Not my listing? Not my problem

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SNYDER, N.Y. – April 8, 2009 – A new white paper issued by the consulting firm WAV Group presents the results of a “secret shoppers” test of 100 IDX-powered broker Web sites and determined that most agents do not respond to inquiries about listings belonging to other brokers.

The study shows that 33 percent of e-mails received no response, the average response time was 10 hours and 16 minutes, and only five of the 25 responding agents answered all the questions posed. When making phone calls to 64 listings with phone numbers, none of the 58 agents they reached could answer questions about the listing.

“I would not presume that brokers are going to pull down their IDX sites anytime soon, but I do believe that brokers need to take the relationship with the online consumers more seriously and deploy solutions that will improve response rates to increase consumer satisfaction and confidence,” says WAV Group partner Victor Lund.

The paper suggests that consumers are more satisfied with syndicated listings sites that put them in contact with the listing agent or broker.

Source: Inman News (04/03/09)

© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688

Mortgage rates at record low for second week

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WASHINGTON – April 3, 2009 – Rates on 30-year mortgages fell to the lowest level on record for the second consecutive week after the Federal Reserve launched a new effort to assist the staggering U.S. housing market.

Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.78 percent this week, from 4.85 percent last week.

It was the lowest in the history of Freddie Mac’s survey, which dates back to 1971. Rates are down by more than a full percentage point from a year ago.

“Mortgage rates followed other interest rates lower this week amid reports of slower economic growth” Frank Nothaft, Freddie Mac vice president and chief economist, said in a prepared statement.

Low rates have sparked a surge in refinancing activity. The Mortgage Bankers Association said Wednesday its weekly application index climbed 3 percent for the week ended March 27, on top of a 30 percent increase a week earlier. Nearly 80 percent of applications came from borrowers seeking to refinance.

Mortgage rates fell dramatically over the winter and have fallen further after the Federal Reserve said last month it would buy $1.2 trillion in mortgage-backed securities and $300 billion in long-term government debt, which traditionally influences rates on 30-year home loans.

Lenders, however, have tightened their standards dramatically over the past year, so the best rates are available to those with solid credit.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed-rate mortgage dropped to 4.52 percent this week, from 4.58 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages fell to 4.92 percent, compared with 4.96 percent last week. Rates on one-year, adjustable-rate mortgages fell to 4.75 percent, from 4.85 percent.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point last week for all mortgages in Freddie Mac’s survey except for one-year adjustable mortgages, which had an average fee of 0.6 point.

Copyright © 2009 The Associated Press, Alan Zibel (AP Real Estate Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Breakout: Mortgage Rate Trend Index
Well over half (64 percent) of mortgage industry experts polled by Bankrate.com this week expect mortgage rates to remain relatively stable for the next 30 to 45 days. While 29 percent predict an increase, only 7 percent foresee additional declines.

Broker price opinions contributing to downward spiral?

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WASHINGTON – April 2, 2007 – The National Community Reinvestment Coalition and real estate appraisal associations testified before the House Subcommittee on Financial Institutions and Consumer Credit on March 11, saying that broker price opinions (BPOs) are hurting property values nationwide.

More realty practitioners have been doing BPOs due to an increase in foreclosures and short sales, and they insist their estimates are accurate due to their comprehensive knowledge of the local market. However, some groups say agents low-ball BPOs in order to expedite sales; and they insist that this tactic pushes down neighborhood residential values because appraisers must take both recent listing prices and closed sales prices into consideration when valuing properties.

Those who testified at the subcommittee hearing want Congress to prohibit the use of BPOs as substitutes for appraisals in transactions involving distressed properties, noting that 23 states make it illegal for agents to sell BPOs.

The National Association of Realtors® plans to release a statement on the issue in May.

Source: Chicago Daily Herald (03/27/09) Harney, Ken

Rates trigger race to buy, refinance

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ORLANDO, Fla. – March 26, 2009 – Tumbling interest rates are setting off a mortgage-refinancing scramble among homeowners and pulling undecided buyers into the market.

Loan terms for 30-year fixed-rate mortgages fell to 4.63 percent from 4.89 percent for the week ending March 20, the Mortgage Bankers Association (MBA) reported Wednesday. That’s the lowest in the history of the survey, which began in 1990.

Refinancing accounted for 78.5 percent of all mortgage applications last week.

Applications are up in part because of a federal refinancing program through Freddie Mac and Fannie Mae that is part of the Obama administration’s housing rescue plan.

Rates have been driven down by the Federal Reserve’s decision last week to buy up to $300 billion of long-term government bonds and $750 billion in mortgage-backed securities held by Fannie and Freddie.

The falling rates are jolting homeowners and buyers:

• Homeowners who had been waiting to refinance say they’re now getting great deals. Nancy Hemenway, 58, of Arlington, Va., is closing on a refinance in a couple of weeks.

“We were watching the rates and didn’t see how they could go much lower,” says Hemenway, executive director of a non-profit. “We thought there might be a problem because banks weren’t lending, but that didn’t happen at all. We just filled out some paperwork and faxed it.”

• Low prices on foreclosed homes are luring buyers into the market. Up to 45 percent of existing home sales in February were distressed properties, according to a report this week by National Association of Realtors.

Michael McCullough, a public relations specialist in Atlanta, is closing today on a 3,000-square-foot home with a large yard and four bedrooms.

“My wife and I have no business buying this large a home, but we can afford it because it was a foreclosure, and we secured a 4.6 percent, 30-year fixed” loan, says McCullough. “There are tons of deals out there.”

• Realtors such as Leslie McDonnell at Re/Max Suburban in Libertyville, Ill., are seeing sudden pickups in business. Enticed by low prices and rates, McDonnell has bought several properties herself this year. “We’ve definitely seen an impact. Things have gotten busier for sure,” McDonnell says. Low rates “are compelling people into action. I do feel like we’ve hit bottom.”

Overall mortgage applications last week were 20 percent above their year–ago level, according to the MBA.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n2-032609.cfm

Small banks could drive recovery, Bernanke says

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WASHINGTON – March 23, 2009 – Small banks could play a key role in spurring the nation’s economic recovery, Federal Reserve Chairman Ben S. Bernanke said Friday, as many appear strong enough to make new loans while bigger institutions have pulled back.

Bernanke urged community bankers “not to let fear drive” their decisions and to make sound loans. In a speech, he told the Independent Community Bankers of America that the Fed has instructed bank examiners to encourage such institutions to make loans so long as they are “economically viable.”

The Fed chairman is working on multiple fronts to try to restart lending, and his words of encouragement yesterday were part of that broader effort. The central bank has already supported government injections of cash into big financial institutions and, this week, launched a new program to fund $200 billion in consumer loans.

Smaller banks have, generally, held up better through the recession than the biggest financial institutions. While 20 banks have failed so far this year, that pace is far slower than in the early 1990s, when hundreds failed annually.

Small banks have tended to make straightforward loans to individuals and businesses, rather than exposing themselves to the complicated securities that dragged down their larger competitors. “If community banks are prudent but opportunistic in extending credit to strong borrowers, they will help the economy recover while benefiting from that recovery themselves,” Bernanke said. He also said that “in some instances, community banks are able to step in at crucial moments when local businesses or consumers have been unable to find credit elsewhere.”

But there are some limits to how much small banks can boost the broader economy. One is scale.

The 7,800 smallest U.S. banks had total deposits of only about $1.2 trillion last year, about the size of Bank of America and J.P. Morgan Chase put together. Even though some community banks have seen their deposits rise by up to 8 percent this year, according to Cam Fine, chief executive of the independent bankers group, they would have to grow improbably fast to make up for the total decrease in lending last year.

Moreover, while most community banks have held up relatively well through the recession so far, major losses could still lie ahead. Small banks tend to lend heavily for office buildings, retail centers and other real estate projects in their communities. Losses on those loans are likely to rise in the coming months, analysts have said, as stores and office tenants default and newly developed homes sell for less than had been anticipated.

There are indeed large parts of the country, such as the Southwest, Florida and the industrial Midwest, where commercial real estate is “very, very weak,” Fine said. He argued, though, that small banks, burned by the real estate crash of the early 1990s, made loans on sufficiently conservative terms that most should be able to weather the problems.

Banks as a whole still face major challenges. The Federal Deposit Insurance Corp. said yesterday that the industry lost $32.1 billion in the final three months of 2008, more than the $26.2 billion first reported last month.

 

Source:  http://www.floridarealtors.org/NewsAndEvents/n5-032309.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

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

Tough times can turn homeowners into landlords

TAMPA – Jan. 13, 2009 – When Dave and Gina Schudi of Phoenix went house hunting last year, they knew the time was right to buy – not sell – a home.

So when they did purchase a new one, they rented out their old home.

“It all depends on the market,” said Dave Schudi, who plans to sell the old house eventually. “We’ve got good renters in there.”

Falling house prices and a slow market are forcing more homeowners to consider renting their properties.

It’s something Tampa, Fla., Realtor Julia Vakulenko suggests to potential clients.

“Basically, we ask all the people who contact us, ‘Must you sell it right now?’“ she said. “Most likely, it will just sit there or maybe sell below the market value.”

For many, the role of landlord is something they’d never considered. If done right, however, renting out a home can help the owner ride out the housing slump, said Vakulenko, of Tampa4U.com. But the process does require doing some research, said Vakulenko, who owns five rental properties.

She often refers clients to property management companies who can determine what their home would rent for and whether there’s a market for it. Homeowners are often disappointed to learn that their home would rent for less than their mortgage payment, added John Nuzzolese, president of the Landlord Protection Agency in East Meadow, N.Y.

“Whether it’s for sale or for rent, it’s only worth what people are willing to pay for it,” he said. “People have to be realistic and put themselves in the tenants’ shoes.”

Real estate analyst Danielle Babb often sends people to www.rentometer.com to see what the going rent is in their area. The Web site allows users to see what comparable properties in the area charge.

Once you’ve set a rent range, determine your demographic – students, families, young professionals – and market the house to them, said Babb, author of “The Accidental Landlord” (Penguin Group, 2008). Babb, who has owns 27 rental properties, wrote the book after watching friends and colleagues trying to rent out houses they couldn’t sell.

“You’ve got to think like a renter. There’s lots of availability,” she said. “They’re going to choose the most exciting option.”

Babb, Nuzzolese and Vakulenko offered the following suggestions for homeowners who are considering renting their home:

• Familiarize yourself with local laws dealing with rental properties. It’s important to understand the eviction process, how to handle security deposits and what type of access you have to the property once it’s rented.

• Determine whether you want to select the tenant and handle property issues or hire a company to do it. If you take on the responsibility, you are obliged to fix any problems (leaky faucets, broken furnace, etc.) or find professionals to do it.

• Develop a rental application. Ask questions on the application that will help you quickly determine whether you want this person for a tenant. Consider asking about pets, smoking and employment, for example.

• Ask for references. Call former landlords and ask about the person’s rental history. Verify that the references listed are really landlords and not the applicant’s friends posing as landlords.

• Screen potential tenants. Once you’ve narrowed your field of potential tenants, hire a service to run a criminal and financial background check on the applicants. Be wary of tenants with previous evictions or bankruptcies.

• Consult with an attorney or the Landlord Protection Agency, www.thelpa.com, before writing a lease. A well-written lease is crucial to protect your property. It will help you evict a tenant or hold them accountable for damage if necessary.

• Collect a security deposit equal to one month’s rent. This will help cover any damage to the property and protect you if a tenant moves without paying rent.

• Perform a walk-through of the property with the tenant before he or she moves in. During the walk-through, make notes and take photos of any property damage such as chips in the tile, spots on carpeting, etc. You and the tenant should sign the paper as an acknowledgement of what condition the property was in at the start of the lease.

• Check on the property. Drive by at least once a month and look for signs of trouble such as garbage in the yard, extra cars in the driveway, or excessive wear and tear. Make arrangements to walk through the property three months into the lease to see how well the tenant is caring for it. (Make sure you give the proper notice required for entering the property.)

• Do not accept partial rent payments. Accepting money from tenants who are not paying the full rent can make it more difficult to evict them.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n1-011309.cfm

First-time home buyer? You’re in luck

ORLANDO, Fla. – Jan. 12, 2009 – Is now the time to buy a house in Central Florida?

The answer to that question is hardly simple, given the prolonged housing slump and the nationwide recession. It also depends on a complex mix of personal issues and factors, including, of course, “The Fear Factor.”

If you own a home and need to sell it before you can afford to buy a better one, you might find that difficult for another year or so – maybe longer – because of the glut of properties still on the market and the state of the U.S. economy.

But if you are a first-time buyer, the situation is different. Do you have enough cash for a down payment – at least 3.5 percent for a Federal Housing Administration loan, as much as 20 percent for a conventional bank loan – plus closing costs? And is your job or career relatively stable?

If the answers are yes and yes, then you have options. Still, is this the right time to take the plunge?

“Now is a much better time than a year and a half ago,” said Chris Toadvine, a certified financial planner in Orlando and president of the Financial Planning Association of Central Florida. “I think home prices may fall a bit further, but if I were a buyer, I would not be trying to time a bottom.”

From a dollars-and-cents perspective, it’s certainly a buyer’s market. Asking prices for Orlando-area homes have not been so low at any time in the past four or five years, and the number of properties on the market is still at or near record levels.

“There’s a substantial amount of inventory still to be sold,” said Hank Fishkind, a private economist who analyzes the Florida and Central Florida real-estate markets for Attorney’s Title Insurance Fund and other industry groups and companies.

Foreclosures will continue adding to the volume of homes for sale and keep downward pressure on prices throughout the year, Fishkind predicts, though he notes that the rate of increase in the number of foreclosures is now slowing.

The median sales price for existing homes in Central Florida has fallen about 30 percent in the past year, to well below $200,000. Prices are now back to levels last seen in the spring of 2004. New-home prices in the Orlando area have dropped about 20 percent from their 2006 peak, according to some industry surveys, to just more than $300,000, and are still heading down.

Others’ pessimism can pay off

As a result, homes are much more affordable now than they were only a year ago. For example, a first-time homebuyer with the median household income of $34,947 in January 2008 had only 75 percent of the income needed to afford the median-priced existing home, which cost $188,275 at the time. But as of two months ago, a first-time buyer making the median of $35,334 had 96 percent of the income needed to afford that median-priced starter home, which by November cost $141,971.

Denise Kovach, a certified financial planner with Certified Financial Group Inc. in Altamonte Springs, said that, for first-time homebuyers who do not have to sell an existing house, this is a decent time to consider making a move. “As with the stock market, usually the best time to buy is when everyone is feeling most pessimistic,” she said.

Those first-time buyers can take advantage of a relatively new federal tax credit for primary residences purchased by July 1, 2009. The credit reduces your income tax dollar for dollar as much as $7,500, with the size of your credit depending on your home’s purchase price. It’s actually more like an interest-free loan from the government, because the IRS “recaptures” the credit during the next 15 years, or when the home is sold.

Most homebuyers during the early years of a mortgage also “itemize” on their federal tax return to take advantage of the deductions they can take for property taxes and home-loan interest. But even those who claim just the standard deduction can use another new tax break to deduct at least part of their property taxes: $1,000 for joint filers, $500 for singles.

Price plunge near bottom, experts say

For potential buyers who have everything they need lined up and are ready to sign on the dotted line – but are holding off for fear the house they buy will keep losing value in the coming year – industry professionals can’t offer any guarantees. But they generally agree that most, if not all, of the historic plunge in values has likely run its course.

In coming years, they expect a slow but steady increase in property values, at or slightly above the rate of consumer inflation, without dramatic leaps fueled by lax lending practices and easy money. Those days are long gone.

Credit standards are higher now than they were just a couple of years ago, and full documentation of income and good credit scores are required of those seeking the best home-loan deals.

“I think that, if someone buys a home today and locks in a low-rate, long-term mortgage, they will be glad they did 10 years from now,” Toadvine said.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n3-011209.cfm

Florida pushing tough law to combat mortgage fraud

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MIAMI – Jan. 5, 2009 – After months of stinging criticism for letting crooks and con artists prey on Florida borrowers, regulators have proposed sweeping changes in state law that would make Florida one of the most tightly regulated mortgage markets in the country.

The provisions call for annual criminal background checks for everyone selling mortgages in Florida, a ban on the most toxic types of loans, and reviving a state fund that used to compensate victims of mortgage fraud.

The fund would provide up to $50,000 for people who can prove they were scammed by rogue brokers. Regulators quietly killed a similar fund more than 10 years ago, then used the money to pay for operating expenses, like salaries and conferences at five-star hotels, The Miami Herald reported in September.

Terry Straub, finance director for the Office of Financial Regulation, which is drafting the new bill, said restoring the fund is “the equitable thing to do.”

The measures would add to a regulatory overhaul that began in September after a Miami Herald investigation showed the agency allowed more than 10,000 people with criminal records to work in the mortgage profession between 2000 and 2007.

The state Cabinet imposed emergency rules including a lifetime ban on anyone convicted of a felony involving fraud or financial wrongdoing.

The latest proposals – making the emergency rules harder to undo – will be debated when the legislative session begins in March. But many of the changes already have the support of top elected leaders.

“We are looking for more of an enforcement mentality,” said state Chief Financial officer Alex Sink, who joined with Gov. Charlie Crist in forcing the state’s top mortgage regulator to resign in response to the newspaper series.

The Miami Herald found that thousands cleared criminal background checks despite committing crimes state law specifically required regulators to screen, including fraud, bank robbery, racketeering and extortion.

In addition, more than half the criminals selling mortgages during the land boom – 5,306 – were not subject to any background check. In fact, the state refused to license and screen them for years, despite repeated pleas from industry leaders.

In their new bill, state regulators are pushing to screen and license everyone.

The proposals – which reach far beyond a federal mortgage law passed last summer – would also require fresh nationwide criminal background checks every year, when licenses are renewed.

Under current state law, brokers only get screened when they apply for the first time. Their license can be revoked if they get convicted of a crime after that, but the state relies on the brokers to report their own arrests.

“This will give us a shot to look at everybody’s background once a year,” Straub said.

The Herald found 564 brokers who were convicted of crimes after getting their licenses – including at least 20 convicted of mortgage fraud. All were allowed to keep selling loans.

The Herald investigation also showed how regulators killed the victims’ compensation fund with virtually no public debate in the 1990s, despite warnings that mortgage fraud was on the rise.

Since then, Florida’s fraud rate has climbed to the highest in the nation – one of every four fraudulent loan applications in the U.S. now comes from Florida, according to the Mortgage Asset Research Institute.

The old victims’ fund was financed by a portion of mortgage broker license fees.

Regulators have continued to collect the money, but have not compensated a single victim since 1997, the newspaper found.

The new bill proposes creation of a Mortgage Brokerage Guaranty Fund that would pay victims if they successfully sue their mortgage broker, but can’t collect because the broker becomes insolvent.

Each borrower would be eligible for up to $50,000. If there were multiple claims against the same broker, payouts would be capped at $250,000.

All states are required to come up with a program to help compensate victims of mortgage fraud, under the new federal law. But there are several options, including requiring brokers to buy insurance to cover fraud and making brokers show a minimum net worth.

Experts say guaranty funds are the most stringent and reliable because they collect money from brokers up front when they pay for their license.

David Bruns, spokesman for AARP Florida, one of the largest consumer groups in the state, said they’ll push for a victims’ fund.

“We regard this as a critical issue,” said Bruns. “The fact of the matter is, the mortgage crisis and mortgage fraud is still a critical problem in Florida. If anything, it has gotten worse.”

But Ritch Workman, president of the Florida Association of Mortgage Brokers who won a seat in the Florida House in November, is wavering on a campaign pledge to push for the fund.

The Melbourne Republican said lawmakers are leaning toward requiring brokers to buy bonds instead. “What I want to do is dig deeper into bonding and see what that entails before I make a decision on whether I will stick to my guns on the guaranty fund,” Workman said.

Sink said she supports the creation of a victims fund, though nothing could “compensate victims for the enormous amount of fraud we’ve had in our system,” she said.

The state’s latest proposal also contains language that would ban mortgage brokers from peddling some of the most toxic types of loans that became common during the land boom.

They would be barred from selling adjustable rate loans with penalties built in to prevent borrowers from refinancing, and loans where the borrower actually owes the lender more money with each passing month.

Thomas Morcom, who represents the Florida Association of Mortgage Brokers, said banning particular loan types may face opposition because the law would not apply to federally chartered banks.

“That wouldn’t limit those products,” said Morcom. “Instead, it would just limit consumers’ choice to get those products.”

While the proposals won’t be considered by lawmakers until March, the OFR’s Straub, who helped write the bill, warned the industry that drastic change is on the way.

“Everybody we’ve talked to indicates they understand the need for these things,” he said. “Thirty years ago the industry was different and it wasn’t necessary. Now it is.”

 

Source: http://www.floridarealtors.org/NewsAndEvents/n4-010509.cfm