Q&A: Signing Documents

Q. Signing Documents

My wife and I purchased a home a month ago and we have not felt good about the whole deal from the time we left the closing. The lender we used had told us that we would have to pay points to get the rate down so we could afford the payment and we agreed to that. The problem is that when we got to the closing, the amount they had on the loan documents was a lot higher than what we had been told earlier by our lender. The title company said there was nothing they could do about it and that we just had to sign the papers? Is that true? We felt trapped, had all our stuff packed and felt we had no choice except to go ahead. Now we are not so sure. Did we make a mistake and if so, what can we do about it now?

A. The answers to your questions, in the order in which you asked them are: No. No. Yes and Probably not much.

Let’s talk about your problem which, unfortunately, happens all the time to folks. I will address first this specific situation and then the general problem of papers which don’t match up to what you had been led to believe would be included.

It is the responsibility of a title company to handle all the details of the closing in accordance with state law and in compliance with the details in the contract signed by the seller and the buyer. In addition, the title company is obligated to accept instructions from the lender for many details associated with the closing. Those details include what forms should be in the closing package what amounts should be inserted in all the documents related to money, etc. SO, when the title company said there was nothing they can do, what they meant was, “There is nothing we can do UNLESS the bank gives us some other instructions.”

When you are closing a real estate transaction the title company is the facilitator for that transaction. For a large percentage of closings, the title company has no relationship with either party and is simply being paid to process the paper work and assure that it is a transaction which was properly and legally handled. But there are times when the title company is, in fact, an agent for a party to the transaction. This is called dual agency. This means they are working for one specific party to the deal. This is most common if you are buying a new construction home and the title company is the company picked by the builder (sometimes owned by the builder) to handle all their transactions.

In addition, if the home you are buying is a bank-owned home, then the title company is, in fact, working for the owner of the foreclosed property (whether that is a lender, servicer or insurer/investor). SO, when the title company said there was nothing they could do, what they meant was “There is nothing we can change UNLESS we get different instructions from our principal (the lender/servicer/insurer).

Did you make a mistake? I have to tell you that you did. It probably doesn’t make you feel a lot better to know that almost everyone makes the same mistake.

THE MISTAKE: Believing that because someone presented you with papers that you must sign them. You DO NOT have to sign them. No, you can not go ahead with the transaction unless you sign them, but that also means that the other people can’t get what they want either. If you insist that the papers have to be changed to what you were told before (especially if you have a good faith estimate which documents the amounts you should be paying) then there is a very strong chance that the lender will change their instructions to the title company, the papers will be changed accordingly and then all of you can re-convene in order to close the deal.

This is almost certainly not going to happen this afternoon. But it can happen. It is worth holding out for. It is worth making everyone else uncomfortable until you get the deal you were told you would be getting.

Is there anything you can do now? I doubt it because you signed all the papers. You used your most prized possession and endorsed yourself into a pickle. You can hold on to the lesson you learned, share it with others and promise yourself to never again sign documents which you don’t clearly understand or which do not correspond to the agreement with the other party.

JUST DON’T DO IT!

© Copyright 2009, Home Ownership Matters, LLC. All rights Reserved. "Answer Book in a Foreclosure Climate" by Mildred Wilkins, available in 2009 from www.DovePublishingHouse.com.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)

WORD: Marketable Title

And the WORD for Today is...

Marketable Title – means a title that can be readily sold to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances. Marketable does not mean the same as CLEAR title. Many bank-owned properties are sold with the use of a marketable title (which is disclosed) but if the buyer does not understand the risks associated with such a purchase and does not conduct a title search there could be unpleasant consequences.

Marketable Title means a title which can be readily marketed but may not have all liens cleared. A buyer should therefore be aware of their legal rights and secure additional protection with a title policy which provides gap coverage.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased atwww.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Title Policy

And the WORD for Today is:

Title Policy – common types of title policies are “mortgagee policies,” which protect lenders, and “owner policies,” which protect buyers. Most lending institutions won’t loan you money to buy a house or other property unless you purchase a mortgagee policy. This policy will repay the balance of your mortgage if a claim against your property voids your title. Mortgagee policies remain in effect until the loan is repaid. Most lenders will require you to buy a new mortgagee title policy if you refinance your home. When the new loan pays off the existing loan, the old mortgagee policy expires. You are entitled to a premium discount on a new mortgagee policy if you refinance within seven years. Owner policies insure property owners against the specific kinds of claims listed in the policy. When you buy a house and purchase a mortgagee policy, a title company will automatically issue an owners policy—for a set premium—unless you specifically reject it in writing. An owner policy remains in effect as long as you or your heirs own the property or are liable for any title warranties made when you sell the property. You should keep your owner policy, even if you transfer your title or sell the property.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Clear Chain of Title

Q: When selling their home, is the seller responsible for paying the back taxes or tax liens? I have always assumed that they would be.

A: Short answer: YES, to both. More accurate answer is: Depends on whether the seller is an individual or an entity.

Individual sellers of real estate are required to provide a clear chain of title and that requires that any back taxes or tax liens would have to be satisfied prior to or at the closing. In order to demonstrate that there are no outstanding debts against the property, the seller signs a vendor’s affidavit which affirms that there are no outstanding obligations which have not been paid. Additionally, they provide the purchaser with a general warranty deed further guaranteeing that a clear title has been conveyed.

Buyer Beware—Bank-owned sellers

The use of the word ‘their’ in the question above indicates you are talking about buying a home from an individual rather than an REO (bank-owned property) from an insurer such as HUD, VA, Fannie Mae or Freddie Mac. While these insurers (as well as other guarantors) are required to pay back taxes and Federal tax liens before they transfer title, they are NOT required to cover all liens and consequently you will most often receive what is called a “special warranty deed”, “sheriff’s deed” or “trustee’s deed”. Irrespective of what it is called, any of these types of deeds will be transferring “marketable title” but not necessarily “clear title” to you. You owe it to yourself to get clarity on all the words highlighted in this section before you purchase a home which is being offered for sale by an institution rather than an individual.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Is the Seller Responsible for back taxes?

Q: When selling their home, is the seller responsible for paying the back taxes or tax liens?

A: Short answer: YES, to both.

Individual sellers of real estate are required to provide a clear chain of title and that requires that any back taxes or tax liens would have to be satisfied prior to or at the closing. In order to demonstrate that there are no outstanding debts against the property, the seller signs a vendor’s affidavit which affirms that there are no outstanding obligations which have not been paid. Additionally, they provide the purchaser with a general warranty deed further guaranteeing that a clear title has been conveyed.

Buyer Beware—Bank-owned sellers

The use of the word ‘their’ in the question above indicates you are talking about buying a home from an individual rather than an REO (bank-owned property) from an insurer such as HUD, VA, Fannie Mae or Freddie Mac. While these insurers are required to pay back taxes and Federal tax liens before they transfer title, they are NOT required to cover all liens and consequently you will most often receive what is called a “special warranty deed”, “sheriff’s deed” or “trustee’s deed”. Irrespective of what it is called, any of these types of deeds will be transferring “marketable title” but not necessarily “clear title” to you. You owe it to yourself to get clarity on all the words highlighted in this section before you purchase a home which is being offered for sale by an institution rather than an individual.

Pass it on! your ‘contingency’ and move to a closing.

What are contingencies?

They are stumbling blocks which must be addressed before you can close on the new home purchase. It might be that you have a home you must sell first. It might be that you need to get money from a 401K and have not yet applied for that to be released. You might need to pay off some outstanding judgments in order to get final loan approval to complete this transaction. It could be that you are awaiting a final answer from your employer about a possible job transfer or any one (or ten) other things.

Most important is to discuss with your agent whether or not there are conditions in the content of your offer, (probably under further conditions) which grant the seller permission to continue to show the home. If there are NO contingencies then I would say the home should have been pended and no, there should be no further showings.

Real estate contracts are somewhat complex but you really can understand them if you take the time to understand what the words really mean. Read your specific contract and see what they can and cannot legally do until the closing actually occurs. Best of luck.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Preliminary Title Report

And the WORD for Today Is...

Preliminary Title Report – refers to a report showing the condition of the title before a sale or loan transaction. It is prudent for real estate agents to request a preliminary report immediately upon the listing of a property for short sale due to the increased likelihood the defaulted borrower may have other “challenges” such as unpaid taxes or home association dues. It important to have this information to get a clearer picture of the borrowers’ financial liabilities as well as to allow adequate time to resolve any issues which must be resolved prior to closing. An updated title report should be prepared prior to closing and the issuing of a title insurance policy.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

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WORD: "General" Warranty Deed

And the WORD for Today is:

“General” Warranty Deed—provides the broadest coverage for the purchaser. It conveys the property to the new buyer but the guarantor is also warranting that he is entitled to the property as well as guaranteeing against any defects in title or outstanding encumbrances on the title. In cases where there is later found to be a cloud on the title, in whole or in part, the guarantor of a general warranty deed will satisfy a claim with a cash award if there is a loss. The ALTA 98 title policy is the insurance which makes that guarantee to the new purchaser.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

REO Assumptions and Assertions

REO Assumptions and Assertions

Biggest Assumption: They just need to dump it

Translation: They’ll take any kind of crazy offer

Assertion: N-O-T YET

As a former Fannie Mae Broker–Specialist, I can provide insight into the real world of buying and selling bank-owned properties. First, forget most of what you think you know about such transactions—you’re probably way off target.

The Devil’s in the Details . . .

If you’re assuming they just need to dump it, you are half way right. They do, they really do, but not at any price. The most common misconception is that the holder of REO property will accept any offer without consideration for the value of the collateral. I suspect you’ve been watching too much late night television. While it is true that the increased volume of foreclosed properties means a substantial increase in REO inventory, the basic business principles which govern liquidation are not changing as rapidly as they need to (or as you had hoped they would.)

Harsh New Reality

It is a harsh new reality that today’s market is being flooded with REO’s. Thousands more will be added in the months ahead as a result of the backlog which has been created because of political posturing. As a consequence, both federal agencies (HUD, VA, Fannie and Freddie) and private mortgage insurance carriers will need to adjust their guidelines during the upcoming months. Unfortunately, as a practical matter, in the meantime, they and loan servicers must operate within the guidelines of existing regulations and existing contractual stipulations until they are amended. They will be relaxed—necessity will dictate that they must be. The consequence will be a ‘let’s make a deal free-for-all.’ Good for agents and buyers—not so good for price stabilization. But it has to happen and the sooner we get to it the better.

They Don’t Know Its Value

You’re right on target with that assertion. The “local market reality” is a piece of data which is hard for the servicer to grasp when they handle properties around the country from a centralized location. The truth is, their usual resources are less than reliable. They must rely on:

• Their appraisal, and we know how likely that is to be inflated
• A $50-$75 BPO—okay, does anyone really think you’re getting an accurate evaluation with a product produced in a BPO mill? Do you really think that they are trying to determine value with that document? (They are NOT. They are fulfilling a servicing requirement to have a BPO performed.)
• Their gut instinct
• The loan amount shown in their computer—but since when has that been connected to the ACTUAL value of the property?

Hence, the market will dictate and that process takes time. If the property is ‘rejected by the market’ for an extended period of time then it is declining in both actual and perceived value. It’s in everyone’s best interest to determine fairly accurately, from the onset, what is today’s market value. Consequently, the servicer needs a current, as-is appraisal. While many appraisers were rewarded for inflating values during the boom years, they are now stuck with the unpleasant task of trying to justify vast differences between former and current value. Market correction is not enough of an explanation but the recently sold comps don’t lie. It’s worth what someone will pay for it—today—not last year.

The Law of Supply and Demand

In time (I think within the next three to four months) the inventory will be so high that the valuations will plummet and get in line with what a ready and able buyer is willing to pay a reluctant REO owner. During the boom years hundreds of thousands of houses were built across the country without any clear need based on population growth. Speculation in real estate was HOT. The jobs created, the loans generated, and false illusion of prosperity made for wonderful headlines.

I was nearly thrown out of a Foreclosure Task Force meeting in Indiana in 2006 when I dared to mention the need for a moratorium on new construction since the city had already built more than 30,000 new homes in 5 years for only 10,000 new residents. I mentioned a college business class on supply and demand. I visited Denver in 2006 and thought they were building homes for the entire United States to move there. Then I moved to Florida and quickly observed that enough new houses were being built there for the few folks who didn’t want to move to Denver or Indianapolis. Shall I mention Atlanta, Las Vegas and twenty other cities which issued building permits without checking to see where the buyers were coming from. We are paying the piper (and we will be paying for the next ten years) for allowing an excessive amount of housing to be built. We created an economic situation which will dictate FEWER aggregate occupied households as people move to sharing homes in order to survive the financial crisis created, in part, by the ‘creative financing’ used to sell the new housing stock.

In time, the newly created rental housing market (previous homeowners, now renting again) will absorb much of the current excess single family housing but we will have changed the dynamics of communities across the countries from single family, owner-occupant to rental dwellings, perhaps housing more than one family. Investors are the most likely purchasers for the glut of foreclosed homes which will hit the market during the next two years. As businessmen and women, they will make decisions based on totally different criteria than buyers who would be owner-occupants. Financial institutions will have no choice except to reconsider their options when holding costs, fines from municipalities and other constraints dictate they do something to stop the bleeding. Excess has its payback. The law of supply and demand will not be ignored; pretending it does not exist is a sure fire way to pay the piper.

Now About that Insurance and Title Work

If you do not know the difference between a ‘marketable title’ and a ‘clear title’ this would be an excellent thing for you to research if you are planning to purchase an REO property. Suffice it to say that the REO you are purchasing can have gaps in the title coverage which leave room for undisclosed liens to surface after the closing and bite the new owner in the proverbial behind. Since you will have signed numerous documents which stated that you understood that you had no recourse after closing: you will not be surprised when I tell you: YOU HAVE NO RECOURSE AFTER CLOSING.

Watch for an upcoming webinar on the HOM website: “Buying REO is Risky Business”. You might want to put that on your schedule.

Copyright © 2008, Home Ownership Matters, LLC. All rights Reserved.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)

Word: Orphan Houses

Today’s word is “orphan houses”, a new concept and a direct consequence of the dramatic increase in foreclosures across the country. There are numerous ones in your town and we hope your home doesn’t become one.

What’s an “orphan house” anyway? Unfortunately, it is a home which has been lost as a consequence of foreclosure or was voluntarily relinquished by the homeowner via a deed-in-lieu in order to avoid foreclosure. As if that were not bad enough, the insurer has neglected to transfer the title into their name which can cause major problems for the former owner down the road. 

As long as the title remains in the borrower's name, then any and all liability fall upon that borrower—who remains the owner of record. Thus the name “orphan house”, you lost it, and they have chosen not to legally claim it.

Now why would they do that? Obviously you are smart enough to know that when financial institutions do (or fail to do) something it usually is associated with saving them money. The catch this time is liability.  Whomever owns the property (has the title legally recorded in their name) bears the risk or liability for anything which occurs at or on the property.  If there is a fire and the vacant house burns, the insurer does not have a risk, it is NOT in their name. If the local municipality mows the 4 feet high grass and processes a bill for that address, it will have the former borrower name attached to it. (No new deed has been recorded). The homeowner’s association may continue billing in the name of the former borrower (that would be you) and those bills can be attached to the property as liens. 

As a practical matter, if there has been a foreclosure there is a clear date when the ownership rights in the property ended. That is very murky when you mailed off paperwork to process a deed-in-lieu. Lenders are very willing lately to let you walk, complete the simple form and leave the property (within some guidelines of course). I am simply telling you that they are covered, YOU, however, are not.

How do you avoid an “orphan house” in your future? The best advice is to seek legal counsel about the aftermath of a foreclosure or deed-in-lieu. A competent attorney should be able to help you work through the details so you don’t end up with an unpleasant surprise down the road.

Yes, it is definitely worth the legal fee you will incur to avoid possible financial risk down the road.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

From the Desk of: REO Landmines

Let’s start with the basics: REO (real estate owned) refers to real estate which is owned by entities such as lenders, servicers or corporations. There are several ways property becomes REO but most often it is through default of the borrower who is either foreclosed upon or voluntarily relinquishes the property through deed-in-lieu. Corporations also become entitled if they acquired the home as part of an employee relocation package buyout.

Whatever mechanism resulted in the acquisition, a piece of real estate is now owned by an entity who needs to sell it. A special division, either called the REO or disposition division, is usually charged with the task of turning REO properties into liquid assets. As the foreclosure problem worsens the percentage of homes on the local market for sale which are, in fact, REO’s has increased. Strategies for dealing with the holders of these properties are somewhat different than purchasing from a private citizen. Those differences can be looked at as potential landmines if you are not familiar with the process.

Landmine # 1. Most REO properties are sold using a standardized contract which will be used throughout the nation. (for instance, HUD, Fannie Mae, VA). The language and terms in these contracts will supersede anything you write in your local purchase agreement, therefore, it is critical that you understand all the language in their standard contract.

Landmine # 2. Most REO properties are sold “as is”. While entities must allow for an independent inspection if one is allowed by state law, there is no requirement that any repairs be made as a result of the inspection.

Landmine # 3. Buyer are frequently charged a per day fee for delays in closing caused by their side of the transaction. Whether caused by the borrower, their lender or the realtor does not matter. It is not uncommon for the delay fee to be $100.00 per day.

Landmine # 4. Transfer of title will usually be granted with a special warranty deed or a Sheriff’s deed. Both provide a MARKETABLE title; not a CLEAR title. It is common for liens to remain attached.

Landmine # 5. When submitting an offer on an REO property, you buy the whole “kit and kaboodle.” What’s in the “kaboodle.”

Copyright 2007, Home Ownership Matters, LLC. All Rights Reserved.

(As always, if you have any questions, comments or feedback, we welcome and appreciate them. Just e-mail Heather at homeownershipmatters@gmail.com. Thanks for reading, and come back soon to see what else we've posted!)

Q&A: Flood Insurance

Q. We closed on a house more than two months ago and just received a letter from the lender telling us we have to have flood insurance on the property. Shouldn’t the title company have done a survey and determined whether or not flood insurance was needed BEFORE they allowed us to close? How can they force us to take on this extra expense now?

A. It would be highly unlikely that a title company would close without a survey which stipulated whether or not the property was in a flood zone, therefore requiring flood insurance. The closing also should have included a “flood insurance certification” which would have declared that all parties were aware that no flood insurance was required.

However, mistakes do happen occasionally. It might have been missed or it might reflect a change in the flood map or very likely it means there was a situation where part of the neighborhood is in a flood zone and part of it is not. Your home might have ‘appeared’ to be exempt from the flood insurance requirement when, in fact, it was required.

Commitment to Cooperate

In the event there had been a recent change in the flood zone maps (or they just plain made a mistake) which means the property must be covered with flood insurance you no doubt signed a document at closing which states you would cooperate with all parties (Lender, title company or REALTORS®) if they needed you to help them with correcting forms, etc from closing.

Compliance Disclosure

Almost all closings also include a document which states you specifically agree to add flood coverage IF it becomes a requirement AFTER you have closed. Lenders have the right to have the collateral protected from risks such as floods and therefore the stipulation that flood insurance can be added , when deemed necessary.

I’m afraid you must continue the coverage. Flood insurance is pretty expensive and I know that can cut a good sized hole in your budget when you were not expecting it. But the real beneficiaries—You and Your Family.

Better to have it and not need it, then to need it and not have it.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth #3

Myth #3: That bank-owned property is always free of any undisclosed liens or other encumbrances.

Reality: Many of the homes being purchased as REO or bank-owned properties are being transferred with liens already attached or the possibility of liens becoming attached.

Reason: The kind of title policy which is used for REO sales is a special, limited coverage policy. The holder of REO properties makes no warranties about possible clouds on the title prior to their acquisition through foreclosure or deed-in-lieu. Title is transferred using a special warranty deed or a sheriff’s deed and most importantly all the documents which the purchaser has signed states that they understand these facts.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)

Q&A: Promised Perks

Q.  I am not quite sure whether or not I have a legal problem but I think I got shafted and I want to know what to do about it. I recently bought a new house and the real estate agent promised me a cash rebate as well as a bonus from the builder if I purchased. I was supposed to receive these as soon as I closed. The rebate and bonus were not mentioned at the closing and now the agent refuses to talk to me. What should I do and how do I get the money I was promised?

A: Well, let’s see. You were promised a cash rebate and a bonus which appear to be outside the scope of the “official” or legal transaction since you did not receive the money as part of the closing on the home you purchased.

I am very carefully saying here that the promises made to you do not appear to be legal. Kickbacks seldom are. Trying to enforce an illegal promise could get a little dicey.

When you purchase a home (including new construction) the purpose of the lender’s appraisal is to be sure that:

a. The home is at least worth what they are about to loan you to acquire it.

b. That no amount in excess of the value of the home is being financed

For example, that you are not financing a house worth only $400,000 with a loan of, say $425,000 to allow enough money left from the lender’s funds to give you a kickback of $15,000 and a bonus of $10,000 (for furniture or a vacation or anything remotely like that). That is commonly called mortgage fraud.

The title company has a responsibility to be sure that there are no components of the closing which are in violation of the law. The title company can not be responsible for what the parties agreed to if it is not in the contract and not part of the closing instructions sent over from the lender. One of the requirements for a legal closing is that there be no “undisclosed” exchange of funds, such as kickbacks from the seller to entice you to buy.

All funds which are to exchange hands between any of the parties associated with the transaction are to be included on the HUD-1 document. It is against the law in most places for someone to pay you a rebate and a bonus to get you to buy the home they built. (I know the car companies did it, but look at them now. Apparently their guidelines are a bit more lax than real estate transactions and look at where it got them.)  

The HUD-1 is the official record of the transaction and anything which cannot appear on it usually is suspect.  In fact, fairly often during the last several years, what is on the HUD-1 frequently could stand a little more scrutiny.

I’m a grown-up so I know that what you described was not uncommon practice during the past 4-5 years in some of the hottest markets in the country. Wild construction growth, wild deals, wild foreclosures now. I am familiar with parking lot exchanges and promissory notes and gifts, rebates and bonuses which cannot appear on the HUD. Property values are falling in markets like California and Florida where I live like parachutes, in part, because one of the components of speculative building was to build in ‘extras’ such as the two things you asked about. The country is experiencing both a market correction to more realistic value for homes but also a major part of the problem was that the loans covered more than the piece of real estate, if you get my drift.

What should you do?  Enjoy your new home and try to keep up the payments. You got took!

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Closing Protection Coverage

And the WORD for Today Is:

Closing Protection Coverage – is a well-kept secret which relates to a closing on a local real estate transaction. Unlike the title policy which pertains to the title of the property, closing protection coverage pertains to the handling of the funds and documents by the closing agent. Closing protection coverage covers losses due to the mishandling of funds or documents by the authorized closing agent. If a borrower chooses to purchase closing protection coverage, then they have coverage against loss of settlement funds resulting from any of the following acts of the licensed agent or anyone acting on behalf of the licensed agent, subject to restrictions or exclusions identified in the coverage:

1. Theft fraud, misappropriation or any other failure to properly disburse settlement, closing or escrow funds;
   
   
2. Failure to comply with any applicable written closing instructions, when agreed to by the licensed agent. (See closing agent).

You must be specifically named in the closing protection coverage form in order to be protected. A copy of this form is available to you, upon request.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Title & TILA

And the WORD for Today is:

Title – the legal document which establishes your right of ownership.

TILA – one of the nation’s more important consumer credit statutes. TILA stands for the Truth in Lending Act, which requires that creditors must disclose, in writing, certain information related to the cost of the credit obligation which the consumer will have as a result of signing the documents for the loan in question. The TILA requirements includes disclosure of the true annual percentage rates as well as other important credit information. TILA violations are enforced by the Federal Trade Commission.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth #9

Myth #9: Processing a deed-in-lieu of foreclosure is such a simple process that there is no need to involve an attorney and pay their high fees.

Reality: While the deed-in-lieu process is exceedingly simple (the consumer simply signs the one-page document produced/presented by the lender, gets it notarized and sends it back) the process has MAJOR, POSSIBLY DISASTROUS consequences for the borrower. Therefore, it is never a good idea for a consumer to relinquish a property via deed-in-lieu without adequate legal and insurance counsel. Real estate professionals should have nothing to do with this simple, disaster-prone activity.

Reasons:

1. Any number of things could happen between the time the borrower MAILS notification of a title transfer to the lender/servicer and the time when that transfer is, in fact, recorded. The Ohio Attorney General’s Office has shared with me that the office has received numerous complaints of the lender’s failure to do so for MANY months. In the meantime the borrower remains responsible for any damages, costs, injuries, etc associated with the property.
2. Lender/servicer may claim to never have received the MAILED deed-in-lieu if the problem which has arisen is a particularly expensive one.
3. Acceptance of the title to the home does not absolve the consumer of the financial obligation for the full indebtedness; i.e. possible deficiency judgment.
4. Additionally, there is always the possibility of a tax liability associated with eventual transfer to a new purchaser if the home sells for less than full pay-off plus costs.

The risks are substantial: Hiring a competent attorney is the only smart thing to do. REALTORS, you are advised to keep your nose out of this.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

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1. An Ethics complaint, at the least
2. A lawsuit if you have sought to gain financially from the use of HOM material
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You SHOULD:

Contact Heather (HomeOwnershipMatters@gmail.com) or myself for permission to use HOM materials on your website or marketing we will gladly provide you with a release which will clearly identify the restrictions on use so there is no misunderstanding. It is NOT complicated to avoid copyright infringement

We are happy to partner with real estate boards, other organizations and brokerage firms to provide foreclosure related articles and materials. The goal of the company is to be a partner with other real estate professionals in spreading information which will be helpful to the general public. The use of HOM material, whether it is a portion or an article in its entirety, with proper credits will never create a problem.

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Sincerely,

Mildred

Mildred Wilkins, President and Founder

Home Ownership Matters, LLC Toll-Free: (866) 507-5105 Fax: (877) 587-4507

7399 N Shadeland Ave. #164 Website: www.HomeOwnershipMatters.com

Indianapolis, IN 46250 Blog: HomeOwnershipMatters.blogspot.com

WORD: Still Mortgages...

The WORDS for Today:

Mortgage Fraud-The intended victim is the LENDER. The transaction involves a group of scam artists. The usual players are: a real estate sales person, a mortgage broker, an appraiser, and a title company closer. A buyer is a necessary component of the scam. Sometimes they will be a part of the scam team and sometimes they will not be aware that they are, in fact, breaking the law. This team operates by:
a. Purchasing a low-income property, usually for cash
b. Secure a grossly inflated appraisal to support a new loan
c. Close the transaction with a buyer (typically called a “straw buyer” by law enforcement)
d. Profit from the difference between the lowest cost of the property, perhaps $15-20K and the new loan which will always be substantially HIGHER than the actual value of the dwelling may be as high as $90K-300K depending on the proximity to more expensive housing an the boldness of the players

Mortgage Modification- The borrower may be able to refinance the debt and/or extend the term of the mortgage loan. This may help them to catch up by reducing the monthly payments to a more affordable level. Borrowers may qualify if they have recovered from a financial problem and can afford the new payment amount.

Mortgage Warehousing-means a mortgage company holds a loan, which would ordinarily be sold. Most often the reason to “warehouse” the loans for a period is in anticipation of selling them later at a lower discount. These mortgages will be used as the security with a bank to borrow new money to loan.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

WORD: Eviction, Forceful Eviction

The WORDS for Today:

Eviction—a court action to remove someone from a property which is owned by another. Eviction is frequently required after a lender has been forced to foreclose against a homeowner who has become unable to make the house payments, and then refuses to vacate the property after notification of the pending sheriff’s sale.

Forceful Eviction—the use of legal recourse by the lender to gain possession of the residence. If the property is occupied by the owner of record in a fee simple title, then the owner has the right to continue to live in the home, rent free, until the foreclosure sale. Once the sale has occurred, the lender is entitled to possession and may then take steps to force the consumer out.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

FYI: Short Sale–Slow Crawl

What they DIDN’T tell you about short sale offers  

The man back at the bank has a few things to take care of before he can respond to the offer you just made to buy a home as a short sale. Did your REALTOR mention?

The Lender must:

• Order an appraisal (could take awhile)
  
• Order title work (won’t take long but has it been ordered)
  
• Get a broker price opinion completed (hopefully the real estate agent knows what they are doing)
  
• Check to be sure there are no unpaid homeowner’s association dues or municipal bills which must be paid (could add to what YOU have to pay)
  
• Check to be sure that the SELLER qualifies for a short sale under the guidelines for the specific insurer for this property—at this time—since those guidelines are  changing pretty rapidly lately
  
• Check all the details of the SELLER’s financials to be sure they have no assets or other reasons why a short sale cannot be approved (did they even send this stuff in yet)
  
• Verify that there are no Federal liens which must be satisfied
  
• Work out a deal with the SELLER’s second lien holder, if there is one
  
• Check with the insurer on the home to be sure that the guidelines for accepting a short sale are being followed
  
• Consider ANY/ALL offers which have been submitted on this home to be sure they respond to the one which will net the lender the most, after expenses (You did know they could consider other offers, right?)
• Negotiate with the SELLER what will be done about the shortage (on certain loan types)
  
• Review a preliminary HUD statement to be sure that the numbers which were provided by the LISTING agent on a net sheet are going to allow the lender to new what is required by their insurer or investor to close
  
• Present a Counter Offer, to the buyer with the BEST, overall offer, if the preliminary HUD reflects that the net will be below the acceptable amount required
• Must not allow a closing which not protect the interest of the insurer/investor

Somebody told you all this, right? If not, maybe your agent doesn’t understand short sales as well as they need to. Sure glad you found the information on this blog. Just a word of caution:  don’t sign a notice to vacate your current residence until AFTER you get a signed approval letter from the lender granting permission for a short sale. This could take a little while. 

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)