My favorite online news source, The New York Times, ran a story today “Dubious Fees Hit Borrowers in Foreclosures” in which the writers interviewed Katherine M. Porter, associate professor of law at the University of Iowa. In a review of many loans that are now going into foreclosure, Porter found that questionable practices among lenders are leading some experts to contend that lenders are taking advantage of higher-risk borrowers and those facing foreclosure.

“Because there is little oversight of foreclosure practices and the fees that are charged, bankruptcy specialists fear that some consumers may be losing their homes unnecessarily or that mortgage servicers, who collect loan payments, are profiting from foreclosures.

Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.

“Regulators need to look beyond their current, myopic focus on loan origination and consider how servicers’ calculation and collection practices leave families vulnerable to foreclosure,” said Katherine M. Porter, associate professor of law at the University of Iowa.”

You may be asking what this means to you in Palo Alto, happily making your payments on your $1+ million mortgage on your $2.4 million median priced home (no, that isn’t a typo!). As Mortgage Manics have heard me say before (OK, read), national lenders use a mostly one-size-fits-all approach to lending, meaning that practices and guidelines that are developed and applied to home buyers in Iowa, Tennessee and Colorado are also applied to us here in Silicon Valley. As a result, if you are reading about unscrupulous practices and excessive fees by national lenders that are being exposed in areas with high foreclosure rates, you may want to check the fine print on your mortgage and see what you are paying for in addtion to PITI.

In addtion, Porter found that lenders didn’t provide accurate payoff amounts for their loans to consumers, with one claiming they were owed $1,000,000 when the actual payoff amount was $60,000. That must be that fuzzy math stuff . . .

Countrywide was recently sanctioned by a court in Pittsburgh for losing or destroying over $500,000 in checks between December 2005 and April 2007 for homes in foreclosure. These are the companies holding the title to our homes, so we need to keep an eye on them.

You can read the full text of the article here.

On that happy note, have a great week, and thanks for reading.

Tags: 4---mortgage-mania, 94301, 94303, 94306, bay-area-real-estate, Countrywide, Home buying, Loan-Application, Preapproval, Prequalification, Real estate, real-estate-market, real-estate-prices

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Dsiclaimer: The following post is based on a presentation by Christopher Thornberg, an economist at Beacon Economics, that I attended last night, courtesy of my accountant, Tom Wagstaff of Petrinovich, Pugh and Co. This is a departure from my normally upbeat view of the local economy, and fortunately they re-opened the bar following the presentation for all the Realtors in the audience to drown their sorrows.

Economist Chris Thornberg showed some pretty convincing evidence for his expectation that housing prices will fall between 20% and 25% over the next couple of years, primarily because the ratio of home prices to incomes is higher than anytime in history, almost double the peaks in previous economic cycles. Gloom and doom for an hour, ah it brought tears to the eyes of many a Realtor in San Jose. Smugly I said, ” . . .but I live and work in Palo Alto, land of Stanford, Venture Capital, Facebook and Google! Sushi on every table and a BMW in every driveway! We are our own little world here, so we don’t have to worry about the housing market meltdown in Nebraska, or even the East Bay.”

Not so fast. The lastest housing boom has been driven by increasing housing prices, driven in part by cheap credit and loans. More people got these loans, bought more expensive houses, so the demand for these loans went up, and the cycle accelerated.

Now the appreciation is going the other way (flat to negative), and the equity that has driven consumer spending over the last few years (cash out refi = new boat), has gone away (bye, bye boat, and house!).  Thornberg forecasts that the subprime meltdown will be followed by Alt - A defaults (already happening) which will pull down the high-end markets from below (that would be Palo Alto, Los Altos, etc.). Even if the Fed were to reduce interest rates to 0%, it wouldn’t fix this mess. Much like last night’s temblor in San Jose, Palo Alto will be on the periphery of this shakeup. We won’t be knocked flat, but we will rock and roll a bit, and not in the fun way. Sigh . . .

To add to the gloom, I have been attending recent forums for candidates for Palo Alto City Council. Whether the topic is Palo Alto’s aging libraries, or green initiatives, the same topics keep coming up: Infrastructure, Schools, Tax revenue.

If you live or work in Palo Alto, I highly recommend you take an interest in the upcoming City Council race and the issues the candidates are raising. You can learn more about the issues and candidates on the Palo Alto Weekly website.

Happy Halloween!!

Tags: 4---mortgage-mania, Buyer and seller tips, Countrywide, Facebook, Google, Google Analytics, Home selling, Loan-Application, Option ARMs, Preapproval, Prequalification, Real estate, real-estate-market, real-estate-prices

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Exciting times indeed in real estate! Market woes, mortgage troubles, bankruptcies, lay-offs…

Adding to the bad news is that Foxtons, the UK-based discount real estate brokerage, is laying off 350 employees from its New York and New Jersey operations. Some have predicted that this down market will weed out the non-traditional players [see comments section], Redfin being the company most commonly named. Michael Wurzer, meanwhile, says his long-time prediction of declining agent numbers may finally be coming true.

Inman reports that Move.com, the 800-pound gorilla of the business, is being sued by Active Rain, the utterly addictive 50,000-strong online real estate community. It has been an open secret in the real estate world that Move.com was positively salivating over Active Rain’s strong viral network of real estate professionals, and that negotiations had broken off. Now the full story has come out. Active Rain’s side of the story is, essentially, that Move.com took a page out of Microsoft’s playbook of the 1990’s, before they got smacked down by some unfavorable court rulings: court a smaller company, find out everything you can about its business model, technology, and market…then break off the talks at the end and do it yourself. Move.com, meanwhile, says that nothing Active Rain showed them during negotiations was even remotely earth-shattering.

ActiveRain’s official statement to the ActiveRain community: (login required)

Members of the ActiveRain Real Estate Community,

Recently Inman News reported on a lawsuit brought by ActiveRain against Move, Inc. Of course reports of this nature raise a lot of questions, and it has always been a part of our culture to openly discuss things with our community. We would like to be able to discuss these issues more with you. However, since this is a matter of pending litigation, our counsel advises us not to comment.

Should you be interested in the positions of ActiveRain and Move, Inc. in this lawsuit, attached are ActiveRain’s Complaint and Move, Inc.’s Answer filed with the Court in this proceeding.

We thank you for your continued support and understanding.

ActiveRain members, by and large, appear to be supportive of the company, suspicious of Move.com’s intentions, but perhaps a bit concerned that ActiveRain would have considered consorting with Move.com in the first place. The delightful and ever-opinionated Laurie Manny says: [boldface mine]

Imitation is the most sincere form of flattery.

How did Realtor.com/Move.com expect to become successful without us, the membership? Realtor.com has been repelling Realtors with their high prices and lack of performance for well over a year now. Free blogs - for how long? They do not rank up on the engines now on their own, they need AR to do that. What are they offering the membership that we do not already have? Ok, so maybe in about 6 months we would all acheive similar rankings to what we already have?

I think you guys at AR are fantastic, but I have to ask. Why the hell did you jump into bed with such losers to start with? If they were going to pay it somebody else would have as well.

Live and learn.

ActiveRain complaint

Move.com response

Other commentary on the same story:

• Joel Burslem at FOREM speculates that some Active Rainers may not be happy to find out they`were about to consumed by the borg, and he goes on to remind readers that the content you contribute to online communities like Active Rain doesn’t necessarily belong to you.
• Douglas Heddings suggests that full-service agents will be partying late into the night at this news.
• Stefan Swanepoel weighs in.
• Brian Brady thinks they’ll settle for $8M to keep this thing from going to court and having a California jury hear stories about cigar-chomping good ol’ boys fleecing a trio of hard-working American entrepreneurs.
• The Libertarian Jesuit Bloodhound says Active Rain doesn’t have a case.  Move.com, a big, slow, and stoopid Realtor-teat-sucking monster if ever there was one, actually made a wise decision for once, and decided they’d be overpaying for what was essentially a commodity product.

Pictures courtesy of thisfabtrek.com, foxtons.com, gorillahub.com, move.com, and activerain.com

Tags: Active Rain, Countrywide, Foxtons, Industry, Move.com, Redfin

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