Once again, the government seems to have forgotten that the failing housing market is the single most important aspect to economic recovery and job creation.

On Thursday, President Obama gave an impassioned appeal for $447 billion in tax cuts as his plan to create jobs. One item of note conspicuously absent was how to help the housing market recover more quickly and restore industry jobs. By the way – anyone care to guess how many real estate agents dropped out of the market in the last 3 years?

While Obama did pledge to help “responsible homeowners” refinance existing mortgages, his plan sounds familiar. Haven’t we heard this before? Has it worked?

According to the LA Times story:

Home sales, prices and construction have been bad and have been getting worse for so long that Washington and many Americans have grown numb to the problem…

Coming out of the deep recession of the early 1980s, new-home construction roared back to life — propelling the economy forward and creating 9% of the new jobs in the first year of recovery. This time around, construction accounted for 93% of the net decline in employment.

“Housing — it’s not the American dream, it’s the nightmare,” says Karl E. Case, co-founder of the Case-Shiller home-price index. The latest reading of the index, which calculates price changes for the U.S., fell 4.5% in June year-over-year and is down 32% from five years earlier.

It’s obvious that the housing market is the root cause of many of our economic problems, including high unemployment. It is the economy’s “silent killer,” as the writer says. And it seems to be the forgotten industry.

What did you think of the Obama jobs plan? Will it help the real estate industry? Please share your thoughts.

Are big banks the enemy of agents? The US Government’s Federal Housing Finance Agency (FHFA) seems to think so, suing 17 major banks for mortgage fraud. Below is the observation of a reader who emails us his experience on how banks are taking business out of the hands of very qualified local agents. This frustrated agent suggests that banks are helping prolong the poor housing market. Do you agree?

Today I got word of another agent in our area losing their home to foreclosure. It makes me so mad because the banks are helping to further cause foreclosures in our area and I am sure everywhere in the nation. And lets be honest, they aren’t hurting…….not the big banks! But we, the little guys who bailed them out, are!

In our MLS we have 944 registered agents. Last year we had a total of 1410 sales. This year we have to date 844 sales. That is not a lot of sales per agent on average. 2010 was 1.49 per agent and this year it is less than 1 so far.

Another way we see the banks perpetuating the downfall of our housing and real estate market is by taking the business away from our area. They hire out-of-area agents who do not know our market, do not know our disclosures and are difficult to reach, to sell their REO inventory. They then want the buyer to use their “out-of-area” title and closing companies with incentives to do so by offering to pay the costs. This is putting more and more local agents and affiliates out of business.

What can we do to stop the banks from reaping further record breaking profits while putting Realtors and their affiliates out of business?

I have also heard that the banks get further subsidies if they foreclose on a house. If this is true no wonder the success rate of short sales is so low. What can we, as Realtors, do to stop these practices?

This week we got a very powerful email from one of our readers. It was a list of questionable practices some agents, specializing in REO, are using at the expense of others. The following email is rich with information. Please take a read and let us know what you’ve seen. At RE-Insider, we believe that we can all benefit by sharing our experiences.

I’ve been tracking activities in my area for at least five years. I am unusual in that I work in, and am very familiar with, an area that covers more than three counties. My background as an engineer, and my experience in trends and forensics, makes it feel (to me) as though I can almost see these activities growing in practice before my eyes.

– MANY local REO agents have been, and still are, manipulating their sales by hiring buyers’ agents at a very low split compensation and then suppressing other agent’s offers in favor of their sub-agent’s offers. The framework of the team is only known to the brokerage, and not to the banks, since all the employees are 10-99 employees. This is out-and-out fraud, and I can name names, even.

– Other REO agents are continuing practices that are blatant RESPA violations. In the past two months alone, I have had two separate buyers told to pay title/escrow fees in SPITE of the fact that they were forced to use the Bank’s [Seller’s] own escrow company.

The agents use the trick this way: The buyer receives the bank addendum stating that they should “check one” of two boxes: either they will use THEIR chosen escrow company and pay the title insurance and escrow fees, OR, they may choose to use the bank’s RECOMMENDED escrow company and the bank will pay an escrow fee.

Once the buyer agent sends back the form and the buyer has elected their own title company, the selling agent then says, “I already put this PENDING, and if I have to re-write this form NOW, I will have to let it go back on the market, and you will have to hope we don’t get any more offers. OR, you can just check the box that says that you are choosing OUR escrow company.” <--- Violation Number 1 Then, AFTER ALL THIS, and the Buyer has been strong-armed into going with the escrow company that the Bank/Seller wants to use, the listing agent then provides a "disclosure" stating that the escrow company is in part or wholly owned by the bank. <--- Violation Number 2 Of course, the capper is that the Buyer ends up paying all sorts of junk fees to the pseudo-escrow company before all is said and done, so that the reality of the bank "paying" those fees is mitigated, and the buyer has basically paid them anyway. - Another insidious thing that agents are doing is that there are some agents who OBVIOUSLY never intend to work a short sale listing they get. It's quite transparent that they only took the listing in order to get buyer leads as long as they can. These days, there is NO REASON not to close nearly every short sale out there. I find it a sad state of affairs that everybody--the public and real estate agents as well--have completely gone numb to doing the right thing, and to being honest and accountable.

Forget about buyer beware. It’s now agent beware. In another fast-spreading scam, another federal agency today put the industry on notice that they are stepping up their investigations into short sale fraud.

As RE-Insider reported last week, the FBI is increasing its mortgage fraud investigation. Now Freddie Mac has announced that it is doing the same in an effort to stop short sale fraud.

According to Freddie’s Shelly Poland and Robert Hagberg, who are responsible for fraud investigation, short sale fraud is on the rise – especially when real estate agents fail to fully disclose all other parties involved in the transaction.

According to them agents should be on the lookout for the following trends:

• Falsely indicating on a new short sale listing that there is an offer on a property to discourage legitimate offers and protect an accomplice’s planned low bid
• Manipulating the short sale listing price by making the house look more distressed than it really is (“reverse staging”), inflating repair estimates, or using similar tactics designed to obtain an artificially low home value on the Broker Price Opinion
• “Flipping” schemes where the fraudster “buys” a house in a short sale without putting down any of his own money and then sells it a few hours (or days) later to a legitimate buyer at a much higher price
• Manipulating the settlement statement so the fraudster can skim away net proceeds from the sale for himself or other parties in the transaction without the seller’s or investor’s knowledge

While short sales have increased dramatically – up 31% from a year ago –regulatory oversight and enforcement has apparently fallen behind. Now short sale fraud is the top priority for Hagberg’s group. Freddie Mac has begun working with agents and law enforcement officials to detect and investigate suspicious behavior.

To strengthen their hand, the government-backed mortgage institution has even implemented a new policy that requires all parties involved in a transaction to sign an affidavit attesting that it is a true “arms-length” deal.

So now, agent beware.

According to a new FBI report, two of the top 10 markets for mortgage fraud investigation are in California – Los Angeles and San Francisco. As agents, could you be involved?

Some of the FBI’s most scrutinized areas of mortgage fraud involve loan origination, foreclosure-rescue initiatives and short sales. According to the report, an estimated $10 billion in loans in 2010 was based on fraudulent application data – even though total loan applications submitted were well off of previous years’ averages.

According to a HousingWire story written by Kerry Panchuk:

Fraud also is occurring when parties are engaged in property flipping, loan modifications, equity skimming, builder bailouts, reverse mortgages, and title and escrow deals.

The FBI said professionals working in the mortgage industry were involved in many of the cases, with organized crime playing a significant role.

“There have been numerous instances in which various organized criminal groups were involved in mortgage fraud activity. Asian, Balkan, Armenian, La Cosa Nostra, Russian and Eurasian organized crime groups have been linked to various mortgage fraud schemes, such as short sale fraud and loan origination schemes,” the FBI said.

The FBI cites the down real estate market for creating an environment that keeps mortgage fraud alive, especially in depressed housing markets such as California’s. This has forced many agents to cut corners. With the FBI cracking down agents must be especially diligent and protect their careers, reputations and licenses.

Are Freddie Mac and Fannie Mae unwittingly forcing agents out of their jobs?

Earlier this week, RE-Insider noted that the Obama administration was considering renting out Fannie Mae and Freddie Mac mortgaged homes acquired through foreclosure, essentially taking tens of thousands of homes off the market.

That takes care of many lower-priced homes that agents could otherwise be selling. Now federal rules may be taking pricier homes (with their more lucrative agent fees) off the market through a “one-two punch” of lengthy foreclosures and a reduced federal loan ceiling.

According to an analysis by USA Today, homes priced between $417,000 to $999,999 nationally were delinquent for roughly four months longer than less-expensive homes:

Loans below $417,000 are generally owned by mortgage giants Freddie Mac and Fannie Mae.

Their processes lead to quicker resolution than if loans are held by others. “It’s a much simpler process,” says Jason Kopcak, mortgage loan expert at Cantor Fitzgerald.

Bigger loans, often found on pricier homes, tend to be held by lenders or investors. Banks are “moving the stuff they don’t own first,” to satisfy others and limit litigation, says Paul Miller, analyst at FBR Capital Markets.

To add insult to injury, Fannie Mae and Freddie Mac “conforming” loan limits are scheduled to shrink from $729,750 back to $625,000 after Sept. 30. That means home buyers in higher-priced markets will be forced to search for jumbo loan mortgages from the few banks who offer these types of loans – all at higher rates and fees.

This reduction in the loan limit will dramatically shrink the buying pool and reduce home prices in pricier neighborhoods from San Francisco to New York.

Fortunately, there are legislators who are looking to extend the higher loan limit for the two government-backed mortgage agencies. While RE-Insider agrees this is desperately needed to shore up the struggling housing market – and will help hundreds if not thousands of real estate industry professionals continue to make a living – time is running short.

RE-Insider would like to know your thoughts. Have the feds inadvertently created a rigged game that’s keeping more expensive homes off the market? How will these events impact your business?