FDIC floats rules on when they’ll close financial firms

A story by Deborah Solomon in the Wall Street Journal covers an FDIC proposal that will let financial creditors take the hit when a financial firm must be closed “but left wiggle room for the U.S. to make payments to certain types of creditors.”

“The proposal is the first step in the government's effort to clarify how it will seize and dismantle large financial firms that run into trouble. The Federal Deposit Insurance Corp. was given authority to liquidate firms as part of the U.S. effort to prevent another collapse like that of Lehman Brothers, whose demise rippled through the financial sector.”

The FDIC is taking the action at the same time that regulators in other countries are addressing the so-called “too big to fail” firms and banks.

What’s the FDIC considering? As a first step

"it planned to prohibit additional payments to shareholders and long-term debtholders in the event of a firm's demise. The FDIC said it could make additional payments to certain short-term creditors in situations where it maintains "essential operations" or to "minimize losses and maximize recoveries."

The proposed rule has been put out for comment. We’ll keep you posted.

By the way, three more banks recently failed.

Here’s the WSJ story.

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Stephen M. Flatow, Esq.

Vested Title Inc.

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

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Foreclosure properties are not always a bargain

We get a lot of phone calls from potential buyers. They usually go like this, “What can you tell me about buying a property at a foreclosure sale?”  My answer, “Don’t unless you have done it before and you were successful.”

The New York Times ran a story, “Avoid Foreclosure Market Until the Dust Settles” by Ron Lieber. He writes,

“Are you out of your mind to even consider buying a foreclosed property right now?”

He tells the tale of Todd Phelps and Paul Whitehead “thought they had won the lottery” when they bought a property at a foreclosure sale.

“Several days later, however, they realized that what they had really bought was a second mortgage from Wachovia on a house that still had an enormous, unpaid primary loan. In other words, they did not own the home free and clear, and the auction company wouldn’t give back their $137,000 check.”

Admittedly, these homes are “tempting for scores of first-time homebuyers, second-home seekers and people looking to get an early jump on buying a retirement home while prices and interest rates are low.”

Bidding on a foreclosed home does have its pitfalls but it’s a way to get a start in the real estate market. And we have many clients who make a living buying at foreclosure sales, fixing up the property and selling it. Yet, the Phelps and Whitehead story is a cautionary one and you are invited to read the full report here.

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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FHA has a “Little-Known Loan Program for Fixer-Uppers”

Lynnley Browning writes in the Sunday New York Times about a program through the Federal Housing Administration, FHA, for rehabilitation of “distressed homes or any other fixer-upper not only face the daunting task of turning a run-down property into a livable one, but often worry about paying for it all.”

“There’s a way to make essential repairs and add other accouterments without dipping into savings or taking out a home-equity loan. The Federal Housing Administration’s 203(k) rehabilitation program provides for loans covering renovation costs as well as the purchase price of a primary residence — investors excluded — and it allows for just a 3.5 percent down payment.”

“Although the program has been around since 1978, it is not well publicized, and many borrowers mistakenly think they have to buy a wreck in order to qualify. They don’t.”

“Covered repairs include a new roof or heating system (geothermal ones too). Decorative changes, like replacing vinyl with ceramic tile on the kitchen floor replacement, or painting the interior, are covered.”

The rates are usually a percentage point higher than conventional mortgages and certain aspects of the program can result in “closing costs $1,000 or more higher than average.”
Read the entire report.

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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Foreclosure freeze may have grim future

The slow-down in foreclosures by several of the big lenders is not all good news. As reported in the Star-Ledger:

“A halt in home foreclosures at the largest mortgage firms may sideline buyers worried about legal issues, further depressing sales at a time when distressed properties account for almost a quarter of all transactions.”

Why? Because doubt on the legal sufficiency of the foreclosures will result in those houses not reaching the real estate market.

“Bank of America Corp., the largest U.S. lender, extended a freeze on foreclosures to all 50 states on Friday as concern spread among federal and state officials that homes are being seized based on faulty data. JPMorgan Chase and Ally Financial Inc.’s GMAC Mortgage unit stopped repossession cases in 23 states where courts supervise home seizures — including New Jersey — amid allegations that employees submitted documents with unverified or false information to speed the process.”

Statistics from around the country demonstrate that foreclosure sales play a major role in the rebound of the real estate market.

"’Our preliminary review of September foreclosure activity doesn’t show any obvious or notable impact," said Rick Sharga, senior vice president of RealtyTrac. The effects may show up in the October data, he said.’”

 On the other hand,

“A reduction in foreclosure sales may result in a short-term boost to the nation’s median home price as buyers shy away from distressed properties, said Thomas Lawler, founder and president of Lawler Housing and Economic Consulting in Leesburg, Va.”

 The halt to pending actions by several lenders means that many property owners are living rent free. That would include those who have made so-called “strategic defaults.” Let’s hope the system straightens out sooner rather than later.

Read the full story.

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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Why’s my FICO score dropping? Here’s an answer

The New York Times’ Lynnley Browning writes,

“IF you’re looking to refinance or buy a home, potential lenders and mortgage brokers will be checking your credit scores. And if those scores are being verified, chances are they are going down.

“Yes, you read that correctly. Each time a credit score is pulled from one of the three credit bureaus as part of a loan application, it can decline by as much as 20 points, or more. Call it the Great Credit-Score Ding.”

While information about credit scores and their use is becoming more widespread, “few buyers know this goes on — or what to do about it.”

“Most consumers are unaware that this happens,” said Paul Stephens, the director of policy and advocacy for Privacy Rights Clearinghouse, a consumer advocacy group in San Diego.

The so-called FICO score is sold to the three credit bureaus — Equifax, Experian and TransUnion — “which each then use different formulas to compute a consumer’s creditworthiness.”

The higher your credit score, the lower your interest rate.  So why does your score get affected by credit report inquiries?

“It is the “hard pull” inquiry — in which lenders and brokers learn that you are in need of money, and check your credit in order to process your application — that can most damage your score.”

This can result in a 20 point or more drop in your score each time you authorize a lender to check your credit.

“So how can borrowers minimize the blow, especially those shopping for the best mortgage rates and working with more than one lender or broker?”

“If all the requests are made within a short time, they usually will count as only one check.”

There is some good news, “borrowers who check their own credit scores through a less invasive “soft pull,” to get an estimate of creditworthiness and of loan rates, do not see their scores go down.” So, ask your lender to do “a soft pull before deciding which loan to go with, at which point a formal inquiry is made.”

Read the full column, Preventing Credit Score Dings

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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