Following is just-in from NAR’s Joe Ventrone (Vice President of Regulatory and Industry Relations):

Over the past few months, the GSEs (Fannie Mae and Freddie Mac) along with the Private Mortgage Insurance Industry (MIs) have been increasing fees and tightening up underwriting standards. This is a direct result of the mortgage crisis which surfaced last August. NAR is communicating with the GSEs about these changes and raising concerns about their impact on the market and unintended consequences. For example, the declining market policies may be stigmatizing entire markets and unfairly denying homeownership to homebuyers, especially minority and low income homebuyers. Although the recent GSE actions will have a significant impact on the mortgage and housing markets, we recognize they have suffered serious financial losses in recent quarters and their goal, like ours, is to make sure they are strong enough to continue making the secondary market work. Without the GSEs, the current crisis would have been much worse.

The following factors may help explain recent GSE decisions:
• These are essentially private entities that are universally losing billions because the mortgage markets in the last several years failed to apply strong underwriting standards.
• After what has happened in the mortgage market, with hundreds of billions of losses, a period of retrenchment is inevitable. A return to zero down mortgages is unlikely, which is not necessarily a bad thing.
• The FHA mortgage insurance program is a sound alternative for subprime and many Alt-A borrowers, People with weaker credit and a small downpayment should consider using FHA. There is a long history of FHA filling that role, and we expect the pending FHA reform legislation to help revitalize its programs and make them even more accessible.
• If Fannie and Freddie are charging too much and setting their standards unnecessarily high, considering the risk, there will be an opening for others to compete. Unfortunately, considering how cautious banks and other mortgage lenders have become, this could take considerable time.
Attached please find an update from our Real Estate Services program which was drafted by NAR consultants. This update provides up to date information on the current state of the mortgage market.

These are very trying times for our mortgage finance system, our members, and the American homebuying consumer. We at NAR are keeping abreast of up to the minute changes from the mortgage lending industry as well as the GSE’s and the financial regulatory agencies. In this regard, we continue to work with the GSEs on their declining markets policy. Please visit www.Realtor.org for current information. Please do not hesitate to call any of the following NAR staff if you have any questions.

NAR Contacts

FHA Programs Regulatory Contact:
Jerome Nagy, jnagy@realtors.org <mailto:jnagy@realtors.org> , 202.383.1233

FHA Programs Legislative Contact:
Megan Booth, mbooth@realtors.org <mailto:mbooth@realtors.org> , 202.383.1222

GSE Programs Regulatory Contact:
Jeff Lischer, jlischer@realtors.org <mailto:jlischer@realtors.org> , 202.383.1117

GSE Programs Legislative Contact:
Marcia Salkin, msalkin@realtors.org 202.383.1092

A story in today’s New York Times reports that bankruptcies were up 18 percent in February. Of particular note:

Americans filed for bankruptcy in growing numbers in February, buckling under the combined weight of rising energy prices, a weakening housing market and sky-high personal debts.

An average of 3,960 bankruptcy petitions were filed per day nationwide last month, up 18 percent from January and up 28 percent from a year earlier, according to Automated Access to Court Electronic Records, a bankruptcy data and management company.

 February was the busiest month for filings since Congress overhauled the bankruptcy law in 2005. Bankruptcy experts said the rise was particularly worrisome because those changes made filing for bankruptcy more complicated and expensive.

 “This number of bankruptcies may be under-representative of the true financial distress consumers are feeling because of the steps Congress has taken,” said Jack Williams, a scholar in residence at the American Bankruptcy Institute and a professor at Georgia State University.

The latest figures show the financial pain is spreading from states like California and Florida, which exemplified the housing boom and subsequent bust, to those along the Eastern Seaboard like Maryland, Virginia and Delaware, which were among the 10 states with the largest percentage increase in filings in January and February. “You are seeing a good-size uptick everywhere,” said Mike Bickford, president of Automated Access.

As tempted as I am to fire off a snappy (read: snippy) response to some of the misunderstandings contained in Frank LLosa’s recent post about RPAC, I’m reminded of Seth Godin’s admonition that miscommunication is almost always the fault of the communicator, not the recipient. So if Frank has his facts wrong about something VAR does…especially something so essential to his business as RPAC…it’s likely VAR’s fault for not communicating more thoroughly or frequently or clearly.

So, herewith, a primer on RPAC for them what want or need to know:

1. RPAC is the largest PAC in America. RPAC of Virginia is the biggest business PAC in Virginia. Big deal? Heck, yeah. When it comes to the funding of a Political Action Committee, size matters…at least it does to candidates and elected officials. The better funded your PAC, the more likely elected officials are to think twice before doing something that would negatively impact your real estate business, or more importantly your customers and clients. It’s the “carry a big stick” theory of politics, and it’s effective. That’s why we beg and plead with you to invest every year. Because it’s the only protection you’ve got against bad law and regulation. Sure, you can give individually to whomever you wish…but where’s the big stick? (And yes, that makes it all the more imperative that we consider and develop carefully our policy positions so that they’re about what’s good for Virginia, good for our communities, good for consumers…and not solely self serving).

2. RPAC of Virginia gives fairly evenly to Democrats and Republicans. National RPAC does, too. We’re not affiliated with a political party. We represent candidates who support private property rights and fair land use policies and housing opportunity and free enterprise. In the recent General Assembly election cycle here in Virginia, we supported more Republicans than Democrats…which makes sense, considering the Republicans were the party controlling both houses of the General Assembly at the time. With the Dems now in control in the Senate, I suspect it’ll be different next time around.

3. RPAC is governed by about 20 trustees who are REALTORS just like (most of) you. They run real estate businesses AND they’re active in state and local politics. So when funding decisions are made, do remember that they’re made by folks who do what you do for a living and understand the issues confronting your profession.

4. This is a biggy: RPAC funds can only be used for CANDIDATES. We’re prohibited by law from using it to lobby; we’re prohibited from using it in issues campaigns (say, to support or oppose a grantors tax increase). Lobbying and issues campaigns are funded with your dues dollars, not with RPAC funds. You invest in RPAC so that your association has funds to help elect candidates who support what’s best for your business and for homeownership in Virginia. That’s pretty much all that your RPAC money is used for. The vast majority of RPAC overhead costs — staff, recognition, brochures, etc — are paid for from your VAR dues dollars, not from the PAC.

5. Before the RPAC Trustees decide to support/endorse a candidate (which usually means we give them money or in-kind campaign support, but not always), we interview the candidates to determine which is best for your interests. We don’t pay attention to a candidate’s stand on social issues; instead, we ONLY look at his or her position on real estate issues. We almost always interview in races for an open seat. In races where an incumbent who has supported your issues is running, we’re less likely to interview; after all, such a candidate has a track record, and we can tell if he’s been for us or against us. On the other hand when an incumbent hasn’t supported us, we either stay out of the race, or we look for someone to challenge him/her in the election. Likewise, most local associations interview candidates before they make endorsements in local races.

6. Which reminds me: Of every dollar you invest in RPAC, 30 cents goes to NAR for use in federal (Congress and US Senate) races. The remaining 70 cents is used in Virginia for statewide and General Assembly races AND in local races (and the local portion is controlled by your local association, but their rules and process for candidate contributions are nearly identical to VAR’s)

7. There are serious limits to what National RPAC can give to Federal candidates (Congress and US Senate). I’ll spare you the gory details, but it totals $15,000 per candidate per election cycle. National RPAC does NOT get involved in the presidential race. In Virginia, however, there are no limits. Still, I think you’ll find the size of our contributions to be in line with those of other groups. There’s a limit, of course, to what the market will bear, and any contribution that seems larger than the market will put us in every newspaper in the state, and…let’s just say the coverage wont be flattering. You can find a record of all political contributions in Virginia at http://vpap.org.

8. Despite the conclusion one might draw from the National Home Builders Association’s recent decision to cease all funding of Congressional candidates until Congress does what the builders want, it’s not about buying votes. Sometimes I wish it was that easy, but I’m glad it’s not. What it’s about is electing thoughtful officials who’ll at least listen when we come to them with good, sound policy proposals. It’s an open door. But if we’re not fighting to elect that kind of candidate, there are plenty of other groups out there with different ideas from you who’ll fill the void with their brand of candidate, and you’ll be out in the cold. If we’re not engaged in political advocacy, we can’t effectively represent you. That’s what RPAC is for.

That’s enough for now. Three last things:

> You’ll find a really cool member-produced video about RPAC on VAR’s website. It’s short, it’s current, and it’s worth your time.

> Here’s a list of 2007 VAR legislative successes, powered by VAR’s first rate lobbying team and your support, but undergirded by the “big stick” that is RPAC. Do note how many of the issues we’re invlved in aren’t only about us, about REALTORS®; rather, they’re about better communities and moving Virginia forward.

> Lastly…I do apologize for being so pedantic. I understand that politics can be an unpleasant and divisive business. But to those REALTORS® who would recoil from it and refer to RPAC as something nasty and say that politics is distasteful and REALTORS should have no part of it, I say this: When they declare that ditch on your investment property a wetland, and they put a tax on your commissions, and they decide to fund the bulk of transportation infrastructure on the backs of homebuyers and sellers, and implement all manner of regulation that negatively impacts your bottom line, you’re going to want to say “Where was RPAC?” And I’ll have to bite my tongue to keep from replying, “Where were YOU?”

I read today that rhinotillexis is on the decline, and that’s a good thing.

The term means “picking one’s nose with one’s fingers.” In an article by Jim Shahin in the February 15, 2008 issue of American Way, a Harvard study reveals that rhinotillexis is down 70% from the year before. The decline is attributed to the fact that cameras are everywhere and people are becoming more cautious about the activity for fear of showing up on YouTube and grossing out their friends.

So for you REALTORS® out there, here’s this friendly warning:  Please don’t pick and drive, especially with clients in the car or around cameras. You never know who’s watching. (Chalk this up to more helpful advice from your association.)

> This from the Chicago Trib: Should you buy or should you hold off?

> This from Inman: Realtors question Web site name restrictions, about concerns some are raising about a new Code of Ethics standard of practice that says REALTORS shall not “use URLs or domain names that present less than a true picture.” The new SOP, approved last November, is the result of the use, by some members, of domain names that suggest that the REALTOR is actually the MLS (for instance, a broker whose website is “VirginiaMLS.com”). Seems to me such usages are misleading at best…and therefore the new NAR SOP is appropriate. Or in other words, just because it’s legal and you own it doesn’t mean it’s ethical. What do you think?

In our ongoing effort (okay, MY ongoing effort) to keep you well-read on what’s being written out there about the housing economy and your profession, here are a few must-reads:

> Incredible, but true: Daniel Kadlec actually writes something positive about the current housing market in last week’s issue of TIME . Any article about the current situation that’s entitled Ignore the headlines (as this one is) has got to be provocative, right?

> This, from the February 22 New York Times about some new proposals Congress is considering for “rescuing” homeowners who are upside down on their mortgages. What’s your take on this idea of a bailout (for lack of a better term)?

> Interesting piece here (from seekingalpha.com) that takes a contrarian view of what’s happening (and is ahead) in the mortgage markets. Be sure and read the comments, too, many of which take a contrarian view of the author’s contrarian view.

> Speaks for itself: Top 5 Things I Love About The Current Real Estate Market

> The Next Slum? In this month’s Atlantic Monthly, Christopher B. Leinberger says the subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today’s McMansions into tomorrow’s tenements.

> How to find your lost iPhone. I read about this at sellsiusrealestateblog. If you lose your iPhone, this service will locate it for you on a Google map. Not that I can imagine anyone so careless as to misplace anything as lovely as an iPhone….

> From today’s NYT (Feb 23): A ‘Moral Hazard’ for a Housing Bailout: Sorting the Victims From Those Who Volunteered

Lastly, if you have a life outside work, pick up a copy of THE ROAD by Cormac McCarthy. Has not a thing to do with real estate, but I just finished it, and it’s the best thing I’ve read in a long time. And don’t be dissuaded by the fact that it’s an Oprah Book Club pick; it won last year’s Pulitzer Prize.

– Scott Brunner, CAE

This, from NAR:

On February 13, 2008, the President signed the stimulus bill, H.R. 5140.  This is the first in a series of memorandums discussing the implementation of the two mortgage related provisions included in the signed measure.  The bill provides temporary increases to both the Federal Housing Administration (FHA) and government sponsored enterprises (GSE) mortgage limits until December 31, 2008.  NAR will provide updated information on these provisions as it becomes available.

The new law makes seven temporary changes to the FHA and GSE loan limits: 
> Raises the base FHA loan limit (“floor”) to $271,050 (65 percent of the current GSE limit of $417,000),
> Sets the base GSE loan limit (“floor”) at $417,000.
> Raises the maximum FHA loan limit from $362,750 to $729,750 (175 percent of the Fannie/Freddie (GSE) floor of $417,000)
> For all areas where the FHA limit exceeds $417,000, the GSE limit will be the same as the FHA limit.  So, for example, if the FHA limit is $590,000, the GSE limit will also be $590,000.
> Increases the factor used to calculate FHA limits from 95 percent to 125 percent of area median sales price.  Any area with an area median sales price above $216,840 will benefit from this change.
> Replaces the existing FHA ratios used to calculate maximum loan amounts for two-, three- and four-family units financed by FHA with the ratio used by Fannie Mae/Freddie Mac ratios to calculate their limits for two-, three- and four family unit properties.

Fannie Mae and Freddie Mac two-, three- and four family unit loan limits increase the same percentage that the single family limit increases.  In 2006, for example, the GSE single family limit increased 15.95 percent and the mortgage limits for multiple units increased 15.95 percent.  This change should result in significant increases in FHA limits for multi-unit properties.  The Secretary of the US Department of Housing and Urban Development (HUD) will now have the discretion to raise the maximum FHA loan limit by an additional $100,000 for all properties (including 2-4 family units).

Implementation
HUD is required by the law to publish the new mortgage limits by March 14, 2008.  These new limits will be effective for FHA immediately upon publication.  NAR developed estimates of the temporary FHA and GSE single-family loan limits.  This data can be found here.

The NAR sent a letter to HUD on February 13, 2008, urging HUD to implement the limits as quickly as possible.

The implementation schedule is complicated by the fact that Fannie Mae and Freddie Mac will be using the same limits above $417,000 and Office of Federal Housing Enterprise Oversight (OFHEO) Director James B. Lockhart, III (Fannie and Freddie’s regulator) noted in a recent speech that implementation could take up to three months with an additional month for partial enactment.  Mr. Lockhart offered no explanation as to what partial enactment means.  NAR sent a letter to OFHEO on February 13, 2008, urging immediate adoption of the new loan limits.

To date, Fannie Mae and Freddie Mac have not indicated their implementation plans once limits are established by OFHEO.

Eligible loans
> FHA – The statute applies to “mortgages for which the mortgagee has issued credit approval for the borrower on or before December 31, 2008”.  We believe this means any loan which receives underwriting approval before January 1, 2009.

> GSE – The statute applies to “mortgages originated during the period beginning on July 1, 2007, and ending at the end of December 31, 2008”.  We believe this means any loan originated before January 1, 2009.  This also means that GSE can buy loans that meet the new loan limits that were originated after June 30, 2007.  Consumers with existing jumbo mortgages may want to consider refinancing under the new loan limits prior to January 1, 2009.

What if I don’t think my loan limit accurately reflects the median home price?
FHA has a process by which the local area median loan limits may be challenged.  If you do not believe the published loan limit accurately reflects 125 percent of your median home price, you may provide HUD with comparable home sales data to make the case that the loan limit should be raised.  NAR is currently creating a guide for REALTORS on how to challenge your loan limit and it will be available shortly.

The opinions expressed below are from consultant Brian Chappelle, Partner, Potomac Partners 2127 S. Street N.W. Washington D.C.  20008.   These are the consultant’s opinions and do not necessarily reflect the views of NAR.

While every client must make their own decision on this topic, below is an assessment of the risks.

Areas at the new base loan limit (“floor”) of 65 percent of the current GSE limit ($417,000) = $271,050

Since this amount is established in the bill and the law requires that HUD implement the provision in 30 days, there appears to be minimal risk in taking applications at the higher base loan limit (“floor”) immediately.

If you wanted to close a loan at the higher base limit prior to HUD’s implementation of the statute, the primary risks are two-fold.  1) You would have to run the loan through the Total Scorecard again to remove the “Ineligible” message because of an excessive mortgage amount for the area.  If the borrower’s credit quality deteriorated in the interim, there could be an eligibility issue.  You could underwrite the loan manually to avoid this issue and 2) the insurance endorsement process.  A loan must be submitted within 60 days of closing.  Otherwise, the lender is required to certify that the most recent payment was made in the current month (See Mortgagee Letter 2005-23 for FHA late endorsement requirements)

High cost areas (Above $271,050)

The mortgage limit is determined by calculating 125 percent of the area median sales price which is determined at the county or metropolitan statistical area (MSA) level.  We believe that HUD is likely to use the same methodology and data that were utilized for calculating the 2008 mortgage limits.  However, although it has been less than 30 days since HUD published those limits, it is also possible that HUD could update its data.

Risk is Divided into Two Categories:
> First, for areas with mortgage amounts below the current Fannie/Freddie mortgage limit ($417,000), we see less risk since HUD will be able to make its decision independently and implement these limits reasonably soon (i.e. less than the month) and will probably not implement any special underwriting requirements.  The main issue is, of course, the calculation process for the maximum mortgage amount.  In this regard, maximum loan amounts are increasing in many high cost areas because of the 125 percent of area median calculation (instead of 95 percent that was previously used).  The issue is really how much.

> Second, for areas that will have maximum mortgage limits above the current Fannie/Freddie maximum limit, it is more complicated because of the impact on Fannie Mae and Freddie Mac, the role of their regulator (OFHEO) and possible special pricing and underwriting requirements for these loans in addition to the calculation issue discussed above.

We believe there is much more uncertainty about the speed with which the new provisions will be implemented for loans above $417,000 particularly for conforming loans.  However, pricing and underwriting issues would also apply for FHA loans.  For example, since these loans will be available for a short period of time (until December 31, 2008), it is possible that Ginnie Mae would form special customized pools that could affect pricing.

NAR Contacts
> FHA Programs Regulatory Contact:
Jerome Nagy, jnagy@realtors.org, 202.383.1233

> FHA Programs Legislative Contact:
Megan Booth, mbooth@realtors.org, 202.383.1222

> GSE Programs Regulatory Contact:
Jeff Lischer, jlischer@realtors.org, 202.383.1117

> GSE Programs Legislative Contact:
Lynn King, lking@realtors.org, 202.383.1156

– Scott Brunner, CAE

Admittedly, our National Association has been taken a beating of late for its adjusting and re-adjusting (and re-re-adjusting) of its 2007 homes sales forecasts. That, along with the seeming “It’s Always Sunny in Real Estate” spin that many critics read into the latest iteration of its public awareness initiative, have gotten us to the point that many in the press and the RE.net are questioning NAR’s credibility, both as a distiller of housing industry economic data and a truth teller when it comes to what’s really in consumers’ best interests in today’s real estate markets.

While NAR (or VAR either, for that matter) is not above criticism, there are always (at least) two sides to every story. There are even multiple facets to the same story. And there are certainly multiple ways of collecting and analyzing data, and multiple, sometimes contradictory, conclusions that can be drawn from that analysis. I’ll not belabor the point, except to say this: In particular, I believe that NAR’s Chief Economist Lawrence Yun has gotten a bad rap for what some see as his too-rosy forecasts and well-spun public comments about the health of the real estate economy.

Thankfully, he now has a new platform for explaining himself and the inner workings of NAR’s econometrics, and it’s worth a read. It’s not a blog (yet), but NAR has begun to post commentaries by Yun at realtor.org behind the “research” tab. In particular, his recent post on some of the reasons for divergent home price trends is a spin-free, must-read.

I’m glad Lawrence is finding his voice. He’s a fresh, thoughtful, truth-telling asset to NAR. Would that more in the media (and, yes, the real estate blogosphere) were as thoughtful.

Now if they’d just turn his commentaries into a blog, we could all comment….

(I’m told Lawrence’s commentaries will be posted with some frequency at http://www.realtor.org/research, in case you want to bookmark it.)

This, from Seth Godin’s blog:

The posture of a communicator

If you buy my product but don’t read the instructions, that’s not your fault, it’s mine.
If you read a blog post and misinterpret what I said, that’s my choice, not your error.
If you attend my presentation and you’re bored, that’s my failure.
If you are a student in my class and you don’t learn what I’m teaching, I’ve let you down.

It’s really easy to insist that people read the friggin manual. It’s really easy to blame the user/student/prospect/customer for not trying hard, for being too stupid to get it or for not caring enough to pay attention. Sometimes (often) that might even be a valid complaint. But it’s not helpful.

What’s helpful is to realize that you have a choice when you communicate. You can design your products to be easy to use. You can write so your audience hears you. You can present in a place and in a way that guarantees that the people you want to listen will hear you. Most of all, you get to choose who will understand (and who won’t).

It’s an important point: miscommunication or failure to engage is pretty much ALWAYS the fault of the communicator, not the recipient/listener. As we association leaders strategize about how we can better communicate with and engage our members, it’s something we must keep in mind. If REALTORS aren’t reading / buying / wanting / benefitting from it – presuming what we have to offer is truly valuable – it’s likely because we’re not packaging / positioning / communicating it correctly.

– Scott Brunner, CAE

My name is Scott, and I’m a control freak. Or rather, I can occasionally be a control freak. Or rather, when I’m really passionate about something I can tend to overwhelm my fellow staffers with all my incredibly creative (??!) and insightful (???) ideas and guidance. Does that a control freak make? (The insecure side of me envisions VAR staff members nodding vigorously.)

As a leader, I’m learning that passion and creativity can be blessings and curses. They’re blessings when leaders channel them to spur individuals, teams and organizations to attempt new things, to be proactive and audacious and excellent in achieving their goals. But they can be curses when leaders – for all the best reasons, mind you – mistake their own ideas for the only ideas, and fail to trust in the inherent talent and creativity of the teams they’ve assembled to take a decent idea, make it better, and own and implement it without excessive oversight or…control.

The trick, of course, is that word trust. Trust means understanding you don’t have all the answers…and don’t have to. It means building the right team, equipping them with all the right tools and skills, and letting them go. Sometimes, it even means following them to places and outcomes you’d never have considered on your own (like this blog, for instance….).

Maybe that’s just common sense, but for an old control freak like me, it’s a lesson that’s been a long time coming. I bring it up now, as I watch your VAR staff execute preparations for our Legislative & Education Conference held this week in Richmond, because now that I see it, I’m starting to get it. I’ve never seen such a well-oiled machine as this group of folks (led expertly, on this conference project, by VAR’s cool and unflappable meeting planner Tracey Floridia, and supported by 25 other capable team members).

We started in the fall with a few ideas for this conference, a focus on content that contributed to strategic outcomes, and the sense (on my part at least) that we had exactly the right assets in place to prepare and execute this event with more polish and professionalism and style than ever before. We all contributed ideas, and then…I got out of the way. I hit the road. Traveling. All over the place, visiting members and local associations and attending NAR meetings, being about the business of Virginia REALTORS – and hoping that out-of-sight, out-of-mind would help temper my control-freakiness.

And you know what? To my amazement, it sort of did. Oh, my team was never really out-of-mind; they offered me abundant opportunities for input and feedback. But danged if they haven’t dazzled me with what they’ve accomplished…not only on this event, but myriad other projects in the works.

How easy it is for leaders like me to slip into the mindset that our performance will be evaluated based on how many good ideas we have, how many of our own ideas we implement. Or perhaps we lapse into thinking that the association will go into a holding pattern if we aren’t right there every minute shouting orders, contributing. But those aren’t good measures of effectiveness. They sound more like more insecurity than leadership. In contrast, real leadership mans establishing direction, building and equipping a team, removing obstacles from their paths, and letting them do what they’re good at, what you hired them to do in the first place.

Here at VAR, as leadership development goes, I’m still a work-in-progress. But this week in particular, I’m feeling mighty proud of this remarkable staff team and the work they’re doing on your behalf. And that feeling of pride trumps my insecurities any old day.

– Scott Brunner, CAE