HOW THE BANKS GOT INTO REAL ESTATE. A CHRONOLOGY OF A CATASTROPHE

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

I'll never forget the day.  It was early in June 2010. 

I got up early, made the coffee, took a quick shower, and hit my computer to check e-mail.  I had a class scheduled for CE so I only had an hour or so to review the e-mail and ActiveRain overnight posts. 

I didn't get to the CE class.  I was mesmorized by the News Headlines and the ActiveRain Blogs. 

I REMEMBER THE DAY WELL.  Taking a sip of coffee, while the e-mail was downloading, I logged onto ActiveRain and looked at the Blog Dashboard.  Goodness, about every other word was BANKS, BANKS, BANKS.  So, I clicked on a post by"AJ",always a good reporter of mortgage industry news and there it was, right at the top of his blog post

BANKS IN REAL ESTATE - CONGRESS APPROVES THE TAKEOVER OF SEVERAL GIANT REAL ESTATE COMPANIES BY A CONSORTIUM OF BANK HOLDING COMPANIES. 

PRESIDENT OBAMA SIGNS SWEEPING LEGISLATION GIVING BANKS AUTHORITY TO BUY REAL ESTATE COMPANIES. 

Congress, overwhelmed by the virtual demise of the real estate industry, has capitulated to the banking industry and approved legislation to permit banks in real estate on a federal and state level.  The emergency legislation sponsored by Senator Schumer, D-NY and sent to Representative Frank was reconciled and sent to President Obama who signed the Bill in the Rose Garden while entertaining the recently pardoned Angelo Mozilo, former head of Countrywide Mortgage and Richard Wohl, former President of IndyMac. 

Well, it was no surprise.  We had all expected it.  Real estate sales had fallen to about 10% of the volume for 2008.  There was little opposition to the Bill.  Although the President of the National Association of Realtors had attempted to meet with Senator Dodd, D-CT whose aide was overheard commenting "Hey, Sen. Dodd got a VIP sweetheard mortgage loan from Countrywide.  He knows who butters his bread." Foreclosure for sale

FORECLOSURE FOR SALE.  The action was precipitated by the overwhelming number of homes on the market now selling, foreclosures offered for sale and short sale listings that were not being approved by the banks financing the homes with owners in financial distress or default.  Fully 50% of the homes on the market nationwide were foreclosures or short sales, but the banks stopped approving any offers to buy in late 2008.  Many suspected that the banks conspired to slow and finally cease approving contract offers that included a commission to real estate agents/brokers.  Once the agents and brokers ceased listing activities, banks began listing properties in default on the Internet and invited prospective buyers to visit the homes.  Names, addresses and phone numbers of the owners were listed.  If the buyers were interested in buying, they were to contact their local bank member of the consortium banks authorized to handle the sales. 

STREAMLINED REAL ESTATE CONTRACT.  The banks offered online forms for buyers to complete and deliver to one of the banks on the "approved" financing resources list available at the local bank member of the consortium.  Once the bank received a form from an interested buyer, they were advised to obtain the services of an attorney to prepare a Contract of Sale.  All fees for credit review, appraisal, legal fees, surveys, etc. were paid in advance by the purchasers.  Bank clerks were all advised to direct home buyers to obtain the services of an attorney and when the contract between the buyer and seller was completed, the bank would process a loan application through one of the bank consortium members.

There was little for real estate agents to do since most banks controlled over 50% of the existing properties in the country.  Prices weren't published anywhere.  While agents still maintained the MLSs, few sellers listed because buyers were all going to the banks for lists of foreclosures.  Sellers found that their net was lower than they expected.  However, they were happy because, as the bank clerk advised, "you won't have to pay a real estate commission". 

COULD THIS BE WHY BANKS TAKE SO LONG TO APPROVE FORECLOSURES AND SHORT SALES

Top Contributors to Sen. Charles Schumer, D-NY, 2007-2008 Cycle

Citigroup Inc $80,800
UBS Americas $74,250
Paul, Weiss et al $67,000
Kasowitz, Benson et al $64,250
Metropolitan Life $59,000
Goldman Sachs $58,040
Morgan Stanley $57,000
Guardsmark Inc $54,000
Lehman Brothers $53,750
Merrill Lynch $50,250
JPMorgan Chase & Co $47,800
Cantor Fitzgerald $46,250
Milberg, Weiss et al $46,250
News Corp $46,250
Time Warner $43,500
Newmark & Co Real Estate $43,450
Cassidy & Assoc/Interpublic Group $40,171
Deloitte Touche Tohmatsu $39,999
Tudor Investment Corp $39,250
Lazard Freres & Co $39,000

Contributors to Representative Barney Frank, D-MA, 2007-2008 Cycle

Ace Cash Express $5,000
American Bankers Assn $8,000
Bank of America $1,000
Bank of America $2,000
Bank of New York Mellon $2,000
Citigroup Inc $2,500
Citizens Financial Group $1,000
Fifth Third Bancorp $2,000
Financial Services Roundtable $5,000
Huntington Bancshares $1,000
Independent Community Bankers of America $10,000
JPMorgan Chase & Co $4,500
JPMorgan Chase & Co $2,500
KeyCorp $1,000
LaSalle Bank $5,000
Massachusetts Bankers Assn $1,250
National Bankers Assn $1,000
National City Corp $1,000
US Bancorp $2,500
Wachovia Corp $3,000
Wells Fargo $2,000

 Top Contributors to Sen. Barak Obama, D-IL, 2008

Goldman Sachs $658,430
University of California $495,159
JPMorgan Chase & Co $423,107
Citigroup Inc $393,904
UBS AG $377,600
University of Chicago $375,829
Harvard University $363,074
Lehman Brothers $342,760
Kirkland & Ellis $341,064
Skadden, Arps et al $335,234
Sidley Austin LLP $334,845
Google Inc $327,964
Exelon Corp $309,161
Morgan Stanley $297,463
National Amusements Inc $284,850
Jones Day $251,250
Time Warner $250,002
Jenner & Block $236,899
Latham & Watkins $230,276
Bank of America $227,442

Top Contributors to Senator Christopher Dodd, D-Conn. 2008.

Citigroup Inc $310,294
SAC Capital Partners $286,600
United Technologies $263,400
American International Group $224,678
St Paul Travelers Companies $205,400
Bear Stearns $205,100
Goldman Sachs $175,600
Royal Bank of Scotland $174,050
Morgan Stanley $155,000
Credit Suisse Group $154,550
Merrill Lynch $139,550
JPMorgan Chase & Co $130,850
Lehman Brothers $124,200
KPMG LLP $113,100
National Westminster Bank $111,900
General Electric $108,250
Deloitte Touche Tohmatsu $108,000
Hartford Financial Services $101,500
The Hartford $94,350
Bank of America $91,300

Courtesy, Lenn Harley, Broker, Homefinders.com. 

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Comments 61 New Comment

Ambassador
2,281,521
Lenn Harley
Real Estate Broker - Virginia & Maryland
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate

Gene.  I am of the opinion that almost anything that has come from the government for the past 12 months is scary indeed.

October 11, 2009 06:21 AM
Rainmaker
316,050
BILL CHERRY
William S. Cherry & No Co., Wealth Coach
William S. Cherry & No Co., Wealth Coach

I frankly don't think very well of NAR; never have.

Their lobbying on behalf of member interest is enormously lack luster.

I don't want my dues being spent to support any particular party or candidate.  But if the membership as a whole feels it is appropriate, then those contributions should be equally divided.

February 20, 2013 06:02 AM
Ambassador
2,281,521
Lenn Harley
Real Estate Broker - Virginia & Maryland
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate

Bill.  I was OUTRAGED when I saw the list to whom the Virginia associations contributed.  I reduced my RPAC contribution from $100 to $10.

February 20, 2013 07:20 AM
Rainmaker
316,050
BILL CHERRY
William S. Cherry & No Co., Wealth Coach
William S. Cherry & No Co., Wealth Coach

I don't do TRPAC (Texas) for that very reason.  I think that the for an association of a zillion members, NAR and the state associations do a terrible job of representing our interests.

 

February 24, 2013 10:15 PM
Ambassador
2,281,521
Lenn Harley
Real Estate Broker - Virginia & Maryland
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate

Bill.  Good for you.  I'm very disappointed with the Virginia assn.  I don't pay much attention to the MD assn.  They've been lost for decades.

February 25, 2013 02:27 AM
Ambassador
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Lenn Harley

Real Estate Broker - Virginia & Maryland
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