Troubled homeowners may get help from judges

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MIAMI – Feb. 24, 2009 – In Judge A. Jay Cristol’s bankruptcy court, the bench shakes and a deep thud reverberates throughout the room as he stamps one of many documents that mark the steady progress of a case.

It’s a sound that is sure to be heard more often if Congress gives him and judges around the country the power to renegotiate a homeowner’s mortgage. The process, known as a “cram-down,” is part of President Barack Obama’s $75 billion plan to stem the soaring rate of foreclosures that helped ignite the recession.

The proposal, which could be voted on by Congress in a month or two, is already drawing fire from the mortgage industry. The move would force lenders to the negotiating table and could hurt the coffers of banks and investors holding mortgages.

But a growing number of people – from housing advocates to bankruptcy attorneys to judges like Cristol – believe it may be the best hope to keep people in their homes.

“We can’t help them all, but we can help a lot of them ameliorate the situation somewhat,” Cristol said.

Obama’s plan is part of a carrot and stick approach to dealing with a crisis in which 2.3 million households received foreclosure filings last year.

About one in four with a mortgage owes more to the bank than their properties are worth, according to Mark Zandi, chief economist at economic forecasting firm Moody’s Economy.com.

Mary Reyes, a consumer bankruptcy attorney in Miami, keeps a list of people who are anxiously waiting for the cram-down idea to become law.

“It’s extremely necessary,” Reyes said. “It will keep people from just walking away from their homes.”

Marta Lopez is on Reyes’ list. Lopez has not paid her $1,232 monthly mortgage payment since October after losing one of her two jobs. She had been making more than $2,000 per month before losing a job cleaning offices. Now, she brings in around $1,080 a month working at BJ’s Wholesale Club.

Her apartment was valued at $186,000 when she bought in May 2007, but now she can’t make the payments on her 30-year-fixed mortgage at 8.5 percent interest. She’s looking for another job, but Lopez wants quick action from Congress so she can enter bankruptcy and stay in her apartment.

“It will save me,” said Lopez, 58, of Hialeah, Fla. “They might be able to lower my interest rate and my principal and have me start paying for what the house is actually worth, and I’ll be able to stay there.”

Congress is already being lobbied heavily on both sides of the issue. While many Democrats in the House and Senate support the plan, it’s not clear if Senate Democrats have the 60 votes they need right now for the measure to pass.

Ten groups in the lending industry oppose the legislation. The Mortgage Bankers Association has said that new home buyers will pay higher interest rates and down payments if lenders face the risk that a judge could change mortgage terms.

Meanwhile, homeowners who have kept up with mortgage payments in a recession have balked at attempts by the government to use time and money to help people who, for whatever reason, have wound up in default.

But supporters of the cram-down contend that everyone can benefit because removing foreclosures from the market could stabilize prices and help the economy.

Henry Sommer, a bankruptcy attorney in Philadelphia, said going to court makes the lender act, rather than voluntarily agree to modify a loan.

“It gives the homeowner some rights,” said Sommer, past president the National Association of Consumer Bankruptcy Attorneys. “In every other program, the homeowner is essentially begging.”

While many lawyers have altruistic motives, it’s also clear that bankruptcy attorneys will make more money with more cases.

Under current bankruptcy law, judges can remove some items, including second mortgages. Or, they can “cram down” a loan on investment properties, or personal property such as a car or boat, to the property’s current value. But existing code does not allow adjustments for a debtor’s primary residence.

One group of property owners which will not get relief if the bill passes – investors who bought homes during the housing boom with the goal of selling them quickly for a profit.

A judge would determine a property’s value and an interest rate, based on an appraisal, and the parties could settle the bankruptcy before trial. Lenders could appeal a judge’s decision.

“The standard generally is, ‘What would a willing lender give to a debtor today?’” said Paul G. Hyman, chief bankruptcy judge in the Southern District of Florida.

One main concern is whether the cram-down will create an avalanche of new filings and jam up bankruptcy courts around the country.

“There probably would be an increase in filings: We think we’re equipped to handle them,” said U.S. Bankruptcy Judge Gregg Zive in Reno, Nev., adding that it’s difficult to guess the number of cases until the bill is passed.

Zive, president of the National Conference of Bankruptcy Judges, did say it would help if Congress accepts a recommendation from the governing body of U.S. courts to add nine new bankruptcy judges and make 22 temporary judgeships permanent.

Hyman said cases likely won’t be delayed significantly in his district – which includes Miami – because many will be settled before trial, once the parties see how the court values the property and sets an interest rate.

In Cristol’s court Wednesday, the judge said that banks’ resistance to reach settlements with mortgage holders is “somewhat stupid” because they are incurring costs related to a foreclosure while getting no payments in return.

Things move quickly and rather seamlessly in the 14th-floor courtroom, where Cristol addressed three cases in the span of two minutes Wednesday and discussions between attorneys and Cristol can last 10 seconds. A 79-year old Chief Judge Emeritus, Cristol has a wealth of experience in dealing with people in financial trouble – he spoke clear Spanish to one man in court Wednesday – and said judges should be willing to help.

“We’re here to work,” Cristol said. “If we have to work an extra one or two hours a day we will.”

 

Source: http://www.floridarealtors.org/NewsAndEvents/n4-022409.cfm

Freddie Mac investigates self over lobby campaign

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WASHINGTON – Feb. 24, 2009 – Lawyers hired by mortgage finance giant Freddie Mac are quietly investigating the firm’s own $2 million lobbying campaign, The Associated Press has learned. The lobbying effort helped quash proposed new regulations on the company before the housing market collapsed.U.S. government control due to its massive investment losses.America. Freddie Mac’s activities fall under oversight of the new Federal Housing Finance Agency, which describes itself as “a world-class, empowered regulator with all of the authorities necessary to oversee vital components of our country’s secondary mortgage markets.”Washington to stop a proposal in the Senate in 2005 sponsored by Sen. Chuck Hagel, R-Neb. The legislation would have forced Freddie Mac and Fannie Mae to sell hundreds of billions of dollars worth of assets from their portfolios of mortgages and mortgage-backed securities. At the time, the portfolios were highly lucrative but their value plunged when the housing market collapsed.Verizon Center. Freddie Mac executive Hollis McLoughlin, who oversaw the $2 million campaign by DCI, was photographed by the AP in Freddie Mac’s leased skybox four months ago at the season home opener of the Washington Capitals hockey team.

It was not immediately clear how much Freddie Mac is spending to investigate its own conduct or whether it is spending any federal bailout money on the internal probe. The firm was placed under

One of Washington’s leading law firms, Covington & Burling LLP, has spent more than a month interviewing current and former Freddie Mac employees and executives, according to three people familiar with the matter. These people spoke on condition of anonymity because they fear reprisals if they were identified. The inquiry is led by former Justice Department prosecutor Stephen Anthony, who specializes in corporate internal investigations.

Freddie Mac board chairman John Koskinen confirmed for the AP that an inquiry is under way but declined to comment further. Anthony did not return phone calls and e-mails seeking comment. Corinne Russell, spokeswoman for the federal office that regulates Freddie Mac, declined to comment.

The internal investigation is happening even as the Obama administration provides $200 billion more in government assistance to Freddie Mac and its larger sister company, Fannie Mae. The two government-sponsored enterprises are the largest providers of home mortgages in

The inquiry inside Freddie Mac follows stories by the AP about the company secretly hiring Republican consulting firm DCI Group of

The DCI Group did not file lobbying reports describing the work it was performing. At the time, Freddie Mac executives who knew about the initiative referred to it among themselves as “the stealth lobbying campaign,” according to people familiar with the matter. DCI Group spokesman Geoffrey M. Basye says the firm practiced the highest ethical standards and coordinated with Freddie Mac’s lawyers to ensure uncompromising compliance with all applicable federal and state laws and regulations.

The people familiar with the internal inquiry told the AP that Anthony has interviewed current and former Freddie Mac employees about three issues raised by the AP stories:

• An accounting of the work done for the $2 million in payments to the DCI Group. It targeted 17 Republican senators in 13 states working to defeat Hagel’s regulatory legislation by convincing prominent constituents and financial contributors the bill would hurt the housing boom. The measure was never brought to a vote and died.

• An accounting of six-figure payments to 52 outside lobbying firms and political consultants in 2006, including details about what work, if any, the consultants performed for the money paid to their firms. The consultants included former House Speaker Newt Gingrich and ex-Sen. Alfonse D’Amato. The payments to the 52 consultants amounted to $11.7 million. D’Amato’s firm, which was paid $240,000, declined to comment. Gingrich’s firm was paid $300,000 for strategic advice on a number of issues.

• An accounting of personal use by Freddie Mac executives of company-paid tickets and a company-leased skybox at the

Covington & Burling has represented Freddie Mac in other controversies, including its defense against charges it made illegal campaign contributions. Freddie Mac settled the matter by paying a record $3.8 million fine imposed by the Federal Election Commission in 2006. Separately, Covington & Burling represented Freddie Mac in roughly 20 lawsuits alleging the company fraudulently inflated the price of its stock from 1999-2002. All have been settled.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n5-022409.cfm

Orlando might see high-speed rail after all as new idea plows ahead

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ORLANDO, Fla. – Feb. 23, 2009 – The high-speed train that was supposed to race through Orlando might be back on track, even though it was stopped nearly five years ago by then-Gov. Jeb Bush.

The federal stimulus package signed into law this week contains $8 billion for mass-transit trains – with priority going to those capable of going at least 110 mph.

That provision prompted the Florida High Speed Rail Commission – appointed in 2001 but largely dormant in recent years – to reactivate itself.

There will be plenty of competition for the money, with 11 areas throughout the country known to be pushing bullet trains. Among the corridors are Boston to Washington; Portland to Seattle; and San Diego to San Francisco.

The nine-member Florida board will meet Thursday to discuss how to get some of the money, possibly as much as $2 billion.

“We either apply for it and get it – or we don’t and get nothing,” said Orange County Commissioner Linda Stewart, a bullet-train backer who is working with the high-speed panel but is not a member.

Florida flirted with high-speed rail for years. Voters even backed an amendment to the state constitution in 2000 calling for a statewide bullet train that eventually would have linked Orlando with Tampa and Miami.

But Bush, never a train fan, pushed a second amendment in 2004 that derailed the venture. He argued the project was too expensive – its 30-year construction and operation price tag was put at $25 billion – and would not carry enough passengers.

Stewart and Lee Chira, a former Orange County commissioner and chairman of the high-speed-rail panel, say the system, while expensive, would create thousands of jobs and provide an alternative for motorists fed up with crowded Interstates 4 and 95.

They have the support of U.S. Reps. John Mica, R-Winter Park, and Corrine Brown, D-Jacksonville. But Gov. Charlie Crist has refused to jump aboard.

“He’s done nothing,” said Chira, who, like Crist, is a Republican.

Several calls to Crist spokesman Sterling Ivey about the governor’s position on high-speed rail netted this e-mail response: “The governor supports alternative transportation initiatives, such as SunRail in Central Florida, that will provide jobs during construction, help Floridians transverse the state, and protect the environment.”

Ivey would not elaborate.

SunRail is the $1.2 billion commuter-rail project that would run 61 miles from DeLand in Volusia County through downtown Orlando to Poinciana in Osceola County.

It was defeated in the Legislature last year, but Crist came out strongly for SunRail earlier this month during a news conference in Tallahassee.

His silence on high-speed rail has confounded Chira, who said he has spent his own money on travel and other activities to keep the commission going.

“It’s hard to get him on anything,” Chira said of Crist. “I’m flying on this on my own.”

Chira contends the Florida proposal could fare well with federal transit officials because studies already have been done to identify preferred routes and stations. Also, an environmental-feasibility report of the route from Orlando to Tampa is complete.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n3-022309.cfm

Government expands national program to buy foreclosures

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IRMO, S.C. – Feb. 23, 2009 – The federal government is spending $4 billion to buy and fix up foreclosed homes despite concerns over how the money is being distributed, questions about oversight and fears that the program amounts to a windfall for banks that repossessed the properties.

Now, even before the first dollars are spent, another $2 billion is on the way under the economic stimulus package signed this week by President Barack Obama.

Last month, the Department of Housing and Urban Development signed off on hundreds of grants to all 50 states. The Neighborhood Stabilization Program, as it’s known, was passed last year as part of a housing rescue plan that was regarded at the time as the most significant housing legislation in a generation.

But critics have assailed the program for the lack of money it will send some hard-hit communities and the discontent stirring among residents who want a say in what happens to their neighborhoods.

“What houses are gonna be involved? We still don’t know that and we’re a month away from the funds arriving,” said Mike Aaron, president of the Livingston Avenue Area Commission, a group in a foreclosure-ridden area of Columbus, Ohio. “That’s what’s making us uneasy right now.”

The total amount coming into Ohio, for example, is $258 million, and Columbus is getting $23 million of that. Those figures do not include new money from the stimulus package and HUD has said it has not yet decided what the guidelines for the new grants will be.

Aaron said Columbus has rebuffed his group’s attempts to talk about the best ways to use money, which has already been awarded to the state.

“We need to be involved in the process,” said Aaron, who is pressing for an oversight board comprised of city officials and residents.

And then there’s back biting about who gets how much.

The first round money is being divvied up based on the number and percentage of foreclosures, number and percentage of homeowners behind on their mortgages, and the concentration of subprime mortgages.

While the formula sounds fair, some of the results aren’t. California and Florida are both getting more than $500 million in federal help, even though California has 500,000 foreclosures – around twice the number as Florida.

Vermont, meanwhile, is getting the minimum of $20 million, even though the state had less than 150 foreclosures last year and the lowest foreclosure rate in the nation, according to RealtyTrac Inc.

Some city and county officials are also questioning the government’s math.

Almost one in 10 houses in Merced County, Calif., are in foreclosure, one of the highest rates in the country. Yet the county will get just $2 million of the money going to California.

The city, which has a foreclosure rate of 12 percent, will get just $1.4 million.

“Someone stopped me on the street and said, ‘Oh good you got the funding. So what can you do with this money? Buy like four homes?’“ city housing manager Masoud Niromaud said, adding that there are more than 1,300 homes in foreclosure in Merced. “Seems that they (HUD) could paid more attention to the formula – ran it a couple of times. They didn’t do that.”

Economists say lenders will surely benefit from the plan, though it doesn’t include enough money to be considered a significant backdoor bailout for banks.

“In terms of bailing out lenders it’s hardly the biggest thing out there but surely there will be cases where the land purchases will be at least in part to help politically connected lenders,” said Dean Baker, co-director of the Center for Economic and Policy Research, a Washington-based think tank.

In many cases, government officials plan to dole out the money to nonprofit organizations and smaller government entities that will purchase homes.

Critics and local housing officials are shaking their heads over the carte blanche grantees have in how they spend the federal funds. One South Carolina county said it would consider proposals to put homeless or HIV/AIDS patients in foreclosed homes eligible for the grant, while officials in Florida’s Miami-Dade County said they plan to snap up foreclosed apartments with grant money despite staunch public comment against it.

Many of the proposals called for renting out the homes to low- to moderate- income families.

On the streets of neighborhoods pockmarked with vacant houses, many residents said they’d welcome new neighbors no matter how they got into the homes.

“I would want to put somebody in it, whether they’re renting it or not. That’s a house that somebody could be in,” said Cheryl Poole, a 51-year-old Irmo resident worried about home values and the empty house across the street from her one-story ranch.

On the other extreme is Debra Oakley, a 55-year-old woman who said she isn’t so sure she wants a new neighbor.

The two houses to the left of her home are vacant, including one that nonprofits are being encouraged to buy using stabilization grant money.

“I’ve often wondered about what kind of people would move over there,” said Oakley. “I like it just like that: vacant.”

Susan Popkin, a researcher at the nonprofit Urban Institute, said many homeowners have grave concerns about their changing neighborhoods and how that might affect their already declining property values.

In major cities nationwide, tensions have risen recently as federally subsidized renters move from housing projects and violence-ridden neighborhoods to nicer communities in suburban areas.

“The fear is real. The reality isn’t,” Popkin said. “The thing they’re anxious about is what’s already happening in their neighborhoods.”

That’s true in Columbus, Ohio, where 84-year-old Walt McKinley said he’d welcome any help to rescue their neighborhoods.

McKinley, who lives in the city’s downtrodden Linden neighborhood, said he worries the spread of foreclosures in his neighborhood will drive up crime and wants the city to use the grant to demolish the house next door to his, which has been vacant since it was foreclosed upon and the owners abandoned it over the summer.

“I told ‘em at work that if possible, I would even drive a bulldozer myself and bulldoze it,” McKinley said. “I would be happy to.”

But critics say there’s no guarantee that McKinley’s neighborhood or other hard-hit communities will benefit from the grants. No one is tracking just how the money will be spent and grantees have been tightlipped on their plans.

HUD will monitor how states and cities spend neighborhood stabilization money, but leave it to local governments to monitor how pass-through grants are used by nonprofits and other, smaller government groups.

Many Republicans opposed the first round of stabilization grants and don’t want to increase the program. They say additional money will just give more slush funds to disreputable nonprofit groups.

“Instead of trying to work out troubles in the existing funds, we’re basically doubling the size of the program and potentially doubling the size of the problem, said Frederick Hill, spokesman for the Republican Oversight and Government Reform Committee, about the House’s plan to double neighborhood stabilization grant money.

Some economists also have expressed concerns over a lack of oversight.

“The record of housing authorities is not very good. It’s certainly reasonable to be concerned that the money will end up going to politically connected lenders and developers and not do very much for communities,” Baker said.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n2-022309.cfm

Renter’s dilemma: Home prices are so low that it may cost less to buy than to rent

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MIAMI – Feb. 18, 2009 – Just six months ago, with South Florida home prices in a steady fall, the decision to buy or rent was clear for many prospective homebuyers – keep on renting, of course.

But these days, as the housing downturn enters another year, the question of whether the time has come to take the plunge is not as easily answered. The waters are at once tempting and forbidding.

There are lots of opportunities to own for less than it costs to rent, but it’s unwise to make your decision without first considering the market and how long you are willing to commit.

Here are a few issues to keep in mind.

The case for buying now:

Median home prices in South Florida are back to 2003 levels and some new, never-lived-in property is selling for less than it would cost to build a similar home.

Additionally, the median price for a single-family home – now around $216,500 – is starting to come within reach of households earning around the median income in Miami-Dade and Broward counties. That could unleash pent-up demand.

Interest rates today are at record lows. This could save a buyer thousands more than buying at a cheaper price down the road when interest rates may be higher.

There are eye-popping bargains out there due to foreclosures and short sales. The excess of homes and condos on the market also means prices are low.

A new $7,500 tax credit is available for first-time homebuyers until July 1. This can be used to offset the cost of a downpayment.

The case for holding off:

There is the risk that home values will keep falling – especially for condos, analysts have said. The economy may also deteriorate further, threatening job security, and making the thought of taking on a home mortgage even more daunting.

Rents are also declining.

By holding off, renters can avoid paying homeowner and condo association fees that have spiked in many communities because of delinquencies and foreclosures.

Actual property appreciation could be years away.

Lending restrictions could loosen and downpayment requirements ease, tying up less cash in future purchases.

Still Hunter, a vice president of investment in the Fort Lauderdale office of Marcus & Millichap, a real estate services firm, attributed falling rental prices to a booming shadow market of condos and homes being rented by investor/owners as well as renters rooming together to save money and a decline in foreign workers – typically renters – who have headed home as jobs dry up here.

Rents on decline

Hunter said his firm’s rental outlook for 2009 shows average rents (for one- to three-bedroom apartments) declining in Broward County by 2.6 percent to $1,094 and in Miami-Dade by 1.3 percent to $1,109.

“From my perspective, it makes sense to rent right now, while rents continue to decline and home prices continue to decline. We’re not at the bottom,” Hunter said.

Still, Hunter said, home prices have adjusted so much, it might make sense to jump into the market.

“It’s a tough question to answer,” he said.

On the other hand, Ron Shuffield, president of realty firm Esslinger Wooten Maxwell in Coral Gables, said it was the first time in a long time when the cost of owning could be cheaper than renting. He was able to demonstrate how a person buying a condo in Toscano, a new complex near Dadeland Mall, at the current list price of $220,800 could save $775.92 annually over renting an identical unit for $1,350 monthly. EWM is the exclusive brokerage firm for Toscano.

The analysis is based on a buyer getting an FHA loan with a 4.625 percent interest rate. A buyer would need to pay more money out of pocket each month – the monthly payment for the 759-square-foot unit is $1,914.79. But after annual tax deductions for mortgage interest, mortgage insurance and property tax, the annual savings tip the scales toward owning, Shuffield said.

In his analysis, savings also include equity built up each year from paying down the mortgage.

Before affordability alone sways a renter to start looking, the first question to ask is how long a potential buyer thinks he or she will live in a home, said William Hardin, director of real estate programs at Florida International University.

In a normal market, where homes appreciate at a rate of about 3 percent annually, owners typically lose money when they sell within two years because the cost of selling generally exceeds 6 percent due to expenses.

But, again, that’s in a normal market.

There are very few real estate analysts audacious enough to call a bottom on home prices right now. However, Madeleine Romanello, a real estate agent for Douglas Elliman Florida, said that prices in some highly desirable areas such as Coral Gables and Miami Shores seem to have stabilized at 2004 levels.

No bouncing back

Even when prices hit bottom, it doesn’t mean they will bounce back up, said Alan Ojeda, chief executive of the Rilea Group, a Miami-based developer of large-scale rental properties. That makes the horizon for profit even longer and means that a buyer in the current market should be committed to a home for several years.

Ojeda, who said he is trying to fill up One Broadway, a new luxury rental tower in Miami’s Brickell area, takes it a step further, saying that unless a renter believes a home’s price will appreciate in the next three years, he or she would be better off remaining a renter.

“It’s the same theory you use when you decide whether to buy or lease a car. What you are looking for is to use a car. If there’s no appreciation in a home, wouldn’t you prefer to use a home, since after three years you would have spent more money on real estate taxes and the mortgage. What would your gain have been?” Ojeda asked.

Still, there are signals the blood-letting in the real estate market may be starting to slow. Sales were up significantly in December, the last time figures from the Florida Association of Realtors were available, and that made a dent – albeit small – in the number of homes for sale.

Hardin said it was hard to imagine values would continue to fall at the same rate at which they have since the market peaked. Prices are likely to continue falling, but it’ll be by smaller percentages, he said.

Unless renters wholeheartedly believe prices will rise over the next several years, they may want to stay put, he said. Aside from the past seven years or so, real estate has always been seen as a long-term investment, Hardin said, so buying low today and selling in 10 years could be lucrative.

Either way, there’s little downside in delaying the decision.

Now or later?

Romanello acknowledged there would be little difference in buying now vs. later. She said that among her clients who had decided to wait, the worst that happened was they lost several great opportunities.

‘I don’t think there is any urgency to buying because I don’t think in six months’ time prices are going to be up 10 percent,” Romanello said.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n3-021809.cfm

Homeowners’ rallying cry: Produce the note

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ZEPHYRHILLS, Fla. – Feb.18, 2009 – Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.

And just like that, the foreclosure proceedings came to a standstill.

Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess.

During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.

Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage.

“I’m going to hang on for dear life until they can prove to me it belongs to them,” said Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. “I’ll try everything I can because it’s all I have left.”

In interviews with The Associated Press, lawyers, homeowners and advocates outlined the produce-the-note strategy. Exactly how many homeowners have employed it is unknown. Nor is it clear how successful it has been; some judges are more sympathetic than others.

More than 2.3 million homeowners faced foreclosure proceedings last year and millions more are in danger of losing their homes. On Wednesday, President Obama will unveil a plan to spend at least $50 billion to help homeowners fend off foreclosure.

Chris Hoyer, a Tampa lawyer whose Consumer Warning Network Web site offers the free court documents Lovelace used to file her request, has played a major role in promoting the produce-the-note strategy.

“We knew early on that the only relief that would ever come to people would be to the people who were in their houses,” Hoyer said. “Nobody was going to fashion any relief for people who have already lost their houses. So your only hope was to hang on any way you could.”

Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are “making lawyers jump through procedural hoops to delay what’s likely to be inevitable.”

Deutsch said the original note is almost always electronically retained and can eventually be found.

Judges are often willing to accept electronic documentation. And lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. Still, assembling such documents to a judge’s satisfaction takes time, which to homeowners is the point.

Lovelace filed her produce-the-note demand last fall after the bank acknowledged that her original mortgage document had been lost or destroyed. Since then, there has been no activity on the foreclosure – no letters from the lender, no court filings.

The law firm handling the foreclosure for the lender refused to comment.

A University of Iowa study last year suggested that companies servicing mortgages are often negligent when it comes to producing the documentation to support foreclosure. In the study of more than 1,700 bankruptcy cases stemming from home foreclosures, the original note was missing more than 40 percent of the time, and other pieces of required documentation also were routinely left out.

The first big success of the produce-the-note movement came in 2007 when a federal judge in Cleveland threw out 14 foreclosures by Deutsche Bank National Trust Co. because the bank failed to produce the original notes.

Michael Silver, a lawyer for two of the families in that case, said at least one eventually lost their home. Still, he considers that a success.

“From the perspective of the person who’s in the home, you may have kept them in the house another 10 or 12 months,” he said. “If I can get a result with economic benefits to a client, then I think I won.”

Democratic Rep. Marcy Kaptur of Ohio endorsed the strategy in a fiery speech on the House floor during debate on the federal bank bailout last month.

“Don’t leave your home,” she said. “Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don’t have that mortgage, and you are going to find they can’t find the paper up there on Wall Street.”

April Charney, head of foreclosure defense for Jacksonville Area Legal Aid in Florida, said the strategy has been so successful for her that she now travels around the country to train other lawyers in how to use it. She said she has gotten cases delayed for years by demanding that lenders produce paperwork they cannot find.

“This is an army of lawyers getting out there to stop foreclosures so we can get to the serious business of creating solutions,” Charney said. “Nothing good is going to happen as long as we continue to bleed homeowners.”

On the Net: Consumer Warning Network: http://www.consumerwarningnetwork.com
American Securitization Forum: http://www.americansecuritization.com

 

Source: http://www.floridarealtors.org/NewsAndEvents/n2-021809.cfm

First-time homebuyers: How to get the $8,000 tax credit

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WASHINGTON – Feb. 17, 2009 – How does a first-time homebuyer take advantage of the $8,000 tax credit that President Obama is expected to sign into law tomorrow? It comes with a few rules. According to the most recent analysis, the following rules will apply – though things could change as tax professionals weigh the details:

• The deduction is worth 10 percent of a home’s value up to $8,000, which means all homes worth more than $80,000 could qualify for the maximum amount.

• There is an income limit to qualify. A married couples’ modified adjusted gross income (MAGI) should be under $150,000 and single filers’ MAGI should be less than $75,000.

• Partial tax credits may be available for married couples with MAGI incomes over $150,000 but under $170,000, and single filers with incomes over $75,000 but under $95,000.

• If married couples file separately, they can both claim 5 percent of the home purchase ($4,000 each for a home over $80,000) on their tax returns.

• It’s a tax credit, not a deduction. That means the entire amount goes back to the first-time homebuyer unlike deductions, such as mortgage interest, that are subtracted from gross income before tax is calculated. If qualified for $8,000, the buyer gets $8,000, even if they would not owe that much in taxes otherwise.

• The tax credit applies to homes purchased between Jan. 1, 2009, and Dec. 31, 2009.

• The tax credit does not have to be paid back, providing the homebuyer keeps the property for at least 36 months and resides in the home.

• To qualify as a first-time homebuyer, the purchaser cannot have owned a home within the previous three-year period. However, ownership of a vacation home or rental home does not disqualify the buyer.

• If purchasing a new home, the effective date to receive the credit is the first day the homeowner actually lives in the house. If construction began in 2008, that buyer could still qualify. And if construction begins in 2009 but the owner does not take possession until 2010, the buyer would not qualify.

• The tax credit can be claimed on 2008 income tax forms even though the purchase took place in 2009. A buyer could close on a home the same day that President Obama signs it into law, fill out their income tax forms the next day, and receive the tax credit fairly quickly.

The tax credit is not a downpayment, but it could be used toward a downpayment if first-time homebuyers plan ahead. U.S. taxpayers have money withheld from every paycheck for income taxes. If they owe more tax than the amount deducted, they pay the IRS; if they owe less, they get a tax refund.

By anticipating at least an $8,000 refund in early 2010 when they file 2009 taxes, these buyers could cut down on their tax withholding this year and save the money toward a downpayment. There is one caveat, however: Should they not buy a home in the qualifying period, they would still owe the IRS the money, and reducing their withholding amount could result in a high bill at tax time.

Questions? Call FAR’s Legal Hotline at 407-438-1409. It’s a free call for members except for long distance phone charges, if any.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n1-021709.cfm

Tainted drywall affects real estate: Firms begin to seek legal advice

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MANATEE COUNTY, Fla. – Feb. 17, 2009 – The presence of defective drywall in some Manatee County homes has heightened awareness about the issue in the real estate world.

Buyers, sellers and real estate agents are all asking the same question: Which homes are affected?

“In the real estate community, the concern is which of these homes potentially has the Chinese drywall,” said Greg Owens, a Realtor with Keller Williams of Greater Manatee, Inc. “We’re here to represent our buyer’s best interest. We need to know from the builders and the construction companies which of these homes potentially have defective drywall that affects the homes.”

As the problem unfolds, neighborhoods in Manatee County that have reported the problem include GreyHawk Landing, Heritage Harbour, Greenbrook in Lakewood Ranch, Fairways at Imperial Lakewoods and Crystal Lakes. But more are likely to follow.

Real estate firms are beginning to seek legal advice on the problem.

Realtor Leslie Wells said she is consulting with an attorney about how to best approach the issue. It will likely include an additional drywall disclosure to accompany a standard residential disclosure form from the Florida Association of Realtors.

“From our standpoint, we want to be careful that the proper disclosures are made, but we aren’t going to overreact to this because it’s only been found in certain subdivisions,” she said.

Florida law requires a residential seller to disclose all known facts that materially affect the value of the property when they are not known or readily observable to the buyer.

Anne L. Weintraub, an attorney for Icard Merrill, has not personally handled any cases involving Chinese drywall but believes it’s likely she eventually will. If a client were looking to purchase property in an area known to be affected by tainted drywall, she would recommend that they take precautions, which would include conducting an investigation beyond the standard home inspection.

“The truth of the matter is that all parties to any real estate transaction involving properties affected by Chinese drywall must use extra caution, make the appropriate disclosures, and buyers must go the extra mile to confirm they are protected before closing,” Weintraub said. “In the event a seller has knowledge of Chinese drywall in their property and fails to disclose it to the buyer, the seller will most definitely be answering for their lack of disclosure in front of a judge.”

The landmark case, Johnson vs. Davis, ended the notion of “buyer beware” in Florida for residential property in the mid-1980s when the Supreme Court ruled that a seller has a duty to disclose defects on a home.

The ruling made it a duty for owners to disclose what they knew about defects that would affect the value of the property, said John Neukamm, chair-elect of the Florida Bar’s real property, probate and trust law section. A subsequent case made the same true for a broker involved in the sale of the real estate.

So in the case of Chinese drywall, an owner who even suspects or ignores symptoms of defective drywall could be held liable.

“You can’t just kind of like play see no evil or hear no evil,” Neukamm said.

The buyer who discovers a defect in the home can either sue for damages to recoup the out-of-pocket cost or actually reverse the transaction.

“If the cost to repair is too much, they can literally unwind the transaction,” he said. “It’s a pretty serious situation.”

Beth Barnett, a Realtor for Coldwell Banker at Lakewood Ranch, said she is getting questions about the potential of Chinese drywall in homes.

In addition to adding a disclosure to the contract for the home, she’s also advising people to have the home inspected to see if there are any problems. “It’s definitely scaring people,” she said.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n4-021709.cfm

Other insurers poised to pick up State Farm’s slack

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PALM BEACH COUNTY, Fla. – Feb. 17, 2009 – For 700,000 homeowners covered by State Farm Florida, the departure of the state’s largest private home insurer might not be as financially painful as feared.

Florida Insurance Commissioner Kevin McCarty said Friday he’s negotiating with 15 insurers that want to take over State Farm Florida’s homeowners policies, and those carriers are interested in covering 50,000 to 500,000 policies each.

“We’ve got private companies that are ready, willing and able to take these policies,” McCarty said.

That’s a relief for homeowners who feared their coverage would move from State Farm to state-run Citizens Property Insurance Corp., which traditionally has charged the highest rates in Florida, although a rate freeze has held down Citizens’ rates in recent years. McCarty approved State Farm’s Jan. 27 request to pull out of Florida – but only if State Farm doesn’t dump those policies into Citizens.

“Most of the policies will be able to be placed in the private sector at rates at or below Citizens’,” McCarty said.

McCarty wouldn’t name the carriers he’s talking to. Smaller carriers such as Ormond Beach-based Security First Insurance have said they aim to add customers dumped by State Farm.

Florida Peninsula Insurance of Boca Raton is talking to McCarty about taking on 100,000 policies, Chief Executive Roger L. Desjadon said.

“We are a Florida-focused company, and we think that if you do the business correctly, you can do it very successfully in this state,” Desjadon said.

But Bill Newton, executive director of the Florida Consumer Action Network, doubted that State Farm’s exit would be as seamless as McCarty suggested.

“It’s a bit of a stretch,” Newton said. “If you could smoothly transition the policies with no bump, great, but I don’t think you can do it.”

Citing hurricane risk and steep losses, State Farm said last month it would drop 1.2 million Florida policies, including 700,000 homeowners policies, 80,000 condo unit owners policies and 94,000 personal liability umbrella policies.

McCarty on Friday approved State Farm’s plan, with caveats. It’s unclear whether State Farm will agree to the conditions set by McCarty. One of those conditions: that State Farm’s so-called captive agents be allowed to sell homeowners policies written by other carriers. Now, State Farm agents can arrange policies only through State Farm and Citizens.

“We’ll need to study the (Office of Insurance Regulation’s) opinion more closely, but we do appreciate its quick consideration of the plan,” State Farm said in a statement. “We hope to have further conversations with the OIR to create an orderly process that is best for our customers, our agents and the marketplace.”

Insurance experts lauded McCarty for taking steps to keep Citizens’ already bulging policy rolls from growing. Citizens has 1.1 million policyholders.

“Citizens is already overtaxed with the policies they have,” McCarty said.

Not only are Citizens’ prices high, but any losses could be absorbed by taxpayers.

“The more policies that are in Citizens, the more taxpayers are on the hook for potential losses,” Citizens spokesman John Kuczwanski said.

State Farm Florida has 54,000 homeowners policies in Palm Beach County, 5,900 in Martin County and 12,700 in St. Lucie County.

State Farm also is Florida’s largest auto insurer. Its life insurance and 3 million auto policies won’t be affected by the move, despite a 2007 Florida law that prevents carriers from selling auto coverage but not homeowners policies if they sell both types of coverage in other states.

State Farm is getting around that law by moving its auto policies into State Farm Mutual Automobile Insurance Co., a national carrier that sells only auto coverage.

McCarty talked tough during Friday’s news briefing. He said state regulators and politicians weren’t to blame for State Farm’s departure. Instead, he called State Farm’s losses “a crisis created by the company.”

And McCarty said State Farm broke its promise to stay in Florida if regulators approved a 52 percent rate hike in 2006.

“They said they would stay and commit to Florida with a 52 percent rate increase,” McCarty said. “We certainly got a lot of heat from policyholders for approving that increase.”

Not everyone is convinced that State Farm will leave. Newton, of the Florida Consumer Action Network, compared the showdown to a poker game where both sides are bluffing.

“The other shoe is yet to drop,” Newton said. “It’s hard to believe they would just walk away from that much business.”

But Florida Insurance Consumer Advocate Sean Shaw said both sides have been playing their hands too convincingly for State Farm to stay.

“They’re pretty far down the line to be bluffing at this point,” Shaw said. “We’re past the showdown phase and onto a new hand.”

Poker game or not, State Farm Florida’s departure is a dramatic example of the turmoil that has gripped Florida’s homeowners insurance market since Hurricane Andrew struck south of Miami in 1992. The barrage of hurricanes that hit Florida in 2004 and 2005 deepened the insurance crisis.

Since Andrew, insurance prices have soared. State Farm, for instance, has increased rates 530 percent since 1992, McCarty said, and hundreds of thousands of policyholders have been dumped by private insurers into Citizens.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n2-021709.cfm

NAR: Implement stimulus package quickly

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WASHINGTON – Feb. 16, 2009 – Now that the American Recovery and Reinvestment Act has been sent to President Obama for his signature, the National Association of Realtors® (NAR) looks forward to swift implementation.

“We are pleased that Congress and the administration have taken prompt action to address the current economic crisis,” says NAR President Charles McMillan. “Job creation and tax cuts are going to help families recover and prosper, and these initiatives will help more people keep their homes and help others become homeowners.”

The legislation contains two important housing provisions advocated by NAR. The final stimulus bill increases the first-time homebuyer tax credit to $8,000 and eliminates the repayment requirement of earlier legislation. In addition, the credit availability has been extended until Dec. 1, 2009.

“These important provisions will help bring first-time homebuyers to the market and reduce housing inventory,” says McMillan. NAR estimates that the homebuyer tax provisions could stimulate up to 300,000 additional home sales, helping stabilize home values and potentially preventing some homeowners from being “underwater” on their mortgage, which can often lead to foreclosure.

The bill also reinstates the 2008 higher loan limits for FHA, Fannie Mae and Freddie Mac. “These … make mortgages affordable regardless of where you live,” McMillan says. “ This will also help reduce inventory and improve liquidity in the overall mortgage market.”

NAR commended President Obama and Congress for including neighborhood stabilization efforts to help communities purchase and rehabilitate foreclosed and vacant properties. Realtors also praised the provision to help America’s wounded soldiers who need to move or relocate.

In addition to federal bailout measures, NAR’s also advocates better foreclosure mitigation efforts and lower interest rates for homeowners and buyers. NAR expects these components to be addressed in the coming days.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n1-021609.cfm