Short-sale disputes were designated as the most significant legal issue facing real estate professionals, according to therecent National Association of Realtors’.  In addition, according to a NAR survey, REO agency issues, property condition and RESPA issues are among the the top issues facing real estate professionals today.

Read more here from DSNews.com.

As the housing market begins to dig itself out of the trough caused by the bubble, new tough down payment requirements are hamstringing recovery momentum, especially among first time home buyers. Under the newly proposed Qualified Residential Mortgage (QRM) rule (meant to prevent another credit bubble in housing markets) only borrowers putting down 20 percent can get the best deals. To buy a median nationally priced home of $170,000, the borrower would have to come up with $34,000 in cash, which takes the average middle class family 14 years to save. Even repeat buyers will be restricted from getting the best deals as equity has eroded from their home which is normally used to purchase a new home.

The Federal Reserve Board’s regulations governing loan originator compensation went into effect April 6 after a federal appeals court dissolved a stay suspending implementation of the rule.

The U.S. Court of Appeals for the District of Columbia Circuit issued an order March 30 to stay the implementation of the Board’s loan originator compensation regulations. However, on April 5, the appeals court on Tuesday ruled National Association of Mortgage Brokers and (NAMB) the National Association of Independent Housing Professionals (NAIHP) had not “satisfied the stringent standards required for a stay pending appeal,” and dissolved its administrative stay of the rule.

The Associations filed a lawsuit March 9 against The Federal Reserve System seeking to restrain implementation of a section of the Fed’s loan originator compensation rule. On March 30, Judge Beryl Howell denied NAMB’s request although she found the rule could cause irreparable harm. NAMB then appealed to the U.S. Court of Appeals, which then issued the stay on March 31, preventing the rules from going into effect April 1. The Federal Court then dissolved the stay after both NAMB and the Federal Reserve filed replies.

The three-judge appeals court panel also denied an emergency motion to stay implementation of the rule pending appeal, and denied a motion for expedited relief that sought to fast-track the appeal process.

Read more about this on HousingWire.

The definition of loan fraud is simple.  According to the F.B.I. loan fraud is any material misstatement, misrepresentation or omission relied upon by a mortgage underwriter or lender to fund a loan.

The definition does not make any exception for white lies, half truths, fibs or creative facts.  It says any material misstatement, misrepresentation or omission.  In most cases if you are involved in a real estate loan transaction, as a borrower, real estate agent, attorney or some other party, and you have to ask yourself or someone else “Is that loan fraud?”  95% of the time the answer is “yes.”

In most cases when I am asked about whether or not something is loan fraud the conversation usually goes something like this:

Client: The upstairs bathroom plumbing does not work right at all.  The seller’s brother-in-law did all of the work himself and never had a permit for the remodeling.  I want the seller to fix it.

Me: Then we should state that in the purchase contract.  I can have that written in as one of the terms.

Client:  Well the seller and the seller’s agent are concerned that if it is in the contract I won’t get the loan.  They suggested that the seller pay me for the repairs after the closing because he doesn’t have the cash right now.  I am fine with that.  I trust them.

Me: So you, and the seller and their agent are afraid that if you tell your mortgage lender the truth that they may not make the loan to you.  Is that right?

Client:  Yes.  I think that if my lender finds out about the condition of the bathroom I won’t get the loan.  And I don’t mind doing the work myself once we move in.

Me:  Ok.  So think about this, if you lie to the lender or omit certain facts then they will give you the loan, but if you tell them the truth they may not give you the loan.  Is that what you are worried about?

Client:  Yes.  That is what the loan officer and my real estate agent told me.

Me:  Does that sound like loan fraud?

Client:  No.  Not really. I am not being fraudulent.  I’m just not going to tell the lender and I will honestly do the work once I move in.

Me:  Well.  That is not only loan fraud on your part, but now it sounds like conspiracy to commit loan fraud by the seller, loan officer and the agents.  In fact that is exactly what it is.  Let’s do the right thing and work this out in a manner that you, the seller and the lender are satisfied with.

Ok, I know sometimes it can’t be worked out.  But that does not make the option of committing loan fraud all right.  If a deal cannot be kept together with the truth and full disclosure, it is likely better to move on to the next deal.

Here are just a few examples of how mortgage loan fraud is commonly committed:

Making false loan applications.
Lying on a mortgage loan application, or falsifying or misstating employment or income.

Kickbacks.
Making or receiving payment in return for a referral which resulted in a transaction or service.

Undisclosed second mortgages.
Taking an undisclosed loan from the seller to assist in the purchase.

Misstating intent to occupancy.
Stating a borrower/owner will occupy a property that they do not intend to occupy.

Receiving false gift funds or equity.
Stating that a borrower will receive a gift of equity or gift of down payment but the funds will actually be paid back.

Inflated purchase price.
Using two purchase contracts and sending the false contract with a higher sales price to the lender in hopes of obtaining a higher appraisal.

Falsifying deposits.
Stating to a lender that a deposit has been paid when it has not.

False adjustments, purchases or credits.
Paying additional funds to, or receiving additional funds from, the seller to adjust the purchase price prior to or after closing.  This includes buying items of personal property from the seller for more than fair market value.

These are only a few examples of loan fraud.  If you are a borrower or real estate professional, remember that loan fraud is a federal, criminal offense.  It can be a crime of conspiracy, that is if you assist in the commitment of loan fraud you can be punished under the law. 

In most of the circumstances I encounter neither the borrower, real estate agent or loan officers are intending to defraud the lender.  They are simply trying to get the deal done, trying to get the seller and the buyer to where they want to be.  Unfortunately, the definition of loan fraud says ANY material misstatement, misrepresentation or omission.  Whether or not a fact is material is up to a judge or jury to decide.  Never let it get that far.

If you have a question about whether or certain facts amount to loan fraud speak with a qualified real estate attorney.

First: Pay Off Your Debt

It’s a common mistake for home-buyers-to-be: They focus on saving as much money as possible for a down payment instead of paying off other debts.

How Much Can You Afford?

The answer to that is a function of two things: How much you can borrow and how much of a down payment you can muster. As a rule of thumb, your annual mortgage payment, taxes and homeowner’s insurance shouldn’t exceed 28% of your gross income.

Types of Loans

Now you’re ready to start shopping around for the right loan. A first-time home buyer with a steady job and good credit can buy a home with less than a 20% down payment.

Questionable Credit

Worried you don’t have perfect credit? You may yet qualify for a loan insured by the Federal Housing Administration, or FHA. These government-insured loans are issued with even more lenient credit criteria. You can also put down as little as 3.5% for an FHA loan. A portion of closing costs may be used to meet the 3.5% cash requirement.

Down-Payment Assistance Programs

Still having trouble coming up with that down payment? Each year HUD gives states and municipalities money to distribute to low- and moderate-income families for housing.

Read more: Tips for First-Time Home Buyers – Spending – Deals – SmartMoney.com

In Massachusetts an estate of homestead protects a homeowner’s primary residence from the claims of certain creditors. Prior to the change in the law the declaration of homestead protected the equity in the home for up to $500,000 of its equity in the event the home owner is sued. That is, if a homeowner is successfully sued in court, $500,000 of the home’s equity could not be touched by an attachment and or execution of sale by the judgment creditor. To acquire the homestead a homeowner would need to file a written declaration and record it with the county Registry of Deeds.

The Massachusetts Legislature has recently passed long awaited revisions to the Massachusetts Homestead Act. The revised law now provides automatic protection up to $125,000 on a homeowner’s primary residence, and a written homestead can also be filed to increase the protection up to $500.000.  The act also provides homeowners additional protection:

• An automatic homestead exemption of $125,000 is now provided for all Massachusetts homeowners for protection against certain creditor claims on their primary residence.
• Homeowners are eligible for a $500,000 homestead exemption by filing a written declaration of homestead at the county registry of deeds.
• A written homestead declaration can now be signed by both husband and wife.
• Homeowners who already have a written homestead are still covered up to $500.000.
• Homes held in trust can be declared as a homestead by the trustee.
• If a single person who has a homestead gets married, the homestead automatically protects the new spouse!
• A homestead can now pass on to the surviving spouse and children who live in the home.
• You do not have to re-file a homestead after a refinance.
• In all mortgage transactions the closing attorneys must now provide the mortgagor with a written notice of availability of a homestead.

As a matter of practice our office had always provided new homeowner’s with a professionally prepared declaration of homestead for a nominal fee.  Now homeowners will automatically benefit from the automatic coverage.  We can assist any homeowner who would like to declare a written homestead to receive the full $500,000 of protection. Contact our office for more information.

If investors fear that rising oil prices will derail an emerging recovery, they will remove their money from stocks and put it into safer bonds, especially government Treasuries. That will help lower mortgage rates. More bond purchases will push bond prices up and their yields, or their interest rates paid to bond owners, down.  Mortgage rates would also decline, since they cannot be lower than government bond rates.

That’s exactly what’s been happening this week. Oil prices went over $100 a barrel, its highest price since September 2008.  Mortgage rates have declined for three consecutive weeks, with the average rate for the 30-year fixed-rate mortgage declining from 5 percent to 4.84 percent last week.   Read more of what Michael Kling says here.

The 30-year fixed-rate mortgage (FRM) averaged 4.87 percent with an average 0.7 point for the week ending March 3, 2011, down from last week when it averaged 4.95 percent. Last year at this time, the 30-year FRM averaged 4.97 percent.

The 15-year FRM averaged 4.15 percent with an average 0.7 point, down from last week when it averaged 4.22 percent. A year ago at this time, the 15-year FRM averaged 4.33 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.72 percent this week, with an average 0.6 point, down from last week when it averaged 3.8 percent. A year ago, the 5-year ARM averaged 4.11 percent.

The 1-year Treasury-indexed ARM averaged 3.23 percent this week with an average 0.6 point, down from last week when it averaged 3.4 percent. At this time last year, the 1-year ARM averaged 4.27 percent.

“Mortgage rates saw an overall improvement this week,” said Frank Nothaft, vice president and chief economist, Freddie Mac. “Interest rates for 30-year fixed mortgages were almost 0.2 percentage points below this year’s high set just three weeks ago. This means that homebuyers could now expect to pay $263 less per year on a $200,000 loan.”

Despite the low rates, housing demand still remains weak, Nothaft said. New home sales in January were near record lows dating back to 1963 when the data began, according to the Census Bureau . Similarly, pending sales of existing homes fell for the second consecutive month in January, according to the National Association of Realtors.

The process starts with a real estate buyer with a property under contract. Once the settlement agent or closing attorney has been retained by the mortgage lender the begin the “title work.” That is the examination of the chain of ownership or chain of title to the property. This examination discloses the history of owners and lien holders on the property and helps the closing attorney to ensure that the buyer receives good clear title to the property and that the seller actually owns the property.

The closing attorney will also assist the lender to make certain the certain conditions of the mortgage loan are met. Like having the property insured for the proper amount of homeowner’s insurance or “hazard” insurance. The closing attorney will also help the lender and borrower meet conditions of the loan that are related to the title to the property, such as providing accurate real estate tax information.

Adjustments for items that are agreed to between the buyer and seller, such as credits for rents, utilities and closing cost credits, are provided to the closing attorney to be accounted for at closing. Real estate agents will provide their commission statements to the closing attorney to be paid at closing.

If required by the mortgage lender the closing attorney will arrange to obtain an “mortgage survey” or “plot plan” for the property.

Once the closing attorney has obtained all of the figures, and has the figures provided by the parties, they will produce a settlement statement (or HUD statement) using those figures and the closing cost figures provided by the mortgage lender.

Documents that are required to be signed by the buyer are provided to the closing attorney by the lender. The closing attorney will coordinate the signing of the settlement statement and loan documents (note, mortgage and disclosures) at the closing.

Once the settlement statement is complete and approved and documents are signed the lender will fund the loan and provide the money to the closing attorney for disbursement according to the settlement statement.

The closing process is complete with the recording of the deed, mortgage and other required documents by the closing attorney.

Realtors® have access to resources not available to the average home buyer or seller.  Between personal spheres of influence, professional networking and trade memberships Realtors® have a unique perspective on their local real estate market and on particular properties and trends, above and beyond what can be found on a listing sheet or on the internet.  They are in constant contact with other real estate professionals, buyers and sellers and often have exclusive details on properties and opportunities not found elsewhere.  Their resources cannot be tapped online or in print.  A good Realtor® will leverage their resources to assist their clients to find the right property or the right buyers.

Whether you are buying or selling real estate, obtaining the best price is critical.  An experienced Realtor® is by trade a good negotiator and will provide their clients the tools to identify the proper price point for real estate.  On average sellers workings with a Realtor® tend to get a higher price for their property than sellers trying to sell on their own.  Likewise, buyers tend to get the best overall price when their offer to purchase is presented to the seller by a Realtor®.  If the price isn’t right for a particular property an untrained individual may never know it.  A Realtor® can draw on their valuable experience and resources to assist their clients in making the best offers and counter offers.

A Realtor® will help you realize the best value for your real estate sale or purchase.  Financially sellers think they will save tens of thousands of dollars by not using a Realtor® but it has been my experience that when sellers are not working with a Realtor® they tend to have many complications with their transactions; Complications that would have easily been avoided with the assistance of a Realtor®.  Complications lead to delays and additional costs that may not directly affect the final sale price but can certainly have a financial impact that is often not considered until it is too late.  Getting involved with an unqualified buyer can mean a huge loss to a seller when the buyer has to back out of the transaction just days before closing.  A Realtor® can protect from this sort of loss and other circumstances that are not foreseen by the average seller.

If you have a question about working with a Realtor® or would like the contact information for qualified local Realtor® please contact me.