How Foreclosure Affects Your Property Values

When determining property values, appraisers take several factors into account.  One of those factors is recent sales price of comparable houses in your neighborhood.  It used to be standard practice to exclude foreclosure sales from these "comps".  However, since the foreclosure crisis, foreclosure prices - and the downward pressure they are exerting on the marketplace - cannot be ignored.  When foreclosures were an anomaly, their statistical value could be ignored, but in the current market, they are having a real effect on the value of non-foreclosed property.  A new report from the Center for Responsible Lending has put a number on that effect.  They are estimating that the current foreclosure crises has reduced home value for non-foreclosure houses by a total of two trillion dollars.

via Housing Wire

Foreclosure and Voting

Michele Lerner at HSH.com speculates about the effect the voters displaced by the current foreclosure environment will have on the election:

In every state, voter registration is tied to residency, but states vary in how a voter must establish their residency and re-register to vote. With some 1.3 million homes in some stage of foreclosure as of August 2012 and with approximately 3.8 million foreclosures already complete since September 2008, according to the market research firm CoreLogic, foreclosures could keep hundreds of thousands of voters away from the polls this November.

Foreclosures expected to deter thousands of voters via HSH.com

Mortgage Defaults Down

The economy will not experience significant recovery until the housing market improves, and the housing market will not improve until the downward pressure on prices caused by all the foreclosures on the market abates.  So it's a bit of good news that mortgage defaults are down.  Defaults in August were 1.4% in contrast to 1.92% a year ago.

via Housing Wire

Mortgage Debt Exemption Set To Expire

Next year people negotiating for a principal reduction on their mortgage might find themselves taxed for that forgiven debt.  Any discharged debt is considered income by the IRS, but to encourage recovery in the housing market, Congress passed the Mortgage Forgiveness Debt Relief Act in 2007.  That Act exempted from taxation any forgiveness of mortgage debt due to a decrease in the value of the home.  Unless extended, that relief will expire at the end of 2012.  There is currently a bipartisan effort to extend this exemption that is still needed so direly by people finding themselves in homes worth less than they owe.

(ht: Los Angelos Times)

Monday Primer: Affidavit Of Heirship

Question:
What do you do with a seller who inherits a piece of property from an owner who died intestate (without leaving a will) and needs to show good title to the property so that she can sell it?

Answer:
She will need to arrange to have an Affidavit of Heirship recorded in the office where deeds are recorded.  Requirements for an Affidavit of Heirship vary from state to state, so she needs to consult an attorney in her jurisdiction.  In general though, this is what she should expect...
First Things First: Did She Actually Inherit The Property:
If she was the only child of a widowed owner, it's easy to ascertain that she was the heir, but if there were other relatives such as a spouse or other children, she needs to check the rules of intestate succession in her state to find out who inherits in the event that a person dies intestate.  If anyone other than her has an interest in the estate, she'll need them to sign off on the sale as well.
Who Should Sign The Affidavit:
Assuming that succession is in order, she needs to find someone to execute the affidavit.  In many states she will actually need two signers.  Both witnesses need to be people who had knowledge of the deceased and can attest to the date of his death and to who he left behind.  The witnesses must also be people who did not have an personal interest in the property.
What Should Be In The Affidavit:
The affidavit should have the name of the deceased, the date of death, and the heirs left behind.  It should include a statement attesting that the witness has no interest in the property.  All of this should be done in front of a notary.
Last Step:
The final step in this process is recording the affidavit in the office in her county where deeds are recorded.

We Keep Hearing That Mortgage Rates Have Hit Rock Bottom

...but they keep dropping lower.  30 year fixed rate mortgages averaged 3.49% last week.  15 year mortgages came in at 2.83%.

via HousingWire

Data Retrieval Services Scam

If you buy a house, it is important to have for your records a copy of your recorded deed.  I tell this to buyers who come through my office.  What I usually don't tell them is that the county where your deed is recorded can provide you with a copy of your recorded deed for a nominal printing fee.  Usually around $3.

I'm going to have to start telling buyers that because today a former purchaser came into my office with an advertisement she had received.  It was designed to look like a bill and was offering to obtain publicly available records for her for the cost of $87.00.  I'm glad she came to me instead of just sending them a check. for services she did not need (she still had her original deed) and could have been provided much cheaper at the county courthouse if she did need them.

I should note that this ad does contain a line explaining "Secured Document Services is not affiliated with the county in which your deed is filed in, nor affiliated with any government agencies.  This offer serves as a solicitation for services and not to be interpreted as a bill due."  What this company is doing is not illegal, just infuriating.

ProTip: Things that are actually sent from Montgomery County don't usually look this slick.

HUD May Open 203(k) Loans To Investors

The Sarasota Herald-Tribune is reporting that HUD may consider opening FHA insured 203(k) loans to investors.

According to mortgageorb.com, the 1996 moratorium on investors obtaining 203(k) loans may be lifted. "HUD Secretary Shaun Donovan is on the record saying that the FHA intends to reopen the program to investors," the online newsletter wrote.Additionally, the article quotes a Federal Housing Administration spokesman as saying FHA is "currently evaluating options for reopening the 203k program to investors" and "It just seems to be a win-win on many levels."

The program allows an purchaser to obtain an FHA insured loan on properties requiring over $5,000 of renovations to meet insurability standards. Currently this loan structure is only available to owner-occupant buyers.  Opening this up to investors could help revitalize the sagging housing market.

Google+ Hangout With HUD

If you have any questions about refinancing, on Thursday you'll be able to ask the man himself.  Zillow has announced that they are joining with Shaun Donovan, the Secretary of Housing and Urban Development to host a Google+ Hangout to answer homeowner questions about refinancing.  The Hangout can be streamed at whitehouse.gov/live and will begin at 3:15 EST.

A Note About Dual Tracking

One of the practices California is limiting with their new homeowner's bill of rights is the practice of dual tracking.  When a lender is dual tracking, it means that one department is pursuing loan modifications with the owner while another department moves ahead with foreclosure procedures.  Particularly insidious is when a bank informs an owner that a loan modification cannot be granted unless the owner is 90 days behind on payment.  When pursuing a loan modification it is wise to be wary of any suggestion to suspend mortgage payments.

California Passes Legislation To Protect Homeowners Facing Foreclosure

A bill in California has just been passed that proposes protections for homeowners against some of the questionable lender practices that have come to national attention in recent years.

The legislation would make California the first state to prohibit lenders from "dual tracking," the practice of negotiating with clients to modify a mortgage so that payments become more affordable while simultaneously pursuing foreclosure. In such cases, homeowners can wind up being evicted even though they had been working with the bank to modify their loans.

The measures would outlaw so-called robo-signing — the improper or faulty processing of foreclosure documents— and would allow state agencies and private citizens to sue financial institutions, under limited conditions, for economic compensation and for additional civil damages of up to $50,000 if lenders willfully, intentionally or recklessly violate the law. No lawsuit could go forward if the bank or servicer first fixes the problem with documentation or procedures, according to the bills.

Critics of the legislation claim that the new laws are complex, ambiguous, and will slow the tenuous recovery of the housing market.

via The Los Angeles Times

Abandoned Village For Sale On eBay

It looks like a bit of a fixer-upper, but if you have $3 million sitting around, you could own this Italian village.

via SFLuxe

Image via eBay listing

Wednesday Primer: Right Of Redemption

What you need to know:

When buying a property that has undergone foreclosure, one of the things to be aware of is the right of redemption.  In many states, the borrower who was foreclosed on has a certain time in which he can come back, pay what he owed, and redeem his house.  These rights vary from state to state, so before you buy a foreclosed property, you should ask an attorney in your jurisdiction what the relevant law says.

In Alabama this right is created by statute and can be found in the Alabama Code at Section 6-5-247.  The redeemer can be the borrower, other creditors of the borrower who had a junior lien, or the spouse or heirs of the borrower.  The right of redemption here runs for one year from the date of the foreclosure.  There has been discussion in the state legislature about reducing that redemption period, but as of this posting nothing has passed. 

What you need to do:

Find out the date of foreclosure and the date the redemption period will end.

Find out the foreclosure amount.  If the foreclosure amount is greater than your purchase price, you can feel reasonably comfortable since your investment will be returned.  If the foreclosure amount is less than the purchase price, you should acquire a redemption bond to insure your investment in the case of redemption.

Find out what is included in the redemption amount.  For instance, in Alabama, the redeemer must pay the foreclosure amount, but he is responsible for other costs such as necessary improvements made to the house.  If this is the case in your jurisdiction, you need to make sure that you keep good documentation on improvements you make.

This post is for informational purposes only and is not intended as legal advice. If you have a legal question, you should contact an attorney in your jurisdiction.

Foreclosure Attorney Advises Occupy Your Old Home, Faces Disbarment

The California Bar is recommending disbarment for Michael T. Pines, a foreclosure attorney who advised his clients to break into and occupy their homes after foreclosure.

From the Associated Press:

In the earlier order, State Bar Court Judge Richard A. Honn said Pines viewed himself "as a modern-day Henry David Thoreau, who encouraged civil disobedience to effect universal societal benefits."

This may be an instance of civil disobedience.  It seems more likely that it is an indication of desperation in the face of the current economy.

Foreclosure Attorney Facing Loss Of Law License

The Good News: Foreclosures Are Up

In May, foreclosures rose 9%.  Though this sounds bad, the news is actually good.  A rise in foreclosures corresponds to a decrease in the shadow inventory - homes with loans in default that are ripe for foreclosure, but have not entered the market.  Currently, there is an artificial downward pressure on home prices because  so many houses can be had cheep at foreclosure sales.  Any seller in this current market will have noticed that buyers are expecting fire sale prices even on non-distressed properties.  Until that shadow inventory is cleared, house prices will not stabilize to a normal level (whatever the new normal ends up being).  So while it's not exactly the kind of news you open a bottle of champagne for, the increase in foreclosure is still a good sign for the current recovery.

Foreclosure Spike Is Positive News For Housing

Sometimes Innovative Staging Ideas Are The Best Way To Sell A Home

And sometimes this happens.