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August 9th, 2010
Short sales comprise around 30% of the closings we see in our office and there doesn’t appear to be an end in sight! In talking with agents, I find they either want to know everything about them or want to avoid them like the plague.
If you are considering dipping your spoon in the short sale broth, there a few things you need to know before agreeing to take one of these sales on. If you are unable to gather this information from the inception, it might be wise to run!
You must at minimum know the following:
• All the lenders associated with the home, the loan balances, how many months delinquent the prospective client is and if there are additional liens.
• The seller’s housing expenses – interest, principal, taxes and HOA dues.
• The actual reason for the hardship.
• How much money the client earns monthly and their debt ratio.
• Do they have other assets?
• Are they able to make a financial contribution and if so, how much?
• Is the property vacant or occupied and is it the primary residence or not?
• Is the property subject to a Homeowner’s Association? Are the dues current?
• Have they received a Notice of Trustee Sale (Foreclosure notice)? If so, how much time do you have to try and sell it?
If you can’t get this information without pulling teeth, you are guaranteed to be pulling your own by the end of this process. There will be piles of subsequent paper to collect after you decide to help these sellers and the amount of cooperation you receive in the beginning is a good sign not only to determine if you’ll be able to sell the house, but to determine if you can work with these clients!
If you are interested in a little free feedback, you can go to www.chicagotitleshortsale.com. You can follow the forms link and be taken to Mortgage Resolution Service’s pre-qualification form (MRS is a sister company of Chicago Title). Once you complete it and email or fax it back to them, they’ll take a look at it and offer you an expert opinion on whether or not you should partake in the soup!
July 19th, 2010
We have an internal publication called “Fraud Insights”. This article appeared in the most recent issue and I thought I’d pass it along.
Loan officers from two different states embezzled funds from their employers by redirecting the payments to themselves at closing. These actions caused mortgage brokerages to implement tighter controls.
One of our operations in Georgia received a call from the owner of a local mortgage brokerage. He asked if we could run a search in our system to locate the transactions closed with his brokerage and how much was paid to his company in broker fees. The owner of the brokerage had discovered his branch offices had been instructing settlement agents to deliver the broker checks to their branch office. In some cases, they would forward the checks to their corporate office, and in other cases, simply endorse the checks over to themselves and cash them. The brokerage owner was in the process of contacting all the title companies in town to gather his evidence, determine the extent to which this occurred and file charges against loan officers guilty of this theft.
Not long after this request, a similar inquiry came in from another mortgage broker from Washington. His loan officer opened his own bank account in the brokerage name. This loan officer was originating loans and having the checks sent to his attention so he could negotiate the checks and disburse the funds to himself.
The owners of these brokerages learned a valuable lesson. They knew the settlement agents were not to blame since they simply followed the loan instructions by making the check payable to the brokerage. Unfortunately, these owners did not have the proper checks and balances in place to know when a loan was originated in their brokerage’s name. This would have allowed the owners to provide the settlement agent directly with written instructions for where to send the broker package and check. In both instances, these owners said they would make sure, in the future, that the settlement agent would know where to send the checks.
Although Our Company did not suffer any losses as a result of the wrongdoing of these loan officers, our customers were impacted.
July 14th, 2010
Since many homeowners may not understand what a short sale is, they may not be aware of how a short sale on their home may be a better option for them than a foreclosure.
First of all, a short sale may be an option when a homeowner finds himself in financial difficulties and facing the possibility of not being able to meet their mortgage obligation. If the amount owed on the mortgage is more than the home is worth at the time, the mortgage lender may agree to a short sale: taking less than the amount owed them.
Now that is a simplified explanation and here are a few things a homeowner may want to consider if a foreclosure is a possibility.
• Foreclosure – Credit score may be lowered and will typically be affected for over 3 years.
• Short Sale – A short sale may lower the credit score as little as 50 points if all other payments are being made. A short sale’s affect can be as brief as 12 to 18 months.
• Foreclosure – Foreclosure may remain as a public record on the credit history for 10 years or more.
• Short Sale – A short sale is not reported on a credit history report. The loan is typically reported “paid in full” or “settled”.
• Foreclosure – A homeowner who loses a home to foreclosure may be ineligible for a Fannie Mae backed mortgage for a period of 5 years.
• Short Sale – After a successful and closed short sale, a homeowner may be eligible for a Fannie Mae backed mortgage after only 2 years.
• Foreclosure – Difficult to get security (such as military or government) clearance; current clearance revoked and position terminated.
None of these factors are set in stone. As with any other situation, it is best to consult with your mortgage lender for advice and guidelines in each individual situation. Regulations may vary from state to state.
To learn more about the short sale process, talk to your Chicago Title sales representative.
June 29th, 2010
Recently, I was reminded that closing customs & practices can vary tremendously from state to state. While I was reviewing closing documents with buyers relocating from New York, they expressed concerned about signing an “estimated” HUD, and asked when they had to come back in to sign the “final” documents.
This couple told me when they bought their New York co-op, the seller, lender, agents and attorneys sat at the same table; documents and money were passed furiously around the room and the buyers were handed keys as they left the office. The deed and loan documents were recorded at some point later, but possession occurred at the closing table.
Not so in Washington State! For a buyer coming from out of the area, our system can seem confusing. So, here are a few tips for those relocating and buying here:
SIGNING
Ideally, the loan documents arrive (hopefully) a day or more before the buyer comes in to sign, but the lender purchase funds are nowhere in sight. The buyer and seller sign at different times and I can’t remember if I’ve ever seen an attorney attend a residential closing. Rarely do the agents or loan officers attend.
FUNDING
Once the buyer signs the loan documents they are returned to the lender for review. Most lenders require at least 24 hours to review the documents before they will wire the funds to escrow.
CLOSING
The funds arrive to the escrow office from the lender and escrow is given permission by the lender to release the documents to record. The title company then sends the Deed (conveys ownership from the seller to the buyer) & Deed of Trust (secures the loan documents) via a runner to the County courthouse and delivers these documents* to the recorder’s office. The recorder’s office processes the documents and stamps them with a “recording number”. The acknowledgement of recording numbers for the documents provides assurance to all parties that title has passed to the new buyer. That conveyance is communicated via the title company to escrow who then calls the agents, buyer and seller to congratulate them on a successful consummation of the sale.
This, my fellow Washingtonians (and transplants), is the golden moment of closing.
Depending on how the contract is set up, this is usually the point where keys will be given to the buyer (now the new homeowner) by the selling agent according to the agreement on the Purchase Contract.
*see my future blog on the emergence of the E-Recording process
June 17th, 2010
Now that we have all been using the new 2010 HUD for the past few months and are trying to get more comfortable with it, I thought I’d post this FAQ sheet to answer some more questions.
This FAQ is designed to make it easier to read the 2010 HUD for transactions in the State of Washington.
Why does the seller have to pay the excise tax in the State of Washington?
The excise tax is the seller’s obligation per RCW 82.45.080. Here is the law as stated in the RCW:
“Tax is Seller’s Obligation-Choice of Remedies.
The tax levied under this chapter shall be the obligation of the seller and the Department of Revenue may, at the department’s option, enforce the obligation through an action of debt against the seller or the department may proceed in the manner prescribed for the foreclosure of mortgages and resort to one course of enforcement shall not be an election not to pursue the other.”
Excise Tax is shown on line 1203 of the HUD. This is a seller charge. However, some lender’s require escrow to show it as a charge to the buyer (as it relates back to GFE#8), and a credit back to the buyer and charge to the seller on page one. The seller is still paying the excise tax.
Why is the total commission not shown on page two (2) in the 700 section?
If the closing agent is not holding the earnest money, the commission will be shown as follows:
The earnest money deposited by the buyer will still show as a credit on line 201 (page one). The commission paid at closing will be shown on page two on line 701 and line 702. The earnest money held by the selling agent will also be shown on line(s) (506-509) as a charge to the seller. The total of 701 and 702 and any commission in the 500 section represent the total commission paid at closing.
If the closing agent is holding the commission the earnest money will be shown as a credit on line 201 and the entire commission will be shown on line 701 and 702. This information is taken directly from the HUD regulations page #68244.
Why is the Owner’s Policy of Title Insurance shown as a charge to buyer on page 2 and then a credit back to the buyer and charge to the seller on page 1?
The NWMLS Purchase and Sale Agreement Section E under title insurance says the following: “Seller authorizes buyer’s lender or closing agent at seller’s expense to apply for the then current ALTA form of Homeowner’s Policy of title insurance…”.
The owner’s policy of title insurance is a seller charge. Lenders instruct escrow to show the owners policy as a charge to the buyer and then a credit back to the buyer on page one and a charge to the seller on page one. The owner’s policy is still a seller paid charge. The lender instructs escrow to reflect the charge this way.
If you have any questions please don’t hesitate to contact your escrow team or one of our sales representatives.
April 30th, 2010
How do you really feel about the 2010 HUD? Have you looked at the 2010 HUD and said to yourself “My commission’s missing” or “This isn’t the total of my lender/mortgage broker fees”? Don’t worry, that’s the way it’s supposed to look. The 2010 HUD is no longer a simple detailed list of anyone’s fees. The real question is this: Is the HUD really clearer to the consumer and the real estate industry?
Lenders are all interpreting the regulations differently which is prompting them to give different and varying instructions to escrow agents regarding disclosure and placement of fees. As with all changes, this will take some time for the industry to get on the same page. Lenders and title and escrow companies are working with HUD to try and come up with a clearer interpretation of the law and its practice.
What does “Your adjusted origination charges” mean to you and your client? There are a lot of misunderstandings regarding what should be shown in each section. These are all the fees owing to the lender and/or mortgage broker which may or may not include the Yield Spread Premium. If the loan officer is being paid the Yield Spread Premium then that amount would be added to the adjusted origination charges and shown as a credit to the buyer/borrower.
Title services and lender’s title insurance is the total of all escrow, lender’s title premium and additional closing fees lumped together and disclosed as one fee to the consumer. There should be no itemization of any additional charges to the escrow company on the new HUD. These fees should all be lumped together with the lender’s policy premium and disclosed as one fee.
The biggest confusion to the client is the charge for an Owner’s policy. The regulations require that this fee be charged to the buyer on line 1103 (block 5 of the GFE). Since most of the Purchase and Sale Agreements in our area have the seller paying this charge as is local custom, we have to show a credit to the buyer and a corresponding charge to the seller on page one of the HUD.
Overall, once the industry and consumers get used to the change, the HUD is really easier to understand from a consumer standpoint. . The Good Faith Comparison Page (GFE) really puts an emphasis on the costs of the transaction by disclosing the exact increase or decrease of fees quoted on the GFE compared to the actual costs shown on the HUD.
The “superstar” of the new HUD is on page three (3) under loan terms. This area discloses all the terms of the note in clear and simple language. The buyer/borrower no longer needs to walk through the muddy waters of the Promissory Note to understand the terms of the note.
With the continued communication between all lenders, escrow, title and real estate professionals we will get through this change together.
March 22nd, 2010
Yes…It’s That Time Again! Tax Season!
As a professional real estate agent, there are many tax deductions that you can potentially claim as business expenses. It’s always a good idea to contact your tax advisor or accountant if you have any questions.
Here are Some Common Tax Deductions for Real Estate Agents:
Advertising Costs: Signs, newspaper advertising, flyers, online advertising, post cards, promotional materials, and anything else that was used to market your business may be deductible.
Professional Fees: Your MLS Board Dues, Realtor dues, renewal fees with your state board, Errors & Omissions Insurance, and any other professional fees you incur may also be deductible.
Education Materials: Did you take continuing education classes or seminars? Those may be deductible as well.
Car/Driving Expenses: This is an obvious one most agents remember – but many often get confused about how much mileage they can deduct or how to separate “personal” and “business use”. Another confusing thing for many agents is deducting depreciation if you own your car or lease payments if you lease. You can choose to deduct per mile driven or you can also do the actual cost of insurance, gas prices, repairs & maintenance, and other vehicle expenses.
Office Equipment: Office equipment can include desk fees if you have them at your office, computer/software, phone fees (including cell phone), cameras, office supplies, and anything else related to necessities of running your office.
Wages Paid: Did you pay an assistant? Hire someone to help you? Did you pay out any referral fees to other agents? All of these may be deductible as well.
Business Entertainment: You can deduct fees for dinners, event tickets that are business oriented, entertaining for business at home, and anything else related to costs you incurred for entertaining business clients. Be careful with this one – be sure it was really for business before claiming it.
February 16, 2009 in Agent Life, Featured Articles by admin
Also shown in UpstartAgent blog
March 12th, 2010
As you know, our nation’s economy has been brought to its knees by an unprecedented number of high-level schemes that unraveled in quick succession. Bernie Madoff with his “Ponzi” scheme and last decade’s poster child for fraud, Enron Corp., may be extreme, but not unique examples of unchecked greed which left large numbers of investors broke and angry. While some participants were aware of the risks and “rolled the dice” with their money anticipating high returns, many innocent (or perhaps naive) consumers and honest investors have been caught in the middle.
The 1031 Exchange industry had plenty of bad actors, too. Some irresponsibly invested monies they held in trust; others shipped accounts offshore and left the country. Many investors were left holding the financial bag by having to pay tax penalties for failing to complete the exchange. Finally, the courts are intervening and long overdue regulations are being put in place.
On March 5th, 2010 IRS Revenue Procedure 2010-14 was enacted (for a full copy http://www.irs.gov/pub/irs-drop/rp-10-14.pdf) to provide a safe harbor for investors whose assets are being held up in bankruptcy court and tax penalties may still apply.
A word of caution from our sister company, IPX 1031 Exchange (http://www.ipx1031.com/): “The safe harbor sets forth strict criteria for eligible transactions. Taxpayers who have experienced losses due to an exchange company bankruptcy should consult with their tax advisor.”
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A few years ago I had the opportunity to attend a Downtown Association sponsored event where the topic was The Alaskan Way Viaduct and Seawall Replacement project. It was early in the morning and I was not psyched about listening to some “fireball” from the WSDOT drone on about highway engineering. I wasn’t expecting to be so riveted.
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