As we move forward into 2010, industry funding concerns are becoming more of a reality. Most recently, The Rim has slipped into bankruptcy and faces challenges due to funding limitations. These funding limitations stem from restrictions on who banks can now lend their reserves. Improvement in this area will only occur when restrictive measures imposed by bank auditors change. Until modifications are made, especially with the way banks are “graded” this situation will only worsen. Right now, banks must comply with any and all restrictions imposed upon them or they become subject to some harsh results. 

Concerns regarding the impact (to our economy) of maturing Commercial Mortgage-Backed Securities (CMBS) and the lack of funding sources for them is also a significant issue. This lack of funding could have a negative impact on the entire real estate industry; an impact that could result in a new low in this market.  SABOR is trying to take proactive measures to prevent a potential real estate crisis.
 
We are seeking testimonials on funding-related issues so that we can move these concerns forward to our Congressional delegation and avoid a significant credit crisis in coming months that may last a number of years. Within the residential side of the market, concerns involve appraisal issues, short sales, use of higher credit scores, long term implications for increased numbers of FHA loans, jumbo loans, general funding and liquidity issues and Residential Mortgage-Backed Securities (RMBS).
 
Additional commercial-related concerns include those commercial practitioners who are directly involved with loans being "called" on retail/office buildings and other commercial properties, especially when payments have been maintained in a timely manner. Currently, real estate funding/refinancing options are diminishing greatly, if not disappearing at a significant pace. Bank auditors are impacting this situation to a large degree.
 
We also need to have input/recap(s) provided by Appraisers, Mortgage Bankers, Mortgage Brokers and those in the lending field. Here are the issue items that are part of our discussions: 

• The U.S. mortgage meltdown has dominated business news for months. The crisis seems to deepen daily, and its impacts are felt throughout an increasingly interdependent financial world.  Read more in this article:
  How Smart Growth Exacerbated the International Financial Crisis - pdf 4-29-08
   
• Beneath the constant drumbeat of headline numbers emanating from Washington on U.S. jobs, national unemployment, GDP, and home prices lies a complex, diverse set of 366 metropolitan economies. While no metro area has been immune from the current economic downturn, the pain is unevenly distributed.  This article centers on
  Tracking Economic Recession and Recovery in America’s 100 Largest Metropolitan Areas - pdf - 6-09
   
• Dr. Mark Dotzour, Chief Economist for the Texas Real Estate Center, crisscrosses the nation delivering his economic message and collecting data. Read this recap of his findings gleaned from meetings of the National Association of Business Economics in Washington, D.C. -
  Real Estate Center News Release  - pdf - 3-12-10
   
• In October 2009, FHA announced that its capital reserve fund had fallen below the congressionally mandated level of two percent. The drop in capital reserves has led Congress and the Administration to call for changes to strengthen FHA. Review those changes here:
  NAR Regulatory Issue Alert - FHA Changes Announced  - pdf - 1-20-10
   
• The Federal Reserve provides upbeat assessments of the economy, suggesting the recession is over and growth could be more robust than previously anticipated. USA Today offers this analysis:
  Fed all but Declares Recession Over - 9-24-09

 
Commercial Issues

• The lights went off in the U.S. commercial real estate markets in the summer of 2007, when the credit markets froze. The resulting affect on Debt Perception is discussed in this article:
  Debt Perception - a report by Mark Dotzour - pdf - 6-9-10
   
• The Federal Reserve System responds to Congress regarding steps to contain the instability of the commercial real estate market:
  Federal Reserve response to Congress - pdf - 2-25-10
   
• Congress writes the Federal Reserve System expressing their concerns over steps to stabilize the commercial real estate market:
  Commercial Real Estate Letter - Congress to Treasury & Federal Reserve - pdf - 2-1-10
   
• If you thought the residential real estate crash was bad, wait until you see what's in store for commercial real estate. This article takes a close look into the commercial real estate sector:
  The Next Real Estate Meltdown - pdf - 1-15-10
   
• By most measures, The Rim shopping center is an unqualified success. San Antonio's largest center, with more than 1.5 million square feet of shops, draws crowds. It generates monthly rents averaging nearly $1 million. All of that, however, belies the financial turmoil at The Rim -
  The Rim Faces Financial Woes - 1-7-10
   
• The developer of The Rim confirms that four legal entities that each own separate portions of the sprawling shopping center have filed for Chapter 11 bankruptcy protection. Details here:
  Developer of The Rim faces debt-restructuring challenge - 11-13-09

 
Credit scoring
This has become a serious issue in the lending community and it can affect your ability to obtain or refinance your next mortgage.
Review articles and books relating to credit scoring here. 

The Home Valuation Code of Conduct (HVCC)
HVCC establishes standards for solicitation, selection, compensation, conflicts of interest and appraiser independence. Read this NAR article for more details:
Home Valuation Code of Conduct (HVCC) 
 
Warehouse Lending
Based upon revised projections of 2009 lending volume there could be a $630 billion shortfall in home mortgage availability caused by a lack of warehouse lending capacity.
Read more here: Warehouse Lending - doc
 
Reserves  Issues

• The concept of Bank Reserves is defined in this series of articles:  Bank Reserves 
   
• Banks in aggregate have now burnt through all of their capital and are forced to borrow reserves from the Fed in order to keep lending. Read more in this article:
  Bank Reserves Go Negative - 1-29-08

Short Sales/Foreclosures

• Homeowners who are underwater with their mortgage may find that relief is on the way from a bill strongly supported by the National Association of REALTORS^® that would impose a deadline on lenders to respond to short sale requests. The legislation, H.R. 6133, “Prompt Decision for Qualification of Short Sale Act of 2010,” was offered in Congress by U.S. Reps. Robert Andrews (D-N.J.) and Tom Rooney (R-Fla.). The bill would require lenders to respond to consumer short sale requests within 45 days.
  For more information click here  - 9-27-10
   
• Buyers continue to be discouraged with the extended short sale process, resulting in foreclosures that could have been prevented. New resources from the National Association of REALTORS^® aim to help REALTORS^® and consumers successfully navigate the short sale process. 
  Read more here: REALTORS^® Strive to Reduce Stress in Short Sale Transactions - 2-19-10
   
• HAFA (Home Affordable Foreclosure Alternatives Program), which helps homeowners who are unable to retain their home under the Home Affordable Modification Program (HAMP), provides incentives in connection with short sales and deeds-in-lieu of foreclosure.  Read more here: 
  Home Affordable Foreclosure Alternatives Program (HAFA) Guidelines - pdf
   
• The Treasury Department revised guidelines for short sales to help homeowners who need to sell their houses but cannot secure contracts at a high enough price to pay off their mortgages.  The plan was created to aid homeowners whose income or debt is too low to qualify them for a loan modification under the Making Home Affordable program. 
  Read more here:  Short Sale Guidelines Revised 
   
• Short sale procedures for loan servicers have been standardized in guidelines released under the federal government's Making Home Affordable loan modification initiative for troubled home owners.
  Read more here: Federal Short Sale Guidance -12-2-09
   
• The increasing number of short sales on the market presents challenges for REALTORS^®.  This NAR article provides information on short sales, their challenges, the government's efforts to address these challenges, and tools to help you navigate the short sale process.
  Read more here:  The Basics: Short Sales 
   
• Scores of homeowners who thought they'd cut a deal with their banks to sell their houses for less than their unpaid mortgages are seeing those agreements fall apart months later, contributing to the mounting foreclosures that threaten the housing market's recovery.
  Read more here: Home Sellers Frustrated - Source: USA Today - doc

Additional Articles on Industry Concerns:

• The Federal Reserve Bank of Minneapolis offers an analysis of the Great Depression and lessons that can be applied to today's economic conditions -
  What Can We Learn from the Great Depression?   - pdf - 2008
   
• The Chief Economist for the Real Estate Center at Texas A&M University, Mark Dotzour observes that the current global crisis is a complex brew of interconnected problems that are pitting various social, business and political groups against each other in the search for a solution. The challenge now is to break the gridlock of competing interests vying to control the rescue process.
  Read more here: Holistic Approach to the Financial Crisis - pdf - 7-09
   
• Mark Dotzour, states that if the U.S. economy is like a vehicle driving a dirt road in Afghanistan, there are four known mines that must be negotiated.
  Read more here: Four Mines Endanger U.S. Economic Convoy

 
If you or your client(s) have been impacted by any of these issues or ones not addressed above, please e-mail a short recap of your situation/concerns to This e-mail address is being protected from spambots. You need JavaScript enabled to view it   as soon as possible.