Virtual real estate closings - not really

Real Estate Transactions Go Virtual

The traditional real estate closings with a room full of people and stacks of documents are becoming a memory, as much of the process is now online.

The above is the heading of an article in The New York Times.  Some quotes:

Real estate transactions have gone largely digital as the pandemic has disrupted nearly every aspect of home buying, from house hunting to securing a mortgage, getting an appraisal, notarizing documents and signing the final closing documents.

Well, not so fast, pardner.  This is an oversimplification of the entire closing process.  First of all, we have to define what is truly digital.  In New Jersey, contracts have been signed digitally for several years. The column recognizes that but it's a fact that we cannot transfer title to a home or mortgage property without ink signatures.

An appraisal?  Well, lenders have ordered them remotely for years, and email just makes it easier for the  appraiser to deliver her final product.  Is that revolutionary?  I don't think so.

Notarizing of documents is done is some jurisdictions remotely, but the pitfalls are obvious to anyone who is trying to protect their property rights.

While some clients continue to prefer in-person closings, others are giving their lawyers power of attorney to sign the final documents for them or they’re executing closings on virtual platforms like DocuSign.

It is becoming quite common for sellers to sign their documents ahead of time and deliver them to a third party, usually a title insurance agent such as Vested Land Services, to be held until the buyer completes the mortgage and her loan funds.  While it's true that many seller's give their attorney a "power of attorney," we recommend that it be expressly limited to signing off on the closing statement and miscellaneous documents that may be required by the buyer's mortgage company.

By all means, read the complete article here.

Your comments are always welcome.

 

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Fake mortgage loan applications on the rise

Fake mortgage loan applications on the rise.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

* * * * *

One of the reasons behind the mortgage debacle of 2008 was the many false mortgage loan applications lenders and mortgage loan purchasers relied on when approving the loan.  Whether it was for a home purchase or a mortgage refinance, fraudsters couldn't resist bumping up a borrower's income or otherwise flat out lying on the loan application.

 

Despite the warnings, it appears that fake loan apps are on the rise as told in this report from nytimes.com.

 

Falsified applications are now the most common type of mortgage fraud, their incidence having risen steadily for the last three years, according to LexisNexis Risk Solutions’ annual mortgage fraud report.

The report .... breaks down the composition of verified mortgage fraud activity in 2013 as reported by lenders, insurers and other subscribers to a LexisNexis database known as MIDEX. The database tracks only fraud involving industry professionals, such as loan officers, real estate agents and appraisers.

“Eighty percent of all mortgage fraud involves a professional,” said Tim Coyle, the company’s senior director of financial services and an author of the report. “It almost has to — it’s a very complex game.”

Credit fraud, such as undisclosed debt on a credit history or misrepresentation on the credit report, had a big jump in incidents since 2012 but appraisal fraud is down to 15%, a 5-year low.

 

Read the full report here. 

 

Good luck to us all.

 

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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What to do when the house appraises too low?

As anyone attempting to borrow money since 2008 can tell you, it’s not a walk in the park. While credit card companies seem to be back to offering cards through the mail, mortgage lending has gotten tighter as set out in this story from the NY Times.

One consequence of the subprime mortgage crisis is a far more rigid home appraisal process. Borrowers can complain about lower than expected appraisals — which may mean they can’t borrow enough to meet an agreed-upon sale price, or can’t refinance — but lenders very rarely reconsider.

Why the low appraisals?  One reason is that lenders cannot dictate the appraisal value to the appraiser.

Federally enacted rules have set up regulatory walls between loan originators and appraisers so as to shield them from pressures to inflate home values. Now many banks order appraisals through a third party, typically an appraisal management company, which acts as an intermediary.

What to do?

One option is available to borrowers: a rebuttal letter to the lender. If such a challenge is to garner any attention at all, it must lay out solid and objective evidence of where the appraiser went wrong. But without a decent knowledge of appraisal guidelines, that can be difficult to do.

 But the rebuttal better be based on facts and you should have the appraisal in front of you.

You are looking for houses in the neighborhood that have closed within, say, the last six months, and they should be a similar style of house.  If the comparable is a Cape Cod, and you are buying a colonial, well, you get my drift.

Don’t forget to compare interiors, too.  Out dated kitchens and the existence of a swimming pool, for instance, can change the comparable value of two otherwise similar properties.

Is it easy to change the appraiser’s mind?  No.  But as the article recommends, have another bank in mind.

We have worked with several lenders who seem to find sunshine in properties (and borrowers) where others found only clouds.  Let us know if we can help.

Read the full article. 

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Don't take "no" on your mortgage application laying down

From the Wall Street Journal.
"When the Bank Says No, Draft a Rebuttal- A rebuttal letter can help you fight a lower-than-expected home appraisal"

The buyer is ready to buy, and the seller is ready to sell. Then comes the low blow: The home is appraised below the contract price.

In order to close the transaction, the buyer has to come up with a greater down payment.

A possible recourse, albeit one with slim chances, is a formal rebuttal letter, also called a reconsideration letter, prepared by the borrower or loan originator, with input from a real-estate agent or an appraiser.

To challenge an appraisal, borrowers should make their case with the commissioning lender, said Michael Vargas, president of New York-based Vanderbilt Appraisal Co., which specializes in high-end homes. Lenders, however, are prohibited from communicating directly with appraisers, under the Home Valuation Code of Conduct (HVCC), rules enacted by Congress in 2009 to reduce mortgage fraud. Therefore, the lender will commonly send the borrower's rebuttal to an appraisal-management company, a third-party entity that hires appraisers, for review.

Read the full article.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Need a mortgage? You need a home appraisal

While the New York Times article mentioned here is written with New York City it mind, this column about the home appraisal process is applicable to New Jersey homes, too.

BEFORE anyone can buy a house with a loan from a bank or refinance a mortgage, the lender needs an objective assessment of the property’s value — after all, the home is the bank’s collateral for the loan. Assessing the value is the job of the appraiser.

No mortgage is made without an appraisal.  In my experience the way an appraisal is made has run the gamut from a "drive-by" where the appraiser takes photos from outside the home and gets her information about similar homes (called "comparables" or "comps") from sales reports to the true appraisal where the appraiser physically inspects the home to count and measure rooms, gets a copy of the survey, interviews the homeowner, visits the municipal building department to determine if all improvements have been reported to the municipality and performs a thorough comparison between the subject property and its comparables.

The best thing a homeowner or broker can do to help the appraisal process is to prepare a one-page sheet for the appraiser that outlines the changes and repairs that the home has undergone since it was bought.

Read the full column.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Turned down for a mortgage? Maybe here’s why

The New York Times’ Vickie Elmer addresses reasons for mortgage loan application rejection.

“WE regret to inform you...” Nobody applying for a new mortgage or a refinancing wants to see or hear these words. But last year more than two million people were turned down for home loans, according to federal data, often because they didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic. Lenders’ underwriting criteria have become more rigorous in recent years; some banks have tightened up beyond federal requirements.

Here are the six biggest triggers for rejection, according to industry experts.

• INSUFFICIENT INCOME Lenders want to make sure you can afford to make the mortgage payments. Someone who earns, say, $40,000 a year need not bid on a $750,000 apartment, unless there’s a trust fund with quarterly payouts or other money available. Also, lenders typically look for at least a two-year track record of income, which could hurt those who may have switched jobs recently.
• CLOUDY FINANCIAL PICTURE. Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of your adjusted gross monthly income. Borrowers may be surprised at what counts and what doesn’t.
• BAD CREDIT Lenders typically reject applicants with a FICO score below 620. Failing to pay your mortgage on time affects your score.
• LOW APPRAISAL. This is the predominant reason people are denied home loans today, according to industry experts.
• PROPERTY PROBLEMS. Issues within an apartment unit or a house such as major repairs have to be addressed. In our area of NJ, there are several condominiums with lawsuits pending against them that have turned into deal killers.
• INFORMATION MIX-UPS. About 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.

Read the full article.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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If you want to sell your home, you better price it right

The Asbury Park Press carries an AP story of interest to home sellers.
Advice for home sellers - Pricing homes right in a housing slump

“The good news for sellers: Your house will sell. The bad? Only if the price is just right.”

That translates into taking a hard look at your listing price if you are serious about selling.

“The recently expired tax credits for homebuyers gave sellers a boost. Home sales surged and values edged up. The worst appeared to be behind us. But since the deadline passed at the end of April, housing has faltered. Job insecurity, tight credit and consumer confidence are undermining a sustained recovery, despite the lowest mortgage rates in decades.”

“Here's the disconnect facing sellers: The vast majority of sellers believe their homes are worth more than what their real estate agent recommends, according to HomeGain.com. At the same time, most buyers think for-sale homes are overpriced.”

And it doesn’t look things will change for a while. What do you think?

Read the full article.

For your next title order or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Vested Title Inc.
165 Passaic Avenue, Suite 101 Fairfield, NJ 07004
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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A personal look at the housing collapse

Hollis R. Towns, executive editor of the Asbury Park Press, writes about a second home he has in the Atlanta, Georgia area. Things aren't going well with the home that he's trying to sell.

"I've always understood Main Street's frustration with the Obama administration and the bailout of Wall Street. The fat cats were made whole and the little guys were left trying to hold on. But you never really understand an issue until you are affected by it."

Mr. Towns found a buyer, the present tenants, but problems arose with the appraisal.

"It was for $90,000 — $44,000 less than the list price of $134,000 and $34,000 less than the payoff amount. This, for a 3,500-square-foot, six-bedroom Cape Cod with a finished, walk-out basement, screened porch and bonus room, all on nearly an acre of land in a drop-dead gorgeous, old neighborhood."

The culprit is the undeniable fact that the house was located in a neighborhood full of foreclosed homes. Prices on those homes are, by necessity, depressed. That impacts the value of homes where the owners have made every payment on time.

The lender was of no help--suggesting a "short sale" that would impact the owner's credit report and possibly have terribly adverse income tax consequences.

Read Mr. Towns' column.

[Note, I wrote to Mr. Towns in order to get more facts surrounding his original acquisition of the property; was it as his home or an investment property, and why he didn't sell the house when he moved. As of July 1, I have not received a response.]

For your next title order
or if you have questions about what you see here,
contact Stephen M. Flatow
Vested Title Inc.
648 Newark Avenue
P.O. Box 6453
Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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From Realty Times - Realtor Organization Opposed FHA Anti-Flipping Rule

Writing in Realty Times, Bob Hunt discusses the position of the California Association of Realtors that now opposes the FHA 90-day anti-flipping rule.

The primary component of FHA's anti-flipping policy is the 90-day rule. No FHA funding will be provided for properties purchased within 90 days of the seller's acquisition of the property. The intent of this policy is to protect buyers from overpaying (and, of course, to protect FHA's insurance program). Now, being against that sounds like opposing motherhood and apple pie.

However, proponents of the CAR motion argued that, in the current environment, the effect of the anti-flipping rule was actually to harm potential FHA buyers and to shut them out of the real estate market.

What it boils down to this-- you can never eliminate fraud in the sale of real estate, but FHA may be throwing the baby out with the bath water by blocking all sales within 90 days of acquisition.
Food for thought.

Read the full article.

What do you think?

For your next title order
or if you have questions about what you see here,

contact Stephen M. Flatow
Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

We're the New Jersey specialists.

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Piggy Back Seconds Blocking Modifications?

At our catbird seat in Northern New Jersey we have heard of many homeowners who have been frustrated in their refinance attempts by low appraisal values and other wrinkles, such as lender's instructing borrowers to go into default before applying for a modification.

The Obama Administration's attempts at freeing up refinance money just do not seem to be working. For instance, a New Jersey homeowner buys near the top of the market, has been making on-time payments, and is looking for a lower rate. Along comes the government's HARP program and a loan limit of 105% of appraisal value. If you bought a house for $300,000, put down $30,000, and your property is now worth $225,000, the arithmetic is simple--under HARP you qualify for a loan of $236,250.00. That's a far cry from the $270,000 =/- you are trying to refi.

What if you have a piggy back second mortgage from your closing? Kenneth R. Harney's Washington Report: Second Liens and Piggyback Loans discusses the issue.

Second liens and “piggyback” loans have been big impediments to successful
mortgage modifications for thousands of financially-stressed home owners. Now
the Obama administration has a new program to deal with the problem.

Under a plan outlined last week, the Treasury department will soon begin offering cash incentives and subsidies to lenders who lower troubled home owners' monthly payments on second mortgages and credit lines, or simply write them off their books.

How will this work?

• Treasury will enter into agreements with second lien holders to reduce interest rates to just one percent on fully-amortizing seconds and to two percent for interest-only seconds, for the next five years.
• Treasury will pay cooperating lenders $500 for each second lien they modify, plus $250 a year for each year the home owners stay current on payments. Alternatively, lenders may be offered a lump-sum cash payment from the government to cancel the second-lien debt altogether.
• Whenever first mortgage holders cut a borrower's principal balances by a percentage of the loan amount, second lien holders will be required to reduce balances owed by a similar percentage.

Will it work in markets such as New Jersey? Only time will tell. Read the full article here.

For your next title order, think:

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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