Ed Delgado, the president and CEO of the Five Star Institute, answered questions from FORCE members about the state of REO in 2014.
[bd_staff_faq q=”For many of us, the status of REO is all local—Northeast is way different from California, Florida, or Nevada. How can we get this information from the FORCE?” a=”That is a great question, and one that we take seriously because we know the market is very region-specific. On a weekly basis, FORCE members receive a copy of the FORCE Market Briefing, which breaks down regional econometrics as they relate to the real estate market. (If you are not receiving your copy, please email mandy.naglich@thefivestar.com.)”] [bd_staff_faq q=”What is the status of the IRS extension on forgiveness of debt from short sales being tax exempt?” a=”The Mortgage Debt Relief Act of 2007—which makes debt that is reduced or cancelled through a loan modification or debt forgiven through a foreclosure or short sale tax-exempt—is only applicable in calendar years 2007 through 2013. (Other criteria also apply, such as the indebtedness must be on a principal residence and the maximum amount that can be excluded from taxes is $2 million.)
This tax relief expired on December 31, 2013, and so far, no extension has been passed by Congress, though homeowner advocates are lobbying heavily for lawmakers to reconsider. On Tuesday, January 14, Rep. Bill Foster (D-Illinois) introduced the Homeowners Debt Relief Extension Act, which would extend the mortgage debt tax exemption until January 1, 2016, and apply to any debt forgiven after December 31, 2013. Whether or not Congress can put aside its partisan differences long enough to approve a bill for the benefit of American homeowners and the middle class remains to be seen.”] [bd_staff_faq q=”Regarding the settlements made with servicers and the GSEs, will the property stay with the GSE after a forced repurchase?” a=”Generally speaking, when a loan is repurchased, the lender or originator doing the repurchasing acquires it. The loan goes back to the repurchaser and in the event of a foreclosure, the loan holder takes possession of the property; it does not stay with the GSEs.”] [bd_staff_faq q=”I do a lot of property preservation work. By doing this I see a lot of vacant properties in the area. Is there a way to capitalize on these vacancies and turn them into listings?” a=”Inherently, it is very difficult to confirm if a property is vacant or abandoned. This is one of the issues the Five Star plans to address when we meet with representatives in Washington, D.C. Banks have been penalized for taking action on vacant or presumed-vacant properties, only to find out that the resident was out of the property for an extended period of time.

An infamous case involved a member of the military who was stationed overseas. The bank and its property inspectors assumed that because the home was empty for a prolonged period, it had been abandoned. The servicemember returned home from his tour of duty to find his home had been wrongfully repossessed, which resulted in litigation for the bank.

Without being completely positive that the property is vacant, it would not be possible to receive that property as a listing. It would be in your best interest to contact the servicer of that property.”] [bd_staff_faq q=”Do you think the market is manipulated to make the economy appear better than it is?” a=”No, I don’t think the market is being manipulated. The only things that can be misconstrued are data points. A good example is unemployment. We look at national unemployment as 6.7 percent, according to the government’s December report. In reality, a better measure of unemployment is the U6 data point, which reflects total unemployment in the United States. That number is actually 13.1 percent.

The most widely publicized unemployment stat—currently, the 6.7 percent figure—only counts those people who are out of work and actively seeking employment. The U6 unemployment rate adds in those people who’ve become “discouraged” (phrase used by the Labor Dept. to describe unemployed persons who have given up on the job search because they think such efforts are futile) and those that are “marginally attached” to the workforce (used to describe unemployed persons who’ve stopped seeking employment for other reasons), as well as those that are available to work full-time but have been forced to settle for part-time work for economic reasons. The U6 rate is what I consider the more comprehensive measurement of unemployment because it takes into account the workforce in its totality; the standard unemployment rate that you always hear cited in the news covers a much smaller, pre-defined segment of the workforce.

So as we explore the housing market, with economic statistics, it is important that they are positioned accurately. I would also point out that everything in housing is regional; those large national numbers don’t tell the real story of local markets.”] [bd_staff_faq q=”Why are banks countering so high on short sales with no comps to back up the value?” a=”

I think the presumption of stability that entered the marketplace during a period of time when “deals” were being made has expired. Home prices right now have stabilized to the point that both servicers’ and investors’ expectations have increased regarding net proceeds from sales—and this includes short sales.”] [bd_staff_faq q=”Hedge funds are coming in and buying up homes to use as rental properties. Do you think this affects homeownership rates?” a=”

Two key points inherently impact homeownership rates: the prevailing interest rate environment and the ease of access to credit. Interest rates have been historically low for the last 36 months. However, at the same time, there have been very strict requirements when it comes to obtaining credit. Many potential homeowners have been disqualified because of these rigorous applicant standards. The jury is still out on how the low interest rate environment paired with the hedge fund trend will affect overall homeownership rates in the United States.”] [bd_staff_faq q=”Does doing work for Ocwen or Nationstar—for example, BPO services—only turn around to hurt the agent and broker community in the end?” a=”

No. Being assigned work opportunities is a good thing. And, in a soft market especially, building your relationships by accepting work assignments always benefits the agent.”]