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That Will be $417,000 Please – You Have Three Days To Pay

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money billMany real estate agents do not realize that mortgage brokers and bankers sign agreements with their wholesale lenders (B of A, Wells, etc) that if a loan goes bad because of differing reasons (fraud mostly), that the banker/broker must buy the loan back.

Imagine being at your desk and getting a certified letter in the mail that says that you owe the lender you sold the loan to $417,000 because their was fraud found on the loan.  Come up with the $417,000 in three days or else we will close you down, sue you, revoke your license and find out where your kids go to school.

How about this…  Imagine if not only the mortgage people got this letter but the real estate agents started to get the letter and needed to come up with the money if a loan went bad.

Right now, without a massive pattern of fraud that is investigated by the FBI over a long period of time are real estate people held responsible.

It’s like a coach getting fired for his team being bad and the players keep getting paid millions (see the National Basketball Association) for years to come.

OK, fellow agents, how about it?  Willing to share the pain?

Realty Reality! That describes Fred, a sharp witted and outspoken realist for the mortgage and real estate world who has appeared on CNBC and NPR's Marketplace along with being quoted in the New York Times, The Wall Street Journal and other media outlets. Fred is the CEO of U S Spaces, Inc/Arrivva (a real estate brokerage firm in PA, NJ, DE and CA) and U S Loans Mortgage Inc (mortgage brokerage in PA, CA, FL and VA), and serves on the Board of Directors and is the Federal Legislative Director for the UpFront Mortgage Brokers. Fred is also the co-creator of real estate startup Rentscoper.com, a mathematically driven rental search engine. See everything Fred at fredglick.com.

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21 Comments

21 Comments

  1. Ross Therrien, Prudential Verani

    February 23, 2010 at 9:42 am

    Inflated income was a problem in New Hampshire back in the early 90’s and the lenders–ComFed, the Realtor and the developer all got nailed. Lender and agents went to jail, the developer got away with it but his attorney went to jail. My license is not worth any buyer or sellers persuit of the big American dream.

  2. John Kalinowski

    February 23, 2010 at 10:16 am

    If the real estate agent is a partner to the fraud, then yes, they should be somehow held responsible. Otherwise, why would they if they had nothing to do with qualifying the loan and did not commit fraud?

  3. Fred Glick

    February 23, 2010 at 10:58 am

    How about if a real estate agent manipulates a buyer into purchasing a home even without a loan?

    That’s one of the point I am trying to make.

  4. Dennis C Smith

    February 23, 2010 at 2:46 pm

    I lost a lot of business in 2005-7 because agents calling for me to pre-qual clients who could not afford the houses they wanted to buy and I told them so. I would follow up with the agents a bit later and they would say, “oh Fred bought that place, another broker did the deal.” They knew they guy was not qualified, I told them so. Many of them are not in the business any more, some still are and if they call I don’t work with them–they were willing to jeopardize my license and my company for their commission. When I did not go along they found another broker to do the deal, and stopped referring any clients as well since I wouldn’t play ball.

    Real estate agents have missed a lot of the blame and negative associations that have accrued to mortgage brokers and lenders. Ninety percent of homebuyers contact a real estate agent before they contact a lender, and most of them then contact the lender the real estate agent recommends. As you say they got paid and their level of risk on the deals is just about zero, not only financially but in the coin of public relations as well.

    Thank goodness the market has taken most (many?) of the bad ones out of the industry.

  5. Fred Glick

    February 23, 2010 at 3:08 pm

    @Dennis. Great points!

  6. John Kalinowski

    February 23, 2010 at 5:12 pm

    @Fred – You wrote: “How about if a real estate agent manipulates a buyer into purchasing a home even without a loan?” What does that mean, and how does it pertain to the article your wrote above?

    @Dennis – Why is it the real estate agent’s job or responsibility to determine how much risk a lender is willing to take? If one lender states that a buyer is not qualified, isn’t that based on their own underwriting guidelines and their investor’s risk/reward profile? If one lender is not willing to do a deal because a buyer is not qualified per their standards, it doesn’t mean there aren’t lenders/investors out there who use different metrics for risk tolerance.

    If one lender says no, it doesn’t make the agent evil, immoral, unethical, or criminal if they then find another lender who is willing to do the deal.

    Isn’t it ultimately the lender’s responsibility to determine how much risk they are willing to take? It’s not up to the agent to make that determination, nor is it their responsibility if the lender makes a bad decision or has a lending profile that’s too risky. Just sounds like sour grapes to me.

  7. Fred Glick

    February 23, 2010 at 5:33 pm

    John- it’s called a cash deal! What if the real estate agent lied to a buyer to sell them a house.

    Shouldn’t they pay the commission back?

  8. Ken Montville

    February 23, 2010 at 5:38 pm

    I have to go with John K on this one. It’s one thing to collude to commit fraud. It’s another to find a lender that can get things done for highly motivated buyers.. Even in today’s environment there are lenders that will only touch A+ paper and others that will assume more risk. Sure. It would be great to only work with the creme de la creme and be able to make a great income. Where do I sign up?

  9. John Kalinowski

    February 23, 2010 at 5:41 pm

    Fred – That’s so vague and non-specific, how can it even be answered? Of course if someone is guilty of fraud or misrepresentation they should be held responsible, both criminally and financially. That’s what our court system is for, and why would anyone argue otherwise.

    Again, how does an agent lying to a buyer in a cash deal have anything to do with the article you wrote above, which discusses mortgage brokers committing fraud. Your article’s basis was that real estate agents should be held responsible for coming up with the money “if a loan went bad”. Loans go bad for lots of reasons, most of which have nothing to do with fraud. Why in the world would the agent have to come up with the money unless they were guilty of breaking the law?

    I guess I just don’t understand the point you’re trying to make. If someone breaks the law, then yes of course they should be punished whether they are a real estate agent or a mortgage broker or a candlestick maker.

  10. aMY L cavENDER

    February 23, 2010 at 5:43 pm

    Good post. I too lost a bit of business between 2005-2007 because I wouldn’t do 100%, no doc loans. Guess where most of those loans are now? That’s why I get to explain to people now that I need to look at credit, income, assets, dna, first born, color of their urine. Then my processor will want to know what type of car they drive, political affiliation. Then the underwriter will look for their elementary through college gpa, how many times you’ve been sick in the last year and if you keep your house clean.

  11. Dennis C Smith

    February 24, 2010 at 1:56 pm

    @John: There may not be a legal obligation for the agent to determine if their client can qualify to purchase the property or not, though steering them to lenders who will make sure they qualify may be borderline–I’m not a lawyer. But what about the ethical obligation to represent your client and their obtaining homeownership, not just for a little while but to be homeowners for the long term absent other forces such as job loss, illness or death that impact household income? Much of the discourse the past several years has been acrimonious in nature and directed at me and my profession. A writer for the OC Register regular posts my weekly blog “Question of the Week” and over the years I have been called scum, dirtbag, greedy-whore, etc just because I am a mortgage broker.

    The vast bulk of criticism for failing loans falls on the lending side of the real estate industry, where certainly a fair amount of criticism is due. The relative lack of criticism however, directed to agents who abetted putting families into homes they could not afford does not reflect the role many, many agents played in the process.

    And don’t get me started on homebuilders who own(ed) their own brokerages, etc…..

    I appreciate your comments John, but sometimes just following the law is not good enough.

  12. Fred Glick

    February 24, 2010 at 2:32 pm

    @Dennis. I am sure the word CONSPIRACY could be used in some real estate transaction. 🙂

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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Economic News

Gas prices are down, so are gas taxes about to go up?

Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.

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Gas taxes and your bottom line

Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.

Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.

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Supporters and opponents are polar opposites

Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.

Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.

While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.

The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.

Is a gas tax politically plausible?

Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”

Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”

Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.

Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.

“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”

Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.

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