“Shared joy is a double joy; shared sorrow is half a sorrow.” —Swedish proverb
What’s your problem? VAR’s housing policy forum finds similar tales from across Virginia By Andrew Kantor
Banks that can’t seem to get their acts together. Appraisal management companies sending out unqualified appraisers. Consumers who base their expectations on media sound bites, not reality. Government programs that confuse the market — and that may have a questionable future.
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Sound familiar? Those were the issues brought up by hundreds of Realtors® from across Virginia at VAR’s mid-February Housing Policy Forum. Splitting up by region into six caucuses, they developed their lists of what ails their markets. And across the board they discovered that the issues were roughly the same. (Well, with one exception: Northern Virginia’s concern about lack of inventory.) As they read off their lists, the echoes were clear. “I could probably say ‘ditto’ and sit down,” said Kemper Funkhouser of Coldwell Banker Commercial in Harrisonburg, spokesman for Realtors from the Shenandoah Valley area, at one point. They presented these issues to four housing experts brought in for the occasion: Ken Harney of the Washington Post; NAR immediate past president Ron Phipps; Anthony Sanders, professor of real estate finance at George Mason University; and David Stevens, president and CEO of the Mortgage Bankers Association. The discussion was open, frank, and pointed. So what ails the housing industry?
Lenders: Slow, confused, and scared Lenders got a fair share of the blame — not surprising, with their being at the root of the housing crisis. Karen Smith of Avery-Hess in Centreville, speaking for the Realtors from the south-central region of the state, summed up the issue as banks having “massive requirements on the borrowers” in the form of exhaustive credit checks and piles of paperwork. “There’s an overcorrection going on,” agreed Cindy Stackhouse of Volume 19 ● Issue 2
Century 21 Stackhouse & Associates in Prince William, speaking for the north-central Realtors’ group. Banks want too much information, or they ask for it too late. For example, she said, they discover liens — or demand an additional title search — three days before closing. So in some cases, in Stackhouse’s experience, “buyers [are] writing checks to pay for liens so they can get the house.” In other cases, it feels as if the banks’ left hands aren’t communicating with their right. They offer workout packages, for example, while trying to kick out homeowners. Lamented Smith, “They’re getting short sales on the table, but someone is cutting off the utilities.” Part of the issue is lender’s everchanging guidelines, according to Kit Hale of MKB in Roanoke, speaking for Realtors in the southwest, who said it felt that “there’s kind of a moving target with regulations.” Other times it feels like banks are deliberately throwing monkey wrenches into the works. For example, they’ll demand something they can’t have. In one instance, Stackhouse said, a seller’s bank wanted to see the buyer’s financial records. The buyer refused and the deal fell through. And, she learned, Bank of America will often refuse to pay transfer taxes, title fees, and other fees on short sales. The result of all this: “We’re having things fall out last minute with the banks.” NAR’s Phipps (who’s also a working broker in Rhode Island) said he’s shocked that, this far into the housing crisis, it takes so long for a bank to approve a mortgage. “That’s, to me, inconceivable,” he said, considering how much information is available on
They’re getting short sales on the table, but someone is cutting off the utilities.
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Common issues across Virginia • Last-minute lender demands • Slow response from banks, especially with short sales • Unqualified appraisers • Lack of buyer education • Hard-to-find financing for marginal buyers • And the good news: Low interest rates, plenty of inventory, general affordability, abundance of consumer information available, higher rents helping to drive home ownership
any borrower at the push of a button. Sanders agreed that financing remains the biggest hurdle. “Mortgage lending is not really growing,” he said. “We’ve swung to the part where it takes forever even to get a refi application processed.” For his part, Stevens thinks that too much weight is given to credit scores, which don’t — and can’t — reflect a borrower’s true financial situation, especially during a recession. That leads to people who are perfectly capable of paying a mortgage being declined because their FICO score reflects issues that no longer matter. “We have to find a way to lend to people who have been impacted by a recession,” he said, “and not think of them as criminals.” It’s all these things together that frustrate Realtors when trying to work with banks. “There are lots of issues,” Smith said, but when it comes to lenders “no sense of urgency.” If lenders top the list of targets of Realtor wrath, government is a close second — whether because of too much action, too little action, the wrong actions, or the typical partisan circus.
Government, here to help “There’s a real fear that folks in government… are just not able to get anything done,” Harney said. Take reforming the GSEs: Fannie Mae and Freddie Mac. Should it be done? Will it be done? Considering the influence they have on the market, inquiring minds really want to know. Although he admits “Given the tone in Washington — the inability to get anything done — is probably good for the GSEs,” Stevens doesn’t see much of a long-term future for them. “I think Freddie and Fannie will be put out of 20 April/may 2012
business,” he said. In fact, he elaborated, “I think by the end of the year, Wells Fargo will do more business than Freddie Mac.” Sanders also expects the GSEs to be replaced with something, although he couldn’t say what. “I understand that we will end up with something like Fannie and Freddie,” he said, “I think it’s a fait accompli — I think it’s going to happen. But I’m scared.” His concern is that, just as they did a few years ago, private lenders will push the GSEs into backing risky loans. So, he said, “if you figure out a way to put a chastity belt on [Fannie and Freddie’s replacement], then OK.” Stevens wasn’t quite as worried, pointing out that “it wasn’t Fannie and Freddie’s 30-year fixed rate that screwed up the market.” For his part, Phipps was concerned that there be something solid in place: “There is a very important role for government, and that is to make sure the capital it available,” he said. “I think the average consumer... really likes the idea of having a 30-year mortgage.” Stevens didn’t disagree with the idea of a government-backed segment of the market. “You need to have some sort of functioning system in place at all times,” he said. “Private capital is opportunistic. Government capital provides a continuous presence.” On the other hand, he said, government “can’t just rush in when things go bad.”
Information underload Buyer education is another issue that came up repeatedly. Too many house-shoppers have, in the words of Funkhouser, “Unrealistic goals and misinformation.” And they’re also www.VARealtor.com
quick to point the finger… at someone else. “When things go wrong, they turn to us,” he said, “and a lot of times we get blamed.” They hear it’s a buyers’ market and jump to conclusions, then grouse when their unrealistic expectations aren’t met. “Buyers can’t afford where they want to live, or feel entitled to get a home at a certain price, or feel their first home should be their dream home,” said Deborah Baisden of Prudential Towne Realty in Virginia Beach, speaking for Realtors from the eastern part of the state. Funkhouser agreed. “We as Realtors need to be able to control the expectations of our clients.” Or, as Stevens put it, “Having facts matters.” There’s another thorn in Realtors collective sides: appraisal management companies. “For most of us in the room,” Phipps said, “it’s our number one daily challenge.” That’s because of the Home Valuation Code of Conduct. The HVCC was supposed to insulate appraisers from those who would try to influence their valuations. But it’s resulted in appraisal management companies that assign appraisers who lack “geographical competence” for an area — and pay them a lot less. While Phipps said that “a good independent appraiser can appraise any property,” he added, though, that “the independence of the appraisal is gone.” (His wife, he pointed out, is an appraiser.) “We’ve got to get back to where a consumer gets a true independent appraisal from an expert,” Phipps said. “I’d like to get back to the part where we had experienced appraisers who knew their markets.” There were more issues brought Volume 19 ● Issue 2
up: condo associations that haven’t renewed their FHA approval, hard-tofind financing, the fate of the mortgage interest deduction, and unemployment to name a few. But if nothing else, the forum reminded Realtors across the state that their frustrations and fears are shared, and they aren’t in this alone.
So what? As cathartic as venting frustrations can be, and as good as it feels to know you’re not alone, the fact is that talking about the various problems of the housing market doesn’t change the fact that those problems exist, and that no individual in the room is in much of a position to change them. But here’s a shameless plug: The fact that no one can change these things is the reason for Realtor associations — local, state, and national. You’re part of one of the strongest, most influential groups in the state and in the country. When we speak as one we speak very, very loudly. And we’ve been doing just that, on the local, state, and national level. The concerns expressed at the forum aren’t just shared by Virginians; they’re nationwide, and Realtor® associations are engaged in discussions to change them. So keep that in mind when you read about a call to action, or when someone asks for your support, or when there’s a meeting or a march or a campaign. You’ve told us what ails you. When the time comes, help us fix it. l
Join the nationwide Realtor Rally in Washington, D.C., on May 17. www.RealtorRally.org
If you figure out a way to put a chastity belt on Fannie and Freddie’s replacement, then OK. April/may 2012 21