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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?

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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

How small businesses can keep up with the changing workforce

(ECONOMIC) Trade schools are booming as career outlook grows. College enrollment is down. The workforce is changing. How can small business keep up?

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Trade employees in the workforce

College enrollment has dropped off by three million in the last decade, with a drop-off of one million due in the last several years as a direct side effect of the Covid-19 pandemic. This phenomenon clearly does not bode well for the future of the United States’ economy and workforce, with students who attend low-income schools and come from low-income families being the most affected. These changes are disproportionately affecting students from low-income schools and families, the very people who need higher education the most, and are erasing much of the work done in the last decade to help close the income and race gap between students, colleges, and socioeconomic backgrounds.

Enrollment in trade schools is skyrocketing.

Recently, trade schools have seen a 40% bump in enrollment across the board. Many students are enticed by the fact that trade schools are affordable and offer a quick turnaround, with students paying $16,000 or less for their program, and their training taking a year or less to complete. Beyond that, those who complete trade school is all but guaranteed a job on graduation day. Their earning potential is often two or even three times higher than the initial cost of attending the program. As many have found, the same cannot always be said about those who pursue a college education.

While the average cost of college at an in-state and public institution hovers at around $28,775 per year (according to Forbes) and takes an average of four years to complete means that trade students have a cheaper educational cost, (between $16,000 to $33,000 for the entire program, or about equal to just one year of a public college tuition) can get work in their field more quickly, and can usually make more than their educational costs in their first year on the job. Tradespeople make an average of $54,000 fresh out of trade school, which rivals the role average college student’s first salary of $55,000. It’s no wonder so many people are choosing to forgo a formal education for trade school!

The almost insurmountable cost of college combined with ever-growing inflation and a lengthy list of requirements just to get a post-college job, all for a low salary and with students having hefty loans to pay back, also play a key role in the downturn in the popularity of college.

The implication of fewer college-educated people, however, means that over time, the United States as a whole could face an economic downturn, as it gives rise to many more blue-collar workers. This can irrevocably alter the makeup of the workforce. Despite current unemployment rates being among the lowest they’ve ever been, the American people are already starting to see a shift in the labor market.

Already, we see a strain in the labor market when 25% of skilled workers in the U.S. exited the workforce following the Covid-19 pandemic. The economy has become so highly specialized that if the U.S. were to keep up the trend of losing college-educated workers, there could irreversible damage to the United States’ economy, deepening the ever-growing divide between the middle class and the working class, further reducing the ability to affect the global economy, knocking the United States out of the classification of a “global superpower.” To make matters worse, much of the United States labor pool is outsourced, and we are seeing the rise of artificial intelligence and robotics taking over many jobs, especially minimum wage jobs. While none of these factors alone vastly affect the U.S. labor market, this is only the tip of the iceberg.

So what can employers do when the makeup of the workforce starts to shift?

Employers could shift the focus on the years of experience rather than the type of education the potential employees have, as well as offering more extensive on-the-job training, which is already commonplace in some industries. Even for those with a college education, the requirements for entry-level jobs seldom match the salary, with many employers requiring a four-year degree, two or more years of experience, and fluency in different programs which vary from company to company. Employers, if possible, need to offer higher salaries with fewer requirements, as many young people are finding the pursuit of college, plus the various other requirements just to be considered for a barely above minimum wage job, while they’re drowning in student debt fruitless, so they forgo college altogether.

A post-pandemic society looks vastly different, and employers must adapt to keep up.

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Economic News

Boomers retirement may be the true reason behind the labor shortage

(ECONOMY) Millennials and Gen Z were quick to be blamed for the labor shortage, citing lazy work ethic- the cause could actually be Boomers retirement.

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Older man pictured in cafe with laptop nearby representing boomers retirement discrimination.

In July, we reported on the Great Resignation. With record numbers of resignations, there’s a huge labor shortage in the United States. Although there were many speculations about the reasons why, from “lazy” millennials to the number of deaths from Covid. Just recently, CNN reported that in November another 3.6 million Americans left the labor force. It’s been suggested that the younger generations don’t want to work but retiring Boomers might be the bigger culprit.

Why Boomers are leaving the labor force

CNN Business reports that 90% of the Americans who left the workplace were over 55 years old. It’s now being suggested that many of the people who have left the labor force since the beginning of the pandemic were older Americans, not Millennials or Gen Z, as we originally thought. Here are the reasons why:

  • Boomers are more concerned about catching COVID-19 than their younger counterparts, so they aren’t returning to work. Boomers are less willing to risk their health.
  • The robust real estate market has benefitted Boomers, who have more equity in their homes. Boomers have more options on the table than just returning to work.
  • Employers aren’t creating or posting jobs that lure people out of retirement or those near retirement age.

As Boomers retire, how does this impact the overall labor economy?

According to CNN Business, there are signs that the labor shortage is abating. Employers are starting to see record number of applicants to most posted jobs. FedEx, for example, just got 111,000 applications in one week, the highest it has ever recorded. The U.S. Bureau of Labor Statistics projects that the pandemic-induced increase in retirement is only temporary. People who retired due to the risk of the pandemic will return to work as new strategies emerge to reduce the risk to their health. With new varients popping up, we will have to keep an eye on how the trend ultimately plays out.

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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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