As of Friday, October 8, 2010, the nation’s largest lender, Bank of America, halted all foreclosures nation-wide. In a news release by Associated Press, a BofA spokesman said: “Our ongoing assessment shows the basis for our past foreclosure decisions is accurate.” I’m not quite sure what this means. While the “basis” for the foreclosure decisions may have been correct – that is, the borrowers were in default – the processing used to conduct the foreclosures appears seriously flawed. If Machiavelli was right, and the ends do justify the means, then the banks have nothing to worry about; the halt will only be temporary. But I’m betting that the American public, especially those who have received the run around for months from lenders offering loan modifications in name only, have run out of patience. When the dust settles on this debacle, the Little Big Horn will look like a mere skirmish in comparison.
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Commercial Real Estate Outlook. For a good economic overview of the latest data on the commercial real estate industry, nationally and locally, the National Association of REALTORS has published its Commercial Real Estate Outlook, May 2010
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FHA’s 90-Day Rule. HUD has recently announced that FHA is waving its prohibiting against using its insured mortgage program to purchase properties that were being sold within 90 days following their acquisition. Before the waiver – and subject to certain exceptions – a mortgage was not eligible for FHA insurance if the purchase contract was signed within 90 days of the time the seller had acquired it. The concern was flipping, which didn’t carry the negative connotations it does today. But now, HUD describes its waiver rationale in the Public Register (Friday, May 21, 2010) as follows:
During this period of high foreclosures, FHA seeks to encourage investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes with the objective of increasing the availability of affordable homes for first-time and other purchasers and helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high.
And it is not just limited to properties acquired through foreclosure – it includes all properties being resold within the 90-day period after the seller’s prior acquisition.
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Personal Bankruptcy Filings Up. Reuters reports that the month of May 2010 marked the second-highest level of personal bankruptcy filings since 2005. To date, the current year’s filings outpaced last year’s by 10%. Through May, 2010 there have been 659,516 bankruptcy – up 5% from a year earlier. California accounts for approximately16% of all filings nationally, followed by Florida at 7% and Michigan at 6%. With its comparatively lower population, Nevada leads the country in filings on a per capita basis.
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Little Known Oregon Mortgage Law. While scanning for some piece of information in the mortgage laws the other day, I came upon the following statute that I’d forgotten about years ago – didn’t seem relevant then. It was last amended in 1961. Today, it seems very relevant….
86.040 Improvements on mortgaged lands. No person shall sell, dispose of, remove or damage any building or other improvements upon mortgaged lands. All such improvements are deemed a part of the mortgaged property and are subject to the mortgage lien. When any improvements are removed from the mortgaged premises in violation of this section, the mortgagee[*] may follow and regain possession of such improvements wherever found or may recover the reasonable value thereof from the person removing them. [*PCQ Note: The “mortgagee” is the lender]
86.990 Penalties. Violation of ORS 86.040 is punishable, upon conviction, by a fine not exceeding $500 or imprisonment in the county jail not exceeding six months, or both. [Amended by 1961 c.726 §410]
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Fannie Mae Shortens Waiting Period on Short Sales and Deeds-in-Lieu of Foreclosure
In April 2010, Fannie Mae, the giant mortgage purchaser in the secondary market, gave notice that in May it was shortening the required waiting period for borrowers to become eligible for a mortgage loan after undergoing a prior short sale or deed-in-lieu of foreclosure. The waiting period commences on the completion date of that prior event. Depending upon (a) the borrower’s credit, (b) their housing and loan expense ratios (Front End and Closed End LTVs) and (c) the percentage of their loan versus the home value (i.e. the “loan-to-value ratio” or “LTV”) – such as an 80% loan), the waiting period after short sales and deeds-in lieu is now as little as two years. This assumes that – other than the adverse pre-forelcoure event itself – the prospective borrower has little or no other derogatory credit.
Several points in all this: It remains to be seen, but my guess is that over the next few months to a year, this waiting period may continue to shorten, as more and more former owners of distressed housing get back on their feet and want to repurchase another home. They will likely be more prudent buyers, looking for long term value in their homes (no flippers, thank you) and safety in their loan products. If lenders want to lend, they are going to have to find a way to shorten the adverse credit impact of these pre-foreclsure events. Many of the people making up the ranks of distressed homeowners today are those that got caught up in the easy credit boom, and are otherwise good credit risks. For a more detailed explanation, see, FNMA’s Eligibility Matrix.
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Niche Marketing – International Clients
For those Realtors thinking of expanding their practice, the National Association of REALTORS (“NAR”) has prepared a state-by-state summary of information on international marketing. NAR reports that U.S. imports and exports of goods and services are each in the $2 trillion range each annually. With trade expansion and cross border immigration, demand for residential and commercial real estate is increasing each year. The Oregon report can be found here. NAR’s reports include statewide data and information on the following topics:
- Population demographics: U.S. born, foreign born, naturalized, and non-U.S. citizen residents
- Main languages spoken in households
- Immigration and naturalization trends
- Non-immigrant visitors to the state
- Foreign direct investment in the U.S. and the specific state
- Value of state exports by type of product
- State exports to specific trading partner countries
