As investors navigate the real estate market, they are faced with some the same issues as others in the mortgage industry such as regulations and compliance, the highs and lows of growth, and technology innovations.
Chris Cobbs, Managing Director of National Asset Advisors told MReport how investors can make the most of their operations in every facet of the housing market.
MReport: How can an investor in today’s real estate market still capitalize on opportunities and prosper in today’s market?
Cobbs: There is a lot of opportunity out there in real estate and local business, so even with a national footprint or a large regional footprint, anyone that is looking to place a large amount of capital on the investment side is looking for people on the ground and for people who can quickly acquire properties, renovate, and provide them with a ready-to-go home.
MReport: As new regulation is coming about, how can investors ensure compliance with the new rules where it affects their business?
Cobbs: Firms like ours have to focus their attention on understanding those regulations and being able to comply with them. Our niche is providing compliant seller-financed transactions. We generate contracts for deed, installment contracts, and land contracts, where the title of the property doesn’t transfer until the underlying seller-financing is retired. In addition, those transactions must have been deemed to be creating debt by federal legislation so states regulate that just like they regulate hard-money lending.
We set out to establish a company that could provide origination for those transactions in a compliant manner which would increase their value in the secondary market.
MReport: In what ways do you think the investment industry can evolve and improve? New technology? New regulations?
Cobbs: There’s a lot of technology in this space. It’s really changed the way that everyone conducts business, made information available more quickly, therefore allowing decisions to be made more accurately. But the downside to that is that not all the data is verified and is made available perhaps a little too fast. The information is made available now because the social media platforms and the Internet have created the space for it, whether accurate or not, to anyone that wants to find it. Speed has been the desire in this industry, so the speed at which we can obtain information now dictates that it cannot always be verified as readily or as much as it should be. This is one issue that could be improved upon in this industry.
From a regulatory standpoint, not to speak for all mortgage lenders, but particularly someone from a company that does seller financing, we are way overregulated. We are a microscopic part of the overall investment market. If we were to fail or if any of our peer companies were to fail, it would make a blip on the radar screen. We are not insured by the federal government on any of our loans. If they are going to buy them at any point or time, they are going to be scrubbed to ensure that they were originated in a compliant manner. As a result, we are held to same standard as Bank of America and we are not a Bank of America. It’s a difficult and very costly part of our business that hampers our ability to provide services to consumers that really need them, because they can’t financed with more conventional institutions like the Bank of America.
On the consumer side, we are completely on-board with consumer protections. We do everything that we can to make sure that everyone we are dealing with, is aware of what we are doing and what their obligations are. On the downside, if they can’t perform and they do default, we are not suing them in court for their deficiencies. We just want the property back and to search for solutions for these customers. It’s important to understand the borrower.
As credit quality improves, the default side of it becomes less of an issue, but informing them of their options and letting them know what they can do or need to do is part of what we do. The forcing of servicers to do what they should have been doing all along is a good thing, but regulating a company to use this form or that form and penalizing them if they don’t is just overkill.