Pocket Listings Anyone?

CAR just presented an hour webinar on the subject of ‘Pocket Listings’. It becoming a problem the way the market is right now. And agents who are not following the letter of the law will come under increasing scrutiny from the DRE and other regulators. That’s what the rest of us need – more regulations to curb the avarice of a few. Ain’t that the way it goes?

REALTORS® marketing a property for which they have obtained a listing will generally place that listing on the Multiple Listing Service (MLS).  At times, however, listings are not placed into the MLS.  Listings not placed on the MLS are commonly referred to as “pocket listings”. This article will discuss the various legal issues and risks of pocket listings.  Please note that this article references the California Model Multiple Listing Services Rules (Amended February 2013). REALTORS®, however, must comply with their own local MLS rules.  Many local MLSs adopt the Model MLS Rules in its entirety, whereas other MLSs may have slight variations and may have different numbering systems.

II.  Pocket Listings

Q 1. What is a pocket listing?

A A pocket or off-MLS listing generally refers to a listing agreement that an agent has obtained but does not place on the MLS. A “pocket listing” is not a legally-defined term, and can have other meanings as discussed below.

Q 2. Is a pocket listing legal?

A Yes, a pocket listing can be legal. However, a pocket listing raises a number of legal and practical issues that agents should consider and address as discussed below.

For more information on ‘Pocket Listings’, the legality, the ethics, the fiduciary, get the answers from CAR Legal:

Pocket Listings – CAR Legal

9 year fraud battle has a happy ending.

Over the years I’ve written a lot about real estate fraud. Real estate fraud had only just come to our region in a big way back in 2005/2005 and Realtors® were trying to grapple with this new issue. Problem was, nobody else thought it was an issue. Banks didn’t care, law enforcement wasn’t interested, our DA, the Dept. of Real Estate, FBI – you name it, nobody cared.

And over the years I’ve written a lot about the Stonewood Case – a house kiting scheme with some investment undertones. By the time the law finally got on the case, the perp’s were indicted for $143 MILLION dollars. Yeah, not exactly chump change. It really jump started our foreclosure market back in 2006-2007 as these places started to dump back onto the market in ever increasing numbers.

It’s been a 9 year effort led by local Realtors®, some tenacious reporters, our board attorney and a bunch of victims who weren’t afraid to stand up.

Yesterday the last two perp’s were found guilty. Hendrix Montecastro and his mother Helen Padrino. There were 9 people indicted, the others were so guilty they all plead guilty. These two decided to test it in court and act as their own counsel. Yeah, that worked well. So instead of the few or tens of years their cohorts were dealt, Padrino is up for 30+ and Hendrix is down for 100.

All I can say is, he looks a lot better in his orange jumpsuit than he did in the 3 piece Armani’s he used to sport when he’d come into the office to try to intimidate us. Sentencing comes in a couple weeks.

You can read some of the history and testimony here:


California Homeowners Bill of Rights – New Law for 2013.

The new California Homeowner Bill of Rights becomes law today. If you’re not familiar with this measure, it was a bill carried on behalf of California Attorney General Kamala Harris last year that sought to codify some of the measures set forth in the national mortgage settlement deal struck in early 2012. 

Initially opposed by the California Association of Realtors as well as the California Bankers Association and the California Mortgage Bankers Association, the bill was pushed through the legislature by a closed joint committee  of both houses so when the bill eventually reached the floor, it was voted on immediately and passed to the Governor. Total time in committee, floor and signature was measured in hours rather than days, months or years, as is typical for most bills. 

Due to the secretive nature of the committee structure, there was little opportunity for interest groups to provide input and there was great concern that what emerged would be a very flawed effort reflecting an over reaction to purported lender wrongdoing. However, CAR did have an opportunity to work with the committee to effect some modifications to the final version that removed our opposition to the bill. CAR was not supportive of the bill in its final version but adopted a neutral position, although banking groups remained steadfast in their opposition due to to concerns about meritless litigation that the bill opens up for aggreaved homeowners. 

Here’s what the bill does:

  • Stops dual tracking. Once the process has started for either a loan modification or short sale by the lender, the foreclosure process must be stopped. This is in response to cases where the property proceeds along multiple courses at the same time only to have the foreclosure process conclude days ahead of a short sale approval by another arm of the bank. As pointed out, this frequently resulted in the bank taking the property back and ultimately receiving thousands less in the foreclosure sale than they would have in a short sale. Of course we know the banks are covered either way and really don’t care but ultimately this should result in more short sales and fewer foreclosures, which is better for the recovering market.
  • Under the dual tracking provisions, banks must give an applicant a response to their loan modification before they can start the foreclosure process. If a homeowner has not applied for a loan modification, the bank must inform them of their right to do so before starting the foreclosure process.
  • No more robo signing.
  • Banks must provide a single point of contact to borrowers trying for a loan modification or short sale. Homeowners and Realtors are often frustrated by multiple points of contact and the handoff fr5om one agent to  another within a bank frequently resulting in the loss of paperwork sending the process back to square one while the foreclosure process continues apace in another department.
  • Allows the borrower to sue loan servicers if the borrower thinks they have violated any foreclosure laws. This is one of the most worrisome components of the bill in that it may open the door to frivolous lawsuits resulting in increased costs and unnecessary delays in an already costly and time consuming process. 

With nearly 1 million foreclosures recorded in the state since 2007, California remains one of the hardest hit areas of the country. However, foreclosures are down in most areas by 30% or more in the past year and with prices starting to climb across the state, the hope is that fewer and fewer people will be pushed into foreclosure anyway. Some 30% of state homeowners remain underwater in their loans but the combination of improving employment statistics and home price increases has decreased that by more than 5% in the past year.

The Homeowners Bill of Rights may well provide some relief for harried homeowners and produce further delays to the process, but it will do little to change the underlying ability of a homeowner to ultimately afford their home and will, in most cases, only delay the inevitable. If Sacramento and DC don’t screw it up, an improving economy will do more to aid homeowners than the HBR will ever accomplish – and ultimately that’s the best news for everybody. 

Mortgage Debt Relief. Wassup?

Another question hanging about our heads this year-end involves extension of Mortgage Debt Forgiveness, that measure that allows lenders not to 1099 you for the mortgage debt relief sellers who have gone through a short sale or foreclosure receive.

At this point with all eyes focused on the fiscal cliff, it is unlikely anything specific to this measure will be passed this year. If there is a continuing resolution (kick the can down the road for 90 days and let the new Congress deal with it), debt forgiveness could/would likely be a part of that. Otherwise we just get to wait until after the first of the year. NAR is pushing very hard for this – it was the subject of a recent call to action for Realtors nationwide, and we are moderately optimistic it will be extended by the new congress but by no means assured. Join the club with all the other individuals, businesses, charities, military members and others awaiting their fate at the whim of the administration and the able hands of Congress.

I know this is very nerve wracking for people involved in short sales or foreclosures right now who don’t know if their phantom income (debt relief) will be taxed or not. Imagine shortselling your home at a loss of $100,000 to your lender. If you close prior to December 31st, you have no tax liability on that money. If you close after January 1, that $100,000 could be added to your regular income and taxed at your increased rate – a potential difference of $20,000+. And right now nobody knows what’s going to happen. Merry Christmas. I’ll provide any updates as they become available.

You can let Congress know how you feel about this by clicking here:

 Do No Harm To Housing

…The Light at the End of a Very Long Tunnel

CoreLogic® has just published their most recent Home Price Index showing a 3.8% rise in home prices for July marking the 5th consecutive month of year-over-year increases. They are forecasting an increase of 4.6% in August and are now anticipating that we will see a gain for the full year.

In this month’s Realtor® Report, you’ll find that housing  activity in Southwest California is running slightly ahead of these national numbers with year-over-year increases of 6% in both July and August putting us ahead of 2011 median price by 5% year to date. Temecula posted its 6th consecutive monthly median over $300,000 and its highest month since April 2008  ($347,985).

Sales were down somewhat in August, at least in part due to our increasingly severe inventory shortage. Demand activity remains strong and if we had more homes to sell, they would be selling. Year-to-date sales are 9% ahead of 2011 (4,963/5,454) and still running 4% ahead of 2010 (5,228/5,454) keeping us on pace to set a new high water mark for the region, but our inventory is down 62% since January.

Back in June, I updated you on a bill H.R. 5823. Authored by California Congressman Gary Miller, the “Saving Taxpayers from Unnecessary GSE Bulk Sales Act of 2012” follows months of direct lobbying to the FHFA and others to carve California out of their proposed pilot program to remove hundreds of homes from our inventory and convert them to rentals for 5 years in an ‘effort to stabilize the market’.

The bill is still languishing in committee. Meanwhile the FHFA has announced its intention to proceed with the program and remove 500 for-sale homes in LA and Riverside County to fire-sale to an investor as rentals by year-end. Even if we knew how they were selecting these homes, where they were located and who they were going to sell them to, this would still be a bad program. The fact that we don’t know any of those things only makes it worse.

I would like to thank the Riverside County Board of Supervisors, the Southwest California Legislative Council and the Cities of Temecula and Murrieta (so far) for joining Realtors® in SUPPORTING H.R. 5823 and opposing this FHFA program. Simply stated, the goal of this program is to stabilize the market by removing  ‘excess inventory’. But our region has no excess inventory, there is strong demand for the properties we have and our prices have been stable for 3+ years and have recently started to appreciate. This program would make it even more difficult for qualified buyers to find a home in our communities while exposing our neighborhoods to numerous rentals owned by an absentee landlord (hedge fund) just waiting out their 5 years to dump them back onto the market.

To get all the numbers behind the local real estate market as well as more information on how you can join the coalition supporting HR 5823, visit: http://www.slideshare.net/genewunderlich/9-realtor-report


Waited Too Long?

If you’re waiting for mortgage rates or house prices to hit bottom, you may have delayed too long.

Among the housing trends you can expect to see this spring: Potential homebuyers will find increased competition when shopping for a home this spring, as more bargain hunters get off the fence. Investors also will continue to take advantage of the opportunity to buy low.

Rising mortgage rates will serve as a warning to borrowers who thought the low rates would last forever. More bad news: Some mortgages will cost more this spring because of higher loan fees.

Most of the good news goes to refinancers and underwater homeowners. Millions of borrowers will have the opportunity to refinance their mortgages through two government programs that make the refinancing process easier and cheaper.

The Federal Housing Administration, or FHA, reduced loan fees for these borrowers, and Fannie Mae and Freddie Mac removed many of the obstacles that prevented borrowers who were upside down from refinancing.

Here are some of the housing trends you should expect to see for spring 2012.

Mortgage rates rise but won’t skyrocket


Many borrowers missed the record-low mortgage rates seen earlier this year, but they still have a chance to grab low rates this spring.

Mortgage rates have bounced from the bottom, and it’s unlikely they’ll drop back to record lows, but there’s no need to panic. Mortgage experts don’t expect rates to skyrocket anytime soon.

The Mortgage Bankers Association’s latest forecast indicates that the rate on the 30-year fixed mortgage will average about 4.3 percent in the second quarter. That’s up from the first quarter’s average of 4.16 percent in Bankrate’s weekly survey. But 4.3 percent would still be low, especially when you compare it to the 6 percent or 7 percent borrowers paid at the height of the housing boom.

The recent jump in rates comes as investors become more confident. Still, the picture is far from rosy, as nearly 13 million people remain unemployed.

“It takes a paycheck to pay a mortgage,” says Jay Brinkmann, chief economist and senior vice president of research for the MBA. “Mortgages aren’t paid with percentage points on (gross domestic product).”

Until the labor market improves, it is unlikely mortgage rates will spike, Brinkmann says.

Buyers face fierce competition with investors


Attractive mortgage rates, low home prices and rising rents make the current housing market the perfect opportunity for investors. When looking for bargains, homebuyers will continue to compete with investors.

“This is true particularly at the lower end of the market and with first-time homebuyers” says Jed Smith, managing director of quantitative research for the National Association of Realtors.

One of the strongest recent housing trends: Many investors pay cash. These cash offers are an obstacle for buyers who need mortgages because sellers prefer buyers who can pay cash to close quickly, Smith says.

Investors bought about 23 percent of the homes sold in January, according to the NAR’s latest numbers. That’s up from 21 percent in December, and that trend is not expected to shift this spring.

“Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest,” Smith says.

Homebuyers are expected to get off the fence


Homebuyers waiting for prices to hit bottom may soon get off the sidelines, industry experts say.

“We’re starting to pick up on the purchase side,” says Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, Ill. “I don’t think you’ll go back to (the home purchase activity we had in) ’06 anytime soon, but this is the best that we have seen in a while.”

The price gap is closing between what sellers expect to get for their homes and what buyers pay, Brinkmann says. That’s one reason home sales are improving.

As consumer confidence and rents rise, more renters will want to become homeowners, Smith says.

The trend already has started, according to a recent study by Kingsley Associates, a San Francisco-based real estate research and consulting firm. About 59.5 percent of the tenants surveyed in the study said they intend to renew their leases this year. That is the lowest rate since early 2009 on renters’ intention to renew leases. The rate was 63.7 in the fourth quarter of 2010.

“We still have a slow recovery, but I think we’ll start to see additional sales,” Smith says.

Refinances get easier, cheaper


Homeowners who have FHA-insured mortgages and who are current on their payments will be able to refinance with lower fees through the FHA streamline refinance program starting in June. Only loans that closed before June 2009 are eligible to be refinanced in the program.

The FHA will reduce loan fees by more than half on streamline refis. As of June 11, borrowers who refinance through the FHA streamline program will pay only 0.01 percent of the loan in upfront insurance fees and 0.55 percent in annual mortgage fees.

Another government program, known as HARP 2.0, will make it easier for thousands of borrowers to refinance their mortgages this spring.

The revamped version of the Home Affordable Refinance Program allows borrowers to refinance regardless of how underwater they are on their mortgages. Some lenders say they are focused on refinancing mortgages on loans they currently service, for now, but others accept any applicant who qualifies for HARP 2.0. To qualify, your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac, your payments must be current, and your mortgage must have closed by June 2009.

Some will have to pay more for mortgages


Unless you get a HARP or FHA streamline refi, you will likely pay more for a mortgage this spring because Fannie Mae, Freddie Mac and the FHA increased their loan fees in April.

Homebuyers with small down payments will pay significantly more for FHA mortgage insurance premiums.

“Those who don’t have credit scores in the high 600s, low 700s may be forced to go the FHA route,” Conarchy says. “And will be stuck with the higher fees.”

A borrower who takes out a $200,000 FHA loan should expect to pay about $3,500 upfront for mortgage insurance. The fee is 1.75 percent of the loan total. Before the increase, the borrower would have paid a $2,000 fee for the same loan.

Annual insurance premiums went up, too. For a $200,000 loan, the monthly premium is about $208 per month. That’s about $17 more per month than what it would have cost before the increase.

In June, the FHA increased the annual insurance for loans greater than $625,500. A borrower who lives in a high-cost area and takes out the maximum $729,750 (which is the FHA limit for high-cost areas) will pay $912 each month in mortgage insurance alone.


Half Empty or Half Full

It’s all in the perspective. A recent media article featured data from a report by  RealtyTrac showing that the Riverside-San Bernardino area remains #3 in the nation for foreclosure activity. I cringe when I see these kinds of articles. Because while the underlying report data is accurate, a reporter, who typically knows little about real estate, has no idea what the data means. They have no perspective, thus their summaries are often misleading to their readers causing unwarranted confusion and concern.

For example, data shows that Murrieta has 1 home in every 149 in foreclosure for a total of 264 ‘foreclosures’. Temecula was close behind with 258 ‘foreclosures’ and 1 in 152 households, Lake Elsinore had 147 ‘foreclosures’ with 1 in 151 households. They then compared our region with the national average of 1 in 686, making us sound pretty bad off.

But while the data is accurate – the media interpretation is not, or at least incomplete.

So, as Paul Harvey used to say, “Now, the rest of the story…” I’ll use Murrieta’s numbers, since that’s what the article used, but the statistics and comparables are very similar across all markets in Southwest California.

First, it’s not surprising that our area still ranks high on the foreclosure scale – after all it was just a few years back that we were among the top three in the nation with Sacramento and Stockton (which still rank #1 & #2). But rather than 264 homes going back to the bank as the article intimated, there were just 140 in June for Murrieta, down 43% from last June. And only 25 of those are actively on the market for sale. Bank-owned homes as a percentage of our market has continued to decline to just 7% of our active market in July. The number of both REO and Short Sales on the market has dropped by half since January.

Preforeclosure delinquencies are down 8% for the region, and Notices of Sales (NOS) are down 28%. The only number that bumped up slightly in June was Notices of Default (NOD), which were up 3% (68 to 70). The rest are in some stage of the foreclosure process but may never revert to the bank. Homes actually going back to the bank are down 68% from last June, 3rd party (courthouse step) sales are down 22% and cancellations of foreclosure sales by banks are up 17%.

Two additional trends are affecting our market right now. First, after long delays and numerous moratoriums, banks may finally be starting to move more aggressively on properties that have been in foreclosure for 1, 2 or 3+ years. This ‘shadow inventory’ concern has been hampering a sustainable recovery in housing. It’s past time for an honest accounting – by the banks and by delinquent sellers. We’re also seeing a slight up-tick in foreclosure activity on homes that were granted loan modification 2 – 3 years ago but have subsequently fallen back into foreclosure.

Second, counteracting the increased foreclosure activity is an apparent willingness and/or ability of banks to successfully complete short sales. Maybe they finally figured out they make more money on a short sale and that it’s less deleterious to the market. Rising median prices also means fewer people under water which means more people able to refinance at today’s record low rates into more affordable mortgages.

So there you have it. Yes we are still #3 in the country for ‘foreclosure activity’ and with 1 in 150 homeowners still being affected that’s not great. Compared to North Dakota with just 3 foreclosures in the whole state and a ration of 1 in 105,833 homeowners in default, we look pretty dismal. It’s all in your perspective.

But we’re still selling homes at a record pace this year and our prices are inching up. Compared to where we were four years ago, or even a year ago, we’re headed in the right direction. They didn’t tell you that.

RealtyTrac, a trusted source of foreclosure information, publishes a nifty little ‘Heat Map’ showing foreclosure activity by zip code for any area of the country. If you’re curious, it’s a great way to spend a little time when you’re not on facebook. Here’s the data http://www.realtytrac.com/trendcenter/trend.html & here’s the local numbers: Perspective. http://www.slideshare.net/genewunderlich/8-realtor-report-13973332.


SRCAR Hosts City Managers Forum

The Southwest Riverside County Association of Realtors recently held their 3rd annual ‘Breakfast with the City Managers’ event and featuring Bob Johnson (Temecula), Rick Dudley (Murrieta), Frank Oviedo (Wildomar), Bill Rawlings (Menifee) and Tom Evans (Lake Elsinore).  The event is one of the highlights of the year for many members and this year was no different.

City Managers reminded us how fortunate we are to be living and working in our communities. Our cities may not exactly be thriving during these challenging times but they are all doing way better than most. Despite last year’s pilferage of redevelopment funds and the added insult of stripping VLF funds equaling 22% of Wildomar’s budget and 18% of Menifee’s, infrastructure improvements, job attraction and parks continue to figure prominently in each city’s action plan.

Every city is also experiencing some degree of revitalization as well. Unemployment rates are lower in our region than the national average and significantly lower than the rest of Riverside  County. There are new apartment buildings going up in Temecula and 5 new housing tracts under development in Wildomar. New restaurants, shops and businesses are starting to fill in some of those shuttered buildings that have populated our region for the past few years. Public safety in our cities is among the best in the nation as is our education system. While there have been some municipal lay-offs, our cities have been able to negotiate with their employees and service providers to maintain a high level of service to residents within the economic realities of our times.

All acknowledge that there are still challenges ahead for our region. One manager opined that it might be 20 years before the cities see a return to the level of property tax revenue they enjoyed just four years ago. But as the cities diversify their base that becomes less significant. Temecula currently gets only about 10% of its budget from property taxes while Menifee, one of our newest cities, relies on property taxes for nearly 50% of their budget. An aggressive business attraction plan aims to reduce that dependency over the next few years.

Both Murrieta and Temecula have held discussion about the merits of becoming a charter city and you’ll be hearing more about that. The managers  also shared the challenges and frustrations of dealing with some aspects of our state and federal government. One recent example was the state’s last minute decision to  recalibrate the way they assess the cities and gave cities a three day payment window or be assessed penalties. Two of our cities took hits of nearly $2 million dollars, the others lost lesser amounts. It can be vexing to be a pro-business region in California.

Should you have an opportunity to visit with any of our local City Managers, you will find them most helpful and ready to expound on the positive things happening in our region. While each city strives to maintain its own identity and be the best for its own residents, there is a great sense of shared community among the cities acknowledging that a business gain in Lake Elsinore benefits Menifee, a new overpass in Temecula is good for Murrieta traffic and a new brewpub in Wildomar would be good for me. Talk to your City Managers. They are good folks and eager to keep our cities moving in the right direction.