Keep Real Estate Jobs in California – Stop the Off-Shoring of Work to India

Our government is showing a callus lack of regard for the well being of workers and consumers in California. Just how, you might ask?

A great example is in 2008 the U.S. government stepped in and bailed out Freddie Mac as part of the effort to save the mortgage industry – jobs and all.  What did Freddie Mac do after it received our hard earned tax dollars? It turned nearly all of its settlement services needs over to one company – First American.

And what did First American do? Replaced jobs in California and sent them to India.

First American makes a significant percentage of its business from California Real Estate professionals, home buyers and sellers and tax payers.  But it continues to send jobs out of state, and out of the country. Talk about biting the hand that feeds you!

Chances are, if you bought a home recently in California, something used in your transaction that was previously “Made in the USA,” now isn’t.

Like you, I am extremely worried about the dwindling number jobs in the California real estate industry.  Especially when a major player like, First American, is dramatically off-shoring American jobs to their subsidiary company First Indian Corporation.

What First American jobs are being performed in India?  Read their press release which states, “The First Indian Corporation’s primary areas of focus include title insurance, property tax, flood certification, default management services, and credit and property information.”

To give you an idea of the scale of how many jobs they are shipping to India’s Bangalore & Hyderabad, check out this link: http://jobsearch.monsterindia.com/searchresult.html?co=xfirstacinx&cat=22

At this difficult time we should consider focusing our tax dollars and support for creating and holding on to American jobs. Let’s keep Californians and all Americans working. What’s so bad about that?

Freddie Mac is Off-Shoring American Jobs

By now you know that I’ve raised several concerns about Freddie Mac and their seemingly exclusive partnership with First American in the California real estate market.  (See my earlier stories here)

At a time when our country is desperate for lack of jobs, when our President in his State of the Union calls for a new jobs program, how, I ask, is it possible that our government is continuing support companies and programs that outsource critical jobs to India?

Like you, I am extremely worried about the dwindling number jobs in the CA real estate industry.  Especially when a major player like, First American, is dramatically off-shoring American jobs to their subsidiary company First Indian Corporation.

I am not naïve. I understand the cheap labor pool and other corporate benefits of off shoring.  But First American’s First Indian isn’t just handling mortgage services for Indian properties.  They are doing the work that Americans use to do for transactions on American soil.  And they are not just performing the services for First American clients, but those of Freddie Mac as well.

So what First American jobs are being performed in India?  According to their press release, “The First Indian Corporation’s primary areas of focus include title insurance, property tax, flood certification, default management services, and credit and property information. The company assimilates and delivers information that helps First American customers make decisions, operate their businesses and advance their lives.”

To give you an idea of the scale of how many jobs they are shipping to India’s Bangalore & Hyderabad, check out this link: http://jobsearch.monsterindia.com/searchresult.html?co=xfirstacinx&cat=22

In 2008 the US government stepped in and bailed out Freddie Mac in an effort to save the mortgage industry – jobs and all.  In 2010, President Obama’s State of the Union Address restated his desire to help keep the American worker employed.

So why, I ask, would this government-owned company, Freddie Mac, continue to align themselves with a partner who so obviously sends these jobs off-shore, away from the American worker?     Why haven’t they found a partner who provides both the quality information needed as well as support American-based jobs?  We know Freddie Mac will have many responses to their RFP from America companies.  They need to choose one. Now.

As you know, we sent a note to Freddie Mac last week, looking for answers on why they refuse to complete their own RFP process.  So far we have had no response.  We welcome you to contact them, as well as others politicians, like the ones below, to try to get some answers.

• Freddie Mac
• HUD (Housing and Urban Development)
• FHFA (Federal Housing Finance Agency)
• GAO (General Accounting Office)
• Senator Feinstein
• Senator Boxer

An open letter to the NEW CEO of Freddie Mac: While Freddie Mac Fiddles, California Burns

January 18, 2010

Charles E. “Ed” Haldeman, Jr
Chief Executive Officer
Freddie Mac
8200 Jones Branch Drive
McLean, VA 22102-3110

Dear Mr. Haldeman:

This is not my first time writing Freddie Mac, HUD and U.S. senators regarding Freddie Mac’s seemingly anti-competitive actions in the California marketplace.

Last year, I wasn’t alone in calling out Freddie Mac’s unfair practices. It was echoed in other media and even among several lawmakers.  In particular I’m concerned with unresolved and continuing questionable business practices in the California real estate market.

In early 2009, Freddie Mac sent out a Request for Proposal (RFP) to a group of pre-selected Natural Hazard Disclosure (NHD) companies in California.  This, immediately, got my attention. By limiting the companies who received the RFP to First American and several small regional companies unable to meet the RFP requirements, while excluding qualified NHD companies from being considered, Freddie Mac succeeded in short changing the American home buyer by removing their right to choose from a collection of qualified providers.  Mr. Haldeman, as you can see, this exclusion lends further credence to the idea that your organization wasn’t acting with transparency, openness or fairness during this very influential process.  In fact, it appeared that Freddie Mac was attempting to pre-determine the “winner.”   And by selecting only one provider for these services, it appears California home buyers and sellers were the ones who would be shortchanged.

After my letter and others, most notably one from Sen. Jim Costa (D-Fresno), were sent, Freddie Mac appeared to relent and issued a second RFP, giving new firms about 48 hours to respond so they could be considered as additional Freddie Mac approved NHD report providers.  Despite the short time frame, several NHD firms submitted completed RFPs and began to wait to hear a decision from Freddie Mac.

And now, months and months later, they continue to wait.

And while these companies wait, Freddie Mac continues to treat First American Title’s FANHD as their preferred and only provider.

What amazes is me, is that nearly a year later; these qualified NHD firms continue to wait for a response from Freddie Mac.   Each time a firm contacts Freddie Mac, they are told that “Freddie Mac is too busy to respond to RFPs,” despite having issued one.

Mr. Haldeman, why won’t Freddie Mac respond?  It is no secret to those of us in the industry that Freddie Mac is using First American Title’s FANHD, nor is it a secret that First American Title CFO, Anthony “Buddy” Piszel used to be Freddie Mac’s CFO.

May I remind you the threat to harm competition is contemplated in the California Business & Professions Code Section 17200 as unfair business practices. In addition, from what I can find, this arrangement appears not comply with federal and California antitrust and unfair competition laws, and could possibly be a violation of the Sherman Act.

I imagine that you are aware that Natural Hazards Disclosure Reports are a settlement service as defined by, and regulated by HUD (the Department of Housing and Urban Development). Consequently, exclusive business arrangements like this one between Freddie Mac and First American could easily merit a look to see if they have restricted competition and thus, eliminated small companies and jobs in the state of California as well as a RESPA violation.

Mr. Haldeman, while you were not Freddie Mac’s president when the exclusive agreement between Freddie Mac and First American took place; you are now.  Stop this unfair exclusive agreement designed to eliminate competition and jobs in California.

I look forward to your reply,

Serena Ehrlich
Publisher and Editor,
RE-INSIDER

CC:     HUD (Housing and Urban Development)
FHFA (Federal Housing Finance Agency)
GAO (General Accounting Office)
Senator Feinstein
Senator Boxer

Choosing Quality over an RFP

I wanted to share this recent comment to our last blog post:  Following Up on Freddie Mac: What Has Happened?

“Serena,

I found your post very interesting. Especially the suspicious behavior you cited:

“In talking to a number of other disclosure companies in California I discovered that the only ones which received the initial RFPs from Freddie Mac were several regional disclosure companies who would have not met Freddie’s criteria to become a supplier of disclosure reports. Somehow the disclosure companies which would have qualified ***never received an RFP.*** ”

“I am still getting feedback from the disclosure companies who completed and submitted these RFPs saying that they never heard back from Freddie Mac, despite submitting their RFP responses ***within the 48 hour deadline.***

Maybe we should only buy our disclosure reports from those companies. Please let us know who they are!

Thanks,

Rick”

**************************************************

Dear Rick,

I wish I could just give you a list and send you on your way.

As you know, when it comes to selecting disclosure service providers, we at RE-Insider continue to encourage realtors to choose their partners based on the product’s quality, accuracy, thoroughness, high-level of customer service, insurance coverage and more.  No matter how it is sliced, there are no shortcuts when making this decision, including a rushed RFP.    We strongly continue to believe that selecting a natural hazards disclosure company based on the submission of an RFP vs. quality of service and the report does not represent the good faith effort that is expected of real estate professionals.

Thank you so much for your question.  I hope this helps, if you have any other questions or comments, please let me know!

Serena

Following Up on Freddie Mac: What Has Happened?

Well it has been 4 months since we last looked in on Freddie Mac and the relationship it has with First American.

At that time we had a lot of response from legislators, both state and federal, asking Freddie Mac for an explanation on this anticompetitive and potentially non RESPA compliant business relationship they have with First American disclosures.

Freddie Mac responded to all of these inquiries by issuing a statement saying they did not have an exclusive relationship with First American disclosures.

Please note, this statement was a direct contradiction of the memo Freddie had previously sent out under the banner of its Homesteps division directing real estate agents that First American disclosure reports were required for Freddie’s REO properties. Freddie went on to say they had sent out RFPs to a number of disclosure companies in California at the beginning of 2009 and no one who met their standards responded except First American.

In talking to a number of other disclosure companies in California I discovered that the only ones which received the initial RFPs from Freddie Mac were several regional disclosure companies who would have not met Freddie’s criteria to become a supplier of disclosure reports. Somehow the disclosure companies which would have qualified never received an RFP.

How convenient for First American.

It seemed that Freddie had decided to relent early this fall due to pressure it received from legislators and reissued the RFP to all the disclosure companies that did not receive one originally.

So we’d assume that everything is being fairly handled, right? Well, maybe not quite.

From what I can tell in my research, it now seems Freddie sent out a much more complex, completely different RFP to First American’s competitors than it originally sent out in the beginning of 2009. On top of that they put a 48-hour deadline on the companies to return the RFP to them in order to be considered for supplying reports. On the surface it would appear that Freddie wanted to resolve this issue quickly and fairly.

Here we are now at the end of the year, and months have gone by since the 48-hour deadline.

The problem?  I am still getting feedback from the disclosure companies who completed and submitted these RFPs saying that they never heard back from Freddie Mac, despite submitting their RFP responses within the 48 hour deadline.

One company told me that their inquires into Freddie Mac about the status of  their RFP were met with a cool response, “Freddie Mac is too busy to deal with the RFPs at this time, maybe later.”

I am sorry to report that despite all the initial responses by Freddie Mac, in fact, nothing has changed.   Freddie Mac and First American are continuing on with their questionable, seemingly exclusive, business relationship and those firms who submitted RFPs are being stalled.

Have you seen anything like this in your marketplace?  Are you being stalled by Freddie Mac?  If so, let me know, I would love to speak with you!

Congressman Jim Costa Questions Freddie Mac’s Recent Partnership with First American Natural Hazard

Dear Readers,

As you know, I recently wrote an open letter to Freddie Mac’s CEO regarding their recent exclusive partnership with First American Natural Hazard. My concern has always been that arrangements like this are designed to cut out the smaller independent providers and to create situations like the monopoly currently being enjoyed by the two big title companies in CA real estate REO transactions. Well, I am not the only one who feels this way.

CA Congressman Jim Costa (D-Fresno) recently wrote his own open letter to Freddie Mac (click here to view) that includes several questions that we would love to see answered, including:

Did Freddie Mac consider the impact this might have on other independent NHD Report providers? What measures have been taken to ensure that this special deal does not negatively affect California consumers? What benefits does Freddie Mac gain by dealing with First American Natural Hazard Disclosures?

Freddie Mac will have to answer these questions and many others as people both on Capitol Hill and throughout the CA marketplace realize the enormity of the ramifications of agreements such as the one between Freddie Mac and First American Natural Hazard.  Especially in light of the fact that it is our own tax dollars paying to support companies like Freddie Mac who so quickly turn around and engage in practices that ultimately harm CA tax payers .

We will continue to request that Freddie Mac opens the Natural Hazard Reports market to fair and open competition leaving the decision where it is supposed to be, with California home buyers and their real estate agents.

In the meantime, a huge thank you to Rep Jim Costa (D-Fresno) for his efforts!

Serena

An Open Letter to Freddie Mac’s CEO on Your Anti-Competitive Business Practices

John A. Koskinen
Interim Chief Executive Officer
Freddie Mac
8200 Jones Branch Drive
McLean, VA 22102-3110

Dear Mr. Koskinen:

Considering the state of California’s unemployment across its real estate industry, created in part by the most severe mortgage crisis in American history, I’m disturbed by some of Freddie Mac’s most recent anti-competitive actions.

It is surprising to see the new Freddie Mac, under the auspices of the U.S. government, engaging in “questionable” business partnerships that require all buyers of Freddie Mac California REO properties to agree to the use of one company’s Natural Hazard Disclosure (NHD) report – thereby cutting out an entire industry from a consumer’s choice. Specifically Freddie Mac is now requiring the exclusive and sole use of FANHD natural hazard disclosure reports.

As you know, this is the ONLY disclosure source that can inform a buyer of potential problems that may affect the desirability and value of their new home.

This deal seems designed to kill a highly competitive real estate industry, hurt dozens of companies and put hundreds if not thousands of employees out of work.

This exclusive arrangement unfairly “corners” the California market for REO properties and has in fact created a monopoly to the benefit of one company, First American Title’s FANHD. As we all know, eliminating the competition among NHD report providers in the REO market is unethical and against the interests of the buyers.  If fact it could be considered much worse.

The threat to harm competition is contemplated in the California Business & Professions Code Section 17200 as unfair business practices. In addition, from what I can find, this arrangement fails to comply with federal and California antitrust and unfair competition laws, and is in violation of the Sherman Act.

Natural Hazards Disclosure Reports are a settlement service as defined by, and regulated by HUD (the Department of Housing and Urban Development). Consequently, this arrangement certainly appears to be in violation of RESPA Section 8.

And your decision to partner with First American Title is most interesting since no panel has certified this company’s report to be a better or more accurate product than anyone other vendor.  To some, First American Title’s recent hire of former Freddie Mac’s Executive Vice President and CFO, Anthony “Buddy” Piszel raises eyebrows.  Could this new agreement have been part of a package deal in his hiring?

First American Title doesn’t have a pristine reputation either. It is frequently covered in the media as a repeat offender for RESPA violations, having been forced to settle and pay penalties in numerous government lawsuits across the United States.

Please Mr. Koskinen, don’t wait until your personal reputation is besmirched for letting Freddie Mac engage in what the court of public and legal opinion may consider to be a clear RESPA violation and illegal.

California, its people, its institutions and its government need your personal intervention to put an end to this exclusive arrangement between Freddie Mac and FANHD which ultimately will drive First American competitors out of the real estate market, further additional unemployment, reduce badly needed taxes and most importantly be detrimental to the interests of California consumers.

The right to choose an NHD provider should be left to the consumers of the state of California.

I look forward to your reply,

Sincerely,

Serena Ehrlich
Publisher and Editor
RE-INSIDER

CC:      FHFA (Federal Housing Finance Agency)
GAO (General Accounting Office)
Senator Feinstein
Senator Boxer