REALatively Speaking…

Every new market condition creates new challenges for the active REALTOR ®. Often we are faced with dilemmas about how far to go in our actions that will both serve the needs of our clients to the fullest, yet remain on the safe side of risk management and the Code of Ethics.

Currently there is an issue with agents representing buyers that have had a difficult time getting an offer accepted; they are resorting to creativity in how they are writing their offers and how many offers they are submitting at the same time.

It goes without saying that if the buyer is an FHA buyer with 3.5% down, and the REALTOR ® writes the offer as conventional with 20% down or anything that is not accurate, that there may be a violation of Article 2 of the Code of Ethics which prohibits the œexaggeration, misrepresentation or concealment of pertinent facts relating to the property or the transaction and Standard of Practice 2-4: œREALTORS ® shall not be parties to the naming of false consideration in any document.

Risk management experts have also stated that submitting multiple offers on behalf of buyers without full disclosure to the sellers involved may open the possibility of actions against the buyer for œlack of good faith in their offer.

At the CAR meetings in Sacramento, there was further discussion regarding the ethics of submitting multiple offers and it was suggested that REALTORS ® may be in violation of Article 2 of the Code of Ethics which prohibits the œconcealment of pertinent facts relating to the transaction if this information is not disclosed to the sellers involved.

Before submitting offers ask yourself:

• Is the offer being submitted true and accurate?
• Are there any issues that are being œconcealed that you would want to know about as a listing agent reviewing offers?
• Are you working with a buyer making more than one offer at the same time without disclosing that fact to the seller?

Always remember, as REALTORS ®, we have an obligation to a higher standard of care and that the actions we take on behalf of our clients can never override our obligation to the Code of Ethics.

©2009 Bay East Association of REALTORS ®

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If a lender or loan servicer is not following the Obama administration™s Making Home Affordable program guidelines may report the lender and/or loan servicer in one of two ways: through the Making Home Affordable Web site if the loan is owned or guaranteed by Fannie Mae or Freddie Mac, or by contacting a supervisor at the servicer.

Below are steps that NAR recommends:

First, visit www.makinghomeaffordable.gov, the official Treasury Web site for the Making Home Affordable program. At the site, determine whether the loan is owned or guaranteed by Fannie Mae or Freddie Mac by clicking œLoan Look Up on the ribbon on the top of the home page. Only the holder of the loan is allowed to perform this, so do in the presence of the client or after obtaining their written permission.

If the loan is a Fannie Mae or Freddie Mac loan, call (800) 7Fannie (732-6643) or (800) Freddie (373-3343), as appropriate, describing the specific inconsistency. Do this whether the issue relates to the refinancing or the loan modification program.

Next, if the loan is not owned or guaranteed by Fannie Mae or Freddie Mac, determine if the servicer is participating in the Home Affordable Modification Program (HAMP) by going to the Web site and clicking œContact Your Mortgage Servicer on the top ribbon. To date, 16 servicers are participating, covering more than 80 percent of all mortgages.

If the servicer is participating, the first step is to contact the servicer using the phone number or e-mail address listed on the site to appeal the issue to a supervisor. Be sure to identify the specific provision of the guidance that is not being followed. If the supervisor cannot or will not correct the problem, call (800) 7Fannie (732-6643)  to report the disagreement. Fannie is administering the program for the Treasury Department and will work to resolve the issue.

For more information, please visit:

Making Home Affordable Program Website (consumer friendly)

Detailed Information on Making Home Affordable and Other Government Programs

To help you make your loans more affordable, below are direct contact numbers for the loan modification departments at major U.S. banks:

Bank	Program Name	Phone Number
	Bank of America Financial Difficulty Relief	800-846-2222
	Chase Home Ownership Center	866-550-5705
	Citibank™s Office of Homeownership Preservation	866-915-9417
	Citifinancial Hardship Assistance	877-915-9417
	National Homeownership Retention Program for Countrywide Customers	800-669-6607
	Fifth Third Bank Financial Hardship Assistance	866-601-6391
	HSBC Payment Assistance Program	800-338-6441
	Regions Bank Loan Payment Assistance	866-298-1113
	SunTrust Home Retention Team	888-886-0696
	U.S. Bank Lending Assistance Program	800-872-2657
	Wachovia Loan Modification Programs	800-707-4607
	Wells Fargo Home Mortgage Alternative Payment Options	800-678-7986

Beginning Monday, June 15, 2009, banks in California cannot foreclose a mortgage without either renegotiating the loan or giving the homeowner three months notice.

The California Foreclosure Prevention Act, signed by Gov. Schwarzenegger in February, adds 90 days onto the time period between when homeowners default on a loan and when their home can be repossessed in foreclosure. Banks can avoid the 90-day holdup by having a comprehensive program in place to make mortgages more affordable by reducing the interest rate, extending the loan term, or reducing or deferring some of the principal. Such programs must be approved by regulators.

Click here for the full story. See Related Bill: Assembly Bill X2 7  for more information.

The Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, and the New York State General Attorney have created a new agreement titled the Home Valuation Code of Conduct (HVCC), which prohibits lenders, mortgage brokers, and real estate agents from selecting and having any œsubstantive communication with an appraiser.

• HVCC was created to protect consumers against fraudulent appraisals, which some industry experts believe was a contributing factor to inflated home values.
• The code applies to all conventional, single-family loans that are originated on or after May 1 and are sold to Fannie Mae or Freddie Mac.   It does not apply to loans backed by the Federal Housing Administration (FHA) or the Veterans Administration.
• Under HVCC, a lender™s loan production staff is prohibited from selecting an appraiser for a property or having any œsubstantive communication with an appraiser or an appraisal management company about a home™s valuation.   However, a non-loan production staff member may call the appraiser, or the lender can farm out the request to an appraisal management company.
• Lenders no longer can perform œvalue checks, where appraisers pull comps for a house to see if the numbers are likely to work for a client, before the actual appraisal is ordered.
• Mortgage brokers and/or real estate agents cannot order or pay for an appraisal.
• Borrowers will receive, free of charge, a copy of their appraisal at least three days before closing, giving homeowners more time to contest what they view as an inaccurate appraisal.  
• Because lenders are more likely to farm out requests to appraisal management companies, some appraisers believe borrowers will have to pay more out-of-pocket expenses“approximately $100 more than they would have previously.
• The appraisal process may take longer, so some housing experts recommend borrowers lock in a mortgage rate for a longer period of time.   It™s important to note that the longer the lock, the more costly it is.
• Some real estate industry analysts are worried that appraisal management companies may hire an appraiser unfamiliar with a neighborhood, which could lead to an inaccurate valuation.   To prevent this, appraisers recommend consumers check an appraiser™s name and license number with the California Dept. of Insurance to see where the appraiser is from and if the appraiser is familiar with the area where the home is located.  

Consumers and/or mortgage brokers and agents can visit http://www.orea.ca.gov/html/lic_appraisers.asp to check an appraiser™s license.

From June 11, 2009 C.A.R. Market Matters Weekly Advisory.   Reprinted with permission of the CALIFORNIA ASSOCIATION OF REALTORS ®

The homeowner strategy of walking away from foreclosure homes when home values plummet below the outstanding mortgage balance has now been given a new twist by lenders. Banks are refusing to take back foreclosure properties, leaving homeowners to assume responsibility for their upkeep.

A new foreclosure-related trend is beginning to take shape, and it raises troubling questions about the role of home values and bank sales in preventing foreclosure. In cities across the U.S., banks are forgoing their right to take possession of properties that have been foreclosed upon, and are canceling the bank sales at the last minute. Instead of putting homes on the auction block, lenders are simply walking away, leaving homeowners and city officials in a confusing and frustrating legal limbo.

Low home values breed walk away phenomenon

The so-called lender “walk away” phenomenon is the latest bizarre twist in the prolonged foreclosure crisis, and may signal a whole new wave of foreclosure problems that were completely unforeseen. Banks are discovering that owning foreclosure properties is more expensive than it’s worth, because home values are so low. To save money, they don’t even bother paying for a foreclosure auction. They just contact the homeowner and inform him that the foreclosure process has been halted, and that he’s still fully responsible for any financial or legal liabilities related to the house.

Failure preventing foreclosure

Most of these homeowners have already vacated their properties after enduring the heartbreak of foreclosure. In their absence, the properties fall into decline, and often become targets of vandals who strip them bare of fixtures or pipes that can be sold for scrap metal. Many residences are condemned by city officials and are slated for destruction, especially in cities and neighborhoods where foreclosure blight is a major headache. In foreclosure-plagued Buffalo, New York, for example, city officials sued nearly 40 banks last year for abandoning dozens of homes that fell into a state of deterioration. But in recent months, that kind of pass-the-hot-potato scenario has played out in cities across the country, where banks are systematically walking away from situations where home values are too low to even justify the cost of a foreclosure seizure and subsequent bank sale.

The responsibility typically goes back to the borrower in default, who’s then hit with the huge liability of owning a worthless property that’s costing both him and the city money. Homeowners who have accepted the loss of their homes and are struggling to put their personal and financial lives back together, suddenly find themselves in a much more complicated situation. Both the bank and the city hold them liable for an uninhabitable home that’s still technically theirs. The distressed homeowner, whose name is the one on the deed and the title, may get a bill for the cost of demolition. And the cost to tear down a worthless home and remove the rubble can run into the tens of thousands of dollars.

Source:  Tom Kerr MortgageLoan.com

One of the concerns a consumer has after experiencing a bankruptcy, foreclosure, or short sale (referred to as a “preforeclosure sale” by Fannie Mae) is the ability to obtain credit to purchase another home.   Fannie Mae has updated its credit guidelines.   This legal article summarizes those guidelines.    

Q1:   How long is the time period after a foreclosure before a consumer can be eligible to obtain credit to purchase a home?

A:   Five years from the date the foreclosure sale was completed.  

Additional requirements that apply after 5 years and up to 7 years following the completion date are as follows:

• The purchase of a principal residence is permitted with a minimum 10 percent down payment and minimum representataive credit score of 680.
• Purchase of a second home or investment property is not permitted.
• Limited cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time.
• Cash-out refinances are not permitted for any occupancy type.

(Source:   FNMA Announcement 08-16, 6-25-08  )

Q 2.   Why do the additional requirements for foreclosures in Question 1 only apply from 5 to 7 years following the foreclosure completion date?

A    According to Fannie Mae policy in Part X, Section 103 of the Selling Guide, Fannie Mae requires only a 7-year history to be reviewed for all credit and public record information.   The 7-year timeframe also aligns with the information provided by the borrower on the loan application relative to disclosure of a past foreclosure action.   (Source:   FNMA Selling Guide, 4-1-09. )

Q 3.   Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the foreclosure?

A    Yes.   Three years from the date the foreclosure sale was completed.   The same additional requirements apply as listed in Question  1 except the minimum credit score of 680 is not required.   (Source:   FNMA Announcement 08-16, 6-25-08.  )

Read the full article by clicking here.

Source: May 12, 2009, C.A.R. Legal Department.   Reprinted with permission of the CALIFORNIA ASSOCIATION OF REALTORS ®