OREGON REAL ESTATE ROUND TABLE

Tag: Washington County

  • Promoting Housing Recovery Parts 1 and 2, by Patrick Pulatie


    Previously, I have posted articles regarding housing and foreclosure issues. The purpose was to begin a dialogue on the steps to be taken to alleviate the foreclosure crisis, and to promote housing recovery.   Now, we need to explore how to restart lending in the private sector.  This will be a three part article, with parts I and II herein, and III in the next post.

    To begin, we must understand how we got to the point of where we are today, and whereby housing became so critical a factor in the economy. (This is only an overview. I leave it to the historians to fill in all the details.)

    Part One – Agreeing On The Problems

    Historical Backdrop

    At the beginning of the 20th century, the U.S. population stood about 76,000,000 people. By the end of 2000, the population was over 310 million. The unprecedented growth in population resulted in the housing industry and related services becoming one of several major engines of wealth creation during the 20th century.

    During the Depression, large numbers of farm and home foreclosures were occurring. The government began to get involved in housing to stop foreclosures and stimulate housing growth. This resulted in the creation of an FHA/Fannie Mae– like program, to support housing.

    WWII led to major structural changes in the U.S., both economically and culturally. Manufacturing and technological changes spurred economic growth. Women entered the work force in huge numbers. Returning veterans came back from the war desiring to leave the rural areas, begin families, and enter the civilian workforce. The result was the baby boom generation and its coming influence.

    From the 1950s through the 1970s, the US dominated the world economically. Real income growth was occurring for all households. Homeownership was obtainable for ever increasing numbers of people. Consumerism was rampant.

    To support homeownership, the government created Fannie Mae and Freddie Mac so that more people could partake in the American Dream. These entities would eventually become the primary source of mortgages in the U.S. F&F changed the way mortgages were funded, and changed the terms of mortgages, so that 30 year mortgages became the common type of loan, instead of 5 to 15 year mortgages.

    Storm clouds were beginning to appear on the horizon at the same time. Japan, Korea, Germany, and other countries had now come out of their post war depressions. Manufacturing and industrial bases had been rebuilt. These countries now posed an economic threat to the U.S. by offering improved products, cheaper labor costs, and innovation. By the end of the 1970s, for many reasons, US manufacturing was decreasing, and service related industries were gaining importance.

    In the 1980s and 1990s, manufacturing began to decline in the U.S. Service Industries were now becoming a major force in the economy. With the end of the Cold War in 1989, defense spending began to decline dramatically, further depressing the economy.

    In the early 1990s, F&F engaged in efforts to increase their share of the mortgage market. They freely admitted wanting to control the housing market, and took steps to do so, undermining lenders and competition, and any attempts to regulate them.

    In 1994, homeownership rates were at 64% in the US. President Clinton, along with Congress and in conjunction with Fannie and Freddie, came out with a new program with the intent to promote a 70% homeownership rate. This program was promoted even though economists generally considered 64% to be the maximum amount of homeownership that an economy could readily support. Above 64%, people would be 

    “buying” homes, but without having the financial capabilities to repay a loan. The program focused upon low income persons and minorities. The result was greater demand for housing and homeownership, and housing values began to increase.

    Lenders and Wall Street were being pushed out of the housing market by F&F, and had to find new markets to serve. F&F did not want to service the new markets being created by the government homeownership programs. The result was that Wall Street would naturally gravitate to that market, which was generally subprime, and also to the jumbo market, which F&F could not serve due to loan amount restrictions. This was the true beginning of securitized loan products.

    The events of 9/11 would ultimately stoke the fires of home ownership even further. 9/11 occurred as the US was coming out of a significant recession, and to keep the country from sliding back into recession, the Fed lowered interest rates and kept them artificially low until 2003. Wall Street, recognizing the promise of good financial returns from securitized loans, freed up more and more capital for banks and mortgage bankers to lend. This led to even greater demand for homes and mortgages.

    To meet the increased demand, home construction exploded. Ancillary services did well also, from infrastructure, schools, hospitals, roads, building materials, and home decor. The economy was booming, even though this was “mal-investment” of resources. (Currently, as a result of this activity, there are estimated to be from 2m to 3.5m in excess housing units, with approximately 400k being added yearly to housing stock.)

    It did not stop there. Buyers, in their increasing zeal, were bidding for homes, increasing the price of homes in many states by 50 to 100,000 dollars more than what was reasonable. The perception was that if they did not buy now, then they could never buy. Additionally, investors began to purchase multiple properties, hoping to create a home rental empire. This led to unsustainable home values.

    Concurrently, the Fed was still engaged in a loose money policy. This pumped hundreds of billions of dollars into the housing economy, with predictable results. With increasing home values, homeowners could refinance their homes, often multiple times over, pulling cash out and keeping the economy pumped up artificially. A homeowner could pull out 50,000 to 100,000 dollars or more, often every year or two, and use that money to indulge themselves, pretending they had a higher standard of living than what existed. The government knew that this was not a reasonable practice, but indulged in it anyway, so as to keep up an appearance of a healthy economy. Of course, this only compounded the problem.

    The end result of the past 40 years of government intervention (and popular support for that intervention) has been a housing market that is currently overbuilt and still overvalued. In the meantime, real wages have not increased since the mid 1990s and for large numbers of the population, negative income growth has been experienced. Today, all segments of the population, homeowners especially so, are saddled with significant mortgage debt, consumer debt, and revolving credit debt. This has led to an inability on the part of the population to buy homes or other products. Until wage and debt issues are resolved, employment increases, and housing prices have returned to more reasonable values, there can be no housing recovery.

    Current Status

    As all know, the current status of housing in the US is like a ship dead in the water, with no ability to steer except to roll with the waves. A recap:

    Private securitization once accounted for over 25% of all mortgage loans. These efforts are currently nonexistent except for one entity, Redwood Trust, which has issued one securitized offerings in 2010 and one in 2011. Other than this, Wall Street is afraid to invest in Mortgage Products (to say nothing of downstream investors).

    Banks are unable to lend their own money, which represented up to 15% of all lending. Most banks are capital impaired and have liquidity issues, as well as unknown liabilities from bad loans dating to the bubble.

    Additionally, banks are suffering from a lack of qualified borrowers. Either there is no equity in the home to lend on, or the borrowers don’t have the financial ability to afford the loan. Therefore, the only lending that a bank can engage in is to execute loans and sell them to Fannie Mae, Freddie Mac, or VA and FHA. There are simply no other options available.

    F&F are buying loans from the banks, but their lending standards have increased, so the loan purchases are down. F&F still distort the market because of government guarantees on their loans (now explicit instead of implicit), and they are still able to purchase loans above $700k, which was implemented in response to the housing crisis.

    F&F are still having financial issues, with the government having bailed them out to the tune of $140b, with much more to come.

    VA is buying loans and doing reasonably well, but they serve a tiny portion of the market.

    FHA has turned into the new subprime, accepting credit challenged borrowers, and with loan to values of 95% or greater. Default rates on FHA loans are rising significantly, and will pose issues for the government when losses absorb all FHA loss reserves, which may have already happened (depending on how you look at the accounting).

    The Mortgage Insurance companies are financially depressed, with PMI being forced to stop writing new policies due to loan loss reserves being depleted. Likely, they will cease business or be absorbed by another company. Other companies are believed to be similarly in trouble, though none have failed yet.

    The US population is still overburdened with debt. It is believed that the household consumer debt burden is over 11%, for disposable income. This is far too high for effective purchasing of any products, especially high end. (There has been a lessening of this debt from its high of 14% in 2008, but this has primarily been the result of defaults, so most of those persons are not in a position to buy.)

    Patrick Pulatie is the CEO of LFI Analytics. He can be reached at 925-522-0371, or 925-238-1221 for further information. http://www.LFI-Analytics.com, patrick@lfi-analytics.com.

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  • Government Officials Weigh New Refi Program, Carrie Bay, DSNEWS.com


    Word on the street is that the Obama administration is sizing up a new program to shore up and stimulate the housing market by providing millions of homeowners with new, lower interest, lower payment mortgage loans.  According to multiple media outlets, the initiative would allow borrowers with mortgages backed by Fannie Mae and Freddie Macto refinance at today’s near record-low interest rates, close to the 4 percent mark, even if they are in negative equity or have bad marks on their credit.

    The plan, first reported by the New York Times, may not be seen as a win-win by everyone. The Times says it could face stiff opposition from the GSEs’ regulator, the Federal Housing Finance Agency (FHFA), as well as private investors who hold bonds made up of loans backed by the two mortgage giants.

    The paper says refinancing could save homeowners $85 billion a year. It would also reach some homeowners who are struggling with underwater mortgages, which can disqualify a borrower from a traditional refinance, and those who fail to meet all the credit criteria for a refinance as a result of tough times brought on by the economic downturn.

    Administration officials have not confirmed that a new refi program is in the works, but have said they are weighing several proposals to provide support to the still-ailing housing market and reach a greater number of distressed homeowners.

    According to information sourced by Bloomberg, Fannie and Freddie guarantee nearly $2.4 trillion in mortgages that carry interest rates above the 4 percent threshold.

    The details that have been reported on the make-up of the refi proposal mirror recommendations put forth by two Columbia business professors, Chris Mayer and R. Glenn Hubbard.

    They’ve outlined the same type of policy-driven refi boom in a whitepaper that calls for Fannie- and Freddie-owned mortgages to be refinanced with an interest rate of around 4 percent.

    They say not only would it provide mortgage relief to some 30 million homeowners – to the tune of an average reduction in monthly payments of $350 — but it would yield about $118 billion in extra cash being pumped into the economy.

    Other ideas for housing stimulus are also being considered. One involving a public-private collaboration to get distressed properties off the market and turn them into rental homes has progressed to the point that officials issued a formal notice earlier this month requesting recommendations from private investors, industry stakeholders, and community organizations on how best to manage the disposition of government-owned REOs.

    Treasury is also reviewing a proposal from American Home Mortgage Servicing that would provide for a short sale of mortgage notes from mortgage-backed securities (MBS) trusts to new investors as a means of facilitating principal reduction modifications.

    There’s speculation that President Obama will make a big housing-related announcement in the weeks ahead as part of a larger economic plan.

  • The Meat of the Matter – In Re: Veal Analyzed, by Phil Querin, Q-Law.com


     

    “When a note is split from a deed of trust ‘the note becomes, as a practical matter, unsecured.’ *** Additionally, if the deed of trust was assigned without the note, then the assignee, ‘having no interest in the underlying debt or obligation, has a worthless piece of paper.’” [In re Veal – United States Bankruptcy Appellate Panel of the Ninth Circuit (June 10, 2011)]

    Introduction. This case is significant for two reasons: First, it was heard and decided by a three-judge Bankruptcy Appellate Panel for the Ninth Circuit, which includes Oregon.  Second, it represents the next battleground in the continuing foreclosure wars between Big Banks and Bantam Borrowers: The effect of the Uniform Commercial Code (UCC”)on the transferability of the Promissory Note (or “Note”).

    Remember, the Trust Deed follows the Note.  If a lender is the owner of a Trust Deed, but cannot produce the actual Note which it secures, the Trust Deed is useless, since the lender is unable to prove it is owed the debt.  Conversely, if the lender owns the Note, but not the Trust Deed, it cannot foreclose the secured property. [For a poetic perspective on the peripatetic lives of a Note and Trust Deed, connect here. – PCQ]

    By now, most observers are aware that Oregon’s mandatory recording statute, ORS 86.735(1), has been a major impediment to lenders and servicers seeking trying to foreclose borrowers.  Two major Oregon cases, the first in federal bankruptcy court, In re McCoy, and the other, in federal district trial court, Hooker v. Bank of America, et. al, based their decisions to halt the banks’ foreclosures, squarely on the lenders’ failure to record all Trust Deed Assignments.  To date, however, scant mention has been made in these cases about ownership of the Promissory Note. [Presumably, this is because a clear violation of the Oregon’s recording statute is much easier to pitch to a judge, than having to explain the nuances – and there are many – of Articles 3 and 9 of the UCC.  – PCQ]

    Now we have In re: Veal, which was an appeal from the bankruptcy trial judge’s order granting Wells Fargo relief from the automatic stay provisions under federal bankruptcy law.   Such a ruling meant that Wells Fargo would be permitted to foreclose the Veals’ property.  But since this case arose in Arizona – not Oregon – our statutory law requiring the recording of all Assignments as a prerequisite to foreclosure, did not apply.  Instead, the Veals’ lawyer relied upon the banks’ failure to establish that it had any right under the UCC to enforce the Promissory Note.

    Legal Background. For reasons that do not need to be explained here, the Veals filed two contemporaneous appeals. One was against Wells Fargo Bank, which was acting as the Trustee for a REMIC, Option One Mortgage Loan Trust 2006–3, Asset–Backed Certificates Series 2006–3.  In the second appeal, the Veals challenged the bankruptcy court’s order overruling their objection to a proof of claim filed by Wells Fargo’s servicing agent, American Home Mortgage Servicing, Inc. (“AHMSI”).

    Factual Background. In August 2006, the Veals executed a Promissory Note and Mortgage in favor of GSF Mortgage Corporation (“GSF”). On June 29, 2009, they filed a Chapter 13 bankruptcy.  On July 18, 2009, AHMSI filed a proof of claim, on behalf of Wells Fargo as its servicing agent.  AHMSI included with its proof of claim the following documents:

    • A copy of the Note, showing an indorsement[1] from GSF to “Option One”[2];
    • A copy of the GSF’s Mortgage with the Veals;
    • A copy of a recorded “Assignment of Mortgage” assigning the Mortgage from GSF to Option One; and,
    • A letter dated May 15, 2008, signed by Jordan D. Dorchuck as Executive Vice President and Chief Legal Officer of AHMSI, addressed to “To Whom it May Concern”, stating that AHMSI acquired Option One’s mortgage servicing business.[3]

    The Veals argued that AHMSI [Wells’ servicing agent] lacked standing since neither AHMSI or Wells Fargo established that they were qualified holders of the Note under Arizona’s version of the UCC.

    In a belated and last ditch effort to establish its standing, Wells Fargo filed a copy of another Assignment of Mortgage, dated after it had already filed for relief from bankruptcy stay.  This Assignment purported to transfer to Wells Fargo the Mortgage held by “Sand Canyon Corporation formerly known as Option One Mortgage Corporation”.

    The 3-judge panel noted that neither of the assignments (the one from GSF to Option One and the other from Sand Canyon, Option One’s successor, to Wells) were authenticated – meaning that there were no supporting affidavits or other admissible evidence vouching for the authenticity of the documents.  In short, it again appears that none of the banks’ attorneys would swear that the copies were true and accurate reproductions of the original – or that they’d even seen the originals to compare them with.  With continuing reports of bogus and forged assignments, and robo-signed documents of questionable legal authority, it is not surprising that the bankruptcy panel viewed this so-called “evidence” with suspicion, and did not regard it as persuasive evidence.

    • As to the Assignment of Mortgage from GSF (the originating bank) to Option One, the panel noted that it purported to assign not only the Mortgage, but the Promissory Note as well.[4]
    • As to the Assignment of Mortgage from Sand Canyon [FKA Option One] to Wells Fargo[created after Wells Fargo’s motion for relied from stay], the panel said that the document did not contain language purporting to assign the Veals’ Promissory Note.  As a consequence[even had it been considered as evidence], it would not have provided any proof of the transfer of the Promissory Note to Wells Fargo. At most, it would only have been proof that the Mortgage had been assigned.

    After considerable discussion about the principles of standing versus real party in interest, the 3-judge panel focused on the latter, generally defining it as a rule protecting a defendant from being sued multiple times for the same obligation by different parties.

    Applicability of UCC Articles 3 and 9. The Veal opinion is well worth reading for a good discussion of the Uniform Commercial Code and its applicability to the transfer and enforcement of Promissory Notes.  The panel wrote that there are three ways to transfer Notes.  The most common method is for one to be the “holder” of the Note.  A person may be a “holder” if they:

    • Have possession of the Note and it has been made payable to them; or,
    • The Note is payable to the bearer [e.g. the note is left blank or payable to the “holder”.]
    • The third way to enforce the Note is by attaining the status of a “nonholder in possession of the [note] who has the rights of a holder.” To do so, “…the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the “person entitled to enforce.”

    The panel concluded that none of Wells Fargo’s exhibits showed that it, or its agent, had actual possession of the Note.  Thus, it could not establish that it was a holder of the Note, or a “person entitled to enforce” it. The judges noted that:

    “In addition, even if admissible, the final purported assignment of the Mortgage was insufficient under Article 9 to support a conclusion that Wells Fargo holds any interest, ownership or otherwise, in the Note.  Put another way, without any evidence tending to show it was a “person entitled to enforce” the Note, or that it has an interest in the Note, Wells Fargo has shown no right to enforce the Mortgage securing the Note. Without these rights, Wells Fargo cannot make the threshold showing of a colorable claim to the Property that would give it prudential standing to seek stay relief or to qualify as a real party in interest.”

    As for Wells’ servicer, AHMSI, the panel reviewed the record and found nothing to establish that AHMSI was its lawful servicing agent.  AHMSI had presented no evidence as to who possessed the original Note.  It also presented no evidence showing indorsement of the Note either in its favor or in favor of Wells Fargo.  Without establishing these elements, AHMSI could not establish that it was a “person entitled to enforce” the Note.

    Quoting from the opinion:

    “When debtors such as the Veals challenge an alleged servicer’s standing to file a proof of claim regarding a note governed by Article 3 of the UCC, that servicer must show it has an agency relationship with a “person entitled to enforce” the note that is the basis of the claim. If it does not, then the servicer has not shown that it has standing to file the proof of claim. ***”

    Conclusion. Why is the Veal case important?  Let’s start with recent history: First, we know that during the securitization heydays of 2005 – 2007, record keeping and document retention were exceedingly lax.  Many in the lending and servicing industry seemed to think that somehow, MERS would reduce the paper chase.  However, MERS was not mandatory, and in any event, it captured at best, perhaps 60% of the lending industry.  Secondly, MERS tracked only Mortgages and Trust Deeds – not Promissory Notes.  So even if a lender can establish its ownership of the Trust Deed, that alone is not enough, without the Note, to permit the foreclosure.

    As recent litigation has revealed, some large lenders, such as Countrywide, made a habit of holding on to their Promissory Notes, rather than transferring them into the REMIC trusts that were supposed to be holding them.  This cavalier attitude toward document delivery is now coming home to roost.  While it may not have been a huge issue when loans were being paid off, it did become a huge issue when loans fell into default.

    So should the Big Banks make good on their threat to start filing judicial foreclosures in Oregon, defense attorneys will likely shift their sights away from the unrecorded Trust Deed Assignments[5], and focus instead on whether the lenders and servicers actually have the legal right to enforce the underlying Promissory Notes.

    [1] The word “indorsement” is UCC-speak for “endorsement” – as in “endorsing a check” in order to cash it.

    [2] Although not perhaps as apparent in the opinion as it could have been, there were not successive indorsements of the Veals’ Promissory Note, i.e. from the originating bank to the foreclosing bank. There was only one, i.e. from GSF to Option One.  There was no evidence that the Note, or the right to enforce it, had been transferred to Wells Fargo or AHMSI.  Ultimately, there was no legal entitlement under the UCC giving either Wells or its servicer, AHMSI, the ability to enforce that Note.  The principle here is that owning a borrower’s Trust Deed or Mortgage is insufficient without also owning, or have a right to enforce, the Promissory Note that it secures.

    [3] Mr. Dorchuck did not appear to testify.  His letter, on its face, is clearly hearsay and inadmissible.  The failure to properly lay any foundation for the letter, or authenticate it “under penalty of perjury” is inexplicable – one that the bankruptcy panel criticized. This was not the only example of poor evidentiary protocol followed by the banks in this case.  However, this may not be the fault of the banks’ lawyers. It is entirely possible these were the documents they had to work with, and they declined to certify under “penalty of perjury” the authenticity of them. If that is the case, one wonders how long good attorneys will continue to work for bad banks?

    [4] This is a drafting sleight of hand.  Mortgages and Trust Deeds are transferred by “assignment” from one entity to another. But Promissory Notes must be transferred under an entirely different set of rules – the UCC. Thus, to transfer both the Note and Mortgage by a simple “Assignment” document, is facially insufficient, by itself, to transfer ownership of – or a right to enforce – the Promissory Note.

    [5] The successive recording requirement of ORS 86.735(1) only applies when the lender is seeking to foreclose non-judicially.  Judicial foreclosures do not contain that statutory requirement.  However, to judicially foreclose, lenders will still have to establish that they meet the standing and real party interest requirements of the law.  In short, they will have to deal head-on with the requirements of Articles 3 and 9 of the Uniform Commercial Code.  The Veal case is a good primer on these issues.

    Phil Querin
    Attorney at Law
    http://www.q-law.com/
    121 SW Salmon Street, Suite 1100 Portland, OR 97204 
    Tel: (503) 471- 1334

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  • PMI to pay underwater borrowers to stay put by by Jacob Gafney, Housingwire.com


    Private mortgage insurer PMI Group (PMI: 1.34 -11.26%) will offer cash incentives to some homeowners in negative equity to help prevent mortgage defaults.

    PMI subsidiary, Homeowner Reward is working with Loan Value Group, to administer the pilot program, called Responsible Homeowner Reward.

    The program launched Monday and will start in select real estate markets where falling house prices left borrowers owing significantly more on their mortgage than what the property is worth.

    Participation in RH Reward is voluntary and there is no cost to the homeowner, according to PMI. The cash will come after a lengthy period of keeping the mortgage current, generally from 36 to 60 months. According to PMI, the reward will be between 10 to 30% of the unpaid principal balance.

    The Loan Value Group works “to positively influence consumer behavior on behalf of residential mortgage owners and servicers,” according to its website.

    LVG programs already delivered more than $100 million in cash incentives to distressed homeowners. However, those programs focus on turnkey solutions such as cash for keys, with an aim to avoid principal forgiveness. The Homeowner Reward program is taking a different path.

    “We continue to seek creative and effective loss mitigation strategies,” said Chris Hovey, PMI vice president of servicing operations and loss management. “PMI is especially supportive of homeownership retention efforts in states that are facing unprecedented housing challenges.”

    Write to Jacob Gaffney.

    Follow him on Twitter @jacobgaffney.

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  • Below Market Interest For Some Home Buyers Rate Available , by Brett Reichel, Brettreichel.com


    If an interest rate below 4% is appealing to you, you should consider the Oregon State Bond Loan as an option in your next home purchase.

     Yes – it can be used in a “next” situation.  Though the program is a first time home buyer program, there are options for previous home owners to use this program.  The Bond Loan defines a first time home buyer as someone who hasn’t owned a home in the last three years.  So, if you owned a home, but sold it prior to 2007, it’s possible that you could qualify for this loan.

    Currently, the State Bond Loan has an interest rate of 3.875%* and an APR of 4.721%*.  These low interest rates might be a once in a lifetime opportunity. 

    The program is underwritten to FHA guidelines so it’s a pretty easy program to qualify for.  FHA allows for less than perfect credit, and has flexible debt-to-income guidelines as well. 

     There are income limitations, but they are quite generous.  You should plan on being a long term owner due to the potential “recapture” tax penalty (which isn’t automatic, nor is it as bad as many loan officers make it out to be).

    Any “first time” home buyer should be considering this tool to minimize their housing expense!

    *Based on a $200,000 sales price and $194,930 loan amount.  Finance Charge $157,406.55, Amount Financed $190,935.08 and Total of Payments $348,341.73.  Credit on approval.  Terms subject to change without notice.  Not a commitment to lend.  Call for details.  Equal Housing Lender.

     

    Brett Reichel’s Blog  http://www.brettreichel.com

     

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  • Appraisal Fraud in Clackamas, Oregon? , by Brett Reichel, Brettreichel.com


    Wowza…..pretty bold headline, isn’t it?

    How can that claim be made or the question raised?

    First – a quick note on technicalities on appraisals – Comparable Sales are compared to the Subject property to try to lead the appraiser to a supportable “opinion of value”.   Differences in properties are accounted for by “adjustments” to the comparable sale, which then leads to an “adjusted value” of the comparable.  The adjustments are supposed to equalize differences in properties.  Adjustments are supposed to be supported through market analysis, specifically “matched pair analysis“.

    A simplified example of a “matched pair analysis” would be two houses that are identical in every way, with the exception of one of them having a fireplace.  House A, without the fireplace sells for $100,000, and House B, with the fireplace sells for $101,000.  What’s the value of the fireplace?  Since the houses are identical in every way, the value of the fireplace is clearly $1,000.  In that market area, in that price range, fireplaces are worth $1,000 and until proven differently, the appraiser is justified in adjusting comparable sales $1,000 for fireplaces (having them or not having them).

    One of the things we’ve seen adjustments for lately, is the adjustment in “time”.  This adjustment is made for changes in the market between when a comparable sale is sold and when your subject sold.  If the market is dropping, then the adjustment to the comparable would be downward, and in a rising market, upward.

    As you might suspect, appraisers have been making this adjustment…..a lot….lately.  The problem is, they have been skipping the “matched pair analysis” process and just using median prices to justify the adjustment.  This is NOT acceptable appraisal practice.  But, if it’s become the norm, if it’s become acceptable, it should apply when median prices escalate.

    Thus the headline.  A recent market report indicates that median prices have been on a 90 day upswing in Clackamas, Oregon.  Have the appraisers reversed their course and adjusted upward for time?  No they haven’t.  Why?

    Lender pressure is why.  The whole point of industry reform (HVCC and/or Dodd-Frank) was to eliminate lender pressure, but now the lenders have even greater methods of applying pressure with the new rules.  Really, the problem starts in two places, regulation and the GSE‘s.   The GSE’s are Fannie Mae & Freddie Mac.  Their forms require the use of Median Prices.  Fannie/Freddie, Barney and Chris (a criminal “friend of Angelo”) are behind this lender fraud.  The rest of the market is captive and held to their criminal standards, including the poor appraiser.

    Frankly, this only helps the banks, and it doesn’t do anything for the borrower, the seller.  It doesn’t help stabilize our markets or improve our economy.

    What to do?  Well, don’t shoot the appraiser – he/she can’t do anything about what the lenders force them to do.  Complain to the lender, complain to your legislators, complain to regulators, call Elizabeth Warren, complain long, hard and loud….maybe if enough voices are heard we can get out from under the tyranny of the banks and Fannie Mae and Freddie Mac.

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  • Home equity picture improves, a little, by Wendy Culverwell, Portland Business Journal


    The number of homes worth less than their outstanding mortgages fell slightly in the first three months, according to figures released Tuesday by CoreLogic Inc. (NYSE: CLGX), a Santa Ana, Calif.-based real estate data firm.

    According to CoreLogic, 27.2 percent — or 13.5 million homes — had negative or near-negative equity in the first quarter. That compares to 27.7 percent in the fourth quarter of 2010.

    In Oregon, 17.2 percent of homes are worth less than their mortgages and another 5.8 percent had near-negative equity. Collectively, Oregonians owe $121.9 billion on 696,142 mortgages on properties worth a total of $175 billion.

    “The current economic indicators point to slow yet positive economic growth, which will slowly reduce the risk of borrowers experiencing income shocks,” said Mark Fleming, chief economist with CoreLogic. “Yet the existence of negative equity for the foreseeable future will weigh on the housing market recovery by holding back sale and refinance activity.”

    Negative equity occurs when a borrower owes more than the home is worth. “Near-negative” refers to homes with less than 5 percent equity, a figure that would be wiped out by transaction costs if the property were sold.

    In Washington state, 16.9 percent of homes had negative equity and 5.8 percent had near-negative equity. Collectively, Washingtonians owe $291.7 billion on 1,412,110 mortgages on properties worth a total of $429.1 billion.

    Nevada, where 63 percent of all mortgaged homes are worth less than the outstanding loan balance, led the nation for negative equity. The other top five states were Arizona, 50 percent, Florida, 46 percent, Michigan, 36 percent and California, 31 percent. Nevada, Arizona and Florida showed improvement from the prior quarter.

    The average “underwater” home is worth $65,000 less than the outstanding mortgage balance.

    Read more: Home equity picture improves, a little | Portland Business Journal

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  • Use Caution When Selling REO Properties, by Phil Querin, PMAR Legal Counsel, Querin Law, LLC Q-Law.com


    Foreclosure Sign, Mortgage Crisis
    Image via Wikipedia

    By now, most Realtors® have heard the rumblings about defective bank foreclosures in Oregon and elsewhere. What you may not have heard is that these flawed foreclosures can result in potential title problems down the road. 

    Here’s the “Readers Digest” version of the issue: Several recent federal court cases in Oregon  have chastised lenders for failing to follow the trust deed foreclosure law. This law, found inORS 86.735(1), essentially says that before a lender may foreclose, it must record all assignments of the underlying trust deed. This requirement assures that the lender purporting to currently hold the note and trust deed can show the trail of assignments back to the original  bank that first made the loan.

    Due to poor record keeping, many banks cannot easily locate the several assignments that  occurred over the life of the trust deed. Since Oregon’s law only requires assignment as a condition to foreclosing, the reality of the requirement didn’t hit home until the foreclosure crisis was in full swing, i.e. 2008 and after.

    Being unable to now comply with the successive recording requirement, the statute was frequently ignored. The result was that most foreclosures in Oregon were potentially based upon a flawed process. One recent federal case held that the failure to record intervening assignments resulted in the foreclosure being “void.” In short, a complete nullity – as if it never occurred.

    Aware of this law, the Oregon title industry is considering inserting a limitation on the scope of its policy coverage in certain REO sales. The limitation would apply where the underlying foreclosure did not comply with the assignment recording requirement of ORS 86.735(1). This means that the purchaser of certain bank-owned homes may not get complete coverage under their owner’s title policy. Since many banks have not generally given any warranties in their

    REO deeds, there is a risk that a buyer will have no recourse (i.e. under their deed or their title insurance policy) should someone later attack the legality of the underlying foreclosure.

    Realtors® representing buyers of REO properties should keep this issue in mind. While this is  not to suggest that brokers become “title sleuths,” it is to suggest that they be generally aware of the issue, and mention it to their clients, when appropriate. If necessary, clients should be told to consult their own attorney. This is the “value proposition” that a well-informed Realtor®  brings to the table in all REO transactions.

    ©2011 Phillip C. Querin, QUERIN LAW, LLC

    Visit Phil Querin’s web site for more information about Oregon Real Estate Law http://www.q-law.com

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  • A New Twist on the Old Contractor Lockbox


    Asset managers REO brokers and affiliates, what we show you may scare you.

    Although contractor lockboxes are a necessity in the REO world unfortunately they are also great for inviting unwanted attention to your vacant asset. We try to hide the lockbox on the gas meter or the water spigot, but many times they end up living on the front door knob. Nosey neighbors and bored kids love to try to get into your vacant homes to take a look, sometimes wary travelers or homeless people seek homage in your place. Much of this can be avoided simply by not drawing attention to the fact that the home is vacant.

    Obviously better than leaving the key on top of the outdoor sconce, the contractor lockbox does provide a more difficult way for someone to access the key. However, as you just witnessed in the video above, a handheld hammer and 5 whacks cracks it wide open. Even scarier is how easy it is to pick a push style model. Without force or any damage, the code of a push style contractor lockbox can be easily determined by pressing the clear key and running through the numbers. Within 30 seconds most people can gain access using this method.

     

    The Bottom of the St. Helens RocLok Lock Box model.

    Unfortunately with all of the trade’s people needing access to the place, keeping a key hidden at the property is a must. Electronic Realtor lockboxes offer better security however the electronic key to open them is not available to subs and contractors for the trash out or repairs. So what is the answer? After 7 years as an REO broker, Ryan Belshee came up with a solution to this problem, The RocLok Hide a Key.

    Combining the security of the contractor lockbox and a faux rock that looks, weighs and adapts just like natural stone; the RocLok provides the much needed disguise other key hiding safes lack.

    Just like any other lockbox, the RocLok has a 3 digit, re-adjustable code that safeguards spare keys. The code is set by you and changed as frequently as needed when in the unlocked state. However, the most notable improvement is that instead of screaming, “I’m hiding a key, come and get it,” the RocLok hides in plain sight. Nothing like the little pebble sized plastic rocks that have been around for decades, the RocLok is a 12 pound concrete based rock. It is weather and impact resistant, ages naturally and doesn’t depend on batteries or power to operate.

    The use of the RocLok in your field services will reduce break-ins and reduce the cost of servicing the

    The St. Helens RocLok Lock Box Hides Keys Disguised as a Natural Rock

    asset. As an additional safety precaution the RocLok is now available with the new LokDown System allowing the agent to secure it to the ground, tree or pole meaning no one is going to walk off with your keys without a lot of work. The LokDown was designed to withstand over 250 lbs of lifting force when installed into the ground and much more if attached to a pole or other solid object.

    For more information about the RocLok Hide a Key or to purchase one please visit: www.RocLok.com – Bulk orders are available and can be shipped to multiple locations for easier disbursement. Contact us at: info@roclok.com to obtain accurate pricing.

     

  • Fannie Mae Homepath Review, by Thetruthaboutmortgage.com


    Government mortgage financier Fannie Mae offers special home loan financing via its “HomePath” program, so let’s take a closer look.

    In short, a HomePath mortgage allows prospective homebuyers to get their hands on a Fannie Mae-owned property (foreclosure) for as little down as three percent down.

    And that down payment can be in the form of a gift, a grant, or a loan from a nonprofit organization, state or local government, or an employer.

    This compares to the minimum 3.5 percent down payment required with an FHA loan.

    HomePath financing comes in the form of fixed mortgages, adjustable-rate mortgages, and even interest-only options!

    Another big plus associated with HomePath financing is that there is no lender-required appraisal or mortgage insurance.

    Typically, private mortgage insurance is required for mortgages with a loan-to-value ratio over 80 percent, so this is a pretty good deal.

    HomePath® Buyer Incentive

    Fannie Mae is also currently offering buyers up to 3.5 percent in closing cost assistance through June 30, 2011.

    But only those who plan to use the property as their primary residence as eligible – second homes and investment properties are excluded.

    Finally, many condominium projects don’t meet Fannie’s guidelines, but if the condo you’re interested in is owned by Fannie Mae, it may be available for financing via HomePath.

    Note that most large mortgage lenders, such as Citi or Wells Fargo, are “HomePath Mortgage Lenders,” meaning they can offer you the loan program.

    Additionally, some of these lenders work with mortgage brokers, so you can go that route as well.

    Final Word

    In summary, HomePath might be a good alternative to purchasing a foreclosure through the open market.

    And with flexible down payment requirements and no mortgage insurance or lender-required appraisal, you could save some serious cash.

    So HomePath properties and corresponding financing should certainly be considered alongside other options.

    But similar to other foreclosures, these homes are sold as-is, meaning repairs may be needed, which you will be responsible for. So tread cautiously.

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  • Don’t Be Fooled Again! by Brett Reichel, Brettreichel.com


    Many people will tell you that an Adjustable Rate Mortgage (ARM)  is horrible, and something a borrower should never take out.  A friend recently stopped by worried that his ARM was adjusting and that his payment would go through the roof.  We analyzed his paperwork and found out that his interest rate would be going down by MORE THAN 2 PERCENT!  This made a big impact on his payment!

    The ARM’s that were bad were:

    • Sub Prime loans where the rate was artificially low
    • Had super short introductory periods like two years or less
    • Had a pre-payment penalty that was in force longer than the first adjustment of the loan
    • Had a payment that didn’t even cover their interest

    These loans were definitely toxic.

    The difference between today’s ARM’s?  Today’s ARM’s are much safer and better loans.  If you think you are only going to be in a property for 5, 7 or 10 years, you can find an ARM that has a fixed rate time frame that matches!   Here are features to look for in an ARM:

    • A fixed rate period that is the same or longer than the time frame you are planning on staying in the house.  If you think you’ll be there for five years, get a 5 year fixed ARM, or a 7 year fixed ARM.
    • Caps or limits to how high the interest rate a go to both at each adjustment and for the life of the loan.
    • Low margins.  What’s a margin?  Essentially, it’s the lenders “mark up” over the cost of their funds.  The lower the margin, the lower your future interest rate.
    • Most importantly, a lower rate than a 30 year fixed rate loan.  If you are sharing the interest rate risk with the lender, you should get a break in your costs.

     Recent customers of mine who are moving to a new town for just five years, will be saving over 1% in interest rate compared to the thirty year fixed rate loan.  For them this means about $100 per month!  For $100 a month, they can buy their loan officer a steak dinner every month for getting them such a good deal!

    Don’t be fooled by so-called experts.  ARMS are a great deal IF MATCHED to the correct situation.  Thirty year fixed rate loans are great, but sometimes an ARM is a better option.

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  • Strategic Default: Inconceivable Assumptions Suddenly Conceivable, by Tim Rood, Mortgagenewsdaily.com


    Until recently it was generally believed that only a small fraction of Americans would willingly choose to skip their monthly mortgage payment, aka “strategically default”, when they found themselves stuck in a negative equity situation.

    The logic driving this belief was based on the notion that borrowers wouldn’t want to damage their credit profile or deal with the social stigma surrounding a public foreclosure. The assumption that most underwater borrowers will continue making their monthly payments (absent a life event) is factored into the analytics of risk managers, buyers and sellers of mortgage related assets, servicing managers, and regulators across the country.

    What if this assumption is wrong? Is that inconceivable?

    It wasn’t long ago when conventional wisdom convinced us that lenders would never make loans to borrowers that had virtually zero likelihood of being able to pay the loans back. In a 2010 study conducted by the Cato Institute, it was estimated that there were over 27 million Alt-A and subprime loans in the system by mid-2008. That’s approximately 50 percent of all loans in the market.  Remember when we thought home price would never fall on a national level? Never been done and won’t ever happen, right? That assumption was shattered when home values nationally dropped between 30-50% from their peak in 2006, wiping out roughly $7 trillion of home equity in the process.

    Fannie Mae recently published it’s latest National Housing Survey and exposed disturbing patterns and sentiments with American homeowners. For example,  46% of borrowers are “stressed” about their underwater mortgage, up from 11% in June 2010. That’s an alarming four-fold increase in three quarters. That statistic becomes even more concerning when viewing the sheer number of borrowers faced with negative equity. At the end of 2010, which doesn’t include the home price declines seen in 2011, CoreLogic estimated that 11.1 million homes, or 23.1 percent of all homes with a mortgage, were underwater. Think about those two stats this way – every morning, 46% of the estimated 11.1 million underwater borrowers wake up and debate why they should keep paying their monthly mortgage payment. Further weighing on borrowers is that  47% of borrowers surveyed reported higher household expenses than the year before…

    From that perspective, it doesn’t seem inconceivable that our assumptions might be off base again. Is principal forgiveness the answer?

    Probably not, and here’s why. Remember how many folks HAMP was supposed to save by giving them new loan terms? The number touted by the administration was over 4 million. In reality, the number is likely to come in around 500-750,000 permanent modifications. Imagine the scenario when a government sponsored principal reduction program is announced. Out of the 11 million underwater borrowers – you’ll probably get three times as many borrowers applying for relief. Maybe one tenth of them will actually qualify and be granted a principal reduction. In the meantime, some 20+ million applicants would have stopped making payments to “qualify” or be considered for qualification. How many of them will be able to or even want to get current again after they are turned down?

    Like it or not, we have got to find ways to stabilize home prices, reward responsible behavior among existing homeowners, and encourage home buying. I don’t see any ideas on the table that would accomplish any of these objectives…. and the effects are starting to show up in data.

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  • Did you order the appraisal yet? – The Ideal Home Loan Process


    Awhile ago I produced a video about some conversations between certain Realtors and my team.

    I also wrote a nice long post about the subject, and Realtor professionalism in general, on my site.

    I like to go back and watch the video from time to time because it makes me laugh, and that is a rare commodity in today’s Real Estate market. While I was watching it, I thought I would share with the audience here what I consider to be the ideal home loan process, and exactly how the appraisal fits in to that timeline.

    1) Pre-application Consultation – Ideally, home loan applicants would sit down with a competent, licensed Mortgage Professional 6 months before they intend to enter the market. Many people have unique circumstances regarding credit, income, employment, etc., and 6 months is usually enough time to work through issues to present the best possible loan file to underwriting.

    2) Gathering of Essentials – Before you apply, you should gather your last 30 days paystubs, 2 most recent bank statements, last 2 years Federal tax returns with w2s & 1099s, & most recent retirement statements. And, if applicable, any divorce decrees, award letters, child support orders, and last 2 years business tax returns for self-employed/business owners.

    3) Fill out a Loan Application – When it’s time to fill out a loan application, do so with somebody you trust and get along with. You will be speaking with your loan officer a lot over the course of the coming weeks, so you might as well make sure that those conversations are with somebody you like and who is professional. They should clearly explain your loan terms, and all of the disclosures that need your signature so that you feel comfortable with the agreement you are entering into.

    4) Behind the Scenes – This is where the real work starts. Your Loan Officer and his/her team will be verifying and documenting your income and assets, dissecting your credit report, pre-approving you through automated underwriting, ordering a preliminary title report and title insurance, and many other things that are just as exciting as they sound, but necessary. This prepares your file to be ideally what we call a “one touch” file in…

    5) Underwriting – Despite the possibility of unexpected snafus, underwriting can still be a fairly smooth process if you have chosen the right Loan Officer to work with. Depending on underwriting turntimes, in a couple of days you should have a conditional approval. Think of this as the “to-do” list that you and your Loan Officer must complete before your loan documents can be drawn up.

    6) Conditions – You will work with your Loan Officer to get all of the “to-dos” done and submitted to the underwriter. Once you are sure that all conditions can be satisfied, this is when you would order the…

    7) APPRAISAL! – Your Loan Officer will order your appraisal through an Appraisal Management Company. Depending on the company used, and the demand for appraisals, this process will take a few days to a week. It has to be completed within 10 days, but it usually doesn’t take that long. Assuming the appraisal comes in at an acceptable value, the next step is to order the…

    8 ) DOCS! HOORAY!! – The docs, or loan documents, are the paperwork you sign at closing. These include the final application, disclosures, the note, and sometimes your last 2 years tax returns need to be signed (if you e-filed the previous 2 years). Next step is…

    9) FUNDING!!! – There will be some “prior-to-funding” conditions, but most of the time its standard escrow items. The escrow company sends all of the documents you signed at closing to the lender, and the lender reviews those documents for accuracy and completeness. If everything is ship-shape (which it should be if you are working with the right people), then you can…

    10) MOVE IN!!!!! – Time to pay for pizza and beer in an attempt to trick your friends into helping you move.

    And there you have it, the ideal home loan process. Each individual loan carries its own set of circumstances, so it isn’t out of the realm of possibility that your process might deviate from these 10 steps. However, if you select the right person to work with, you should have a good idea of what you are up against from the beginning.

    Jason Hillard - @homeloan_ninja
    Jason Hillard

    If you have any questions about Real Estate financing in Oregon or Washington, or the home loan process in general, feel free to shoot me an email at obi-wan_shinobi@homeloanninjas.com or check out the wealth of information at http://www.homeloanninjas.com/! I started the site because I continue to be appalled by the complete lack of reliable information about home loans in the mainstream media. I sincerely hope it is a true resource that helps to educate everyone to become a better home loan consumer.

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  • The Median Price Fallacy, by Brett Reichel, Brettreichel.com


    Every month or so, the news media generates articles based on the latest statistics from various multiple listing services. In those articles they relate how “Median Prices” have either fallen or increased. What’s that mean? Well, a median price is one where it’s the middle price of all the sales in an area. So, let’s say we have a small city called Brettville. In Brettville last month, there were 15 sales. One sale was at $200,000, 7 were above $200,000 and 7 were below $200,000. Then the middle price, or median price for Brettville last month was $200,000.

    Market analysts watch median prices for changes, and use them as an indicator of market price changes. However, median prices are not a good and clear indicator of an individual houses value, despite what most appraisal reports say today. In fact, when an appraiser uses changes in median prices as a justification for time adjustments to value, it is inaccurate analysis.

    What’s a time adjustment? An appraiser uses comparable sales (comps) to determine their opinion of value on the property they are appraising. The appraiser makes dollar value adjustments on these sales when they compare them to the subject property . A “comp” might be 200 square feet bigger than the subject so the appraiser would adjust for that difference. One thing appraisers do commonly in today’s market is adjust for the difference in time between when a “comp” sold and the date of the appraisal. If a market is appreciating or depreciating at 1% a month, the appraiser would make an adjustment to the value of the comp in comparison to the subject to compensate for the difference in time.

    It’s inaccurate analysis to use median price to justify this time adjustment. Why? Because median price could be affected by more cheap houses selling in an area or more expensive houses selling in a neighborhood. It could have zero to do with any change in value.

    Another factor that makes median prices not appropriate for time adjustments is that different market value ranges could have different changes in value. In some of the markets, larger, move up style homes are depreciating faster than starter homes. Why? Because there are more first time home buyers in the market than move up buyers.

    If you are not happy with your appraisal, review it, and read the comments. If the appraiser justifies the time adjustment with median prices, and not a matched pair analysis, you have a faulty appraisal, and valid grounds for a complaint. Don’t expect your lender to do this, your loan officer doesn’t understand, and the underwriter probably doesn’t either. But the appraiser knows what they are doing. They used to laugh at Realtors for doing this in an appreciating market. Now they’ve jumped on that bandwagon, too.

    For More of Brett’s writing. Go to http://brettreichel.com

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  • Report Reveals Racial Disparities in Mortgage Lending, Posted in Financial News, Mortgage Rates, Refinance


    Funds used for refinancing home mortgages were less available in the minority sections of major U.S. cities than in predominantly white areas after the recent housing crash, according to a new study released on Thursday. The study, compiled by a coalition of nonprofit groups across the country, revealed that refinancing in minority areas has decreased since the recession.

    Mortgage Refinancing Drops 17 Percent in Minority Areas

    The report, titled “Paying More for the American Dream V,” took a look at seven metropolitan areas–Boston, Charlotte, Chicago, Cleveland, Los Angeles, New York City and Rochester, N.Y.–to explore conventional mortgage refinancing.

    The study, compiled by groups like California Reinvestment, the Woodstock Institute in Chicago and the Ohio Fair Lending Coalition, revealed the following:

    • Refinancing in minority areas decreased by an average of 17 percent in 2009 compared with the year prior.
    • Refinancing in white areas jumped by 129 percent.
    • Lenders “were more than twice as likely” to deny applications for refinancing by borrowers living in minority communities than in majority white neighborhoods.

    The report also found that minority borrowers were more likely to obtain a high-risk subprime mortgage loan than white borrowers, even if their credit was good.

    Lenders Urged to Invest More in Low-Income Communities

    Because of the inconsistency the study’s authors found in lending practices, they are concerned that there are ongoing racial disparities in mortgage lending as a whole.

    Adam Rust, Director of Research at the Community Reinvestment Association of North Carolina, noted in statement “Lenders are loosening up credit in predominantly white neighborhoods, while continuing to deprive communities of color of vital refinancing needed to aid in their economic recovery.”

    To aid the issue, the authors are urging lenders to make changes, including:

    • Investing more in low-income communities
    • Improving disclosure requirements to protect unwary borrowers

    They noted that it is subprime loans that contributed largely to the housing market crash because not only were they given to those with poor credit, but income was never checked to confirm that borrowers could repay the balance.

    With foreclosures expected to flow heavily in the months to come and home sales still struggling, the authors believe that expanding fair lending opportunities to all who qualify could help repair the housing industry. It’s for this reason they think changes to lending practices should be a top priority for financial institutions.

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  • Oregon Foreclosures: The Mess That MERS Made, by Phil Querin, Q-Law.com


    For the past several years in Oregon, foreclosures have been processed fraudulently and in violation of Oregon’s trust deed law. Banks, servicers, title companies and licensed foreclosure trustees, were all aware of the problem for years, but no one did anything about it. This was not a minor error or simple oversight – it was a patent disregard for the laws of Oregon.

    Oregon’s Trust Deed Foreclosure Law. It is widely known that during the credit/housing boom, lenders frequently sold their loans between one another. When the ownership of a loan is transferred, it is necessary to execute, in recordable form, an “Assignment of Trust Deed.” ORS 86.735(1) governs what must occur before a trust deed may be foreclosed in Oregon; all such assignments must be placed on the public record. This is not a new law and it is not significantly different from the laws of many other states. Oregon’s law has been on the books for decades.

    ORS 86.735(1) is not complicated or confusing. It simply means that after the original lender makes a loan and takes back a trust deed (which is immediately recorded), all subsequent assignments of that loan must be recorded before the foreclosure is formally commenced. In this manner, one can see from the public record, the “chain of title” of the loan, and thereby know with certainty, that the lender filing the foreclosure actually has the legal right to do so. It protects the consumer and assures the reliability of Oregon land titles.

    The MERS Solution. In the 1990s, MERS came into existence. Its avowed purpose was to replace the time honored system of public recording for mortgage and trust deed transfers, with an electronic registry which its members would voluntarily use when a loan was transferred. This registry is for use only by MERS members, all of whom are in the lending industry. The immediate effect of MERS was that lenders stopped publicly recording their mortgage and trust deed assignments. This deprived local governments of millions of dollars in recording fees, and took the business of the sale of loans “underground.” A more detailed discussion of MERS’ business model is posted here.

    Although the numbers vary, it is believed that MERS comprises approximately 60% of the national lending industry. Until recently, it had no employees. MERS was not born from any state statute or national enabling legislation. It was the brainchild of its owners, Mortgage Bankers Association, Fannie Mae, Freddie Mac, Bank of America, Nationwide, HSBC, American Land Title Association, and Wells Fargo, among others.

    How MERS Has Contributed To Oregon’s Mortgage Mess. In an effort to give MERS the appearance of authority, its rules clarify that it will act solely as a “Nominee” for each of its members – doing only what its member instructs, but in its own name and not the name of the member. The “Nominee” is, as some Oregon federal judges have correctly observed, nothing more than “a strawman.”

    When the foreclosure crisis hit, lenders realized that they needed some way to get the trust deed into current bank’s hands to initiate the process. Since MERS’ existence was virtual, and with no real employees, whenever it came time to assign a mortgage or trust deed, a MERS “Assistant Vice President” or “Assistant Secretary” would execute the assignment on behalf of MERS in their “official” capacity. But since MERS has no such officers, it simply created mass “Corporate Resolutions”, appointing one or more low level member bank employees to “robo-sign” thousands of bogus assignments.

    It is important to note that these MERS “officers” only made one assignment – i.e. from the original lender whose name appeared on the public record when the loan was first made, to the foreclosing lender. In Oregon, this means that ORS 86.735(1) requiring the recording all of the intervening assignments, was intentionally ignored. Hence, there was never a “chain of title” on the public record disclosing the intervening assignments of the loan. As a result, in Oregon, no one – including the homeowner – knows if the bank foreclosing a loan even has a legal right to do so.

    And there is reason to believe many of the banks did not have the legal right to foreclose. In every Oregon foreclosure I have witnessed during the last twelve months, where the loan was securitized into a REMIC, there is substantial doubt that the foreclosing bank, acting as the “trustee” of the securitized loan pool, actually had any right to foreclose. This is due to the strict tax, accounting, and trust laws governing the REMIC securitization process.

    The short explanation is that if the paperwork was actually transferred into a loan pool between, say 2005 – 2008, there would be no need for an assignment to that trustee today – the loan would have already been in the pool and the trustee already had the right to foreclose; but if the loan was not transferred into the pool back then – when it should have been, it cannot be legally assigned out to that trustee today. Although it is not always easy to locate, the Pooling and Servicing Agreement, or “PSA,” governing the REMIC will contain a “Cut-Off Date.” That date is the deadline for the sponsor of the REMIC to identify the pool’s notes and trust deeds (or mortgages) in the trust. After that time [subject to limited exceptions – which do not include the transfer of nonperforming loans into the trust – PCQ], no new loans may be added. For example, if the REMIC was created in early 2006, the Cut-Off Date is likely to also be in 2006. This would mean that a bank, acting in the capacity of a trustee for a certain REMIC today, would not have the legal right to foreclose, if that trustee only recently received the trust deed assignment. The REMIC had been closed years earlier.

    This is fraudulent. Yet it was so widespread, that foreclosures routinely adopted this “single assignment” model, and it became an assembly line business for MERS and its member banks. The assignment documents were typically prepared in advance by foreclosure mill attorneys and foreclosure trustee companies, uploaded into cyberspace to a servicer or foreclosure processing company, and signed, en masse, by robo-signers. Then the assignments were shipped over to notaries, who never actually witnessed the MERS “officer” sign an document. Once completed, the original assignment document was sent via overnight mail to the foreclosure trustee to record and begin the foreclosure. In many instances, the foreclosure trustee, (a) acting as a MERS “officer” would sign the assignment document transferring ownership of the loan to a lender, then (b) he or she would sign another document appointing their company as the Successor Trustee, then (c) that same person would also sign the Notice of Default, which commenced the foreclosure. No conflict of interest there…. It is this “need for speed” that epitomizes the MERS business model.

    The result has been predictable – today there is evidence of fraudulent foreclosure paperwork on a massive scale. Forgeries are rampant. Notarization laws are flaunted. Until recently, the banks and MERS have gotten away with this scheme. The lending, servicing and title industries have simply taken a “don’t ask, don’t tell” approach to foreclosures in Oregon and elsewhere.

    However, in 2010, Oregon and several other states said “enough.” In Oregon for example, there were at least three federal district court and bankruptcy court cases that struck down foreclosures due to the use of the MERS strawman model, and also based upon the flagrant violation of ORS 86.735(1). The most notable of these cases is the February 7, 2011 published opinion of Hon. Frank R. Alley III, Chief Bankruptcy Judge in Donald McCoy III v. BNC Mortgage, et al. Judge Alley held, in part, that: “…the powers accorded to MERS by the Lender [whose name appears in the Trust Deed] – with the Borrower’s consent – cannot exceed the powers of the beneficiary. The beneficiary’s right to require a non-judicial sale is limited by ORS 86.735. A non-judicial sale may take place only if any assignment by [the Lender whose name appears in the Trust Deed] has been recorded.” [Parentheticals mine. PCQ]

    Judge Alley concluded that a failure to follow the successive recording requirement of ORS 86.735(1) meant that the foreclosure was void. It is important to note that in McCoy, as in most rulings against MERS lenders, the courts have not held that the banks may not prosecute their foreclosures – merely that before doing so, they must record all intervening assignments, so there is no question as to the foreclosing bank’s standing.

    MERS is now engaged, through surrogates and one or more lobbyists, to introduce a bill in the Oregon legislature. It is a bold effort to legislatively overturn Judge Alley’s ruling, as well as similar adverse rulings by Oregon federal court judges, King, Hogan, and Perris.

    MERS, its member banks, and the foreclosure industry, including its foreclosure mill attorneys, have never had justification for ignoring Oregon’s foreclosure law. Nor have they offered any justification. Instead, they have threatened that if ORS 86.735(1) and other homeowner protections in our foreclosure statutes are not amended to give MERS the right to continue acting as a strawman, and to avoid recording all successive assignments, the Oregon housing and foreclosure crisis will continue longer than necessary. Metaphorically speaking, having been caught with their hand in the cookie jar, MERS now asks the Oregon Legislature to legalize cookie theft.

    Oregon Consumers Need To Be Protected. MERS’ proposed legislative solution does nothing to protect homeowners. Rather, it is aimed at legalizing patently fraudulent conduct, in the name of “helping” Oregon homeowners get through the foreclosure crisis faster. Thanks, but no thanks. The title and lending industry are concerned that if a law is not immediately passed giving MERS its way, foreclosures will come to a halt and commerce will suffer. The banks have even threatened to file judicial foreclosures against homeowners, to somehow avoid the recording of assignments law. This is a complete ruse. Here’s why:

    Lenders cannot avoid their paperwork problems in Oregon by going into court. As we have seen in Oregon’s federal court cases, the banks are still unwilling to produce the necessary documents to prove they have standing to foreclose. If a bank does not have the legal documentation minimally necessary to establish its right to foreclose non-judicially, why would it go into court and shine a bright light on its own fraudulent paperwork? The outcome will be the same – as we have seen in judicial foreclosure states such as Florida, where they now require the banks’ attorneys to certify to the truthfulness of their pleadings and paperwork.
    Lenders will not go into court for fear of further alienating an already alienated public. [Note the recent MERS Announcement to it’s members, tightening is rules due to concern over its “…reputation, legal and compliance risk….” – PCQ]
    The banks know that with the high court filing fees and lawyers, it will be much more costly for them to foreclose judicially in court. While they do not seem concerned about their high executive bonuses, when it comes to the cost of foreclosures, they’ll pinch a penny ’til it screams.
    In any event, there is little reason to fear judicial foreclosures clogging court dockets. With proper documentation, the process can be relatively fast (3+ months), since the cases could be disposed of on summary judgment. If judicial foreclosure cases became too numerous, the local courts can create expedited protocols and assign certain judges to speed them through – as done in other states. Lastly, many foreclosures are already being filed judicially, especially on commercial properties. To date, there has been no hue and cry that it is overwhelming the court systems.
    The lenders’ complaints that foreclosures are slowing Oregon’s housing recovery are not necessarily verified by the stats. Oregon’s Regional Multiple Listing Service (“RMLS™”) shows that January 2009 housing inventory (i.e. dividing active listings by closed sales) was 19.2 months; January 2010 was 12.6 months; January 2011 was 11.3 months. February 2009 was 16.6 months, February 2010 was 12.9 months; and February 2011 was 10.9 months. March 2010 showed housing inventory at 7.8 months (down from 12.0 months in 2009), and there is no reason we cannot expect even better numbers when this month is over.

    These numbers suggest that housing inventory is gradually being reduced year over year. Although it is true that housing prices continue to decline, that is more likely the result of lenders fire-selling their own REO inventory, than anything else. I say this because of many anecdotal reports of lenders refusing short sales at prices higher than they ultimately sold following foreclosure. Perhaps lender logic is different than human logic….

    In an online article in Mortgage News Daily [a lender resource site – just look at their advertising – PCQ], it was reported:

    The cost of a foreclosure, it turns out, is pretty staggering and we wonder why lenders and the investors they represent aren’t jumping at a solution, any solution, that would allow them to avoid going to foreclosure whenever possible.***According the Joint Economic Committee of Congress, the average foreclosure costs were $77,935 while preventing a foreclosure runs $3,300.

    Overall, foreclosure is a lose-lose proposition for all concerned – except perhaps the companies servicing and foreclosing the loans [Point of Interest: Bank of America owns BAC Servicing and ReconTrust, and is making millions from the business of servicing and foreclosing the loans it made to its own borrowers. A sterling example of vertical integration in a down market… PCQ]

    The only good solution is a non-foreclosure solution. Lenders already have ultimate control over the outcome for every loan in default. In those cases where modifications are viable, they should do so on an expedited basis. [Point of Interest: Go to the following CoreLogic site here , where in 2010 they touted their new analytics program that is designed to enhance lender decision making on modifications, short sales, and deeds-in-lieu. One has to believe that if such programs exist and banks stopped losing borrowers’ paperwork, they could actually have a decision back fairly quickly – rather than the 14-month horror stories we hear about. – PCQ]

    Although it is doubtful that the industry can and will – anytime soon – create a fast and fair process to reduce principal balances, that is certainly a fair solution. It is fair to the homeowner in need, and actually fair to the bank, since the cost of foreclosure, including taxes, insurance, commissions, and other carrying costs, are significantly more than the short term pain of a write down. [If the banks need a little accounting sleight-of-hand from the FASB, there’s no reason they couldn’t put some pressure on, as they did with the mark-to-market rules. -PCQ]

    Another, more likely and quicker solution, is to establish a fast-track short sale process. This should not be complicated if the banks stopped “losing paperwork” and focused on turning short sales into 45-60 day closings, consistent with the timing for equity sales. It has been lender delays that have stigmatized short sales, so only hungry investors, and buyers with the patience of Job, participate. This can change if banks begin expediting their short sale processing.

    With both the modification and short sale alternatives, lenders do not receive the property back into their already bloated REO departments; and there is the added advantage that the banks do not have to risk a judicial slapdown, when using their fraudulently prepared Assignments of Trust Deed. In short, it is a “win-win” solution for lender and borrower.

    Conclusion. The MERS business model was based upon the concept that “It is better to seek forgiveness than permission.” The problems they created were done with their eyes wide open in a brazen act of “might makes right” hubris. After having created these problems, they are now seeking to legislatively overturn the rulings of several of Oregon’s highly regarded federal judges. These decisions have affirmed the rule of law. To do otherwise – that is to sanctify MERS’ illegal conduct by eviscerating statues designed to protect homeowners, would be a travesty.

    MERS, the banks, and the title industry own this problem, and they should own the solution. Whatever the outcome, it must be fair, and should not be borne on the backs of Oregon’s already struggling homeowners.

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  • VA Home Loan Eligibility in Eugene/Springfield Oregon can be confusing, by Fred Chamberlin, Myfhamortgageblog.com


    VA Guaranteed Home Loan eligibility in Eugene/Springfield Oregon can be very confusing. Who is and who is not eligible may be a surprise to those that are eligible that may not realize it. As a Vietnam Era U.S. Air Force veteran with 10 years of service, my eligibility is pretty easy to see.

    Some are obvious (like mine), others are more obscure:

    Veterans with active duty service (who were not dishonorably discharged) during World War II and later periods are eligible for VA loan benefits. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days of service.
    Veterans and active duty military personnel who served during peacetime must have had more than 180 days of active service. Veterans of enlisted service starting after September 7, 1980, or officers with service beginning after October 16,1981, must in most cases have served at least 2 years.
    Veterans who have served after August 2, 1990 (Gulf War period) must have completed 24 months of service or at least 90 days of active duty for which you were called or ordered to active duty. Most of this is written in “militaryeze” so the easiest way is to submit for a certificate of eligibility or COE. Reservists and National Guardsmen will often qualify for the 90 days of active duty provision if they had been called up for duty.
    Active duty personnel with at least 181 days of service or 90 days during the Gulf War.
    The VA does not require that you have a certain credit score in order for approval. The actual mortgage lenders, however, are allowed to set their own standards for VA loan requirements and that is normally either 620 or 640 mid score.

    Changing economic conditions and increased losses due to loan defaults have motivated lenders to limit who they will lend to.

    Since early 2010, most VA lenders in the U.S. have tightened their lending and credit score requirements, making home financing harder to come by for those with credit issues or other criteria that makes their loan more risky.

    As a result, getting a loan without a down payment is more difficult, though one of the few remaining options for 100% financing is a VA loan. Major lending groups have generally resolved to set the minimum credit score requirement at 620.

    To learn more about this, our article Credit Score Requirements For VA Mortgages (in a later post) is a great place to start.

    There are several specific pieces of documentation a lender will need to determine your eligibility:

    A DD214 for discharged veterans.
    A NGB Form 22 for Army or Air National Guard
    A statement of service for active military personnel.
    A certificate of eligibility (COE) to determine you have VA entitlement.
    Widows/widowers of service personnel that died while on active duty.

    Because each lender has different qualifying guidelines, the next step is to contact me to find out if you meet their VA loan requirements such as minimum FICO/credit scores, debt-to-income (DTI) ratios, and find out about maximum loan amounts with and without a down payment.

    I can help you attain your certificate of eligibility on your behalf.

    Lastly, if you have either had a divorce, filed bankruptcy, or had a previous home go into foreclosure, you are not immediately disqualified from a VA loan, although there are some additional restrictions.

    You can find more information regarding these future topics in our articles titled Divorce And VA Loan Eligibility, Does A Bankruptcy Mean I Can’t Get A VA Loan? and Can I Get A VA Loan If I’ve Had A Recent Foreclosure?

    Contact me

    Navigating the mortgage approval process doesn’t have to be daunting. With me on your side those hurdles can be overcome. I am available right now to help you with the loan process and know the ins and outs of FHA, VA, USDA and conventional financing. If you want to buy a home using an FHA loan or refinance using VA, I am here to help. Contact me at Alpine Mortgage Planning, 1200 Executive Pkwy., Ste. 100, Eugene OR 97401, 541-342-7576/541-221-3455 cell or by e-mail. Only you can make the choice it is time to get the process started.

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  • OregonRealEstateWanted.com: New Buyer Posting


    New buyer (SG14) has been posted on the OregonRealEstateWanted.com web site. This buyer is an investor and they are looking for residential multifamily opprotunities under $200,000 in the Portland Metro area. Buyer is looking for seller financing opportunities only. To learn more about this buyer and others that may be looking for real estate you have for sale. Please visit OregonRealEstateWanted.com

    Oregon Real Estate Wanted
    http://oregonrealestatewanted.com

    Fred Stewart
    Stewart Group Realty Inc.
    http://www.sgrealty.us

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  • Why Are Appraisals So Bad?, by Brett Reichel, Brettreichel.com


    Ok – so….blinding flash of the obvious here….Appraisals are serious problems for real estate transactions right now. Lawrence Yuen, the Chief Economist from the National Association of Realtors said this week “Home sales are being constrained by the twin problems of unnecessarily tight credit and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers”.

    Many of you have experienced first hand the effects of a low real estate appraisal. Maybe you were denied the ability to refinance to a lower interest rate or worse yet, maybe you had a sale blow up on a home you were trying to purchase. Or, if you are a Realtor or lender, you’ve had clients you can’t help due to a low appraisal.

    The appraisers say, that they are just reading the market. To a degree, that’s true. Nearly no one’s house is worth what it used to be, and with the market making that move downward, clearly there are going to be lower appraisals (another blinding flash of the obvious).

    Mortgage guys(used in a gender neutral way here) and Realtors will blame the Home Valuation Code of Conduct (the HVCC, which has been recently replaced by a new law with similar restrictions). It’s true the HVCC has created some issues.

    Personally, I can live with an accurate appraisal, even if it doesn’t give me my desired outcome. That’s life, appraisals should be as accurate as possible, and lenders need a good report to base their analysis of the collateral on. But, we aren’t getting accurate appraisals. Why?

    Here are a few reasons:

    First – the HVCC created a monster by leading most lenders to decide to order their appraisals through appraisal management companies. Many appraisal management companies require cheap and quick appraisals. The biggest national appraisal management companies that the “big 4″ lenders require the market to use, order appraisals from wherever they can get the cheapest fee’s and the quickest turn-around times. Little consideration is given to the qualifications of the appraiser, other than appropriate licensing, certification, insurance, and bonding. Sometimes, this means an apprasier is coming from two or three hours away from the subject property!

    Why is this an issue? Because all real estate is local. Identical houses just blocks apart, sometimes across the street, can have significant differences in value because of market perceptions. Differences in schools, addresses, and many other factors create value differences in markets. If you are from two hours away, you probably don’t know all these nuances. It’s easy to miss that a buyer will pay $25,000 more for a house within certain elementary school boundaries, and that the boundary can be in the middle of the street. If the appraiser isn’t extremely familiar with the market they shouldn’t do the appraisal there, or they should learn and quantify these differences really quickly and complete an accurate report.

    Second – appraisers have a tendency to forget markets are driven by psychology. In the stock market, the “efficient market theory” has been proven to be inaccurate. Psychology affects an illiquid investment like real estate even more. Too many appraisers approach appraisal from a technical viewpoint that ignores market psychology. The reason we need good appraisers is to quantify these nuances that make differences in value that a computer can’t pick up on. That’s why lenders rely less and less on “Automated Value Models” run through computers, and instead rely on an expert in the local market.

    Third – seasonality is an issue. Most markets have seasons where houses don’t sell as readily. Maybe it’s too much snow, maybe too much heat, maybe it’s the holidays, but really these seasons affect sales prices, and this too should be quantified and reflected in reports.

    Fourth – lender meddling is another issue. FannieMae and FreddieMac (the agencies)force repurchases of loans on to the big lenders, who force them on smaller lenders. Repurchasing loans creates huge losses for lenders. The agencies use flimsy excuses, like claiming valid appraisals are invalid, to force these repurchases, and scare the other lenders to death. Thus lenders get more conservative and pressure appraisers to bring appraisals in lower through their underwriting practices. The agencies create additional pressure on the appraiser through the use of the Form 1004 MC, which was created to analyze market conditions, but is really an ill-conceived form that can lead to poor analysis of the market by both underwriters and appraisers.

    Fifth, incompetence is all too common in the appraisal profession. A recent appraisal report done in a suburb of Seattle indicated that the appraiser depreciated the value of the house at 1/2% a month because median prices dropped in that Multiple Listing Service area by 6% over the last twelve months. On the surface this would appear to be an appropriate decision. But, median prices are not the best indicator of values. Appraisers and underwriters will not accept median prices to determine appreciation, why would they be appropriate in a declining market? In fact, many appraisal text books identify this practice as wrong. We see this poor reasoning time and time again in appraisal reports and it is invalid analysis.

    What do we do about this? Apply pressure to get accurate appraisal reports! Your loan officer might not be able to do much, but maybe someone higher up can. Make sure your complaints are based on sound data, and not just your emotional involvement in the transaction. If you are in the real estate or lending industry, learn more about appraisals so that you can know what to look for and give your clients better advice. In any event, we need to continue calling attention to this ongoing problem.

    Brett Reichel’s Blog http://brettreichel.com

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  • The New, Old Paradigm’s….., by Brett Reichel, Brettreichel.com


    Is we no longer use the word “Paradigm”……

    Do you, like me, have a hard time keeping up with all the latest buzzwords, catch-phrases, and schools of thought? Here’s a tip – forget them all.

    It’s interesting to look over recent history and realize that no matter how much we think things have changed, things have stayed the same. As wise old King Solomon said “there is nothing new under the sun”.

    What have we learned from the last two economic “busts”? Mainly that old wisdom still applies. In the “Tech Boom” or the “Dot Com Bubble” we were told that there were new metrics to measure companies by and that earnings didn’t matter. Guess what? Whoever told us that was wrong. Earnings and good corporate governance are still a necessity to make a good company and a good investment.

    In the recent “Real Estate Bubble”, we were told that house prices always went up, and that it didn’t matter if a home buyer was credit worthy or had income. Guess what? You’re right, whoever told us that was wrong. Having decent character (credit), and enough income to meet your obligations creates a successful homeowner.

    There are some wrong thoughts out there bouncing around the world right now as well. If you follow blogs, opinion posts, comments on articles, etc., you will see constant negativity out there right now. Really, if there was a time to be negative, it’s understandable why people would think now is that time. The economy remains in a shambles. Unemployment is high. Many feel that both the Democrat’s and Republicans have abandoned the “little guy” and small business, and are trying to give everything to the big banks, and wall street. Pretty much everyone thinks things are bleak, and there is no reason for positivity.

    In my business, regulation grows and grows like an ugly alien weed from a bad sci-fi flick and threatens to choke everything out in its path. My comrades in the Real Estate market bemoan the millions of foreclosures coming on the market. Self-proclaimed experts predict further collapse and decay.

    But a few weeks ago, I was watching a series on the history of America on the History Channel and what struck me was that we’ve been here before. In the history of this country, it has faced many economic challenges and has always overcame those challenges. The economic forces of capitalism and its “creative destructionism” have always created opportunity for those willing to seize it.

    “Creative destructionism” is a concept that was first recognized by Marx, and he viewed it as a negative. But, like much of the rest of his thoughts, his viewpoint was wrong. Economist Joseph Schumpeter recognized this force as one of innovation and progress.

    Really, what we want to take from this is that we don’t live in a time of collapse and decay, we continually live in a time of this “creative destructionism” where, yes, things will change and change rapidly, but there will still be opportunity for us to thrive.

    That’s the “old paradigm” – that’s where the old wisdom comes in to play. In a capitalist society (and for those of you who are more negative, even a “semi-capitalist” society), there is always opportunity.

    I’m re-reading an old book from the self-help section called “Think and Grow Rich” by Napoleon Hill. I got it for 99 cents on my Kindle through Amazon (Wow …. there’s new and opportunity). He said something on early in the book that really caught my attention and struck me as being very up to date and modern, and remember this book was written back in the 30′s in the “Great Depression” :

    “Never in the history of America has there been so great an opportunity for practical dreamers as now exists. The six-year economic collapse has reduced all men, substantially, to the same level. A new race is about to be run. The stakes represent huge fortunes which will be accumulated within the next ten years. The rules of the race have changed, because we now live in a CHANGED WORLD that definitely favors the masses, those who had but little or no opportunity to win under the conditions existing during the depression, when fear paralyzed growth and development.”

    I guess what I’m trying to say is that, yes, a lot of things have changed and will change. Yes, our time right now has it’s serious challenges. But, really, now is the time to apply old wisdom. It’s a time, no matter what our failures have been, to pick ourselves up by our bootstraps, to work hard, to be positive, to seize these new opportunities and to run this “new race” we’ve had to run before.

    It’s up to us, it’s up to me, it’s up to you. Opportunity is out there. We just have to grab it.