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The risks in commercial real estate loans and securities have “been reduced” and are not expected to threaten the overall health of the financial system, the U.S. Federal Reserve says. "It appears that worst-case scenarios are becoming increasingly unlikely," Patrick M. Parkinson, director of the central bank's division of banking supervision and regulation, testified at a hearing of the Congressional Oversight Panel.Experts have feared the commercial real estate market would severely damper the economy due to a surge in foreclosures in commercial property the past two years. According to Foresight Analytics, commercial property values have fallen by 42 percent since its peak in 2007. What’s more, about $350 billion in commercial real estate debt is expected to mature every year through 2013.But the commercial market is beginning to stabilize. Vacancy rates among office, industrial, and retail properties have stopped rising. Rental rates continue to fall but at a much slower pace. Plus, sales of commercial properties last year were nearly double 2009 levels.In some markets, commercial-property values have even increased by more than 30 percent from their lows in 2009. For example, last week the Mortgage Bankers’ Association’s former Washington headquarters sold for $101 million, after MBA had sold the building for $41.3 million the year prior. Experts say that investors are bidding up property values and taking advantage of low interest rates.Source: “Fed Official: Commercial Real Estate Risks ‘Reduced,’” Dow Jones Business News (Feb. 4, 2011) and “The Outlook: Commercial Real Estate Coming Back, But Unevenly,” The Wall Street Journal (Feb. 7, 2011)
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Bank of America Corp. is splitting its mortgage business into two units in order to get a better handle on the flood of foreclosures. Bank of America’s new unit, Legacy Asset Servicing, will be charged with resolving issues involving faulty paperwork that had led the bank to temporarily suspend foreclosures across the country for nearly two months in October. The new unit will also handle mortgage modifications and buyback claims on bad loans sold to investors.Meanwhile, Bank of America’s Home Loans unit will continue to handle new loans and the servicing of current loans. The company also said it plans to exit the reverse mortgage origination business.Bank of America Home Loans lost $8.92 billion in 2010 and has been battered by a stream of lawsuits, mostly focused on bad loans it acquired when it purchased Countrywide in 2008. Source: “Bank of America Splits Foreclosures, Discontinued Projects From Mortgage Lending Business,” Associated Press (Feb. 4, 2011
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More than 30,000 U.S. home owners are facing foreclosure after defaulting on their reverse mortgages. Reverse mortgages are a type of home-equity loan only available to home owners 62 years old or older. These home owners tapped into the equity of their paid-off homes to help boost their income, but now they could lose their homes after failing to pay property taxes, property insurance premiums, or other costs associated with the home. Florida, in particular, is hard hit with nearly 5,300 in default from reverse mortgages; that’s the highest number in the country, making up about 18 percent of the U.S. total, according to the CredAbility Group, a nonprofit consumer credit counseling service.However, some experts say critics shouldn’t be too quick to just blame the problem on reverse mortgages in general. Peter Bell, president of the Reverse Mortgage Lenders Association, says that many of the home owners now in default likely would have been facing foreclosure earlier if they hadn’t had reverse mortgage companies lend them the money needed to pay insurance and tax bills."The reverse mortgage has actually provided more protection for them than under usual circumstances," he says. "Whenever a home owner can't pay their taxes, they run the risk of losing their property through foreclosure. In this case, mortgage servicers have provided advances on their behalf to avoid that."Source: “Seniors Find Dark Side to Reverse Mortgages,” Orlando Sentinel (Feb. 3, 2011)
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The number of foreclosure filings in 2010 among veterans, active-duty troops, and reservists rose 32 percent over 2008, reports RealtyTrac, a foreclosure research firm.More than 20,000 of the military members who took out special government-backed mortgages lost their homes in 2010. That number marks the highest number since 2003. More military members are seeking aide in special programs for troops and veterans too. For example, the number of military families asking for assistance has risen 19 percent in 2010 over the previous year, says Bill Nelson, executive director of USA Cares, a charity that provides financial assistance to Iraq and Afghanistan war-era troops.
Last year, about 12,000 military families applied to the Pentagon's expanded Homeowners Assistance Program and 9,000 were found eligible. The program covers most of the difference in sales price and mortgage for service members who must transfer and sell their homes for less than they owe. The program will also sometimes even buy the house outright.
The Mortgage Bankers Association says that loans from private banks guaranteed by Veterans Affairs generally outperform other categories of mortgages. The VA helped 66,000 families avoid foreclosure last year, Mike Frueh, VA assistant director for loan and property management, told USA Today.
Source: “20,000 Military Members, Vets Faced Foreclosure in 2010,” USA Today (Feb. 4, 2011)
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While renting offers zero tax breaks, buying a home offers several tax benefits that can make homeownership more affordable. Real estate professionals need to be careful in providing detailed tax advice to clients to avoid lawsuits, but you can ensure clients have the information they need to understand the all of the tax benefits of home ownership. The following is a few of the tax benefits to home ownership, according to Stephen Fishman, an author and lawyer who specializes in small business, tax and intellectual property law. ▪ Home mortgage interest deduction: Home owners can take an itemized deduction on interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home. This deduction could potentially reduce the cost of borrowing by one-third or more.▪ Property tax deduction: Home owners can deduct from their federal income taxes the state and local property taxes that you pay on the home. ▪ Deductible home buying expenses: Several closing costs in a home purchase are also deductible, such as loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.▪ $250,000/$500,000 home-sale exclusion: Home owners who have lived in their home for two of the prior five years prior to its sale do not have to pay income tax on the majority of their profit — $250,000 for single home owners and $500,000 for married homeowners who file jointly. ▪ 14 days of free rental income: Home owners can rent the home up to 14 days during the year and pay no tax at all on the rental income. Source: “The Tax Benefits of Homeownership,” Inman News (Feb. 4, 2011
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Unable to pay high legal fees, more foreclosed upon home owners are opting to go to court to represent themselves in their foreclosure hearings.
About 20 states require a judge’s approval for foreclosures--home owners last opportunity to plea their case and avoid foreclosure.
In New York, about 32,000 home owners came to court in the first 10 months of 2010 for foreclosure hearings but only 12,000 had a lawyer representing them.
“Many of the home owners would do much better with an attorney,” says Paul Lewis, chief of staff to New York’s chief administrative judge.
Self-help clinics are popping up across the country to help home owners learn how to defend themselves in court at these foreclosure hearings.
For example, in New Mexico, a community center began offering a class with tips on everything from how to download the forms, decipher the lingo, and mount a defense against a multi-billion dollar bank, to even providing tips on which side of the lectern you should stand when defending yourself in court.
Many of the home owners have legitimate arguments to why the foreclosure shouldn't stand, but the cases can be complex in defending yourself, says Louis McDonald, the chief judge for New Mexico’s 13th Judicial District.
“The system is failing those who can’t afford representation,” he says. McDonald says “more legal aid" is needed to help such home owners.
Source: “Foreclosed Homeowners Go to Court on Their Own,” The New York Times (Feb. 3, 2011
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U.S. regulators are proposing a new rule to ban Fannie Mae and Freddie Mac from acquiring loans where home buyers are charged private transfer fees.
Private transfer fees, also known as “capital recovery” frees, are inserted by developers for newly-built housing subdivisions. They require sellers to pay a percentage of the selling price to the original developer of the property every time the property changes hands for up to 99 years. The percentage charged is usually 1 percent of the sales price.
Real estate groups have been speaking out against private transfer fees, calling it an unfair extra fee to home owners.
The Federal Housing Finance Agency has proposed a rule that Fannie, Freddie, and 12 Federal Home Loan Banks would no longer be able to acquire mortgages that have such fees.
Source: “U.S. Government Proposes Restrictions on Home-Resale Fees,” Dow Jones Business News (Feb. 1, 2011)
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The State of California reached a $6.55 million settlement with two former Countrywide executives in a high-profile lawsuit filed by the state regarding predatory lending practices.
Former Chief Executive Angelo Mozilo and Countrywide President David Sambol deny the allegations in the lawsuit, which accuse Countrywide of false advertising and unfair competition in marketing mortgages and home equity lines of credit.
The $6.55 settlement will be used to aide Californians affected by the mortgage crisis and provide grants to help home owners facing foreclosure, California Attorney General Kamala Harris said in a public statement about Wednesday’s settlement.
Countrywide was acquired by Bank of America Corp. in 2008.
The original lawsuit filed in June 2008 also had included Countrywide as a defendant. Countrywide reached a settlement in October 2008, agreeing to provide about $6.8 billion nationwide in loan modifications and foreclosure relief.
Countrywide has faced a series of legal battles and fines. In October 2010, Mozilo also had agreed to pay $67.5 million in penalties to settle civil fraud and insider-trading charges by the Securities and Exchange Commission.
Source: “California Settles With Two Former Countrywide Executives,” Dow Jones Business News (Feb. 2, 2011)
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The National Association of REALTORS® applauded the Federal Housing Finance Agency (FHFA) for moving ahead with a proposed rule to restrict government-sponsored enterprises Fannie Mae and Freddie Mac and the 12 Federal Home Loan Banks from investing in mortgages encumbered by private transfer fee covenants.
NAR has long been vocal in its opposition to private transfer fees, which are often attached to a property by developers and require payment of fees back to the developer each time the property is resold; the covenants can be difficult to reverse and may be attached to a deed for up to 99 years.
“As the leading advocate for home ownership, we commend FHFA for the proposed rule to ban private transfer fees, which we believe often decrease affordability, negatively impact equity and provide little benefit to property purchasers,” NAR President Ron Phipps said. “FHFA is taking the necessary steps to ensure that these fees are no longer used to simply generate revenue for investors and private developers.”
The proposed rule would exclude private transfer fees paid to some home owner, condominiums, and cooperative associations. “We understand that FHFA believes that some private transfer fees have a legitimate place in real estate markets, and support their decision to exempt certain organizations from the proposed ruling where there may be a direct benefit to the home owner; however, FHFA must ensure that the fees paid are reasonable and fully disclosed to home buyers well in advance of closing,” Phipps said.
According to FHFA the proposed rule would only apply to private transfer fee covenants created on or after the date of publication of the rule.
Since there is virtually no oversight on where or how private transfer fee proceeds can be spent, on how long a private transfer fee may be imposed, or on how the fees should be disclosed to home buyers, as many as 19 states have banned or restricted private transfer fees. The Federal Housing Administration has also restricted private transfer fees through its home loan programs.
— NAR
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House Republicans say it’s time to end the government’s control over Fannie Mae and Freddie Mac, which were placed in government control in September 2008.
"Congress must take immediate measures to minimize this cost and ensure taxpayers are never put in this situation again," Rep. Scott Garrett (R-N.J.) said in a statement. "The status quo is unacceptable, which is why we will continue to seek alternative solutions to housing finance in the United States that decrease the government's exposure and get private capital off the sidelines."
A subcommittee hearing is scheduled for Feb. 9 to focus on how to transfer the power.
Meanwhile, the Treasury Department is expected to release a report on the future of Fannie and Freddie later this month, which is expected to contain options on how to replace Fannie and Freddie.
Source: “Republicans to Discuss End of Fannie, Freddie Control,” Dow Jones Business News (Feb. 2, 2011)
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Daily Real Estate News | January 28, 2011 |
Inexperienced real estate professionals are to blame for hampering the short sale process, according to two real estate professionals who specialize in distressed sales.
"The banks know who's experienced and who's not," said real estate pro Travis Waller at a recent conference in New York. "If you don't present the files correctly to the bank, you're going to get put at the bottom of the pile. When the banks recognize you know what you're doing with your presentation of the documents, you'll get a call within a few days."
The flood of short sales on the market have prompted many in the real estate industry to refocus their careers, finding it to be the main driver of business nowadays.
But "many short sales are lost to foreclosure because of the inexperience of the listing agent," Waller said.
Waller said that borrowers he’s worked with have already missed four to seven mortgage payments before they come to him, which means he must work quickly on a short sale deal before the property falls into foreclosure.
"You are working under the gun as a short sales agent. If you don't know what you're doing, then time is just ticking away," he said.
Home Affordable Foreclosure Alternative program agreements in the short sale process can be completed in as few as 60 days by experienced agents, he said.
Source: “Inexperienced Real Estate Agents Causing HAFA Short Sales to Fail,” National Mortgage News (Jan. 14, 2011)
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Daily Real Estate News | January 28, 2011 |
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document.write(' Share ');Mortgage rates are continuing their gradual climb upwards after reaching record lows. The 30-year fixed mortgage rate rose to 4.8 percent from 4.74 percent the previous week, Freddie Mac reports. The average on 15-year mortgage rates also rose slightly from 4.05 percent to 4.09 percent for the week.
In November, 30-year loans had reached a 40-year low at 4.17 percent and the 15-year mortgage rate was at 3.57 percent.
The average on the five-year adjustable-rate mortgages this week increased to 3.7 percent from 3.69 percent the previous week.
Meanwhile, the Mortgage Bankers Association says it expects mortgage lending to drop considerably in 2011, due to high unemployment, borrowers’ diminished credit coming out of the recession, and more lenders not willing to take on a high risk.
MBA says it expects new loans this year to decrease by 36 percent to its lowest level in more than a decade, falling to $966 billion in 2011 from $1.5 trillion this year.
Earlier in the week, MBA reported a drop in mortgage applications to the slowest refinancing activity in more than a year. Mortgage applications dropped 12.9 percent in the week ended Jan. 21, according to MBA’s seasonally adjusted index.
The index dropped 15.3 percent, which is the lowest level since January 2010. Refinancing activity has continued to decline since October from rising interest rates and tighter underwriting standards.
Source: “Bond Yields Rise and So Do Mortgage Rates,” Freddie Mac (Jan. 27, 2011); “U.S. Mortgage Applications Declined Last Week,” Reuters News (Jan. 26, 2011); and “Mortgage Lending Projected to Fall 36%,” Dow Jones Business News (Jan. 26, 2011
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Daily Real Estate News | January 28, 2011 | Bank of America Corp.’s Countrywide continues to be a thorn in its side. Bank of America acquired Countrywide in 2008 and the mortgage unit has faced countless lawsuits accusing it of misleading investors about its finances and lending practices.
The latest lawsuits come from the states of Michigan and Oregon and Fresno County, Calif., and more lawsuits are expected on their way.
Bank of America said it expects an additional $6.1 billion of write-downs and legal costs from Countrywide.
Last year the bank agreed to a $624 million settlement to resolve a similar class-action lawsuit against Countrywide.
However, some investors opted out of the class-action settlement, likely believing they could get higher recoveries by suing on their own.
"It is unfortunate that select investors chose to opt out of a fair and equitable agreement to settle these issues,” Shirley Norton, a Bank of America spokeswoman, said in a statement. “We intend to vigorously defend these claims."
Source: “Lawsuits Mount for BofA’s Countrywide,” Reuters News (Jan. 28, 2011)
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Daily Real Estate News | January 28, 2011 |
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document.write(' Share ');Thousands of customers in Montana who owed late fees or any other charges pending at the now defunct Hollywood Video and Movie Gallery are finding it difficult to get a mortgage or finance a car.
Movie Gallery, the parent company of the video rental stores and once the second-largest video rental chain, went bankrupt last year, and the debt collection agency National Credit Solutions is now trying to collect from its past customers. National Credit Solutions filed negative credit reports without informing the customers and did not give customers the opportunity to dispute the fees, according to a lawsuit filed by Montana’s Department of Justice on behalf of the customers.
National Credit Solutions is also accused of charging the customers penalty late fees--more than $300 in some cases--on top of what they already owed.
The black marks on the customers’ credit reports are preventing some from getting loans or refinancing a mortgage. But some customers say they are being charged for failing to return a movie even when they had.
Movie Gallery is trying to collect from 12,325 customers from Montana. It’s unclear whether customers outside of Montana had been affected, too.
"It's crazy to think that a Montanan would be prevented from refinancing their house or buying a new car simply because they returned 'Caddyshack' two days late," State Attorney General Steve Bullock said in a statement.
Source: “Montana Files Lawsuit Over Video Late Fees,” Associated Press (Jan. 26, 2011
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Daily Real Estate News | January 28, 2011 |
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document.write(' Share ');A Richmond, Va., real estate developer admitted that he asked for more money than what he needed -- anywhere from $7 million to $20 million -- from federal and tax credit programs to rehabilitate historic properties in the city.
Justin Glynn French, 40, pleaded guilty to defrauding federal and state tax credit programs, which were intended to revitalize historic Richmond.
Since 2005, French has applied for historic rehabilitation tax credits on at least 35 properties in Richmond.
In one incident, French purchased a property for $700,000 and expected rehabilitation costs of about $200,000. However, in applications to the tax credit programs he listed rehabilitation costs at more than $1.5 million. Ultimately, he received tax credits of more than $707,000, still more than $500,000 over what he needed.
French faces up to 30 years in prison.
Source: “Richmond Developer Pleads Guilty to Defrauding State, Federal Tax Credit Programs,” Associated Press (Jan. 25, 2011)
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