Albert Einstein said: “In the middle of every difficulty lies opportunity.”  These words are especially comforting in the present day, what with the suffering economy, rampant lender bankruptcy, bailouts and falling sales volume.  But my purpose of today’s post is not to point out everything that is going wrong; rather, I would like to take this time to point out the proverbial silver lining and hopefully encourage those who are feeling the pressures of a faltering system. 

            With tomorrow’s celebration of food and family come a few new beginnings.  Thanksgiving heralds the dawning of a new year on the horizon, the beginning of December, and the end of fall for another ten months.  Take this time to look at your business with a fresh eye.  The reports on our failing industry are innumerable and I will not waste your time with statistics pointing out the bad.  Instead, consider this: the median price paid for a single-family home in Southern California last month was $311,060.  This is almost half of what it was in October of last year!  But that’s not the only good news: 552,750 single-family homes were sold in October, an increase of nearly 117% from 2007.

            It took me too long to gather these encouraging figures from among the gloom and despair that seems to pervade real estate’s online social community.  An unwarranted, yet pervading sense of defeat can somehow be discerned from a network of professionals who signed on for the unknown, willing to jump off the edge and commit to a nail-biting, commission-only lifestyle.  The housing market couldn’t stay red hot forever, but with any luck will surely bounce back as quickly as it crashed.  In the meantime, agents and real estate professionals need not resign themselves to defeat, but instead raise their heads and commit to positively looking towards the future.   The housing market of the most powerful nation in the world will rebound, but worrying about it will not expedite the process. 

            The holiday season is a perfect illustration of how, at a whim, we as humans can forget the negative things around us and focus completely on the positive.  As Thanksgiving draws nearer by the hour, pumpkin pie and long lost relatives are surely at the forefront of everyone’s minds.  Memories and reflections are replacing work woes and to-dos.  Having a day like Thanksgiving to look forward to changes our normal outlook, helping us forget about task queues at the office and bad traffic at five o clock.  In the same way, looking towards a time when home sales abound and loan servicers are prolific will take our focus away from the current situation and, in turn, free our minds to think of innovative strategies that further enhance our business models; making you not only a better selling agent but a happier, brighter person.

            The rise of California’s sale rate is a sign of things to come, the elusive silver lining peeking around a storm cloud.  But for now, leave your work at the office and go enjoy your families.  There will be time enough to trim the fat; not only from your business model or sales pitch, but also from your thighs.  Happy Thanksgiving.

    Yet another product of our faltering economy is the rise in the rate of foreclosure throughout the country.  But how do we go about fixing it?  I don’t know about the rest of you, but I support the concept of extended terms and reduced interest, as opposed to billing me, the taxpayer, for the bailout.

According to Consumeraffairs.com, foreclosure filings have been logged for 261,255 homes across the U.S., a 48% increase from May of last year.  Exhibiting typical bureaucratic expediency, the Bush administration waited until last week (November 11^th) to roll out a loan modification plan which, besides the delay in implementation, I have no qualms with.  The program is designed to keep borrowers current on their payments by extending the loan term and reducing interest.  In the event a borrower has missed several payments in a row, loan servicers also have the option to temporarily forgive the principle owed and add it onto the back of the loan, essentially restarting the borrower’s month to month but not completely forgiving said debt.  Under strict guidelines imposed by the FHFA (Federal Housing Finance Agency), lenders who cannot restructure the payment schedule will be required to re-evaluate the borrower’s situation, most importantly the borrower’s personal income. 

            The FDIC proposed a similar plan, but thankfully Bush and the powers that be stomped it into the dust.  Under the FDIC plan, the government would provide lenders $1,000 to cover modification expenses and also pledge to insure 50% of the rebuilt loans should they re-default in the future.  This plan may have worked when our dollar was still valuable, but at this point the only way to implement the FDIC scenario is to heavily tax the United States populace.  Inman predicted that if 1 in 3 of the modified loans were to re-default, it would in turn cost us taxpayers $24.4 billion.

            That was a close one.  Fortunately, Bush’s plan does not simply provide loan servicers with tax money, but instead will issue such institutions several guidelines/procedures to follow when refinancing and will require them to be implemented no later than December 15 of this year. 

            Are there any of you out there that instead favor FDIC’s proposal?  Some would cite the seemed blind eye turned toward loans owned by Freddie Mac and Fannie Mae as reason enough, but in reality these loans only represent 20% of delinquent borrowers.  According to FHFA Director James Lockhart, “Some 60 percent of seriously delinquent mortgages have been sliced and diced and sold to investors in private-label mortgage-backed securities.” In fact, Mac and Mae have already been extremely productive: from January to August of this year, the institutions have been responsible for a collective 36,847 loan modifications. 

Luckily, some private institutions have also taken the hint and started their own independent modification program.  JP Morgan Chase released that they have, since early 2007, prevented nearly 250,000 loans from defaulting by restructuring payments and terms.  Numbers don’t lie, and these numbers are telling me that we should continue to implement strategies that have been proven to keep homeowners out of foreclosure, instead of potentially costing American taxpayers $50 billion.