Daily Archives: November 18, 2012

Perks lure tenants to online rent payments | Waccabuc NY Real Estate

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About six years ago, Steven Van Praagh received a call from a friend who owned a couple of rental properties in the Harlem area of Manhattan. Praagh, who was a commercial website developer, listened to his friend’s rant about being sick and tired of dealing with paper checks for rent payment.

What his friend really wanted to know: Was there a way create a payment service online?

Praagh listened, and then asked, “Would this be like PayPal for real estate?” And his friend’s response was, “Yeah, exactly.”

Six years later, ClickPay is a bustling business. In short, the company provides property owners and managers the ability to accept secure online payments (rent, homeowners association fees and dues, maintenance fees, etc.) from residents via e-check, credit and debit card.


Steven Van Praagh

What apartment owners and managers like about ClickPay is that they don’t need a bunch of workers to hang around opening envelopes, processing checks and visiting the bank. What tenants like about ClickPay is that it saves them time. They don’t have to write a check and drop it off at management.

Tenants who use online banking to mail their checks think they are paying electronically. In reality, a paper check still gets mailed, Van Praagh said. “What ClickPay does is form partnerships with the banking networks to keep the payments electronic. The banks like it because they save the on postage.”

In New York, where rents can easily be four or five digits, it has become a marketing tool for the landlords.

This is the way it works. Let’s say you are an owner of 750 apartment units in 10 New Jersey buildings of 75 units apiece and you want to use ClickPay.

Someone from ClickPay interviews you to figure out the size of the portfolio, management and types of tenants, as the company wants to make sure ClickPay is marketable to those same tenants. Then ClickPay talks to property management about accounting software to make sure its program can integrate. Once all that happens, ClickPay offers a couple of different services.

Once live on the system, ClickPay does customer training for all bookkeepers, controllers, property managers and asset managers. There are no setup fees or set costs.

Finally, tenants get a note to let them know their rent is due. ClickPay will send rent bills, including emailing a PDF of the bill. In the invoice there is a link that says, “Pay Your Rent Now.” If tenants click on that link, they will be forwarded to the ClickPay website. All they have to do is check in, change the password and take over their account.

Other tenants in other buildings can use the search engine, find their complex and see if ClickPay is available. If so, they find their unit, put in the leasing information, and as long as it matches up, they can use ClickPay.

Although ClickPay works with more than 100 property management companies, a couple of real estate investment trusts, Apollo Real Estate Advisors and hundreds of thousands of tenants, you’ve probably still never heard of ClickPay or its payment system. That because it is still Northeast-centric. Property management in Toronto embraced the evolving trend.

“We work with 10 percent of the top multifamily managers in the country, but in New York, we have 30-40 percent of the top managers,” Van Praagh said. “We have deals with most of the who’s who in New York.”

ClickPay’s penetration in the Big Apple is partly due to the fact it was the first 100 percent electronic payment system offered in the city.

“There were other lockbox services that had other types of electronic systems, but we were the first totally paperless,” Van Praagh said. “We are still the only one in New York.”

Other companies that facilitate electronic rent payments include RentPayment, PayLease, eRentPayment, PayYourRent.com, and SmartRentOnline.com.

“Until recently, it was a fragmented market, but now there are some big players,” Van Praagh said. “Companies that were in the utility payment business have now gone after payment of rent as a new business line.”

At the moment, Van Praagh is not dismayed by the new competition. “It’s not all they do, so they don’t focus 100 percent on it like we do. That’s good for us,” he said.

This is a relatively new product and new product sector, so there’s a lot of expected growth ahead.

Even in buildings where there is ClickPay, penetration varies.

“We range from 30 percent to 70 percent adoptions per building. We have some buildings that are 100 percent, but they are small,” Van Praagh said.

The concept behind ClickPay as a kind of PayPal for renters seems so apparent — a basic service that the industry needed — that it was somewhat of a surprise to me that such a system wasn’t invented back in the 1990s.

ClickPay was founded in 2006, and development was very slow at the start because real estate is a very complicated business due, for example, to the vast amount of federal, state and municipal regulations.

“There are a lot of nuances when it comes to processing real estate versus any other business,” Van Praagh said. “Then you get into places like New York City, which has so many of its own regulations. When you start dealing with large property owners, you quickly see they are dealing with such challenges as collection, rent subsidy, Section 8 housing, etc., so you need a lot of bells and whistles just to be able to tie your software to the property management and accounting software packages.”

I would have thought once ClickPay signed with a management company, it would offer incentives early in the game to entice clients to come over to the new system.

That doesn’t happen.

However, ClickPay, like your airline, does have a loyalty reward program. A client who uses ClickPay gets access to its perks network that boasts a couple of hundred thousand vendors giving rewards of one sort or another.

ClickPay figured it had to do something to make tenants feel better about paying those substantial rents in places like New York. If you’re paying $2,000 a month for a studio apartment, you might just want a toaster to help ease the pain.

via inman.com

Fiscal cliff will usher in profound change | Cross River NY Real Estate

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Most people seem to feel some sense of relief at the passing of the election, but markets are apprehensive. We need for big stuff to happen, and we know that more will happen now, faster than it has in years. But we don’t know what will happen, or to what effect.

The daily flow of economic data causes upsets, but reassures markets — at least we know where we are. For the next month Hurricane Sandy will distort to uselessness most of the usual reports, as it did this week’s shaky ones for retail sales, unemployment and industrial production. Maybe a new trend, maybe nothing.

Sandy had nothing to do with the rest of the world. Eurozone industrial production in September fell sharply, down 2.5 percent in the month. Third-quarter eurozone GDP fell by 0.2 percent annualized, negative for the second straight quarter and three of the last four. Japan’s third-quarter GDP sank 3.5 percent. China’s official reports cannot be trusted, not during a leadership change. Nobody outside the new Politburo Standing Committee knows what the change means — and maybe not even those seven men.

Against that backdrop the U.S. has embarked on the most profound change in its finances since the income tax began in 1862. The stock market had a bad day after Obama’s victory, but the cause appeared to be Europe. Since then, the straight-down stocks seemed to be anticipating his newly announced tax-negotiating position.

“The wealthy don’t need a tax cut.” Fair enough. However, the reversal of a tax cut made 11 years ago amounts to a tax increase, in every way and effect.

But because the president’s proposal affects only the top 2 percent of income earners, it’s a painless way to raise money. So those in favor say.

Over 10 years, increasing the rate on the top two tax brackets (from 33 percent to 36 percent, and from 35 percent to 39.6 percent) would raise $441 billion. Limiting deductions by these taxpayers, another $123 billion. Another $206 billion from new taxes on dividends plus an inevitable increase in capital gains taxes … the link to sinking stocks is unmistakable.

The very worst of the lies today about taxation: “We have had higher brackets for the rich and not hurt the economy.” We have had higher brackets, but nobody paid them in previous systems that were more loophole than collection. Pulling $800 billion-plus out of the pockets of 2 percent of taxpayers will have negative economic effect.

Some spending cuts will come soon, but very few. There will be no cuts in current social spending (Obamacare will add). The reductions will come in the form of promises, not taking effect until late in the decade. The front-loading of taxes and back-loading of spending cuts makes Republican negotiators nervous. And should, based on the history.

The great tax reform of 1986 removed many prior loopholes and reduced brackets to two: 15 percent and 28 percent. But by 1990 that reform was not generating enough revenue to fund social spending above forecast.

We raised brackets and closed loopholes. In 1993, President Clinton reached a grand deal: Raise the rate on the top bracket to 39.6 percent in exchange for hard limits on spending. That, along with a tech-fueled economic boom and a stock market bubble, created a budget surplus. Clinton’s deal was fair and effective, but that economy was not authentic, and we will be reapplying those brackets now to a far weaker economy.

The most extraordinary change in the works: For the first time since 1862, a no-loophole system. Thus at any given bracket, the effective rate of tax will be higher than ever.

Some think a “cliff” deal will reassure business and help the economy. More likely, everyone affected will know that austerity has arrived on our shore, and our hopes will rest on a far more adaptable economy than anywhere else. Good bet, too.

The prospects for a deal have improved now that two hardheads who, from a distance undermined House Speaker John Boehner’s efforts in 2011 — Paul Ryan and Eric Cantor — will now join the negotiating team. On the other side, all will depend on the extent of President Obama’s determination for righteous extraction of cash from people who neither need it nor earned it.

Temporary bad news today on another front: the bankruptcy of the maker of Twinkies and Wonder Bread. (In my childhood, my mother said they called it that because we wonder if it’s bread.) Take heart: The brands will be sold and revived. Couldn’t make it through a time like this without an occasional smuggled Twinkie.

The National Federation of Independent Business Small Business Optimism Index is one of the very best economic measures, in part because the survey goes back almost 40 years. Small-business conditions have been unchanged since the end of 2010, stuck below any recession bottom since ’81.


Survey of 2,029 small-business owners conducted in October 2012. Source:NFIB.com.

via inman.com

FHA’s $16.3B deficit raises specter of taxpayer bailout | South Salem NY Real Estate

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A fund used to support the Federal Housing Administration’s single-family mortgage and reverse mortgage insurance programs ended fiscal year 2012 with a $16.3 billion deficit, according to an annual report submitted to Congress today.

The shortfall raises the specter that the agency will require a taxpayer bailout next year for the first time in its 78-year history.

In order to avoid a bailout, FHA will raise annual insurance premiums, sign off on more short sales, streamline sales of foreclosed properties, offer “deeper levels” of payment relief through its loss mitigation program, expand sales of delinquent loans, and, for new loans, reverse a policy instituted in 2011 that canceled required premium payments after loans reached 78 percent of their original value.

Next year, FHA plans to raise the annual insurance premium paid by borrowers on an FHA loan by 10 basis points, or 0.1 percent, which is expected to add $13 a month to the average borrower’s monthly payments.

The agency has also vowed to expand its sales of delinquent loans under its Distressed Asset Stabilization Program, committing to sell at least 10,000 such loans per quarter over the next year. Because such sales require investor purchasers to delay foreclosures for a minimum of six months, they represent an opportunity for borrowers to possibly avoid foreclosure while reducing FHA’s costs, according to the U.S. Department of Housing and Urban Development (HUD), of which FHA is a part.

The FHA has been hard-hit by defaults from housing bubble-era loans made from 2005 and 2008, with future losses estimated at $70 billion for loans made in 2007, 2008 and 2009 alone.

The agency has taken steps to strengthen its capital reserves in recent years, including raising mortgage insurance premiums three times in 2010 and again earlier this year. The agency has also tightened credit standards and prohibited seller funding of buyer down payments, a practice the agency now estimates will cost it more than $15 billion on loans issued before 2009.

“While the loans made during this administration remain the strongest in the agency’s history, we take the findings of the independent actuary very seriously,” said FHA Acting Commissioner Carol Galante in a statement.

“We will continue to take aggressive steps to protect FHA’s financial health while ensuring that FHA continues to perform its historic role of providing access to homeownership for underserved communities and supporting the housing market during tough economic times.”

In today’s report, the FHA said its capital reserve ratio, which measures reserves in excess of what’s needed to cover projected losses over the next 30 years, had dropped to -1.44 percent from an already slim 0.24 percent in 2011. Congress requires the agency to maintain a 2 percent ratio — a mandate the FHA now projects it will meet in 2017, up from 2014 in last year’s projections.

HUD said this year’s deficit “does not mean FHA has insufficient cash to pay insurance claims, a current operating deficit, or will need to immediately draw funds from the Treasury.” The deficit, calculated by an independent actuary, also does not take into account an estimated $11 billion in capital accumulation expected by the end of fiscal year 2013.

“Coupled with the $11 billion in additional capital from expected new insurance guarantee volumes in fiscal year 2013, we believe it is possible to return the (fund’s) capital ratio to a positive level within the year, and reduce the likelihood that FHA will need to call upon the Treasury for any special assistance this fiscal year,” wrote HUD Secretary Shaun Donovan in the report.

Whether FHA actually ends up needing a bailout will be determined not by this report, but by a valuation of the fund made for the president’s budget proposal for fiscal year 2014 to be released in February. A final decision on whether to draw funds for FHA from the U.S. Treasury will be made in September.

This year’s report projections are less sanguine than last year’s because of changes in its economic modeling, lower interest rates that have spurred refinancings and yielded lower premiums, and lower expectations for home prices, which turned around later than projected this year. Appreciation estimates do not include home price improvements since June.

The Center for American Progress (CAP), which describes itself as a nonpartisan research and educational institute, said today’s news was “almost inevitable” after the FHA stepped in after the housing bubble burst and private capital fled the housing market.

“By living up to its congressional mandate to provide support to the housing market in hard times, the Federal Housing Administration not only funded home loans for 7 million families, but prevented even more catastrophic home price declines,” said Julia Gordon, CAP’s director of housing finance and policy, in a statement. “Such declines could have cost 3 million additional jobs and sent our economy spiraling into a double-dip recession.”

Gordon noted that FHA still has more than $30 billion to settle claims, but federal budgeting rules require the agency to hold enough capital to cover all claims over the next 30 years.

Debra Still, chairman of the Mortgage Bankers Association, agreed that FHA plays a crucial role in today’s market, particularly since the agency is nearly the sole backer of credit for first-time buyers with less than 20 percent down payments.

“These buyers are a necessary support for the housing market. While there is near-unanimous agreement that FHA’s role in the single-family housing market today is too large, we must remember that the housing market would be far worse off, today and in the future, without FHA,” Still said in a statement.

She added that MBA stands ready to work with policymakers to protect the fund and enable FHA to continue to perform its mission in the single-family market. She cautioned, however, that “ensuring the right balance” in forthcoming regulations defining rules for a qualified mortgage (QM) and a qualified residential mortgage (QRM) were important for future credit availability.

QM would establish standards for borrowers’ “ability to pay” the mortgages they seek, while QRM would establish certain baseline standards for safe underwriting and require lenders to retain a 5 percent minimum ongoing stake in any loans they originate that don’t meet QRM requirements.

“For example, a final QM rule could drive an even higher share of the single-family market to FHA if it is not carefully crafted to protect consumers while ensuring the availability of credit from private sources,” Still said.

“More broadly, the best medicine for FHA is a steadily growing housing market with stable home price appreciation, a less likely outcome if the rules cause lenders to increase cost or tighten qualification requirements for borrowers.”

The regulations are under the aegis of the Consumer Financial Protection Bureau (CFPB), which postponed action on both rules in June after protests from Realtors, builders, banks, unions and consumer groups. Under Dodd-Frank, the CFPB is required to issue the qualified mortgage rule by Jan. 21, 2013.

The FHA has repeatedly said it will not require a taxpayer bailout. The National Association of Realtors has supported that stance, and urged Congress not to take steps that might discourage homebuyers, such as raising FHA minimum down payment requirements.

Earlier this year, the FHA got some breathing room after receiving a one-time payment of almost $1 billion from a $25 billion national mortgage settlement with the nation’s five biggest loan servicers.

The government has since sued one of the loan servicers, Wells Fargo, for “hundreds of millions of dollars” due to alleged “reckless origination and underwriting of its retail FHA loans over the course of more than four years, from May 2001 through October 2005.” The bank claims that the lawsuit violates the terms of the $25 billion settlement and has asked a federal judge to throw the case out.

via inman.com

Falling REO inventory dries up foreclosure discounts | Bedford Hills NY Real Estate

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Some metro areas across the U.S. are experiencing steep discounts on foreclosed properties – upwards of 27% in some cases – but the overall mark-down is not as deep as it seems, Zillow said in a new report.

The online real estate listing firm said the national-foreclosure discount on distressed properties is about 7.7%, a paltry amount considering how much lower REOs sell for in certain locales.

Truth is, there are fewer foreclosures out there. Last month, RealtyTrac the online marketplace for foreclosures, reported a yearly decrease in 131 out of the nation’s 212 metropolitan areas.

“Two-thirds of the nation’s largest metros posted decreases in foreclosure activity in the third quarter, indicating that most of the nation’s housing markets are past the worst of the foreclosure problem” said Daren Blomquist, vice president at RealtyTrac.

Zillow uses a different methodology, of course, and compares the sales price of a foreclosure to the estimated-non-distressed sale level of the exact same property.

Metros like Pittsburgh and Cleveland experience foreclosure discounts as steep as 27.4% and 25.8%, respectively.

“The smallest foreclosure discount is found in places where competition for homes is so high, people there are willing to pay the same amount for a foreclosure re-sale that they would for a non-distressed home simply to take advantage of historic affordability,” said Zillow chief economist Stan Humphries. “Additionally, in areas such as Phoenix and Las Vegas, where not long ago one out of every two homes sold was a foreclosure re-sale, buying a foreclosure is no longer just for investors.”

Sacramento is a market where the foreclosure discount is a small 0.7% difference from an average property price.  In the high-priced Los Angeles and New York markets, foreclosure discounts are now running at 4.2% and 15.5%, respectively.

Denver is another market where housing demand is keeping up, and it’s foreclosure discount hovers around 6.4%, which is under the 7% national average.

via housingwire.com

Mortgage applications shoot up 12.6% after hurricane rebound | Bedford NY Real Estate

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The number of mortgage applications filed for the week ending Nov. 9 shot up 12.6% as Northeast consumers returned in the wake of Hurricane Sandy, according to the Mortgage Bankers Association.

The refinance index alone grew 13% from the previous week while home purchases rose 11%.

“Following the decrease in applications two weeks ago due to the effects of superstorm Sandy, mortgage applications in many East Coast states rebounded strongly this week,” said Mike Fratantoni, MBA’s vice president of research and economics.

“Application volume in New Jersey more than doubled over the week, while volume in Connecticut and New York increased more than 60%. In addition to the rebound in the states impacted by the storm, the 30-year fixed mortgage rate reached a new record low in the survey.”

The average interest rate for a 30-year, fixed-rate mortgage with a conforming loan balance declined to a low point of 3.52% from 3.61% a week earlier.  The 30-year, FRM jumbo declined to 3.83% for the same week. In addition, the 30-year FRM backed by the Federal Housing Administration declined to 3.34% from 3.37%

The average 15-year, FRM fell to 2.88% from 2.95%, and the 5/1 ARM edged down to 2.60% from 2.61% last week.

kpanchuk@housingwire.com

via housingwire.com

FHA splits REOs from pre-foreclosures | Pound Ridge NY Real Estate

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The audit for the Federal Housing Administration found the mutual insurance fund short a projected $13.48 billion. However, it could have been worse, if not for the separation of REOs and pre-forelcosures on FHA books.

Capital resources for the year was negative $2.34 billion, which was impacted by five factors including an estimated decrease of $0.45 billion in real-estate owned inventory.

This year the FHA introduced the claim-type prediction model to separate REO claims and pre-foreclosure claims, according to the recent audit submitted to Congress, resulting in a decrease of $5.04 billion for the year and an expected decrease of $6.46 billion in 2018.

Distribution between REO and pre-foreclosure claims were relatively stable until widespread declines in home prices and higher volumes of defaults started to impact the fund in 2009. As a result, foreclosure claims became prolonged and delayed.

In previous years, historical average claim rates between REOs and pre-foreclosures were used to forecast future years. However the delay in claims decreased more REO counts than pre-foreclosure counts, so to avoid any biased delays the claims are now separately accounted for.

Click on the chart to view distribution between REO and pre-foreclosure claims:

“We assume that approximately 20 percent of the model projected REO liquidations would take the form of asset sales instead of foreclosure and the loss rate of the asset sales will gradually converge to the loss rates on REO dispositions during the next two years,” according to the report.

Click on the chart to view REO loss rate.

via housingwire.com