Nearly one in five delinquent mortgages through the first half of 2009 was owned by someone who could afford to pay, but decided defaulting was a smarter financial play.
The decision to walk away, called “strategic default,” was studied by crediting agency Experian and international consulting group Oliver Wyman.
Their results were released in a report today that found 19 percent of mortgage defaults nationwide in the beginning of 2009 were strategic. The absolute number, 355,000, was a 53 percent increase from the same period the previous year.
Florida real estate experts were surprised by the 19 percent figure – not because it was so high, but because it was so low.
“Personally, I’d be willing to say it’s higher here,” said Boca Raton real estate attorney Marlyn Wiener. “Frankly, the majority of the clients who come into my office are strategically defaulting.”
Today’s report defined strategic defaulters as borrowers who miss six consecutive mortgage payments without missing multiple payments on other debt, such as car or credit card payments.
The theory is it’s more financially savvy in the long run to walk away from a devalued home than continue to pay on the mortgage.
The report pointed to Florida and California as states where strategic defaults are concentrated. From 2005 to the first half of 2009, the number of strategic defaulters went up by 52.8 times in Florida, it said.
A May report from the Federal Reserve Board found that when home equity falls below 50 percent, half of mortgage defaults are driven entirely by the lowered value.
About 44.3 percent of homes in Palm Beach, Broward and Miami-Dade counties have loan balances that are higher than the home’s worth, according to a report last month by Zillow, a real estate analysis firm.
Today’s news on strategic defaults comes as some predict a looming backlash against people who can afford to pay but don’t.
Last week, government-sponsored mortgage purchaser Fannie Mae announced it was banning strategic defaulters from getting new loans for seven years.
Wiener said two of her clients recently received calls from collection agencies seeking to collect on a mortgage default.
“It’s not like you just send them the keys and it all goes away,” said Bill Hardin, director of real estate programs at Florida International University in Miami. “It can come back, and it can come back for a while.”
In Florida, lenders are allowed to seek a deficiency claim for five years and have up to 20 years to collect.
Strategic defaulters gamble that banks won’t come after them because they are too overwhelmed with foreclosures. But banks are now hiring collection agencies, or even selling the deficiency claims to companies whose profit margin is based on recovering the debt.
Shari Olefson, a Fort Lauderdale attorney and author of Foreclosure Nation, Mortgaging the American Dream, said she blames lawyers for advertising strategic default as an option without telling clients of the repercussions. Wiener said she always tells clients a lender could pursue a deficiency claim.
Olefson also said that strategic defaulters are not just hurting themselves, that entire neighborhoods suffer from depreciated values when a homeowner walks away from a mortgage.
“It’s taking advantage of a national crisis,” she said. “Some people legitimately are unemployed and can’t afford the mortgage and they’re not getting any sympathy because of the strategic defaulters.”
Source: The Palm Beach Post, Fla., Kimberly Miller. Distributed by McClatchy-Tribune Information Services.
Wednesday, June 30, 2010
Foreclosures: One-third of Fla. sales
According to a new report from RealtyTrac, foreclosure homes accounted for 31 percent of all residential sales in the first quarter of 2010. Additionally, the average sales price of properties sold while in some stage of foreclosure was nearly 27 percent below the average sales price of properties not in the foreclosure process.
A total of 232,959 U.S. properties in some stage of foreclosure – default, scheduled for auction or bank-owned (REO) – sold to third parties in first quarter 2010, a decrease of 14 percent from the previous quarter and down 33 percent from the peak during the first quarter of 2009, when sales of foreclosure homes accounted for 37 percent of all residential sales.
“First-time homebuyers and investors continue to buy foreclosure properties in large numbers and at substantial discounts,” says James J. Saccacio, chief executive officer of RealtyTrac. “As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration.”
The average sales prices on properties in some stage of foreclosure decreased 23 percent from 2006 to 2009, while the average discounts on foreclosure purchases steadily increased from 21 percent in 2006 to 27 percent in the first quarter of 2010. Discounts on REOs are larger than discounts on pre-foreclosures, although discounts on pre-foreclosures appear to be trending higher as short sales become more common.
Also from the RealtyTrac report:
• Foreclosure sales increased 2,500 percent from 2005 to 2009.
• More than 1.2 million U.S. properties in some stage of foreclosure sold to third parties in 2009, an increase of 25 percent from 2008 and an increase of nearly 327 percent from 2007.
• Total foreclosure sales in 2009 were up more than 1,100 percent from 2006.
• Foreclosure sales accounted for 29 percent of all sales in 2009, up from 23 percent in 2008 and up from 6 percent in 2007.
• The average sales price of properties that sold while in some stage of foreclosure in 2009 was 25 percent below the average sales price of properties not in the foreclosure process. That was up from an average discount of 22 percent in 2008 but down from an average discount of 26 percent in 2007.
• The average foreclosure discount in 2005 was 35 percent, driven by a nearly 50 percent discount on REOs; however, the discount on pre-foreclosures trended up slightly over the same five-year period, from nearly 12 percent in 2005 to 15 percent in 2008 and 2009.
• Nevada, California, Arizona posted the highest percentage of foreclosure sales in the first quarter. Foreclosure sales accounted for 64 percent of all sales in Nevada in the first quarter, the highest percentage of any state. California posted the second highest percentage, with foreclosure sales accounting for 51 percent of all sales there in the first quarter – up slightly from 50 percent in the previous quarter but down from 70 percent of all sales in the first quarter of 2009. Foreclosure sales as a percentage of all sales were also down in Arizona from the first quarter of 2009, but the state still posted the third highest percentage in the first quarter, with foreclosure sales accounting for 50 percent of all sales.
• Other states where foreclosure sales accounted for at least one-third of all sales were Massachusetts, Rhode Island, Florida, Michigan, Georgia, Illinois, Idaho and Oregon.
Source: Florida Realtors®
A total of 232,959 U.S. properties in some stage of foreclosure – default, scheduled for auction or bank-owned (REO) – sold to third parties in first quarter 2010, a decrease of 14 percent from the previous quarter and down 33 percent from the peak during the first quarter of 2009, when sales of foreclosure homes accounted for 37 percent of all residential sales.
“First-time homebuyers and investors continue to buy foreclosure properties in large numbers and at substantial discounts,” says James J. Saccacio, chief executive officer of RealtyTrac. “As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration.”
The average sales prices on properties in some stage of foreclosure decreased 23 percent from 2006 to 2009, while the average discounts on foreclosure purchases steadily increased from 21 percent in 2006 to 27 percent in the first quarter of 2010. Discounts on REOs are larger than discounts on pre-foreclosures, although discounts on pre-foreclosures appear to be trending higher as short sales become more common.
Also from the RealtyTrac report:
• Foreclosure sales increased 2,500 percent from 2005 to 2009.
• More than 1.2 million U.S. properties in some stage of foreclosure sold to third parties in 2009, an increase of 25 percent from 2008 and an increase of nearly 327 percent from 2007.
• Total foreclosure sales in 2009 were up more than 1,100 percent from 2006.
• Foreclosure sales accounted for 29 percent of all sales in 2009, up from 23 percent in 2008 and up from 6 percent in 2007.
• The average sales price of properties that sold while in some stage of foreclosure in 2009 was 25 percent below the average sales price of properties not in the foreclosure process. That was up from an average discount of 22 percent in 2008 but down from an average discount of 26 percent in 2007.
• The average foreclosure discount in 2005 was 35 percent, driven by a nearly 50 percent discount on REOs; however, the discount on pre-foreclosures trended up slightly over the same five-year period, from nearly 12 percent in 2005 to 15 percent in 2008 and 2009.
• Nevada, California, Arizona posted the highest percentage of foreclosure sales in the first quarter. Foreclosure sales accounted for 64 percent of all sales in Nevada in the first quarter, the highest percentage of any state. California posted the second highest percentage, with foreclosure sales accounting for 51 percent of all sales there in the first quarter – up slightly from 50 percent in the previous quarter but down from 70 percent of all sales in the first quarter of 2009. Foreclosure sales as a percentage of all sales were also down in Arizona from the first quarter of 2009, but the state still posted the third highest percentage in the first quarter, with foreclosure sales accounting for 50 percent of all sales.
• Other states where foreclosure sales accounted for at least one-third of all sales were Massachusetts, Rhode Island, Florida, Michigan, Georgia, Illinois, Idaho and Oregon.
Source: Florida Realtors®
Lenders use deeds-in-lieu to clear out inventory
Thanks to new federal programs that offer cash incentives, some lenders are turning to deeds-in-lieu as the best solution for underwater borrowers willing to turn over their properties.
It’s cheaper for lenders to do deeds-in-lieu because it gives them overnight control of the property. With mortgage rates at less than 5 percent, lenders believe that they can resell a property faster and on more favorable terms than they would receive going through a short sale.
Matt Vernon, an expert in short sales and deed-in-lieu deals for Bank of America, says his company is offering cash incentives that range from $3,000 to $15,000 to persuade troubled borrowers to sign on.
Deeds-in-lieu don’t harm a borrower’s credit rating as much as a foreclosure or a bankruptcy, but because they are treated as debts that are “not paid as agreed,” they do leave a mark on credit scores.
Source: Washington Post, Ken Harney (06/26/2010)
Source: INFORMATION, INC. Bethesda, MD
It’s cheaper for lenders to do deeds-in-lieu because it gives them overnight control of the property. With mortgage rates at less than 5 percent, lenders believe that they can resell a property faster and on more favorable terms than they would receive going through a short sale.
Matt Vernon, an expert in short sales and deed-in-lieu deals for Bank of America, says his company is offering cash incentives that range from $3,000 to $15,000 to persuade troubled borrowers to sign on.
Deeds-in-lieu don’t harm a borrower’s credit rating as much as a foreclosure or a bankruptcy, but because they are treated as debts that are “not paid as agreed,” they do leave a mark on credit scores.
Source: Washington Post, Ken Harney (06/26/2010)
Source: INFORMATION, INC. Bethesda, MD
House votes to extend homebuyer credit 3 months
Homebuyers would get an extra three months to complete their purchases and qualify for a generous tax credit under a bill overwhelmingly passed by the House on Tuesday.
Under current law, homebuyers who signed purchase agreements by April 30 have until today, June 30, to close on the sale to qualify for tax credits of up to $8,000. The bill would give buyers until Sept. 30 to complete their purchases.
The extended deadline only applies to people who signed purchase agreements by April 30. The National Association of Realtors estimates that about 180,000 homebuyers who already signed purchase agreements are likely to miss the deadline.
“We owe this to the people who have essentially followed the rules who are caught by a closing date,” said Rep. Sander Levin, D-Mich., chairman of the House Ways and Means Committee.
The bill passed 409-5. It now goes to the Senate, where senators were working Tuesday evening on a bill that would extend the tax credit and extend unemployment benefits for workers who have been laid off for long stretches.
The Senate could vote on its bill as early as this week – if senators can round up 60 votes to overcome a filibuster.
The popular tax credit has helped to stabilize the nation’s slumping housing market. Nearly 3 million taxpayers claimed the tax credit through May 22 – claiming more than $21 billion – according to the Treasury Department.
The Realtors group says the tax credit has generated 1 million new home sales that wouldn’t have happened otherwise.
The bill would also make it easier for the Internal Revenue Service and state prison officials to share information about inmates in an effort to fight fraud. The Treasury Department’s inspector general for tax administration reported last week that nearly 1,300 prison inmates had improperly received more than $9 million in homebuyer tax credits while they were locked up.
The report said the IRS did not have up-to-date information on inmates.
The tax credit for first-time homebuyers was part of President Barack Obama’s economic recovery package enacted last year. In November, Congress extended the credit and expanded it to longtime owners who bought new homes. First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.
The Realtors group has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month.
Delays with mortgage lending and appraisal companies have meant that home sales are taking far longer to complete this year.
“A lot of lenders weren’t able to handle the influx of loans that came with the tax credit,” said Lucien Salvant, a spokesman for the National Association of Realtors.
There have been particularly long delays for buyers of so-called short sales – ones in which banks agree to accept less than the total mortgage amount. In Las Vegas, for example, short sales made up nearly a third of all sales last month.
Many banks “just don’t have the process to the point where they can do it in a reasonable amount of time,” said Jack Woodcock, a real estate agent in Las Vegas. Extending the tax credit deadline, he said, would be a welcome relief to those borrowers, many of whom “made their decision based upon that tax credit.”
Source: The Associated Press, Stephen Ohlemacher, Associated Press writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Associated Press writer Alan Zibel contributed to this report.
Under current law, homebuyers who signed purchase agreements by April 30 have until today, June 30, to close on the sale to qualify for tax credits of up to $8,000. The bill would give buyers until Sept. 30 to complete their purchases.
The extended deadline only applies to people who signed purchase agreements by April 30. The National Association of Realtors estimates that about 180,000 homebuyers who already signed purchase agreements are likely to miss the deadline.
“We owe this to the people who have essentially followed the rules who are caught by a closing date,” said Rep. Sander Levin, D-Mich., chairman of the House Ways and Means Committee.
The bill passed 409-5. It now goes to the Senate, where senators were working Tuesday evening on a bill that would extend the tax credit and extend unemployment benefits for workers who have been laid off for long stretches.
The Senate could vote on its bill as early as this week – if senators can round up 60 votes to overcome a filibuster.
The popular tax credit has helped to stabilize the nation’s slumping housing market. Nearly 3 million taxpayers claimed the tax credit through May 22 – claiming more than $21 billion – according to the Treasury Department.
The Realtors group says the tax credit has generated 1 million new home sales that wouldn’t have happened otherwise.
The bill would also make it easier for the Internal Revenue Service and state prison officials to share information about inmates in an effort to fight fraud. The Treasury Department’s inspector general for tax administration reported last week that nearly 1,300 prison inmates had improperly received more than $9 million in homebuyer tax credits while they were locked up.
The report said the IRS did not have up-to-date information on inmates.
The tax credit for first-time homebuyers was part of President Barack Obama’s economic recovery package enacted last year. In November, Congress extended the credit and expanded it to longtime owners who bought new homes. First-time buyers were eligible for a tax credit of up to $8,000. Current owners who bought and moved into another home could qualify for a credit of up to $6,500.
The Realtors group has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month.
Delays with mortgage lending and appraisal companies have meant that home sales are taking far longer to complete this year.
“A lot of lenders weren’t able to handle the influx of loans that came with the tax credit,” said Lucien Salvant, a spokesman for the National Association of Realtors.
There have been particularly long delays for buyers of so-called short sales – ones in which banks agree to accept less than the total mortgage amount. In Las Vegas, for example, short sales made up nearly a third of all sales last month.
Many banks “just don’t have the process to the point where they can do it in a reasonable amount of time,” said Jack Woodcock, a real estate agent in Las Vegas. Extending the tax credit deadline, he said, would be a welcome relief to those borrowers, many of whom “made their decision based upon that tax credit.”
Source: The Associated Press, Stephen Ohlemacher, Associated Press writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Associated Press writer Alan Zibel contributed to this report.
Tuesday, June 29, 2010
Florida Realtors previews new residential contract, riders
Florida Realtors® has posted PDF versions of the new Florida Realtors/Florida Bar Purchase Contract, As-Is Contract and Comprehensive Rider (formerly known as the FAR/BAR contracts) on floridarealtors.org. The forms will be available in electronic format from Form Simplicity and other forms vendors by the end of July. The Florida Realtors purchase contract, known widely as the FAR contract, remains unchanged and will continue to be available.
“These new forms are the culmination of four years of work by the Joint Attorney/Realtor committee, authors of the FAR/BAR contracts, to create a better tool for Realtors and attorneys alike,” says Marcia Tabak, deputy general counsel of the Florida Realtors. “Some new features include a limited hold harmless and indemnity clause for brokers, an initials box at the bottom of each page and several new riders, including a Short Sale Approval Contingency.”
A summary of the changes to each form accompanies the contract.
To train Realtors on the new forms, Florida Realtors is offering two education sessions during its Annual Convention & Trade Expo in August at the Rosen Shingle Creek resort in Orlando. On Friday, Aug. 27, the Realtor-Attorney Joint Committee will hold a 90-minute program. On Saturday, Aug. 28, Realtors may attend a CE contracts class to learn how to properly fill out the forms.
Questions? Contact the Florida Realtors Legal Hotline at 407) 438-1409, or email your question to Florida Realtors attorneys from the home page of floridarealtors.org.
Source: Florida Realtors®
“These new forms are the culmination of four years of work by the Joint Attorney/Realtor committee, authors of the FAR/BAR contracts, to create a better tool for Realtors and attorneys alike,” says Marcia Tabak, deputy general counsel of the Florida Realtors. “Some new features include a limited hold harmless and indemnity clause for brokers, an initials box at the bottom of each page and several new riders, including a Short Sale Approval Contingency.”
A summary of the changes to each form accompanies the contract.
To train Realtors on the new forms, Florida Realtors is offering two education sessions during its Annual Convention & Trade Expo in August at the Rosen Shingle Creek resort in Orlando. On Friday, Aug. 27, the Realtor-Attorney Joint Committee will hold a 90-minute program. On Saturday, Aug. 28, Realtors may attend a CE contracts class to learn how to properly fill out the forms.
Questions? Contact the Florida Realtors Legal Hotline at 407) 438-1409, or email your question to Florida Realtors attorneys from the home page of floridarealtors.org.
Source: Florida Realtors®
Florida Realtors previews new residential contract, riders
Florida Realtors® has posted PDF versions of the new Florida Realtors/Florida Bar Purchase Contract, As-Is Contract and Comprehensive Rider (formerly known as the FAR/BAR contracts) on floridarealtors.org. The forms will be available in electronic format from Form Simplicity and other forms vendors by the end of July. The Florida Realtors purchase contract, known widely as the FAR contract, remains unchanged and will continue to be available.
“These new forms are the culmination of four years of work by the Joint Attorney/Realtor committee, authors of the FAR/BAR contracts, to create a better tool for Realtors and attorneys alike,” says Marcia Tabak, deputy general counsel of the Florida Realtors. “Some new features include a limited hold harmless and indemnity clause for brokers, an initials box at the bottom of each page and several new riders, including a Short Sale Approval Contingency.”
A summary of the changes to each form accompanies the contract.
To train Realtors on the new forms, Florida Realtors is offering two education sessions during its Annual Convention & Trade Expo in August at the Rosen Shingle Creek resort in Orlando. On Friday, Aug. 27, the Realtor-Attorney Joint Committee will hold a 90-minute program. On Saturday, Aug. 28, Realtors may attend a CE contracts class to learn how to properly fill out the forms.
Questions? Contact the Florida Realtors Legal Hotline at 407) 438-1409, or email your question to Florida Realtors attorneys from the home page of floridarealtors.org.
Source: Florida Realtors®
“These new forms are the culmination of four years of work by the Joint Attorney/Realtor committee, authors of the FAR/BAR contracts, to create a better tool for Realtors and attorneys alike,” says Marcia Tabak, deputy general counsel of the Florida Realtors. “Some new features include a limited hold harmless and indemnity clause for brokers, an initials box at the bottom of each page and several new riders, including a Short Sale Approval Contingency.”
A summary of the changes to each form accompanies the contract.
To train Realtors on the new forms, Florida Realtors is offering two education sessions during its Annual Convention & Trade Expo in August at the Rosen Shingle Creek resort in Orlando. On Friday, Aug. 27, the Realtor-Attorney Joint Committee will hold a 90-minute program. On Saturday, Aug. 28, Realtors may attend a CE contracts class to learn how to properly fill out the forms.
Questions? Contact the Florida Realtors Legal Hotline at 407) 438-1409, or email your question to Florida Realtors attorneys from the home page of floridarealtors.org.
Source: Florida Realtors®
Buyers drive hard bargains in a tough market
Unrealistic buyers are ruining the deal for sellers who are unwilling to make extreme concessions, some real estate practitioners complain.
“We see buyers who must have learned their moves from the World Wrestling Federation,” says Glenn Kelman, CEO of the online brokerage Redfin. “They think the final smack-down occurs at the inspection, where the seller will be reluctant to refuse any demand because the alternative is putting the house back on the market as damaged goods.”
But buyers say they’re simply being smart.
“We had the position, ‘If the seller is willing to come down enough, we will buy this home,” says Chris Dunn, a consultant in Chicago, who sought a 10 percent reduction on a property priced at more than $500,000. “If they weren’t willing, we would have just moved on. In this market, you have a lot of options.”
True or False?
Source: The New York Times, David Streitfeld (06/17/2010)
Source: INFORMATION, INC. Bethesda, MD
“We see buyers who must have learned their moves from the World Wrestling Federation,” says Glenn Kelman, CEO of the online brokerage Redfin. “They think the final smack-down occurs at the inspection, where the seller will be reluctant to refuse any demand because the alternative is putting the house back on the market as damaged goods.”
But buyers say they’re simply being smart.
“We had the position, ‘If the seller is willing to come down enough, we will buy this home,” says Chris Dunn, a consultant in Chicago, who sought a 10 percent reduction on a property priced at more than $500,000. “If they weren’t willing, we would have just moved on. In this market, you have a lot of options.”
True or False?
Source: The New York Times, David Streitfeld (06/17/2010)
Source: INFORMATION, INC. Bethesda, MD
Republicans kill Senate jobless aid measure
According to the National Association of Realtors® (NAR), up to 180,000 homebuyers will lose their federal homebuyer tax credit through no fault of their own if Congress fails to pass an extension by June 30 when the closing deadline expires.
Included in that number are thousands of homebuyers in every state of the union, from 390 in Wyoming to 17,700 in California, according to estimates by NAR. In Florida, 14,830 homebuyers could lose the tax credit if closings are delayed.
“We are strongly urging the Senate and the House to act quickly to pass this legislation and ease the minds and pocketbooks of these homebuyers,” said NAR President Vicki Cox Golder.
“These are not buyers who just entered into the market. These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a workflow jam with lenders or other delays such as lapses in the National Flood Insurance Program, Rural Housing Service, and new home construction, and might not be able to complete the purchase of their homes by the current deadline,” said Golder. “It would be a tragedy for them not to be able to complete the purchase in time to claim the credit.”
NAR issued the following state-by-state estimate of the number of home sales that would be delayed beyond the June 30 deadline; numbers are rounded to the nearest 10:
Alabama, 2,590
Alaska, 830
Arizona, 5,440
Arkansas, 2,090
California, 17,700
Colorado, 3,390
Connecticut, 1,770
Delaware, 400
District of Columbia, 300
Florida, 14,830
Georgia, 6,270
Hawaii, 710
Idaho, 1,270
Illinois, 7,030
Indiana, 3,560
Iowa, 2, 030
Kansas, 1,840
Kentucky, 2,540
Louisiana, 1,800
Maine, 840
Maryland, 2,630
Massachusetts, 3,930
Michigan, 6,470
Minnesota, 3,760
Mississippi, 1,530
Missouri, 3,600
Montana, 760
Nebraska, 1,110
Nevada, 3,800
New Hampshire, 690
New Jersey, 4,300
New Mexico, 1,160
New York, 9,190
North Carolina, 4,890
North Dakota, 460
Ohio, 8,510
Oklahoma, 2,760
Oregon, 2,090
Pennsylvania, 5,830
Rhode Island, 500
South Carolina, 2,460
South Dakota, 500
Tennessee, 3,910
Texas, 15,340
Utah, 1,130
Vermont, 400
Virginia, 3,890
Washington, 3,190
West Virginia, 940
Wisconsin, 2,690
Wyoming, 390
Source: Florida Realtors®
Included in that number are thousands of homebuyers in every state of the union, from 390 in Wyoming to 17,700 in California, according to estimates by NAR. In Florida, 14,830 homebuyers could lose the tax credit if closings are delayed.
“We are strongly urging the Senate and the House to act quickly to pass this legislation and ease the minds and pocketbooks of these homebuyers,” said NAR President Vicki Cox Golder.
“These are not buyers who just entered into the market. These are buyers who previously met all the qualifications for the tax credit, but find themselves at the mercy of a workflow jam with lenders or other delays such as lapses in the National Flood Insurance Program, Rural Housing Service, and new home construction, and might not be able to complete the purchase of their homes by the current deadline,” said Golder. “It would be a tragedy for them not to be able to complete the purchase in time to claim the credit.”
NAR issued the following state-by-state estimate of the number of home sales that would be delayed beyond the June 30 deadline; numbers are rounded to the nearest 10:
Alabama, 2,590
Alaska, 830
Arizona, 5,440
Arkansas, 2,090
California, 17,700
Colorado, 3,390
Connecticut, 1,770
Delaware, 400
District of Columbia, 300
Florida, 14,830
Georgia, 6,270
Hawaii, 710
Idaho, 1,270
Illinois, 7,030
Indiana, 3,560
Iowa, 2, 030
Kansas, 1,840
Kentucky, 2,540
Louisiana, 1,800
Maine, 840
Maryland, 2,630
Massachusetts, 3,930
Michigan, 6,470
Minnesota, 3,760
Mississippi, 1,530
Missouri, 3,600
Montana, 760
Nebraska, 1,110
Nevada, 3,800
New Hampshire, 690
New Jersey, 4,300
New Mexico, 1,160
New York, 9,190
North Carolina, 4,890
North Dakota, 460
Ohio, 8,510
Oklahoma, 2,760
Oregon, 2,090
Pennsylvania, 5,830
Rhode Island, 500
South Carolina, 2,460
South Dakota, 500
Tennessee, 3,910
Texas, 15,340
Utah, 1,130
Vermont, 400
Virginia, 3,890
Washington, 3,190
West Virginia, 940
Wisconsin, 2,690
Wyoming, 390
Source: Florida Realtors®
Friday, June 25, 2010
REITs are a surprising market bright spot
You could hold a rodeo clown convention in most office buildings these days without disturbing the few workers left inside. So why are real estate investment trusts, which buy and sell commercial property, doing so well?
The average real estate fund – most of which invest solely in REITs – has gained 11 percent this year, vs. a 1.1 percent loss for the Standard & Poor's 500-stock index, including reinvested dividends. The average REIT has gained 14.7 percent, says the National Association of Real Estate Investment Trusts (NAREIT), a trade group.
Those are swell numbers in a distinctly not-so-swell environment. "It's been a bit of a surprise," says Ken Heebner, manager of CGM Realty fund.
One reason for such big gains: Investors may think things can't get much worse. They have a point. The unemployment rate in May was 9.7 percent, down slightly from its 10.1 percent peak in October. Nevertheless, 15 million people were looking for work at the end of May, a situation that doesn't argue for rising demand for office space or shopping malls.
Walk through the average office building, and mostly what you'll hear is the sound of your own footfalls. Office vacancy rates were 15 percent at the end of the first quarter, vs. 14.7 percent at the end of 2009, according to Cushman & Wakefield, a global real estate firm. Rents are down 6.6 percent from a year ago, to $36.88 a square foot.
Commercial leases tend to be relatively long-term ones, Heebner says. Even if the economy were to turn around tomorrow, office REITs might not feel the benefits for another two years.
What has improved? Credit. At this time last year, Wall Street viewed REIT borrowers the way slugs view salt, which meant that REITs had a hard time raising money for purchases or acquisitions. The supply of new commercial real estate is low, which is unusual for a real estate cycle. Just as the top of the stock market is marked by a flood of dubious new issues, the hallmark of a toppy commercial real estate cycle is hundreds of unnecessary office parks. Were commercial real estate developers so wise and prudent that they cut back their building as the top approached?
Of course not. But the boom in residential real estate drove the price of construction laborers up, slowing new commercial construction projects. The dizzying rise in the price of raw materials in 2007 and 2008 also made new commercial construction expensive. So new supplies of office space were somewhat restrained.
"The expectation is that we're at or near a bottom" in occupancy levels, says Steve Shigekawa, co-manager of Neuberger Berman Real Estate fund. "If the economy continues to improve, we expect that vacancy rates will start to come down and see occupancy picking up."
The problem: After a strong run, "These are relatively expensive stocks," Heebner says.
Both Heebner and Shigekawa favor lodging REITs, which invest in hotels. "Demand is picking up for lodging, travel is improving, and we're seeing group bookings pick up as well," Shigekawa says.
If you're going to buy individual REITs, look for strong balance sheets. Nearly all REITs are borrowers; look for REITs with lots of cash and multiple sources of capital, Shigekawa says.
REITs distribute nearly all of their income to investors, and the average REIT yields 4.6 percent, say NAREIT. If you're an income investor, make sure the REIT is paying cash dividends. Some cash-strapped REITs are making their payouts with stock.
Index fans should consider the Vanguard REIT Index fund (ticker: VGSIX) or its exchange-traded cousin, the Vanguard REIT ETF (VNQ).
A commercial real estate boom could be years off, so don't look for outsize returns anytime soon. Nevertheless, you can earn decent income while you're waiting for the office to fill back up.
Source: USA TODAY, a division of Gannett Co. Inc. John Waggoner's column appears Fridays.
The average real estate fund – most of which invest solely in REITs – has gained 11 percent this year, vs. a 1.1 percent loss for the Standard & Poor's 500-stock index, including reinvested dividends. The average REIT has gained 14.7 percent, says the National Association of Real Estate Investment Trusts (NAREIT), a trade group.
Those are swell numbers in a distinctly not-so-swell environment. "It's been a bit of a surprise," says Ken Heebner, manager of CGM Realty fund.
One reason for such big gains: Investors may think things can't get much worse. They have a point. The unemployment rate in May was 9.7 percent, down slightly from its 10.1 percent peak in October. Nevertheless, 15 million people were looking for work at the end of May, a situation that doesn't argue for rising demand for office space or shopping malls.
Walk through the average office building, and mostly what you'll hear is the sound of your own footfalls. Office vacancy rates were 15 percent at the end of the first quarter, vs. 14.7 percent at the end of 2009, according to Cushman & Wakefield, a global real estate firm. Rents are down 6.6 percent from a year ago, to $36.88 a square foot.
Commercial leases tend to be relatively long-term ones, Heebner says. Even if the economy were to turn around tomorrow, office REITs might not feel the benefits for another two years.
What has improved? Credit. At this time last year, Wall Street viewed REIT borrowers the way slugs view salt, which meant that REITs had a hard time raising money for purchases or acquisitions. The supply of new commercial real estate is low, which is unusual for a real estate cycle. Just as the top of the stock market is marked by a flood of dubious new issues, the hallmark of a toppy commercial real estate cycle is hundreds of unnecessary office parks. Were commercial real estate developers so wise and prudent that they cut back their building as the top approached?
Of course not. But the boom in residential real estate drove the price of construction laborers up, slowing new commercial construction projects. The dizzying rise in the price of raw materials in 2007 and 2008 also made new commercial construction expensive. So new supplies of office space were somewhat restrained.
"The expectation is that we're at or near a bottom" in occupancy levels, says Steve Shigekawa, co-manager of Neuberger Berman Real Estate fund. "If the economy continues to improve, we expect that vacancy rates will start to come down and see occupancy picking up."
The problem: After a strong run, "These are relatively expensive stocks," Heebner says.
Both Heebner and Shigekawa favor lodging REITs, which invest in hotels. "Demand is picking up for lodging, travel is improving, and we're seeing group bookings pick up as well," Shigekawa says.
If you're going to buy individual REITs, look for strong balance sheets. Nearly all REITs are borrowers; look for REITs with lots of cash and multiple sources of capital, Shigekawa says.
REITs distribute nearly all of their income to investors, and the average REIT yields 4.6 percent, say NAREIT. If you're an income investor, make sure the REIT is paying cash dividends. Some cash-strapped REITs are making their payouts with stock.
Index fans should consider the Vanguard REIT Index fund (ticker: VGSIX) or its exchange-traded cousin, the Vanguard REIT ETF (VNQ).
A commercial real estate boom could be years off, so don't look for outsize returns anytime soon. Nevertheless, you can earn decent income while you're waiting for the office to fill back up.
Source: USA TODAY, a division of Gannett Co. Inc. John Waggoner's column appears Fridays.
No flood insurance before next week
As previously reported, H.R. 5569, a bill to extend the authorization of the National Flood Insurance Program (NFIP) until Sept. 30, 2010, passed the full U.S. House of Representatives as a stand-alone billearlier this week. (Read previous article)
The House-passed bill went to the Senate yesterday, and the National Association of Realtors® (NAR) hoped Senators would take it up, and pass it, last evening or today. However, the Senate adjourned and the issue is now postponed until at least Monday.
NAR has already sent a letter to each U.S. Senator urging quick passage of HR 5569.With NFIP shut down for 25 days now, NAR is actively working with the Senate to take up and pass HR 5569 before Congress' July 4th recess.
Tax credit extension
A separate omnibus bill that includes a separate flood insurance extension also includes language that extends the homebuyer tax credit past its June 30 closing date. However, the omnibus bill remains controversial and is not assured. It has yet to pass either the Senate or the House.
"In addition to several provisions we like in that omnibus bill, the legislation also contains provisions we're not as happy with, such as changes to the taxation on "Carried Interest," says Florida Realtors Vice President Of Public Policy John Sebree.
Source: Florida Realtors®
The House-passed bill went to the Senate yesterday, and the National Association of Realtors® (NAR) hoped Senators would take it up, and pass it, last evening or today. However, the Senate adjourned and the issue is now postponed until at least Monday.
NAR has already sent a letter to each U.S. Senator urging quick passage of HR 5569.With NFIP shut down for 25 days now, NAR is actively working with the Senate to take up and pass HR 5569 before Congress' July 4th recess.
Tax credit extension
A separate omnibus bill that includes a separate flood insurance extension also includes language that extends the homebuyer tax credit past its June 30 closing date. However, the omnibus bill remains controversial and is not assured. It has yet to pass either the Senate or the House.
"In addition to several provisions we like in that omnibus bill, the legislation also contains provisions we're not as happy with, such as changes to the taxation on "Carried Interest," says Florida Realtors Vice President Of Public Policy John Sebree.
Source: Florida Realtors®
Thursday, June 24, 2010
State Farm to ‘non-renew’ Fla. homeowners
State Farm, citing exposure to possible hurricane damages, says it is dropping property insurance coverage of more than 100,000 Florida residents.
After threatening to pull out of Florida’s troubled property market last year, the Illinois-based company forged a deal with state regulators allowing it to non-renew 125,000 of its 810,000 residential insurance policies and raise the rates on the rest by 15 percent, The St. Petersburg (Fla.) Times reported Wednesday.
Even the owners of a hurricane-resistant “castle” say the company is dropping them.
Contractor Jim Kuhnsman and his wife Deann built a home in Tampa Bay with a foundation, roof and walls made of steel and reinforced concrete, but says State Farm is dropping their coverage Sept. 15.
“The fact we built this house like we were supposed to and then they drop us? You’d think if we all built these kinds of wonderful houses, people should insure us,” Kuhnsman said.
Kuhnsman’s agent told him his home was chosen at random as part of State Farm’s reduction of policies.
Homeowners losing coverage were not selected on a house-by-house basis, State Farm spokeswoman Michal Connolly said. Other factors, she said, such as hurricane exposure in different neighborhoods, were considered.
“Some homeowners might not think they are (at risk), but when you use the data we have, it could be they’re in a general area that could be highly affected by a storm.”
Deann Kuhnsman says she’s shopping for alternatives and planning to switch her car insurance from State Farm “as soon as I lose my homeowners insurance.”
Source: United Press International
After threatening to pull out of Florida’s troubled property market last year, the Illinois-based company forged a deal with state regulators allowing it to non-renew 125,000 of its 810,000 residential insurance policies and raise the rates on the rest by 15 percent, The St. Petersburg (Fla.) Times reported Wednesday.
Even the owners of a hurricane-resistant “castle” say the company is dropping them.
Contractor Jim Kuhnsman and his wife Deann built a home in Tampa Bay with a foundation, roof and walls made of steel and reinforced concrete, but says State Farm is dropping their coverage Sept. 15.
“The fact we built this house like we were supposed to and then they drop us? You’d think if we all built these kinds of wonderful houses, people should insure us,” Kuhnsman said.
Kuhnsman’s agent told him his home was chosen at random as part of State Farm’s reduction of policies.
Homeowners losing coverage were not selected on a house-by-house basis, State Farm spokeswoman Michal Connolly said. Other factors, she said, such as hurricane exposure in different neighborhoods, were considered.
“Some homeowners might not think they are (at risk), but when you use the data we have, it could be they’re in a general area that could be highly affected by a storm.”
Deann Kuhnsman says she’s shopping for alternatives and planning to switch her car insurance from State Farm “as soon as I lose my homeowners insurance.”
Source: United Press International
Fannie Mae to penalize homeowners who walk away
Government-sponsored mortgage purchaser Fannie Mae is trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from getting new loans for seven years.
Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy announced Wednesday.
“Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting,” said Terence Edwards, executive vice president for credit portfolio management.
A strategic default occurs when a homeowner stops making payments on a mortgage despite being able to do so. It has become increasingly common in communities where housing values fell sharply and homeowners are “underwater,” or owe more than their houses are worth.
Fannie Mae said that in locations where the law allows, it also plans to take legal action to recoup outstanding mortgage debt from borrowers who strategically default. The company plans to instruct its servicers to monitor delinquent loans facing foreclosure and recommend cases to pursue for such judgments.
A spokesman for fellow government-backed mortgage buyer Freddie Mac said its current policy requires at least a five-year wait. Freddie Mac will “take a close look” at the new Fannie policy, said spokesman Brad German. “We’ll consider it in light of current market conditions in order to manage our risk as effectively as possible.”
Fannie and Freddie were created by Congress to buy mortgages from lenders and package them into bonds that are resold to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s about half of all mortgages.
The wave of foreclosures affecting Fannie and Freddie loans has caused a major problem for the U.S. government, which effectively guarantees the loans.
The government seized control of Freddie and Fannie in September 2008, a rescue that has cost taxpayers $145 billion so far. The two companies show no signs of becoming self-sufficient.
In announcing the new policy, Fannie Mae said homeowners who make a good faith effort to resolve their situation with their mortgage companies, and those who have extenuating circumstances, will be eligible for new loans in a shorter time period. The company did not detail how long the wait might be.
Fannie Mae shares fell 1 cent to close at 41 cents. Fannie Mae shares finished unchanged at 48 cents. Both companies plan to delist their shares from the New York Stock Exchange because they don’t meet listing requirements that they remain above $1 per share.
Source: The Associated Press, Eileen A.J. Connelly, AP business writer. All rights reserved.
Troubled borrowers who do not try in good faith to work out a deal, but have the capacity to pay, are targeted by the policy announced Wednesday.
“Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting,” said Terence Edwards, executive vice president for credit portfolio management.
A strategic default occurs when a homeowner stops making payments on a mortgage despite being able to do so. It has become increasingly common in communities where housing values fell sharply and homeowners are “underwater,” or owe more than their houses are worth.
Fannie Mae said that in locations where the law allows, it also plans to take legal action to recoup outstanding mortgage debt from borrowers who strategically default. The company plans to instruct its servicers to monitor delinquent loans facing foreclosure and recommend cases to pursue for such judgments.
A spokesman for fellow government-backed mortgage buyer Freddie Mac said its current policy requires at least a five-year wait. Freddie Mac will “take a close look” at the new Fannie policy, said spokesman Brad German. “We’ll consider it in light of current market conditions in order to manage our risk as effectively as possible.”
Fannie and Freddie were created by Congress to buy mortgages from lenders and package them into bonds that are resold to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion. That’s about half of all mortgages.
The wave of foreclosures affecting Fannie and Freddie loans has caused a major problem for the U.S. government, which effectively guarantees the loans.
The government seized control of Freddie and Fannie in September 2008, a rescue that has cost taxpayers $145 billion so far. The two companies show no signs of becoming self-sufficient.
In announcing the new policy, Fannie Mae said homeowners who make a good faith effort to resolve their situation with their mortgage companies, and those who have extenuating circumstances, will be eligible for new loans in a shorter time period. The company did not detail how long the wait might be.
Fannie Mae shares fell 1 cent to close at 41 cents. Fannie Mae shares finished unchanged at 48 cents. Both companies plan to delist their shares from the New York Stock Exchange because they don’t meet listing requirements that they remain above $1 per share.
Source: The Associated Press, Eileen A.J. Connelly, AP business writer. All rights reserved.
At its June meeting, the Florida Real Estate Commission (FREC) issued a reminder to real estate salespersons submitting claims to BP for loss of a commission due to the oil spill in the Gulf of Mexico: Be aware that Chapter 475, Florida Statutes, requires any claim or payment for commission to go through the broker.
Real estate salespersons are not allowed to collect commission checks directly and, just as with any other commission, these payments must go through the brokerage company.
Questions? Florida Realtors® members may call the Legal Hotline at (407) 438-1409, or email their question to the link provided on the home page of floridarealtors.org.
Source: Florida Realtors®
Real estate salespersons are not allowed to collect commission checks directly and, just as with any other commission, these payments must go through the brokerage company.
Questions? Florida Realtors® members may call the Legal Hotline at (407) 438-1409, or email their question to the link provided on the home page of floridarealtors.org.
Source: Florida Realtors®
Wednesday, June 23, 2010
New-home sales plunge 33% with tax credits gone
Sales of new U.S. homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.
The bleak report from the U.S. Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation’s housing market.
The credits expired April 30. That’s when a new-home buyer would have had to sign a contract to qualify.
“We fear that the appetite to buy a home has disappeared alongside the tax credit,” Paul Dales, U.S. economist with Capital Economics,” wrote in a note. “After all, unemployment remains high, job security is low and credit conditions are tight.”
New-home sales in May fell from April to a seasonally adjusted annual sales pace of 300,000, the government said Wednesday. That was the slowest sales pace on records dating back to 1963. And it’s the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.
Analysts were startled by the depth of the sales drop.
“We all knew there would be a housing hangover from the expiration of the tax credit,” wrote Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.”
Economists surveyed by Thomson Reuters had expected a May sales pace of 410,000. April’s sales pace was revised downward to 446,000.
The government offered an $8,000 credit for first-time buyers. Current homeowners who buy and move into another property could receive up to $6,500.
New-home sales fell nationwide from April’s levels. They dropped 53 percent from a month earlier in the West and 33 percent in the Northeast. Sales in the South dropped 25 percent. The Midwest posted a 24 percent decline.
Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale in March fell 0.5 percent to 213,000, the lowest level in nearly 40 years. But due to the sluggish sales pace in May, it would still take 8.5 months to exhaust that supply, above a healthy level of about six months.
The median sales price in May was $200,900. That was down 9.6 percent from a year earlier and down 1 percent from April.
New-homes sales made up about 7 percent of the housing market last year. That’s down from about 15 percent before the bust.
The drop in new-home sales means fewer jobs in the construction industry, which normally powers economic recoveries but has remained lackluster this time.
Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders. The impact is felt across multiple industries, from makers of faucets and dishwashers to lumber yards.
Source: 2010 The Associated Press, Alan Zibel, AP real estate writer.
The bleak report from the U.S. Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation’s housing market.
The credits expired April 30. That’s when a new-home buyer would have had to sign a contract to qualify.
“We fear that the appetite to buy a home has disappeared alongside the tax credit,” Paul Dales, U.S. economist with Capital Economics,” wrote in a note. “After all, unemployment remains high, job security is low and credit conditions are tight.”
New-home sales in May fell from April to a seasonally adjusted annual sales pace of 300,000, the government said Wednesday. That was the slowest sales pace on records dating back to 1963. And it’s the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.
Analysts were startled by the depth of the sales drop.
“We all knew there would be a housing hangover from the expiration of the tax credit,” wrote Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.”
Economists surveyed by Thomson Reuters had expected a May sales pace of 410,000. April’s sales pace was revised downward to 446,000.
The government offered an $8,000 credit for first-time buyers. Current homeowners who buy and move into another property could receive up to $6,500.
New-home sales fell nationwide from April’s levels. They dropped 53 percent from a month earlier in the West and 33 percent in the Northeast. Sales in the South dropped 25 percent. The Midwest posted a 24 percent decline.
Builders have sharply scaled back construction in the face of a severe housing market bust. The number of new homes up for sale in March fell 0.5 percent to 213,000, the lowest level in nearly 40 years. But due to the sluggish sales pace in May, it would still take 8.5 months to exhaust that supply, above a healthy level of about six months.
The median sales price in May was $200,900. That was down 9.6 percent from a year earlier and down 1 percent from April.
New-homes sales made up about 7 percent of the housing market last year. That’s down from about 15 percent before the bust.
The drop in new-home sales means fewer jobs in the construction industry, which normally powers economic recoveries but has remained lackluster this time.
Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders. The impact is felt across multiple industries, from makers of faucets and dishwashers to lumber yards.
Source: 2010 The Associated Press, Alan Zibel, AP real estate writer.
New flood insurance program considered
The National Flood Insurance Program (NFIP) went on hiatus May 31. Until today, the best hope for an extension was an amendment that U.S. Senators attached to a much larger bill; however, other items within that larger bill weighed it down.
But the U.S. House approved H.R. 5569, a new bill, this morning. H.R. 5569 extends NFIP through Sept. 30, 2010, and makes it retroactive to May 31, 2010. As a stand-alone bill, H.R. 5569 allows NFIP to be considered on its own merits. It now goes to the Senate for a vote.
“The National Association of Realtors is pushing U.S. Senate leadership to quickly take this up and pass it,” says Florida Realtors Vice President of Public Policy John Sebree.
The House-Senate negotiation process is not always smooth, but once they agree on a version, the bill goes to President Barack Obama to be signed into law. It’s not yet clear whether the Senate will agree to pass H.R. 5569 or continue to consider an NFIP extension through the larger bill’s amendment.
Even if the Senate approves H.R. 5569, Realtors have a continued interest in passage of the larger bill because another amendment extends the homebuyer-tax-credit closing past its current June 30 deadline.
Florida Realtors News will report any NFIP reauthorization updates.
Source: Florida Realtors®
But the U.S. House approved H.R. 5569, a new bill, this morning. H.R. 5569 extends NFIP through Sept. 30, 2010, and makes it retroactive to May 31, 2010. As a stand-alone bill, H.R. 5569 allows NFIP to be considered on its own merits. It now goes to the Senate for a vote.
“The National Association of Realtors is pushing U.S. Senate leadership to quickly take this up and pass it,” says Florida Realtors Vice President of Public Policy John Sebree.
The House-Senate negotiation process is not always smooth, but once they agree on a version, the bill goes to President Barack Obama to be signed into law. It’s not yet clear whether the Senate will agree to pass H.R. 5569 or continue to consider an NFIP extension through the larger bill’s amendment.
Even if the Senate approves H.R. 5569, Realtors have a continued interest in passage of the larger bill because another amendment extends the homebuyer-tax-credit closing past its current June 30 deadline.
Florida Realtors News will report any NFIP reauthorization updates.
Source: Florida Realtors®
Calif., Fla., other states to get more housing aid
The Obama administration has approved five state-designed plans to help homeowners as part of a $1.5 billion effort to assist areas slammed by the housing bust.
Treasury Department officials, who spoke on condition of anonymity because the decisions had not yet been made public, said plans for Arizona, California, Florida, Michigan and Nevada had received approval.
The states estimate that the plans are projected to help up to 93,000 homeowners. That’s a small part of the administration’s main existing $75 billion mortgage assistance program, which is widely viewed as a disappointment.
President Barack Obama unveiled the state assistance effort in February. Since then, state agencies have designed their own approaches, largely focused on borrowers who owe more on their properties than their homes are worth or those who have lost their jobs.
Officials say the state efforts could be used to make changes to the administration’s broader mortgage assistance plan. The state agencies are planning to work with local housing groups to put the plans in place.
According to the proposals from the states, the largest recipient of the funding is California, which will get nearly $700 million to assist about 46,000 borrowers. Florida is getting the second-largest pot of money, $418 million. That will help about 12,500 borrowers.
Michigan will receive about $155 million to assist 17,000 borrowers, while Arizona will receive $125 million for 12,000 borrowers. Nevada will receive $103 million for about 5,000 homeowners.
Besides these states, the Obama administration is providing an additional $600 million in financial support to help homeowners in states with high rates of unemployment.
Those states – Ohio, North Carolina, South Carolina, Oregon and Rhode Island – have submitted plans to the Treasury Department. They are being reviewed now, with approvals expected in August.
The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis, which have met with limited success.
More than a third of the 1.2 million borrowers who have enrolled in the Obama administration’s main mortgage modification program have dropped out, officials said this week. About 340,000 homeowners, or 27 percent of those who started the program, have received permanent loan modifications and are making payments on time.
Source: The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP Business Writer Martin Crutsinger contributed to this report from Washington.
Treasury Department officials, who spoke on condition of anonymity because the decisions had not yet been made public, said plans for Arizona, California, Florida, Michigan and Nevada had received approval.
The states estimate that the plans are projected to help up to 93,000 homeowners. That’s a small part of the administration’s main existing $75 billion mortgage assistance program, which is widely viewed as a disappointment.
President Barack Obama unveiled the state assistance effort in February. Since then, state agencies have designed their own approaches, largely focused on borrowers who owe more on their properties than their homes are worth or those who have lost their jobs.
Officials say the state efforts could be used to make changes to the administration’s broader mortgage assistance plan. The state agencies are planning to work with local housing groups to put the plans in place.
According to the proposals from the states, the largest recipient of the funding is California, which will get nearly $700 million to assist about 46,000 borrowers. Florida is getting the second-largest pot of money, $418 million. That will help about 12,500 borrowers.
Michigan will receive about $155 million to assist 17,000 borrowers, while Arizona will receive $125 million for 12,000 borrowers. Nevada will receive $103 million for about 5,000 homeowners.
Besides these states, the Obama administration is providing an additional $600 million in financial support to help homeowners in states with high rates of unemployment.
Those states – Ohio, North Carolina, South Carolina, Oregon and Rhode Island – have submitted plans to the Treasury Department. They are being reviewed now, with approvals expected in August.
The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis, which have met with limited success.
More than a third of the 1.2 million borrowers who have enrolled in the Obama administration’s main mortgage modification program have dropped out, officials said this week. About 340,000 homeowners, or 27 percent of those who started the program, have received permanent loan modifications and are making payments on time.
Source: The Associated Press, Alan Zibel, AP real estate writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP Business Writer Martin Crutsinger contributed to this report from Washington.
Tuesday, June 22, 2010
Foreclosure rescue scam reports increase, new study says
The Financial Crimes Enforcement Network (FinCEN) released its first analysis of suspicious activity reports containing information about potential foreclosure rescue scams. The report, “Loan Modification and Foreclosure Rescue Scams – Evolving Trends and Patterns in Bank Secrecy Act Reporting,” analyzed more than 3,500 SARs filed from 2004 through 2009, with the great majority of those reports (3,000) filed last year.
“The increase in reporting of suspected foreclosure rescue scam activity could mean that there is an increase in fraudulent activity, but it also reflects an increase in awareness among financial institutions of the fraud perpetrated,” said FinCEN Director James H. Freis Jr.
Along with the increase in reported activity, the analysis found that the nature of foreclosure rescue scams shifted too. The latest scams reflect more advance-fee schemes, in which the alleged loan modification or foreclosure rescue specialists say they’ll arrange modification of a homeowner’s mortgage for more favorable repayment terms. Once the scammers receive large advance fees, they rarely, if ever, provide any service.
A variation of the advance fee scam involves phony debt elimination programs, in which the homeowners paid advance fees and are given bogus documents or instructed to contact their lenders with specious assertions that the original mortgage debt is illegal.
According to the latest FinCEN analysis, the top 10 metropolitan regions, ranked by the concentration of local subjects of all mortgage loan fraud suspicious activity reports tracked between Jan. 1, 2009 and June 10, 2010, are:
Miami-Fort Lauderdale-Pompano Beach, FL, came in ranked as No. 1; Los Angeles-Long Beach-Santa Ana, CA, No. 2; New York-Northern New Jersey-Long Island, NY-NJ-PA, No. 3; Chicago-Naperville-Joliet, IL-IN-WI, No. 4; Washington-Arlington-Alexandria, DC-VA-MD-WV, No. 5; Riverside-San Bernardino-Ontario, CA, No. 6; Phoenix-Mesa-Scottsdale, AZ, No. 7; Atlanta-Sandy Springs-Marietta, GA, No. 8; San Francisco-Oakland-Fremont, CA, No. 9; and Orlando-Kissimmee, FL, No. 10.
Source: Florida Realtors®
“The increase in reporting of suspected foreclosure rescue scam activity could mean that there is an increase in fraudulent activity, but it also reflects an increase in awareness among financial institutions of the fraud perpetrated,” said FinCEN Director James H. Freis Jr.
Along with the increase in reported activity, the analysis found that the nature of foreclosure rescue scams shifted too. The latest scams reflect more advance-fee schemes, in which the alleged loan modification or foreclosure rescue specialists say they’ll arrange modification of a homeowner’s mortgage for more favorable repayment terms. Once the scammers receive large advance fees, they rarely, if ever, provide any service.
A variation of the advance fee scam involves phony debt elimination programs, in which the homeowners paid advance fees and are given bogus documents or instructed to contact their lenders with specious assertions that the original mortgage debt is illegal.
According to the latest FinCEN analysis, the top 10 metropolitan regions, ranked by the concentration of local subjects of all mortgage loan fraud suspicious activity reports tracked between Jan. 1, 2009 and June 10, 2010, are:
Miami-Fort Lauderdale-Pompano Beach, FL, came in ranked as No. 1; Los Angeles-Long Beach-Santa Ana, CA, No. 2; New York-Northern New Jersey-Long Island, NY-NJ-PA, No. 3; Chicago-Naperville-Joliet, IL-IN-WI, No. 4; Washington-Arlington-Alexandria, DC-VA-MD-WV, No. 5; Riverside-San Bernardino-Ontario, CA, No. 6; Phoenix-Mesa-Scottsdale, AZ, No. 7; Atlanta-Sandy Springs-Marietta, GA, No. 8; San Francisco-Oakland-Fremont, CA, No. 9; and Orlando-Kissimmee, FL, No. 10.
Source: Florida Realtors®
Modified mortgages faltering
More troubled mortgage borrowers are failing out of the Obama administration’s foreclosure-prevention program than are winning permanently lower home payments, the government reported Monday.
Borrowers who qualify for the Making Home Affordable program receive a three-month trial modification, and if they stay current on payments, they can receive a permanent modification.
Over about the past year, 340,459 homeowners got permanent modifications under the Making Home Affordable program. But 429,696 trial modifications and 6,357 permanent modifications were canceled, often for reasons such as no income verification.
That means about 35 percent of the 1.2 million homeowners enrolled since March 2009 were later found to be ineligible or failed in the permanent modification phase, leaving some to question whether the $50 billion program uses taxpayer funds wisely.
“How much money are we spending for each modification?” says Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “It’s money for banks, not for homeowners. The money spent per homeowner to keep them in their home is going to be pretty high.”
About half of homeowners who didn’t qualify for a permanent modification still got alternative modifications worked out with their lenders, according to government data from the eight largest mortgage servicers. Seven percent wound up in foreclosure and 3.6 percent in bankruptcy, 9.8 percent brought their loans current, 1.1 percent paid off their loans, and 2.1 percent gave up their homes through a short sale or deed in lieu of foreclosure.
“The bulk of people in those situations are getting alternative modifications with reduced payments,” says Herb Allison, assistant Treasury secretary.
The redefault rate among borrowers in the program is about 2 percent, officials said.
The number of trial modifications being launched is slowing. Just 30,099 trials were started in May, compared with 47,160 in April and 91,000 in January.
Allison says the administration is “well on track” to meet its goal of helping up to 4 million homeowners avoid foreclosure. Efforts such as servicers’ alternative modifications are included in reaching that mark.
That could be confusing to some housing advocates who mistakenly thought up to 4 million homeowners would get a modification under the federal program, Baker said. But “I don’t believe it was a deliberate effort to mislead.”
Source: USA TODAY, a division of Gannett Co. Inc., Stephanie Armour. All rights reserved.
Borrowers who qualify for the Making Home Affordable program receive a three-month trial modification, and if they stay current on payments, they can receive a permanent modification.
Over about the past year, 340,459 homeowners got permanent modifications under the Making Home Affordable program. But 429,696 trial modifications and 6,357 permanent modifications were canceled, often for reasons such as no income verification.
That means about 35 percent of the 1.2 million homeowners enrolled since March 2009 were later found to be ineligible or failed in the permanent modification phase, leaving some to question whether the $50 billion program uses taxpayer funds wisely.
“How much money are we spending for each modification?” says Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “It’s money for banks, not for homeowners. The money spent per homeowner to keep them in their home is going to be pretty high.”
About half of homeowners who didn’t qualify for a permanent modification still got alternative modifications worked out with their lenders, according to government data from the eight largest mortgage servicers. Seven percent wound up in foreclosure and 3.6 percent in bankruptcy, 9.8 percent brought their loans current, 1.1 percent paid off their loans, and 2.1 percent gave up their homes through a short sale or deed in lieu of foreclosure.
“The bulk of people in those situations are getting alternative modifications with reduced payments,” says Herb Allison, assistant Treasury secretary.
The redefault rate among borrowers in the program is about 2 percent, officials said.
The number of trial modifications being launched is slowing. Just 30,099 trials were started in May, compared with 47,160 in April and 91,000 in January.
Allison says the administration is “well on track” to meet its goal of helping up to 4 million homeowners avoid foreclosure. Efforts such as servicers’ alternative modifications are included in reaching that mark.
That could be confusing to some housing advocates who mistakenly thought up to 4 million homeowners would get a modification under the federal program, Baker said. But “I don’t believe it was a deliberate effort to mislead.”
Source: USA TODAY, a division of Gannett Co. Inc., Stephanie Armour. All rights reserved.
Monday, June 21, 2010
U.S. agencies trying to recoup mortgage scam losses
Federal agencies that saw billions of dollars vanish in an alleged mortgage scam involving one of the nation’s largest lenders are seeking to recoup the losses.
The U.S. government last week accused Lee Bentley Farkas, founder of the now-defunct mortgage firm Taylor, Bean & Whitaker, of masterminding complex mortgage schemes that targeted government agencies and led to the collapse of Colonial Bank, one of the nation’s largest regional banks.
On Friday, government-owned mortgage financier Freddie Mac, based in McLean, said it might have lost at least $1.8 billion, more than it had previously disclosed, in its dealings with Taylor Bean. It has filed a claim in Taylor Bean’s bankruptcy proceedings to recoup that money. But if it fails to do so, taxpayers could be on the hook because the government has pledged to cover Freddie’s losses.
Other agencies hit by the alleged scam – the Federal Housing Administration, Ginnie Mae and the Federal Deposit Insurance Corp. – have funds available to absorb losses and would only turn to taxpayers if those funds became depleted.
Legal experts say that even if the agencies recover money, it is unlikely they would get enough to make up for the losses.
“Rarely in my experiences are there enough funds available to pay back the agencies 100 cents on the dollar,” said Walter Stuart, a New York attorney who specializes in financial institution litigation.
Earlier this week, federal authorities arrested Farkas, 57, accusing him of covering up losses at his firm and creating fictitious mortgage assets, among other scams. He also is accused of trying to defraud the Treasury Department of $553 million from its rescue fund for banks. Farkas, through his attorney, has denied wrongdoing.
The FHA and Ginnie Mae could potentially get hit with more than $3 billion in losses, said Kenneth Donohue, the Department of Housing and Urban Development’s inspector general. FHA and Ginnie Mae halted business with Taylor Bean in early August. The company shut down one day later.
Taylor Bean was one of FHA’s largest business partners. The company would borrow money from Colonial to buy FHA-insured home loans from small lenders. It would pool the loans into securities and sell them to investors. Ginnie Mae would then guarantee those securities.
Federal prosecutors allege that Ginnie Mae continued to approve Taylor Bean as a securities issuer, and increased the amount of securities it could issue, based on false financial data that Taylor Bean submitted to Ginnie Mae.
If federal prosecutors recoup money, some of it could go back to the FHA insurance fund or to the general treasury, Donohue’s spokesman said.
The FDIC also has money at stake. It took over Colonial in August and had to pay out slightly more than $4 billion from its insurance fund to cover the cost of the collapse and make its depositors whole, agency officials said.
FDIC officials said they have two options for recouping that money: work with the Justice Department or file a separate civil lawsuit. No decision has been made on whether to pursue civil action, they said.
Any recovery in civil cases would be paid to the failed bank’s creditors, with depositors at the front of the line, an agency spokesman said.
The Securities and Exchange Commission launched a civil case this week against Taylor Bean. It is seeking the return of ill-gotten gains and penalties plus interest from Farkas and his company, though the court handling the case has not yet set dollar amounts. The court also will decide whether that money will go to Treasury or a fund that repays investors harmed by such scams.
Source: washingtonpost.com
The U.S. government last week accused Lee Bentley Farkas, founder of the now-defunct mortgage firm Taylor, Bean & Whitaker, of masterminding complex mortgage schemes that targeted government agencies and led to the collapse of Colonial Bank, one of the nation’s largest regional banks.
On Friday, government-owned mortgage financier Freddie Mac, based in McLean, said it might have lost at least $1.8 billion, more than it had previously disclosed, in its dealings with Taylor Bean. It has filed a claim in Taylor Bean’s bankruptcy proceedings to recoup that money. But if it fails to do so, taxpayers could be on the hook because the government has pledged to cover Freddie’s losses.
Other agencies hit by the alleged scam – the Federal Housing Administration, Ginnie Mae and the Federal Deposit Insurance Corp. – have funds available to absorb losses and would only turn to taxpayers if those funds became depleted.
Legal experts say that even if the agencies recover money, it is unlikely they would get enough to make up for the losses.
“Rarely in my experiences are there enough funds available to pay back the agencies 100 cents on the dollar,” said Walter Stuart, a New York attorney who specializes in financial institution litigation.
Earlier this week, federal authorities arrested Farkas, 57, accusing him of covering up losses at his firm and creating fictitious mortgage assets, among other scams. He also is accused of trying to defraud the Treasury Department of $553 million from its rescue fund for banks. Farkas, through his attorney, has denied wrongdoing.
The FHA and Ginnie Mae could potentially get hit with more than $3 billion in losses, said Kenneth Donohue, the Department of Housing and Urban Development’s inspector general. FHA and Ginnie Mae halted business with Taylor Bean in early August. The company shut down one day later.
Taylor Bean was one of FHA’s largest business partners. The company would borrow money from Colonial to buy FHA-insured home loans from small lenders. It would pool the loans into securities and sell them to investors. Ginnie Mae would then guarantee those securities.
Federal prosecutors allege that Ginnie Mae continued to approve Taylor Bean as a securities issuer, and increased the amount of securities it could issue, based on false financial data that Taylor Bean submitted to Ginnie Mae.
If federal prosecutors recoup money, some of it could go back to the FHA insurance fund or to the general treasury, Donohue’s spokesman said.
The FDIC also has money at stake. It took over Colonial in August and had to pay out slightly more than $4 billion from its insurance fund to cover the cost of the collapse and make its depositors whole, agency officials said.
FDIC officials said they have two options for recouping that money: work with the Justice Department or file a separate civil lawsuit. No decision has been made on whether to pursue civil action, they said.
Any recovery in civil cases would be paid to the failed bank’s creditors, with depositors at the front of the line, an agency spokesman said.
The Securities and Exchange Commission launched a civil case this week against Taylor Bean. It is seeking the return of ill-gotten gains and penalties plus interest from Farkas and his company, though the court handling the case has not yet set dollar amounts. The court also will decide whether that money will go to Treasury or a fund that repays investors harmed by such scams.
Source: washingtonpost.com
Chinese drywall victims may qualify for mortgage help
Homeowners with tainted Chinese drywall could finally get some help from their mortgage companies.
Mortgage giants Fannie Mae and Freddie Mac have directed servicers to reduce or suspend mortgage payments for those with bad drywall.
Fannie Mae’s policy goes into affect in July and gives homeowners up to six months forbearance. Freddie Mac’s new rules take effect immediately and allow homeowners with the bad drywall to take a hiatus from paying or to pay a lower amount for up to 1 year.
“It’s taken a long time for help to come,” said U.S. Senator Bill Nelson, who has pressed for this kind of assistance. “But this is some welcome news for folks who are out there really struggling.”
The drywall emits a corrosive gas that destroys appliances, air conditioners and anything metal. Some homeowners also think it causes health problems.
The government is still investigating Chinese drywall but recommends affected homes be gutted and rebuilt with domestic drywall. It’s a project that builders say can cost about $100,000.
Many homeowners have moved out, fearing that it’s not safe to breathe in the sulfuric gas. Others, though, don’t have anywhere else to go.
Regardless, until now, homeowners were responsible for paying mortgage payments, whether they able to live in their homes or not.
These new policies are only for loans owned by Fannie Mae or Freddie Mac. Homeowners can find out if they qualify by contacting their loan servicer.
Source: Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
Mortgage giants Fannie Mae and Freddie Mac have directed servicers to reduce or suspend mortgage payments for those with bad drywall.
Fannie Mae’s policy goes into affect in July and gives homeowners up to six months forbearance. Freddie Mac’s new rules take effect immediately and allow homeowners with the bad drywall to take a hiatus from paying or to pay a lower amount for up to 1 year.
“It’s taken a long time for help to come,” said U.S. Senator Bill Nelson, who has pressed for this kind of assistance. “But this is some welcome news for folks who are out there really struggling.”
The drywall emits a corrosive gas that destroys appliances, air conditioners and anything metal. Some homeowners also think it causes health problems.
The government is still investigating Chinese drywall but recommends affected homes be gutted and rebuilt with domestic drywall. It’s a project that builders say can cost about $100,000.
Many homeowners have moved out, fearing that it’s not safe to breathe in the sulfuric gas. Others, though, don’t have anywhere else to go.
Regardless, until now, homeowners were responsible for paying mortgage payments, whether they able to live in their homes or not.
These new policies are only for loans owned by Fannie Mae or Freddie Mac. Homeowners can find out if they qualify by contacting their loan servicer.
Source: Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.
Need stories for Twitter, Facebook, etc.?
The National Association of Realtors® (NAR) reminded Realtor members that they have free access to expertly written, ready-to-use consumer articles in the new Realtor Content Resource. It’s a members-only benefit through HouseLogic.com, NAR’s homeownership site for consumers.
To access the content, visit www.HouseLogic.com/members and enter your NRDS identification number.
The articles help homeowners make smart decisions about maintaining, protecting and increasing the value of their homes.
“Realtors are the best source for real estate information, and the Realtor Content Resource helps our members enhance their reputation as housing experts,” says NAR President Vicki Cox Golder. “The Realtor Content Resource includes helpful tools, marketing slicks, and innovative consumer content that a Realtor can use at no cost.”
Current topics include:
• Smart home improvement and maintenance tips
• Tax, finance and insurance insights
• Methods to engage in issues that affect communities
A recently launched widget also makes it easy for members to import HouseLogic articles into their own e-newsletters, web pages or blogs. The size and shape of the widget can be customized, as can the number of articles displayed at one time. The content updates automatically in real time, so no additional work is needed to keep the information timely. The free widget is available at www.houselogic.com/widgets.
Source: Florida Realtors®
To access the content, visit www.HouseLogic.com/members and enter your NRDS identification number.
The articles help homeowners make smart decisions about maintaining, protecting and increasing the value of their homes.
“Realtors are the best source for real estate information, and the Realtor Content Resource helps our members enhance their reputation as housing experts,” says NAR President Vicki Cox Golder. “The Realtor Content Resource includes helpful tools, marketing slicks, and innovative consumer content that a Realtor can use at no cost.”
Current topics include:
• Smart home improvement and maintenance tips
• Tax, finance and insurance insights
• Methods to engage in issues that affect communities
A recently launched widget also makes it easy for members to import HouseLogic articles into their own e-newsletters, web pages or blogs. The size and shape of the widget can be customized, as can the number of articles displayed at one time. The content updates automatically in real time, so no additional work is needed to keep the information timely. The free widget is available at www.houselogic.com/widgets.
Source: Florida Realtors®
Squatters take over homes, causes housing crisis
Imagine going to a house or condo you own and finding a stranger living there who claims the property no longer belongs to you.
It’s happening across Florida and other parts of the country through what authorities say is abuse of a centuries-old concept known as adverse possession.
Dating back to Renaissance England, adverse possession allowed people to take over abandoned cottages and farmland, provided they were willing to live there and pay the taxes. These days, officials say, the legal doctrine is being misused by squatters, trespassers and swindlers to claim ownership of vacant or foreclosed homes.
In Broward and Palm Beach counties alone, adverse possession claims have been filed on some 200 homes in recent months. Three of the four people behind the claims have been arrested, and police are investigating the fourth man, who along with his father, a convicted mobster, tried to take over properties in Hollywood.
“We look at this as another con job, another get-rich-quick scheme,” said Don TenBrook, a Broward state prosecutor of economic crimes. “You’re starting to see them pop up all over the place. It’s been spawned by the real estate crisis.”
A bill in the Legislature this spring would have helped cut back on the abuses and better protect Florida property owners, but it failed to pass – the result of political retribution, state Rep. Ron Schultz, one of the sponsors, told the Sun Sentinel.
“We tried to nip this in the bud, but that didn’t quite work,” said the Republican from Homosassa. “This is becoming a fairly wide scam in Florida.”
Antonio Vurro owned an empty rental home in Sunrise that he was trying to sell when he discovered in February that someone had moved in, changed the locks and was trying to open a utility account.
“There were boxes all over the place and a mattress in each room,” Vurro said in a recent interview. “This is not right. It’s my house.”
The occupant, Fitzroy Ellis, told Vurro he was entitled to take over the home because it was abandoned. Police disagreed, and Ellis, 64, is now in the Broward County Jail charged with six counts of grand theft.
Ellis tried to claim a total of 48 properties in Broward, including a $1 million house in Coral Springs, through a company he formed called Helping Hands Properties Inc., county official records show. He told a Plantation police detective he planned to rent out the houses and condos and could offer tenants a good price “since he didn’t have to pay anything for the homes,” according to a police report.
Ellis, who is representing himself, wrote in court documents that the allegations against him are “false and an abuse of power.”
Another South Florida man, Mark Guerette of Wellington, filed notice in official county records that he was taking possession of 100 homes in Broward and three in the Palm Beach community of Lake Worth through Saving Florida Homes Inc. and two other companies. On one day last November, he filed takeover notices on 10 condos in the same North Lauderdale complex at 1200 SW 52nd Ave., records show.
Police say Guerette, 46, rented out six of the properties and collected more than $20,000 from tenants before he was arrested in April. He has pleaded not guilty to a charge of organized scheme to defraud.
His lawyer, Robert Shearin, said Guerette is nothing more than a good Samaritan, rescuing blighted homes.
“The banks are letting these properties go down the tubes,” Shearin said. “Here’s a guy trying to help out, and he ends up in jail.”
New twist, old law
The attempted takeovers are more fallout from Florida’s declining housing market, said Dennis Koehler, a West Palm Beach lawyer.
“People who are upside down just choose to leave the property, let it sit,” he said. “Some people have decided, ‘Hey, this is an opportunity for me.’ “
The opportunity involves a new twist on a very old law, dating to 16th-century England. Adverse possession allows non-owners of a property to eventually take ownership if they pay the taxes, occupy, maintain and improve the land for a period of years – seven in Florida. The purpose was to prevent abandoned properties from sitting idle with no one paying taxes on them.
It’s been used mostly to take over abandoned farmland or settle boundary disputes, such as a fence or building encroaching on a neighbor’s property.
In theory, vacant houses can also be taken through adverse possession, if the seven-year window passes and the property owner makes no attempt to pay the taxes or liens – an unlikely scenario, especially when a bank is laying claim through foreclosure, property experts say.
And claimants risk breaking other laws if they trespass, break into a home or try to collect rent without being the actual property owner.
Even if someone claiming adverse possession manages to legally occupy a home and pay taxes on it, “an owner could come in the sixth or seventh year and say, ‘I want my property back,’” Koehler said.
Koehler said he was hired by a West Palm Beach man, Carl Heflin, to provide legal advice on taking over homes through adverse possession. Koehler told the Sun Sentinel that he outlined a series of steps Heflin would need to take and stressed that he “couldn’t just move in and squat.”
But that’s exactly what Heflin did, according to the Palm Beach County Sheriff’s Office.
Beginning in December 2008, Heflin filed adverse possession notices on properties in West Palm Beach and even submitted deeds declaring ownership of 27 of them, police and court records show. He also moved his computer into a law office of a now disbarred attorney and changed the locks, the records say.
“When he told me about that,” Koehler said, “I dropped him as a client like a hot potato.”
Danielle Rubio said Heflin duped her into believing he was a legitimate landlord and in April 2009, she rented a three-bedroom home from him. The home was in disrepair, Rubio said, and Heflin’s ex-wife Cheryl collected a deposit with the promise to fix it up.
Rubio and her family spent just a few hours in the house when her 2-year-old son got sick from mold and was hospitalized, she said. Seeing little progress on the home in the following days, Rubio said she started checking Heflin out and tracked down the owner of record, who told her the house was in foreclosure and he had no tenants.
Rubio said Heflin refused to return her money, about $1,200, and she moved her family in with a relative.
“We were with my aunt two months before we could save enough to get a place,” she said. “We gave all the money to (the Heflins).”
Heflin, 52, was arrested last summer and is scheduled for trial June 21 on multiple counts, including organized scheme to defraud. Two associates, George Chambers and Sue Ann Smith, pleaded guilty in March to petty theft and as a condition of their probation must testify against Heflin.
Heflin and his attorney could not be reached for comment. Heflin’s ex-wife has not been charged and declined to comment. “I don’t care to speak to you about any of this,” she said.
“It’s scary that people can just take your money without even thinking about it,” Rubio said. “We never thought we would ever be in something like that. The paperwork looked legitimate.”
Ex-cons involved
Similar problems have occurred in Florida’s St. Lucie and Pasco counties, in Las Vegas, Nev., and southern California.
A squatter citing adverse possession took up residence last month in the former home of the mayor of Deltona in Volusia County. The house had been foreclosed on and sold when a woman moved in, hooked up cable television and refused to leave until sheriff’s deputies forced her out and gave her a trespass warning.
In South Florida, those trying to take properties have included people with criminal records, experience in real estate, or both.
Heflin told a sheriff’s detective he had “always been interested in real estate” and worked in 2007 for a company that secured foreclosed properties for banks.
Guerette had been an officer in property management, mortgage funding and real estate companies, corporation records show. He was convicted of misdemeanor and felony theft charges in 1994.
Adverse possession even lured a Hollywood man with ties to the mob.
Joseph Spitaleri was a member of the Trafficante organized crime family when he was convicted of racketeering in 2001, sentenced to nearly five years in federal prison and ordered to repay $1.7 million. He was one of 19 people named in a wide-ranging indictment that included charges of laundering money through mob-controlled check-cashing stores in Broward County.
In February, Spitaleri filed adverse possession notices on 14 Hollywood homes and one in Fort Lauderdale through Saving Florida Neighborhoods Inc. His son, Michael, claimed 13 other properties through his company, MAS & Son Inc., records show.
Joseph Spitaleri withdrew his claims in March, and his son gave up all but four of his last month.
One of the homes Joseph Spitaleri claimed ownership of is on Hollywood’s South Lake and is currently under contract to be sold for $1.2 million, said real estate agent Mike Harris. He said he learned of the adverse claim through another Realtor, and the owner’s attorney “contacted the outfit that was trying to steal this property” and cleared the title.
Joseph Spitaleri could not be reached, but was “not really involved” in the adverse possession claims, his son said.
“I canceled everything (for him) and had it all in my name,” Michael Spitaleri said. He declined to answer further questions.
Hollywood police are investigating Michael Spitaleri’s property claims, said spokesman Lt. Manny Marino.
Politics killed solution
For property owners, consequences of adverse possession can be costly. A claim can cloud the title and affect future sales, forcing the owner to hire an attorney and in some cases go to court.
One Polk County nursery owner has spent more money fighting an adverse possession claim than his property is worth, said county Property Appraiser Marsha Faux. Polk holds the state record for the most adverse possession claims 613 – many in unplatted subdivisions that are delinquent in their property taxes.
“Most are foreign owners, and they thought one day it might be developed and it would be close to (Walt Disney World) and they’d make a fortune,” Faux said. Others are properties in use by the actual owners but someone beat them to paying the property tax bill, she said.
The judiciary committee of the Florida Senate warned of the potential abuses of adverse possession last fall. Rep. Schultz, a former property appraiser, introduced legislation to stop them, including requiring all property owners to be notified when a claim is made and preventing non-owners from paying a tax bill until it becomes delinquent.
The bill, co-sponsored by Sen. Paula Dockery, cleared the Senate unanimously but died in the House the last day of the legislative session, April 30.
Schultz said a House leader told him the sponsors were the problem. Dockery, a Republican from Lakeland, was running for governor, but the preferred candidate of the House leadership was Attorney General Bill McCollum, Schultz said.
And Schultz said he angered leaders by voting against their priorities, including bills tying teacher pay to student test scores and requiring pregnant women to get an ultrasound before an abortion.
“When you are the lone ‘no’ vote among Republicans, you can expect to be noticed, and your bills have a certain aroma,” Schultz said. “I was quite disappointed. It was a general purpose, anti-fraud bill and it didn’t get a hearing.”
Palm Beach County Property Appraiser Gary Nikolits said the “political payback” has hurt all Floridians.
The proposed law “had statewide consequences and had benefit for all taxpayers,” he said, “so shame on the leadership.”
Source: The Associated Press, Sally Kestin, South Florida Sun Sentinel. All rights reserved. Database specialist Dana Williams contributed to this report.
It’s happening across Florida and other parts of the country through what authorities say is abuse of a centuries-old concept known as adverse possession.
Dating back to Renaissance England, adverse possession allowed people to take over abandoned cottages and farmland, provided they were willing to live there and pay the taxes. These days, officials say, the legal doctrine is being misused by squatters, trespassers and swindlers to claim ownership of vacant or foreclosed homes.
In Broward and Palm Beach counties alone, adverse possession claims have been filed on some 200 homes in recent months. Three of the four people behind the claims have been arrested, and police are investigating the fourth man, who along with his father, a convicted mobster, tried to take over properties in Hollywood.
“We look at this as another con job, another get-rich-quick scheme,” said Don TenBrook, a Broward state prosecutor of economic crimes. “You’re starting to see them pop up all over the place. It’s been spawned by the real estate crisis.”
A bill in the Legislature this spring would have helped cut back on the abuses and better protect Florida property owners, but it failed to pass – the result of political retribution, state Rep. Ron Schultz, one of the sponsors, told the Sun Sentinel.
“We tried to nip this in the bud, but that didn’t quite work,” said the Republican from Homosassa. “This is becoming a fairly wide scam in Florida.”
Antonio Vurro owned an empty rental home in Sunrise that he was trying to sell when he discovered in February that someone had moved in, changed the locks and was trying to open a utility account.
“There were boxes all over the place and a mattress in each room,” Vurro said in a recent interview. “This is not right. It’s my house.”
The occupant, Fitzroy Ellis, told Vurro he was entitled to take over the home because it was abandoned. Police disagreed, and Ellis, 64, is now in the Broward County Jail charged with six counts of grand theft.
Ellis tried to claim a total of 48 properties in Broward, including a $1 million house in Coral Springs, through a company he formed called Helping Hands Properties Inc., county official records show. He told a Plantation police detective he planned to rent out the houses and condos and could offer tenants a good price “since he didn’t have to pay anything for the homes,” according to a police report.
Ellis, who is representing himself, wrote in court documents that the allegations against him are “false and an abuse of power.”
Another South Florida man, Mark Guerette of Wellington, filed notice in official county records that he was taking possession of 100 homes in Broward and three in the Palm Beach community of Lake Worth through Saving Florida Homes Inc. and two other companies. On one day last November, he filed takeover notices on 10 condos in the same North Lauderdale complex at 1200 SW 52nd Ave., records show.
Police say Guerette, 46, rented out six of the properties and collected more than $20,000 from tenants before he was arrested in April. He has pleaded not guilty to a charge of organized scheme to defraud.
His lawyer, Robert Shearin, said Guerette is nothing more than a good Samaritan, rescuing blighted homes.
“The banks are letting these properties go down the tubes,” Shearin said. “Here’s a guy trying to help out, and he ends up in jail.”
New twist, old law
The attempted takeovers are more fallout from Florida’s declining housing market, said Dennis Koehler, a West Palm Beach lawyer.
“People who are upside down just choose to leave the property, let it sit,” he said. “Some people have decided, ‘Hey, this is an opportunity for me.’ “
The opportunity involves a new twist on a very old law, dating to 16th-century England. Adverse possession allows non-owners of a property to eventually take ownership if they pay the taxes, occupy, maintain and improve the land for a period of years – seven in Florida. The purpose was to prevent abandoned properties from sitting idle with no one paying taxes on them.
It’s been used mostly to take over abandoned farmland or settle boundary disputes, such as a fence or building encroaching on a neighbor’s property.
In theory, vacant houses can also be taken through adverse possession, if the seven-year window passes and the property owner makes no attempt to pay the taxes or liens – an unlikely scenario, especially when a bank is laying claim through foreclosure, property experts say.
And claimants risk breaking other laws if they trespass, break into a home or try to collect rent without being the actual property owner.
Even if someone claiming adverse possession manages to legally occupy a home and pay taxes on it, “an owner could come in the sixth or seventh year and say, ‘I want my property back,’” Koehler said.
Koehler said he was hired by a West Palm Beach man, Carl Heflin, to provide legal advice on taking over homes through adverse possession. Koehler told the Sun Sentinel that he outlined a series of steps Heflin would need to take and stressed that he “couldn’t just move in and squat.”
But that’s exactly what Heflin did, according to the Palm Beach County Sheriff’s Office.
Beginning in December 2008, Heflin filed adverse possession notices on properties in West Palm Beach and even submitted deeds declaring ownership of 27 of them, police and court records show. He also moved his computer into a law office of a now disbarred attorney and changed the locks, the records say.
“When he told me about that,” Koehler said, “I dropped him as a client like a hot potato.”
Danielle Rubio said Heflin duped her into believing he was a legitimate landlord and in April 2009, she rented a three-bedroom home from him. The home was in disrepair, Rubio said, and Heflin’s ex-wife Cheryl collected a deposit with the promise to fix it up.
Rubio and her family spent just a few hours in the house when her 2-year-old son got sick from mold and was hospitalized, she said. Seeing little progress on the home in the following days, Rubio said she started checking Heflin out and tracked down the owner of record, who told her the house was in foreclosure and he had no tenants.
Rubio said Heflin refused to return her money, about $1,200, and she moved her family in with a relative.
“We were with my aunt two months before we could save enough to get a place,” she said. “We gave all the money to (the Heflins).”
Heflin, 52, was arrested last summer and is scheduled for trial June 21 on multiple counts, including organized scheme to defraud. Two associates, George Chambers and Sue Ann Smith, pleaded guilty in March to petty theft and as a condition of their probation must testify against Heflin.
Heflin and his attorney could not be reached for comment. Heflin’s ex-wife has not been charged and declined to comment. “I don’t care to speak to you about any of this,” she said.
“It’s scary that people can just take your money without even thinking about it,” Rubio said. “We never thought we would ever be in something like that. The paperwork looked legitimate.”
Ex-cons involved
Similar problems have occurred in Florida’s St. Lucie and Pasco counties, in Las Vegas, Nev., and southern California.
A squatter citing adverse possession took up residence last month in the former home of the mayor of Deltona in Volusia County. The house had been foreclosed on and sold when a woman moved in, hooked up cable television and refused to leave until sheriff’s deputies forced her out and gave her a trespass warning.
In South Florida, those trying to take properties have included people with criminal records, experience in real estate, or both.
Heflin told a sheriff’s detective he had “always been interested in real estate” and worked in 2007 for a company that secured foreclosed properties for banks.
Guerette had been an officer in property management, mortgage funding and real estate companies, corporation records show. He was convicted of misdemeanor and felony theft charges in 1994.
Adverse possession even lured a Hollywood man with ties to the mob.
Joseph Spitaleri was a member of the Trafficante organized crime family when he was convicted of racketeering in 2001, sentenced to nearly five years in federal prison and ordered to repay $1.7 million. He was one of 19 people named in a wide-ranging indictment that included charges of laundering money through mob-controlled check-cashing stores in Broward County.
In February, Spitaleri filed adverse possession notices on 14 Hollywood homes and one in Fort Lauderdale through Saving Florida Neighborhoods Inc. His son, Michael, claimed 13 other properties through his company, MAS & Son Inc., records show.
Joseph Spitaleri withdrew his claims in March, and his son gave up all but four of his last month.
One of the homes Joseph Spitaleri claimed ownership of is on Hollywood’s South Lake and is currently under contract to be sold for $1.2 million, said real estate agent Mike Harris. He said he learned of the adverse claim through another Realtor, and the owner’s attorney “contacted the outfit that was trying to steal this property” and cleared the title.
Joseph Spitaleri could not be reached, but was “not really involved” in the adverse possession claims, his son said.
“I canceled everything (for him) and had it all in my name,” Michael Spitaleri said. He declined to answer further questions.
Hollywood police are investigating Michael Spitaleri’s property claims, said spokesman Lt. Manny Marino.
Politics killed solution
For property owners, consequences of adverse possession can be costly. A claim can cloud the title and affect future sales, forcing the owner to hire an attorney and in some cases go to court.
One Polk County nursery owner has spent more money fighting an adverse possession claim than his property is worth, said county Property Appraiser Marsha Faux. Polk holds the state record for the most adverse possession claims 613 – many in unplatted subdivisions that are delinquent in their property taxes.
“Most are foreign owners, and they thought one day it might be developed and it would be close to (Walt Disney World) and they’d make a fortune,” Faux said. Others are properties in use by the actual owners but someone beat them to paying the property tax bill, she said.
The judiciary committee of the Florida Senate warned of the potential abuses of adverse possession last fall. Rep. Schultz, a former property appraiser, introduced legislation to stop them, including requiring all property owners to be notified when a claim is made and preventing non-owners from paying a tax bill until it becomes delinquent.
The bill, co-sponsored by Sen. Paula Dockery, cleared the Senate unanimously but died in the House the last day of the legislative session, April 30.
Schultz said a House leader told him the sponsors were the problem. Dockery, a Republican from Lakeland, was running for governor, but the preferred candidate of the House leadership was Attorney General Bill McCollum, Schultz said.
And Schultz said he angered leaders by voting against their priorities, including bills tying teacher pay to student test scores and requiring pregnant women to get an ultrasound before an abortion.
“When you are the lone ‘no’ vote among Republicans, you can expect to be noticed, and your bills have a certain aroma,” Schultz said. “I was quite disappointed. It was a general purpose, anti-fraud bill and it didn’t get a hearing.”
Palm Beach County Property Appraiser Gary Nikolits said the “political payback” has hurt all Floridians.
The proposed law “had statewide consequences and had benefit for all taxpayers,” he said, “so shame on the leadership.”
Source: The Associated Press, Sally Kestin, South Florida Sun Sentinel. All rights reserved. Database specialist Dana Williams contributed to this report.
Friday, June 18, 2010
Federal mortgage fraud dragnet snares 86 South Florida suspects
A seven-month, multiagency probe into mortgage fraud has led to federal charges against 86 people in South Florida and a slew of cases being prosecuted – all part of a larger national crackdown, the U.S. Attorney’s Office in Miami announced Thursday.
Dubbed Operation Stolen Dreams, the defendants are accused of acquiring $76 million in fraudulent loans. Among those snared were mortgage and real estate brokers, loan and title processors, straw buyers and two title attorneys.
Some defendants have pleaded guilty, others await trial.
“For millions of Americans, the dream of homeownership has become a nightmare,” U.S. Attorney Wifredo Ferrer said in a statement. “The unscrupulous actions of individuals and companies who abuse the financial system and the trust of others for their own financial gain are immoral and illegal.”
Among the South Florida cases made public on Thursday:
U.S. vs. Yolette Antoine and Constance Powell: The women are charged in a $4.4 million immigration-mortgage fraud scheme. Antoine allegedly advertised herself in the Haitian-American community as someone who could provide assistance with immigration and housing matters. She obtained personal information of clients. “The defendants then stole the identities of these clients and used the stolen personal information to fraudulently purchase various properties. After the closings for the properties, the defendants would prepare and execute false quit-claim deeds transferring title in the properties to The Antoine Investment Group, which defendant Antoine controlled,” the release said. The company is out of business. Attempts to reach the women were unsuccessful. Antoine is scheduled to make her first court appearance on Friday.
U.S. vs. Ramos, et al: Eleven defendants, including a mortgage broker, a real estate broker, a loan processor, and eight straw buyers, were charged in a scheme that defrauded nine financial institutions of approximately $11.25 million in fraudulent loans on 15 residential properties. The defendants flipped properties at inflated prices to straw purchasers. The properties ultimately went into foreclosure.
U.S. vs. Medina, et al: Thirteen defendants, including a loan officer, a title agent, recruiter and straw buyers, were charged in a mortgage fraud scheme that resulted in the approval and disbursement of $16.9 million in fraudulent mortgage loans, causing losses of $9.7 million.
In other cases, title attorney Peter N. Price, of Hollywood, pleaded guilty to one count of making a false statement on a HUD-1 form. He will be sentenced in August.
Another title attorney, Michael Samuda, of Pembroke Pines, is among three people charged in a mortgage fraud and closing scheme involving the sale of a $1.25 million home in Fort Lauderdale.
Mortgage fraud prosecutions will continue in South Florida, said Amos Rojas Jr., Special Agent in Charge of the Florida Department of Law Enforcement’s Miami Regional Operations Center.
“This is a serious crime that has heavily affected many communities and families in South Florida: “We are vigorously combating this issue and will continue to investigate and arrest those criminals who engage in this crime.”
The nationwide crackdown was coordinated by the Department of Justice’s Financial Fraud Enforcement Task Force, which was created in November 2009.
Across the country, Operation Stolen Dreams has involved 1,215 criminal defendants – including 485 arrests. The defendants are allegedly responsible for more than $2.3 billion in losses. To date the operation has resulted in 191 civil enforcement actions and the recovery of more than $147 million.
Source: The Miami Herald, Luisa Yanez. Distributed by McClatchy-Tribune Information Services.
Dubbed Operation Stolen Dreams, the defendants are accused of acquiring $76 million in fraudulent loans. Among those snared were mortgage and real estate brokers, loan and title processors, straw buyers and two title attorneys.
Some defendants have pleaded guilty, others await trial.
“For millions of Americans, the dream of homeownership has become a nightmare,” U.S. Attorney Wifredo Ferrer said in a statement. “The unscrupulous actions of individuals and companies who abuse the financial system and the trust of others for their own financial gain are immoral and illegal.”
Among the South Florida cases made public on Thursday:
U.S. vs. Yolette Antoine and Constance Powell: The women are charged in a $4.4 million immigration-mortgage fraud scheme. Antoine allegedly advertised herself in the Haitian-American community as someone who could provide assistance with immigration and housing matters. She obtained personal information of clients. “The defendants then stole the identities of these clients and used the stolen personal information to fraudulently purchase various properties. After the closings for the properties, the defendants would prepare and execute false quit-claim deeds transferring title in the properties to The Antoine Investment Group, which defendant Antoine controlled,” the release said. The company is out of business. Attempts to reach the women were unsuccessful. Antoine is scheduled to make her first court appearance on Friday.
U.S. vs. Ramos, et al: Eleven defendants, including a mortgage broker, a real estate broker, a loan processor, and eight straw buyers, were charged in a scheme that defrauded nine financial institutions of approximately $11.25 million in fraudulent loans on 15 residential properties. The defendants flipped properties at inflated prices to straw purchasers. The properties ultimately went into foreclosure.
U.S. vs. Medina, et al: Thirteen defendants, including a loan officer, a title agent, recruiter and straw buyers, were charged in a mortgage fraud scheme that resulted in the approval and disbursement of $16.9 million in fraudulent mortgage loans, causing losses of $9.7 million.
In other cases, title attorney Peter N. Price, of Hollywood, pleaded guilty to one count of making a false statement on a HUD-1 form. He will be sentenced in August.
Another title attorney, Michael Samuda, of Pembroke Pines, is among three people charged in a mortgage fraud and closing scheme involving the sale of a $1.25 million home in Fort Lauderdale.
Mortgage fraud prosecutions will continue in South Florida, said Amos Rojas Jr., Special Agent in Charge of the Florida Department of Law Enforcement’s Miami Regional Operations Center.
“This is a serious crime that has heavily affected many communities and families in South Florida: “We are vigorously combating this issue and will continue to investigate and arrest those criminals who engage in this crime.”
The nationwide crackdown was coordinated by the Department of Justice’s Financial Fraud Enforcement Task Force, which was created in November 2009.
Across the country, Operation Stolen Dreams has involved 1,215 criminal defendants – including 485 arrests. The defendants are allegedly responsible for more than $2.3 billion in losses. To date the operation has resulted in 191 civil enforcement actions and the recovery of more than $147 million.
Source: The Miami Herald, Luisa Yanez. Distributed by McClatchy-Tribune Information Services.
U.S. Supreme Court: Florida beach program OK
Florida’s efforts to renourish eroded beaches does not violate the rights of nearby property owners, the U.S. Supreme Court ruled Thursday in a case brought by Walton County landowners following 1995’s Hurricane Opal.
In a 15-page ruling, the nation’s highest court agreed with the state that beachfront owners are not severely harmed when renourishment efforts extend the distance their properties lie from the shoreline by, in essence, expanding the shoreline seaward.
The case stems from recovery efforts following Hurricane Opal, when Destin and Walton County began a process of pumping sand onto beaches, establishing a boundary line between public and private land to control future erosion.
Stop the Beach Renourishment, a not-for-profit group of six landowners, argued before the Supreme Court that these augmented beaches deprived them of direct beachfront access and should be considered a taking of their land. The First District Court of Appeal (DCA) agreed.
But the nation’s high court upheld the 2008 state Supreme Court opinion that overturned the earlier DCA decision. The state has a “constitutional duty to protect Florida’s beaches,” according to the Florida Supreme Court, and was within its rights by moving forward with renourishment.
Landowners’ rights were not violated, the U.S. Supreme Court ruled, even if the extra sand increased the distance between the landowners’ property lines and the water.
“Regardless of whether an … event exposes land previously submerged or submerges land previously exposed, the boundary between (private) property and sovereign land does not change,” Justice Antonin Scalia wrote for the majority. “It remains (ordinarily) what was the mean high-water line before the event.”
Attorneys for the landowners said Thursday they we disappointed in the ruling, saying it further diminishes private property protections guaranteed in the U.S. Constitution.
“Private property rights are a legacy forged in the American Revolution by our Founding Fathers and passed on to us through the generations,” attorneys Kent Safriet and Richard Brightman of Hopping, Green & Sams wrote in a joint statement following the high court ruling. “They are a cornerstone of our society’s prosperity and freedom. Today’s ruling weakens those rights to the detriment of private property owners everywhere.”
Source: News Service of Florida, Michael Peltier
In a 15-page ruling, the nation’s highest court agreed with the state that beachfront owners are not severely harmed when renourishment efforts extend the distance their properties lie from the shoreline by, in essence, expanding the shoreline seaward.
The case stems from recovery efforts following Hurricane Opal, when Destin and Walton County began a process of pumping sand onto beaches, establishing a boundary line between public and private land to control future erosion.
Stop the Beach Renourishment, a not-for-profit group of six landowners, argued before the Supreme Court that these augmented beaches deprived them of direct beachfront access and should be considered a taking of their land. The First District Court of Appeal (DCA) agreed.
But the nation’s high court upheld the 2008 state Supreme Court opinion that overturned the earlier DCA decision. The state has a “constitutional duty to protect Florida’s beaches,” according to the Florida Supreme Court, and was within its rights by moving forward with renourishment.
Landowners’ rights were not violated, the U.S. Supreme Court ruled, even if the extra sand increased the distance between the landowners’ property lines and the water.
“Regardless of whether an … event exposes land previously submerged or submerges land previously exposed, the boundary between (private) property and sovereign land does not change,” Justice Antonin Scalia wrote for the majority. “It remains (ordinarily) what was the mean high-water line before the event.”
Attorneys for the landowners said Thursday they we disappointed in the ruling, saying it further diminishes private property protections guaranteed in the U.S. Constitution.
“Private property rights are a legacy forged in the American Revolution by our Founding Fathers and passed on to us through the generations,” attorneys Kent Safriet and Richard Brightman of Hopping, Green & Sams wrote in a joint statement following the high court ruling. “They are a cornerstone of our society’s prosperity and freedom. Today’s ruling weakens those rights to the detriment of private property owners everywhere.”
Source: News Service of Florida, Michael Peltier
Dealing with IRS tax credit rejections
The IRS has been rejecting first-time homebuyer claims from anyone who shows a Form 1098 Mortgage Interest Expense in their prior year files.
In many cases, the applicants are entitled to the credit because their previous mortgage interest deduction is for a timeshare, mobile home, boat or other recreational property.
If you have a client in this unfortunate position, here is some advice from Enrolled Agent Eva Rosenberg, who authors the Web site TaxMama.com.
• Respond to the IRS immediately and tell them why their rejection is wrong. Be prepared to prove that the mortgage the IRS is seeing isn’t on a personal residence. First-time homebuyers are entitled to own other types of real estate and still get the homebuyers credit, so provide proof that the previous mortgage was on something else.
• Send a letter explaining the situation and providing proof of a previous rental or other non-ownership living situation, including copies of rental contracts for the last three years, an old driver’s license showing that address, utility bills, etc.
• Homebuyers who believe the IRS may view their situation in this way should be proactive, providing proof that they are a first-time buyer when they initially file for the credit.
• Anyone who is rejected after two attempts to explain the problem to the IRS should call the Taxpayers Advocate Service toll-free, (877) 777-4778 (877) 777-4778, their Congressman, and their Senator, Rosenberg advises.
Source: TaxMama.com, Eva Rosenberg, EA (06/16/2010)
Source: INFORMATION, INC. Bethesda, MD
In many cases, the applicants are entitled to the credit because their previous mortgage interest deduction is for a timeshare, mobile home, boat or other recreational property.
If you have a client in this unfortunate position, here is some advice from Enrolled Agent Eva Rosenberg, who authors the Web site TaxMama.com.
• Respond to the IRS immediately and tell them why their rejection is wrong. Be prepared to prove that the mortgage the IRS is seeing isn’t on a personal residence. First-time homebuyers are entitled to own other types of real estate and still get the homebuyers credit, so provide proof that the previous mortgage was on something else.
• Send a letter explaining the situation and providing proof of a previous rental or other non-ownership living situation, including copies of rental contracts for the last three years, an old driver’s license showing that address, utility bills, etc.
• Homebuyers who believe the IRS may view their situation in this way should be proactive, providing proof that they are a first-time buyer when they initially file for the credit.
• Anyone who is rejected after two attempts to explain the problem to the IRS should call the Taxpayers Advocate Service toll-free, (877) 777-4778 (877) 777-4778, their Congressman, and their Senator, Rosenberg advises.
Source: TaxMama.com, Eva Rosenberg, EA (06/16/2010)
Source: INFORMATION, INC. Bethesda, MD
Thursday, June 17, 2010
Realtors in Florida help develop web-based forms program
Real Estate Industry Solutions’ President and Chairman Joe Ballarino knows what it’s like to deal with piles of paperwork and filing closed real estate transactions in boxes. In Ballarino’s other role as broker and owner for a Naples-based real estate firm, he banished paper in 2005 and transformed his brokerage from a paper-based system to an electronic one.
However, Ballarino knew there had to be an easier way to help other Realtors go paperless; so last year, Ballarino led a Real Estate Industry Solutions development team in researching and ultimately developing a web-based forms application tool. That tool, Form Simplicity, is now accessible to all Realtors® in Florida as a member benefit from Florida Realtors.
“As a broker, I knew all too well the burden Realtors face dealing with paper and the storage of closed transactions,” says Ballarino. “As the technology subsidiary of Florida Realtors, we wanted to see if we could help Realtors throughout North America reduce their paperwork and increase productivity through technology.”
During the product development process, the development team learned about the obstacles Ballarino faced as a broker trying to keep track of forms and transactions. They also collected feedback and conducted focus groups with Realtors throughout Florida.
“Our developers not only heard about how time-consuming it is for Realtors to deal with handwriting forms, but they also gained valuable insight from Realtors who were already using a forms technology product.” says Ballarino. “We received a lot of feedback saying that many forms products were cumbersome and difficult to learn. That gave us a goal: to build an easy-to-learn, easy-to-use product with powerful features.”
In late 2009, a few Florida Realtors became beta testers of the new web-based transaction product – Form Simplicity. Between October 2009 and March 2010, the beta group that started with a handful of members grew to hundreds as other members requested access to the new product. During the beta test, Realtors tested the product by creating active transactions and then offering feedback and suggestions.
Based on beta testers’ suggestions, Form Simplicity developers enhanced the product; and, on April 1, 2010, Form Simplicity was officially launched as a new Florida Realtors member benefit. In the first 60 days, members created 10,000 transactions. According to Ballarino, feedback is still important for ongoing development, and a feedback button allows all users to suggest changes or share their thoughts.
“Form Simplicity gives Realtors the ability to create an unlimited number of transactions with as many forms from the library as needed; further, members can also fax from, and into, Form Simplicity as much as needed at no extra cost through at least 2010. Further, we fully support single sign on (SSO) at no charge (links from MLS systems and Realtor board websites), as well as importing MLS data directly into a transaction, eliminating the need to retype the information,” says Ballarino.
“Form Simplicity also stores transactions with their associated files securely on state-of-the-art servers that feature full redundancy and disaster recovery procedures – members have no worries with compliance of file storage. The program also streamlines the organization of clauses and packages, auto-populates fields, and gives brokers valuable insight into their agents’ transactions. With the ability to e-mail and fax transactions for free, Florida Realtors will have no need to use paper.”
Form Simplicity is currently a member benefit to all Florida Realtors members. Form Simplicity is a product developed by Real Estate Industry Solutions, a wholly owned subsidiary of Florida Realtors.
Realtors across the state can go to forms.floridarealtors.org to begin using Form Simplicity. To login, use the ID you use to login to floridarealtors.org. You may also signup for a free training webinar and watch an overview video of the product on its homepage. For questions, e-mail Info@FormSimplicity.com.
Source: Florida Realtors®
However, Ballarino knew there had to be an easier way to help other Realtors go paperless; so last year, Ballarino led a Real Estate Industry Solutions development team in researching and ultimately developing a web-based forms application tool. That tool, Form Simplicity, is now accessible to all Realtors® in Florida as a member benefit from Florida Realtors.
“As a broker, I knew all too well the burden Realtors face dealing with paper and the storage of closed transactions,” says Ballarino. “As the technology subsidiary of Florida Realtors, we wanted to see if we could help Realtors throughout North America reduce their paperwork and increase productivity through technology.”
During the product development process, the development team learned about the obstacles Ballarino faced as a broker trying to keep track of forms and transactions. They also collected feedback and conducted focus groups with Realtors throughout Florida.
“Our developers not only heard about how time-consuming it is for Realtors to deal with handwriting forms, but they also gained valuable insight from Realtors who were already using a forms technology product.” says Ballarino. “We received a lot of feedback saying that many forms products were cumbersome and difficult to learn. That gave us a goal: to build an easy-to-learn, easy-to-use product with powerful features.”
In late 2009, a few Florida Realtors became beta testers of the new web-based transaction product – Form Simplicity. Between October 2009 and March 2010, the beta group that started with a handful of members grew to hundreds as other members requested access to the new product. During the beta test, Realtors tested the product by creating active transactions and then offering feedback and suggestions.
Based on beta testers’ suggestions, Form Simplicity developers enhanced the product; and, on April 1, 2010, Form Simplicity was officially launched as a new Florida Realtors member benefit. In the first 60 days, members created 10,000 transactions. According to Ballarino, feedback is still important for ongoing development, and a feedback button allows all users to suggest changes or share their thoughts.
“Form Simplicity gives Realtors the ability to create an unlimited number of transactions with as many forms from the library as needed; further, members can also fax from, and into, Form Simplicity as much as needed at no extra cost through at least 2010. Further, we fully support single sign on (SSO) at no charge (links from MLS systems and Realtor board websites), as well as importing MLS data directly into a transaction, eliminating the need to retype the information,” says Ballarino.
“Form Simplicity also stores transactions with their associated files securely on state-of-the-art servers that feature full redundancy and disaster recovery procedures – members have no worries with compliance of file storage. The program also streamlines the organization of clauses and packages, auto-populates fields, and gives brokers valuable insight into their agents’ transactions. With the ability to e-mail and fax transactions for free, Florida Realtors will have no need to use paper.”
Form Simplicity is currently a member benefit to all Florida Realtors members. Form Simplicity is a product developed by Real Estate Industry Solutions, a wholly owned subsidiary of Florida Realtors.
Realtors across the state can go to forms.floridarealtors.org to begin using Form Simplicity. To login, use the ID you use to login to floridarealtors.org. You may also signup for a free training webinar and watch an overview video of the product on its homepage. For questions, e-mail Info@FormSimplicity.com.
Source: Florida Realtors®
Citi, Fannie, Freddie offer Gulf mortgage relief
Homeowners in areas of the Gulf of Mexico affected by the BP oil spill can get mortgage relief from Citigroup Inc. and government sponsored mortgage purchasers Fannie Mae and Freddie Mac.
Citigroup says it is suspending loan foreclosures in the region through Sept. 17.
Fannie Mae says companies servicing its home loans may suspend or reduce borrower payments for up to 90 days. Additional time may be granted after a review of individual circumstances.
Freddie Mac spokesman Brad German said it also offers relief for a variety of reasons, including loss of income.
The eight-week-old oil disaster is affecting the coasts of Louisiana, Mississippi, Alabama and Florida.
Citigroup's home mortgage division said Wednesday it is suspending loan foreclosures in the region through Sept. 17, and that borrowers with first mortgage loans owned by CitiMortgage who meet certain criteria will not be subject to foreclosure sales or foreclosure notifications.
"In the midst of this crisis, we will continue to explore ways to help people avoid foreclosure so they and their families can remain in their homes and have one less thing to worry about," Citigroup CEO Vikram Pandit said in a statement.
CitiMortgage borrowers occupying homes in zip codes within 25 miles of affected coastal areas will be eligible.
The eight-week-old disaster, in which tens of thousands of gallons of oil still pour from the broken deepwater well daily, is affecting the coasts of Louisiana, Mississippi, Alabama and Florida.
Fannie Mae said companies servicing its home loans may immediately suspend or reduce payments for borrowers whose property or income are negatively affected for up to 90 days. Additional time may be granted after a review of individual circumstances.
"We want to give homeowners every opportunity to weather this unprecedented disaster, including relief from their mortgage payment if that will help them get back on their feet and stay in their homes," CEO Michael J. Williams said in a statement.
Borrowers seeking relief under Fannie Mae's or Freddie Mac's special relief measures should contact their mortgage servicer.
Source: The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Citigroup says it is suspending loan foreclosures in the region through Sept. 17.
Fannie Mae says companies servicing its home loans may suspend or reduce borrower payments for up to 90 days. Additional time may be granted after a review of individual circumstances.
Freddie Mac spokesman Brad German said it also offers relief for a variety of reasons, including loss of income.
The eight-week-old oil disaster is affecting the coasts of Louisiana, Mississippi, Alabama and Florida.
Citigroup's home mortgage division said Wednesday it is suspending loan foreclosures in the region through Sept. 17, and that borrowers with first mortgage loans owned by CitiMortgage who meet certain criteria will not be subject to foreclosure sales or foreclosure notifications.
"In the midst of this crisis, we will continue to explore ways to help people avoid foreclosure so they and their families can remain in their homes and have one less thing to worry about," Citigroup CEO Vikram Pandit said in a statement.
CitiMortgage borrowers occupying homes in zip codes within 25 miles of affected coastal areas will be eligible.
The eight-week-old disaster, in which tens of thousands of gallons of oil still pour from the broken deepwater well daily, is affecting the coasts of Louisiana, Mississippi, Alabama and Florida.
Fannie Mae said companies servicing its home loans may immediately suspend or reduce payments for borrowers whose property or income are negatively affected for up to 90 days. Additional time may be granted after a review of individual circumstances.
"We want to give homeowners every opportunity to weather this unprecedented disaster, including relief from their mortgage payment if that will help them get back on their feet and stay in their homes," CEO Michael J. Williams said in a statement.
Borrowers seeking relief under Fannie Mae's or Freddie Mac's special relief measures should contact their mortgage servicer.
Source: The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Thousands of home sales depend on extension
Tax credit extension and flood insurance
A USA Today story published in today's Florida Realtors News inaccurately said that the U.S. Senate passed a bill extending the closing deadline under the homebuyer tax credit for three months. That is incorrect. The Senate did vote to add that extension as an amendment to a larger bill, but that bill is struggling to find support - a bill that also includes an extension of the expired National Flood Insurance Program.
Call For Action
The larger bill now includes two topics of immediate concern to Florida Realtors, and it might not pass the Senate; and if it does, the House of Representatives must still consider it. The National Association of Realtors has issued a Call For Action, asking all Realtors to email their representatives using NAR's dedicated website. It only takes a few minutes, but only 5 percent of Florida Realtors have participated so far.
Please help pass these vital measures by visiting NAR's Call For Action website at: http://takeaction.realtoractioncenter.com/campaign/nhip_rhs_two
A USA Today story published in today's Florida Realtors News inaccurately said that the U.S. Senate passed a bill extending the closing deadline under the homebuyer tax credit for three months. That is incorrect. The Senate did vote to add that extension as an amendment to a larger bill, but that bill is struggling to find support - a bill that also includes an extension of the expired National Flood Insurance Program.
Call For Action
The larger bill now includes two topics of immediate concern to Florida Realtors, and it might not pass the Senate; and if it does, the House of Representatives must still consider it. The National Association of Realtors has issued a Call For Action, asking all Realtors to email their representatives using NAR's dedicated website. It only takes a few minutes, but only 5 percent of Florida Realtors have participated so far.
Please help pass these vital measures by visiting NAR's Call For Action website at: http://takeaction.realtoractioncenter.com/campaign/nhip_rhs_two
Wednesday, June 16, 2010
State spells out who will get foreclosure relief funds
A state group has unveiled plans for divvying up $317 million in federal foreclosure relief to mortgage-challenged Floridians struggling with unemployment, underemployment or medical hardships.
The Florida Housing Finance Corp. will distribute the money to counties based on local home-value declines, unemployment rates and totals of seriously delinquent mortgages. South Florida counties are tops on the distribution list, followed by Orange County, which would get $23.7 million. The state hopes to help 12,000 households with its Mortgage Intervention Strategy.
"We are counting on lenders to pick out people who are part of the community and just need some help getting back on their feet, so they can stay in the home they so desperately want to stay in," said David Westcott, director of homeownership programs for the Florida Housing Finance Corp.
The housing group last week gave housing counselors a preview of the plan in Orlando. It is expected to approve the distribution plan – and choose a pilot county – on Friday. The money could reach homeowners before the end of the year.
Homeowners who qualify would get at least nine months of their mortgage, taxes and insurance paid for through the U.S. government's Hardest Hit Fund program. Florida is one of five states that will share in $1.5 billion of the funds.
Following that mortgage hiatus, homeowners also may qualify for an average $25,000 reduction in the loan principal that they owe. The hope is that, once their income increases, they can get a further loan modification and resume making mortgage payments.
The money is considered a loan to be forgiven incrementally – 20 percent a year for five years. If the homeowner can no longer make mortgage payments and the home goes into foreclosure, the loan is likely to be wiped away, Westcott said.
To qualify for the relief, homeowners must apply to a local housing-counseling agency; such agencies are now in the process of seeking the housing-finance authority's permission to screen applicants. Homeowners who are already in a loan modification are unlikely to qualify, officials said. And homeowners may need to sign affidavits stating that they are underemployed, for instance.
Westcott said the pilot program is likely to wind up in a hard-hit South Florida county, where the agency would test the program for two or three months before rolling it out statewide later this year.
Members of the Florida Housing Finance Corp. met Friday at the Peabody Orlando hotel with about four dozen housing-counseling agencies to introduce the program.
"We don't want to help people who, through their own mismanagement, got themselves into the situation they are in, using their home as an ATM and taking out all the equity to buy themselves a boat. ... We are not going to help the strategic defaulter," said Nicole Gibson, federal loan-programs administrator for the corporation. "They don't want their home anyway."
Several of the housing counselors who attended the session questioned some aspects of the program, such as whether enough jobs would return to sustain the mortgages once homeowners have exhausted their funds.
"Unless people have some income, there's still going to be a problem," said Eddie Felton, executive director of the Home Ownership Center of Lee County. "A lot of those jobs aren't coming back."
The program is also open to criticism from homeowners who have been making their payments all along and who will question, Felton said, why the government isn't helping them.
"Here it is: My tax dollars again are being given to people who aren't worthy," Felton said. "That's the way it's going to be perceived."
Source: The Orlando Sentinel, Fla., Mary Shanklin. Distributed by McClatchy-Tribune Information Services.
The Florida Housing Finance Corp. will distribute the money to counties based on local home-value declines, unemployment rates and totals of seriously delinquent mortgages. South Florida counties are tops on the distribution list, followed by Orange County, which would get $23.7 million. The state hopes to help 12,000 households with its Mortgage Intervention Strategy.
"We are counting on lenders to pick out people who are part of the community and just need some help getting back on their feet, so they can stay in the home they so desperately want to stay in," said David Westcott, director of homeownership programs for the Florida Housing Finance Corp.
The housing group last week gave housing counselors a preview of the plan in Orlando. It is expected to approve the distribution plan – and choose a pilot county – on Friday. The money could reach homeowners before the end of the year.
Homeowners who qualify would get at least nine months of their mortgage, taxes and insurance paid for through the U.S. government's Hardest Hit Fund program. Florida is one of five states that will share in $1.5 billion of the funds.
Following that mortgage hiatus, homeowners also may qualify for an average $25,000 reduction in the loan principal that they owe. The hope is that, once their income increases, they can get a further loan modification and resume making mortgage payments.
The money is considered a loan to be forgiven incrementally – 20 percent a year for five years. If the homeowner can no longer make mortgage payments and the home goes into foreclosure, the loan is likely to be wiped away, Westcott said.
To qualify for the relief, homeowners must apply to a local housing-counseling agency; such agencies are now in the process of seeking the housing-finance authority's permission to screen applicants. Homeowners who are already in a loan modification are unlikely to qualify, officials said. And homeowners may need to sign affidavits stating that they are underemployed, for instance.
Westcott said the pilot program is likely to wind up in a hard-hit South Florida county, where the agency would test the program for two or three months before rolling it out statewide later this year.
Members of the Florida Housing Finance Corp. met Friday at the Peabody Orlando hotel with about four dozen housing-counseling agencies to introduce the program.
"We don't want to help people who, through their own mismanagement, got themselves into the situation they are in, using their home as an ATM and taking out all the equity to buy themselves a boat. ... We are not going to help the strategic defaulter," said Nicole Gibson, federal loan-programs administrator for the corporation. "They don't want their home anyway."
Several of the housing counselors who attended the session questioned some aspects of the program, such as whether enough jobs would return to sustain the mortgages once homeowners have exhausted their funds.
"Unless people have some income, there's still going to be a problem," said Eddie Felton, executive director of the Home Ownership Center of Lee County. "A lot of those jobs aren't coming back."
The program is also open to criticism from homeowners who have been making their payments all along and who will question, Felton said, why the government isn't helping them.
"Here it is: My tax dollars again are being given to people who aren't worthy," Felton said. "That's the way it's going to be perceived."
Source: The Orlando Sentinel, Fla., Mary Shanklin. Distributed by McClatchy-Tribune Information Services.
Foreclosure court filings down in 1Q
The number of foreclosure filings for the first quarter of the year is down significantly compared to the past two years.
According to the Office of State Courts Administrator, the number of foreclosure filings for January through April stand at 105,149. During that same period in 2009, there had been 143,936 filings and in 2008 there were 111,337.
"Is it where it could be?" asked Miami-Dade Judge Jennifer Bailey, who chaired a Florida Supreme Court task force on the foreclosure crisis. "No. Is it getting better? Yeah."
The crush of foreclosure cases has been an ongoing problem for the state court system as the state budget tightened and they had fewer people to handle the massive amount of paperwork associated with foreclosures.
The result was a painful process for homeowners and lenders.
The number of cases created a huge backlog in courtrooms, with cases that once took three months getting dragged out to six months. In 2007, the court recorded 182,044 foreclosure filings. In 2008, that number jumped to 368,742 and increased again in 2009 to 399,120 filings.
Bailey said the numbers in Miami-Dade follow the statewide trend, though there is still an immense caseload compared to several years ago when the housing market was booming.
At the order of the Florida Supreme Court, local court systems have created foreclosure mediation programs over the past several months to ease the process by bringing all the parties together before it heads to court.
Sometimes it works and the parties settle. Other times it doesn't.
"I believe we're seeing a whole lot more 'work-outs' than we were before," Bailey said.
It's still too early to tell though if the mediation programs will have the desired impact overall, Bailey said. Some judicial circuits created their programs recently, and even in Miami-Dade, which established a program before the Supreme Court ordered it, there are still a few hiccups.
Getting borrowers to the table has also been difficult sometimes because phone landlines have been disconnected and other contact information has not been provided. But for the cases where all sides can get to the table, it has been working out, Bailey added.
"For those institutions that have realized what an opportunity this is to keep their costs down, those cases are settling," she said.
Source: News Service of Florida, Kathleen Haughney.
According to the Office of State Courts Administrator, the number of foreclosure filings for January through April stand at 105,149. During that same period in 2009, there had been 143,936 filings and in 2008 there were 111,337.
"Is it where it could be?" asked Miami-Dade Judge Jennifer Bailey, who chaired a Florida Supreme Court task force on the foreclosure crisis. "No. Is it getting better? Yeah."
The crush of foreclosure cases has been an ongoing problem for the state court system as the state budget tightened and they had fewer people to handle the massive amount of paperwork associated with foreclosures.
The result was a painful process for homeowners and lenders.
The number of cases created a huge backlog in courtrooms, with cases that once took three months getting dragged out to six months. In 2007, the court recorded 182,044 foreclosure filings. In 2008, that number jumped to 368,742 and increased again in 2009 to 399,120 filings.
Bailey said the numbers in Miami-Dade follow the statewide trend, though there is still an immense caseload compared to several years ago when the housing market was booming.
At the order of the Florida Supreme Court, local court systems have created foreclosure mediation programs over the past several months to ease the process by bringing all the parties together before it heads to court.
Sometimes it works and the parties settle. Other times it doesn't.
"I believe we're seeing a whole lot more 'work-outs' than we were before," Bailey said.
It's still too early to tell though if the mediation programs will have the desired impact overall, Bailey said. Some judicial circuits created their programs recently, and even in Miami-Dade, which established a program before the Supreme Court ordered it, there are still a few hiccups.
Getting borrowers to the table has also been difficult sometimes because phone landlines have been disconnected and other contact information has not been provided. But for the cases where all sides can get to the table, it has been working out, Bailey added.
"For those institutions that have realized what an opportunity this is to keep their costs down, those cases are settling," she said.
Source: News Service of Florida, Kathleen Haughney.
Tuesday, June 15, 2010
Home size declines; buyers opt for single story
The size of new single-family homes declined again in 2009, dropping to a nationwide average of 2,438 square feet, according to information about new home characteristics released recently by the U.S. Census Bureau (http://www.census.gov/const/www/charindex.html).
For nearly 30 years, the average size of new U.S. homes increased, peaking at 2,521 square feet in 2007. It was essentially flat in 2008 and then dropped, so that new single-family homes were almost 100 square feet smaller in 2009 than in 2007.
“We also saw a decline in the size of new homes when the economy lapsed into recession in the early 1980s,” says National Association of Home Builders (NAHB) Chief Economist David Crowe. “The decline of the early 1980s turned out to be temporary, but this time the decline is related to phenomena such as an increased share of first-time home buyers, a desire to keep energy costs down, smaller amounts of equity in existing homes to roll into the next home, tighter credit standards and less focus on the investment component of buying a home. Many of these tendencies are likely to persist and continue affecting the new home market for an extended period.”
In keeping with their slightly smaller size, new single-family homes completed in 2009 had fewer bedrooms than previously. After increasing for almost 20 years, the proportion of single-family homes with four bedrooms or more topped out at 39 percent in 2005; it was 34 percent last year. The proportion of single-family homes with three bedrooms increased from 49 percent to 53 percent between 2005 and 2009.
New single-family homes completed last year also had fewer bathrooms. The proportion of homes with three or more bathrooms was 24 percent last year, a decline from the peak of 28 percent in both 2007 and 2008. The percentage of single-family homes with two bathrooms increased from 35 to 37 percent last year, and the percentage with 2 or 2 ½ bathrooms was at 31 percent for the third consecutive year. The proportion of single-family homes with 1 or 1½ bathrooms has been below 10 percent for more than a decade.
In 1973, the first year for which the Census Bureau reports characteristics of single-family homes completed, most new single-family homes – 67 percent – had only one story. Twenty-three percent had two or more stories, and 10 percent were split-levels.
The proportion of one-story homes declined steadily for more than three decades, dropping to a low of 43 percent in 2006 and 2007. At the same time, the proportion of single-family homes with two or more stories increased, rising from 23 percent in 1973 to a high of 57 percent in 2006 (split level homes currently account for less than one percent of all single-family homes). Since 2006 the trends have been reversed, as the share of single-family homes with one-story increased to 47 percent last year, while the share with two or more stories dropped to 53 percent.
Regional differences in completed single-family homes
• In 1973, less than half of all new single-family homes completed had air conditioning; in 2009, 88 percent were air conditioned nationwide. Regionally, the proportion ranged from a low of 69 percent in the West to a high of 99 percent in the South. The Northeast and Midwest were at 75 percent and 90 percent, respectively.
• Nationwide, 62 percent of new single-family homes completed in 2009 had two-car garages, and 17 percent had garages for three or more cars. However, there were clear regional differences. Three-car garages were found in only about 11 percent of homes in the Northeast and the South. In the Midwest, 30 percent of all homes had three-car garages, and in the West, 26 percent.
• Regional differences were especially pronounced in the selection of exterior wall material. Nationwide, 34 percent of all single-family homes completed in 2009 homes had vinyl siding, 23 percent were brick, 19 percent were stucco, and 13 percent had fiber cement siding.
• Vinyl siding predominates in the Northeast, where it accounted for 74 percent of the market; wood was a distant second with a 12 percent market share. In the Midwest, vinyl siding accounted for 62 percent of the market while wood and brick were at 15 percent and 11 percent, respectively.
• Brick was the leader in the South, where it was found in 40 percent of new single-family homes. Twenty-eight percent of new homes in the South had vinyl siding and 13 percent had stucco.
• The Census Bureau began reporting statistics on fiber cement siding, which is relatively new to the market, in 2005. It already accounts for 24 percent of the market in the West. Stucco and wood account for 52 percent and 15 percent of the market, respectively, in that region.
Source: Florida Realtors®
For nearly 30 years, the average size of new U.S. homes increased, peaking at 2,521 square feet in 2007. It was essentially flat in 2008 and then dropped, so that new single-family homes were almost 100 square feet smaller in 2009 than in 2007.
“We also saw a decline in the size of new homes when the economy lapsed into recession in the early 1980s,” says National Association of Home Builders (NAHB) Chief Economist David Crowe. “The decline of the early 1980s turned out to be temporary, but this time the decline is related to phenomena such as an increased share of first-time home buyers, a desire to keep energy costs down, smaller amounts of equity in existing homes to roll into the next home, tighter credit standards and less focus on the investment component of buying a home. Many of these tendencies are likely to persist and continue affecting the new home market for an extended period.”
In keeping with their slightly smaller size, new single-family homes completed in 2009 had fewer bedrooms than previously. After increasing for almost 20 years, the proportion of single-family homes with four bedrooms or more topped out at 39 percent in 2005; it was 34 percent last year. The proportion of single-family homes with three bedrooms increased from 49 percent to 53 percent between 2005 and 2009.
New single-family homes completed last year also had fewer bathrooms. The proportion of homes with three or more bathrooms was 24 percent last year, a decline from the peak of 28 percent in both 2007 and 2008. The percentage of single-family homes with two bathrooms increased from 35 to 37 percent last year, and the percentage with 2 or 2 ½ bathrooms was at 31 percent for the third consecutive year. The proportion of single-family homes with 1 or 1½ bathrooms has been below 10 percent for more than a decade.
In 1973, the first year for which the Census Bureau reports characteristics of single-family homes completed, most new single-family homes – 67 percent – had only one story. Twenty-three percent had two or more stories, and 10 percent were split-levels.
The proportion of one-story homes declined steadily for more than three decades, dropping to a low of 43 percent in 2006 and 2007. At the same time, the proportion of single-family homes with two or more stories increased, rising from 23 percent in 1973 to a high of 57 percent in 2006 (split level homes currently account for less than one percent of all single-family homes). Since 2006 the trends have been reversed, as the share of single-family homes with one-story increased to 47 percent last year, while the share with two or more stories dropped to 53 percent.
Regional differences in completed single-family homes
• In 1973, less than half of all new single-family homes completed had air conditioning; in 2009, 88 percent were air conditioned nationwide. Regionally, the proportion ranged from a low of 69 percent in the West to a high of 99 percent in the South. The Northeast and Midwest were at 75 percent and 90 percent, respectively.
• Nationwide, 62 percent of new single-family homes completed in 2009 had two-car garages, and 17 percent had garages for three or more cars. However, there were clear regional differences. Three-car garages were found in only about 11 percent of homes in the Northeast and the South. In the Midwest, 30 percent of all homes had three-car garages, and in the West, 26 percent.
• Regional differences were especially pronounced in the selection of exterior wall material. Nationwide, 34 percent of all single-family homes completed in 2009 homes had vinyl siding, 23 percent were brick, 19 percent were stucco, and 13 percent had fiber cement siding.
• Vinyl siding predominates in the Northeast, where it accounted for 74 percent of the market; wood was a distant second with a 12 percent market share. In the Midwest, vinyl siding accounted for 62 percent of the market while wood and brick were at 15 percent and 11 percent, respectively.
• Brick was the leader in the South, where it was found in 40 percent of new single-family homes. Twenty-eight percent of new homes in the South had vinyl siding and 13 percent had stucco.
• The Census Bureau began reporting statistics on fiber cement siding, which is relatively new to the market, in 2005. It already accounts for 24 percent of the market in the West. Stucco and wood account for 52 percent and 15 percent of the market, respectively, in that region.
Source: Florida Realtors®
FHA: Changes system for selling HUD homes
The U.S. Department of Housing and Urban Development (HUD) announced that 23 companies will serve as Asset Managers (AM) and 32 other firms will serve as Field Service Managers (FSM) under its Management and Marketing (M&M) program, known as M&M III.
Under M&M III, the functions of maintaining and selling the property have been separated. The Field Service Managers will be responsible for property maintenance and preservation and the Asset Managers will be responsible for the sale of the homes. HUD hopes the change will reduce risk, increase sale prices and accelerate the pace of reselling HUD’s inventory of foreclosed FHA homes.
Under prior agreements, M&M contractors were responsible for both maintenance and marketing of the Department’s real estate-owned (REO) properties, but each function requires significantly different skill sets, thereby increasing the effectiveness of the program.
“These new contracts epitomize FHA’s continuing effort to reduce risk, increase net returns, decrease holding times and improve efficiency in the resale of its inventory of foreclosed properties,” said HUD Secretary Shaun Donovan. “It is critically important that FHA successfully and efficiently sell its inventory of these properties, and these contractors will help us do that.”
HUD’s current inventory of foreclosed FHA property is approximately 44,000 homes. That is up from the usual average level of 35,000 to 40,000.
Source: Florida Realtors®
Under M&M III, the functions of maintaining and selling the property have been separated. The Field Service Managers will be responsible for property maintenance and preservation and the Asset Managers will be responsible for the sale of the homes. HUD hopes the change will reduce risk, increase sale prices and accelerate the pace of reselling HUD’s inventory of foreclosed FHA homes.
Under prior agreements, M&M contractors were responsible for both maintenance and marketing of the Department’s real estate-owned (REO) properties, but each function requires significantly different skill sets, thereby increasing the effectiveness of the program.
“These new contracts epitomize FHA’s continuing effort to reduce risk, increase net returns, decrease holding times and improve efficiency in the resale of its inventory of foreclosed properties,” said HUD Secretary Shaun Donovan. “It is critically important that FHA successfully and efficiently sell its inventory of these properties, and these contractors will help us do that.”
HUD’s current inventory of foreclosed FHA property is approximately 44,000 homes. That is up from the usual average level of 35,000 to 40,000.
Source: Florida Realtors®
Monday, June 14, 2010
HUD’s announces another protection: ‘Sources of income’
The U.S. Department of Housing and Urban Development (HUD) will begin requiring applicants seeking grant funding to comply with any state and local laws that protect individuals from being denied housing based on their “lawful source of income.”
The funding requirement is part of a broader effort by HUD to make certain grant applicants meet state and local anti-discrimination laws, including those prohibiting housing discrimination based on a person’s income, such as Section 8 Rental Assistance, Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) or earnings from seasonal employment.
Last week, HUD announced new protections based on sexual orientation under its grant programs. These initiatives are not based on new federal laws; instead, HUD will, for the first time, consider any local laws that ban categories of discrimination.
HUD included the new protections in its general funding notice released this week. It details the minimum requirements for Fiscal Year 2010.
“A family’s source of income should never be used as a basis to discriminate against them,” says HUD Secretary Shaun Donovan.
“Prohibiting this form of discrimination provides an essential protection for many Americans, including disabled veterans, seasonal workers, and persons that are using housing choice vouchers to maintain housing for themselves and their children,” says John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity (FHEO). “Racial discrimination is often perpetrated through denials of housing opportunities to Section 8 voucher holders. It is wrong and HUD will now keep systemic violators from applying for HUD funds.”
Traditionally, HUD requires all applicants for competitive grant funding to comply with all applicable federal fair housing and civil rights requirements including those expressed in Fair Housing Act; Title VI of the Civil Rights Act of 1964; Section 504 of the Rehabilitation Act of 1973; and Title II of the Americans with Disabilities Act.
Source: Florida Realtors®
The funding requirement is part of a broader effort by HUD to make certain grant applicants meet state and local anti-discrimination laws, including those prohibiting housing discrimination based on a person’s income, such as Section 8 Rental Assistance, Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) or earnings from seasonal employment.
Last week, HUD announced new protections based on sexual orientation under its grant programs. These initiatives are not based on new federal laws; instead, HUD will, for the first time, consider any local laws that ban categories of discrimination.
HUD included the new protections in its general funding notice released this week. It details the minimum requirements for Fiscal Year 2010.
“A family’s source of income should never be used as a basis to discriminate against them,” says HUD Secretary Shaun Donovan.
“Prohibiting this form of discrimination provides an essential protection for many Americans, including disabled veterans, seasonal workers, and persons that are using housing choice vouchers to maintain housing for themselves and their children,” says John Trasviña, HUD Assistant Secretary for Fair Housing and Equal Opportunity (FHEO). “Racial discrimination is often perpetrated through denials of housing opportunities to Section 8 voucher holders. It is wrong and HUD will now keep systemic violators from applying for HUD funds.”
Traditionally, HUD requires all applicants for competitive grant funding to comply with all applicable federal fair housing and civil rights requirements including those expressed in Fair Housing Act; Title VI of the Civil Rights Act of 1964; Section 504 of the Rehabilitation Act of 1973; and Title II of the Americans with Disabilities Act.
Source: Florida Realtors®
Economists: 3-year backlog of foreclosures in courts
Shortly after Orlando Eslava’s bank started to push him through the foreclosure process last year, he got some good news: He was eligible for a government mortgage relief program that would lower his loan payments. But the lender plowed ahead with the foreclosure sale anyway, taking back the condo in Aventura, Fla., even as Eslava made payments under the federal plan.
When a Florida judge learned of the foreclosure, she threw out the case and nullified Eslava’s existing mortgage balance.
Eslava’s case reflects the state of confusion among lenders and courts as they struggle to keep up with a backlog of millions of delinquent homeowners making their way through the foreclosure process. Bank repossessions jumped more than 40 percent in May, to more than 90,000, compared with the same period last year, according to data released Thursday by RealtyTrac, an online service that tracks the foreclosure market.
That uptick is likely to continue this year, and it could take at least three years to work through the backlog of delinquent borrowers, economists say. In many cases, lenders are pushing their cases through overwhelmed courts and facing emboldened homeowners challenging the repossession of their homes on technical grounds.
By the time HSBC began the foreclosure process last year, Eslava, 53, had been trying to get a loan modification for more than a year. In November, a judge approved HSBC’s request to proceed with the repossession and set an April 9 sale date. But after discovering that HSBC could not produce proof that it held Eslava’s mortgage note, the judge ordered the bank to post a $414,000 bond.
The next day, Eslava learned that he was eligible for the federal foreclosure prevention program, which would lower his mortgage payments to $620 a month from about $1,000.
“It was a big relief. Like it was finally going to be over,” Eslava said.
The loan modification should have prevented the foreclosure. But HSBC continued to oppose efforts by Eslava’s attorney, Sheleen Khan, to cancel the foreclosure sale. “All he was looking to do was modify the loan,” Kahn said. “It was very trying for him and nerve-racking for me because we didn’t know what would happen.”
Eslava made several payments under the government relief program, but HSBC foreclosed on the home in April. Kahn filed a motion to overturn the sale, pointing out that in addition to ignoring the loan modification, the bank had not posted the bond required by the judge.
Miami-Dade Circuit Court Judge Jennifer Bailey agreed and brought both sides back to court in early May. Noting that 60,000 foreclosure filings were made in Miami-Dade County last year and that every hearing takes precious minutes, Bailey lambasted the bank’s attorneys for wasting time.
“It doesn’t sound like much, but [every case] represents a situation where the bank’s position is constantly shifting and changing because they don’t know what the Sam Hill is going on in their files,” Bailey said, according to a transcript of the hearing.
“Why did you lose the note? Because you’re operating at the same level of chaos and disorganization that caused you to oppose the motion to cancel the sale when” Eslava had been given a loan modification, Bailey said. A few minutes later, Bailey sanctioned the bank by wiping out Eslava’s mortgage debt. The mortgage note “is null and void. Mr. Eslava is relieved of the debt,” Bailey said.
Eslava, who was not at the hearing, was shocked by the news. He had hoped that the foreclosure would be reversed and that he would remain in the government program. “It’s naturally a good feeling,” he said. “I did everything I was supposed to do.”
HSBC, which as the trustee owns the legal title to Eslava’s loan on behalf of a group of investors, said it does not comment on the specifics of legal matters.
Wells Fargo, which acted as the servicer on the loan, said in a statement: “We work hard to comply with all applicable legal requirements and we expect the firms we work with – in this case, Florida Default Law Group – to do the same. Although this was a technical error on their part, if we make a mistake, we fix it and we hold others we work with to the same high standards.”
Florida Default Law Group, which represented both banks in court, declined to comment.
There have been similar cases in New York and Illinois in which frustrated judges have wiped out a homeowner’s mortgage, but it is still far from a trend, said Diane E. Thompson, attorney on foreclosure issues at the National Consumer Law Center. “I don’t think that homeowners or their advocates should step into court and expect judges to do this for them, even if the lender can’t come up with the note,” Thompson said.
Many states are dealing with the backlog of homeowners winding their way through the process with mediation programs, requiring lenders in some cases to consider a loan modification before moving forward with a foreclosure. Maryland lawmakers approved a similar program this year. “That is a more hopeful trend, and it has the potential to resolve these disputes for everybody,” Thompson said.
Source: 2010 washingtonpost.com.
When a Florida judge learned of the foreclosure, she threw out the case and nullified Eslava’s existing mortgage balance.
Eslava’s case reflects the state of confusion among lenders and courts as they struggle to keep up with a backlog of millions of delinquent homeowners making their way through the foreclosure process. Bank repossessions jumped more than 40 percent in May, to more than 90,000, compared with the same period last year, according to data released Thursday by RealtyTrac, an online service that tracks the foreclosure market.
That uptick is likely to continue this year, and it could take at least three years to work through the backlog of delinquent borrowers, economists say. In many cases, lenders are pushing their cases through overwhelmed courts and facing emboldened homeowners challenging the repossession of their homes on technical grounds.
By the time HSBC began the foreclosure process last year, Eslava, 53, had been trying to get a loan modification for more than a year. In November, a judge approved HSBC’s request to proceed with the repossession and set an April 9 sale date. But after discovering that HSBC could not produce proof that it held Eslava’s mortgage note, the judge ordered the bank to post a $414,000 bond.
The next day, Eslava learned that he was eligible for the federal foreclosure prevention program, which would lower his mortgage payments to $620 a month from about $1,000.
“It was a big relief. Like it was finally going to be over,” Eslava said.
The loan modification should have prevented the foreclosure. But HSBC continued to oppose efforts by Eslava’s attorney, Sheleen Khan, to cancel the foreclosure sale. “All he was looking to do was modify the loan,” Kahn said. “It was very trying for him and nerve-racking for me because we didn’t know what would happen.”
Eslava made several payments under the government relief program, but HSBC foreclosed on the home in April. Kahn filed a motion to overturn the sale, pointing out that in addition to ignoring the loan modification, the bank had not posted the bond required by the judge.
Miami-Dade Circuit Court Judge Jennifer Bailey agreed and brought both sides back to court in early May. Noting that 60,000 foreclosure filings were made in Miami-Dade County last year and that every hearing takes precious minutes, Bailey lambasted the bank’s attorneys for wasting time.
“It doesn’t sound like much, but [every case] represents a situation where the bank’s position is constantly shifting and changing because they don’t know what the Sam Hill is going on in their files,” Bailey said, according to a transcript of the hearing.
“Why did you lose the note? Because you’re operating at the same level of chaos and disorganization that caused you to oppose the motion to cancel the sale when” Eslava had been given a loan modification, Bailey said. A few minutes later, Bailey sanctioned the bank by wiping out Eslava’s mortgage debt. The mortgage note “is null and void. Mr. Eslava is relieved of the debt,” Bailey said.
Eslava, who was not at the hearing, was shocked by the news. He had hoped that the foreclosure would be reversed and that he would remain in the government program. “It’s naturally a good feeling,” he said. “I did everything I was supposed to do.”
HSBC, which as the trustee owns the legal title to Eslava’s loan on behalf of a group of investors, said it does not comment on the specifics of legal matters.
Wells Fargo, which acted as the servicer on the loan, said in a statement: “We work hard to comply with all applicable legal requirements and we expect the firms we work with – in this case, Florida Default Law Group – to do the same. Although this was a technical error on their part, if we make a mistake, we fix it and we hold others we work with to the same high standards.”
Florida Default Law Group, which represented both banks in court, declined to comment.
There have been similar cases in New York and Illinois in which frustrated judges have wiped out a homeowner’s mortgage, but it is still far from a trend, said Diane E. Thompson, attorney on foreclosure issues at the National Consumer Law Center. “I don’t think that homeowners or their advocates should step into court and expect judges to do this for them, even if the lender can’t come up with the note,” Thompson said.
Many states are dealing with the backlog of homeowners winding their way through the process with mediation programs, requiring lenders in some cases to consider a loan modification before moving forward with a foreclosure. Maryland lawmakers approved a similar program this year. “That is a more hopeful trend, and it has the potential to resolve these disputes for everybody,” Thompson said.
Source: 2010 washingtonpost.com.
Friday, June 11, 2010
Multifamily builders less pessimistic
The multifamily market showed signs of moving toward stability in the first quarter of 2010, according to NAHB’s Multifamily Market Index (MMI). The current production index for market-rent apartments jumped to 30.6 – 14 points higher than a year earlier – while future demand expectations for Class A apartments rose to 49.6 from 34 and for Class B to 53.1 from 43.9. For lower-rent units and for-sale condominiums, the current production indexes rose to 38.2 and 25.0, respectively – more than 10 points higher than in the first quarter of 2009.
The MMI measures multifamily builder sentiment based on production and occupancy at the current time as well as builders’ expectations for conditions over the next six months. An index number greater than 50 indicates that the number of builders who view conditions as getting stronger outnumber the number who view conditions as becoming weaker. The values are not seasonally adjusted.
The current demand index for Class A apartments – among the hardest hit by the recession ¬– also showed improvement, rising to 41.7, or 19 points higher than a year earlier. The index measuring demand for Class B apartments rose to 43.4, up seven points. Demand for Class C apartments – the least expensive, and the most likely to stay occupied during hard times – actually showed a slight decline, falling about two points to 43.1.
Builders’ expectations for future production, though improved from a year ago, are still constrained by the difficulty in obtaining loans to fund development. Condo starts showed the lowest expectation for increased starts at 32.7. The future production index for lower-rent communities is 45.1 and for market-rate rent communities 43.5.
“The most encouraging part of the MMI is the number of multifamily builders expecting gains in rental occupancy over the next six months,” says NAHB Chief Economist David Crowe. “Builders’ optimism is directly related to recent positive employment news and expectations for the trend to continue. Current conditions are still depressed by multifamily builders’ difficulty obtaining financing for acquisition, development and construction.”
Source: Florida Realtors®
The MMI measures multifamily builder sentiment based on production and occupancy at the current time as well as builders’ expectations for conditions over the next six months. An index number greater than 50 indicates that the number of builders who view conditions as getting stronger outnumber the number who view conditions as becoming weaker. The values are not seasonally adjusted.
The current demand index for Class A apartments – among the hardest hit by the recession ¬– also showed improvement, rising to 41.7, or 19 points higher than a year earlier. The index measuring demand for Class B apartments rose to 43.4, up seven points. Demand for Class C apartments – the least expensive, and the most likely to stay occupied during hard times – actually showed a slight decline, falling about two points to 43.1.
Builders’ expectations for future production, though improved from a year ago, are still constrained by the difficulty in obtaining loans to fund development. Condo starts showed the lowest expectation for increased starts at 32.7. The future production index for lower-rent communities is 45.1 and for market-rate rent communities 43.5.
“The most encouraging part of the MMI is the number of multifamily builders expecting gains in rental occupancy over the next six months,” says NAHB Chief Economist David Crowe. “Builders’ optimism is directly related to recent positive employment news and expectations for the trend to continue. Current conditions are still depressed by multifamily builders’ difficulty obtaining financing for acquisition, development and construction.”
Source: Florida Realtors®
House OKs plan for higher FHA mortgage fees
Higher monthly fees may be in the works for consumers who take out home loans guaranteed by the Federal Housing Administration (FHA), the primary source of mortgages for first-time homebuyers.
The House on Thursday approved a bill giving the FHA power to hike monthly premiums it charges to consumers. The vote was 406-4, but it was unclear whether the Senate would follow.
Officials say the agency needs to do so to stabilize its finances, which have deteriorated because of the foreclosure crisis.
The agency does not make loans, but offers insurance against default. Borrowers pay extra fees because FHA-backed loans require down payments of only 3.5 percent of the purchase price.
Under changes being considered by FHA officials, a borrower with a mortgage of $170,000 would pay an extra $42 a month. The fees would bring in $5.8 billion in new revenue for the agency next year.
“It’s going to cost everybody a little more money,” said David Stevens, the agency’s commissioner. The agency, he said, “was never meant to be, nor should it be a bailout program. It should stand on its own two feet.”
The changes are expected to reduce the number of mortgages the agency backs annually by about 7 percent from the current level of around 1.8 million loans a year, Stevens said.
The potential changes, however, are likely to make it harder for marginal borrowers to qualify for loans, said Rhonda Porter, a loan officer with Mortgage Master Service Corp. in Seattle.
“It’s going to impact the person who might want to buy a little bit more than they were originally approved for,” she said. “There’s going to be less wiggle room.”
After the housing market went bust, the FHA became the major source of funding for first-time homebuyers. The agency insured roughly 24 percent of new loans in the first quarter of this year, according to Inside Mortgage Finance, a trade publication.
While the agency has avoided a taxpayer rescue so far, its reserves have sunk below the minimum level required by Congress.
Earlier this year, the FHA raised the fee paid by borrowers at the start of a loan to 2.25 percent of the total mortgage amount. Agency officials want to lower the upfront fee to 1 percent but raise monthly fees.
Borrowers currently pay 0.55 percent of the total loan amount every year, divided into monthly installments. FHA officials want to raise that fee to 0.9 percent, though the bill would give them the power to hike it as high as 1.5 percent.
Source: The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
The House on Thursday approved a bill giving the FHA power to hike monthly premiums it charges to consumers. The vote was 406-4, but it was unclear whether the Senate would follow.
Officials say the agency needs to do so to stabilize its finances, which have deteriorated because of the foreclosure crisis.
The agency does not make loans, but offers insurance against default. Borrowers pay extra fees because FHA-backed loans require down payments of only 3.5 percent of the purchase price.
Under changes being considered by FHA officials, a borrower with a mortgage of $170,000 would pay an extra $42 a month. The fees would bring in $5.8 billion in new revenue for the agency next year.
“It’s going to cost everybody a little more money,” said David Stevens, the agency’s commissioner. The agency, he said, “was never meant to be, nor should it be a bailout program. It should stand on its own two feet.”
The changes are expected to reduce the number of mortgages the agency backs annually by about 7 percent from the current level of around 1.8 million loans a year, Stevens said.
The potential changes, however, are likely to make it harder for marginal borrowers to qualify for loans, said Rhonda Porter, a loan officer with Mortgage Master Service Corp. in Seattle.
“It’s going to impact the person who might want to buy a little bit more than they were originally approved for,” she said. “There’s going to be less wiggle room.”
After the housing market went bust, the FHA became the major source of funding for first-time homebuyers. The agency insured roughly 24 percent of new loans in the first quarter of this year, according to Inside Mortgage Finance, a trade publication.
While the agency has avoided a taxpayer rescue so far, its reserves have sunk below the minimum level required by Congress.
Earlier this year, the FHA raised the fee paid by borrowers at the start of a loan to 2.25 percent of the total mortgage amount. Agency officials want to lower the upfront fee to 1 percent but raise monthly fees.
Borrowers currently pay 0.55 percent of the total loan amount every year, divided into monthly installments. FHA officials want to raise that fee to 0.9 percent, though the bill would give them the power to hike it as high as 1.5 percent.
Source: The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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