Tuesday, April 26, 2011

Revocable Trusts Being Utilized in Foreclosure Cases

There is a new and disturbing trend in foreclosure cases and short sales. "Experts" are advising distressed home owners to place their home in a revocable trust and appoint themself as trustee. There would be advantages to this, but I am suggesting that such home owners consider some free legal advice - and yes, I understand and appreciate the value of "free" advice!!

This is arguably fraud. It would appear to a lender or a judge, that this is an attempt to cloud title or delay or obstruct the foreclosure process. If the short sale is unsuccessful, there could be serious ramifications to this manuever. The reasons that masny experts suggest to do this are valid, but there are other - less risky methods to achieve the same results.

At the point in time that a home is in default - more than 30 days past due - anything that a home owner does regarding title, is going to be closely examined by a Court or lender. Even placing the home in a trust just prior to entering defaultis problematic, so my advice is "DON'T DO IT" and follow my BEST advice...never listen to the advice of someone who has a vested interest in the outcome of the disposition of a home such as a listing or selling agent or anyone else that may benefit from the disposition of the home. Seek the counsel of an attorney and tell them "EVERYTHING". Do not selectively leave out details as the "devil is truly in the details" in such matters.

Sunday, April 24, 2011

A Look at Lease Purchase or Lease Option Scenarios

A lease purchase is typically a lease with an agreement to purchase at some point in the future. They are frrequently also referred to as lease options. One or two years in the future for the purchase is typical. There is normally some consideration paid for the option to purchase in the future.

In most cases, a lease purchase is utilized because the buyer is not in an immediate position to finance a home, and they would like to establish an option to buy at some future date. In the current economy, there are many people who don’t qualify for financing, but would like to be homeowners. A lease purchase can be the perfect tool to enable a potential buyer to move into a home while building his or her financial profile to purchase the property. With qualifying for conventional financing harder than ever, a lease purchase can be a simple and effective way to sell your property and help the future homeowner fulfill the American dream of owning a home.
As an investor, structuring a lease purchase on your investment property can be a winning strategy for all concerned.
There are five reasons why lease purchases are a viable option for investors and potential home owners:

1.) A lease purchase can be a great short-term exit strategy. As many investors have discovered, flipping a property in the current real estate environment can be difficult and costly. Residential inventory levels remain high and with the flood of foreclosures continuing to hit the market, the competition is overwhelming. While a lease purchase probably won’t close in 6 months like a potential retail flip, there is a 12-24 months window to sell the property at better retail pricing. It is best to structure a lease purchase such that it provides positive cash flow during the lease term.

2.) Tenants tend to take better care of your property in a lease purchase. Most tenants look upon the home they occupy as essentially their own (or soon to be). It just makes sense that a tenant takes better care of the property when they intend to own it. One of the most frustrating aspects of being a landlord is the lack of care and respect given to a rental property by some tenants. Most investors that work the lease purchase area experience that most lease purchasers have a slightly better “homeowner” mindset and tend to treat the property with a little more care. They also frequently make improvements such as paint, flooring and countertops. This is especially true if you structure the lease to provide that the tenant (future home owner) makes minor repairs.

3.) It’s easier to avoid real estate commissions with a lease purchase. Unlike a retail flip, most properties for lease purchase are not placed in the MLS. The best approach is to place lease purchase properties on the internet such as Craigslist, Facebook and Twitter. Signs also work well but they are subject to local zoning and ordinances and almost always require a permit. There are no commissions paid when the property is “sold” because it was built into the lease agreement.

4.) It is better to receive a down payment than a security deposit. Unlike a renter, a lease purchaser actually puts up a non-refundable down payment on the property that is not returned if the purchase does not happen. To be clear, the down payment is credited to the tenant if they follow through with the purchase. However, if the buy does not happen, the initial option money is forfeited. Even if you may be skeptical about a tenant’s ability to make the purchase within the term of the lease, you may still execute the contract because you am comfortable with the amount of option money received up front (which is typically much more than a security deposit). In this scenario, the tenant will be that much more motivated to get financing within the term of the lease.

5.) A lease purchase can be a true “win-win” transaction for both the investor and the buyer. When structured fairly, a lease purchase can be a great path to homeownership for your tenant. The ability to lock in a purchase price (at today’s lower prices) and benefit from the monthly rent credit makes a lease purchase the next best thing to a conventional mortgage for the tenant. At the end of the day, if the tenant buys the home, the investor can feel good about making a great return on his or her investment, while at the same time helping the tenant achieve their goal of homeownership.

Paddy Deighan

An Outline on How to Buy Real Estate Notes

There is massive increase in the number of investors purchasing real estate notes. Many first time real estate investors are jumping in as the "experts" explain to them how easy it is to make a fortune buying notes. Of course, there is also danger.

Purchasing a seller financed note is not much different than buying the real estate itself. An investor wants to be certain that it is a solid investment of time and money. There are several issues that should be addressed in any successful real estate note purchse:

Property Appraisal: It is important to get an independent third party to give you an accurate value of the property. This tells you if there is enough equity in the deal for you. Not to mention, the appraisal is beneficial if you are planning to resell the property.

Title Insurance: When transferring title of the property and the note, you as the buyer need to make sure the underlying asset is free of any encumbrances or liens you might not be aware of. Title insurance only protects the buyer of the property at the time of purchase. Therefore, when the seller bought the property they bought title insurance to protect their interest. It is not transferable. You need to make sure you buy a new policy at the time of your transaction so you are protected.

Property Deed: While you are purchasing a note secured to a property, you are also taking ownership of the property. You need to make sure the seller gives you the deed to that property. This is key to all aspects of the note transaction. Furthermore, it gives you the ownership rights of the property in case of forfeiture by the homeowner.

Assignment of Contract: The assignment of contract will detail what the note’s current value is, the terms of the note, and what portion of interest you are purchasing. These final pieces of information will wrap up all key aspects of the transaction ensuring that you the purchaser are getting what was offered in the first place.

Property Insurance: Immediately after your purchase of the note, you should ask the person who lives in the home to give you a record showing that the insurance is paid to date. The policy should always have you named as “additional insured”. If anything ever happens to the property, you will be protected as the “additional insured”.

Leases: You will want to be certain that there are no tenants in the property. They may have rights even against you, the new owner of the property. It is not enough to ask the property owner because the situation may have changed and you are typically buying the note (at a discount) from the lender, not the home owner.

Paddy Deighan, Esq

Monday, April 18, 2011

Why is THIS such a problem....

For some reason, it has recently been a common theme that it is illegal/unethical/immoral - make your choice of evil - to purchase a property and sell it for a profit. I do not know why this has suddenly become an issue. Investors have been buying property and selling for a profit for years.

Ironically enough, many lenders and the federal government have loosened restrictions on "flipping" or "wholesaling" real estate. So, I am at a loss to explain why this is happening.

Additionally, investors who buy and re-sell for a profit, make up a significant number of homes being sold today. Numbers vary from 17%-30% of homes sold are by investors who seek to make a profit. Without them, the current housing market would be exponentially worse than it is now. When you consider that shadow inventory currently is 30 months, it would be catastrophic for investors to leave (or be regulated out of) the real estate market.

Flipping and wholesaling will be a reality as long as real estate is bought and sold and there are many ways to flip or wholesale properties legally. Unfortunately, many have abused the system and given such practices a bad name.

Thursday, April 14, 2011

GREAT News for Short Sale Investors

As reported by the Los Angeles Times, and others, those servicers involved in the robo-signing settlement may now be forced to permit modifications, principle reduction settlements, and short sales. While the terms of this proposed settlement are still being negotiated, the impact of the settlement could have some positive effects for both short sale sellers and purchasers of short sales. As a result of the settlement, it would seem that banks would have to be significantly more flexible with respect to their determinations of value.
As it stands right now, it is often difficult to come to some sort of agreement with the short sale lender on the value of a subject property. Frequently, values need to be appealed using comps or a full appraisal conducted a certified or licensed appraiser. The Los Angeles Times compares distressed properties to “day old bagels”: the point being that banks need to reduce the price of their assets in order to unload their inventory. However, the additional costs associated with foreclosure don’t always make foreclosure the best option. So, even the most difficult lenders (if they are part of this proposed settlement) would now be compelled to consider short sale more seriously.
As an attorney and founder of a third-party short negotiating firm, I can tell you that at present the only party who thinks that a property should be given a distressed value is the buyer. Short sale lenders (particularly, short sales with Fannie Mae as the investor) are sometimes asking for above market value on their properties. Bank-owned homes are frequently listed with a sales price equivalent to market value—not the distressed value associated with vacant and abandoned homes.

Wednesday, April 13, 2011

THIS is Why We Need Real Estate Investors

While many families struggle to find the funds to purchase their own home in today’s market where the deals abound but credit is tight, real estate investors are making the market work by buying in bulk. According to the National Association of Realtors, real estate investors represented 17 percent of all home sales nationwide in 2010. And that number is likely to grow as conventional funding continues to be difficult to obtain and the ability to spot and make a creative deal becomes more and more valuable.

As foreclosures continue to drag home prices downward, more and more real estate investors who may have exited the market prior to or during the housing bust are now re-entering as home prices become too much of a bargain to resist. And while historically investors have been demonized for everything from driving prices up to keeping them down, today many markets are relying on them to keep the entire machine from grinding to a standstill. For example, in Florida 17 percent of all homes are currently vacant. Without investors buying up homes, rehabbing them and selling them – probably still at a steep discount – those properties will drag home prices down in their areas indefinitely. “If Florida is going to have a comeback anytime soon, investors are going to have to play a role,” explained RealtyTrac vice president Rick Sharga. “There are just too many properties for traditional homebuyers to absorb,” he said.

In fact, while Moody’s Investor Services predicts that nationwide, home prices will stabilize by the end of 2011, distressed areas of the country might not stabilize until 2012 or later. Without investors, this process could be literally interminable

Friday, April 8, 2011

I Have to Get This Off of My Chest

OK, this really doesn't have anything to do with real estate...but real estate is vulnerable to economic irresponsibility...sooooo, I am speaking at a conference in Orlando...for the record, discussing Autologous Adipose Derived Stem Cells vs. Pluripotent stem cells in muskulo-skeletal deficiencies....you asked!

Anyway, while minding my own business in The Disney Dolphin Hotel, a GROSSLY overrated resort, I find myself watching the news... A story comes on about a state senator, otherwise now known as the colossal jackass of politics. Aforementioned colossal jackass of politics proposes legislation that enables ILLEGAL immigrants to receive a college education in Florida under the in-state tuition program. His rationale?? THIS IS A QUOTE, "we provided them a free education from K-12, so why not college too"?? WHAAAAAT???

So let me see if I have this straight, an illegal immigrant can pay $10,000 per year to attend college in Florida, but a young man or young lady from Georgia would pay $28,000??

Want more?? I did some research...it costs about $25,000 for each student to attend a Florida university. So, TAXPAYERS will subsidize $15,000 per ILLEGAL IMMIGRANT to attend a university.

Want STILL more?? The illegals earned the money to pay the $10,000 ILLEGALLY and did not pay taxes on it!!!!!!! AND they qualify for financial aid!!!!!!!!!!!!!

WHERE DOES IT END??? And there are some of you that believe that the government can fix real estate, banking, and the auto industry???...they couldn't fix a flat............

The collossal jackass of politics has a name...other than mud....it is Senator Siplan

Another Update on the Waste of Time HAFA

HAFA has largely escaped the sights of Republican members of Congress targeting current programs that they believe are draining taxpayer money and doing little, if anything, to help homeowners. It appears that the Treasury believes that business will continue as usual at least within HAFA, and some politicians have called other foreclosure-aid program termination bills “dead in the water” as the president has promised to veto any such bills that make it through both houses of Congress.

Thanks to new updates to policy guidelines for the Home Affordable Foreclosure Alternative (HAFA) program, servicers must provide much more feedback and transparency during the decision process and some agencies will be permitted to buy HAFA homes and rent or flip them back to the original owner. The Treasury has established directives to bring about these changes in June of this year, but is in the process of encouraging servicers to being to implement required changes immediately rather than waiting. According to the new rules, servicers must provide written confirmation of receipt of request for short sale or deed-in-lieu within 10 days of receipt and must provide an answer or a status notice and explanation within 45 days of receipt. Furthermore, certain non-profit agencies will be exempt from the “arms-length” rules in the system and will be permitted to rent or sell properties back to the original owners following the HAFA negotiations.

My question?? What is the point, HAFA has been a cataclysmic disaster and has helped a small fraction of the home owners that it was supposed to help....all at a cost of BILLIONS to tax payers...

Thursday, April 7, 2011

My Most Important Blog..My Best Kept Real Estate Secret

I have had success with loan modifications and short sales. Tremendous success with foreclosure defense either as an attorney or an expert witness. There is one central element to all of this success: a report of title.

More often than not, there is some defect in the chain of title in foreclosure. Perhaps the Note was assigned; perhaps the Deed of Trust or mortgage was assigned. Rarely are the assignments properly perfected. In a foreclosure defense, it probably means that the servicing agent or the plaintiff is not the "real party in interest". In other words, they do not have legal standing - the legal right - to sue. In such cases, the foreclosure is frequently dismissed. Another aspect of this is the heralded "produce the note" affirmative defense which requires the bank to prove that they have the original Note. If they cannot produce the original, a Court is likely to dismiss the foreclosure for the same reason - the plaintiff/bank is not the real party in interest, or they cannot prove that they are the real party in interest.

In loan modifications and short sales, this leverage provides justification for the bank to work with you. Information is key and the more you have, the better the result. It may cost a little bit of money (from a few hundred dollars to a little over a thousand) but it is money well spent.

Wednesday, April 6, 2011

New Legislation Seeks to End Taxpayer Funding of Fannie Mae and Freddie Mac

Government-controlled Fannie Mae and Freddie Mac may soon have to find a different source of funding if Republican congressmen get their way. Fannie and Freddie have already cost taxpayers $150 BILLION.

Senators John McCain (R-AZ) and Orrin Hatch (R-UT) introduced legislation yesterday that would permanently end federal support for the GSEs. The bill, called the GSE Bailout Elimination and Taxpayer Protection Act is the Senate companion to similar House legislation (HR 1182) introduced by Spencer Bachus (R-AL) and Jeb Hensarling (R-TX). The bill is intended to end the GSE’s federal conservatorship within two years and accelerate the timeline for privatization. The bill not only repeals Fannie and Freddie’s affordable housing goals mandate, but will cap maximum portfolio size at $700 billion and reduce that cap over five years to $250 billion.

Critics of the move say that eliminating these two entities so quickly could destabilize the “fragile housing market,” but McCain disagrees, saying that “the events of the last three years have made it clear that never again can we allow the taxpayer to be responsible for poorly managed financial entities who gamble away billions of dollars”. Many republicans are facing tough opposition to their support of this bill from members of the real estate industry such as the National Association of Realtors (NAR), which wants to keep Fannie and Freddie operating – just under tighter regulations – in order to prevent rising interest rates and another lending crunch

Sunday, April 3, 2011

New Jersey Appoints a Foreclosure Overseer

Last week, a New Jersey judge created a special position for an individual to oversee foreclosure proceedings. Superior Court Judge Richard Williams has been appointed “Foreclosure Overseer,” meaning that he will oversee foreclosure matters in the state and “safeguard the foreclosure process.” The move follows state Supreme Court Chief Justice Stuart Rabner’s December order in which he demanded that major lenders in the state demonstrate why their foreclosure activity in the state should not be suspended in light of “irregular activities” and alleged robo-signing incidents.

The lenders in question – OneWest Bank, BAC Home Loan Servicing, JP Morgan Chase (Chase Home Finance), Wells Fargo Financial New Jersey and CitiResidential Living – all objected to the order. They insisted that they had already reviewed procedures and made improvements before Rabner made his demands. The role of the foreclosure overseer will not be to examine individual cases, but rather to supervise the process itself, looking “at the source of the document creation and ensure that these documents were created by a process that conforms to the law.”

As with every governmental attempt to fix a problem that the private sector is better equipped to handle, some feel that this measure does not go far enough while others believe that it is more governmental intrusion into the private business sector.

Settlement Proposal in Robo Signer Debacle

Martha Coakley, state Attorney General for Massachusetts, has high hopes for a settlement with banks to resolve the robo-signer fiasco and other foreclosure-related procedural flaws once and for all. Coakley describes her team’s goal “all along is to stop this flow of unnecessary foreclosures and clear up titles”. She believes that $25 billion could go a long way toward solving the crisis. Last week, the AGs presented lenders with a proposal that would require them to streamline mortgage modification processes, cut principals and pay up – to the tune of $20 billion. Now, though, in the face of lender opposition to modifications in large part because they fear modifications will only encourage more homeowners to default, many are rallying to demand that banks pay more in penalties. Protestors are rallying outside the AGs’ meeting location, bearing signs with slogans like “Send Bank the Bill”.

The main goal of the settlement is to resolve issues with uncertainty. Homeowners do not know if their foreclosures will hold. Many are hoping to either retrieve their homes from banks or receive settlement money. Buyers are afraid to purchase homes in light of title issues created by the robo-signer crisis. Although the robo-signer crisis did not impact the 27 states that do not route foreclosures through the courts, the uncertainty has extended to every housing market. Lenders and AGs alike hope that some type of settlement could resolve the issue once and for all.

Friday, April 1, 2011

More Fallout from the Robo Signer Fiasco

The Florida law firm Ben-Ezra & Katz is refusing to return thousands of original promissory notes, mortgages and other documents that “evidence and secure” $400 million worth of JPMorgan loans. The law firm, which is firmly situated at the heart of the robo-signer scandal, was terminated by JPMorgan in early March. The firm is refusing to hand over documentation on foreclosures that were handled by the firm, thereby preventing JPMorgan from reviewing files, continuing with foreclosure processes and determining if their representatives were, in fact, in the wrong in a foreclosure probe that stems from the robo-signer fiasco last fall. The probe is being handled by the Florida attorney general’s office, and Ben-Ezra & Katz is one of four firms still under investigation. The firm contends that it is owed $5 million from the bank and this is the basis for not turning over the documents.

Other firms in the crosshairs are also filing suits for payment. David J. Stern is currently suing Chase Home Finance for close to $400,000 that the firm claims was never paid. Ladies and Gentleman...this is the proverbial tip of the foreclosure iceberg