Update: REI On The Hill This Week...

We want to update you on some important, investor-relevant news from Capitol Hill.

But first, a little something to think about...

The Economy: It's Your Fault?

You may not realize it yet (especially if you’re new to real estate investing) but you – as a real estate investor – have become enemy number one since the real estate crash. At least in the government's eyes.

It's no secret that, whenever something goes wrong, the bureaucrats are always looking for someone’s head to roll…they need a fall guy…somebody to publicly, which could range from a hand spanking to the business equivalent of a public hanging.

And although we, as responsible property investors, form essential, key vertebrae in the backbone of any recovery, we've once again been demonized, made out to be the bad guys.

But take heart. We have an advocate, and his name is John Grant.

John Grant If you’re new around here, then you may not know John. But he’s the guy standing in between Uncle Sam’s misguided wrath ... and YOU.

John wears a number of important hats, the most important of which happens to be fearless leader of the Distress Property Coalition, and Real Estate Mogul’s seasoned Washington lobbyist (in the best sense of the word).

We stay in close contact with John. He gives us regular feedback on what's going down in Washington and in the market as a whole. We tell him what we need and he fights for it on our behalf.

Truth be told, while the bureaucrats are trying to make it harder and harder to buy and sell houses for profit, John is our advocate…he’s our reconnaissance team AND our foot soldier, actively making moves in Washington for the entire REI industry – for all of us - on our behalf.

And the fact is, John's been quietly lobbying Congress for the past couple years on behalf of our entire real estate investing industry, and has scored a number of big wins for us (many of which you've heard about in the news, but had no clue who was behind it all).

That said…

An Update From Political and Market Advisor John Grant…

On The Hill This Week

This week marks the launch of DPC’s 2013 lobbying campaign in Washington.

Starting Tuesday afternoon through Thursday, I will be meeting with members of Congress, federal agencies, and Congressional committee staff attorneys to discuss our policy objectives for 2013. I will continue to conduct meetings every Tuesday, Wednesday and Thursday for the next two months in order to move our agenda through Congress and effectuate change at federal agencies.

Tackling Deed Restrictions

deed restrictions DPC's first mission more than two years ago was to reduce restrictions on the resale of short sale properties owned or guaranteed by Fannie and Freddie. We did just that, and lowered the threshold for when investors can resale properties purchased as short sales.

However, our work on deed restrictions is far from complete.

We aim to put an end to prior owners telling investors when or for how much they can resell a property.

Our two-pronged approach will focus on:

Continued work with federal housing agencies, and
A legislative remedy inserted into a housing reform measure.

While our initial work in this area was a success, we recognize the burden of these restrictions and enter 2013 with the momentum of our prior success and a commitment to seek a permanent solution to this problem for investors.

REO and Short Sale Valuations

REO and short sales valuations are also high on the agenda as well.

FHFA reformed the valuation methodology for REO and short sales by allowing servicers to take into account local market conditions and credit availability, among other factors. As we have stated, in theory this valuation methodology is a move in the right direction.

In practice, the results are mixed. In some areas the methodology is resulting in better valuations for investors. In other areas, the new methodology is being utilized as a means to inflate prices.

The GSEs report higher sale prices for REOs, and the uptick in prices directly correlates not to some broad recovery, but to the implementation of the new methodology. This needs to be addressed so that investors obtain fair, not inflated, prices.

As with our fight against flipping restrictions, our strategy to repair this issue possesses multiple paths to success. DPC intends to ask members of Congress to write FHFA to inquire about the execution of the new valuation methodology and determine whether this is nothing more than price fixing in the housing market. DPC is also seeking legislative remedies as well to ensure investors are protected against price rigging.

Hedge Funds and Other Institutional Buyers

hedge funds Large institutional buyers have made headlines across the nation this past year.

While we do not oppose the right of large funds to purchase properties, we do believe there are serious questions that Congress should ask as these funds expand into the residential markets.

Why?

Because if one of these funds blows up, the anti-investor sentiment sure to follow could impact investors nationwide. We want to make sure there are clear distinctions between investors and these funds, should there be any policy fallout.

The fundamental question surrounding these funds is simple: do they pose a potential systemic risk to the housing market?

To make this determination, Congress will need to obtain information from the funds and Fannie and Freddie.

Did the funds over-pay for the properties? Based on the fact the new valuation system was put in place prior to the sales, it appears quite likely they did.
What impacting will over-paying have on the exit strategy of these funds, and the overall housing market, once they decide to liquidate?

Additionally, there are basic consumer protection questions:

Can a fund properly maintain and manage billions of dollars in rental properties scattered throughout a region?
As the funds sell off their risk to additional investors, does this raise issues on who is actually in charge of these rental properties, the purchasers or the buyers of the underlying investment?
Furthermore, what if these funds fail to meet performance estimates, and investors want to exit? What is the potential impact of billions of dollars of residential property (which was bought at an inflated value) re-entering the housing inventory?

DPC has many more questions on this topic, and is presenting these questions to members of Congress this week.

Again, our goal is not to prevent the free-market purchases of residential assets, but rather to urge regulatory bodies and Congress to conduct the proper due diligence that did not take place during the housing crisis.

DPC's 2013 policy white paper covers additional issues that will be addressed in future updates. As our meetings take place and our policy issues progress, I will provide intel to assist investors in planning your investment strategies based on these new developments from Washington.