Archive for June, 2012

Per Ken Wingert, NAR’s senior legislative representative: Our long national nightmare is over. We are officially done with flood insurance extensions for 5 years.

The House had already passed a bill, but the Senate was being held up by Rand Paul (R – Ky.) who tried to attach a controversial and unrelated amendment to the bill. Apparently that’s been dealt with and the bill passed. President Obama will sign the measure this weekend.

“This is the culmination of a successful multi-year Realtor campaign,” said Wingert.

Congress had been extending the National Flood Insurance Program a few months at a time since 2008. Twice this led to shut downs, including one that stalled more than 40,000 home sales in June 2010 alone. Passage of this 5-year reauthorization will bring certainty to real estate transactions in more than 21,000 communities nationwide where flood insurance is required for a mortgage.

If anything new pops up, we’ll let you know. Meantime, good — if delayed — news.

Mortgage bankers want lenders protected if they follow the rules

Two members of Congress are urging the Consumer Financial Protection Bureau to make sure the final rule on qualified mortgages shields lenders from liability if borrowers default, and the Virginia Mortgage Lending Association wants to encourage other Congressfolk to join in the call.

The Dodd-Frank Act requires that all mortgage loans meet a minimum standard — this is the “Qualified Mortgage” or QM rule. Among other things, it requires that lenders are sure that borrowers have the ability to repay.

Lenders want to be sure that meeting the QM standard is enough to keep them out of hot water — to give them “safe harbor” in the event of a default.

You might think that’s obvious. If you follow the rules, you shouldn’t be help liable. But the final QM rule — which the CFPB is expected to release later this year — might only include what’s called “rebuttable presumption.”

That means that the lender has the benefit of the doubt, but could still face lawsuits even if it meets all the QM requirements: “Yes, BigMortgageCo, my client met the QM standards, but you should have noticed that he was dressed in rags and made his down payment in nickels.”

The VMLA points out that if the CFPB opts for “rebuttable presumption” instead of a full safe harbor, “every legal challenge will have to be fully litigated,” and that lenders would “face potential costly lawsuits for the life of any loan they make.”

So Reps. Shelley Capito (R – W. Va) and Brad Sherman (D – Calif.) are writing a letter to the CFPB urging the agency to adopt a full safe harbor in the final QM rule, and the VMLA is encouraging its members to push their Congressmen to sign on as well.

Click here to link to the draft letter, which explains the whole thing.

Appraisal management companies aren’t regulated enough

Appraisal management companies have a list of rules they’re supposed to follow, and it’s up to state and federal regulators to make sure they do. Unfortunately, oversight has been, shall we say, lacking.

According to testimony from the Government Accountability Office titled “Regulators Should Take Actions to Strengthen Appraisal Oversight

Some industry participants voiced concerns that some AMCs may prioritize low costs and speed over quality and competence.

You don’t say.

[A]ppraiser groups said that some AMCs selected appraisers based on who would accept the lowest fee and complete the appraisal report the fastest rather than on who was the most qualified, had the appropriate experience, and was familiar with the relevant neighborhood. (Emphasis ours.)

Really?

And while Dodd-Frank requires state and federal oversight, the GAO pointed out that even minimum licensing standards haven’t been set. (Or, as Housing Wire put it, “There has yet been issued no such standards.”)

Two problems combine to make a larger one. First, unless someone suspects an AMC of violating the rules about appraisal independence, a state board won’t investigate. Second, even if presented with evidence of rule-breaking, state boards often don’t have the funding to investigate.

The result of the lack of enforced regulation?

[I]n some cases, the AMCs were established or operated by former mortgage brokers or appraisers who had been sanctioned or lost their license to practice. There were no laws or regulations in place that prohibited these individuals or those with criminal backgrounds from setting up and managing these companies, even as they became such an integral part of the mortgage process. [source]

This was only testimony to the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity, but at least the issues are being aired. So who knows, maybe something will come of it.

Pending sales jump may be wishful thinking

Interesting take on yesterday’s post about pending home sales. Barry Ritholtz points out that so many sales are derailed by buyers’ inability to get financing, “pending sales” are outpacing actual sales by a huge amount.
The result is that, as good as it is to see the Pending Homes Sales Index so high, it really may not mean much at all.

Read more over at The Big Picture.

How would you price this house?

Friday smile: a Canadian artist has converted a derelict farmhouse into a giant dollhouse, open on one side. The artist has posted pics on her site about the process. Interesting use of an otherwise defunct property. I wonder what happens to it next?

Check out the pictures here.

I hate repeating the headline in the first sentence, but… for the first time in 100 years, America’s cities are growing faster than suburbs. Well, most of the larger cities are.

Urban areas are where the jobs are, where the apartments are, and where the inexpensive public transit is. Commutes are shorter, the environmental impact is less, the social life is better… you get the picture.

MSNBC sums up some of the reasons quite nicely:

Driving the resurgence are young adults, who are delaying careers, marriage, and having children amid persistently high unemployment. Burdened with college debt or toiling in temporary, lower-wage positions, they are spurning homeownership in the suburbs for shorter-term, no-strings-attached apartment living, public transit and proximity to potential jobs in larger cities.

And Realtors, take note of one Jaclyn King, 28, who remembers her parents’ 45-minute daily commute into Denver. “I will never live in the suburbs,” she said. “I just like being connected to everything down here — concerts, work, restaurants, all of it. This is where everything’s at.”

Businesses are starting to cater to them, which makes city living even more desirable. And S&P Capital IQ in New York

has a “positive fundamental outlook” on residential real estate investment trusts, particularly those with holdings in multifamily apartment buildings, citing in part a demographic shift.

Read all about it over at MSNBC.

Pending home sales up 13.3%, beats expectations big-time

NAR’s May Pending Home Sales Index (which is based on contract signings, not closings) was up 13.3% in May from 2011.

That May number was also up 5.9 percent from April, although the consensus estimate (what “experts” predicted) was only for a 1.2% increase. In other words, good news.

The index is at the same level is was in March (also up from 2011) — and that’s the highest level it’s been since April 2010. Oh, and April 2010? That’s when people were rushing to qualify for the home buyer tax credit.

The biggest gains were in the Northeast and Midwest, but the South did well too — our region was up almost 12 percent from May 2011.

Updated: VAR’s Broker Toolkit

One of VAR’s most popular publications – the Broker Toolkit – has been revised and updated for 2012! This toolkit provides all the information you need to start and operate a real estate brokerage in Virginia, including crucial risk management tips to stay safe in your practice.

Some of the riveting topics include:

  • Bookkeeping and escrow funds
  • RESPA policy, including a list of dos and don’ts for real estate agents
  • Anti-trust issues
  • Lead-based paint disclosure requirements
  • Social media policy
  • Fair Housing
  • and so much more!

Even if you’re a seasoned broker, it never hurts to review, especially with New Laws taking effect July 1. (Check out the VAR New Laws page for more information and tools like video, Power Point and more. *Login-required; this is a members-only resource.)

CLICK HERE to peruse the new toolkit, download a copy, and heat up the summer with some fresh, hot risk management tips! (*Login is required for this tool; it’s a members-only resource. It’s good to be a VAR member!)

Flood insurance bill stalls in Senate

Sen. Rand Paul (R-Ky.) has attached a controversial and unrelated amendment to the bill that would extend the National Flood Insurance Program. Because of that, the bill is stuck until further notice.

The bill would fund the NFIP for five years; a version passed the House quickly last summer, and it was expected to do so in the Senate as well after lawmakers reached compromises on two key issues regarding coverage of areas protected by levees. Without an extension, the program will only be funded until July 30.

VAR, in collaboration with forms providers from around the state (Northern Virginia Association of REALTORS®, Richmond Association of REALTORS®, and Roanoke Valley Association of REALTORS®, as well as several large firms and MLSs), has created new disclosure forms to help you comply with changes to agency law. These new disclosure forms are concise and user-friendly and are the product of an effort to reduce the number of new agency disclosure forms. All of the major forms providers had input in their creation and you are likely to see similar disclosure forms throughout the state.

The forms are now available for you to review though VAR’s Standard Forms Center (login required; this is a members-only resource).

**IMPORTANT NOTE: Please do not use them until July 1, 2012 – the date the agency law becomes effective.

  • Disclosure of Brokerage Relationship for Unrepresented Party(ies)
  • Disclosure of Dual Agency or Dual Representation in a Residential Real Estate Transaction
  • Disclosure of Dual Agency or Dual Representation in a Commercial Real Estate Transaction
  • Disclosure of Designated Agency or Representation

In addition to the required disclosure forms, VAR is also rolling out several additional forms to help you with your clients.

  • Shortened Exclusive Right to Represent Buyer Agreement (2 pages);
  • Shortened Non-Exclusive Right to Represent Buyer Agreement (2 pages);
  • NEW short form: Non-Exclusive Right to Represent Buyer Agreement (1 page); and
  • NEW Independent Contractor Listing Agreement (5 pages).

Make sure to take a few minutes to explore the rest of VAR’s Agency Center. We’ve got a growing library of videos and other tools to help you prepare for the changes to the Agency law.