Message to feds: Protect, but don't overregulate

Real estate professionals sound off on consumer protections

The premier event for luxury agents and brokers
Luxury Connect | Oct. 16-18 | Beverly Hills

See related articles:

4 ways to fix housing finance

How to fix housing policy

What role should government play?

Let’s assist distressed owners, small business

The Obama administration is gathering public opinion on how to improve the housing finance system, including the operations of Fannie Mae and Freddie Mac and the federal government’s role in the system.

The Treasury Department released questions seeking comment from the public, and Inman News asked real estate professionals to weigh in on some of these questions. Responses to one of those questions follows, and other questions are addressed in separate articles.

What is the best way for the housing finance system to help ensure consumers are protected from unfair, abusive or deceptive practices?

James Crumbaugh III
CEO
Allison James Estates and Homes
Lake Suzy, Fla.

I do agree that we need consumer protections. I used to lecture my Realtors at my weekly sales meeting about the vultures in the lending industry taking advantage of borrowers who didn’t understand what they were signing.

Many times I would have a Realtor come to me because their customer was turned down for a loan with a solid and known lender, and the next thing I would hear is that they were going with a mortgage broker I had never heard of.

I believe that all loans should be locked in at least 30 days prior to closing and that it is fully disclosed to the borrower what their payments will be once the loan converts.

Judson Voss
President
Roxx Productions LLC
Mooresville, N.C.

I am wary of government-sponsored consumer-protection laws. My experience is that the government tends to create blanket laws that outlaw certain practices that are legitimate just because there are illegitimate operators in the market. 

As an example, many states do not allow individuals to perform short-sale negotiations because of some fraudulent operators. Instead of outlawing the practice or only allowing Realtors to perform the task, why not create certifications and licensing to protect consumers?

Pamela Dela Cruz
Broker-owner
Pamela Dela Cruz & Associates LLC
Walnut Creek, Calif.

In regards to the loan-modification and short-sale processes, the current unfair practice right now practiced by lenders is that they (don’t appear to be helping) homeowners who are current with mortgage payments. In fact, they (tend) not to assist owners unless they are 60 days late. However, bank representatives (don’t seem to be revealing) this to the borrower. It’s just a dirty little secret that Realtors and brokers know about. 

The effect is that the homeowner is even in more at risk of losing their home. Once you receive a notice of default, you have 90 days before the trustee sale. If your house is on the market (and) the bank (does not approve) an offer at hand, the owner will lose the home if there is no trustee sale extension. This is the most deceptive (part) of the whole process.  …CONTINUED

It’s as though lenders or the government are punishing homeowners for not keeping up with their payments. Homeowners will take drastic measures — such as claim bankruptcy — to avoid losing the home, or they try and sell in a short sale, but to no avail. 

The administration is taking short strides in addressing the housing market, not leaps and bounds. The Home Affordable Modification Program and Home Affordable Foreclosure Alternatives program may prove to be effective in time. 

The prevailing problem is the credit-worthiness for consumers in years to come. With negative impact on credit, they will not be able to rebound again very quickly in home purchases. An automatic extension to keep interest rates fixed will help stabilize the economy. 

Finally, when federal and state governments have provided a mortgage debt relief act for investment properties and commercial properties, then I will stand up and cheer.

William Metzker
Owner and principal broker
Terradigm Real Estate Consultancy LLC
Portland, Ore.

Transactional-based compensation needs to go away. Real estate agents and mortgage brokers do not get paid until the transaction occurs, and this compensation method encourages steering consumers into places they don’t need to be in, literally and figuratively.

The practice finds its way into the executive suites, where too many are paid through bonuses based on transactions, which then metastasize in quantity and creativity. 

Changing the compensation structure would also lead to better-educated consumers and service providers, since the energy would transfer from the transaction to the service. As it is now, buyer and seller know more about a cotton shirt than they do a $300,000 note and trust deed.

Steve Wiley
Broker-owner
Smarter Choice Real Estate
Lincoln, Neb.

While some regulation and oversight is reasonable and indicated, I don’t think we should become a socialist society which tries to over-control free markets.

Government regulation and tax policy can go a long way to incentivize the desired behaviors that are reasonably calculated to reach the desired end point.

Sam Roth
Principal broker
Century 21 Best Realty Inc.
Coos Bay, Ore.

Like many things, maybe (the government) should enforce the laws already available instead of jumping on a politically correct issue after the fact. The government agencies are tending to over-regulate to the point that underwriters are often questioning themselves and feel threatened by what might come down next to bite them. 

In the context of all the loans made over the past 10 years, the number of fraudulent lenders or loan officers has been very minimal. In the past, Congress required the lenders to make a certain amount of loans to people who really didn’t qualify, and that came back to bite the whole industry. If lenders had been left to do their own decision-making as to whom can qualify, they never would have gotten into such a mess. 

***

What’s your opinion? Leave your comments below or send a letter to the editor.