As a real You will see that the turn to? In lawyers play a very estate profes- you most areas, the answer is extensive and active role. sional in the a lawyer. While lawyers Hong Kong, after United States participate in residential Infinding a property the you have likely real estate transactions in buyer works with the some parts of the United estate agent to make an developed States in others they do offer. If the offer is some good not. A client coming to accepted the provisional contacts with you from abroad may be contract is prepared by to hear that a the estate agent (real local title and shocked lawyer will have limited or estate agent). So far, this escrow prono involvement in their is similar to the practice fessionals. transaction. You can allay in much of the United

38

Next, the seller’s solicitor requests the title deeds from the seller’s bank.

The title deeds are similar to an abstract in the

United States and contain the deeds and other relevant documents in the chain of title for the property. A bank holds the title deeds as additional security for a loan. The title deeds are delivered to the buyer’s solicitor, who reviews them and conducts a search of the title records and bankruptcy records.

After the title deeds and search results are reviewed, the buyer’s solicitor will raise requisitions on title.

Requisitions are a series of questions about matters affecting title and the property, somewhat like interrogatories on litigation. Frequently the solicitors go back and forth in working through the requisitions and

sometimes this lasts all the way to the very end of the process.

On the mortgage side, the buyer will generally require financing and seeks a lender willing to make the loan.

Pre-approval before purchase is uncommon in Hong Kong. The loan underwriting process is similar to the United States with numerous documents on employment, finances, bank statements and identity submitted with the application. The bank will follow procedures somewhat similar to the United States in investigating the property valuation and the buyer’s credit history before approving the loan. Once

approved, the bank typically appoints the buyer’s solicitor to act on its behalf in preparing the mortgage and providing to it a required certificate of title. The seller’s solicitor will take a role in the payoff of the existing lender by obtaining redemption (payoff) figures and preparing the documentation for the release.

Finally, completion (closing) occurs about 30 days after the date of the formal Sale and Purchase Agreement. By now the buyer’s solicitor has prepared and obtained the seller’s solicitor’s approval for the Assignment. Deeds are not used in Hong Kong, as all the property there is

39

leasehold. The Assignment is the document which transfers title and performs a similar function to a deed in the United States. The buyer’s solicitor updates the title search. The buyer and seller sign the documents, the keys are turned over to the buyer, and the funds are transferred. Wire transfers are usually not used. Instead, bank drafts are made out to the seller and seller’s bank, so the funds do not need to pass through the buyer’s or buyer’s solicitor’s accounts. The seller’s solicitor provides an undertaking promising to see that the release of the existing mortgage is obtained, and it usually is within seven days of completion.

At this point, the seller’s solicitor arranges for the release of the existing mortgage, the Assignment, and the new mortgage to be registered with the land registry. This is done within 30 days of completion. Once the registered documents are returned to the seller’s solicitor, he places them with the title deeds and forwards them all to the buyer’s lender to be held as additional collateral for the new loan.

Compare the Hong Kong conveyancing process described above with what you would find in the United States.

40

Depending on what state you are in, some of the Hong Kong process may or may not sound familiar.

You may be in a state in which lawyers do title searches, prepare documents and conduct the closings, or you may be in a state where all of this is handled by the title company. In other states, it may be some combination.

Where is the title company in the Hong Kong process?

Although title insurance is available in Hong Kong, it is generally not part of the standard conveyancing transaction. In Hong Kong, title insurance tends to be used to resolve title requisition issues that cannot be easily resolved otherwise.

If a policy is issued, it covers a limited, very specific purpose related to the unresolved requisition and not the broader coverage used in the United States.

Note, too, the different terminology used in Hong Kong. With your experience in the United States you will likely be generally familiar with the concepts described, but you may not recognize some of the word usage, and you are the real estate expert!

Imagine the challenges for your client, who will generally be much less familiar with the concepts, practices and

nomenclature of a real estate transaction. Try to bear this in mind in dealing with a buyer or seller from outside the United States.

If you have a client from Hong Kong or any other area unfamiliar with practices in the United States, the more you understand the process and the real estate vocabulary for your client’s home territory, the better you will be able to serve your client in the United States.

JC Mike Calder is Senior Vice President & Director of International Underwriting for FAF International.

The author gratefully acknowledges the assistance of Philip Walden, Managing Director of First American Title Insurance Company’s Hong Kong branch in the preparation of this article.

For further information, please contact Maria Valentin, Vice President, Strategic Markets for First American Title Company (mvalentin@firstam.com)

AR E A A’S U N SUNG H E ROES

A

chieving AREAA’s mission of promoting sustainable homeownership for Asian Americans extends beyond the responsibility of our member Realtors and requires the commitment of our member representatives from title, escrow, lending and supporting services. Whether it is through community outreach or the education of fellow members, AREAA non-Realtor members are an integral part of the organization and critical in carrying out our mission. In an effort to recognize these members, each chapter president was asked to nominate non-Realtor members on their boards who best exemplify professionalism in their fields and a desire to carry-out AREAA’s mission in their local communities perhaps without the visibility of our member Realtors. Here are a few of your friendly neighborhood AREAA non-Realtor chapter board members.

A N G E LI N E

WU A R E A A O R A N G E CO U NT Y

E x e c u t i v e B o a r d M e m b e r; C h a p t e r S e c r e t a r y; C o m m i t t e e C h a i r f o r E v e n t s & M a r ke t i n g

PACIFIC COAST TITLE COMPANY Assistant Vice President

Angeline Wu is an Assistant Vice President of Pacific Coast Title Company, a member of the Fidelity National Financial (FNF) family. As a graduate from the University of California, Irvine with a degree in Criminology, Law, and Society and a minor in Education, Angeline was on track to enter law school. However during her last year of college and during her reign as Miss Asia USA, she was introduced to the title industry by the primary event sponsor. After what was meant to be a temporary position before entering law school, Angeline has become one of the top five company title representatives in each of the past four years and the top representative in 2010.

Angeline has been an Executive Board Member of the AREAA Orange County Chapter since 2009 and was elected Chapter Secretary for a second term. She is dedicated to assisting the President and Vice President as the Committee Chair for Events and Marketing where she is responsible for chapter’s monthly events. She is proud to have helped increase chapter membership to over 250 members and create a series of chapter events educating its members on topics that help carry-out AREAA’s mission.

Upon joining AREAA, Angeline found the organization to be a powerful platform for industry professionals to have a unified voice. She pushes to promote best practices by educating the “frontline” Realtor and lender members through monthly educational chapter events and claims the results of these events as some of her proudest moments from AREAA. While the opportunity to foster business opportunities and lasting friendships through AREAA has been amazing, the greatest satisfaction has been from the confirmation that we are truly promoting our mission when our members approach me after our events and exclaim how much they learned and how much they appreciate what we do.

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J OS E P H

L AI

ER AN

SI N AI

A R E A A N ATI O N A L Membership Chair

A R E A A L A S V E GA S Chapter President

P R I M A RY R E S I D E NTI A L M O R TGAG E , I N C .

Branch Manager

As a 10 year veteran of the mortgage industry, Joseph Lai is currently the branch manager of Primary Residential Mortgage Inc. in Las Vegas, Nevada. Joseph graduated from the University of California, Santa Barbara with a degree in Business Economics with Accounting.

As the current President for the AREAA Las Vegas Chapter, Joseph has been active in increase net chapter membership, helping develop educational classes and raising funds for the local chapter. Joseph is also the 2011 AREAA National Membership Chairman and helped co-chair the 2010 AREAA National Convention in Las Vegas.

Joseph’s greatest accomplishment as an AREAA leader is helping form the finest leadership team to lead the AREAA Las Vegas Chapter. He believes that being involved with AREAA has helped him develop relationships locally and nationally in his professional and personal life. Lai hopes to see AREAA as the largest minority real estate association in the country in 5 years.

AREA A SAN DIEGO Executive Board Member

C R E D IT R E S TO R ATI O N & A N A LYS I S , L LC Owner

Eran Sinai is the founder of Credit Restoration and Analysis, LLC. Since launching in 1997, Eran goal was to assist people in obtaining their dreams of having a financially stable future. Sinai was born and raised in Israel and served in the 1982 Lebanon War. After being seriously wounded, he was released with honors and a few years later, he was sent to the U.S. as part of the Israeli Ministry of Defense Mission to the U.S. He attended college on a soccer scholarship and graduated with a masters degree in Accounting. As a kidney donor recipient, Eran is a part of the San Diego Transplant Team and is a member of the US National Kidney Foundation Transplant Team where he competes in triathlons.

Eran was drawn to AREAA upon discovering that the organization was based on the premise of helping those in the community with targeted programs and drew upon a broad base of professionals with a singular vision of promoting sustainable homeownership.

He finds that AREAA has allowed him to reach out to individuals to breakdown the misconceptions of credit repair and through his seminars has been able to offer fresh perspectives on planning a financial goal. It is Eran’s hope that AREAA will be able to reach a broader audience and bring education to all via multimedia tools and technology.

43

A LI C E

TSANG C I N DY

BAEK Our team’s involvement with AREAA has truly been a blessing. We have networked with many clients that really needed this type of organization to educate themselves, build relationships, and grow their businesses.

A R E A A O R A N G E CO U NT Y

C h a p t e r C o - F o u n d e r; E x e c u t i v e B o a r d M e m b e r; Past President

CENTRAL ESCROW, INC. Principal

Alice Tsang is one of the principal owners of Central Escrow, Inc. She is a certified senior escrow officer and has worked in the escrow/settlement service industry for the past 30 years. Alice was born in Hong Kong, graduated from the University of Hawaii and settled down in Los Angeles upon graduating. In the mid 1970’s, Alice began investing in real estate and aided in the opening of a real estate office and later an independent escrow company. In 2001, Central Escrow, Inc. expanded into Orange County and now operates seven branches with a staff of 100 employees.

A R E A A G R E ATE R

LOS A N G E L E S Founding Member and Advisor

S TE WA R T TITLE V i c e P r e s i d e n t, A s i a n American Division

In 2008, Alice co-founded and held the position of President of the Orange County Chapter. During her term as Chapter President, she is proud to have successfully held educational classes for chapter members covering topics on REOs, short sales, and various new loan programs for first time home buyers. She is equally proud of the signature Holiday luncheon event where the luncheon live auction resulted in the raising of funds for the chapter as well as a significant donation that was raised to benefit the Asian Senior Center.

Alice feels that AREAA has been invaluable in providing her with the opportunity to reach out to a group of dedicated and hardworking real estate professionals that can promote the values of their industries and carry out the mission of AREAA. Her desire has been for these professionals to better themselves through networking, education and advocacy so that they may become future leaders in their community and promote homeownership and community development for the minority Asian American community.

LI LI A

VILL ASEÑOR In five years I want to see AREAA recognized as a world leader in real estate agent education, a national leader in advocacy and cultural sensitivity.

AREA A OR ANGE CO U NT Y

Executive Board Member

W E L L S FA RG O HOME MORTGAGE Regional Diverse Segments Manager

44

I would also like to see new chapters launched in predominately Asian countries, such as Japan, South Korea, India, China and the Philippines.

LINN

AT SU KO

YUBE

C H I N N A P O N GS E

A R E A A G R E ATE R

S AC R A M E NTO Membership Chair

RENEW LENDING

I joined the local AREAA leadership team because I wanted to serve the local community and this was a great opportunity for me to utilize my skills and experience to do that. It was also exciting and challenging to be part of the team to start the chapter in Sacramento. Finally, I wanted to work Andrew Lee, the Greater Sacramento chapter president, and the wonderful team he assembled to run the organization.

Operations Manager

JURILL A AREAA expanded my opportunities professionally through networking and working with fellow leaders and members. It has also given me the opportunity to give back to the community in which I serve.

Education Board Member

W E L L S FA RG O HOME MORTGAGE

Membership Chair

W E L L S FA RG O H O M E M O R TGAG E Loan Officer

CHRIS

AREA A SO UTH E R N C A LI F O R N I A TR I - CO U NT Y

A R E A A S I LI CO N VA LLE Y

In five years, I see AREAA as a national powerhouse that assists and enlightens homeowners and real estate professionals. To be an organization that not only empowers the Asian community, but also makes a difference in other ethnicities across the board.

Since 1998, Atsuko has been a loan officer and in November of 2010 she joined Wells Fargo Home Mortgage. Atsuko was born in Japan and immigrated to the United States at the age of 14 where she has lived in the Bay Area most of her life. Her career began as a loan officer at a local mortgage brokerage firm mainly serving the Japanese community and she was one of the only Japanese speaking loan originators in the area. Atsuko has been active in the real estate community serving as a Board Member for the California Association of Mortgage Professionals Silicon Valley Chapter since 2007.

Atsuko serves as the membership chair for AREAA Silicon Valley Chapter and is responsible for recruiting new members and communicating with members to keep them well informed of the latest news in the real estate community. Her greatest accomplishment as an AREAA leader was growing the Silicon Valley Chapter from zero members at its inception to 150 members in just eight months.

The idea of serving the Asian community in homeownership and the ability to share ideas with fellow industry leaders really attracted Atsuko to join AREAA. She believes that there are many minorities within the Asian American communities who need assistance and may not be able to obtain it due to language barriers so her goal is to create outreach programs in order to assist these minority homeowners.

Branch Manager

TO F I N D O UT H OW YO U C A N CO NTR I B UTE TO YO U R LO C A L C H A P TE R , V I S IT:

ht tp://ar e a a.or g

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ADVERTISERS 6th Annual Asian American Real Estate Convention & Gala www.areaa.org

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Bank of America

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theEDGE

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Prudential Real Estate

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Back Cover

CREATING FUTURE LEADERS TODAY Dedicated to developing future leaders who will transform the way the real estate industry serves Asian American and immigrant homebuyers.

To learn more about the Foundation’s Executive Leadership Program and Consumer Outreach and Homeownership Education Program, visit:

www.areaafoundation.org www.areaafoundation.org