On My Soap Box

Ordinarily I try not to choose sides in the mortgage crisis debate. Was it caused by irresponsible borrowers, unscrupulous lenders, greedy investors? Short answer, yes. There's more than enough blame to go around.

But when I read an article in the Times yesterday morning about mortgage service companies dragging their feet on loan modifications because they can make more money from delinquencies and foreclosures...well, my stomach turned.

As many of you know, many home loans are owned by investors, but serviced by mortgage servicing companies. These companies collect and disburse payments and, among other things, notify borrowers who are in default. They also are responsible for negotiating loan modifications and/or short sales for borrowers in distress. While the new Obama administration plan offers financial incentives for mortgage service companies to modify loans for borrowers in distress, the Times article reveals that they can make far more money by allowing borrowers to languish in default.

We happen to know people who are working to get their loans modified. While these people are not clients of ours, they have sought our advice as friends and professionals. I have been amazed (though not surprised) by the challenges they've faced. It is all but impossible even to get a mortgage service representative on the phone. I chalked this up to gross understaffing are mortgage service companies coupled with the backlog of borrowers seeking relief. It appears that the reasons may be far more insidious.

Put On Notice

The Dow cracked 9000 today. Ford turned a quarterly profit. Home resales were up 3.6%. All good news, right? Yes. But...

The broader economy my be starting to recover, but there are some troubling signs that our local real estate market may still have a way to go.

Specifically, Marin and San Francisco, which have had lower foreclosure rates than almost all other counties in the state, may not be immune much longer. An article in today's Chronicle indicates that Notices of Default (the firstpart of the foreclosure process) are up 30%-40% in San Francisco and Marin. This is a distressing sign.

It's Worth What?!?

If you're buying, selling, or refinancing a home right now, your biggest problem may be one you've never even considered. Admittedly, appraisers were playing a little fast and loose over the past few years. We've all heard the stories. But now a disturbing emerging trend may prove to be a major over-correction. Check out this article from Sunday's Chron. While it's reasonable to ask for stricter controls in the appraisal process, common sense tell us that having someone from Modesto determine the value of your house in Larkspur just doesn't add up.

Jumbo News

Believe it or not, some people still want to buy million dollar properties. Until recently, however, these visionaries have had trouble getting the financing they need. That appears to be changing. This is potentially very good news for all of us. In SF and Marin, stability in the upper end of the market may help firm up other price points. Just as the skyrocketing prices of 2001-2006 were not healthy or sustainable over the long term, today's fast-falling values, particularly in the lower end of the market, are not a true measure of long term value.