Thursday, September 30, 2010

Homeowners Assistance Program - Part V: The closing process

Once a determination is made as to which benefits are most advantageous for the applicant, the closing process can finally begin.� There are several noteworthy items to keep in mind at this time:

1. Prior to closing, the applicant will need to ensure that their mortgage is paid current, including interest, late charges, fees and penalties.� In addition, any homeowner's association or condominium association dues will also have to be paid current.

2. If you are a PCS eligible applicant receiving Government Acquisition Benefits:

A. You will need to have certified funds sent to your Benefits Specialist to pay for interest due on your mortgage to the time of settlement, as well as for any property taxes that may be due.

B. If your buyer has requested a home warranty, your benefits will not cover the cost of a home warranty.� You will have to write a separate check to the home warranty company to cover the cost.

C. Any repairs that your buyer has requested be made to the property prior to closing will also not be covered as part of your benefits.� You will either have to provide a check to the Government at the time of closing, or you will have to ensure that the repairs are made prior to closing.

D. As part of the Government Acquisition Benefits, the applicant will "sell" their property to the Government, who will in turn, on the same day, "sell" the property to the willing buyer.� This results in two transactions, and if the applicant has a real estate agent, said agent's commission will be paid as part of the second transaction (from the Government to the new purchaser).

3. Pursuant to the Unemployment Compensation Extension Act of 2009, which was signed into law in November of 2009, benefit payments under the Expanded HAP program are exempt from Federal taxes.� However, there may be state tax implications, so applicants should seek financial and/or legal assistance. �

4. For any applicants who had Federal taxes withheld prior to the law change in November of 2009 should receive a W-2C (Corrected Wage and Tax Statement) from the IRS.

While the housing market remains stagnate in many areas across the country, the Department of Defense is doing everything it can to assist its military families and civilian employees escape some, if not all, of the financial loss associated with selling home. While the process can be trying at times, once the settlement documents are signed and the mortgage is paid off, you will realize it was all worth it.�

If you are thinking about applying, do not hesitate -- now is the time to take advantage of this program before the appropriated funds run out. �

DC Homestead Application changes ... again!

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

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

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

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

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

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

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

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

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

Monday, September 27, 2010

Homeowners Assistance Program - Part IV: What are the benefits?

Once your application for Expanded HAP assistance is approved, a Benefits Specialist will be assigned to your file, and will immediately contact you to determine the appropriate benefits for your specific situation.

There are four types of benefits available under the Expanded HAP program. �

1.�� �Private Sale Benefits:� If you have already sold your property or you are able to pay any loss on the sale at the time of closing, private sale benefits are paid directly to you after the closing.� PCS and BRAC 2005 applicants would be reimbursed for 90% of the prior fair market value (defined as the price you paid for the property) of their home minus the sale price, plus allowable closing costs (such as realtor's commissions).� Traditional BRAC applicants, wounded warriors and surviving spouses are reimbursed for 95% of their prior fair market value.

2.�� �Short Sale Benefits:� Are calculated the same as Private Sale Benefits, unless the applicant is left with an outstanding obligation after the sale of the property.� If there is a substantial obligation remaining, benefits will be calculated as an amount not to exceed the difference between 95% of the prior fair market value and the total of the short sale, plus the amount of the forgiven obligation.� If there is no outstanding obligation, benefits would be calculated at 90% of the prior fair market value.� However, if the amount of the mortgage that is forgiven by the lender exceeds the Expanded HAP benefit, the applicant would only be entitled to closing costs.

3.�� �Private Sale Augmentation Benefits:� Calculated the same as Private Sale Benefits.� However, if you are unable to pay the loss on the sale of your property at the time of closing, these benefits would be paid at the time of closing to cover some or all of the funds needed to pay off the outstanding mortgage.� Any funds remaining after the sale is complete will be distributed to the applicant at settlement.

4.�� �Government Acquisition Benefits:� Are designed to assist applicants who are "upside-down" with their mortgages, and are available to PCS qualified applicants who are able to bring a willing and capable buyer to settlement.� The Government will pay the greater of 75% of the prior fair market value or will pay off the mortgage for PCS, Traditional and BRAC 2005 applicants.� For wounded warriors and surviving spouses, the Government will pay the greater of 90% of the prior fair market value or the mortgage balance.� In addition, allowable closing costs are also paid (including realtor's commissions).

A. Please note: wounded warriors, surviving spouses and Traditional BRAC applicants do not need to bring a willing buyer to settlement in order to qualify for this benefit.

B. It is also important for applicants seeking this benefit to ensure that they are current with their mortgage payments, and any fees associated with owning the home (i.e., HOA dues or condo fees).

It is possible to increase the amount of your prior market value, for purposes of calculating your benefits, if you made improvements to your property.� At the time of application, you will be asked if any improvements were made to the property, and if so, you are asked to submit copies of paid receipts.� However, items such as painting are considered home maintenance items, and will not be included.

Here is an example of how to calculate private sale benefits:

Your original purchase price was $200,000
You made $10,000 worth of improvements to the property.

��� $200,000�� �Purchase Price
+� $10,000�� �� Approved improvements

��� $210,000�� �"New" Prior Fair Market Value (PFMV)
x�������� 90%

��� $189,000�� �Starting valuation for benefits
-�� $150,000�� �Sales Price (within 10% of the current fair market value)

���� $� 39,000�� �Property benefit
+�� $� 15,000�� �Approved reimbursable closing costs

��� $� 54,000�� �Total benefit you would receive after closing

Once a determination is made as to the benefits the applicant will receive, an additional thirty (30) to sixty (60) days will be needed to proceed to closing, if you are receiving Private Sale Augmentation Benefits or Government Acquisition Benefits.

What does the closing process entail?� Stay tuned for Part V � Closing Process.

Maryland's new power of attorney law

By now, most of us in the business sphere of residential real estate have become comfortably numb to additional laws and regulations. Starting with last year's revisions to the Truth-in-Lending Act (TILA) to this year's Real Estate Settlement Procedures Act (RESPA) reforms, many of us, despite the impact on our business operations, have hardly noticed many of the new legal reforms imposed by state governments.�

The most recent reform impacting Maryland residential real estate transactions comes to us compliments of the Maryland General Assembly. �

Effective October 1, 2010, individuals utilizing a power of attorney (POA) in order to consummate a real estate transaction should use the new Maryland Statutory Form Limited Power of Attorney; or a form that "substantially" conforms to the statutory form. Prior to this new law, an individual could use any specific power of attorney form that was acceptable to a title insurance underwriter.

The new statutory form not only requires the principal (i.e., the person granting the authority) to acknowledge before a notary public but also for the form to be attested and signed by two or more adult witnesses in the presence of the principal and in the presence of each other (one of the witnesses may be the notary). In addition, the new law allows the agent (a.k.a., the Attorney-in-Fact) to execute a certification form to certify the validity of the power of attorney and agent's authority.�

A title company must record the executed and notarized certification along with the POA form.

Because of the many associated pitfalls, one should always try to avoid the use of a POA. In those cases when it's absolutely necessary for a buyer or seller of real estate to use a POA, be very attentive to the legal requirements so as to avoid a closing delay. Federal Title's website provides more detailed information and instructions for using POAs along with the specific forms required in DC, MD, and VA.

Wednesday, September 22, 2010

6 real estate headlines: 9-22

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

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

Great recession really over?
New York Observer: For housing to turn a decisive corner, the inventory overhang has to dissipate. That may take one to three years, according to real estate experts.

Tuesday, September 21, 2010

Pending home sales up in Maimi-Dade County

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

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

Full story...

Miami public hearing to focus on mortgage fraud

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

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

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

Full story

Homeowners Assistance Program: Part III � How do you apply?

If you believe that you meet the eligibility criteria for Expanded HAP, as broken down in Part II of our blog (insert website link here), the next step is to submit an application with the Army Corps of Engineers for your respective district.� Application packages can be downloaded from the Army Corps of Engineers HAP website, located at, along with mailing address for the respective district where they should be mailed.�

There is a checklist of items included with the application package that you will need to include, and in order for your application to be more readily processed, the Corps of Engineers recommends that you submit all requested documentation at one time. �

An important thing to remember is that if you qualify as a service member on PCS orders, and you have not yet sold your home, in order for you to receive Expanded HAP benefits, you must procure a buyer for your property.� If you do not have a buyer, the Corps of Engineers may determine that you would superficially be entitled to benefits, but they will not be able to determine your full eligibility until they have a signed contract.�

Also, you will need to include a contingency clause in the contract for HAP assistance, and you will have to use whatever language you believe will best protect your interest, as the Corps of Engineers will not provide any specific language.

Once you have submitted your application, you will receive an automatically-generated email message acknowledging receipt of your application.� The email will provide you with the contact information for your designated Realty Specialist, and will also state that a determination of your benefits cannot be determined until the Corps of Engineers has received all the necessary information they may request from you.�

As your application is processed, it is possible that the Corps of Engineers will need additional documentation from you, and it is important for you to provide that documentation in a timely fashion in order for your application to proceed. �

If you are a PCS applicant, your best goal is to sell your house for 10% less than your original purchase price, and be within 10% of the current fair market value.� The Corps of Engineers will submit your application and contract to their appraisers to determine whether or not your contract falls within those parameters.�

If you are using a real estate agent, you should have them prepare a Current Market Assessment (CMA) to assist in justifying the sales price.� This will assist the appraiser in making a final determination of the legitimacy of your contract.� Please note, it may take up to two (2) weeks for the appraiser to make a final determination, and if your contract is approved, your file will then be passed to a Benefits Specialist.

It is also important to keep in mind that the process of applying for Expanded HAP assistance through your settlement date will be a very lengthy process.� As I mentioned in Part I of this blog series (insert link here), as of August 11, 2010, HAP has assisted 2,622 service members and civilian employees, and there are another 5,003 eligible applicants that are awaiting benefits, and just as many pending applications to be approved, if not more.�

Your assigned Realty Specialist will not be able to respond to emails or voicemail messages quickly, but they will respond to you.� It can take anywhere from seven (7) to twenty-one (21) days for your completed application to go through the initial determination of eligibility, and it is important to include this information with your potential buyer.� In addition, depending on the type of benefits you are requesting, you may need to include an additional thirty (30) to sixty (60) days before you are able to go to settlement.

Once your application is determined to be complete and you are entitled to benefits under the program, it will then be necessary to determine what benefits you are eligible for.�

Please stay tuned for Part IV � What Are the Benefits?

Monday, September 20, 2010

6 real estate headlines: 9-20

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

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

Americans get more sensible about housing
Reuters: Given that expectations for house-price appreciation are realistically modest, one can conclude that people buying houses today are doing so for pretty good reasons.

Friday, September 17, 2010

D.C. Homestead Application update

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

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

Thursday, September 16, 2010

In Florida, get a title search before entering into a short sale agreement

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

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

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

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

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

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

6 real estate headlines: 9-16

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

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

College Park student housing meets resistance
Washington Examiner: A proposed development for more student housing is meeting heavy opposition from local officials who would rather entice more young professionals to the area.

Wednesday, September 15, 2010

Apply for the Expanded Homeowners Assistance Program

Let's begin Part II - Are you Eligible and our discussion about Expanded HAP with some basic questions and answers regarding eligibility:

1.�� �Who is eligible for benefits under Expanded HAP?

  • Wounded, Ill or Injured service members and Department of Defense ("DoD") civilian employees, including the Coast Guard.
  • Surviving spouses of service members or civilian employees whose spouse dies as a result of a wound, injury or illness incurred in the line of duty.
  • Service members and civilian employees affected by the Base Realignment and Closure (BRAC) of 2005.
  • Service members affected by Permanent Change of Station (PCS) orders during the housing market crisis.

2.�� �What are the requirements for the Wounded, Injured or Ill?

  • For service members, you must: receive a disability rating of 30% or more for an unfitting condition (per VA Schedule for Ratings Disabilities), or be eligible for Service Member's Group Life Insurance Traumatic Injury Protection Program, or have a treating physician (graded a Captain in the Navy/Coast Guard or Colonel in the Army/Air Force) certify that the member is likely to receive a disability rating of 30% or more for an unfitting condition (by preponderance of the evidence under the VA Schedule for Ratings Disabilities) for wounds, injuries or illness incurred in the line of duty while deployed, on or after September 11, 2001.
  • For Civilian Employees of the DoD, you must: have suffered a wound, injury or illness which occurred during the performance of duties, (which was not the result of your own misconduct), while forward deployed in support of the Armed Forces on or after September 11, 2001, and have a treating physician, (graded a Captain in the Navy/Coast Guard or Colonel in the Army/Air Force), provide written documentation that employee meets the criteria for a 30% disability rating or more, by a preponderance of the evidence.
  • For both: it must be shown that there is a need to relocate from your primary residence in order to further medical treatment, rehabilitation or medical retirement as a result of the wound, injury or illness, which causes the need to place the primary residence for sale.

�3.�� �What are the requirements for Surviving Spouses?

Surviving spouses must show that their spouse died as a result of a wound, injury or illness incurred in the line of duty while deployed (or while forward deployed for civilian employees) on or after September 11, 2001, and provide proof of relocation from the service member's or civilian employee's primary residence within two (2) years of the death of their spouse.

4.�� �What are the requirements for those service members or civilian employees subject to the 2005 BRAC?

Service members, civilian employees and employees of non-appropriated fund instrumentalities must show:

  • Purchase of their primary residence occurred prior to May 13, 2005 (date of the BRAC 2005 announcement),
  • On May 13, 2005, they were assigned to an installation or unit identified for closure or realignment under BRAC 2005,
  • Their position was eliminated or transferred and they accepted employment, or were required to relocate due to the transfer, beyond normal commuting distances (50 miles) from their primary residence, and
  • A home value loss of 10% was suffered between July 1, 2006 and the date of application for Expanded HAP benefits in the county/city/parish where the primary residence is located, and a decline of at least 10% personal home value loss from the date of purchase to the date of sale.

5.�� �What are the requirements for those subject to PCS orders?

PCS refers to the assignment or transfer of a service member to a different permanent duty station ("PDS"), which includes relocating to a place of retirement, pursuant to an order which does not specify the duty as being temporary, provides for further assignment to a new PDS, or directs the service member to return to the old PDS.

To qualify, the service member must show:

  • They owned the home prior to July 1, 2006,
  • The property was your primary residence
  • PCS orders dated between February 1, 2006 and September 30, 2010, and said orders must specify a report-no-later-than date of on or before February 28, 2010,
  • The new duty station or home port is more than 50 miles away from the previous duty station or home port,
  • Suffered at least a 10% home value loss between July 1, 2006 and the date of application for Expanded HAP benefits for the county/parish/city in which the primary residence is located,
  • Suffered at least a 10% decline of personal home value loss from the date of purchase to the date of sale, and
  • You have not previously received benefit payments under Expanded HAP.

6.�� �What if a civilian employee chooses to PCS for a higher paying job?

Choosing to move for a higher paying job does not meet the existing qualifications for Expanded HAP, and therefore an employee under these circumstances would not be eligible for benefits.

7.�� �What if a service member or civilian employee is assigned to an installation and they purchased a home after the BRAC 2005 announcement?

If the service member or civilian employee was assigned to an installation and purchased a home after the May 13, 2005 BRAC announcement, you would not be eligible for benefits under Expanded HAP.� However, a service member may be eligible for benefits if they meet the qualifications for PCS Benefits referenced in #5, above.

8.�� �What if a service member or civilian employee retires?

If you are a BRAC 2005 eligible applicant, you would only qualify for benefits if your position is moved or eliminated. �

If you are reassigned or otherwise relocate due to PCS orders, you would not be eligible for benefits under the following circumstances:

  • Retirement prior to reaching your mandatory retirement date,
  • If you are a new accession into the Armed Forces or are otherwise entering active duty,
  • If you are voluntarily separated or discharged,
  • If your separation or discharge is deemed less than honorable,
  • If you request and receive a voluntary release from active duty ("REFRAD"), or
  • If you are REFRAD as a result of misconduct or poor performance.

If you determine that you meet the eligibility requirements, stay tuned for Part III of the blog on how you apply for benefits.

6 real estate headlines: 9-15

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

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

Tuesday, September 14, 2010

Consumer costs increase with RESPA reform

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

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

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

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

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

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

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

Benefits to viewing closing documents in advance

Closing on a purchase can already be an emotional and exhausting event. The last thing anybody wants to do is have to rummage through a stack 60 to 80 pages at closing to decipher what is taking place.

How can a homebuyer be better prepared to make it through the closing package?

At Federal Title & Escrow Company, the typical purchase closing takes no more than an hour, with the typical refinance closing taking less than 45 minutes. Closing is not the correct time to read every document.

Now I know that an all-knowing uncle or a law school professor told you to never sign anything without reading it first, and I am not in any way suggesting that you should not know what you are signing, but just that closing is not the right time to start the reading process.

I have two suggestions for being better prepared so that the closing will go smoothly.

1) View closing documents in advance on our website where you can find a generic set of closing documents for your review. All lenders use similar versions of these documents.

2) Call or email our office in advance and let us know that you wish to review the closing package in advance. Please let your loan office know that this is an important aspect of your closing. Our experience is that if you stress to the loan officer that you wish to review the documents in advance, the lender will typically send us the closing papers a day in advance, and we can in turn scan them and email them to you for your review.

At closing, a settlement attorney will go over the paperwork and provide brief explanations of the documents and point out all of the key points.

Feel free at this time to ask questions or ask for clarifications if anything is unclear. Ideally, by having reviewed the documents in advance and having an experienced settlement attorney conduct the closing, the signing will pass quickly and you can move to the next step � enjoying your new home.

Monday, September 13, 2010

What is the Homeowner's Assistance Program?

Trying to sell a house during a housing market collapse is a harrowing experience.� This is compounded for members of the military who are forced to do so in a short period of time due to a Permanent Change of Station (PCS) move or as a result of the Base Realignment and Closure (BRAC) of 2005. �

The Department of Defense offers the Homeowners Assistance Program (or "HAP") to eligible service members and federal civilian employees.� In addition, HAP was temporarily expanded by the American Recovery and Reinvestment Act of 2009 (or "ARRA" and also known as "Expanded HAP"), to include wounded warriors, surviving spouses, and service members required to permanently relocate under PCS orders during the housing market collapse. �

First, let me begin by stressing that if you think you may qualify for benefits under ARRA, you need to apply immediately.� A recent article by Karen Jowers in the September 6, 2010 Army Times, states that as of August 11, 2010, "HAP had paid nearly $383 million to 2,622 people.� Another 5,003 eligible applicants are awaiting benefits, many of them seeking buyers for their homes." �

The problem is that Congress has only appropriated $855 million for the program, leaving $472 million available for the remaining eligible applicants.� More importantly, applications are processed as quickly as possible according to eligibility, and in the following order:

(1) wounded warriors, injured and ill are given top priority under ARRA,
(2) surviving spouses, processed in chronological order of the date of the death of the service member or civilian employee of the Department of Defense (hereinafter "civilian employees")
(3) those service members and civilian employees affected by the 2005 BRAC, with applications processed in chronological order of the date their respective job was eliminated, and finally,
(4) service members who are seeking benefits as a result of a PCS move, with applications processed beginning with the earliest 'report-not-later-than' date of the PCS orders.

As the housing market continues to stagnate in many areas across the country, now is the time to take advantage of this program, if you are a member of the military or a federal civilian employee.� Because there is so much information about the program, I will be breaking this blog down into multiple parts, so be sure you stay tuned for Part II � Are You Eligible?

Friday, September 3, 2010

Economy is treading water

The unemployment rate edged up and private-sector job creation continued at a modest pace in August, the government said Friday, reflecting an economy that is treading water, neither accelerating into a robust recovery nor slipping into another recession, the Washington Post reports.

The unemployment rate rose slightly to 9.6 percent, from 9.5 percent, the Labor Department said, as hundreds of thousands of people rejoined the labor force.

Private employers, meanwhile, created a net of 67,000 jobs, better than expected but below the 107,000 positions they added to payrolls in July. Overall, the nation shed 54,000 positions, but that was driven by the elimination of temporary Census jobs, which was widely anticipated.

Full story...

Refinance Index rises to highest level in over a year

The Mortgage Bankers Association MBA today released its Weekly Mortgage Applications Survey for the week ending August 27, 2010.� The Market Composite Index, a measure of mortgage loan application volume, increased 2.7 percent on a seasonally adjusted basis from one week earlier.� On an unadjusted basis, the Index increased 2.3 percent compared with the previous week.

The Refinance Index increased 2.8 percent from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 1.8 percent from one week earlier. The unadjusted Purchase Index decreased 0.4 percent compared with the previous week and was 37.0 percent lower than the same week one year ago.

"Refinancing activity picked up again last week, reaching new 15-month highs, as borrowers took advantage of even lower mortgage rates.� The drop in mortgage rates was in line with Treasury rates as the latest data continue to show weak economic growth and an exceptionally weak housing market," said Michael Fratantoni, MBAs Vice President of Research and Economics.� "The sharp decline in MBAs Purchase Application index in May had provided a clear leading indicator of the drops in new and existing home sales that were reported for June and July.� Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September."

Full story...

Thursday, September 2, 2010

6 real estate headlines: 9-2

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

5 reasons to be optimistic about the economy
Washington Post:
A roaring recovery is probably not on the way, but here are five reasons that a slow-and-steady recovery is likely to continue.
A look at home prices in 20 U.S. cities
Washington Post
: Parents benefit from tax deductions for real property taxes, depreciation, costs of repairs and replacements and travel expenses to maintain the investment property.
Americans economic confidence ticks up a bit
BusinessWeek: But worries are rising the economy is growing too slowly to support sustained job growth. Some are concerned it could fall back into a recession.

Zoning out
The Economist: Washington is far too restrictive, car-oriented and anti-density. But to get an optimal amount of housing at the market price is just one goal in developing a great city.

Home price reports dont show a decline yet
Wall Street Journal: Analysts have been calling� for another 5-10% decline in prices this year, and markets are likely to log those drops later this year.
Neighborhood profile: Explore Deanwood, D.C.
Urban Turf
: Located east of the Anacostia River and just inside the Districts northeast border, Deanwood has long been viewed as a community with a small-town atmosphere.