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. 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
|Paul, Weiss et al||$67,000|
|Kasowitz, Benson et al||$64,250|
|JPMorgan Chase & Co||$47,800|
|Milberg, Weiss et al||$46,250|
|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|
|Citizens Financial Group||$1,000|
|Fifth Third Bancorp||$2,000|
|Financial Services Roundtable||$5,000|
|Independent Community Bankers of America||$10,000|
|JPMorgan Chase & Co||$4,500|
|JPMorgan Chase & Co||$2,500|
|Massachusetts Bankers Assn||$1,250|
|National Bankers Assn||$1,000|
|National City Corp||$1,000|
Top Contributors to Sen. Barak Obama, D-IL, 2008
|University of California||$495,159|
|JPMorgan Chase & Co||$423,107|
|University of Chicago||$375,829|
|Kirkland & Ellis||$341,064|
|Skadden, Arps et al||$335,234|
|Sidley Austin LLP||$334,845|
|National Amusements Inc||$284,850|
|Jenner & Block||$236,899|
|Latham & Watkins||$230,276|
|Bank of America||$227,442|
Top Contributors to Senator Christopher Dodd, D-Conn. 2008.
|SAC Capital Partners||$286,600|
|American International Group||$224,678|
|St Paul Travelers Companies||$205,400|
|Royal Bank of Scotland||$174,050|
|Credit Suisse Group||$154,550|
|JPMorgan Chase & Co||$130,850|
|National Westminster Bank||$111,900|
|Deloitte Touche Tohmatsu||$108,000|
|Hartford Financial Services||$101,500|
|Bank of America||$91,300|
Courtesy, Lenn Harley, Broker, Homefinders.com.