Christian over at Pacific Home Funding forwarded the email below.

Although the Oregon Congress will remain in session through Friday June 29th, Senate Bill 965 has died. I don’t know the entire story behind why, but this is good news for the vast majority of mortgage brokers.

For those brokers that give the business a bad name, the State is now actively enforcing existing laws. Better enforcement and current market forces will help to cleanse the industry of a few bad apples.

I would personally like to thank all of you for your help and support in defeating SB 965. The Oregon Legislature adjourned earlier today and the bill has been defeated.

If you can muster up support with your staff one more time, please have them send “thank you” emails to their state representatives for all the hard work they did this year. Personally thank them for their “No” vote against SB 965.

Now the real work begins. We showed the state that we take our professions seriously. Now we need everyone to go to our website http://ocmo.biz/join_today.htm, print off a membership form, fill it out & send it in.

Again, Thank You for your hard work on this issue.

Sincerely,
Bill Ridge
President
OCMO

Popularity: 9% [?]

To keep Oregon from enacting Senate Bill 965b in its current form.

In this letter, the association clarifies what this law will mean for mortgage brokers. Mortgage brokers need surety bonds in order to remain in business.

The Surety and Fidelity Association makes it clear via this document that if Oregon Senate Bill 965 passes the House, and the governor signs it into law, that many small mortgage brokers may simply go out of business. For the predatory lenders, good riddance. For the remaining 3,200+ licensed mortgage brokers in the State of Oregon, this bill simply means that unless they work for a bank or large financial institution, the State of Oregon doesn’t care what happens to them. At best 42 legislatures in the House didn’t care on June 14th when they voted to send it to the Elections, Ethics and Rules carried committee.

Given that 60% of all home loans come through mortgage brokers, the House is smart to investigate this law before bringing to a vote. Possibly because the votes aren’t there?

For the very latest, here’s a helpful snippet from the OAMP:

Some of you, and others within the mortgage industry, have advocated “blasting” all members of the House Rules Committee with as many emails as possible, encouraging them NOT to allow SB 965 to be released from the committee, whether it’s in it’s current form, another amended form or it’s original form (as approved by the Senate).

Though that is our hope, our legislative advocate, John McCulley, feels that “jamming their e-mail in boxes” again at this time could possibly backfire, risking alienating some of those on the committee who are already supporting our position and hardening the opposition of those who don’t. He recommends that we send emails ONLY FROM CONSTITUENTS of the seven members of the committee. Those constituents could be our members, or—preferably—consumers who have benefited from the “non-traditional” programs that are the focus of much of the bill.

This sounds like good advice, and not a delay tactic. If somebody reading this post has statistics or case studies about “non-traditional” programs that provided consumers with tangible results, click on the contact form to the left and send those in.

Popularity: 16% [?]

Iggys House is an interesting concept. Sign up as a seller and you can list your home on the MLS for free. There is really no catch. You are not obligated to sell through their agency.

This service is currently available in Oregon, but not in some other States. Specifically, Midwestern and Mountain States. States that apparently nobody wants to move to…Woops, I didn’t mean that Heartland. We love you!

They also put your home on Realtor.com, Wall Street Journal, etc. Isn’t that the result of listing with MLS? Iggy, please correct me if I’m wrong..

Basically, IggysHouse is a lead generation tool for BuySideRealty, an innovative realtor that operates in a similar fashion to Redfin. The primary difference being that Redfin refunds 2/3 of the 3% buyer’s agent traditional commission to the buyer. That amounts to 2% of the final sale price. BuySideRealty will refund you 3/4 of the buyers’ agent commission that they receive, so the BuySideRealty offer is slightly better.

Redfin requires a minimum $3000 comission payout, so the home you buy needs to cost at least $300k. The advantage to BuySideRealty is that you receive the comission as a check, within 14 days. You can apply it to closing costs, but since most buyers will have a lender lined up in advance, the majority of buyers will opt for the cash rebate option.

IggysHouse.com is a brilliant lead generation tactic that provides a valuable service to sellers. Their buyer’s side business isn’t a new concept, but they clearly know who their competitors are, and how they plan to differentiate.

Agents need to move faster to adopt new ways to compete with this kind of efficiency. The human touch will always be necessary, so I doubt that commissions will disappear altogether, but the cost of buying and selling a $400k home through a traditional agency is over $24,000. The paperwork, legal process, and due diligence are practically the same whether the home is $400k or $200k. The stakes are higher for sure, but if the homeowner took the original risk in buying the home, so why should that risk be transferred to the agent as a % of the home price rather than as a flat rate or negotiated rate?

I’d like to get comments from agents. How can a seller create a contract with agents that provides the agent with a fair reward for service, above-and-beyond? Possibly finding the right buyer at a max price, and keeping 50% of the difference between sale price and “walk away” price? Are there other options there?

Traditional agents’ pricing model is facing significant risk. How do realtors adapt without selling out their fellow agents? How does an entire industry shift at once? Some tough challenges for an industry that clearly prefers to ignore or protest the future, rather than lead it.

Popularity: 15% [?]

This Business Week article suggests that sub-prime borrowers are treating their homes as rentals. They’re paying credit cards first, homes second.

According to Business Week, 32% of sub-prime borrowers were more than 30 days late in paying their mortgage in 2003. That number was 36% in 2006. On the other hand, the percentage that were late on credit card payments fell from 32% to 24%. A significant drop. You can view the rest of the article here.

The up-front cost of a sub-prime loan is obviously more than a rental deposit, but given the circumstances, and risk taken at the wrong time, these people might be smart to drop out of their expensive loan payments when the mortgage + taxes + PMI payment might damage their ability to obtain credit cards.

For these borrowers, the only difference between a sub-prime loan and paying rent is that you pay rent to the sub-prime lender instead of a landlord, the payment is probably 15-30% higher, and you incur some costs at close (unless you roll them in). For the remaining 64% who take out these loans and can make the payments, the risk might be worth the reward. Especially if they’re able to acquire an asset that increases in value at a monthly rate HIGHER than the difference between what they would pay in rent, and their mortgage payment. This is very possible over a 3-4 year period, and holds the potential to lift these people into the Middle Class.

What’s interesting about the sub-prime debate going on in Oregon, and other States, is how little it is understood by the people enacting the laws. For 64% of borrowers, sub-prime loans may in fact offer them a way out of the endless payday loan cycle, by giving them ownership of an asset that has the potential to grow at 3-8%/year. Ironically, if subprime borrowers were given a pass on their property taxes, often 20% of the mortgage payment, these borrowers might actually be able to afford this asset. Cap payday and CC loans to them, give them education vouchers and free classes on budgeting, economics, and finance and they’ll have a chance to make it.

Somehow I doubt SB965 will lead to a debate about ending property taxes for sub-prime borrowers. That would mean the government would actually have to take responsibility for the working poor by sacrificing their revenue too. Not just the revenue of legitimate mortgage brokers licensed through the State. That’s the easy way out.

Popularity: 12% [?]

Joel Burslem brought up this point a couple of weeks ago. In his post, he mentioned two services, Incredibleagents.com and Homethinking.com.

Oddly, Incredibleagents offered only three agents reviews for the entire State of Oregon. I don’t know if that’s an indictment of Oregon agents’ lack of technology experience, or because agents are too busy buying and selling in a “relatively” stable real estate market.

Homethinking offered no agent reviews, but an impressive list of agents. They show current sales statistics for each agent, but oddly enough, the agents themselves don’t care. Well, most don’t. Two agents are listed as sponsors in Eugene. At the time of this post, no buyer or seller had reviewed these agents. In fact, out of 1013 agents listed for Eugene, zero have reviews. Not very helpful to buyers..yet…

Joel raises the question - why aren’t there more services like this? I don’t know either, but I have my suspicions. Agents either get the internet or they don’t. If they don’t, they probably fear the very technology that can help them maintain an edge in an increasingly challenging real estate market. So sites that cater to tech savvy agents (other than social networks) are few and far between. I believe that many agents don’t want to contribute to (or legitimize) sites like homethinking because those sites take away agents’ innate advantage with clients - controlling and managing information. There’s nothing inherently wrong with this assumption, except that it’s completely wrong. The market already opened that box. There’s no going back.

Technology is not what is hurting agents the most. What’s hurting them is the sheer number of agents battling it out as low-cost seller alternatives slowly erode the pool of available homes. 1013 agents in Eugene (according to homethinking.com), in a city that turns over, at best, about 800-900 homes per quarter. That’s > 1 home per agent, per quarter. You don’t need a degree in economics to see that supply far outstrips demand, and as with most markets, it will seek equilibrium one way or another.

Popularity: 9% [?]

On May 11th the bill moved from the Senate (approved) to the House. The House has issued no recent press releases or posts to indicate status there. The title of the Senate’s Press Release about this bill is:

“SENATE PASSES BILL TO PROTECT HOMEBUYERS
Home Loan Fairness Act will target predatory lending practices, head off mortgage crisis”

What’s unclear is how the State defines “predatory” within the language of the bill.

Several people who own small mortgage brokerages have posted to this blog, noting that what this bill really does is limit working families and formerly at risk renters from ever getting their own home. A secondary effect is to weigh supply and demand in the marketplace of loans so that demand favors large banks and other institutions with far more financial resources at their disposal. These institutions are able to absorb the cost of issuing fewer loans to the public. This could result in less competition between lenders, leading to higher fees and rates for traditional borrowers.

This bill is now in the House. The Legislative Session ends June 29th. If you feel that this bill needs to be ratified carefully before being passed, to determine financial impact to both borrowers (subprime and traditional) and lenders, contact your State representative here.

There have been many comments from lenders. I would like to hear from borrowers who are looking to get into low FICO, no down payment, or stated income only loans. The default rate for these loans is currently anywhere from 12-20%. This means that 80% or more of the people who previously qualified for a loan under these criteria will not have access to a home loan.

Popularity: 15% [?]