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Fighting for Free Market Housing Solutions
Do You Believe in the Free Market, Small Government, and Protecting Taxpayers?
DPC has a proven track record of SUCCESS representing residential investors in Washington. Our top victoriesinclude:
Do You Want To STOP Further Taxpayer Bailouts of Fannie and Freddie?
Do You Want To STOP Government Control of the Housing Market?
Do You Want To Stop Government Programs That Fail Homeowners and Fleece Taxpayers?
Reducing short sale flipping restrictions for home rehabbers and investors.
Expanding short sales through supporting the creation of a national program.
Improving communication with services and reducing response time for short sales.
Reforming valuation methodology for REOs and short sales.
Reforming enforcement procedures governing residential investors.
DPC has an aggressive agenda for 2013 and is working with members of Congress and Federal Agencies to continue our track record of success. Major elements of our 2013 agenda are contained in the following letter:
Edward J. DeMarco
Federal Housing Finance Agency
400 7th St. SW
Washington, DC 20024
Re: Standard Short Sale Program, REO and Title Company Issues
Dear Director DeMarco:
On behalf of my clients and myself, I would first like to express our gratitude to you and the staff at the Federal Housing Finance Agency (FHFA) for your work on behalf of taxpayers and distressed homeowners. We fully support the new Standard Short Sale Program as well as additional changes implemented by your agency during the past year.
Since the implementation of the new short sale program, I have met with my clients to discuss the recent changes and broader housing issues specifically related to the Enterprises. Based upon those meetings, I respectfully submit the following questions to you designed to create further dialogue and hopefully continue to improve how the Enterprises function.
For background purposes, my clients are primarily comprised of professionals who purchase, rehab and resell distressed properties. Therefore, most of the questions posed below center on distressed property valuations and re-sale restrictions. Additionally, I also represent several title companies and thus they asked that I provide some questions regarding vendor and vetting issues for your review.
- The GSEs have adopted a new valuation methodology for short sales and REOs that takes into account local market conditions and credit availability. Multiple servicers have stated to my clients that the new valuation formula does not account for REO sales and short sales in a market. Why are distressed sales not considered part of “local market conditions”? If a non-GSE party formulated a valuation ignoring all distressed properties in an area, would that be considered an inflated appraisal, and thus fraud?
- Home sale prices have increased since the adoption of the new valuation methodology. How much of the price uptick, offered by many as evidence of a recovery, is due to higher employment, an improved economy, or the fact that the GSEs are formulating valuations ignoring REOs and short sales?
- We understand FHFA’s obligation to taxpayers and that getting more for these properties helps taxpayers. Has any consideration been given to the potential consequences of home price inflation on the long-term prospects for recovery?
Deed Restrictions/Flipping Restrictions
- Cap on Profits: FHFA and the GSEs have instituted 20% resale caps on short sale properties. Several of my clients are seeing caps in the REO environment as well. Many of the properties we encounter have been abandoned for many months, and require substantial repair. The resale caps are prohibitive for buyers of distressed areas, because after repairs their profit is minimal. Can there be some flexibility on resale caps particularly for homes that need substantial repair? If not, and my clients have no profit incentive to repair these homes, who is going to repair them?
- Resale Timeframe Restrictions: Perpetrators of fraud do not want to hold properties more than a couple weeks. They obtain a false appraisal, whitewash the property and seek a buyer, sometimes having a buyer already lined up. Colorado instituted a 14 day hold period that has proven to be an effective anti-fraud tool. There is no dispute a professional home rehabber can make legitimate and value-adding repairs in 30-45 days. Given the number of properties throughout the country in need of repair, would FHFA consider adopting the Colorado policy, or at least removing any additional resale restrictions on short sale and REO properties after 30 days?
- Do Fannie and Freddie still maintain their position that there is no such thing as a distressed property value, and they should obtain retail value for REOs and short sales? Can they point to any economist not in their employ who agrees with the position that REO values are a “stigma” and not a function of the housing market?
Title Company Vendor/Vetting Issues
1. Third-Party Vetting of Settlement Companies:
Since title companies are licensed and vetted by State insurance commissions, title underwriters and insurance carriers (E&O), what expertise or value do these vetting companies bring to the table that is not already known to the States, underwriters and insurance carriers to justify their substantial fees?
What assurances do title companies have that the information provided is secure and remains confidential due to the sensitivity of such information provided for purchase or finance of real estate?
In return for these fees, vetting companies promise settlement service providers preferential access to lenders’ settlement business - if approved by the vetting company. Why is this not a violation of the RESPA anti-kickback provisions?
Do the lenders receive "anything of value" in any manner by the vetting company for the opportunity to "vet" for the lender which may be in violation of RESPA anti-kickback provisions?
2. Title Company Vendor Issues:
Why have the GSEs closed new opening for vendors to provide settlement services thus creating an "entitlement" mentality among the "approved" vendors?
Besides favorable pricing, can the GSEs provide any additional information on how current vendors were selected, and details on the methodology used to rank the qualifications of the chosen vendors?
Have the GSE's graded the current vendors for customer service, competence and expertise?
Thank you in advance for any guidance you or your staff may be able to provide me on these matters. On behalf of the Distressed Property Coalition, I would like to thank you for your time and consideration of this letter. Should you wish to discuss it in further detail or meet in person, please feel free to contact me. Thank you for your service.