Carole Cohen Realtor®, ePRO

We can kvetch all we want but The Emergency Economic Stabilization Act of 2008 (EESA) is now the law. It makes sense for us to follow what happens from here on out. Active Rain seems like a good place to do this. Many people who read Active Rain are not in the real estate business and frankly, maybe there are readers who can contribute to the pool of information I'm going to try to track here. I hope so! (Yes, you Rainers too!)

To start, as the NY Times' Mark Lander and Edmund Andrews explain, now EESA is law, and now Treasury begins to set up the Administrative end of this. The devil of course, is in the details.

Good points from this article:

1. It will take some time for Paulson et al to set up a staff. Supposedly, Treasury wants to outsource most of the work and is estimating what they call a small in house staff of about two dozen people.

2. The outsourcing will be to "....professionals who will oversee huge portfolios of bonds and other securities for a management fee...."

3. They do not expect this new entity to be fully operational until after the Nov. 4th election.

4. They have to work on laws that will take care of (!) conflict of interest issues. In other words, if a Goldman Sachs staffer/executive winds up working for us as an asset manager, they will have two duties: one to us, the taxpayers, to make sure we are not overspending, and one to their company shareholders to make as much as possible. Yes, the devil is in the details.

My thought: can't people who have the expertise from these private companies take a leave of absence for a year so there is not a conflict of interest? I'm asking sincerely, because 1) maybe this is too cost prohibitive for us. but 2) it could mean some of the financial peeps who have lost their jobs can take short term positions as replacements for the men and women who come to work for us. They will be working for us, won't they?? Why not a one year term for everyone from a private company who comes to work in this new wing of the government. Then they go back to their old jobs.

This idea may sound hard to make happen, but in reality (according to the Times article, there has been at least one person who was the managing director of Pimco, who offered his services for free. We could pay them (they plan to do this anyway) but at least while he/she is working for us, they won't have a conflict. (Now you can all tell me why this won't work LOL)

Now to the real estate related stuff, meaning sub prime mortgage assets (if you can call them that). Lander and Andrews point out that in order for an entire Trust to be purchased by the Feds (and apparently a lot of the sub prime assets are in the form of Trusts) they would have to have 100% agreement from the Trustees. So they plan on only purchasing half of the assets in these cases which circumvents the need for 100% approval.

Also this quote: "....Treasury officials have emphasized that the government will also be buying up whole mortgages, which have not been securitized, and that it may well buy whole mortgages through one-on-one negotiations with individualbanks. Officials said they would probably experiment with other approaches as well...."

I'm going to see if the financialservices.com site (run by Congress) is allowing visitors (they were 'down' all last week, so many people wanted to read the text of the proposed Bill....the final Bill is up to 510 pages or so....). As soon as I can find a link that works, I will link it here. (Do any of you have such a link? If so please link)

More of the 'devil in the details' to follow as we go along. Here in NE Ohio we will be particularly interested in how the mortgage foreclosure aspect of the EESA is set up and handled.

Please link anything here you think is of value!

Peace Out -3C

UPDATE: so far, this is the only place I can find what might be the full text of the EESA. It's the Sun Light Foundation's Public Mark Up site.

Finally, the financialservices.gov (US House) is finally loading so I will link it here. (Maybe people are already tired of reading it! lol)

h/t to Elaine Reese for pointing out Jim Crawford's posts on the EESA. To say the least, he's not a fan of it lol. In any event, here is a good post by him listing the 'earmarks' added into this Act. For those of you who don't want to read all 500 or so pages, these earmarks may be an eye opener.

10.05.08 - Wachovia was set to be purchased by Citi and then Wells Fargo got into the mix, most of you already know this. Here is today's update on the continuing saga, now a judge has blocked the Wells deal, for now. NYTimes article here.

Also today, good stories linked here in NYT about how Europe and the European Union is grappling with same economic/bank failure issues.

10/8/08 They put it this way: calming London in order to stablize the World economy. Britain moves closer to US Bailout sytem in stead of a 'prn' or as needed basis

Also today, Paulson says stay calm and Bernanke orders a small Federal rate cut. I'm thinking (and I'm not an economist nor do I play one on tv) one more week until The World including us can get a handle on initial steps the Feds and the World markets are taking, and I doubt the stock market will really calm down until then.

On a positive note, we had 10% more sales as a company this past month than we did in 2007. And NAR announced that there is a significant increase in the number of homes 'pending' (under contract, waiting to transfer ownership) in September. That matches what happened with us locally, especially in our office, we had a terrific volume in September.

Just wanted to point out that there are buyers realizing the interest rates are still great and prices (for them) are terrific.

OCTOBER 9th Update: Okay I knew this would wind up being a long post but I'm about to make it longer. Here is an early look at today's WSJ article on McCain's proposed home mortgage rescue idea. The reporters claim to know what he plans to do. If they are correct, they will be allowing some of the predatory lenders get rescue money too. I don't really know if this article is accurate, but I'm going to add a total cut and paste here:

OCTOBER 9, 2008 JOHN D. MCKINNON

McCain Reshuffles Rescue Deal

Proposal Could Help Homeowners but Also Reward Predatory Mortgage Lenders

By

WASHINGTON -- Sen. John McCain's $300 billion plan to help homeowners struggling with mortgage debt carries big potential benefits for the troubled real-estate sector, but could reduce the funds available for rescuing banks.

The proposal, which Sen. McCain announced during Tuesday night's presidential debate with Sen. Barack Obama, also could make winners out of investors -- including predatory mortgage lenders -- that the Bush administration and Congress have tried to exclude from the government's largesse. And it raises knotty administrative questions about how the government would handle potentially huge numbers of mortgage refinancings. Among the challenges: screening out undeserving homeowners who might seek to qualify for help.

The McCain plan highlights the continuing struggles of Washington policy makers -- and Sen. McCain, the Republican presidential nominee, in particular -- in coming up with a workable solution to the interwoven problems of the real-estate and financial sectors. Just two weeks ago, Sen. McCain threw his weight behind House conservatives who wanted to shrink the government's role in the rescue. With this week's announcement, Sen. McCain is seeking to maximize government assistance, while focusing it on homeowners.

McCain advisers believe the plan would require no new legislation and is a less-costly prescription for real-estate contagion than buying lots of risky mortgage-related securities, as the recently passed $700 billion rescue measure aims to do. But some analysts said it could drain money away from the rescue effort for banks.

The plan focuses on using much of the government's rescue powers to buy individual mortgages that homeowners are having trouble paying.

An earlier mortgage-assistance plan passed by Congress over the summer tried to do something similar, but with a key difference: It forces lenders and investors to take a loss of principal -- a "haircut" -- on the troubled mortgages, in exchange for the government's help. That program appears to be off to a slow start, partly because lenders have been reluctant to accept the large losses they now face on troubled loans, according to analysts.

Another possible reason is that some up-front funding for last summer's $300 billion program -- which was to come from fees paid by Fannie Mae and Freddie Mac -- could be in some doubt since the two mortgage giants were taken over by the government last month.

Sen. McCain's program would effectively reinvent the homeowner program to speed up the process. The government would buy the existing troubled loans at face value -- absorbing the haircut itself -- and the Federal Housing Administration would issue a new, federally guaranteed 30-year fixed-rate loan, based on the property's present value, at a "manageable" interest rate, the McCain camp said.

Treasury Secretary Henry Paulson said he needs "to learn more about the [McCain] plan," but that the administration is already working to help prevent foreclosures.

The McCain plan envisions combining the resources of last summer's $300 billion housing bill, the $700 billion financial-rescue plan enacted last week, and the still-considerable buying capacity of Fannie and Freddie.

If it works as planned, the initiative would help qualifying homeowners and would put a floor under declining housing prices. It also could help banks by shoring up the value of their troubled mortgage-related assets, McCain advisers said. That, in turn, could reduce the need for buying up troubled financial assets. The plan also could free up credit, lowering interest rates and further stimulating the real-estate sector.

"By starting with the homeowner and working up, you accomplish some of the [same] objectives of the financial-stabilization plans that we've seen come out of Congress," said McCain economic adviser Doug Holtz-Eakin.

The McCain plan is similar in some respects to the Depression-era Home Owners' Loan Corp., which made 1 million refinancing loans totaling $3 billion to help prevent foreclosures. In recent months, some prominent academic economists have suggested similar programs as an alternative to the Bush administration's rescue plan.

Whatever its economic effects, its focus on homeowners is likely to have considerable political appeal.

The Obama camp attacked the plan as a poorly designed giveaway to the least-deserving lenders. "It's a huge gift to the least-responsible financial institutions, some of whom have committed fraud, that leaves the taxpayers with guaranteed losses, all of the downside risk, and none of the upside," said Jason Furman, an adviser to Sen. Obama. "It's an example of John McCain being erratic and walking away from the principles that he purported to support as recently as a week ago."

It wasn't clear whether the government would share in the eventual profits homeowners might realize when they sell their homes.

By relying on existing rescue resources, the McCain plan could reduce the amount of money available for buying financial assets from institutions, said Karen Petrou, managing partner of Federal Financial Analytics.

-Deborah Solomon contributed to this article.

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I'm pretty much just going to post this as Bill Callahan and Frank Ford wrote it. Just a few extra thoughts before I do. The key point to me is that no matter how angry it makes me or all of us, clearly we need to do this. But what we need to do in a quick, band-aid fashion, is a bailout. What should take longer, in my opinion, is the actual restructuring that may occur.

We need to make sure that all the necessary checks and balances are in place, that any regulatory changes put into place make sense for the long term. And as Bill and Frank are pointing out, that they make sense for those of us in our communities. I'm posting this on Active Rain instead of my outside blog because the points they raise are thoughtful, deserve discussion, and might spark some ideas for your own community needs regarding this bail out. Here is what they wrote:

To: Interested parties in Greater Cleveland RE: What we learned last night about the proposed Federal Bailout September 19, 2008 Proposed "Resolution Trust Corporation" - a Community Protection Agenda

While the details are murky, Paulsen, Bernanke and Congressional leaders are publicly committed to create,within a few weeks, a new Federal entity described as analogous to the Resolution Trust Corporation.

Yesterday's Bloomberg report says:

"The two regulators, in talks with lawmakers late today, sought support for a plan to help financial institutions remove from their balance sheets illiquid mortgage related assets at the root of the yearlongcredit crisis.

Congressional leaders said they intend to work to pass such legislation within days."

Presumed insiders Brady, Ludwig and Volcker, in their oped piece about this proposal in the WSJ Wednesday, described the proposed entity's functions:

"Such a stabilizing mechanism would accomplish four much needed tasks:

"First,by buying paper that otherwise is effectively not trading, it would help restore liquidity to the marketplace and help markets to function more fluidly again.

"Second, by warehousing the troubled paper for a longer period than, for instance, the Fed's discount window typically should or could, it would allow for a more orderly liquidation of this paper, and the chance for much of it to recover a portion of its value.

"Third, by giving the agency the ability to manage mortgages with flexibility to keep people in their homes and businesses running, it should lessen the number of foreclosures. This, in turn, would help moderate the decline in real estate values and the deterioration of neighborhoods, thus supporting house prices that in fact lie at the heart of the crisis.

"Fourth, where necessary, like the RTC of the 1980s, this new mechanism can assist the Federal Deposit Insurance Corporation in resolving sick institutions that are so clogged with the troubled paper they cannot continue as independent entities. However, we would hope that purchasing the mortgage related paper will minimize the need to provide emergency, short term assistance to solvent banking institutions."

The third function " managing mortgages" to "lessen foreclosures" is very attractive, of course, and

presumably will be a major political talking point of proponents. It's possible that this initiative represents a breakthrough for our efforts to tame the foreclosure beast in Cuyahoga County.

But how would this work, exactly?

We're aware of three basic categories of "illiquid mortgage related assets" that this "RTC" might take agree to acquire. The first is actual mortgages held by the institutions in their own portfolios. The second category probably much bigger and more problematic is mortgage based securities. The third is contracts and derivatives related to mortgage based securities.

It's easy to see how the "RTC" could take over the management, workout and disposition of actual unsecuritized mortgages, just as the original RTC did. But unsecuritized home mortgages are not a very large factor in the foreclosure crisis.

Much harder to see is how the "RTC" will reduce foreclosures by taking over and managing the institutions' junk mortgage based securities and derivatives. The owner of an MBS doesn't "own" any of the underlying mortgages only an equity share in a pooling entity (e.g. a trust) for which "control" is divided among various contract players, i.e. the trustee, the master servicer, etc.

So how will just taking over an institution's portfolio of nonperforming mortgage based securities which seem to be the main "illiquid mortgage related assets" at issue, and are certainly at the heart of the national foreclosure tsunami enable the "RTC" to do what Volcker et al. say it's supposed to do?

Answer: It probably won't, unless the law is written to make sure it does.

Our proposal:

To the extent that we have any contacts who may be in a position to influence the final shape of this proposal, we should try to get the following principles written into it:

1. In managing any mortgage related assets it may acquire, the "RTC"'s guiding mission includes:

a)avoidance of foreclosure of owner occupied homes;

b) equitable renegotiation of mortgages as needed to preserve both home ownership and equity for all parties;

c) enabling current residents, including tenants of rental housng, to stay in their homes through and after foreclosure;

d) the management and disposal of properties after foreclosure in a manner consistent with community preservation.

2. The "RTC" will not take over any mortgage related asset unless the terms of acquisition give it full

management and control of the underlying mortgage(s).

After drafting the preceding points, we had the opportunity to discuss them with members of the Cuyahoga County Vacant and Abandoned Property Action Council - including representatives of the County, the City of Cleveland (administration and City Council), the First Suburbs Consortium, Cleveland Municipal Housing Court, the Cleveland Neighborhood Development Coalition, and the Enterprise Foundation, as well as Neighborhood Progress.

The Council's members expressed broad agreement with the concerns raised above and their willingness to participate in an effort to address them with legislators.

Members of the Council raised another important concern: Foreclosed properties now controlled by Federal entities (HUD, VA) are exempt from municipal enforcement of building and housing codes. This is creating major problems for cities, especially in connection with HUD properties. Acquisition of thousands of foreclosed properties by a Federal "RTC" could make these problems much worse unless the legislation provides that:

3. The "RTC" will promptly establish and record clear title to any real estate asset it may acquire through

foreclosure or otherwise, and as owner will be subject to all applicable state and local laws and

regulations.

Bill Callahan is the convener of Cleveland's Foreclosure Action Coalition, and blogs about foreclosures and

other local concerns at http://www.callahansclevelanddiary.com. (Bill is being modest here, he is clearly one of our area foreclosure experts.) Frank Ford is Senior Vice President for Research and Development of Neighborhood Progress, Inc. Reprinted with permission from Bill Callahan Peace Out - 3C

UPDATE: Adding this Times article about the Bush request/Fed proposal with more flesh on it now that it's Saturday.

Also adding this link on the bail out from The Economist I always appreciate clear explanations. This sums up what has transpired very well.

FInally, here is a Wall Street Journal blog post with the text of the initial wording of this proposal.

Sept. 22nd Update: Here is a link from The Washington Post's Politico site with the text of the Democratic Party Bailout Proposal they recommend.

Last year I wrote this post about the proposed Eco Village Cottages at W. 58th and Pear. It's an exciting project, and this past week it moved closer to fruition and occupancy with a ground breaking ceremony.

These homes will meet Leeds standards for energy efficiency, are all of the same design (I think there are five homes). They are part of the Cleveland Land Trust which means they will remain affordable throughout their lifetime. (The Land Trust sells homes at market value but the buyers buy at about 80% of market value). You can read about the Land Trust here.

Green City Blue Lake has an informative post on the Cottages. Here is an excerpt:

"....The homes are universally designed, life-cycle homes that allow aging in place. They will include accessibility features such as ramped entrances to porches, and, in the three bedroom model, a first floor bedroom with bath. Buyers who need a fully accessible home can have the additional features they need added at no additional cost.

The cottage designs grew out of the Cleveland Green Building Coalition's Emerging Designers initiative, which brought together young architects to learn about green design while applying what they learned to real projects...."

There are income requirements for eligibility to purchase and of course the supply is limited. But it's exciting to see this project move along (they had projected an August ground breaking and they are pretty darn close to that date).

A wonderful side benefit? Short (and I do mean short) walk to the RTA Station. To recap: affordable, unbelievably low fuel costs, close to public transportation. Do we need more of this all over Cleveland or what?

Peace Out - 3C

Have you ever read a book that stays under your skin and makes you think about it as well as ideas that seem to spawn in your mind because of it?

Are you tired of negativity in your city and among your neighbors? Do you feel like you live in a community without the actual community cohesiveness that would be nice?

Have you ever wondered to yourself, 'there are so many issues that need to be tackled in my neighborhood and I would love to help but I don't know where to start.' I know I have. And now I've read a book that is both under my skin and causing my mind to go off in what could be some good directions. What is the book? Instructions from The Cook, written by Cleveland's own George Nemeth (BFD) (@georgenemeth) and Jack Ricchiuto (@DesigningLife.com). You can read about or order Instructions from The Cook here.

Have you ever had an idea about something you'd like to do for a neighbor, for your neighborhood, or something you'd like implemented into City life? Or maybe you have an idea for neighborhood kids or a business venture. It all seems overwhelming but Jack and George wrote this book to show how it doesn't have to be. And as a matter of fact, they say two important things:

- good things, ideas with longevity, usually start out small not large.

- "people will authentically support what they help create" (page 55 of the book).

- there are lots of good ideas, not just one

- meeting to talk about ideas with people of all sorts of mindsets is usually much more productive than just meeting with people who think like me (this ties into the 'lots of good ideas' truth above).

When Jack and George wrote about 'slow and small' being better than 'fast and big', it took me back to how we learn (my education training kicking in). We learn at our best, our most comprehensive, when we start with a solid foundation of information and then expand our knowledge on that topic/subject as we go along. It helps us not live with pre-conceived ideas, but to be open to possibilities...and yeah it helps us retain the information in a way that leads to the ability to be creative with the knowledge.

I keep thinking about this book ....they point out (and it's so true) "....negativity doesn't necessarily breed progress...."It can bring people together to solve a neighborhood issue, but then when it's resolved, usually people go back home and wait for the next problem. In order to affect something positive Instructions From The Cook recommends building trust amongst ourselves, having no pre-conceived goals set in stone, but let the community build on ideas. Get to know our neighbors.

It reminded me of the famous Jane Jacobs book The Death And Life of Great American Cities, written in the early 60s and yet it rings very timely now. One theme that ran through the book was how things kept getting built by city planners without much thought to how the residents would really use the building or space, and certainly without much input from them. Does this sound familiar? LOL Ah, the Clevelander's lament. And it keeps getting me back to the point that those of us in the community are the ones who can affect postive change, not our governments and our cdc's. How do they know what we want if we don't tell them???

The book gives examples of how people have done just what J and G recommend. They show why it works. And darn if it hasn't gotten me thinking. I find myself back in communication with my own CDC, I find myself talking to other people in the neighborhood. I find myself discussing ideas with a few friends (and yes, at this point they are 'like-minded' friends but I'm hoping it becomes more diverse).

Thought I've had, because of the book: Pick an establishment I'd like to support in my community, and start going there once a month at a regular time. Let people in my 'hood know when I'm going. And anyone else I meet, or anyone else they meet, can come too. It supports the neighborhood and allows us to start getting to know each other and see what kind of ideas might sprout.

Second thought I've had because of the book: If someone on my street needs their lawn mowed I could do that for them all summer. Maybe in turn, they could provide me with something I need in return. Maybe I could tutor someone's young middle or high school student in return for that student cleaning out my gutters and doing other jobs that are just a bit too much for me. You get the idea.

I've had quite a few more thoughts, but am more interested in what other people might want to do. And I'm also dying to get together with George Nemeth and talk about the book over some good coffee! What say you, George? And does anyone else want to come? Peace Out - 3C

(I debated where to post this: my outside blog or Active Rain. Shaking things up a bit by posting it here to see what others in the Active Rain community think about it, get the book some exposure around the country, and also then link it to my outside blog.)

talk with me on Twitter at @clevecarole

Here is an article in Inman news on some agents in San Diego who decided to switch to Tempo 5 for their MLS system. According to the article, there has been a bit of an uproar from agents now using this system. I haven't posted here in a while but I felt the urge based on this Inman News story. My short synopsis is this: progress never comes without bugs. Profound no? :-)

We've been using Tempo 5 in NE Ohio for what seems like about six months. Our NORMLS MLS system switched us over after months of announcements, trainings and manuals to download for assistance. Now I don't want to be all Pollyanna like and say it was smooth sailing. To say there were some 'bugs' is putting it mildly. I do a lot of stats and monthly sold data posts on my other blog. For quite some time the stats were not coming out accurately. There were things that normally get added to MLS listings that wouldn't load. Every week it was a long list of 'we are working on......'

But the truth is, there are added features now that really make it better for consumers and that's really what it's all about. And btw, I consider myself a consumer, since I use their service.

1. Attachments: as listing agents we can attach copies of the property disclosures, etc. to the MLS listing now that Tempo 5 is our system. I have town homes and condos for sale and I am able to also attach the condo disclosure sheet that provides contact names and telephone numbers of board members. I've also utilized this as a buyer's agent. I can download the property disclosures along with MLS print-outs for my buyers. You can't always count on these being provided when you do showings. It's very helpful to not have to make a phone call to an office and ask for them to be faxed to me.

2. I get to provide more photo description on my listings. And one more photo. May not sound like much, but it really allows me to showcase my listings.

3. There is capablity for voice overs and virtual tours and other things that can now be handled much quicker than before.

I could go on, but these are just a sampling of what is good for the prospective buyers or listers about Tempo 5.

Do I not think a few things may still be more cumbersome than they used to be? Yes. But when I look at the pros and cons, the pros win.

So i say to all of you who are now getting into this new system to hum the Guns n Roses song Patience and get ready for a user friendly (for the most part) and consumer friendly MLS system. Just MHO.

If you want a glimpse at how it looks on our NE Ohio MLS system, here is the home page for which you do not need to be signed in.

Peace out - 3C