David Kittle with the Mortgage Bankers Association #132

This week Bruce Norris is joined by David Kittle, the Chairman of the Mortgage Bankers Association. David began his mortgage banking career in 1978. He opened Associates Mortgage Group in 1994 and sold it in 2006. He is currently the Vice President of Vision Mortgage Capital.

Bruce begins by asking David if he chose a good time to sell his company and become the chairman of the MBA. David says that selling his company worked out well for him, and he does not wish that he had changed his plans. David feels that he has the opportunity to make a difference this year, and he is looking forward to it. Bruce agrees with David, and he feels that there are going to be a lot of important things occurring within the next 12 months, and it will be very significant to play a part in them.

Bruce was watching Ben Bernanke being interviewed by the congressional staff, and he noticed that there were a lot of empty seats. Bruce asks David if it is common for there to be many empty congressional seats when he appears before congress. David says that it can be because they can be busy with other votes and opponents.

There are a lot of important political issues being dealt with right now, and it can be easy for real estate and the mortgage world to be ignored because of things like health care and cap and trade. Bruce asks David and the Mortgage Brokers Association keeps mortgage and real estate issues a priority to the government. The MBA has staff members for government affairs who work with committees like the financial services committee and the banking committee to make changes occur.

Bruce asks what the differences are between the Mortgage Improvement Regulations Act and HR 3915. MIRA is actually an example of the MBA calling in a strike on itself. The MBA is saying that there is need for more regulation. Net worth needs to be increased for the brokers and make sure there is increased net worth for the lenders. The difference between a broker and a lender is that brokers have no skin in the game, few education requirements, and they have different disclosure practices. Because brokers have no risk, and they do not lend their own money, they need to disclose the yield spread premium that they earn on a loan. Brokers claim that they have no responsibility to anyone in a loan. MIRA is working towards improving truth in lending, so that there are fewer opportunities for predatory lending. They want to improve trust in lending, good faith estimate, and make sure that matches the HUD-1 at closing. The other legislative options are more confusing than MIRA, and they require more paper work. David thinks this is a bad thing because we need legislation to be simple, so that customers can understand. Under the Bush administration an act was created to take a one page good faith estimate and turn it into a four page estimate. There needs to be less paperwork and more transparency.

Bruce recently filled out a loan application that was 12 inches deep, and he is worried about how large the loan documents are going to be. There are four lines on the loan application in which the applicant must say whether or not they will be occupying the property, and David feels that is over the top. Over a year and a half ago, the MBA presented HUD with a new GFE and a new HUD-1 in which every line matched. You cannot have predatory lending until you lend. If we have complete and understandable disclosure at the closing table then there is less chance for someone to be preyed upon.

In one way, Bruce looks at the process of legislation as very slow, but then it scares him when he sees people trying to pass legislation quickly, because they can do it without having a complete understanding of what they are supporting. Bruce asks if there is a chance that Congress might pass legislation that will not do what we want it to because they are in too much of a hurry. David believes that we have a system that helps prevent hurrying from being a big problem. Bills are first read by people who can explain them to Congress, then they are sent to the House of Representatives, and then they must also go to the Senate. Groups like the MBA help protect U.S. citizens from bad legislation because Congress knows that the MBA is truly there to protect consumers and support transparency.

Bruce asks how transparency failed in 2005 and 2006 when there were very different lending policies. David thinks that just about everyone involved in the industry can be blamed in some way for the failures that occurred in those years. Bruce and David both feel that even the borrowers can be blamed for the failures because they borrowed money knowing that they couldn’t make payments. We cannot just blame brokers or any one specific group of people.

Fraud is rampant, but we are getting better at detecting fraud. The MBA has been lobbying for a new regulator for Fannie Mae and Freddie Mac, and it took this crisis for people to realize that these changes need to occur. For the last 16 years, the MBA has been pushing for a new Fannie Mae and Freddie Mac regulator and it took this situation to finally get it through. Same goes for modernizing FHA which finally happened this year. Many of our current problems would not have occurred if we had gotten a new regulator and FHA reform.

In about 35-40% of the overall country, in some areas it’s higher, FHA is still using a computer system called Cobalt which was developed before DOS and Windows. It is ridiculous for FHA to have equipment that is that old.

Fraud is getting worse because of the difficulties in getting mortgages and refinances. The FBI says there are two types of fraud: fraud for property and fraud for profit. Unfortunately, they are only investigating one type and one they won’t. Individuals who had the stated income loan will not be pursued. Bruce feels like we’re teaching the consumer that it was all OK.

Right now there are a lot of loan modification occurring, but a report has shown that 70 percent of the loan modifications done in 2008 are either delinquent or they have been foreclosed on. Bruce asks David if he thinks loan modifications are an effective way to deal with these problems. David says that loan mods are just one way to fix these problems. There are other ways to solve these problems such as short sales and deeds in lieu of foreclosure. You cannot modify a loan for someone if they lose their job or can’t pay.

Bruce asks if David thinks that the U.S. is headed down the right path to create more jobs. David thinks the best way to get this economy started is to take the $8,000 dollar home buyers tax credit, and expand it so that it is worth $15,000 and everyone can use it. Taxing small business would be the wrong way to go.

Bruce asks if this tax credit should be given to investors as well. David thinks that the program should be limited to owner occupants, any income, and price. On every purchase, regardless of new home or existing home, the buyer goes out after the closing costs and spends an average of $7,500 dollars on their house purchasing things like furniture. That money goes right back into the economy.

The U.S. is currently having trouble with appraisals which is affecting Realtors and lenders who are trying to make refi loans and purchases. David says the HVCC is an issue. MBA is currently speaking out on this issue and there is legislation for a moratorium being pushed right now.

In the 1004MC (market conditions report) the appraiser is asked to tell which direction the value of real estate is going in that area and it also asks the appraiser to come up with the median value. Market value is the common number that appraisers usually come up with. Median valued houses in California are almost all vacant REOs and every time there is a sale that is higher than that median value they consider it to be an anomaly. This is making it difficult to resale properties.

Bruce asks David where he thinks the real estate market is headed in the next year. David thinks that we will recover next year. In multiple places like Oklahoma City and the state of Alaska, property values are going up right now. Things are more stable in places like California, Florida, Nevada, and Arizona. David hopes that people are not afraid to make purchases because energy costs and health care taxes are going to go up. David fears that certain political issues in Congress might slow down the real estate market.

David says the shadow banking system is currently in bad shape because people have no confidence in the rating agencies. We need to find a way to ensure that investments are producing quality loans. We need to set the bar higher for people entering the mortgage business.


David G. Kittle, CMB, Chairman of the Mortgage Bankers Association (MBA), began his mortgage banking career in 1978 with American Fletcher Mortgage Company. As a top producing loan officer, he moved to the management side of the business in 1986.
Kittle opened his own company, Associates Mortgage Group, in 1994 and sold it in 2006. He currently is Executive Vice President of Vision Mortgage Capital, LLC a division of American Home Bank located in Pennsylvania.
Kittle is past president of both the Louisville and Kentucky Mortgage Bankers Associations. He is past Chairman of MBA’s Political Action Committee, MORPAC; former Vice Chairman of MBA’s Residential Board of Governors; and has served on MBA’s Board of Directors since 2004.
Kittle was elected Vice Chairman of MBA in 2006, became Chairman-Elect in October of 2007 and was installed as Chairman of the Mortgage Bankers Association October 2008 at MBA’s Annual Convention in San Francisco.
Kittle received his CMB designation in 2004.
He and his wife Ellen have been married for 16 years and have four children.
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Pat Combs with the National Association of Realtors #131

This week Bruce is joined by Pat Vredevoogd Combs. Pat is a Realtor from Grand Rapids, Michigan. She is the immediate past president of the National Association of Realtors. NAR is America’s largest professional association representing more than 1.3 million members involved in all aspects of residential and commercial industries.

In 2005-2006, Bruce had to change his hairstylist every few months because they would quit hairstyling and they would get into real estate. It seemed like everyone was getting a real estate license. Bruce asks Pat if this was true. Pat says that there were many people getting their license in California, Florida, and Nevada, but not in places like Michigan. The state you live in can greatly affect your perspective on real estate. In Michigan, real estate was in a down market while California and Florida were still booming.

Bruce asks if people are confused by the messages of profit being sent out by the media. When you listen to national news it seems like all markets are the same, and when Realtors work with buyers, the buyers expect this to be true. In 2006, the NAR released a lot of positive information, but many of its members were going through tough times. The NAR had to be very careful about which ads they used in different areas, because each market is different. They were once able to send the same general message to every market, but within the last few years they have had to do a better job of looking at each market individually in order to decide which ads were appropriate.

In 2009, there are multiple states going through a disastrous real estate market, and they are in a severe recession. Bruce asks if there is a tendency for new legislation to be made, in these kinds of economic scenarios, in order to fix the problem. Pat says that this does occur on a national basis. People once said, “If you can breathe, you can get a loan.” Right now, this is not the case. There are some good buyers who are having difficulty getting loans today.

Bruce asks if Pat was surprised when lenders decided that these new strict lending policies were okay. Pat claims that she was surprised by this. NAR partnered with The Center for Responsible Lending to do research on this subject and when they looked at the results of their research they realized that these lending policies were going to cause trouble. Pat testified before Congress in 2006 and 2007, claiming that these policies were going to cause trouble.

There are many groups within real estate who do not look at other real estate groups as partners. Bruce and Pat think that if these groups would work together that these groups could get much more done for the industry. The NAR meets with companies like Mortgage Bankers Association, Habitat for Humanity, Fannie Mae, Freddie Mac. Bruce asks Pat if investors like himself might have something to contribute to these meetings. The Rental Property Association and other major national associations do come together to contribute to these meetings.

NAR just celebrated its 100th birthday, it has 1.3 million members around the United States, it has a staff of lobbyists in Washington, D.C., and it also has relationships with 64 countries. These factors contribute to their ability to be heard in Congress.
Bruce thinks that the input NAR gives in congress is vital, because he doubts that many of the Congress members have the time to read through the bills they sign. NAR’s lobbyists are very well respected and well rated. NAR also has a great grassroots groups. There are Realtors involved in politics and they have the ability to influence members in Congress.

Bruce asks what NAR’s lobbyists do on a regular basis. NAR’s lobbyist help educate Congress. They can take a 400 page document and give Congress members a general idea of what it means and what effect it will have on the U.S. They really help educate.

Hastily created legislation can have unintended consequences. Bruce asks how the Home Valuation Code of Conduct has affected the market. Pat does not think that this legislation has really impacted the market yet. What Realtors are discovering is that all appraisals must go through a new agency that has been formed and this agency is using appraisers who are more desperate. These appraisers are doing appraisals for areas that they are not familiar with, and they are doing these jobs for very low pay.

Pat understands that this agency was formed because people wanted impartial appraisals, but you cannot do an impartial appraisal when you do not know the market. Pat has had trouble completing transactions because these foreign appraisers would appraise her homes at low prices while the sale was being processed. Bruce runs into this kind of problem every time he tries to sell a house. The appraisers are falsely comparing the value of his well fixed homes to vacant REOs. Bruce and Pat think that it would be best if HVCC was annulled. NAR members are meeting with people in Washington and New York to get this legislation changed.

Bruce asks how important the first time home buyer tax credit has been for business. Pat thinks that this tax credit has been fabulous, and she wishes that this tax credit was given to all buyers. In Michigan, first time buyers who were not previously interested in buying real estate are now occupying homes because of this tax credit. A lot of inventory is getting taken off the inventory. Now that those homes are being sold, the sellers are going to able to move themselves up in the market place. Pat also thinks that it would be good if the dollar amount of the tax credit was increased. This tax credit is different from the subprime deals, because people have to qualify for this credit and they must have a down payment. They can now use the $8,000 dollar credit as part of their closing costs, but it is troublesome to go through that process, and Pat has not seen many people doing that.

FHA is becoming more influential in the financing market. Bruce asks Pat if there are any changes she would like to see in that program. NAR is currently working to push the FHA’s maximum price limit increased. For years, no one in California could get an FHA loan because California’s real estate was too expensive. Pat and Bruce are using FHA on almost all of their sales. Bruce dislikes the program that restricts investors from quickly fixing houses so that they can be quickly resold. This program does not allow sellers to use FHA loans for 90 days after the house has been bought. There is a loan for owner occupants right now called the 203K. The 203K helps people buy homes that need fixing. Bruce asks if Pat has seen many of these loans take place in her market. Pat says that she has not. Right now, lenders do not seem to be even suggesting it.

Bruce asks Pat if she is afraid that Congress might try to take tax dollars from interest reductions. Pat is opposed to changing mortgage interest deductions. Every time Congress creates legislation to create money for one thing, they end up taking money away from something else. She knows that the current administration is interested in doing this, but she thinks that it would be a mistake to do that. This market needs as much help as it can get, and doing this might have a devastating effect on markets that are improving.

Pat is a native of Grand Rapids, Michigan and is a REALTOR with Coldwell Banker AJS Schmidt Realty. Pat was a broker/part-owner of AJS Realty before selling in 2006 to Coldwell Banker Schmidt.

Pat is married to team member Guy Combs and is the proud mother and step-mom to six great kids and grandmother of Ethan, Anna, Claire, Violet and Elsa.

Her career in Real Estate began in 1971 as an agent – then on to getting her Broker’s license and many higher education designations which are: ABR (Accredited Buyer’s Agent), CRS (Certified Residential Specialist), E-Pro, GRI (Graduate Real Estate Institute), PMN (Performance Management Network – Woman’s Council).

Many of Pat’s years were busy serving not only her clients but also her community and her professional associations. Here are a few things of note: 2007 President of the National Association of REALTORS, 2005 – 2008 Officer of the National Association of REALTORS, 2002 – REALTOR of the Year for the State of Michigan, 2002 – Chairman of the Michigan Real Estate Commission, 1997 – Regional Vice President – National Association of REALTORS, 1995 – President of the Michigan Association of REALTORS, 1990 – President of the Grand Rapids Association of REALTORS, and 1986 – President of the Michigan Woman’s Council of REALTORS,

For Many Years over the past 35+ years: Board Member of Baxter Community Center, Board Member of West Michigan Fair Housing Center, 4-H Leader (Horse Program), Cascade Township 4th of July Parade Float Contest Sponsor, Board Member of Cascade Township Foundation, Major Gift Chair for WGVU Public TV Auction, Guest on WGVU “Ask the Realtor” TV Program, and Testified before the US Congress and the US Senate.

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William Richards of UBS #130

This week Bruce is joined by the Hedge Fund Relationship Director of UBS, Bill Richards. Bill travels the globe spreading the good news about Hedge Funds. He serves as a director to seven nonprofit organizations. He has been working with hedge funds since 1983.

Bill has clients all over the world. Most of his contacts are made through emails, but his favorite way of meeting people is still face to face. In his younger days, when he was a security salesman, he would always go to see his business partners face to face. It is a much better way to communicate. Bruce asks if many people think differently about the subject because the younger generation is used to communicating via text messaging. Bill thinks that using messaging is not as effective as personal communication because messaging systems have a character limit. Bruce thinks that people react to people completely differently when they are face to face in comparison to when they are using messaging systems. When people meet in person, they do not just look at you as a client, they also begin to see you as a friend.

Bill has an annual meeting that he calls “The Best and the Brightest” where he discusses new concepts with interns. Julian H. Robertson Jr. from Tiger Management opens up the summer series of this event. 24 interns attend this meeting with Julian. There are about 500 summer interns around the world. Potential applicants can apply at UBS.com. This is a fantastic opportunity to meet some of the brightest people in the world. Next week the cofounder of Serious Satellite Radio will be speaking to the interns.

20 years ago there were not many people who knew what a hedge fund was. Bill made his first investment in a hedge fund during 1983 in order to support his oldest son in the future. Thanks to his investment, his son lives independently in Sacramento.

Bruce asks Bill what a hedge fund is. Anyone who wants to learn more about hedge funds should do a Google and search for Alfred Winslow Jones. A hedge fund is basically a safe insured investment which prevents you from losing too much in case your investment goes bad. The key to hedge funds is your net exposure. Most hedge funds average a next exposure of 30 to 40 percent. The net exposure is the difference between your longs and your shorts. The lowest net exposure that Bill has seen is 10 to 15 percent. Right now these markets are extremely volatile, so they are hugging close to shore.

In the real estate business, there are major changes in business rules that occur every month. Bruce feels that a hedge fund manager would need to have a crystal ball in order to predict how the market is going to change, because it can change very quickly. Bill says that hedge funds are a large global industry and that it gets a bad representation from the press. However, some of the world’s best investors such as Julian Robertson and Warren Buffet have been involved in hedge funds.

Bruce asks Bill how someone becomes involved in running a hedge fund. Most hedge fund managers have a good undergraduate education, they have are well educated in mathematics and accounting, some work experience, and they often go to popular business schools like Stanford or UCLA before going back to Wall Street for more experience.

Bruce asks if companies like UBS get their investors involved in some of the hedge funds. Bill says that UBS does do this.

Bruce asks Bill what hedge funds are typically invested in. Bill says that long-short equities are a great way to make money. People who do long-short equities try to find the best companies in the world and then they buy them. They also try to identify the worst companies and invest against those companies until they break down.

Bruce asks Bill what the difference is between hedge funds and real estate investment trusts. REITs are longer term investments. REITs assemble various commercial real estate properties, and then those properties are used for giving investors dividends. Bill likes hedge funds because they invest broadly around the world. Hedge funds also give the investor the ability to invest in countries that aren’t being hurt economically and financially.

Bruce asks Bill about how hedge funds are regulated. The new administration has made it clear that they plan to have all hedge funds register with the SEC. Hedge funds deal with prime brokers who are affiliated with investment banks and all of those prime brokers are regulated as well.

Bruce asks if Bill thinks that there is more regulation coming. Bill does think that there is more regulation coming, because of the recent problems that have come up.

Under the previous administration, hedge funds had the option to register with the SEC, but very soon they will all be required to register with the SEC.

Bruce asks if people are required to have a net worth requirement before they are allowed to invest in hedge funds. The two classes of hedge funds investors are 3C1s and 3C7s. The 3C1 has a minimum net worth requirement of $1 million dollars and certain liquidity requirements. The 3C7s have a minimum net worth requirement of $5 million dollars. Many hedge funds being created right now are adopting the 3C7 structure.

Hedge funds are allowed to freely invest in other countries. The investors travel the world.

Bruce asks if Bill has met some of the smartest people in the world. Bill has met some very interesting entrepreneurs. Bill suggests that anyone who wants to learn more about great investors should read “Julian Robertson: A Tiger in the Land of Bulls and Bears” and “Soros” by Michael Kaufman.

Bruce asks if people who invest in hedge funds are allowed to ask for their money back. Most hedge funds have a one year lock up, and then a quarterly liquidity after that which requires prior notice to get out of investments. They are not a market fund. They only use a portion of your assets. A lot of the best hedge funds are moving to a 2 to 5 year lock up.

Bruce asks how bad situations, such as the one with Bernie Madoff, affect the willingness of people to take on risk. Bernie Madoff was a massive blow to investors. Investors are now requiring more transparency from hedge funds.

Bruce asks if there was much speculation that occurred in the hedge fund world. Bill says that there was a large amount of growth in the Funds of Funds Business which may have gotten ahead of itself, but Bill thinks that most people who invest in hedge funds are sophisticated.

Bruce asks Bill what he thinks hedge funds are looking to invest in now. Bill thinks that the greatest opportunities in life occur when there are the greatest problems. Right now, hedge funds are looking for companies who are being penalized by the market. This is creating many opportunities, and there are multiple new hedge funds being created in Manhattan.

Bruce asks if investors around the world are more or less willing to invest than Americans are. Bill thinks that what makes America great is that we attract the best people from all around the world. He thinks that if everyone is agreeing then everyone is wrong.

Bruce asks Bill what he was able to take away from his experience during the Vietnam War. He says that there is no better place to learn about leadership than the U.S. military. Tough times create a tough individual.

Bill is involved in many non profit organizations. Bruce asks if the wealthy are very generous towards causes. Bill says that they definitely are. People with great wealth always give back to society when asked.

For more on UBS, visit UBS.com. Thank you Bill for a great interview.

Bill Richards entered the business in 1973 and joined UBS in 1995. As a Senior Client Relationship Manager in Hedge Funds, Bill manages the global relationships for UBS with some of the world's largest Hedge Funds. He works with over 105 Tiger Clubs which collectively run 125 billion dollars and represent one of the largest concentrations of overall Hedge Fund money in the world. He met Julian H. Robertson, Jr. of Tiger Fund in 1983 and continues to cover Julian for UBS. In 2006, Bill traveled to New Zealand, Australia, Brazil and Europe with Hedge Fund Clients of UBS. Bill thinks "we are still in the very early days of The Hedge Fund business and that it is one of the most important structural changes ever to hit the Asset Management Industry". He favors Long/Short Equity Hedge Funds which are based on the model first introduced by Alfred Winslow Jones in New York in 1949.

Bill has lectured at various Universities as well as at The United States Army War College. He was an Infantry Lieutenant in combat in Vietnam in 1969-1970. He spoke Vietnamese and served as a U.S. Army Infantry Advisor to the Vietnamese Military on The Cambodian Border. His non profit affiliations include The Vietnam Children's Fund (built 43 schools in Vietnam), iMentor (www.imentor.org) and The All Hallows School. Bill is an active supporter of 100 Women in Hedge Funds (www.100womeninhedgefunds.org). Bill is also part of the internal Speakers Bureau of UBS and a strong supporter of the Learning programs. Each summer, he runs the UBS speaker series called "The Best and The Brightest" and brings in 15 legendary managers speak to our Summer Interns in New York.

Bill appears on CNBC on Squawk Box, Power Lunch and in a year end "Outlook for 2008." Bill is also featured in a documentary called “Wall Street”, directed by Andreas Hoestli. The New York Magazine described this documentary as a worthy detailed investigation of how Wall Street operates.

Bill enjoys hosting private dinners with clients and takes this opportunity to further enhance his relationships with high profile clientele. He graduated from Denison University in 1967. He lives in Manhattan and rides horses at his farm in Upstate New York on week-ends. He collects art, rare books and wine.

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Marsha Norris #129

This weekend is the official launch of I Survived Real Estate 2009. We launch the event with special guest, 14 year breast cancer survivor, and inspiration behind the event, Marsha Norris. Aaron Norris also joins the show as organizer of the event.

Marsha discovered that she had breast cancer in 1995. Bruce asks Marsha what emotions she felt when she discovered her cancer. Marsha said that she felt fear, anxiety, and terror. Fortunately, Marsha is not the kind of person who dwells on negative thoughts for very long, so she quickly began to look for help. Bruce and Marsha went to four doctors before they found one that they were comfortable with. Marsha did a lot of personal research and reading on cancer as well. When Bruce and Marsha went to UCLA they felt like they were being treated as people rather than a disease.

Bruce asks Marsha how important she thinks her attitude has been in regards to her ability to survive cancer. Marsha thinks that her attitude has been crucial, because negativity immobilizes you. She had to be her own cheerleader. She kept thinking, “What can I do for myself, and where can I find people that will help me?”

Marsha thinks that it is important to believe in the choices you have made for yourself, rather than just relying on your doctor. Marsha believes in working with traditional medicine as well as complementary therapies. You have to be comfortable with what is happening and not just let the doctors take control of everything. You have to believe in what will work for you.

Bruce asks Marsha if most people who encounter cancer for the first time are very independent. Marsha thinks that most people are so fearful that they just hand their life over to their doctors. Sometimes Bruce and Marsha go to different doctors and they assume that certain things have already occurred. For example, some doctors have automatically assumed that Marsha has done the lymph node test, and when they discovered that Marsha did not do that they were amazed. Now Marsha is being told that in the future doctors will no longer even use the lymph node test, so many of the things that Marsha was stubborn about turned out to be unnecessary. Her instincts have proven to be correct over time.

Marsha is taking a new treatment now. Cancer takes people on an emotional roller coaster. Coming home from Marsha’s first surgery they went to Claim Jumper for a gigantic lunch. At that point, Bruce was feeling confident that they could handle what they were up against. Two days later, they were told that Marsha needed another surgery. That swing from feeling happy and relieved to feeling downhearted is very tough, and they have dealt with these types of disappointments for 14 years. It can be very emotionally draining.

There has been a new word that has emerged in Marsha’s place for treatment, and it is “remission.” In the past, remission has never been a word that anyone used. It is exciting to hear people say that they are in remission and it is important for people to have hope. Marsha has never taken traditional chemotherapy but she has spoken to people who are in chemotherapy. These people are completely drained, sick, and depressed. Marsha remembers one man who said, “I have nothing left to loose. I have lost my job, my home, and now there is nothing left other than my life.” Every attempt that Marsha has made to get treatment was an attempt to continue living, but many other people suffering from Marsha’s situation are getting treatment to prevent death. She has a much more hopeful outlook.

When Marsha started taking this new treatment she lost some hair, so she decided to shave her hair and get wigs. She took her friend Diana, and Diana almost started crying, but Marsha told Diana, “Don’t do that. I’m choosing to do this.” She told Bruce, “Its just hair, it grows back.” Marsha and Aaron have made fun of her wigs. Aaron named each of her wigs and given each one a personality based on their look.

When people hear that Marsha has cancer, they expect a certain demeanor that they do not receive. They look at her and say, “Well, you do not look sick.” This makes Marsha feel very good. Every day Marsha wakes up and thanks God for giving her another day, and for the little things that she is able to do again now that her right hand is no longer broken.

When Marsha came to the radio show, someone from the radio show approached her and told her that they know someone who has cancer. Bruce asked Marsha how often people approach her and ask her for help with a friend or relative with cancer. This has happened several times with her. She has been able to give advice to people using chemotherapy, and she has offered her time to talk to them should they need it.

Bruce asked Marsha if it is emotionally draining for her to talk to people who need help. Marsha said that it used to be but now she is glad to offer help to anyone who needs it.

Marsha currently has a couple oncologists and ten other physicians/therapists who help her. Bruce asks Marsha how important it is for her to have many different places for her to get help. Marsha thinks that it is very important because you need to treat cancer with multiple tactics. It is not all about medication; you also need nutritional support, massage therapy, acupuncture, and chiropractic help to relieve pain.

It can be overwhelming to watch Marsha’s daily schedule. She spends a large portion of her days taking care of her cancer needs, yet she continues to have a positive outlook. It can get exhausting taking supplements and having to eat a certain way all the time, but it becomes a lifestyle after a while. Every once and a while she has to get a burger.

There have been times where Marsha’s kids will ask if she still has cancer, because they cannot tell based on her attitude and the way she lives. If she feels good and acts good then everyone else feels better as well. Aaron is very proud of the way his mother is handling her cancer. Her strength, persistence, and stubbornness amazes him. There have been many times in which Bruce’s employees have cried in his office because of Marsha’s difficulties and that support is what makes the “I Survived Real Estate” event so important to Aaron. Every event they go to there are always people sending flowers and asking how Marsha is doing.

Bruce asks Aaron how people reacted to the event last year. Aaron said that many people were confused. He gets yelled at by people every month because people are expecting him to do advertising on the radio show. It was difficult to explain to people that The Norris Group and its partners were paying for the event so all TNG needed was for people to donate to or join the walk. This year the panel lineup is a real dream team and Aaron has been surprised by who decided to sign up.

Early in Bruce and Marsha’s marriage, Marsha’s father had lung cancer and he did not have a hopeful attitude. Bruce asked Marsha if her father’s reaction to cancer inspired her to act differently. Marsha said that when she saw him give up, she thought “I can’t believe that he is giving up so easily when he still has two sons to raise. If that ever happens to me, I will not give up like that.”

Marsha has learned a lot about herself through her experiences. She has discovered that she has a lot of inner strength. She does not let doctors push her around. She allows them to give her their opinion but always questions their judgment. Marsha enjoys her current oncologist because she is supportive, and she supports Marsha’s decisions.

Marsha has discovered who her real friends are through her experiences. She has had a lot of support from her family, and she has had a few friends who have not stuck around.

Marsha hopes that her family sees that they have the ability to withstand these difficulties as well.

If someone was recently diagnosed with cancer, the first thing that Marsha would tell them to do would be to relax, and start getting educated on their problems. Research your doctors and choose them wisely. Marsha also insists that people take the non-toxic treatments first, and use the toxic treatments as the last resort. Marsha takes baths with epson salt which helps take the toxins out of your body. There was a time where she was around multiple cancer patients and a doctor, and she suggested that the other patients try epson salt, but the doctor wasn’t supportive of her idea. Two weeks later, one of the ladies that she talked to about epson salt approached her and told her that she was feeling much better.

The event occurring on September 11 will be a formal event. For men, a tux is preferred, but not required. You can get involved by going to the website isurvived2009.com
You can donate to the walk or join the walk and raise the money to attend live for no cost to you while seats remain. If you raise 2000 dollars you can be a gold sponsor, and for 5000 you can be a platinum sponsor. Each seat is valued at $200 dollars so we ask everyone to donate or raise $200. That $200 must be made to our “I Survived Real Estate Walking Team” to count as sponsorship. Visit isurvived2009.com for more information.

Marsha Norris has four children, seven grandchildren, and has been married to Bruce Norris for 39 years. Marsha is a trained massage therapist and loves reading on holistic medicine, different massage techniques, and numerous other topics. She enjoys traveling and looks forward to seeing Alaska this summer.

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John Mauldin #128

This week Bruce is joined once again by John Mauldin from Millennium Wave Investments. John is a New York Times Best Seller and is writer of the highly acclaimed “Thought from the Frontline” e-newsletter.

There was a time when we thought that making loans to anyone that can buy a property was the wisest thing. Bruce asks John if we have discovered this to be untrue. John says that the answer is clearly yes, but making loans to people who can pay them back is still not a bad investment. What we began to do was use a model to predict who could pay off a loan and who could not. These models made us think that we did not need to be as careful about how we lent money. These models assume what is known as a bell curve, but in the real world there is no such thing as a bell curve. In the real world, there is a thing that we call “fat tail.” This means that when you get down to approaching zero, the curve starts going back up at the end. Mathematicians say that this should only happen every 10,000 years, but this seems to happen once every 4 years. You cannot model this sort of phenomenon and it is arrogant to think that you can. Yet we trained two generations of economists and MBAs in such things. Then we unleashed them on investment advisory firms and brokers, and these economists created these models saying, “If we start here, and save this much money, then your stock market investment will grow over time.” People believed them because they were smart people, but they were smart people using bad theories. Some of these theories won Nobel prizes.

One of the books that John recommends reading is “The Black Swan”, which claims that it is arrogant to think that anyone could figure out these models so easily. In the book he says that “A black swan event is retrospectively obvious.” Looking back, we could have seen that loaning money to people who did not have to prove much would have a bad ending. When John first started looking at collateralized debt obligations (CDOs) during the middle of 2006, he discovered that people were taking the worst part of a mortgage backed security (the bottom five percent) and grouping them together, which created a brand new security. They would then create models for rating companies who would then take that bottom five percent and call 70 percent of it AAA. When John discovered this he thought, “All you need to have is a five to ten percent drop in prices to make everything go down to zero.” You would think that if people from different areas of the United States could figure this out then the people actively investing and lending would be able to figure this out even quicker. Not only did they not figure out the problem they were creating, but they actually bought some of the garbage they were creating and they put it into their banks. This is why companies like Merrill Lynch, JP Morgan, and Citi with really bad paper. `

Bruce asks John what the current mood is towards the U.S. and capitalism in general. John thinks that it is more skeptical, and rightly so. A lot of the third world thought of America as this shining city on a hill, but they also thought we were rather arrogant because we told them how they should run their banks. We were not doing the things that we told other people to do. The epicenters for bonds sales were located in California, Nevada, and Florida but we sold all our bonds to Europe and Asia. This is going to come out within the next 6 months to a year. They are going to have write down far more money than they currently are. European banks are in far worse shape than American banks.

Bruce asks if this is because they have lent to emerging countries, or because they have invested in mortgage backed securities. John thinks that both of these options have created problems and other things as well. Western European banks took a huge chunk of Eastern European debt. Austrian banks lent more than the entire Austrian GDP, so the Austrian government could not rescue the Austrian banks if they wanted to. A lot of European banks also lent money to Asia. The UK is in better shape because they have their own currency. Businesses are not making as much money. Ireland is deflating by about four percent every year. There are some serious problems going around the world.

Bruce asks if there is any other time comparable to this downturn. John says we’ve never gone through anything like this worldwide. John says that world trade is down 10 percent and equipment orders in Japan are down 80 percent. Japan is doing their best to destroy their currency, but they are having trouble doing it, because if their currency rises then their products will be more expensive.

In California, there are currently about 240,000 properties in some stage of foreclosure. Today, there is a new moratorium. Bruce asks John how he feels about moratoriums. John thinks that moratoriums are just delaying the inevitable. It is not unusual for lenders to have a loan balance worth $200,000 dollars more than what a house is worth. Fitch recently said that 50 percent of people who bought their home after 2005 are under water on their mortgage payments. They are also estimating that home values will go down another 12.5 percent. This is a very difficult environment. Bruce says this says something about American character.

The problem is that if prices continue to decline and unemployment continues to go up, then you are going to have a much bigger problem. John estimates that unemployment will rise another one percent. It is going to be difficult to entice businesses in Southern California to hire people. If you compare taxes between California and Texas, it makes sense that people would want to move out of California. It is hard to attract people to your state when you are raising taxes. The states that have the highest taxes are losing the most population. John says that Florida was hit harder than California but Florida will come back faster than California because they have a low tax environment and people want to go there to retire.

In one of John’s news articles, he discussed Gary Schilling’s thoughts on solving housing problems. Gary’s idea revolved around creating demand. Gary said that about 800,000 people come into America every year. For the next two years, if these immigrants can buy a home and maintain their lives, then they could get a green card. Within a year, all the vacant homes on the market would be taken. They would also have to live in the home they are buying in order to receive the green card. There are countries such as Canada and Australia who do this. They are searching for immigrants with education and money to come into their country. One of the biggest competitions in the world is to attract young, educated workers. There are only two ways that you can make an economy grow: you can either increase the number of workers or you can increase their productivity. We’ve got a boomer generation who is trying to retire, so we need to be bringing in more educated middle class entrepreneurs. John thinks that we need to have a more welcoming immigration policy.

Bruce says that investors, who are having difficulty getting financing, are having trouble right now. There are a lot of properties in bad condition that investors could fix and make valuable but they cannot get the money to do the job. We have destroyed 40 to 50 percent of the financers for housing construction and development. We destroyed the shadow banking system which helped special investments. They are gone and they are never coming back, so now we need to make new structured security vehicles that investors will feel confident in. This is something that is going to take some time to develop, but John thinks that in 10 years we will be much happier.

For more information on John, you can visit JohnMauldin.com.

John Mauldin is a prolific author, recognized financial expert, and editor of the popular Thoughts from the Frontline e-letter which goes to over 1,500,000 readers weekly. His critically acclaimed new book, Just One Thing and previous Best Seller Bull’s Eye Investing, Targeting Real Returns in a Smoke and Mirrors Market cuts though the fog of information and gives concrete advice for structuring absolute return portfolios. John is primarily involved in private money management, financial services, and investments and research. His next series of books involves the largest millionaire study done in over 15 years with personal interviews with hundreds of affluent individuals. Investors can visit his website at www.johnmauldin.com or get his free weekly e-letter by sending a request to john@2000wave.com.

Join us next week as we launch I Survived Real Estate 2009!

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John Mauldin #127

This week Bruce is joined by John Mauldin from Millennium Wave Investments. John is a New York Times best seller author, and he is the writer of “Thought from the Front Line e-letter”, which goes out to 1.5 million readers every week. He is frequently interviewed on TV shows around the world.

Bruce begins by asking John what his company does, and who his typical client is. John helps investors find investment managers that will work best for them.

John has a new series of books called “Eavesdropping on Millionaires.” Bruce asks John what has surprised him most about wealthy individuals. John says that he was surprised by how many of them felt a need to be in the market, and how many of them have rode the market all the way to the bottom. They did not have a sense of preservation. They did not understand they had won the race, and that they could stop running. They could have lived a comfortable lifestyle, but they continued to invest, and they have lost a large amount of their net worth. This is unlike anything we’ve ever seen. From here we are creating a new “normal.” This time it really is different. We’re watching a new generation become frugal. Savings rates are increasing from 0% to 5%.

Bruce asked John if it is more painful to go backwards financially then to have never been there before. John thinks that it is. John found some stats from David Rosenberg showing that people 55 years and over have seen an increase in employment. John says that people need to be careful when they are listening to people who are anticipating what will happen in the financial future based on what has happened in the past because the underlying forces in our current market are much different than they were before. Statistics also say that the boomer generation has not accumulated any wealth for 12 to 15 years.

Bruce asked John if most people become millionaires because of earning power or investments. John says that everyone has their own path. A large number of people who become financially successful are good savers. Many of them save 20 percent of their earnings. Most lived a frugal lifestyle and saved diligently. The number of people who made money investing is not as big as you would think. John’s company has surveyed 17,000 people, and they have found that it is harder to become a millionaire through investing than it seems.

Ludwig von Mises once said, “It may sometimes be expedient for a man to heat the stove with his furniture. But he should not delude himself by believing that he has discovered a wonderful new method of heating his premises.” When Bruce looks at how we are solving the crisis that started in 2008, he wonders if we are hurting our future by what we are doing. John thinks that in the short term, the answer is “no” but people disagree with him.

The problem we have started 15 years ago when we started leveraging ourselves and we started selling securitized mortgages that were not going to be paid. We have a certain amount of deleveraging pain that we are going to have to go through in order to get through this problem. We can do it in one year or ten years. One year means 25 percent unemployment and breadline depression. If we work through this problem over 10 years then we will experience slow growth, 10 percent unemployment, and difficulty in recovering the stock market.

John would rather take the longer route. John thinks that the Fed did the right thing by stepping in and putting liquidity into the market. People associate credit with cash which it is not. The level of credit that the world is using is imploding. There is far less credit to finance our future. The Fed can print money right now without creating too much future inflation. Someday they will have to stop and they will.

John thinks that the stimulus package idea was not a bad idea, but the way that we have created it and used it is wrong. We used the stimulus package to finance political objectives rather than actually doing things to stimulate the economy. We are borrowing money that our grandchildren will have to pay instead of building infrastructure they can enjoy.

We are planning on going into debt $1 trillion dollars per year for the next ten years but you cannot finance that much money that quickly; there are not enough takers. We were running a $700 billion dollar trade deficit, but that money came back and was invested in some sort of debt. That allowed us to create a large deficit, but now we only have $300 billion dollars worth of trade debt, which means that we have to go out and find $1.7 trillion dollars of money to buy more bonds. John thinks that we will probably raise taxes.

John says we could suspend all these new projects like healthcare like Republicans but there’s no chance that will happen. If this were the path, the dollar would become stringer but we’d still have to work through deleveraging and the housing problem. But, it doesn’t destroy the dollar. John feels the current administration’s solutions will only work for so long. The bond market will implode eventually if this keeps up and it’s an ugly scenario. If there are a enough democrats that come along that agree that the huge deficits aren’t good, taxes will roll out to keep paying for these programs. As long as the deficit is growing as fast as the nominal GDP.

John thinks out of these scenarios the last solution will result.

Bruce asks John if he thinks that we have seen the bottom of the housing market. John does not think we have. He thinks that housing problems will continue through 2010. We have more foreclosures coming. If you are at the point where you would like to buy a house, this is a great time to do so.

More coming next week. Visit thenorrisgroup.com or John at johnmauldin.com.

John is a Fort Worth, Texas businessman, now living in Uptown Dallas, and the father of seven children, ranging from ages 13 through 30, five of whom are adopted.

He was Chief Executive Officer of the American Bureau of Economic Research, Inc., a publisher of newsletters and books on various investment topics, from 1982 to 1987. He was one of the founders of Adopting Children Together Inc., the largest adoption support group in Texas. He currently serves on the board of directors of The International Reconciliation Coalition and the International Children’s Relief Fund. He is also a member of the Knights of Malta, and has served on the Executive Committee of the Republican Party of Texas.

He is a frequent contributor to numerous publications, and guest on TV and radio shows as well as quoted widely in the press.

John is the President of Millennium Wave Advisors, LLC (MWA) which is an investment advisory firm registered in multiple states. John Mauldin is President of Millennium Wave Securities, LLC a FINRA registered broker-dealer. MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB).

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Shelley Kaye of REOMAC #126

This week Bruce is joined once again by Shelley Kaye, the president of REOMAC. She also works with InSource Financial Services where she handles bulk sale purchases.

Bruce first asks Shelley if lenders generally fix the properties when they sell them. Shelley says that it depends on the market and the lender but usually fixes her properties. She does not want to bring the prices of a neighborhood down; she wants to enhance a neighborhood. She knows a large number of other agents who work with lenders to fix properties and they make a lot of profit that way. When you support the value of a neighborhood, you also enable some people to get a refi instead of losing a property. Everybody wins when people fix properties.

Bruce asks Shelley how REO agents feel about auction companies. For the most part, the auction companies and agents are working in a partnership, and in many cases, the agents are still earning a commission. In the past, if a property went to an auctioneer then an agent would not be paid. The agents do open houses for auction companies, and they bring in buyers. In the 1990s, the agents didn’t make a commission so this time is much better. The auction company couldn’t function as successfully if it weren’t for the agents who are also bringing the buyers.

Bruce asks Shelley how REO agents feel about investors. Most good REO agents have a pool of investors that they work with. The problem that agents have is determining who is an investor and who is not. Real investors are easier to work with because they understand the market place, and they are not unrealistic about property values. Agents like working with investors because they know what they want and they understand how lenders do business. Most investors will close quickly. One of the dilemmas that agents have with wannabe investors is that they do not check up on their properties, they do not understand what it takes to buy an REO from a lender, and they do not understand what they are planning to do with a property. Investors must need to know what they are doing and they must do their homework.

In today’s market, an investor needs to be able to look at a property and quickly determine the repair cost and the appraisal to be competitive, because many properties have multiple offers. They must understand so many facets of the business from how much prices are declining to how much the house will rent for.

Bruce asks Shelley if she thinks that short sales will be more attractive to the lenders now than they were in the past. Shelley thinks that they will be more attracted to short sales, because there is a lot of cost in processing a foreclosure. The biggest problem she sees with this is that loss mitigators are not experienced enough to understand what is occurring in the market place. Time is their biggest enemy.

Bruce asks if loss mitgators, asset managers, and ever really talk before something goes to trustee sale. When Shelley worked at Option 1, she would talk to the loss mitigation department. They had formulas to determine how much they would lose in specific deals. Unfortunately, many of the people who work with loss mitigation do not understand the market.

Bruce says The Norris Group has noticed a big change in opening bids at the trustee sales. They are making more sense. Bruce asks if people often communicate with REO agents, prior to trustee sales, to determine accurate prices before the trustee sale. Shelley says that lenders are always getting a broker price opinion. The biggest problem is that they do not get to see the property, so sometimes people give high bids. Lenders always consult with agents and get a BPO (broker price opinion) of some sort.

Lenders pay around $45 to $50 for a drive by broker price opinion and $75 to $100 for an interior BPO. When agents do drive by BPOs they are determining the price by just looking at the outside of the house, so they do not know what damage there might be inside. Bruce says the paperwork is very much similar to that of an appraiser’s.

Bruce asks Shelley if she has people in her company that are being affected by the new appraisal rules and the Home Valuation Code of Conduct. Shelley says that she does not know if agents are being severely affected by this new rule, but she does know that the closings are taking longer. They are also getting paid half as much for the appraisals when dealing with the new management companies. Shelley is glad that steps are being taken to prevent fraud but she thinks that these new rules are hurting appraisers. It’s important to have arms lengths transactions but the Realtors can sometimes point out subtleties in the market that appraisers wouldn’t get to on their own. Agents can actually help arrive at the proper price. Bruce feels that same about the appraisal issues and how they are affecting investors in the market. Bruce feels that these new rules are unfair because they assume that people who make deals quickly are looking for trouble. In reality, over 90 percent of the people who do their business quickly are doing so simply because they are trying to be efficient and helpful. Shelley agrees with Bruce’s feelings on this.

Bruce saw a chart that showed that 35 percent of Option ARM borrowers are behind in payments, 72 percent of Option ARM owners owe more than their house is worth, and California has 58 percent of all those loans. Shelley says it is astonishing and there are also statistics say that those in loan modification plans often go back into default. Our government really hasn’t considered the whole picture. Bruce feels that there are many homeowners that are making their payment because that’s what they signed up for. But it will be important for prices to be supported within a reasonable amount of time and we won’t be saving everyone. We have had a 70 percent home ownership percentage, but historically that percentage has been around 62 percent. Bruce thinks that the home ownership percentage will go down to 62 percent which will leave a lot of vacant homes. Shelley thinks that we need to turn these empty homes into affordable rental units. If investors are buying these properties then they need to be careful not to raise rent. Bruce says that the market usually controls rental prices. If there are enough rentals then the price will come down, and that is occurring in some areas in California.

Bruce asks Shelley what she thinks about shadow inventory. Shelley says that there is a lot of unlisted inventory out there. A lot of lenders have been told by their management that the burst of the bubble is coming within the next 60 days. She doesn’t know if they have been holding that much of the inventory or if the moratorium has caused the problem. The next 60 days she says she is hearing it’s going to explode.

Bruce says in San Bernardino County, there were 40,000 trustee sales in 2008, and there were about 22,000 sales. Bruce asks if other states are looking at California’s situation and wondering why Californians are so worried. Shelley says that there are some states that have been hit less than others, but for the most part, everyone is feeling the same pain. Bruce asks if California is going to experience more trouble within the next 18 months, and if higher priced inventory will be affected. Shelley says that is true and that some of the higher priced inventory is going into the foreclosure market, and more prime inventory is going into default.

Bruce says he hears advertisements for attorneys every day for loan fraud and workouts. Bruce asks Shelley if lenders are having trouble with people looking for loopholes. She does not know if there are many attorneys looking for loopholes, but there are attorneys looking to stop specific attorneys from doing this.

Bruce asks Shelley if she was president for a year, what national policies she would implement to help housing recover. She would focus on creating jobs so that people can pay for their homes. She thinks that principalities and municipalities need to cooperate with buyers and lenders. Programs need to be set up so that people can work on properties and fix them up. More 40 year mortgages need to be put in place, so that payments become more affordable. She would also want less moratoriums being placed on the market so that the problems can fix themselves. Some people should have never been in homeownership to begin with. More incentives need to given to lenders who work with home owners.

Bruce asks Shelley if it might be good to create a short term policy that would forgive foreclosures faster than before since this scenario got so out of hand. Shelley thinks that would be a good idea because people are losing their good credit. The government should really talk to the industry that’s at work so they understand what’s happening the in marketplace. For more information visit www.reomac.com.

Shelley Kaye recently joined InSource Financial Services, LLC as a Portfolio Acquisitions Specialist, handling bulk sale purchases of REO properties. Prior to joining InSource she was a Servicing Oversight Specialist with ECC Capital and for 11 years a Senior Asset Manager for First Option Asset Management Services, managing a team of associates as well as a multi-state REO portfolio. Before working at FOAMS, she spent seven years at First Central Bank where she was the assistant to the VP of the Servicing Department. She has been a licensed Realtor for over 20 years and sold properties in Southern California prior to entering the mortgage banking field.

Shelley has served on the REOMAC® Board for the past 8 years and participates as a speaker on a variety of panels for many industry events. She has held the offices of Sponsor Chair, Treasurer, Secretary, and Vice President , prior to becoming REOMAC President in 2008.

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Shelley Kaye of REOMAC #125

This week Bruce is joined by Shelley Kaye, the president of REOMAC. She also works with InSource Financial Services, where she handles bulk sale purchases.

Bruce begins the radio show by asking Shelley what REOMAC stands for. REOMAC stands for Real Estate Owned Managers Association. It was founded in 1985 by a group of REO asset managers, who met during the California downturn in order to exchange business ideas. Originally the members were only asset managers, but now the group is composed of anyone who can compliment agents and asset managers. Because the market has significantly changed, the lenders are using other sources to help sell their properties.
REOMAC membership has grown substantially, because networking is very important during these difficult times. Right now, REOMAC has stopped accepting new members because they are trying to reformat the organization so that people who want to join can get into the organization. The organizations bylaws say that the membership must be balanced so there are currently more agents that are wanting to join. There are currently four levels of membership that Shelley explains.

The cost of being a member of REOMAC varies by category. The lenders pay $75 dollars per year, the outsource members pay $150 per year, and their affiliate and broker members pay $375 per year.
REOMAC holds about ten to twelve meetings per year around the country and they also have two conferences. Their most recent conference was in Rancho Mirage, and over 2,500 people attended.

Bruce asks Shelley if REOMAC also has members that deal with commercial lender-owned properties. Shelley just implemented a commercial committee this year because REOMAC knew that as the market turned around that would be another phase of default. In their last conference, REOMAC had a session on commercial real estate, and many people were interested.

Bruce feels that commercial real estate is going to be the next market to get hurt. The agents who are prepared for this market will have a lot of business. Shelley agrees that agents need to be prepared for the commercial market because the down economy is affecting every area of business.

Bruce asks Shelley if REOMAC has its largest number of members in California. Shelley says that California does represent its largest member population which is partially due to the fact that REOMAC started as a California organization. When Shelley joined REOMAC in 2001 there was not much business going on with lender owned properties. Subprime loans were going crazy and people were recognizing that people could go in and buy a home. At that time REOMAC had about 300 REOs in the entire company. Last year, REOMAC had closer to 20,000 REOs.

In 2008, lenders were overwhelmed by the number of defaults in their portfolios. They were unable to sell their inventory faster than it was coming in. Bruce asks Shelley if there are agents who have been thru this cycle before saying that there is a difference in how their properties are being handled this time. Shelley does not think there has ever been such a bombardment of properties.
Bruce says that asset managers once talked to REO agents, and there was some type of communication on a regular basis, but now their communication relies on email, and this is sometimes frustrating for an agent. Shelley agrees and disagrees with that statement. Agents are busy in the field as well. Most of the lenders went to online systems, and since you could do all your business online, there was less need to speak to agents.

Bruce says that in 2008, there was a challenge in pricing properties correctly and the lenders took a lot of losses that they could have avoided if they had just listened to their local agents. Shelley does not think that the lenders necessarily needed to listen to the agents because when agents work for a lender they are appraisal driven. The appraisers and brokers were disagreeing with each other. Nobody could keep up with the speed in which property values were dropping. It took a while for everyone to understand what was occurring in the market place. People had many years of increasing prices, so it was hard to fathom that prices were dropping as quickly as they were.

In the past, when there was a decline, the appraisers would notify the seller that they were deducting three percent per month to accommodate for what was occurring in the market place. In this downturn, people were not doing that because they did not understand what has happening. They did not have the proper statistics. If they were looking at comps, that would not work. If they were looking at stats that were even 90 days old, then the broker would have a poor understanding of what they would get for their property. Appraisers give you information from data, rather than what is going on in the market place. The lenders started to realize that the agents were their best source of information.

Bruce asks Shelley if it has been difficult to keep up with all of the rule changes that have been applied to the foreclosure process. Shelley says that it has been difficult for everybody, because there have been times where people were about to sell a property, and in the middle of the process, some sort of law changes.
Laws have been made on both the national and state level. Bruce asks Shelley if a lot of states are having moratoriums. California did for a while but the lenders are the ones that have really put the moratoriums in place. When Fannie and Freddie started doing this, everyone else followed suit.

Bruce asks Shelley if there is any chance for a national moratorium. Shelley hopes not, and she thinks that nobody truly believes that the moratoriums are doing anything other than delaying the inevitable. When someone creates a moratorium for 9 months it messes with your business model and you have to staff up for that. The moratoriums are affecting the REO agents and the lenders. While the moratoriums may keep people in their homes temporarily, it may also be putting other people out of work, which will lead them to losing their homes.

A new rule has just been created that protects tenants after the foreclosure sale. This rule allows anyone who has a lease agreement to stay inside a property during the entire time of the lease. Shelley says that the wording in this new law is vague and unclear, so attorneys are trying to interpret the meaning. The problem with this rule is that it turns lenders into landlords, and that is not the intent of any mortgage or loan process. This is expensive for any lender that exists and it will put fear into the next lender who takes over the property. Shelley says that some people worry that this law will scare away potential investors who buy properties from foreclosure sales. Bruce confirms this belief saying we will not buy a property with a tenant. Shelley wonders who will be collecting the rents as well. Will the agents collect the rent? But why would they do that if they are not going to be able to sell the property? The system is not set up to handle this.

Investors won’t touch this because typically when buying at trustee sale the investor has not seen the inside of the house, has not met the renters, and have no idea what the lease agreement says.

It is difficult to determine what a valid lease is, and whether or not a property is actually something you want to keep. Bruce fears that people will take advantage of this law by faking people into believing that they are legitimate tenants, and that they have the right to take charge of the lease. It seems difficult for the lenders to do this without taking on a lot of losses. The longer they hold on to their properties the more expensive it is, and the less they will be able to make on them. This law may also turn them into a landlord with many other responsibilities and they are not ready for that.

The cities in California have passed a law that allows the city to fine lenders $1,000 dollars a day for things such as brown lawns and green pools. Bruce knows cities that have hired code enforcement people who are paid just to check up on these things. This is actually occurring in Chicago and other cities as well. This is unfair because there are many occasions where the lender does not have the property vacant so that they can repair the property. The cities are just putting the lenders in a position where they will have to spend more and more money. Cities need to be in partnership with the owner of those properties. Cities are starting to fine properties right after they go into foreclosure but they are not fining the occupant or the owner.

Shelley Kaye recently joined InSource Financial Services, LLC as a Portfolio Acquisitions Specialist, handling bulk sale purchases of REO properties. Prior to joining InSource she was a Servicing Oversight Specialist with ECC Capital and for 11 years a Senior Asset Manager for First Option Asset Management Services, managing a team of associates as well as a multi-state REO portfolio. Before working at FOAMS, she spent seven years at First Central Bank where she was the assistant to the VP of the Servicing Department. She has been a licensed Realtor for over 20 years and sold properties in Southern California prior to entering the mortgage banking field.

Shelley has served on the REOMAC® Board for the past 8 years and participates as a speaker on a variety of panels for many industry events. She has held the offices of Sponsor Chair, Treasurer, Secretary, and Vice President , prior to becoming REOMAC President in 2008.

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Randy and Mike Griff of Elite Auctions #124

This week, Bruce is joined again by Randy and Mike Grigg who head Elite Auctions. Randy Grigg is President of Elite Auctions and Mike Grigg is the Chief Auctioneer.

Last week, Bruce, Randy, and Mike discussed a Riverside auction in which a man bought a home out of the MLS. Because of the price deterioration in the market, Bruce said that the man should flip the property via auction. In the end, the buyer earned a large profit after the property sold. Bruce asks about the costs to market.

Randy and Mike Grigg discuss marketing and advertising and what the auction company does to attract attention. They are also able to show all their results to their clients, so that they know where their money is being spent. Bruce asks Mike and Randy how many people showed up to a particular open house they had. They had approximately 60 to 80 people come in to view their property. They typically have a successful auction when there are that many people attending their open house.

Whenever someone attends one of their auctions, they always ask the attendees how they heard about their auction. Only about 30 percent of their attendees go to the open house. In this case, the winning bidder did not go to the open house. The winning bidder owned rental properties in that same area, and he was attracted to the property from a post card advertisement. Altogether, 38 bidders showed up at the auction, and they all had $5,000 dollar cashiers checks. The home being sold needed paint, carpet, and the kitchen was in bad shape. Just down the street from their auction, REDC was selling similar inventory for $98,000. The final sale price for this house was $147,400. The investor bought the home for $75,000. What a fantastic deal. They closed the property in 12 days.

Bruce goes on to discuss what people consider to be a “deal”. Bruce believes that if that buyer owned homes in that same neighborhood then he might have paid more for every house that he owns than that particular one. People are used to thinking that real estate is so cheap, that they have forgotten that real estate used to be 2 or 3 times the current price. Sarah, Bruce’s daughter, bought a house very recently. From Bruce’s perspective, her deal was the interest rate she received. The market was at 5%. The man who bought this property knew the area he was buying in, so the purchase worked well for him.

Auctioning properties is challenging right now, because buyers are very cautious. In a market where prices are escalating quickly, the auctioneer will be ahead of the prices in the MLS. The consumers prove how much the auctioned property is worth when there is competition. Bruce believes that his properties in Rosamond would have sold better if they had been auctioned. Bruce is surprised builders don’t use this method instead.

Bruce asks what Mike’s duties are as the president of the California Auction Association. Mike’s main duty is following California government legislation in regards to real estate auctions. He also assists other auctioneers by showing them what they need to do to be a legitimate auctioneer. Mike arranges conferences where speakers come and talk about their specialties. The main goal is to better California’s auctioneers, so that they can offer better service to their clients.
Bruce asks Mike if there are California rules that trump national rules and vice versa. Mike says that auctioning rules vary greatly state to state, and that California is actually very lenient. Mike would like to see more legislation to stop people from holding deposits for lengthy amounts of time after the bid is rejected from the lender. Bidding on behalf of auctioneers is also something that needs to be addressed by legislation. Instead of an auctioneer having to be licensed like a realtor, there should be a separate real estate auction test. It’s very different.

Bruce asks Mike what C.A.R. thinks of real estate auctioning. Mike does not think that C.A.R. views auctions as a bad thing. There are some Realtors that view auctions as a threat to their business, but it is not. Mike and Randy pay Realtors if they bring in buyers and sellers.

Approximately 10 percent of the time a Realtor represents a client for his auctions. Occasionally, Realtors get confused by the process because they are not used to that method, but Mike does not feel that this has affected his ability to close a deal.
In the United States people have viewed auctioning as a necessary evil. Bruce asks Mike if he thinks that auctioning will have a strong foot hold in the real estate business in the future. Mike thinks that auctioning will become more important for real estate sales in the future. California seems to be far behind the rest of the United States in regards to understanding the value in auction sales.

Bruce believes that the key going forward is to have repetitive clients. If investors get the idea that they can efficiently sell houses in auctions then it would be constantly viewed by retail people as a respectable selling method. Mike believes that as the real estate market returns many of the big auction houses will go back to land auctions, but Mike and Randy’s business will stay as a local California business.

Bruce asks Randy what kind of perception change has taken place in the auction industry. Randy thinks that much of the public still view auctions as a fire sale, but many investors believe that it is an effective way to sale inventory. It depends on who you talk to.

Bruce discusses how variable the results can be when selling properties through auctions. The right person for the sale may or may not be attending. Often the problem with auction sales lies within the seller’s expectations. When people own properties, which they have assigned a feeling of value to, it can distort one’s perception of whether or not a property is being sold at the right price. Randy believes that houses sold through auctions are priced properly about 80 to 90 percent of the time.

Bruce asks Mike how different it is to auction real estate in comparison to other auctions. In real estate you do not get paid immediately. You have to go through escrow, and you have to understand how to deal with Realtors. An antique seller is not going to understand real estate, just as a real estate auctioneer will not understand antiques. In the rest of the auctioneer industry, you usually get paid immediately after the sale. Online auctions are also much different than the on site real estate auctions that Mike and Randy handle.

The number for Elite Auction is 661-325-6500, and their website is www.sellwithauction.com

Randy Grigg
President

Being involved with real estate transactions since 1977, Randy discovered the benefits of using the auction method of marketing real estate after completing a single-family house rehab project that had three failed escrows. Selling time went from 2 months to 7 months due to the buyers backing out because of financing and appraisal contingencies. These extra 5 months of holding costs dramatically reduced the net profit.

As a "control freak" (and knowing other people are too) we designed our company to cater to the desire of our clients to sell their properties quickly in "as-is" condition with no loan, appraisal or property contingencies... at the highest price the market will bear. By selling my own properties "absolute" (no reserve), we learned first hand how to get the right bidders to our auctions. After we continued tweaking our marketing program we finally felt comfortable selling for others. We also have developed a strategy for selling real estate for others where our clients have full control over the final selling price, again understanding many of our clients desire for complete control.


Mike Grigg
AARE - Auctioneer / Agent

Mike graduated from the prestigious "World Champion College of Auctioneers." He has participated in charity and real estate auctions and handles agent/broker relations. Mike serves as President for the California State Auctioneers Association (CSAA). He has been designated AARE, which means he is an Accredited Auctioneer of Real Estate appointed by the National Auctioneers Association.

Mike has called a variety of real estate auctions in California and knows what it takes to get the buyers to competitively bid and drive the prices up. He is one of the 2004 California State Auctioneers Association Bid Calling Champions. Mike began his career in the real estate auction business in 2002 and believes that real estate auctions are the purest form of price realization. Learning real estate exclusively through the auction method is an advantage to potential clients and makes Mike one of the leading auction experts in California . Contact Mike at (661) 325-6500.

Professional Memberships

* On the Board of Directors for the California State Auctioneers Association (CSAA)
* Member of the National Auctioneers Association (NAA)
* Accredited Auctioneer of Real Estate (AARE) designated by the National Auctioneers Assocation
* Member of the Bakersfield Association of Realtors, Arcadia Association of Realtors, and the * MRMLS (A Multiple Listing Service for Southern California )
* Member of the National Association of Realtors (NAR)
* Member of the California Association of Realtors (CAR)

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Randy and Mike Griff of Elite Auctions #123

This week Bruce interviews Randy and Mike Grigg from Elite Auctions. Randy is the President of Elite Auctions for which Mike serves as Chief Auctioneer. Mike is also current president for the California Auctioneer Association.

Bruce begins by asking Randy how he got involved in real estate. In 1977, Randy had heard in seminars that real estate was the way to go, so he eased into it. He brought his first rental house in 1977, and after that he bought about 2 or 3 houses every year, for 20 years, and then stopped. Randy’s plan for real estate was to buy houses so that he could pay them off and enjoy the cash flow. This has worked well for Randy, and he currently has a few dozen houses that he is collecting cash from.

Bruce asks Randy when he started auctioning houses. Randy says that he started doing auctioning after he decided to stop doing real estate for a while. After getting involved, he decided that he did not like the selling process, because he had a few escrows that fell out. He drove past a house in his neighborhood one day, and he discovered that it was being auctioned. He decided to attend the auction in hopes that he might buy the property. He thought that he might be the only person at the auction, but he discovered that many people were interested in bidding at auctions. The house he wanted to buy went up to full market value, so he thought, “this might be a good way to sell.” This occurred in 2002.

Bruce asks Mike when he got involved in the auction business with his dad, and who the typical selling client was from 2002-06. He says that he got involved in 2002, and that he dealt with a lot of homeowners who were expecting to receive a high offer. In 2004-06 most sellers were astonished by the selling price of their homes. When Mike and Randy got involved in the business, they did it to help investors help sell 5 houses per day, but when other home owners discovered what Mike and Randy were doing many decided they wanted to auction their houses too.

Bruce asks Mike if he gets a lot of exposure from just holding an auction that is successful. Mike claims to receive a lot of attention from his auctions, because many times Mike will have 100 people show up for one house, and some of the participants have houses to sell as well.

Between 2004-06 the typical buyer was an own occupant. The typical buyer showing up now is often a long term investor, and first time home buyers are getting into the market now too. One of the recent changes that have been made to the $8,000 tax credit program is that first time buyers can use their 8,000 $dollar credit as a down payment up front.

The typical selling client that Randy works with right now is a rehabber, or a wholesaler, who understands that if they do not get their houses sold within two months then they will lose their opportunity to gain a profit. Prices went down a great deal.

Mike and Randy have an auction coming up on June 4, which will include houses that they have bought at REDC and Hudson Marshall. They have done minor fixes to them, and they are hoping to gain a profit. They have done 25 auctions within the last 8 months, and most of them are profitable.

Bruce asks Mike and Randy if they have ever had their competitors try to buy their houses, and then resell them for profit. They do not know if that has ever occurred, but they doubt that this has ever occurred, because they fix their houses more than other auction companies do.

Some auction companies host their events in a ballroom setting with a large amount of inventory, but Mike and Randy have taken a different route. Mike and Randy typically sell 3 or 4 houses per day, because they do their auctions at the property they are selling.

Mike and Randy’s advertising has done very well, but it has changed dramatically in the past seven years. They are doing much more internet advertising now. It is more expensive to send letters than to advertise on the internet. Mike believes that their may be a time when they no longer need print media. The newspaper does not work as well in bigger metropolitan areas.

Bruce asks Mike what source he receives his most qualified buyers from. Mike claims that the sign on the front of the property often attracts the most qualified buyers, because those buyers often own property on that same street. When you put the word auction on a sign, people pay much more attention.

Mike usually has two open houses during the week before the auction. Each open house is about 2 hours. The main reason why they have a limited time for viewing each house is to create sense of urgency. They are prepping their mind for the auction, because the house is going to be sold at a specific time and date. Bruce asks Mike if it is important that there are other people present when someone attends the open house. Mike thinks this is very important, because it gives them the idea that they are doing the right thing.

Bruce asks Mike what his main objective is when people call about an auction ad. Mike’s main objective for the initial conversation is to get them excited about the auction, and to get them to come to the open house, so that they can fall in love with the property. He also wants to assure potential buyers that buying from an auction is simpler than buying the normal way. The first call that Mike gets from a potential buyer is the most critical call, because it is easy to lose buyers when they first call for information. A first time participant may be looking for a reason not to attend the auction. Mike has hired a professional to handle most of his buyer calls.

Most people assume that an auction would be held on the weekend, but Mike and Randy are having their auction during the week. They hold auctions on everyday except for Sunday and Monday. They prefer not to hold auctions on Sundays because they do not want to get in the way of anyone’s religious traditions, and on Mondays people are busy preparing for the rest of the week. However, he has attended an auction on a Monday that was very successful. The time that they choose to hold their auctions does not seem to matter too much. There are times when more people will show up for a Wednesday auction than a Saturday auction.

Bruce asks Randy how many bidders are typically needed for a successful auction. Randy has had successful auctions with as little as 3 bidders. He often feels better when there are only about 5 to 10 people attending. There’s been up to 70. Bruce asks if there’s been any issues with appraisals. At one auction, the bank lowered the $10k. They stuck to their guns and the buyer ended making up the difference.

Bruce talks about The Norris Group’s current appraisal situation and how the verdict is still out.

Back to auctions, when Mike starts an auction he often begins by auctioning something small for charity. He does this because it helps new bidders to relax, and it encourages them to bid. It’s an ice breaker.

Bruce asks if people ever forget about the buyer’s premium. About half of the time, people forget about the buyer’s premium. This still occurs even though they disclose it in all the written terms, and it is disclosed before all the auctions they do. Even Mike has forgotten the buyer’s premium, because there are many times where people come to an auction not thinking about the buyer’s premium; they are thinking about winning the property they want to bid on.

Bruce asks if Mike can tell when buyers feel remorseful over their decision to buy. Mike can tell when people feel bad about their decision because they do not look excited. This is why Mike does his best to make people feel comfortable when they buy his properties. He does his best to answer his buyer’s questions.

Mike believes that receiving a healthy deposit for the closing of a property is of key importance. In this market, you cannot come out and tell people that they need $15,000 dollars for them to bid, because you will knock out all the first time home buyers. On a single family house in Bakersfield, Mike and Randy will often ask for a $5,000 dollar deposit, because it is enough to encourage people to close the deal. Mike and Randy close about 95 percent of their escrows during the first try.

Bruce asks Randy to describe the perfect seller to have as an auction client. Randy thinks that the perfect seller is someone who works with wholesale properties. Those kinds of people have reasonable price expectations, because they often buy at the right price to flip it, and they are willing to pay for the marketing cost with the expectation that Mike and Randy will make them a profit.

The number for Elite Auction is 661-325-6500, and their website is www.sellwithauction.com

Randy Grigg
President

Being involved with real estate transactions since 1977, Randy discovered the benefits of using the auction method of marketing real estate after completing a single-family house rehab project that had three failed escrows. Selling time went from 2 months to 7 months due to the buyers backing out because of financing and appraisal contingencies. These extra 5 months of holding costs dramatically reduced the net profit.

As a "control freak" (and knowing other people are too) we designed our company to cater to the desire of our clients to sell their properties quickly in "as-is" condition with no loan, appraisal or property contingencies... at the highest price the market will bear. By selling my own properties "absolute" (no reserve), we learned first hand how to get the right bidders to our auctions. After we continued tweaking our marketing program we finally felt comfortable selling for others. We also have developed a strategy for selling real estate for others where our clients have full control over the final selling price, again understanding many of our clients desire for complete control.


Mike Grigg
AARE - Auctioneer / Agent

Mike graduated from the prestigious "World Champion College of Auctioneers." He has participated in charity and real estate auctions and handles agent/broker relations. Mike serves as President for the California State Auctioneers Association (CSAA). He has been designated AARE, which means he is an Accredited Auctioneer of Real Estate appointed by the National Auctioneers Association.

Mike has called a variety of real estate auctions in California and knows what it takes to get the buyers to competitively bid and drive the prices up. He is one of the 2004 California State Auctioneers Association Bid Calling Champions. Mike began his career in the real estate auction business in 2002 and believes that real estate auctions are the purest form of price realization. Learning real estate exclusively through the auction method is an advantage to potential clients and makes Mike one of the leading auction experts in California . Contact Mike at (661) 325-6500.

Professional Memberships

* On the Board of Directors for the California State Auctioneers Association (CSAA)
* Member of the National Auctioneers Association (NAA)
* Accredited Auctioneer of Real Estate (AARE) designated by the National Auctioneers Assocation
* Member of the Bakersfield Association of Realtors, Arcadia Association of Realtors, and the * MRMLS (A Multiple Listing Service for Southern California )
* Member of the National Association of Realtors (NAR)
* Member of the California Association of Realtors (CAR)

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