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Opinion Editorials

The potentially devastating pitfalls of turning REOs into rentals

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A common misconception

First, let’s clear up a misconception.  Foreclosure is a process, usually involving a court of some kind; the process can vary depending on the state.  REO means Real Estate Owned; it is what a house becomes after a foreclosure, when a bank or government entity purchases a home back.  It actually comes from the term, OREO, meaning Other Real Estate Owned, meaning a non-performing asset on the banks books.  The two terms are not interchangeable, and do not mean the same thing.  With that being sorted out, let’s get down to business.

The government, as in the Treasury Dept, and the Federal Housing Finance Agency, has issued a Request for Information  on how to deal with all the REOs that Fannie, Freddie, and FHA have on their books.  There is a fairly big push coming from The Obama Administration, and Sen. Reed who wrote a letter to the FHFA director earlier this month, encouraging the government sponsored entities (GSEs) to start renting out their REOs.  They are asking for either outright purchases, in bulk, or possible joint ventures with the GSEs, to maybe even some other kind of partnership.  The public and other entities have until September 15th to comment.

Over 250,000 REOs between FHA, Fannie & Freddie

These are the ones that have actually completed the foreclosure process, some are currently listed, about 77,000, and some are pending, waiting to close, about 22,000, according to DSnews.  Shadow inventory, the ones in the pipeline, the homes that have received a NOD, the ones that are still going through the foreclosure process, in other words, are not mentioned.  Because of the way notes have been sold, and resold, there may not be way to determine how many are actually out there waiting down the line.  We really are looking a lot of houses potentially flooding the market, just from the GSEs.

It’s no secret that the GSEs have been losing money.  A lot of money.  Part of the push for converting REOs into rentals may be coming from the idea that non-performing assets could generate cash flow, if as above, some of these were done as a partnership with the GSEs.  We are talking about rentals en mass, here.  Not 3-10 at a pop, but entire geographical areas.  In theory, this should stabilize housing by not selling crappy REOs at a discount, it’ll also make rent more affordable in some areas, it could also create jobs since many will need rehabbed.

Theories usually suck though.  We have to look no further than The Washington Post’s investigation into HUD’s HOME program.  What had transpired were many incomplete projects, lost money, money that didn’t get used, money that came from the government and was dedicated to these projects no less, and projects that were completed, but sitting vacant.  Some things were done correctly, yes, but not a lot compared to what was screwed up.  The potential for the same types of things going awry with a rental program is huge.  What is the Government going to do, make investors sign a piece of paper saying “I promise to be a good landlord, treat tenants right, rehab all the properties according to code, not be a jerk and defraud anyone?”  Uh-huh.  Sure.

Katie Cosner, occasionally known as Kathleen, or KT, is a Realtor® with Cutler Real Estate and is active in her local Board of Realtors® on the Equal Opportunity & Professional Development Committee. She has been floating around online for a number of years, and is on facebook as well as twitter. While Katie has a few hardcore beliefs, three in the Real Estate World to live and die by are; education, ethics, and the law - insert random quote from “A Few Good Men” here. Katie is also an avid Cleveland Indians fan, which really explains quite a bit of her… quirks.

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57 Comments

57 Comments

  1. Sig

    August 12, 2011 at 7:42 am

    On the surface this "Theory" looks good. BUT. The journey between a good Government "Theory" and putting said "theory" into action always seems to be easier done if private industry does it. Look at the last time Government put "Theory" into action in the late 1980's and early 1990's via the infamous Resolution Trust fiasco. What a mess that turned out to be. It was a good 'theory" but very bad practice. Government needs to sell those homes to private companies who know how to rehab, and rent them. Government can help guarantee the financing and back the renters if they like but that should be the extent of Government involvement.

  2. Roberta Murphy

    August 12, 2011 at 9:35 am

    Another lovely example of government inserting it$elf into private lives and enterprise. For the sake of all, get those foreclosed homes onto the open market and allow them to be bought by both by both homebuyers and private investors. This lessens chance and opportunity for graft and fraud, and will directly benefit local contractors, suppliers and allow for pride of ownership in blighted neighborhoods.

    This is also a case of government competing against the private investor–and perhaps gaining a political/voting edge from those who benefit from government rentals.

    Do not trust this government grab!

    • Kathleen Cosner

      August 12, 2011 at 11:14 am

      Roberta, Bingo! Seriously, if you haven't, read the Washington Post piece. It's a totally in-depth look at what can happen when there's zero accountability.

  3. CJ Johnson

    August 12, 2011 at 9:47 am

    Who will pay for the property taxes, maintenance, collection of rent, insurance, etc? We will! Who will benefit when the rent is not paid? Evection attorneys! Who will pay to replace the stollen appliances, broken windows, and other damage tenants cause? You got it the taxpayers. Add to this all the neat new government jobs that will be created to administer this program. Can you say stupid idea?

    • Kathleen Cosner

      August 12, 2011 at 11:17 am

      CJ, excellent points, and probably ones no one is thinking about!

  4. Liz Benitez

    August 12, 2011 at 11:20 am

    Such a bad bad bad idea.

  5. ShortWoman

    August 12, 2011 at 11:31 am

    There are so many problems with the proposal that I don't even know where to start.

  6. Gena Riede

    August 12, 2011 at 1:39 pm

    Fannie, Freddie, Banks and the Government have no business in the business of rentals. The minute I heard this, my first thought was that of socialism and Russia. These properties should be sold and purchased by home buyers and investors.

    There is another caviat to this where Fannie has been soliciating a back door entry into MLS systems statewide on the premise that if they have access to the MLS Fannie will offer access to their "Help Desk" for short sales.

    This backdoor entrance into our MLS systems throughout the US and the prospect of them going into the rental business is NOT a good scenario for real estate.

    If Fannie is allowed full access into our MLS systems, where does this stop? Are the banks next. Any MLS that agrees to this in my opinion is opening up Pandora's Box and we are on the way to a much different real estate platform that scares me.

    • Kathleen Cosner

      August 12, 2011 at 3:24 pm

      Gena, Agree. Investors with credit & cash to do so, or owner occs should be the ones to purchase, not some crazy mass buy.

      Haven't heard of any MLS access thing in regards to Fannie. Is this a smaller MLS?

  7. Gena Riede

    August 12, 2011 at 4:49 pm

    Oh, no Fannie Mae wants access to ALL MLS system. They want each MLS to provide a Fannie Mae Help button on the current MLS system where they supposedly the Short Sale agent will have access to help. However, I see this as an opportunity for Fannie Mae to have access to all the listings and as we know, it won't stop there.

    The VP of Fannie Mae was interviewed on CDPE about a month ago where this was discussed and I called our MLS here in Sacramento who has NO INTENTION of providing access or a button for Fannie Mae. But, I have heard that there are states and areas who have done so.

    I see a lot of issues… and there not good ones!

    • Kathleen Cosner

      August 14, 2011 at 4:49 am

      That's about one of the craziest things I've heard of in a while! Wouldn't most MLSs have to re-write their rules in order for that to happen? Not sure they're set up for that kind of thing, a whole 3rd party access deal.

  8. Manhattan Beach Realtor

    August 14, 2011 at 12:59 pm

    What we're seeing is the initial phase of another bailout for GSE's; the feds need a good marketing pitch to the public of why they are going to transfer billions more. Stabilizing housing, making rent more affordable for low income, etc. it's all a nice way to dressing up the fact that billions, if not tens of billions, are soon to land into the accounts of GSE's.

    Consequences?

    Flooding rental market with "affordable" rentals will drive rental rates, and returns, down for landlords across the country. Worse, is that this will occur in severely distressed regions that need capital. Low ROI will drive much needed capital out of these areas.

  9. sfvrealestate

    August 15, 2011 at 12:37 pm

    I agree that this is a bad idea for the Feds to get involved. I can see a limited role for a limited amount of properties through some kind of local city government (perhaps partnered with individual investors) situation. It would be kind of like Section 8 is now.

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Opinion Editorials

New USPS duck-shaped truck design has mixed reactions

(OPINION / EDITORIAL) The USPS is getting a fleet of electronic delivery vehicles. We’re wondering if the actual design got lost in the mail.

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New USPS truck in a fictional neighborhood delivering mail.

So the USPS is getting new trucks and they look like ducks and maybe that sucks… or maybe it wucks. Like “works,” if a duck said it. Just give me this one please.

Anyway.

I don’t know how mean I can be here – there has to be something said for objective journalistic integrity – but I have a feeling most people are going to have a rather sarcastic reaction to the new design. I’m not so sure I can blame them – it has a kind of stubby little nose with a shortened hood and a boxy frame and super tall windshield, which gives the wheels a disproportionately large look compared to the rest of the silhouette. It’s sort of like a Nissan Cube but less millennial cool, which A) is discontinued (so maybe not so cool), and B) is not the car that had those giant hiphop hamsters running around, but I’m still going to link to it anyway.

Elon Musk must be breathing a sigh of relief right now.

The contract was awarded to Oshkosh Defense (which I was thrilled to find out is NOT the adorable kid’s clothing company, even though I personally think that would be hilarious if there was a factory making overalls for tiny humans alongside tactical defense trucks) and officially announced on February 23rd, 2021 to the tune of $482 million. Seriously though, someone is going to mix those up for the rest of all time and eternity; I’d never not think about my own baby pictures if some contractor from Oshkosh Defense showed up.

The release mentions that, “The historic investment is part of a soon-to-be-released plan the Postal Service has developed to transform its financial performance and customer service over the next 10 years through significant investments in people, technology and infrastructure as it seeks to become the preferred delivery service provider for the American public.” It’s called the NGDV – Next Generation Delivery Vehicle, which I happen to adore, and will pronounce as Nugduv, and you can’t stop me anyway. The old one was called the Grumman, by the way.

Some credit this as a radical change, and keeping in mind that radical doesn’t necessarily denote positive or negative, it seems like the perfect word to use here. Then there are those who correctly identify “a mixed bag of responses,” sort of like when you get a bag of candy at Halloween that has at least one thing no one likes. Some call it strange, while others defend it as something every new big vehicle should look like (this is where – as one of many – I found it called a “duck” which oh man do I love, quack quack).

We can also hit up the ever fair public opinion of Twitter, because why wouldn’t we?

JavaScript is not available.

This is how I would draw a car. That is not a plus for this design

I really can’t get over that last one. But I mean, whoa. That’s quite the spectrum. There’s less disagreement on pizza toppings I think. But luckily I think we’re safe there – Domino’s makes people drive their personal cars.

Taking a step back and putting snide commentary away for a moment, there’s some areas that should be discussed. First – and what should probably be obvious – there was a laundry list of requirements and restrictions from the USPS, which made Nir Kahn – design director from custom carmaker Plasan – offer up his own tweets that give some insight on dimensions and design:

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I was involved in an early proposal for the USPS truck so I know the requirements well. They pretty much dictated the proportions – this package sketch shows that to meet the ergonomic and size requirements, there wasn’t much freedom 1/2 #USPS pic.twitter.com/Fk35g98Z83

Kahn mentions that “there wasn’t much freedom,” but also that “it could have looked much better,” and this sort of underlines the entire discussion I think – there were goals in place, and possibly some more aesthetically pleasing ways to meet them, but the constraints won out and drove (hehe) the design more than style did.

Certainly, there are other concerns – the ability for USPS drivers to reach a mailbox while seated is paramount. Others have pointed out that this design – with its large windshield and shortened front – should help with safety around small children (all the better if they are wearing Oshkosh B’gosh, because that implies they are tiny and may not be at all concerned with the dangers of streets). The open field-of-vision will aid in making sure drivers can navigate places that might be frequented by any number of pedestrians, so that’s a plus.

Further, if you get struck by one of these, you’ll basically “just” get kneecapped versus taking it square to the torso. The duck article is the one making this call, and I think there’s some merit there (though it makes me question how the USPS fleet is going to do against the SUVs and big trucks out in the wild). It then goes on to point out that this design has more cargo space, fitting into the idea of “rightsizing,” where the form and function of the vehicle meet in a way that is downsized, but still punches above its weight.

“From smaller fire engines to nimbler garbage trucks, making vehicles better scaled to urban tasks can make a huge difference, not only for keeping other cars moving on narrow streets, but also to ensure that humans on those same streets can access the bike lanes, sidewalks, and curb cuts they need to get around.”

I didn’t try too hard to find stats on crashes in mail trucks, but seems like something that should be addressed.

Maybe the biggest point here is that we sort of have to get new trucks – they are outliving their 24 year expectancy and catching on fire. On FIRE. I mean a mail truck might be the worst place for a fire. I’m not even sure I can’t think up a better answer… Ok maybe toilets would be worse.

The new vehicles can be either petrol or electric powered, have 360 cameras, airbags, and automatic braking. Oh, and air conditioning, which the old vehicles did not have. So yes, literally the worst place to have a fire. But due to the taller vehicles, someone can stand in them now! So escape is even easier! Hooray!

A series of delays pushed back the introduction of new vehicles from their 2018 projected date, with poor initial prototypes and the pandemic being major setbacks. Aggressive bidding led to extended deadlines, which had been narrowed down to a small list of candidates that included Workhorse (who unfortunately suffered a large stock plunge following the announcement). It’s been in the works for at least six years.

In the end, I don’t think we can discount all the advantages here – more efficient vehicles that are safer and provide drivers with modern amenities. That’s a LOT of good. I think once the initial goofy shock is over, the design will be accepted. Everyone thought Nintendo’s Wii was a hilarious name (still pretty much is regardless of being in the public book of acceptable nomenclature), and Cybertruck sales are brisk, so I think we can set a lot of this aside. The Edsel these are not.

So hey, new USPS vehicles in 2023, like an exceedingly late birthday present. All I want to see is a bunch of baby ducks following one of them around oh please let that happen. The USPS kind of has an identity crisis in the modern era, so maybe a funny little cute silly boxmobile is just the right way to get some attention.

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Opinion Editorials

Declutter your quarantine workspace (and brain)

(EDITORIAL) Can’t focus? Decluttering your workspace can help you increase productivity, save money, and reduce stress.

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decluttering

It’s safe to say that we’ve all been spending a lot more time in our homes these last few months. This leads us to fixate on the things we didn’t have time for before – like a loose doorknob, or an un-alphabetized bookshelf, or that we’ve put off ‘declutter’ on our to-do list for too long.

The same goes for our workspaces. Many of us have had to designate a spot at home to use for work purposes. For those of you who still need to remain on-site, you’ve likely been too busy to focus on your surroundings.

Cleaning and organizing your workspace every so often is important, regardless of the state of the world, and with so much out of our control right now, this is one of the few things we can control.

Whether you’re working from a home office or an on-site office, take some time for quarantine decluttering. According to The Washington Post, taking time to declutter can increase your productivity, lower stress, and save money (I don’t know about you, but just reading those 3 things makes me feel better already).

Clutter can cause us to feel overwhelmed and make us feel a bit frazzled. Having an office space filled with piles of paper containing irrelevant memos from five years ago or 50 different types of pens, has got to go – recycle that mess and reduce your stress. The same goes with clearing files from your computer; everything will run faster.

Speaking of running faster, decluttering and creating a cleaner workspace will also help you be more efficient and productive. Build this habit by starting small: try tidying up a bit at the end of every workday, setting yourself up for a ready-to-roll morning.

Cleaning also helps you take stock of stuff that you have so that you don’t end up buying more of it. Create a designated spot for your tools and supplies so that they’re more visible – this way, you’ll always know what you have and what needs to be replenished. This will help you stop buying more of the same product that you already have and save you money.

So, if you’ve been looking to improve your focus and clearing a little bit of that ‘quarantine brain’, start by getting your workspace in order. You’ll be amazed at how good it feels to declutter and be “out with the old”; you may even be inspired to do the same for your whole house. Regardless, doing this consistently will create a positive shift in your life, increasing productivity, reducing stress, and saving you money.

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Opinion Editorials

Online dating is evolving and maybe networking will too

(OPINION EDITORIALS) How has the online dating industry been disrupted during the pandemic? And can we apply a few pointers from this evolved model to networking?

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Woman networking through Zoom video call with two other women.

We are often reminded that hindsight is 20/20 – a proverb that means “it is easy to understand something after it has already happened”, and how ironic that is since we are in the year 2020 and not sure we can fully comprehend all we are learning and what hindsight this will bring.

Reflecting back to six months ago, there were many of us that didn’t have much of a clue about what the rest of 2020 would look like and how we would have to adjust to a more virtual world. We’ve updated our ways of working, connecting with colleagues, socializing with friends, networking with those in our industry, or looking for a new job.

Microsoft suggested that we have seen two years’ worth of digital transformation in about five months. For example: MS Teams, Zoom, and Google Meet have become the new way to host networking sessions, work meetings, and “chats” with colleagues; Tele-med appointments became the norm for routine or non-911 emergency doctor appointments; curbside pickup at grocery stores and food to-go orders via online ordering became the new normal (they existed before but saw tremendous growth in number of users).

We also had to learn how to create engaging and interactive ways to connect solely through a screen. We are already Zoom fatigued and wondering how online meetings have zapped our energy so differently than in person. It turns out, looking at ourselves and trying to talk to a group is a lot for our brains to process.

The Atlantic shares a great article about why the Zoom social life might feel so draining, saying that “Attempting to translate your old social habits to Zoom or FaceTime is like going vegetarian and proceeding to glumly eat a diet of just tofurkey”. No offense to vegetarians, of course.

You could argue though, that we’ve all been interacting via screens for years with the dominance of social media channels – whether it was posting our thoughts in 140 characters on Twitter, or sharing photos and videos of our artisanal sandwiches/cute kid/pet pictures on Facebook. But this seems different. Times are different and we will not be going back soon.

In this interim, many people are trying to make the best of the situation and are figuring out ways to connect. We will always need human connection (and without the germs, even better).

What about our single friends? If they don’t have anyone in the house to already drive them crazy, then where can they go to meet new people and/or possibly love interests?

While many experts are trying to predict the outcomes of this global shift, it may be hard to know what will change permanently. We know many industries are experiencing major disruptions – online dating apps being one of them.

According to Digital Trends, Tinder still ranks as one of the top dating apps. However, now that people are sheltering in place and/or social distancing, there’s a new app taking over as a way to “meet” someone a little faster, while also allowing you to stay behind the screen, sans mask.

Slide is a video dating app that changes your first-date frustrations into real connections and instant chemistry. Explore video profiles, go on first dates via Video Calls at your fingertips, and find that chemistry before dating IRL.”

So, while Tinder, Bumble, and Hinge play quarantine catch-up, Slide is stealing their market share.

How? With video.

Slide recognized the massive success of short-form video platforms like TikTok, and have translated it to dating. They focus on features like:

  • “Vibe Check”, which gives you the option to video chat immediately after matching with someone to see if there’s chemistry. This will save you from long or misinterpreted text conversations and money you may have spent on that first date.
  • A video-first approach that lets you see the real people behind the profiles so you can pass if they aren’t really who they say they are.
  • AI-assisted creation of “future bae” profiles that help suggest your best matches and spare you extra swipes. If Netflix can find similar suggestions…

As of August 2020, the Department of Labor and Statistics estimates about 13.6 million people are currently unemployed and searching for a new j-o-b. Is it possible that some of these newer ways of connecting online could be included in how we network for a new job/career opportunity?

For example, instead of sending a connection or networking request on LinkedIn, what if we could send a quick video about our story, or what we’d love to learn from that person, or how we’d like to connect?

Would that create a faster, better, possibly more genuine connection?

This would seem worth exploring as many job connections are created by in-person networking or reaching real people vs. solely online applications, behind a screen. Some other formats that have seen increased use are Marco Polo for video chats (you don’t have to both be available at the same time) and FaceTime group calls.

It might be worth exploring how short-form video platforms could assist job seekers in networking, outreach, and connecting with others. These are just some ideas as we continue to watch this digital transformation unfold.

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