Mark Cumbest, broker/owner of Cumbest Realty in Pascagoula, has had a front row seat to view the developing subprime mortgage collapse in the U.S. Cumbest, who is chairman of Mississippi Real Estate Commission, was 2007 national chairman of the Mortgage Advisory Committee for the Association of Real Estate License Law Officials (ARELLO).
ARELLO is an organization made up of real estate commissioners from across the U.S. and Canada. Real estate commissions are a regulatory body that enforces real estate license laws of states and provinces. Real estate commissions handle the licensing of real estate agents, brokers and sales persons. They offer educational courses, and they monitor continuing education requirements.
“We hold hearings for people who make complaints about real estate licensees,” Cumbest said. “We are involved in the regulation of real estate licensees. Anytime a complaint is filed, an investigation is made. If it goes to a hearing we hear the cases and rule accordingly.”
When Cumbest was asked to chair the ARELLO Mortgage Advisory Committee starting in January of 2007, problems with the subprime mortgage market were barely a ripple on the economic horizon. Throughout the year as he attended ARELLO conferences, problems began to multiply until now the increasing number of mortgage foreclosures is having a world wide economic impact.
Subprime woes grow
“It has been very interesting,” Cumbest said. “This year the big news has been the subprime mortgage problem that affects everywhere, including Mississippi. Even though this problem has originated over the past few years, ‘07 was the year it really became the focal point in the national media and within the real estate community. It has created a national problem. That problem has caused a softening in the real estate market as a result of a rash of foreclosures that have taken place and continue to take place.”
ARELLO meets five times a year, including some joint meetings with the National Association of Realtors. Cumbest said those meetings provide a great opportunity for him interface and share ideas with other real estate commissioners.
“ARELLO is on the cutting edge of real estate license law issues across the country,” he said. “It has really broadened my horizons, too, thinking and observing and discussing issues of particular interest with other real estate commissioners across North America.”
One of the benefits of being involved with the national group was being aware of problems related to the subprime foreclosures that were happening in others states.
“We share ideas and what may be a problem in one state may not have made it to the other states,” Cumbest said. “Several things brought up offshoots of the subprime mortgage problems we haven’t seen in Mississippi, and I hope we don’t.”
One is unethical companies that pose as “mortgage rescue” businesses. These businesses advertise, “If you are in trouble with your mortgage, call us.” Unwary homeowners sign over the deed to the business that then charge the homeowner’s rent to allow them to stay in the home. Only the rent is later raised to such a high level that it would be more than the original note, often causing the consumers to lose their home.
“The former homeowner would be in worse shape than to begin with,” Cumbest said. “The next step would be eviction, which would be a terrible scenario. It was very alarming to hear about cases like that that have happened across the country. We haven’t seen that type of fraud in Mississippi much, and hopefully we won’t. What we are seeing in Mississippi is mortgage fraud.”
‘No area immune from mortgage fraud’
Mortgage fraud can include an inflated appraisal for property sold to investors who later default on the payment. Then the mortgage company has overloaned on property. Often larger than normal fees are paid to the appraiser, the closing attorney and other parties involved in mortgage fraud scene.
“That is something we have seen,” Cumbest said. “There was a fairly large case that happened in the Hattiesburg-Laurel area back last year. It is not a widespread problem, but it is a problem we have seen that was part of discussion in Mortgage Advisory Committee meetings. No area is immune from mortgage fraud.”
Cumbest said there is a danger that people will overreact to the subprime collapse, causing people to forego real estate purchases. But lower interest rates that are expected to be approved by the Federal Reserve could help stimulate sales.
Ideal time to buy?
Home sales are down in usually hot real estate markets in the state including Jackson and Southaven. And along the Gulf Coast, the lack of availability and affordability for insurance has put a damper on sales. But Cumbest said this may be the ideal time to buy.
“The message I’m telling people is now is an excellent time to buy because of the rates being very low, almost at record low levels, and then there is a great selection to choose from,” Cumbest said. “The price has stabilized and in many cases is coming down. We’re seeing evidence of that. If you were to remove insurance as an issue, the Coast would be in a serious growth posture. The real estate market would be extremely hot if it weren’t for the insurance situation. Even with the insurance situation, in my opinion is we’re better off than most parts of the country. What sets us apart in South Mississippi is the post Katrina demand. There is such a huge demand in our area for affordable homes.”
It may go without saying since many people who got subprime mortgages evidently didn’t realize their note could go up significantly. But it is important to read the fine print when you get a mortgage.
“Have good real estate professionals working with you to be able to advise you of the types of financial options that are out there to avoid the trap of getting involved in a bad mortgage situation,” Cumbest said. “For those who are stuck with the high interest rate loan, I’m advocating everyone in that situation go back to their lender and renegotiate for a fixed mortgage, something they can depend on and budget for.”
What kind of responsibility do real estate agents and brokers have for the subprime mortgage problems? Cumbest said obviously what happened in some areas of the country was that real estate agents may have been too eager for sale. The lesson from that is the important of dealing reputable real estate professionals, banks and mortgage companies with proven track records.
While sales have declined as a result of tightening credit and other problems in the economy such as high fuel costs and declining employment, there are currently more licensed real estate agents in the state than ever in history. There are now more than 15,000 real estate licensees in Mississippi. That includes both active and inactive brokers and salespersons.
“That was a landmark,” Cumbest said. “It is a pretty large responsibility to license a growing number of real estate professionals. We provide education courses, disciplinary hearings and set the fees. In early ‘07, we actually reduced the fees for licensees, which was certainly appreciated by the licensees.”
Contact MBJ contributing writer Becky Gillette at email@example.com.