Written by Federal Title | 13 October 2010

When home buyers and people refinancing their mortgages first see the itemized estimate for all the closing costs and fees, the largest number is often for title insurance.

This moment is often profoundly irritating, mysterious and rushed — just like so much of the home-buying process. Lenders require buyers to have title insurance, but buyers are often not sure who picked the insurance company. And the buyers are so exhausted by the gauntlet they’ve already run that they’re not interested in spending any time learning more about the policies and shopping around for a better one.

But all of the sudden, the importance of title insurance is becoming crystal-clear, The New York Times reports.

Full Story...

Written by Matt Bales | 13 October 2010

On October 12, 2010 Florida Attorney General Bill McCollum sent letters to the Chief Executive Officers of several large lenders, proposing for them to meet with him in Tallahassee, Florida to discuss potential ways to redeem the integrity of the foreclosure system and ensure the continued marketability of real property in the State of Florida.

“I am writing you to express my concern for Florida’s economic future and the credibility of Florida’s judicial foreclosure system as a result of the actions of your company -- actions that have affected the integrity of title to real property for Florida’s homeowners as well as the foreclosure process in Florida,” Attorney General Bill McCollum stated to the Chief Executive Officers of several large banks such as JP Morgan Chase, GMAC Mortgage, Bank of America, and PNC Financial Services.

McCollum emphasized that the problems of faulty foreclosure affadavits has been compounded by the effect of the recently announced moratoriums on foreclosures by several large mortgage servicers, as well as the private litigation that has already begun.

“In my view, the moratoria and the private litigation are counterproductive to obtaining the swift solution necessary to address this serious problem facing Florida’s already fragile economy,” McCollum said.

Written by Federal Title | 13 October 2010

A daily dose of headlines for real estate agents, mortgage lenders and consumers.

America's safest cities Forbes: To find out which cities are the safest, we started by making a list of all American cities with a population above 250,000.	D.C. has lowest cost of living for singles DC Urban Turf: A single individual without children or a car can live within the District borders on about $32,000 a year, the lowest cost of living in the area.
5 ways to avoid foreclosure limbo Reuters: Homebuyers who have been hoping to score a good deal by buying a foreclosed property have been left in limbo by the recent rash of foreclosure freezes.	A primer on the foreclosure crisis CNBC: Several lawmakers on Capitol Hill are calling for other banks to initiate nationwide foreclosure freezes—a move which the Obama administration is currently opposing.
A fresh start for new condos The New Deal: Of course, many buyers are still nervous about new condos, but their desire for a good deal is at least starting to outweigh their doubts.	12 cities: Where to buy versus rent CNN Money: Cities like Detroit and Columbus boast killer buying opportunities, but you're better off renting in places like New York and Seattle.

Written by Joe Gentile | 11 October 2010

Imagine this scenario: You have to move because of your job.  You have lost all of the equity in your condo that you purchased two years ago, but thankfully, you are not underwater and will break even on the sell.  You arrive at the closing and suddenly you discover that you owe a fee of 1% of the sales price to the developer from whom you bought the condo two years earlier.  Now, because of this “Developer Fee”, you have to bring cash to close on the sale of your condo.  Below is a quick Q and A on Developer Fees.

Q.  What is a developer fee?

A.  A developer fee (also known as a capital recovery fee) is a private transfer fee provision requiring you to pay an amount to your developer when you sell your house or condominium in the future.

Q.  What has prompted the emergence of developer fees?

A.  As developers have seen sales prices plummet, attaching a developer fee allows the developer to recoup the loss in sales price by guaranteeing itself future gains from future sales of the property.  

Q.  When does a developer fee expire?

A.  It depends on the terms of the specific agreement, but some private transfer fee provisions continue for as long as 99 years and can apply to all future sales in those 99 years.

Q.  How large is a developer fee?

A.  Typically, a covenant is established that provides for 1% of the sales price to be paid to the developer.  Since this is a covenant that runs with the land, if it is unpaid it creates a lien or cloud on title, preventing the property from being resold or refinanced until it is paid, plus interest.  The fee must be paid even if the property depreciates in value – so a homeowner with declining equity is still responsible for paying the fee.

Q.  Are developer fees legal?

A.  As of this blog, 12 states have adopted legislation banning private transfer fees.  The American Land Title Association is attempting to have the fees banned and declared illegal everywhere else.  The practice has been banned in Maryland, but so far no action has been taken in Virginia or the District of Columbia.

Written by Joe Gentile | 30 September 2010

We recently blogged about the changes in the District of Columbia’s Homestead Application process.  

In that post, we commented on how the Office of Tax and Revenue had suddenly changed the requirements for applying for the DC Homestead credit. A new Homestead Application form was to be used, and the form required supporting documentation to be included with the application, specifically:

•    a copy of the purchaser’s DC driver’s license with the purchaser’s new address
•    a copy of the purchaser’s DC voter registration card with the purchaser’s new address,
•    a copy of the purchaser’s DC motor vehicle registration with the purchaser’s new address,
•    and copies of the purchaser’s 2009 DC tax returns.  

Since it was impossible to obtain these items prior to closing, we were no longer able to file the DC Homestead Application on behalf of the borrower but instead just handed the application to the borrower to file later on.

Of course, a major concern for me as a settlement attorney was how many purchasers would actually file the application post-closing.  

As anybody who has purchased a home can attest, the home buying process can be overwhelming, especially for a first-time buyer. There was no doubt in my mind that many first-time buyers would forget to file the Homestead Application and lose out on a significant savings.

But then the entire process changed … again!  The DC Office of Tax and Revenue announced that the Homestead Application process will be simplified.   A new, simpler application is being prepared and the supporting documentation will no longer be required.  

Most importantly, because the supporting documentation is no longer necessary, the Homestead Application can now once again be completed at closing and submitted as part of the recording process, giving homebuyers one less thing to worry about and allowing them to concentrate on enjoying their new home.

Now let’s just hope that there will not be any more sudden changes…

Written by Federal Title | 22 September 2010

A daily dose of headlines for real estate agents, mortgage lenders and consumers.

Miami-Dade pending home sales jump 33% Miami Herald: Pending home sales were up 33.7 percent in Miami-Dade County in August compared to the same month last year, according to data released Thursday by Miami Realtors.	Obama: Housing market faces tough decisions Wall Street Journal: Top members of Obama's economic team could soon be leaving, and he signaled he will press hard to raise taxes on wealthy hedge-fund and private-equity managers.
Buyers with hypersensitivity should raise concerns early Washington Post: For people who are seriously allergic or sensitive to common household chemicals, buying the right home is fraught with difficulty.	Is that what recovery feels like? The New York Times: The ugly fact is that serious financial crises take a very long time to resolve and result in a permanent fall in the standard of living.
The housing recession isn't over CNN Money: The past three months may have been decent, but the future looks less promising. For the housing market, at least, it doesn't look like the recession is over just yet.	Great recession really over? New York Observer: For housing to turn a decisive corner, the inventory overhang has to dissipate. That may take one to three years, according to real estate experts.

Written by Federal Title | 21 September 2010

Pending home sales were up 33.7 percent in Miami-Dade County in August compared to the same month last year, according to data released Thursday by Miami Realtors.

Pending sales -- signed contracts that have not yet closed -- were up to 10,119 last month, compared to 7,570 in August of last year in Miami-Dade County. Month-over-month, pending sales were up 0.6 percent.

Full story...

Written by Federal Title | 21 September 2010

A daily dose of headlines for real estate agents, mortgage lenders and consumers.

Refinancing: Whom can you trust? Wall Street Journal: Even essential factors like tax rates and inflation expectations are often ignored in favor of simplistic calculations.	Housing expectations shifting CNBC: Either we let housing go through a long and painful correction or we continue a cycle of artificially stimulated boost and bust, as was the case with the tax credit.
Why your first home shouldn't be your dream home Forbes: Given the high level of foreclosures and the loss of value in many homes, today's buyers are more wary of taking on homes they cannot afford,	Regional real estate report Washington Post: Goodwill of Greater Washington has signed leases for retail space in three area locations, according to Grubb & Ellis, which represented the organization in the deals.
Shadow inventory stepping into the light Real Estate Consulting: Hopefully, tremendous affordability and investor appetite for REO will create a pricing floor that isn’t too far below today’s prices.	Recession over, but recovery not felt Washington Times: The worst recession since the Great Depression ended more than a year ago but the aftershocks continue to reverberate through the economy and people's lives.

Written by Federal Title | 21 September 2010

Tasked with getting to the bottom of the factors that led to the Great Recession, the Financial Crisis Inquiry Commission is hosting a hearing at Florida International University, focusing specifically on predatory lending and mortgage fraud. The hearing, open to the public, will feature experts in the field of predatory lending, victims of mortgage fraud and law enforcement officials involved in protecting consumers.

``This is the first [hearing] specifically for homeowners,'' said Graham, a member of the 10-person commission created last year. ``I hope they will come away with a better understanding of the pitfalls a potential homeowner or a current homeowner needs to be on the lookout for.''

The commission consists of former politicians, lawyers, business executives, and academics. Created in 2009, the group is gathering information about the wide range of financial missteps that led to the recession, and must report its findings to the President and the public by Dec. 15.

Full story

Written by Federal Title | 20 September 2010

A daily dose of headlines for real estate agents, mortgage lenders and consumers.

Average 30-year mortgage rate rises USA Today: Rates on 30-year mortgages climbed for the second week, but remain near the lowest level in decades, up from 4.35% a week earlier and 4.32% the previous week.	Where's the foreclosure flood? Wall Street Journal: The number of properties in the foreclosure or delinquency pipeline has grown to record highs, yet volumes of bank-owned properties have fallen steadily over the past year.
Banks hold off on foreclosure notices CNBC: Banks are managing their owned inventory (REOs) by not flooding the market with all the properties they repossessed. They do this so as not to drive home prices down even further.	Losses from Frannie, Freddie seizures near $400B Los Angeles Times: To offset some losses, the Federal Housing Finance Agency is seeking billions of dollars in repayment from banks that sold bad loans to the firms.
Why household wealth is expected to ebb Wall Street Journal: Although the impact on spending can be hard to measure, falling wealth certainly doesn't help to shake the bunker mentality among U.S. households.	Americans get more sensible about housing Reuters: Given that expectations for house-price appreciation are realistically modest, one can conclude that people buying houses today are doing so for pretty good reasons.

Written by Federal Title | 17 September 2010

The District of Columbia Office of Tax and Revenue has agreed to the following:

1)  OTR announces that it will discontinue its ill-conceived Homestead Application system.  Not only will it revert to the old system (without requiring supplemental documentation), but the homestead application form itself will be simplified.  OTR asks for the industry's continued support in assisting homeowners in submitting the application form at the same time as the deed.  We hope that the new form will be unveiled at the next DCLTA general meeting.
 
2)  OTR will train its front line staff that a buyer shall "not be held responsible for the sins of the seller" provided that the deed is recorded within 30 days.  While we all knew that this was the law, a huge percentage of our problems have involved the incorrect assessment of a pre-settlement charge.   We have discussed with the Deputy Chief Counsel the dangers of any assessment that pre-dates a date of a title insurance policy. He has indicated to us that he understands this issue.  This is a major recognition by OTR that they needed to correct a systemic problem.
 
3)  On situations where homeowners inadvertently forget to cancel their homestead on one property when they purchase a new one, OTR has agreed to implement a cross-check upon recordation to eliminate the existing homestead exemption.  This has not been as major an issue for our industry, but it does correct an inequity that has been experienced by homeowners.

Written by Amy Bales | 16 September 2010

In the past few years, short sale transactions have become more prominent in Florida due to the decline in the real estate market.  Buying a home in a “short-sale” means that the lender is accepting less than the total amount due on the existing mortgage. 

Most homes that are sold as short sales are already in the foreclosure process and as real estate values decline more lenders are accepting short sales or discounted payoffs, rather than holding a large inventory of real estate on their books.  

Many people are under the impression that because they are buying a home in foreclosure through the short sale process, that they are receiving a home that is free and clear of liens and similar encumbrances.  This is not the case; the new home owner will be responsible for liens that pass with the property such as property-tax liens, IRS liens, homeowners’ association liens and municipal liens.

Once a bank approves a short-sale, there is frequently a sense of urgency on behalf of the bank and the seller to sell the property which is often in foreclosure.  The purchase and sale agreements are regularly as-is and void of title, lending, appraisal and inspection contingencies.  Therefore, the buyer is often in the dark about the condition and state of the property that they are buying. 

Serious buyers should proceed with caution and order a title search, which is often obtainable within 24 hours, prior to proceeding with entering into the short-sale purchase agreement for the purchase of the home.  Once the title search is reviewed, the buyer may find that due to the existing liens, the house they were thinking of buying is not such a great bargain.

Here at Federal Title our attorneys can assist the buyers with negotiating with the lien holders directly to extinguish the liens for less than face value prior to closing.  Federal Title will also assist the buyer in obtaining an owner's title insurance policy which protects the buyer from title defects that weren't disclosed by the seller at or before closing.  Using Federal Title and Escrow Company will ensure that you do not get the “short end of the stick” on your short sale.  

Written by Federal Title | 16 September 2010

A daily dose of headlines for real estate agents, mortgage lenders and consumers.

A new mortgage refinancing tool The New York Times: The tool compares a user’s current loan with other refinancing options and bases its answer on real-time feeds about these loans’ rates and costs.	25% of open-house goers don't plan to buy Crain's: And then there are those who have other reasons to attend open houses. Fully 11% of respondents said they came to pick up good decorating ideas.
Banks bounce back but can they handle the next crisis? USA Today: Big banks are in much better shape than they were two years ago, but the issue of how to handle the collapse of another cross-border giant still shadows the global economy.	Charting the market: A bit of brighter news Washington Times: Although sales activity has dropped significantly since spring, one housing statistic should be encouraging. Homes are selling more quickly than in recent years.
More sellers cut U.S. home prices for 3rd straight month Reuters: Lingering job market weakness, a hefty supply of foreclosed homes and soft demand after the homebuyer tax credit ended in April kept buyers in the driver's seat in many markets.	College Park student housing meets resistance Washington Examiner: A proposed development for more student housing is meeting heavy opposition from local officials who would rather entice more young professionals to the area.

Written by Federal Title | 15 September 2010

A daily dose of headlines for real estate agents, mortgage lenders and consumers.

D.C. housing market in recovery mode REO Insider: The average price of a Washington-area home was $398,445 in the second quarter of 2010, 4.2% higher than in the second quarter of 2009.	A downside of short sales The New York Times: But the jump in short sales has also given rise to a new form of fraud — which, as a recent study by CoreLogic suggests, could undermine the burgeoning practice.
Scope, cost of planned NW arts district questioned Washington Post: But some people who stand to benefit from the new arts district said they worry that the area's size is daunting and that there is no specific plan.	The return of new condos in Alexandria DC Urban Turf: One of the main draws for buyers may be the amenities, including a 25-meter lap pool, a sun deck, a private dog park, a fitness room and outdoor sports court.
Who's your agent looking out for? Washington Post: Before you know it, the shopping process can become not-so casual -- and you should get answers to some basic questions.	Silver Spring's contracting galaxies DC Mud: RST Development began excavation work on the site to make way for an apartment building that will soon rise just west of Georgia Avenue on the Silver Spring-Washington DC border.

Written by Todd Ewing | 14 September 2010

As is often the case with newly implemented “consumer protection” regulations, the consumer ends up paying more. Today’s mortgage borrowers can expect to pay more as a result of this past year’s RESPA reform, according to a recent study by Bankrate Inc.

Estimated fees charged directly by lenders increased by 22.8 percent, while fees charged by other service providers (i.e., title companies) increased 47.2 percent, according to the study that was conducted in 49 states.

Now it is true that the Bankrate study only examined estimates provided by lenders and not what the consumer actually paid at the closing table. In other words, it may be the case that lenders are now over-estimating closing costs in order to avoid the penalties associated with the new Good Faith Estimate (GFE) tolerance limitations.

Assuming this is the case, what is the benefit to the consumer?  I suppose one could argue that the consumer is spared the “Day of Closing Surprise” element but, on the other hand, the consumer may be discouraged from refinancing or buying due to estimated costs that are purposefully inflated.

Putting aside the Bankrate study, I can personally attest that title charges have in fact increased in Maryland, Virginia and the District of Columbia. The additional burdens placed on title companies by the new RESPA reforms include such things as quicker turn-around times for title work and prompt delivery of preliminary HUD-1 Settlement Statements to lenders.

These time-sensitive functions and requirements have increased the amount of work-flow product and resulted in a cost increase. Looking across the spectrum of Washington, D.C. area title companies and comparing today’s closing fees with those closing fees charged prior to RESPA reform, you will find an approximate 20 percent increase in title charges.

Is the increase in closing costs to the consumer worth the added protection provided by the RESPA reform?