Tuesday, February 12, 2008

How loud does money talk?

Today I received the following notice from the National Association of Home Builders:


ORLANDO, Feb. 12 - Brian Catalde, president of the National Association of Home Builders (NAHB), today issued the following statement regarding disbursement of PAC money to federal congressional candidates:

"Today, the National Association of Home Builders' Political Action Committee, BUILD-PAC, and its 150-member Board of Trustees representing all 50 states, agreed to cease all approvals and disbursements of BUILD-PAC contributions to federal congressional candidates and their PACs until further notice.

"This extraordinary action was taken because the NAHB BUILD-PAC Board of Trustees felt that over the past six months, Congress and the Administration have not adequately addressed the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward. Housing and related industries account for more than 16 percent of the Gross Domestic Product. More needs to be done to jump-start housing and ensure the economy does not fall into a recession. This action will remain in effect until further notice."

Okay, now I ask you, do you think that by withholding their PAC money for Congressional elections, the builders are going to get Congress's attention? Or are the members of Congress going to think the builders are being unreasonable and just look elsewhere for financial support.

What's your opinion?

Tuesday, January 22, 2008

The National Hispanic Mortgage Association sends an official reply

Your blog question is a good one. But, it already has been answered along time ago and continues to be answered in the affirmative.
ITIN mortgage loans have been originated via old school underwriting by many institutions, wherein the identity of the mortgage applicant is fully verified. These old school institutions abide by what the rest of the industry seems to have ignored, the basic idea of "know your customer". Legitimate ITIN lenders can not afford to violate this basic tenet, otherwise they would have disappeared with alot of the "traditional" mortgage players who have vanished as a result of our current mortgage crisis. ITIN loans perform better than the rest of the market because the applicants are thoroughly assessed with respect to their credit worthiness while the applicants' income capacity is fully verified. Hence, by definition, our national security interests as well as our economic interests are promoted and furthered by standardized ITIN mortgage lending.
As a matter a fact, in light of the current state of the mortgage industry and economy, the last thing we should do is prevent anyone (who is not pretending to be someone else) from buying a home. Furthermore, the last thing our nation should do is to drive huge segments of our population towards an underground economy. Underground economies have historically never been good for legimate industries and we should not give any opportunity for unscrupluous lenders to gain a foothold in one of the only consumer markets where loans are actually being paid on time and performing well.
Thank you.

Ron Jauregui

Senior Vice President for Community Alliances

Hispanic National Mortgage Association

401 B Street, Ste. 625

San Diego, CA 92101

Ph: 619-795-3679

Fax: 619-546-4189



Saturday, January 19, 2008

ITINs and mortgages: Should undocumented aliens get mortgages?

Last summer, the Gonzalez Group, a Texas-based national consulting firm that advises Realtors how to effectively market themselves to minority groups, included a story in their newsletter about lending money to undocumented aliens. They said that Wells Fargo in southern California and Deutche Bank and some other bankers were lending money to people who didn't have Social Security numbers. Instead, they were using "ITINs" -- Individual Tax Identification Numbers -- to process the applications.

I called George Hellerman at the IRS about this. Many of you know George without knowing you know him. He does our weekly Median Home Prices Chart in the Sunday Real Estate section of the Courier News. We don't pay him enough to live on, of course. His real job is at the IRS. And since ITINs are issued by the IRS, I figured he'd know something about it. Actually, all he could do was confirm that they issue them. He's not really authorized to talk to the press about this stuff, but he did refer me to someone who could. And that guy told me that ITINs are issued to people who want to pay taxes but don't have and can't get a Social Security number. The official IRS policy is that they do not issue ITINs for the purpose of official identification for anything other than paying taxes.

It turns out the most obvious and common reason why someone needs an ITIN is that they are here without papers. "Undocumented alien" is a polite way of saying "illegal alien."

Now it turns out that undocumented aliens in the white-collar sector actually earn substantial amounts of money and are usually somewhere in the process of becoming legal. They came here legally and overstayed the time permitted on their visa. Maybe they came as a student and found a professional job here, so they stayed. And they're applying for permanent residency or citizenship, and while they're in the lengthy application process, which can take years, I'm told, they get an ITIN.

I'm not making a value judgement here. I'm not Lou Dobbs. I'm just telling you that your federal government has found a way to process the income taxes of people in this predicament: The government lets them stay here and gives them ITINs. If you don't like this, then talk to our representatives in Congress. That's another issue.

Back when mortgage money was flowing freely, as recently as this past summer, it was fairly easy for someone with an ITIN to get a mortgage in New Jersey. I only bumped into this fact in late July, early August, just before the subprime mortgage crisis hit. So when I started calling banks to get more information about it, at first, they would talk to me. But then they clammed up. One Realtor in Plainfield, Monica Caballero at Exit Realty Eagles, told me that her company had been selling homes to people with ITINs. She told me that after June, though, it got harder because in June, banks generally stopped lending money to people with no downpayments. She said I should write a story about how we need more programs for people who can't afford to buy because they have no downpayment.

Of course, that was in early August, before the subprime crisis hit, and now no banks are doing loans with no downpayments. And frankly, nobody admits to doing ITIN loans anymore, so I gave up on writing the story.

But maybe I should revive it. In Friday's HomeGuide, I printed a very lengthy statement from the CEO of Fannie Mae, one of the two government-sponsored enterprises in the mortgage business. You probably didn't read the whole thing. I admit it was overly long. But if you stuck with it or skipped to the end, you saw that he was advocating ITIN loans for new Americans. He actually capitalized it as "New Americans," but we used the lower case "n." He wants to find funding for undocumented aliens again.

The other side of the coin
When I was researching this story last summer, I talked with a spokeswoman from Wells Fargo Bank in Red Bank about their program. I don't have her name handy, but she's the "Emerging Markets" officer for this region, and she's very knowledgeable. She told me that Wells Fargo set up their ITIN program in southern California as a pilot program and that they had expected to make hundreds of loans. They made less than 10. The reason is, Wells Fargo insisted that if someone was applying for a loan using an ITIN instead of a Social Security number, they had to provide some proof that they were in this country legally. She told me that most people who are here illegally will get phony Social Security numbers to pay their taxes rather than use an ITIN. She also said that Wells Fargo was thinking of dropping the program.

Deutche Bank wouldn't talk to me. Oh, someone in the PR department answered my phone calls, but the she could never get the bank officers involved in funding mortgages for applicants with ITINs to talk to me. And when I told her I wanted to know if, as a bank owned by foreign nationals, they were selling securities backed by ITIN loans overseas, she told me they'd never answer that question anyway. The only message I got was that she didn't think they'd actually securitized any blocks of these loans yet.

I talked to a spokesman at the National Hispanic Mortgage Bankers Association, a group that had an agreement with Deutche Bank to fund these loans. If I remember correctly, the association was going to get its members to make these loans, and then the association was going to sell these loans to Deutche Bank who would securitize them--sell bonds secured by these loans. He was very enthusiastic about the program, but when I asked him to give me the name of a member or two in Central Jersey whom I could interview, he never did. He said he would, but he never did. Maybe they weren't making any loans here anymore by that time.

All I can say is that by the end of August, the mortgage bankers who would talk to me were telling me loud and clear that the money had dried up for these loans and it was no longer a story.

Fannie Mae could change all that
That's why it's so significant that the head of Fannie Mae is saying that his organization would look favorably on funding ITIN loans. If his organization is willing to back such loans, then undocumented aliens will be able to buy homes here again. This practice will become more mainstream than ever before.

Personally, I'm not sure how I feel about this. The spokesman at the National Hispanic Mortgage Bankers Association pointed out that the ITIN loans have had a very strong performance record, that they outperform the market as a whole, meaning that the people who get these loans pay on time and very rarely default. From a banker's point of view, they're a good investment. And a lot of bankers I talked to have said that bankers should not be in the business of judging a person's right to be in this country. One guy said, "We're not the Department of Homeland Security." And while that might seem like a laughable statement, I guess I really don't see my local bankers as Homeland Security or Immigration officers.

But if Fannie Mae starts funding ITIN loans, and thousands of illegal aliens start buying homes in this country, is that really the best thing for our economy and national security?

What's your opinion?

Monday, January 14, 2008

Foreclosure and bankruptcy

Back in 1991, when the economy in Massachusetts collapsed, my husband and I lost our home. We thought we were deeding it to the bank, but the bank recorded the title transfer as a foreclosure, even though they did not have to fight us in court.

Here's what happened. In 1988, my husband lost his executive job as a property manager. He held a series of retail jobs while he interviewed with commercial realty companies for another property-management job. Within a year, many of the realty companies he was interviewing with were out of business. Then in 1990, I lost my job. By then, Massachusetts had lost 125,000 jobs in 12 months. We couldn't find jobs that paid as well as the ones we'd had. And, my husband was showing some very alarming signs of mental duress -- we thought it was depression, but it turned out to be early-onset Alzheimer's. So in the spring of 1991, already several months behind in our mortgage payments, we moved in with my mother in NJ, found new jobs here and volunteered to deed our Massachusetts home to the bank.

I should point out that the home was no longer worth the balance on our mortgage. But we would've stayed til the real-estate market bounced back if we could have. Our house was across the street from the ocean, and we loved it. We were looking forward to raising our son there. I still look back on that home as the best one I ever had.

We left because the economy collapsed and our resources collapsed with it.

A lot of people are afraid this is going to happen to thousands of people in New Jersey. I hope it doesn't. But foreclosures are up dramatically, and if the economy really does go into a recession (many people already believe it has), there will be a lot of people out of work and unable to make payments. This is in addition to the folks who have subprime mortgages that are resetting to monthly payment amounts that they can't afford.

Last week at RealEstate Connect, an annual conference about the real-estate industry hosted by Inman News (www.inman.com) in NYC, NYU professor Nouriel Roubini made some dire predictions about the national economy. He said we're in a systemic financial crisis that is severe and massive. "It's going to take years to adjust," he said.

So what do we do about it? I don't have answer. I know personally that I am spending less money, trying to pay down the credit cards and hope for the best. I've delayed needed home improvements.

But if you find yourself sliding toward foreclosure or bankruptcy, what should you do?

Experts say that it's smart to approach your creditors early and see what you can negotiate with them. Perhaps you can get new terms. Perhaps you can offer your mortgagor equity in your home in exchange for patience with your inability to make all the payments.

Jack Guttentag, who writes our Mortgage Corner column on Sundays, has had some good advice about how to negotiate with your mortgagor. You can reread some of his stories by becoming an Inman News subscriber and going here.

We run other advice from banks and Realtors in our Sunday Real Estate and Friday HomeGuide sections. If you would like to have copies as we publish them, e-mail me at pmackenz@c-n.com">pmackenz@c-n.com.

The important thing is to get pro-active. Believe me, I know the shame of falling into a financial hole. To this day, I have phobias about money because of the emotional stress we went through 18 years ago. But the stronger you can be in championing your own cause with your creditors, the more likely you are to fare well in the long run.

Hang in there.

Blogging again

I'm back.

A lot has happened in real estate in the last three months. But the main reason that I have not been blogging, aside from the fact that I've had plenty of other things to do, is that I was frustrated that the blog didn't seem to be going anywhere.

Last week, I attended the Real Estate Connect conference in NYC, and I learned a few things about blogging. One is that it should be a conversation. I've always wanted this to be a conversation with readers. But more than that, it should be a conversation with other bloggers.

So in the future, look for links here to other blogs, other stories, other Web sites. Look for my personal take on the news, and I hope you post your comments and criticisms as well.


Wednesday, October 31, 2007

Should you buy a home now?

Should you buy a home now if you need one?

Remember the Beanie Babies?

Back about 10 years ago when my son was in elementary school, all the kids (and their moms) were crazy about Beanie Babies, the bean-bag toys from Ty. We were all so crazy about collecting them that we stopped seeing them as toys and started seeing them as investments. I remember one mom telling me that her daughter had an original Beanie Baby – I think it was a dark blue elephant, but maybe it was an octopus – that was worth $1,400.

Eventually, the Beanie Baby market crashed, just as the Dutch tulip market crashed hundreds of years ago and the housing market crashed recently. Every market that escalates dramatically because demand outstrips production will crash when the demand falls off or when a new and cheeper way is found to produce the product.

So what’s my point?

Stop seeing your home as primarily an investment. It’s your home. It’s the place that sets the tone and style for your life. It’s a statement about you. And oh yes, maybe when you sell it, you will make some money. But stop making that the sole factor in deciding when you’ll buy a home. If you need a home this year, buy one. It’s much better for your tax returns than renting. There are so many desperate sellers out there that you will probably find an excellent price on a home you really like. And if you have good credit, you will probably not have trouble getting a mortgage.

In fact, most banks are very eager to lend you money if you have good credit. They want a larger downpayment now than they did before the subprime meltdown, and you won’t be able to find a mortgage with no money down. But if you can make a downpayment, go out and get that house now. And enjoy it.

Will the market dip a bit more before it recovers? That may depend on the town where you decide to live. But most economists are projecting a recovery sometime next year. So think about it. Are you planning to sell six months from now? Then maybe you should get a short-term rental instead of buying. But if you’re looking to put down some roots and start a family, or if you’re thinking about trading up or downsizing — and the bank says you can afford it — go ahead.

The more people who make this decision, the more stable the real-estate market will get. And eventually, we’ll see modest, sustainable appreciation again. In some towns, we’re already seeing it. This is a great time to buy.

Tuesday, October 30, 2007

A correction

Someone recently pointed out that it takes 75 hours of classroom time, not 175, to complete the pre-licensing course for a real-estate salesman license in New Jersey. Maybe it just seemed like 175 when I took the course back in the 70s. I apologize for my mistake.