In a speech in Florida, presidential candidate Mitt Romney said he supports the idea of principal reduction.

Quoth Romney:

We’re just so overleveraged, so much debt in our society, and some of the institutions that hold it aren’t willing to write it off and say they made a mistake, they loaned too much, we’re overextended, write those down and start over. They keep on trying to harangue and pretend what they have on their books is still what it’s worth.

Romney said, essentially, that he realizes that without some sort of principal reduction or debt forgiveness, the door to a bigger problem might open: more “strategic defaults” where homeowners walk away because lenders won’t work with them:

In some cases, if the debt is not in something you can service, it’s like you have to move on and start over away from those debts. It’s helpful if you get an institution that’s willing to work with you, but if you don’t you have no other option.

Lenders, he says, are afraid of losing their shirts. But he doesn’t consider their position reasonable:

They just want to pretend all of this is going to get paid someday so they don’t have to write it off and potentially go out of business themselves.

Finally, his message to lenders:

My own view is you recognize the distress, you take the loss and let people reset. Let people start over again, let the banks start over again. Those that are prudent will be able to restart, those that aren’t will go out of business.

And finally what almost sounds like a scolding of the banks:

This effort to try and exact the burden of their mistakes on homeowners and commercial property owners, I think, is a mistake.

(This jibes with a quote from the day before, also in Florida: “Too many institutions aren’t willing to write it off and say, we made a mistake, we over-leveraged, we loaned too much.”)

Click here for more VARbuzz stories on principal reduction.

Worthwhile reading from today’s Washington Post op-ed page, “Why the Federal Reserve slept before the housing crisis.” Unlike the typical blame-the-people-whose-politics-I-disagree-with piece, this one points to a much more mundane explanation of why, in 2006, the Fed apparently ignored all the signs of a major problem.

It wasn’t that they didn’t see the housing boom or recognize that it was ending. At 2006’s first meeting, a senior Fed economist noted “that we are reaching an inflection point in the housing boom. The bigger question now is whether we will experience (a) gradual cooling . . . or a more pronounced downturn.”

At that same meeting, Fed Governor Susan Bies warned that mortgage lending standards had become dangerously lax [...] But [members of the Federal Open Market Committee] — and most private economists — didn’t draw the proper conclusions.

Hardly anyone asked whether lax mortgage lending would trigger a broad financial crisis, because America had not experienced a broad financial crisis since the Great Depression [...] Because it hadn’t happened in decades, it was assumed that it couldn’t happen.

Click here to read the whole piece by Robert Samuelson.

If you have a house in escrow and the buyers are good looking, HGTV might want to use you for an episode of House Hunters.

Roni Spitzer, a casting producer for the show, is heading an open casting call for Realtors® across the country. (It’s an ongoing show, so there isn’t a deadline.)

What are they looking for? I’ll quote Ms. Spitzer:

“The property would need to be in escrow with a closing date with buyers that are energetic, fun and of course, aesthetically pleasing. Drama and challenges are welcome! We really like when they have specific needs and wants; like must have a sky light or no way would I ever buy a home with base board heaters.  The more opinionated the better.

Wait! you say. Why do you need a house in escrow if they’re supposed to be “house hunters”? Two words for ya: pro wrestling.

See, you and your aesthetically pleasing clients will go to the house they’ve already chosen “as if your buyers are seeing it for the first time.” They’ll also go to “decoy homes” — ones they’ll pretend to be vaguely interested in before deciding on the home they’ve, er, already decided on.

You know, like: “We want one that’s 2,241 square feet, with a skylight in the den, green walls upstairs, and a fridge that’s exactly 6.2 feet from the sink. Wow! Amazing! What a coincidence that this house has those very things! We will take it!”

If you’re interested in being on the show (it’s a three-day shooting commitment, and obviously your clients need to be on board), you’ll need to provide a few things: application, head shot, MLS listing or at least pics of the home, and — most notably — a three-minute audition video.

Spitzer offers tips for the video, such as: stand, wear your normal business clothes, don’t shoot by a window, be “Energetic and Enthusiastic.” (The capital Es are hers, so you know she means it!)

And, while the show is fake, “We need you to be honest, and to the point.”

Interested? Questions? Let her know:

Roni Spitzer
Casting Producer
House Hunters
Pie Town Productions
7655 Haskell Ave
Van Nuys, CA 91406
818.205.0638
roni_spitzer@pietown.tv

Remember: Aesthetically pleasing people only.

The Real Estate Standards Organization wants to standardize some of the more confusing parts of a listing by creating an industry-wide “data dictionary” of definitions.

Two of the notable definitions the group would like to set are number of bathrooms and days on market.

“Number of bathrooms,” you might think, is pretty straightforward. You’ve got full baths and half baths, so a home might have 2 baths, 3 baths, or 2 1/2 baths, and so on. But that raises the question of what constitutes a fractional bath.

If it has a sink and toilet, is that half? What if it’s just a toilet? (My wife’s family’s 19th-century farmhouse has such a room.) What if it has a shower stall but not a bathtub — is that 3/4? Is a two-seater outhouse “1″ or “1/2 + 1/2″?

And how do you do the math? If you read that a house has “2.5 baths” does that mean…

• Bath A: Toilet, sink, shower
• Bath B: Toilet, sink, shower
• Bath C: Toilet, sink

or

• Bath A: Toilet, two sinks, shower, Jacuzzi
• Bath B: Toilet, sink, shower

or

• Bath A: Toilet, bidet, two sinks, two-person shower, Jacuzzi
• Bath B: Toilet

or

• A four-seater outhouse with a sink nearby and an outdoor shower stall?

You see the issue.

So RESO wants to not only standardize definitions, but break them down, so a listing would include not only total baths, but “baths full,” “baths half,” “baths three-quarter,” and “baths one-quarter.”

Read all about it — click here for the Inman News article.

Principal reduction is back (still?) in the news. Here’s a quick update.

The basic idea is that, as part of a workout package with homeowners, lenders would reduce the principal owned along with or instead of the interest rate. But it’s not simply a matter of homeowners asking for a handout. (One way to think of it is a short sale — to the same owners.)

More and more economists are saying that, if we want out of the housing crisis, principal reduction has to be on the table. (Here’s one. Here’s another.)

The Spiral of Doom: More than one in five homeowners is underwater. Thanks in large part to foreclosures, supply of homes is way higher than demand. That pushes values lower — and puts more homeowners underwater. That makes them more likely to default and be foreclosed upon… you get the picture.

The any-day-now deal between the states attorneys general and lenders who broke various laws in the robo-signing scandal is going to include principal reductions.

But if you think that’s letting people off the hook, think again. Most principal reduction plans don’t just forgive a chunk of a mortgage. A common caveat is that if the homeowner sells for a profit, that profit goes to the lender or investors. (So you can’t get a $300K loan written down to $250K, then sell the house for $300K and keep all the proceeds.)

The Obama Administration appears to favor some sort of wider principal reduction plan — or at least the general idea. It would keep people in their homes and reduce the glut of foreclosures — and thus protect property values.

But… the Federal Housing Finance Agency (which now runs Fannie Mae and Freddie Mac) doesn’t support the idea. FHFA Acting Director Edward DeMarco said he’s afraid it would lead to losses that would end up on Fannie or Freddie’s shoulders, and those agencies are already hurting from bailing out the nation’s banks.

About four million loans owned (now) by Fannie and Freddie are currently underwater, meaning the property is worth less than the loan on the home.

An analysis from Fitch Ratings found that principal reductions would have a major and positive effect by reducing delinquencies and foreclosures.

FHFA did its own analysis and promised to share the results — but never has. Congress is considering subpoenas to force the agency to disclose what it found. (The logic being that if FHFA’s analysis supported DeMarco’s contention, the agency would have released the numbers.

The Obama Administration has said that it’s going to be more aggressive in pushing FHFA to offer plans that would protect homeowners and property values.

Finally, principal reduction isn’t all that unusual. Corporations do it all the time. Eastman Kodak, for example, is asking the government to require its lenders to accept principal reduction on the company’s loans. It’s called “filing for Chapter 11 bankruptcy.”

A property inspector in Nebraska is suing a Realtor real estate agent who called him an idiot.

Apparently, the agent’s company asked her for feedback about the inspector. She responded by e-mail to all the company’s agents, saying, “I will never let him near one of my listings ever again. Total idiot.” The inspector was not happy about this.

Yes, of course there’s more to it. Click here to read all about it in the Lincoln Journal-Star.

I realize that many people understand what phrases like “such-and-such was at a seasonally adjusted annual rate of of 657,000″ mean in the real world, but I wasn’t one of them. So at the risk of sounding like a fool, I figured I’d explain it, just in case there are others whose eyes gloss over.

A piece about housing starts begins like this: Privately-owned housing starts in December were at a seasonally adjusted annual rate of 657,000.

What that doesn’t mean: “Construction on about 657,000 homes was begun in December.”

What it does mean: “If every month of the year was like December, about 657,000 homes would be started that year.”

In other words, it’s extrapolating — what if every month was like this? — and adjusting for typical seasonal changes (e.g., up in the spring, down in winter).

For example:

A violinist plays in the subway every day, and people toss money into his case. At the end of each day he counts his coins and says, “If every day was like today — and considering I don’t work weekends — I would take in $500 a month.”

The next day people might be more generous and he’d say, “If every day was like today — and considering I don’t work weekends — I would take in $1,200 a month.”

That doesn’t mean he’ll take in $500 or $1,200 that month. It’s just a useful way of looking at a small piece of data: What if every day (or month) was like this one?

RE/Max is reporting that 2011 ended not with a whimper, but with a bang — sales were up not only from November (+5.7%) but also from December 2010.

Read all about it here.

“Everything’s made in China these days!” Wrong.

The Federal Reserve Bank of San Francisco decided to find out exactly how much of what we buy really is made in China. Here’s what it found.

1. A total of 88.5% of U.S. consumer spending is on items made in the United States.
2. Two-thirds of that consumer spending is on services, which are obviously local (no matter what accent the waiter has).
3. All right, forget services. What about all those foreign cars and gadgets? “Two-thirds of U.S. durables consumption goes for goods labeled ‘Made in the USA,’ while the other third goes for goods made abroad.”
4. Chinese goods account for — are you ready? — 2.7% of U.S. consumer spending.

Wait, it gets better.

Take clothing and shoes. About 35.6% of what US consumers buy is made in China. BUT that doesn’t mean 35.6% of the money goes to China. In fact, more than a third of what we spend on foreign-made goods actually goes to American firms and workers — truck drivers, marketing people, retail workers, and so on — who bring them to us.

For Chinese goods, that percentage is even higher: “[O]f every dollar spent on an item labeled ‘Made in China,’ 55 cents go for services produced in the United States.”

Prefer to see it visually? Here’s the “Geography of U.S. Personal Consumer Expenditure” for  2010:

The report concludes:

Although globalization is widely recognized these days, the U.S. economy actually remains relatively closed. The vast majority of goods and services sold in the United States is produced here. In 2010, imports were about 16% of U.S. GDP. Imports from China amounted to 2.5% of GDP.

With commercial lending risky as it is these days, Federal Reserve Governor Elizabeth Duke said that caps on loans — and the regulations around them — may need to be tweaked to encourage lenders to enter the CRE space.

Today, thanks to 2006 regulations, when the value of a CRE loan reaches a certain level (100% of capital if it’s secured by construction and land) stricter guidelines come into play.

To avoid those stricter guidelines, lenders will shy away from those caps, even when “promising, creditworthy lending prospects are available,” as Duke put it. Because of that, she suggested changes in lending guidelines might be in order.

The folks at Housing Wire do a far better job of explaining it — click here to read the full story there.