Monday Morning Coffee

One West Bank & The FDIC

February 22, 2010

Good morning,

I hope you had a great weekend.  As I am typing, the sky has opened up on another rain storm in San Diego.  This could complicate things as we have 3 new listings we need to shoot photos for on Tuesday (that’s called a teaser!)  I am going to give you a couple of quick notes and let you click through for more information.  But first – HAPPY BIRTHDAY CORI!  That’s right, my wife turns, well let’s just say younger than me today.  We are looking forward to going out with our friends John and Jean to celebrate tomorrow night.

Secondly, I am VERY HAPPY to announce that I have added Adriana Amon to my team as a buyers’ agent.  Adriana lives a long stone’s throw away from me in 4S Ranch and she has a strong background as a lender prior to stepping into her agent shoes two years ago.  She is very involved in the community and we have served together on charitable foundations in the past.  I was looking for someone who combined a love for real estate with a commitment to the community and for the 4S Ranch and Del Sur areas, she was the only person I considered (so good thing she accepted!)  We are happy to have her on board and look forward to great things.

Ok,  a couple of quick points on the real estate market:

• You may have seen a video last week being sent around that was done by a couple of mortgage brokers that ripped the FDIC for selling the assets of Indy mac to One West Bank.  The terms they allege are pretty bad as One West received a guarantee that the FDIC would cover loses on every loan and the losses were calculated from the original loan balance and not what One West paid for them.  The video is here.
• The FDIC took the unusual step of answering the video as it was spreading viraly.  Their response is here.
• Then, the brokers ran a response to the response which is here.

My thoughts on this are that One West did receive a great deal and I don’t like the fact that some of the One West senior management were the same people that helped cause this crash in the first place.  However, we also have to consider that the FDIC needs to get rid of the assets of these failed banks and there are not a lot of people walking around with the experience to run this type of bank nor the access to cash needed to make this purchase.  Because of these two factors, whomever bought the assets was going to have to get a great deal (if you know a good banker, and have a couple hundred million dollars you can get a hold of, you might get a similar deal).  That said, I think it is disgusting that the bank then insisted that the  borrowers doing the short sale sign a promissory note to complete the sale – the bank was not going to take a loss at all, saddling the defaulted homeowner with a permanent anchor as they try and swim to shore is inexcusable.

My second topic is on short sales.  We are finding the following is happening:

•  There is a lot of agents that are marketing themselves as ”short sale specialists” and are doing more harm than good.  These agents are listing homes 20% under market in order to drive a bunch of offers they can take to the bank.  The problem is, that banks are getting tired of agents underselling homes and are suspicious that the buyer may be related to either the agent or the seller.  Therefore, they come back with a higher counter or just foreclose.  Unfortunately, the house sits on the market for the 6-9 months the agent is trying to get the short sale approved and brings down the value of all the homes around it.  I spoke to one agent this weekend who had done this (and received so many calls she finally would only schedule appointments by text) and her position was that she wasn’t worried about the neighborhood but only about her client.  What she didn’t realize is that this is a tactic that doesn’t w ork anymore and only hurts everyone involved.   I think as agents, we have the responsibility to do the best we can for our clients and that we can do that in a way that doesn’t destroy neighborhood values.  However, we have very low standards of entry into real estate and not all agents share this view.  If you know someone thinking of a short sale, let them know that the banks are not blindly accepting offers significantly below market price and if they just list slightly below market, they will get the offers they need.
• We have noticed a big change in lender negotiating of short sales in the last 6 weeks.  Lenders are insisting on seeing owners IRA and 401k statements even though they cannot legally go after that money.  The strategy the banks are using is that if they own the second loan and turn down the short sale causing the first lender to foreclose, the second loan can chase the borrower for the money they have lost (as long as it isn’t purchase money).  They are betting that the borrower will dip into their retirement for a portion of the loan in exchange for not being chased for years. 
• While this is troubling, I don’t find it unethical by the banks.  After all, the borrower promised to pay the loan back and the bank can negotiate as hard as they want – just make sure you have a good negotiator on your side if you are looking at a short sale.
• I believe we are at the beginning of a trend where the banks are going to be harder on defaulted borrowers.  I think that initially they were fearful that the Obama led government would come down hard on them if they did not cooperate with loan modification programs.  But now that the Home Affordable Program is looking like a pretty solid failure and Obama has lost a lot of his political power, I think the banks are getting bolder in going after people who owe them money and are not paying.  Make sure you have a good legal and negotiating team on your side when taking on your bank.

Ok, we have some new listings coming out this week, but I will wait until we have photos to show you – weather permitting, that will be next Monday.

So, enjoy the Coffee!  This time it is once again by way of my Dad in Arizona (and no, I did not check it on Snopes, it is a good story regardless!)

RED MARBLES

I was at the corner grocery store buying some early potatoes.  I noticed a small boy, delicate of bone and feature, ragged but clean, hungrily appraising a basket of freshly picked green peas. 

I paid for my potatoes but was also drawn to the display of fresh green peas. I am a pushover for creamed peas and new potatoes. Pondering the peas, I couldn’t help overhearing the conversation between Mr. Miller (the store owner) and the ragged boy next to me. 

‘Hello Barry, how are you today?’ 

‘H’lo , Mr. Miller. Fine, thank ya. Jus’ admirin’ them peas. They sure look good.’ 

‘They are good, Barry. How’s your Ma?’ 

‘Fine. Gittin’ stronger alla’ time.’ 

‘Good. Anything I can help you with?’ 

‘No, Sir. Jus’ admirin’ them peas.’ 

‘Would you like to take some home ?’ asked Mr.. Miller. 

‘No, Sir. Got nuthin’ to pay for ‘em with.’ 

‘Well, what have you to trade me for some of those peas?’ 

‘All I got’s my prize marble here.’ 

‘Is that right? Let me see it’ said Miller.. 

‘Here ’tis. She’s a dandy.’ 

‘I can see that.. Hmmmmm, only thing is this one is blue and I sort of go for red. Do you have a red one like this at home ?’ the store owner asked. 

‘Not zackley but almost..’ 

‘Tell you what. Take this sack of peas home with you and next trip this way let me look at that red marble’.. Mr. Miller told the boy. 

‘Sure will. Thanks Mr. Miller.’ 

Mrs. Miller, who had been standing nearby, came over to help me.. With a smile she said, ‘There are two other boys like him in our community, all three are in very poor circumstances. Jim just loves to bargain with them for peas, apples, tomatoes, or whatever. When they come back with their red marbles, and they always do, he decides he doesn’t like red after all and he sends them home with a bag of produce for a green marble or an orange one, when they come on their next trip to the store..’ 

I left the store smiling to myself, impressed with this man. A short time later I moved to Colorado , but I never forgot the story of this man, the boys, and their bartering for marbles. 

Several years went by, each more rapid than the previous one. Just recently I had occasion to visit some old friends in that Idaho community and while I was there learned that Mr. Miller had died. 

They were having his visitation that evening and knowing my friends wanted to go, I agreed to accompany them. Upon arrival at the mortuary we fell into line to meet the relatives of the deceased and to offer whatever words of comfort we could. 

Ahead of us in line were three young men. One was in an army uniform and the other two wore nice haircuts, dark suits and white shirts….all very professional looking. They approached Mrs. Miller, standing composed and smiling by her husband’s casket. Each of the young men hugged her, kissed her on the cheek, spoke briefly with her, and moved on to the casket.. 

Her misty light blue eyes followed them as, one by one; each young man stopped briefly and placed his own warm hand over the cold pale hand in the casket. Each left the mortuary awkwardly, wiping his eyes. 

Our turn came to meet Mrs. Miller. I told her who I was and reminded her of the story from those many years ago and what she had told me about her husband’s bartering for marbles. With her eyes glistening, she took my hand and led me to the casket. 

‘Those three young men who just left were the boys I told you about. They just told me how they appreciated the things Jim ‘traded’ them. Now, at last, when Jim could not change his mind about colour or size…..they came to pay their debt.’ 

‘We’ve never had a great deal of the wealth of this world,’ she confided, ‘but right now, Jim would consider himself the richest man in Idaho.’ 

With loving gentleness she lifted the lifeless fingers of her deceased husband. Resting underneath were three exquisitely shined red marbles. 

I was at the corner grocery store buying some early potatoes.  I noticed a small boy, delicate of bone and feature, ragged but clean, hungrily appraising a basket of freshly picked green peas. I paid for my potatoes but was also drawn to the display of fresh green peas. I am a pushover for creamed peas and new potatoes. Pondering the peas, I couldn’t help overhearing the conversation between Mr. Miller (the store owner) and the ragged boy next to me. ’Hello Barry, how are you today?’ ’H'lo , Mr. Miller. Fine, thank ya. Jus’ admirin’ them peas. They sure look good.’ ’They are good, Barry. How’s your Ma?’ ’Fine. Gittin’ stronger alla’ time.’ ’Good. Anything I can help you with?’ ’No, Sir. Jus’ admirin’ them peas.’ ’Would you like to take some home ?’ asked Mr.. Miller. ’No, Sir. Got nuthin’ to pay for ‘em with.’ ’Well, what have you to trade me for some of those peas?’ ’All I got’s my prize mar ble here.’ ’Is that right? Let me see it’ said Miller.. ’Here ’tis. She’s a dandy.’ ’I can see that.. Hmmmmm, only thing is this one is blue and I sort of go for red. Do you have a red one like this at home ?’ the store owner asked. ’Not zackley but almost..’ ’Tell you what. Take this sack of peas home with you and next trip this way let me look at that red marble’.. Mr. Miller told the boy. ’Sure will. Thanks Mr. Miller.’ Mrs. Miller, who had been standing nearby, came over to help me.. With a smile she said, ‘There are two other boys like him in our community, all three are in very poor circumstances. Jim just loves to bargain with them for peas, apples, tomatoes, or whatever. When they come back with their red marbles, and they always do, he decides he doesn’t like red after all and he sends them home with a bag of produce for a green marble or an orange one, when they come on their next trip to the store..’ I left the store smiling to m yself, impressed with this man. A short time later I moved to Colorado , but I never forgot the story of this man, the boys, and their bartering for marbles. Several years went by, each more rapid than the previous one. Just recently I had occasion to visit some old friends in that Idaho community and while I was there learned that Mr. Miller had died. They were having his visitation that evening and knowing my friends wanted to go, I agreed to accompany them. Upon arrival at the mortuary we fell into line to meet the relatives of the deceased and to offer whatever words of comfort we could. Ahead of us in line were three young men. One was in an army uniform and the other two wore nice haircuts, dark suits and white shirts….all very professional looking. They approached Mrs. Miller, standing composed and smiling by her husband’s casket. Each of the young men hugged her, kissed her on the cheek, spoke briefly with her, and moved on to the casket.. Her misty lig ht blue eyes followed them as, one by one; each young man stopped briefly and placed his own warm hand over the cold pale hand in the casket. Each left the mortuary awkwardly, wiping his eyes. Our turn came to meet Mrs. Miller. I told her who I was and reminded her of the story from those many years ago and what she had told me about her husband’s bartering for marbles. With her eyes glistening, she took my hand and led me to the casket. ’Those three young men who just left were the boys I told you about. They just told me how they appreciated the things Jim ‘traded’ them. Now, at last, when Jim could not change his mind about colour or size…..they came to pay their debt.’ ’We’ve never had a great deal of the wealth of this world,’ she confided, ‘but right now, Jim would consider himself the richest man in Idaho.’ With loving gentleness she lifted the lifeless fingers of her deceased husband. Resting underneath were three exquisitely shined red marbles. 

Have a Great Week!

Scott Voak

Bailout, Monday Morning Coffee, Mortgages