Archive for the ‘Real Estate Market Trends’ category

Ruling Puts Lenders on the Hook for Unpaid Condo Assessments

December 17, 2015


This ruling should be of great interest to all Condo HOAs and Property Managers. This could potently reduce losses form non dues paying homeowners that quite often run into thousands of dollars.

For a more detailed look at this subject – please read the article below.

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The Illinois Supreme Court created potentially hazardous territory for lenders who take title to condominium property via foreclosure lawsuits. In 1010 Lake Shore Drive Ass’n v. Deutsche Bank Nat’l Trust Co., the Supreme Court held that liens for unpaid condominium assessments are not extinguished unless the lender pays post-sale assessments and in doing so it upheld a money judgment against a lender for unpaid assessments which were the debt obligation of the prior unit owner. The decision does not provide much clarity for lenders going forward, and it leaves lenders potentially vulnerable to money judgments for all unpaid assessments—even assessments which became due prior to judicial sale.

A brief explanation of the condominium statute and the foreclosure statute will clarify the issues at stake before the Supreme Court. In Illinois, lenders who are the successful bidders of condominium property at foreclosure sale are liable for assessments beginning on the first day of the month after judicial sale. Moreover, missed assessment payments operate as a lien on the condominium unit. The condominium statute states that making the post-sale payment for assessments “confirms the extinguishment” of any lien for unpaid assessments. So lenders have the personal obligation to pay assessments beginning the month after judicial sale, with the knowledge that there may be a lien against the property because the prior owner failed to pay assessments. But in mortgage foreclosure actions, the judicial sale is not final until the court confirms the sale: until then, it is merely an irrevocable offer to purchase the property. A lender could potentially wait months between the judicial sale and when the judge confirms the sale.

In 1010 Lake Shore Ass’n, judicial sale occurred on June 17, 2010. The lender failed to pay monthly assessments, and on May 17, 2012, the association filed a lawsuit for possession and unpaid assessments. It claimed that the lender owed it approximately $62,000.00 in unpaid assessments. The association eventually moved for summary judgment. The lender responded that it only owed $43,000.00 of post-sale assessments—the rest of the amount demanded was the debt of the prior unit owner. The trial court entered judgment in the association’s favor in the amount of approximately $70,000.00.

The appellate court affirmed. It held that the judgment was appropriate because the lien for unpaid assessments was not extinguished. It held that liens for unpaid assessments are not extinguished unless the lender pays assessments following the judicial sale. It reasoned that the condominium statute states that post-sale payment “confirms the extinguishment” of the lien, so the lien for unpaid assessments was not fully extinguished. Justice Liu dissented, and argued that under the foreclosure law all claims were barred on completion of the foreclosure, so section 9(g)(3) of the condominium statute offered an alternative method to extinguish the lien for unpaid assessments.

To read the complete article – please use the link below.

Lenders on the Hook

It’s Official: The Fed Finally Raises Rates

December 16, 2015


It’s finally here – the dreaded Mortgage Rate Hike.

For a more detailed look at this subject – please read the article below.

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The Federal Reserve made the long-awaited, much-anticipated announcement on Wednesday afternoon that federal funds target rate will increase by 25 basis points from its near-zero level where it has been since 2006.

The announcement came as the Fed wrapped its eighth and final Federal Open Market Committee (FOMC) meeting of 2015 on Wednesday afternoon. The vote was unanimous.

After a widely-expected rate increase did not happen at the September FOMC meeting, the Fed stated that “In determining how long to maintain this target range, the Committee will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation.” Another FOMC meeting came and went in October, albeit with much less fanfare than the September meeting, without the Committee raising the federal funds target rate.

“The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective,” the FOMC said in its statement Wednesday. “Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.”

The Fed’s decision to raise short-term interest rates took into account, “a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.” In what many analysts and economists saw as the final piece of the puzzle, the November employment summary released by the Bureau of Labor Statistics in early December reported 211,000 jobs added in November, an unemployment rate of 5.0 percent, and an average monthly job gain of 218,000 for the three-month period from September to November.

To read the complete article – please use the link below.

Fed Finally Raises Rates

CFPB Director Says Bureau Will ‘Vigorously Enforce’ Mortgage Servicing Rules

October 1, 2014


This is a baby step in the right direction. The true test will be when they take on one if the major servicers that was  found in violation. Until the feds start pressing criminal charges against the heads of the offending servicer nothing will really change. These executives will continue to make a boatload of money and pay for their wrong doings with the stockholders money.

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For the first time since the new mortgage servicing rules went into effect in January 2014, the Consumer Financial Protection Bureau (CFPB) enforced the rules, handing down a $37.5 million fine on Monday to Michigan-based bank Flagstar for illegally blocking foreclosure prevention.

CFPB Director Richard Cordray said in press call on Monday that his Bureau will not tolerate violations of the new mortgage servicing rules.

“These new regulations establish specific rules of the road for handling loss mitigation applications,” Cordray said. “Since we first announced these rules almost two years ago, we have made clear that we expect full compliance to clean up the problems that had been pervasive in this industry and caused so many people to lose their homes. Consumers must not be hurt by illegal servicing any more. When mortgage servicers fail to treat people fairly, we will vigorously enforce the law.”

Cordray said it is vital that mortgage servicers follow the law because of the “central role” they play in borrowers’ lives.

“(Servicers) are the link between a mortgage borrower and a mortgage owner,” Cordray said. “They collect and apply payments, work out modifications to the loan terms, and handle the difficult process of foreclosure. Importantly, consumers cannot take their business elsewhere. Instead, they are stuck with their mortgage servicer, whether they are treated well or poorly.”

To read the complete article – please use the link below.

‘Vigorously Enforce’ Mortgage Servicing Rules

Housing Report Bucks Conventional Wisdom

August 4, 2014

house-mazeThis report is more of a statement that things are going to progress at about the same rate as current growth. The idea that this forecast is based on “real time” is somewhat misleading as it is using data showing “demand for housing is down” is based on figures March 2014 and the amount of cash purchases data is from December 2013. This is hardy real time data and more. It seems that the writer is using any data that strengthens his contentions. For a more detailed look at this subject – please read the article below.

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Conventional wisdom seems to suggest that recent housing data points to reasons for analysts to worry about the direction of the economy. A new report makes the case that the picture is much brighter than their consensus would lead one to think.

“It’s scary to be a contrarian, particularly if you’re contrarian and bullish. In retrospect, this position is the most fun— if you’re right,” said Michael Simonsen, co-founder and CEO of Altos Research.

Recently, his group published its 2015 Housing Report. Based on real-time observations of housing supply and demand, among other conclusions, the report is forecasting a 7 percent home price increase for 2015.

In terms of home prices, the U.S. real estate market hit the absolute bottom on January 4, 2011, according to the report. Since then, home prices are 39 percent higher.

“Yet every day we see media headlines declaring weakness and disappointment. As recently as June 2015, housing apparently remains a chief concern for Fed chief Janet Yellen, who uses phrases like much slower pace than expected and slowdown,” Simonsen said.

These attitudes reflect a myopic view of actual market conditions and conflate concerns over the mortgage industry, the otherwise-constrained new construction market, and, more broadly, the long-term financial stability of the U.S. consumer with specific current housing market supply and demand dynamics, according to Simonsen.

To read the complete article – please use the link below.

Housing Report

Home Ownership Rate Dips to Lowest Level in Almost Two Decades

July 31, 2014


This is not really a surprise. With home prices on the rise, fairly high unemployment (especially among millennials) and the difficulties in obtaining credit it only makes sense that the homeownership is  down. For a more detailed look at this subject – please read the article below.

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Homeownership in the United States lost a little more ground last quarter, declining to a new 19-year low as consumers—particularly young adults—continue to grapple with debt and difficulties obtaining credit.

According to an estimate from the Census Bureau, the U.S. homeownership rate was 64.7 percent in the second quarter, a decrease of 0.1 percentage point from the first quarter’s previous low and 0.3 percentage points from the same time last year. It was the lowest rate since 1995.

Homeownership continued to slide among the millennial age group, who find themselves more burdened than other groups by high debt, tight credit conditions, and limited job prospects. The percentage of young adults who own their homes was 35.9 percent last quarter, down nearly a full point from last year.

As housing trends move in a healthier direction, one of the biggest headwinds has been a lack of activity among first-time homebuyers, who historically account for 40 percent of sales activity, according to the National Association of Realtors (NAR). Through this year, that share has hovered around 28 percent.

While today’s young adults have so far been inactive compared to historical norms, a recent report from NAR suggests a number of markets, particularly those in the Midwest and West, are likely to see more activity from millennials as labor market conditions and home prices create a more favorable market for buyers.

To read the complete article – please use the link below.

Home Ownership

Default Risk Drops, Still Above Normal Levels

July 30, 2014

Make a Journey

This is kind of good news however the decline is not enough to make a big deal out of. As long as lenders do not pay enough attention to a prospective homeowners debt to income ratio the risk will be there. For a more detailed look at this subject – please read the article below.

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Loan risk in the agency mortgage market came down slightly in June, but analysts warn that risk levels are still unacceptably high.

According to the American Enterprise Institute’s (AEI) latest National Mortgage Risk Index, the share of home purchase loans at risk of going sour in the event of an economic downturn fell nearly half a percentage point last month to 11.44 percent.

AEI said the drop reflected declines for three of the four agencies tracked—Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA)—as well as a decline in the share of loans guaranteed by FHA and Rural Housing Services (RHS).

According to the group, the risk value of loans securitized in Fannie and Freddie’s portfolios fell slightly to 5.8 percent, while the risk index for FHA slipped to 23.6—still nearly four times the maximum acceptable level of 6 percent, AEI says.

Meanwhile, the index for RHS hit a new series high, climbing to 19.75 percent.

The biggest factor underlying the current high-risk environment is the abnormally high amount of debt consumers are paying relative to their incomes, say analysts at AEI’s International Center on Housing Risk.

To read the complete article – please use the link below.

Default Risk Drops

CoreLogic: Student Loans Not Depressing Home Ownership

July 25, 2014

depleted-moneyThis study makes a lot of sense. Student debt is probably no more of a determent to home ownership that it was 25 years ago. For a more detailed look at this subject – please read the article below.

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One of the pet reasons for explaining the lack of demand for houses among millennials is the presence of ever-escalating student loan debts. The thinking goes that college graduates are so mired in debt that they either cannot afford to buy or are too afraid to run up more debt, and so they stay living with their parents or find cheap places to rent.

However, Mark Fleming, chief economist at CoreLogic, isn’t buying it.

Citing a recent panel discussion at the Urban Institute on “Quantifying the Impact of Student Loan Debt on Homeownership,”  and recently published reports by the Brookings Institute and Jeffrey Thompson, economist at the Board of Governors of the Federal Reserve System, Fleming draws the conclusion that  while student loan debt undoubtedly affects financial decisions for those post-college, there is zero empirical evidence to back up the claim that these debts are keeping young people from buying their first homes.

For one thing, Fleming says, the monthly payback amount anyone has to spend on a student loan is based on a percentage of income. This percentage has remained virtually unchanged since the mid-1990s, but then, so have earnings—and members of Generation X didn’t shy away from buying houses just because of these obligations.

Student loan debt is at the $1 trillion mark, and there are more outstanding loans than ever. But Fleming says these facts alone do not show that student loan debt is a bigger burden for millennials, much less one that will prevent homeownership.

To read the complete article – please use the link below.

Home Ownership