Thursday, March 22, 2007

The REO Realtors

The Voice of San Diego reports from California. "For most families, the thought of losing their home due to missed mortgage payments is their worst nightmare. But in a wood-paneled office on University Avenue in La Mesa, one family rallies around the real estate F-word: foreclosure. Indeed, for Donna Sanfilippo and two of her sons, Eric and Robert Weichelt, foreclosures are the family business."

"The brothers' wives also work in the office, as does Sanfilippo's husband, their step-dad. Sanfilippo opened the office in 1992. Robert got into the business in 1986, and Eric followed in 1996. Even Robert's 11-year-old son told his grade-school class a few years ago he wants to grow up to be a 'loaner' -- a mortgage broker, like his dad."

"They work for lenders, selling the homes for which borrowers have fallen months behind on their mortgage payments. They become the local eyes and ears of faceless nationwide mortgage lenders, the hands that tuck a moving notice in the doorframe of the homes inhabited by embattled homeowners. They are the liaison between whoever lives in the foreclosed home, even an unsuspecting tenant, and the lender. And at a time when every month bears a higher number of county homeowners missing payments and moving into the foreclosure process, business in this part of the market is exploding."

"When a new listing comes in from the lender, the agents write it on whiteboards with blue and orange markers. By the time the office gets the listing, the bank has already posted a notice of trustee's sale on the homeowner's door, warning them the home will be auctioned. The REO Realtors drive to the property to see if anyone is still living there. They deliver a letter to the home, alerting the inhabitants of any money the lender may be willing to send their way to help them move. They set a deadline with the inhabitants, and when the house is cleared, they recommend repairs and give a price estimate to the lender. Then the agents list the home for sale and sell it on behalf of the lender."

"Robert Weichelt is old school when it comes to his business mindseto. Unlike some people who got into extremely specialized facets of the real estate industry when homes were sizzling a few years ago and are now losing their jobs, Weichelt claims he wears enough real estate hats to weather any direction the market can go. He considers himself a jack-of-all-trades in the business, having worked in title insurance, mortgage brokering, refinancing and lending, escrow and listings. And, of course, foreclosures."

"Weichelt and his family are reminiscent of Dog, the as-seen-on-TV bounty hunter in Hawaii. That television show has its share of car chases and fugitive rough-handling, and at the end of the day, it's about catching the wanted person. But Dog and his sons and his wife also pepper the show with bursts of compassion that humanize both criminal and bounty hunter. Weichelt shows similar bursts of kindness as he hunts houses instead of people."

"People aren't often too happy to see him, he explains. He loathes entering a house he's thought to be vacant, only to find someone sleeping inside."

"'It scares the daylight out of me,' he says. 'I feel like a cop without a gun.'"

"The REO Realtors often have to go with marshals to what's called a 'marshal lockout,' where the inhabitants of a house refuse to leave until they're forced out by armed officers."

"Weichelt explains it's their job to get as much money for the lender as they can. The last time the foreclosures business boomed was in the mid-1990s, after the last real estate bust. Then, banks had to unload the properties at '50 cents on the dollar, fire sale' prices, Weichelt explains. Now, at least while foreclosures are still at relatively low rates, the lenders are hoping to get top dollar for the properties."

"'The last thing [the lenders] want to do is be the downturn in the market,' Sanfilippo explained earlier. 'They're just like Mr. and Mrs. Smith -- they have an appraised value and they want to sell as close to that as they can.'"

"But they'll still sometimes offer relocation assistance in return for a quick move-out. In the business, that's called 'cash for keys,' and Weichelt considers offering that to pinched families one of the most important parts of his job."

"'At the end of the day, I'm there to get them out,' he says. 'Banks don't mess around. But if I can do it with a smile, at least I'm getting them options.'"

"After a pause, he continues: 'It's not all about the Benjamins, you know what I mean? I do whatever I can to be sympathetic. I'm not going to say, 'That's OK, take your time.' But I am going to say, 'Beat it' -- with a heart.'"

"Most of the people he's talking to these days are still victims of the typical reasons for foreclosure -- the 'life happens' kind, such as illness or job loss or divorce, he says. But a growing number are defaulting on loans they shouldn't ever have taken out, he says."

"Recent tumult in the mortgage market has shed light on lax lending standards embraced by brokers and banks during the boom that allowed hundreds of thousands of people to get into loans they would have previously been barred from. The number of homes in foreclosure activity was at a record low for years during the latest real estate boom, because homeowners in trouble could either sell their homes for a profit or refinance their roller-coaster mortgages for a more predictable, traditional payment. Now, though, declining home values mean more and more homeowners find themselves stuck between payments they can't make and slow sales conditions that make it difficult, if not impossible, to sell their homes before the bank repossesses them."

"Under the housing market's current conditions, foreclosures represent a niche that is growing nearly as quickly as home values ascended a few years ago. The number of San Diego County homes in some level of foreclosure activity reached 1,150 in January, according to RealtyTrac, a nationwide tracker of foreclosure data. That was up 20 percent from January 2006 and up more than 240 percent from the first month of 2005. Sanfilippo has increased her staff by one-third to handle the jump in business. Tuesday, they had seven new properties come in, more than double their daily usual, even these days."

"'It certainly is an uptick in foreclosures,' Sanfilippo says after two decades in the business. 'In 2003, 2004, there were very, very few in San Diego County, because of that quick appreciation.'"

"And some buyers who used mortgages to cover the entire cost of their homes near the end of the price-appreciation boom are now upside-down, owing more than their now-declining home is worth, with no equity cushion to protect against sudden illness, job loss, divorce, or the payments on adjustable-rate mortgages ramping up. The loans to consumers with poor credit, termed subprime mortgages, have proved especially troublesome in recent weeks."


At 10:18 PM, Blogger el scooter de heffe said...

I know Eric well, and work with him on San Diego files. He's a great broker, and a good person to boot.

As for REO being a "growth industry", that's like saying the sky is blue.

I work on the legal side of REO (guess that makes me the incompassionate side of the bank's "get out" mantra, as I have to carry the hammer). I've been in the business for over 10 years, and lived the 1990 salad days for our industry.

Our volume now is exceeding our best months back then. And the pedal is still down, as volumes are still growing.

Folks, I'm convinced this is going to be really, really fugly. I want work, and am thankful REO is back - but the pain I fear is around the corner makes me sick to my stomach. (And, I own a home bought in 2005. I'm going to bleed the same as everyone else.)


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