Yesterday I had the great opportunity to moderate a symposium on mortgage liquidity with a pretty heavy panel of mortgage bankers and industry executives.
I knew they would be guarded in their answers, as I asked about the new world of underwriting, the wind down of Fannie Mae and Freddie Mac, the tighter more expensive FHA, new federal regulation in the industry and a controversial new appraisal process.
And they were guarded, until I opened up the floor to the Realtors, who hammered them hard on foreclosures, short sales, and mortgage credit for independent contractors like themselves.
A Realtor from Wilmington, NC asked what are the plans for companies to put the shadow (foreclosed) inventory onto the market? Most agents believe banks are holding on to these properties to somehow game the market, but the bankers were firm in their rebuttal:
Cara Heiden/Wells Fargo : "With respect to shadow inventory, we are not holding on to properties. On average we do hold the REO about 160-70 days, but once they're listed they're sold in 90 days and the reason that we hold them for a period of time prior to listing is so that we can get them in better shape for sale and uphold, to the extent that we can, market values. So we're not holding other than for the purpose of getting that property to a level that does help maintain market values whenever possible."
Doug Jones/Bank of America : "We too don't hold to have any market placement or timing. We need to clear inventory, so as soon as we go through that process, the property is marketed as an REO and we move it out."
...but when the President of the National Association of Realtors, Ron Phipps, pushed the bankers on short sales, that is selling a property for less than the value of the mortgage, it got a bit trickier....
Cara Heiden: "When we get the offer in and the paperwork is ready to go, our goal is 5-15 days ... "
[the crowd of over 1000 broke out into a huge wave of laughter at this because they don't buy that for a second]
...subject to our investors and what we're authorized to do.
Ron Phipps: "In the field our experience is we don't get responses in a timely fashion."
Cara Heiden: "I'll just say short sales are frustrating for you and they're frustrating for us."
She went on to defend that they are adding staff, training staff, working to improve, etc. But there was no winning that one.
A Realtor from Midland, TX asked why banks aren't giving incentives to investors to buy up REO (bank owned foreclosures) properties.
Mike Williams, the CEO of Fannie Mae, which currently holds over 153,000 REOs on its books, took the question: "Our first priority is to make sure we preserve the value of the property for the company and secondly for the community."
Williams then said they give occupants the first option and then go to the public entities, like the cities.
Once that's done, he added, "I can tell you that investors play a crucial role in our ability to market and sell our properties."