FYI: Fannie Mae Confirms Short Sale Commissions Policy

Thought this might be helpful to some of you:

Fannie Mae Confirms Short Sale Commissions Policy.

In discussions between NAR and Fannie Mae, Fannie Mae has reconfirmed its short sale commission policy and established a process for REALTORS® to follow if issues arise. On February 24, 2009, Fannie Mae sent Announcement 09-03 to its servicers instructing them not to negotiate commissions on short sales below the amount negotiated by the listing agent, unless the commission exceeds 6 percent. The Announcement reminded servicers that third party approvals (i.e., private mortgage insurers) may be required and can affect commissions. In response to concerns raised by NAR that some servicers of Fannie Mae loans are unaware of this policy or believe it is not binding, Fannie Mae has established a process for NAR members when short sale commission issues arise.

Step 1: Determine whether the loan is owned or guaranteed by Fannie Mae. Only the holder of the loan is allowed to do this, so do so in the presence of your client or after obtaining their written permission. Use this website: www.fanniemae.com/loanlookup, or If you don’t have convenient internet access, call: 1-800-7FANNIE (8am to 9pm Eastern Time)

Step 2: If the servicer is unaware of or disagrees with the policy, provide a copy of Announcement 09-03 to the servicer and negotiate an appropriate commission based on the listing agreement (up to 6 percent).

Step 3: Contact Fannie Mae if the dispute is not resolved directly with the servicer. Be prepared to provide the property address, name of owner, and Fannie Mae loan number (if available):

Call: 1-800-7FANNIE (8am to 9pm Eastern Time), or

Email: Resource_center@FannieMae.com.

Fannie Mae Announcement 09-03 (2/24/09)

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0903.pdf

National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001

REALTOR® is a registered collective membership mark which may be used only by real estate
professionals who are members of the NATIONAL ASSOCIATION OF REALTORS®
and subscribe to its strict Code of Ethics

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.)

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.)

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: Sale of Note

And the WORD for Today is:

Sale of Note – refers to the paragraph in a mortgage which indicates that the note or a partial interest in the note (together with the Security Instrument) can be sold one or more times without prior notice to the borrower. Such a sale is likely to result in a change to the loan servicer who collects payments and performs other mortgage servicing responsibilities. The lender is required to provide notice of a change in loan services.

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: Right of Rescission

And the WORD for Today is:

Right of Rescission – a borrower has the right to decide they do not wish to proceed with the utilization of services from a particular entity which is known as the right to rescind or “change my mind.” They may change their mind about using a particular service provider altogether or decide to decline specific services being offered. There are rules associated with this right which usually include:

1. How much time is allowed to rescind;
   
   
2. What documentation is required to rescind;
   
   
3. To whom must you provide such documentation;
   
   
4. What address must be used in order to consider the rescission delivered;
   
   
5. Other pertinent information.

All of these specifics should be included in the disclosure which requires the borrower(s) signature acknowledging the information was provided and understood.

A provision in the federal Truth in Lending Act that allows borrowers to cancel certain kinds of loans within three (3) days of signing:

TILA establishes a right of rescission for any loan transaction in which the borrower’s principal dwelling is used as security. See 15 U.S.C. § 1635(a). The rescission period extends until “midnight of the third business day following consummation [of the loan], delivery of the notice [of the right to rescind], or delivery of all material disclosures, whichever occurs last.” 12 C.F.R. § 226.23(a)(3). Under TILA regulations, a creditor is required to “deliver two copies of the notice of the right to rescind to each consumer entitled to rescind.” 12 C.F.R. § 226.23(b)(1). This notice “shall be on a separate document that identifies the transaction” and shall “clearly and conspicuously” disclose the consumer’s right to rescind the transaction. Id. If the required notice or material disclosures are not delivered, the right to rescind shall expire three years after consummation. See 12 C.F.R. § 226.23(a)(3).

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: Demand Your Note

Demand Your Note

An option for interrupting the foreclosure process which is gaining widespread attention and use across the country is called “demanding the note”. Demand the note means quite simply that you, the borrower, demand that your lender provide you with the note you signed agreeing to the loan.

You have the right to make such a demand. In fact, many courts across the country (especially where judicial foreclosure is required) REQUIRE that the party who initiates the foreclosure provide a copy of the note at the time of the original filing in order to establish that it is a legitimate debt. Unfortunately, many consumers are not aware that demanding to be provided with a copy of the note which establishes that the person demanding repayment has the legal right to do so is both a reasonable request and within the scope of their legal rights.

Cough it up…OR Compromise

Let’s say, just for the sake of discussion, that your lender or servicer could not find the note. Perhaps because your loan has been bundled with hundreds of thousands of other loans in a mortgage-backed security or perhaps because they do not really own it. Perhaps they are not the real party of interest. In that case, their ability to collect on the default is problematic since they can’t prove you owe them anything.

There are numerous lawsuits across the country where consumers are demanding that their loan be rescinded because the note cannot be produced. That option is certainly one you need to consider. Whether rescission is your goal or you just want a reasonable, affordable workout, you are in a much better position to negotiate IF the lender cannot provide documentation of the ‘supposed’ debt. Let the lender either cough it up...OR...COMPROMISE.

Who’s Gonna Make Em?

Well now, that is an interesting question. Look up information on the Qualified Written Request which clearly states that the consumer has the right to request/demand ANYTHING related to the servicing of their loan by using a qualified written request. It is FEDERAL LAW which establishes the borrower’s right to submit such a request to the lender and the guidelines are very clear that whatever is requested must be provided. We will not go into details in this blog because there are several other places on this site and numerous others (National Consumer Law Center, Center for Responsible Lending among them) which will give you clarity on exactly what a QWR is and what the law has to say about it. E-mail Heather for recommended BEST PRACTICES for using this powerful document (homeownershipmatters@gmail.com).

With adequate research and time you can prepare this request by yourself but without taking a class on how to do so you might not get the best result possible. HOM offers classes as well as webinars on the subject; either would be immensely invaluable to you if you need to submit a request.

Do I need an attorney?

If you are wondering whether you should use an attorney, I strongly recommend a good attorney for this project. It would be a wise investment of money to help you with preparing for the biggest fight you are ever likely to get in.

Call your local bar association for recommendations or try to get references from your local REALTOR or title company.

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: Tenant

And the WORD for Today is:

Tenant – was the term which originally referred to someone who had possession of a property without regard to their ownership rights in the property.

Commonly refers to a holder of property under a lease or other rental agreement.

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: Investment Property

And the WORD for Today is:

Investment Property – usually refers to any property which was purchased for the primary purpose of creating a profit. The anticipated profit may come from either income or from the resale of the property. Investors who speculate in the acquisition of real estate for investment purposes should study closely the market in that area to avoid buying in a “down market.”

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: Acquiring Real Estate with Tenants

Q: We have just bought an investment property which the seller lived in and rented out the other side. The seller has already agreed to vacate prior to closing but we do not know what to do abut the tenant. How do we get them out of the second unit?

A: Acquiring rental property which is currently occupied can be a good or a bad thing. Depends. I love that word. Depends.

Depends on:

1. Whether or not your contract says that the purchase is subject to the current tenant’s lease. What that means is: If their lease expires in 10 months, they belong to you and they stay for the next 10 months
2. If your contract states that their tenancy expires if there is a transfer of the real estate, then you have the RIGHT to get rid of them and we need to get to the “HOW”. But before we do, if they are good paying tenants, why don’t you want to keep them? Do you have other plans for the property which requires that they move? Did you forget to consider this before you started the buying process?
3. If you are not absolutely sure what your state law is concerning landlord-tenant rights, now would be an excellent time to check. And
4. Finally, if they will not leave nicely, and you really want them to go, then you will need to do a forceful eviction.

A forceful eviction should always be handled in accordance with state law. So don’t even suggest that is what you plan to do until you have read/studied the guidelines on what is required in your state.

The local sheriff’s department is an excellent place to start with a quick phone call to ask them what is the procedure, what forms are required, how much it costs, how much notice must you give, etc.

Additionally, they can probably direct you to the correct website to study up on this new aspect of your adventure as a new landlord.

P.S.
I almost forgot. You might consider offering them “CASH-for-Keys”. That’s a tidy little concept which is fast gaining popularity as a way to get folks out of foreclosed homes and could be used in this scenario as well.

“CASH for KEYS” is handy when you need someone to go away quickly, quietly and without leaving a mess. Simple—You offer cash as an incentive to vacate your property. How much cash depends on their needs and how badly you want them gone. Is it worth $1000 to have them out in 10 days? It is if the eviction process takes months and could cost you a lot. It is if the clean-out could cost you twice that amount or if they do damage on their way out as a way of getting back at you for a forceful eviction. Is it worth $500 if they leave in a month but agree to leave the home in good condition, promise to remove all trash and other debris and go away nicely?

As a Fannie Mae Broker-Specialist I was authorized to grant up to $1000.00 for ‘cash-for-keys’ provided you agreed to leave the home broom-swept, everything intact and you vacated by the time you said you would. Cash-for-keys is a reasonable request/offer when you have acquired real estate and need to remove the ‘body’ which remains. The amount is negotiable and should hinge on the size of house, time of year, how fast the home will be vacated, is the money required for a deposit on another property, moving expenses or other legitimate need to facilitate the ‘body’ disappearing.

General guidelines for cash-for-keys include:

1. A written agreement which states all the particulars—how much, to whom, by whom, what is expected, when will money be delivered
2. It must be signed by someone in authority with the agency who is offering the cash
3. You should assume that if you do not have a copy—you do NOT have an agreement
4. Terms of acceptability—home broom swept, all trash removed, etc.
5. Specific date and time these must be completed
6. Other details as the parties deem necessary

WARNING: Cash-for-Keys is a type of contract. Give it the respect of a contract. If you have entered into a cash-for-keys agreement (contract) you must honor all the terms as you agreed or you should expect NOT to receive the money. If you promised to vacate by 5 p.m. on Friday that is not the same as 8 a.m. on Saturday. I’m sorry, you lose.

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: Winterization

And the WORD for Today is:

Winterization – of a vacant home is usually performed when a consumer abandons after going into default and becoming frustrated because they have not been able to complete any kind of workout plan with the lender. The lender in such a case will most likely secure (change locks) the property and have someone to use minimal precautions to avoid frozen pipes. If the property is bank owned then the servicer may take more detailed precautions such as having the water drained from the hot water heater and all the pipes blown out in order to assure there is no risk of frozen pipes within the walls.

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: Winter Maintenance

And the WORD for Today is:

Winter Maintenance – refers to maintenance tasks which should be taken care of or performed in the fall in order to protect your property, reduce heating costs and maximize enjoyment of your home during the winter months. Ideally, you should perform winter maintenance prior to the winter season beginning in your area. You might want to purchase: “Home Maintenance for Dummies.”

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: Home Inspection—Worth Every $$$$

Q: We recently sold our home using a REALTOR, a septic tank test was not done. The REALTOR did not suggest we have the house inspected and it did not occur to us that we should do so. Who should have had made the arrangements for the septic test and made sure everything was up to code?

A: Your question is an excellent one and points out the need for a pre-inspection to be completed by you, the seller, BEFORE you list your home. I have to lay responsibility for this one at your agent’s feet. Yes, it is your house and you are responsible for maintaining it but the biggest part of what you pay a real estate commission for is ‘sound recommendations from a professional whose training should have prepared them’ to tell you what I am about to tell you.

Your question was: Who should have made the arrangements for the test? It is unimportant who made the call, you or your agent, to a septic company to come out and do the inspection. Either your agent could have handled that on your behalf or made several recommendations so that you had picked up the phone and actually called someone.

The missing piece seems to be that there was no discussion about the NEED for such an inspection at the appropriate time. Pre-inspections save sellers a lot of heartburn and usually a lot of money as well.

In the industry, agents are pretty divided and very vocal about whether or not it is in the best interests of a seller to spend the money for an inspection which would have uncovered this problem (as well as any other major problems). I am adamant that a pre-inspection should be conducted on any property which is more than a few years old because of the strong possibility that problems exist which can best be taken care of BEFORE the listing has occurred.

Opponents of pre-inspections insist:

1. That the seller should not waste money on an inspection when the buyer is going to have one anyway
2. That the seller is unnecessarily spending $300-$400 which they could make better use of by putting in some flowers

Proponents of such inspections (I am the UNOFFICIAL president of this group)

1. Believe that you would avoid uncovering something which could be a deal breaker AFTER you have an accepted offer (don’t you hate when that happens?)
2. That the cost is a wise investment in the success of your real estate transaction
3. That if you uncover any significant problems you are in a better position to search out the right professionals to correct them and price shop for the best value as well as schedule that work at your convenience rather than be in a rush to get it done
4. That if the needed repairs represent a significant investment, then you can adjust what you’re considering listing the house for rather than have an unexpected expense eat into your profits at the end
5. That an investment for the “extra” inspections (mold, termite and septic system) of $200-$300 above the base cost could save you thousands of dollars at the back end since you can’t renegotiate the sales price AFTER the buyer hits you with repairs which are mandated as allowable under your state’s SELLER DISCLOSURE law. A septic repair/replacement would definitely be covered in most states and a repair could cost upwards of $1,000. The replacement of the septic system or an expansion of the field or the finger system could set you back MANY thousands of dollars. Likewise, a possible termite problem should keep you awake at night, UNLESS you had a pre-inspection and know that you don’t have any.

I could share several terrible, very, very horrible stories of bad things which happened because of major problems which were uncovered during an inspection when I represented the buyer. I will share only one—as briefly as I can. My buyers discovered active termites and significant termite damage during our inspection.

Additionally, there was a crack in the interior chimney wall. This was a lovely $350,000 home and the sellers could have and should have corrected those items before it was listed. The problems were, in fact, fixable. The sellers initially offered some half-baked resolution, which we rejected.

My clients were prepared to walk away and even leave their $3,000 earnest money on the table. They just didn’t want the house any more. A house they had loved and had picked as their retirement home. I prepared a very precise inspection response—quite frankly asking for more than they had to do and they refused. We requested and received a mutual release. We had to fuss a little bit, but their earnest money was returned.

The sellers of the home had already started construction on their new dream home, had had this house on the market for more than six months and now they had to start all over trying to find a new buyer. Plus, they still had to fix everything they should have fixed before. All for lack of a pre-inspection.

During my career as a REALTOR I helped many clients terminate the contract (and get their money back) as the result of significant inspection issues we could not come to terms over.

Much of the time we walked away from the transaction if the seller was not willing to give us EXACTLY what we wanted in the way of a fix. It is definitely not a position of strength for the seller to discover they have any major issue in the time leading up to a possible closing.

After helping numerous buyers ‘walk’ because we were not satisfied with the compromise of repair or other concessions from the seller, I eventually established a personal policy of refusing to list a home unless the seller agreed to a pre-inspection with one of the toughest inspection companies in the city and further agreed to repair the offending items before we listed.

Like I said, I have to drop this at the feet of the REALTOR for failure to adequately prepare you for just such a situation as later occurred. Additionally, I would be interested in whether or not the septic system is specifically addressed on a Seller’s disclosure form, if your state uses one. Any agent worth their salt would have checked to be sure you understood all the questions you were being asked on such a form.

The issue of pre-inspections gets my adrenaline flowing. I should probably go have a glass of tea.

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: Anticipatory Breach

And the WORD for Today is:

Anticipatory Breach – occurs when one party to a contract informs the other party, before performance is due, that they do not intend to perform as obligated under the contract. Legal action may be brought for anticipatory breach even though the original contract (not yet due for performance) has not been breached. An example: a buyer of real estate informs the seller prior to the scheduled closing date that they have decided not to close. The buyer could be found liable for failure to perform.

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: Ad Valorem

And the WORD for Today is:

Ad valorem – means “according to value”. Ad valorem refers to a method of taxation which uses the value of the property being taxed to determine the correct amount of the tax bill. Taxes can be calculated in primarily two ways:

a. “Ad valorem”
b. “Specific”

For example, a tax bill calculated at $7.00 for each $1,000.00 of the home’s value would be ad valorem. A tax bill that set an amount for each property no matter what its respective value would be a “specific” tax method. While most consumers believe their taxes are excessive, the majority agree that the ad valorem method is fair when the method of arriving at the valuation amount is fairly applied.

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.)

Community Service Announcement: Modification Warnings

Community Service Announcement: Modification Warnings

There is a lot of positive which can be said of getting your loan modified and the mortgage payment changed to one which is more affordable. But you would be wise to consider some new twists which may mean it is not as great a bargain as you thought.

Temporary or Permanent Change

Back in the olden days—just a few months ago—loan modifications were made by lenders for distressed borrowers who had demonstrated the ability to resume payments and sustain them as permanent changes to the existing mortgage. The modification was processed as a PERMANENT change in the loan terms so the borrower could rest assured that the new loan was, in fact, one which could work for them. Many of the new modifications are only TEMPORARY. The trial period may be as short as 3 months or as long as six months. This is being used as a new test period to see whether or not you are able to sustain the payment. The problem is that there is no ironclad guarantee that the ‘modified’ loan payment will remain in place after that introductory period.

Life Happens

What happens if your loan is transferred to another servicer during your trial period? Worse yet, suppose your financial institution is sold or otherwise acquired by someone else? In either case, you would be holding an unenforceable, short-term agreement with a party different than the one you actually have to deal with concerning payments. You would be wise to consult with an attorney about the terms of ANY modification being proposed by your lender or to have an attorney to help you with structuring a modification which is practical given your current situation and the value of the property.

Temptation Could be too Strong …

Under the current administration’s plan to encourage lenders to modify as many loans as possible, lenders/servicers are being paid a fee to process those modifications. Substantial fees. They are paid based on whether or not they get the modification completed. They are paid whether it is an agreement which works for you or not. They are paid whether or not you have received what is called “net tangible benefit” (did it do you any good?).

We would hate to think that a bank might process modifications in order to receive payment even when they were aware that the payment amount was not sustainable for the borrower, but remember these are the same institutions which processed loans for some folks who clearly were not in a position to make those payments either. I’m just saying....

Has the modification been recorded?

One might argue that there is no point in recording a short term agreement and you could see their point. But maybe the reason for processing short term or temporary modifications was to avoid recording them in the first place. If there is NO RECORD officially—as in your local city’s Recorder’s Office—of the newly created Modified loan then the only record which exists is the OLD, unaffordable loan. IF your loan is transferred or sold, then the OLD loan is the current loan which is the ONLY loan that exists. Surely you can see where I am going with this.

Recommendation: If your loan has been modified and you want to keep that payment then it MUST be recorded.

HINT: Insist that your modification agreement contain a provision for the loan to be recorded promptly after agreement is finalized by your and your lender/servicer. Otherwise, you could be in for some heartburn.


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(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.)