Shelley K. Reynolds has joined the Homestead team as Director of Marketing & Client Relations. Shelley has more than 12 years of real estate and title insurance experience. Prior to joining Homestead Title, Shelley worked for Attorneys’ Title Guarantee, traveling in Illinois & Wisconsin as the state’s Business Development Manager for over nine years. 
Shelley has extensive experience in the title insurance industry, including land searching, title examination, and real estate closings. In addition, she has valuable experience in business development and staff training, helping clients improve and grow their businesses. Her focus will be ensuring that our customers and clients receive the highest level of customer service. Shelley will assist Realtors, lenders, and attorneys with title and closing questions, rate quotes, mailing lists, and generally improving their business. She will also be introducing some new and innovative educational tools for our customers and clients over the coming months.
Tax Deadline Extended… sort of
Congress Extends the Deadline to CLOSE
Last year, Congress passed a tax credit for first time homebuyers and many “long-time” homebuyers. This credit provided for two deadlines:
- Receive a binding offer to purchase on or before April 30, 2010
- Close the sale on or before June 30, 2010.
Lenders, title companies, and real estate professionals worked feverishly to close transactions before that June 30th deadline. All the while congress was working (less feverishly, we are sure) to pass an extension of the bill.
Hours before it was set to expire, the Senate finally approved an extension to the June 30 closing deadline for the homebuyer tax credit, The move will give buyers who signed a purchase agreement by April 30 more time to close and still receive the tax credit of up to $8,000. Once signed by the President, the new deadline will be Sept. 30, 2010.
This extension will benefit those home-buyers who’s deals stalled or financing ran into trouble. Many homebuyers could not close on short-sales or other distressed properties because of delays in lender approval. The extension will be a welcome relief to those buyers.
Buyers, Realtors, and other professionals should be aware that this extension only affects home buyers who are in a binding contract that was signed before May 2010. It will not benefit those potential homebuyers who are still shopping for a home.
Interest Rates at Historic Lows
Nevertheless, today’s unprecedented interest rates may amount to a savings almost equal to the tax credit. Indeed, in January, a home-buyer might have locked in on a 30 Year Mortgage at 5.4%, a wonderfully low rate by historical standards. Today, that same 30 Year Mortgage might be at 4.6%. On a $200,000 mortgage, this amounts to a monthly savings of about $97.75 or $4,600 in just four years. While the tax credit might not be available for those still shopping for a home, the savings are still there.
Real Estate Scam Warning
I am Dr. William Grey, M.D. and internist in Titchfield Engalnd. I am relocating my family to Madison, Wisconsin and I am interested in retention of you services to buy a house. Please send me information about homes that costing $400,000 to $600,000.
Sounds too good to be true? In most cases it is too good to be true – it is a complex scam.
Falling for the Scam
But, the scammers are sophisticated and even the suspicious, cautious REALTOR or attorney can get sucked into the scam. A wealthy, out of town buyer relocating to your area is every REALTOR’s dream. When you look up the foreign doctor’s name, you will find his information checks out. And, upon further emails, he will be very specific about his needs and wishes. He will tell you about his wife and children, his need to for 3 or more bedrooms, his desire to be near a school and he may even tell you the neighborhood he likes best.
Then, after sending 5 or 6 listings, the good Doctor will tell you he is ready to buy MLS Listing 0654321, the beautiful colonial on the west side. “Please make a full price offer, unless you think, in your judgment, that a different amount would be appropriate.” The Doctor will also provide you with the name of his financial advisor in New York and ask you for a referral to a local attorney.
At this point, the deal still seems suspicious, too good to be true, and likely to be a scam. But how can it be? He’s using a local attorney. He has a financial advisor at Global Financial, Inc. in Manhattan. And, his emails are so specific.
How The Scam Likely Works
The Doctor signs an offer to purchase remotely from England (or Canada or China) and then sends in the earnest money to either the REALTOR or the attorney. The earnest money check will not be for the customary amount, but instead for the entire purchase price. Oops. And in fact, the Doctor will also send another check for a hundred thousand dollars or more. OOPS! Then, after the checks have been deposited, the Doctor will request that the excess funds be returned via wire or western union. Even if the funds appear to have cleared or been credited to the REALTOR or Attorney account, the check will bounce. It was a fake. The wire goes to a foreign bank and is gone forever.
Avoiding the Scam
If a transaction appears too good to be true, it likely is. Some red flags and similarities include:
- A foreign buyer sends you large amounts of funds by accident
- A buyer asks you to deposit funds that come in by check and, shortly thereafter, return them via wire or Western Union (Western Union is a major red flag!)
- A buyer offers to pay full price for a house, sight unseen.
- The Financial adviser either is named Karen James or Paul Jackson and may work at Global Financial, Inc. (While it is possible these are real names and individuals, scammers are using these names)
- The Buyer is from China, Japan, England, or Canada (really any foreign country where the buyer is suddenly relocating and buying sight-unseen)
- The initial emails contain typos or poor grammar
- The Buyer moves incredibly fast, making a decision in hours or even minutes rather than days or weeks.
- The Buyer’s name is Otake Iwao
- The email address comes from @asia.com or some other generic email .
If you suspect a scam, ask lots of questions and have verbal, phone conversations at a minimum. Don’t send any private information, bank account numbers or anything else that you would not want a scam artist to have. Alert your Broker or legal counsel whenever a foreign individual is sending funds, even if the funds originate within the U.S. — this alone is cause for caution. Do not send out wired funds if the incoming funds were not wired. And do not send back large amounts until your bank can confirm with 100% certainty that the incoming funds were legitimate and fully cleared. Having access to the funds does not mean they cleared. Work with your bank to provide solid assurances that the funds are real and cleared whenever you suspect fraud.
Fannie Mae and Freddie Mac HAFA Programs
Many home owners are in financial distress and owe more than their home is worth. In this case, selling their home will not net enough proceeds to pay off their current mortgage. Often, the only option is a “short sale,” in which their lender agrees to accept less than a full payoff to release the mortgage.
HAFA is a Federally sponsored program providing incentives to lenders that agree to short sales. A short sale is a long, difficult process requiring weeks if not months of negotiation with the bank to convince them to accept less than the full amount due. The goal of HAFA is to streamline and standardize the short sale process. HAFA, however, only applies to certain home owners and to lenders that participate in the program.
More importantly, HAFA did not apply to loans owned, underwritten, or guaranteed by Fannie Mae and Freddie Mac. This excluded a large number of loans… until now!
Fannie Mae and Freddie Mac Introduce Their Own HAFA Program
Fannie Mae and Freddie Mac recently announced their own entry into the HAFA Program. Both programs will likely be very similar to the original HAFA program. This development will open the door to a vast majority of distressed homeowners to utilize the HAFA Short Sale Program. And, this means that sellers, REALTORS, and attorneys must understand how the various programs work.
Like the original HAFA program, the Fannie Mae and Freddie Mac programs “piggy back” off of the HAMP Mortgage Modification program. Distressed homeowners must first apply for a mortgage modification under the federal HAMP program. And, like the original program, the new programs provide similar incentives to homeowners and lenders to close a short sale. Homeowners can receive up to $3,000 in “relocation assistance” for completing a short sale.
These programs have just been announced and are not yet in effect. Homestead will continue to provide updates prior to the August 1st implementation date.
For updates and more information on this and other topics, please subscribe to this blog.
This story aired on May 28, 2010 on WKOW News.
By Bob Schaper - bio | email | Twitter | Facebook
MADISON (WKOW) – A quarter of all home sales last month involved distressed properties – and the situation could be getting worse.
Peter Zarov, owner of Homestead Title, says the number of distressed sales – such as short sales and auctions - is likely to go up because closings lag months behind foreclosures.
“I’m hoping we’re at bottom,” he said. “But every time I say that it gets worse.”
Nationally, distressed sales were 33 percent of all sales in April, according to the National Association of Realtors. That was down slightly from March, when it was 35 percent.
New Recording Fees and Procedures in Wisconsin
Changes to Recording Fees & Social Security Protection
Effective June 25, 2010 the cost to record a real estate document in the County Register of Deeds office will be $30 regardless of the number of pages.
Formerly, the fee was based on the number of pages in a document: $11 for the first page and $2 for each additional page. This old fee structure made it difficult to give exact quotes prior to closing. The new fee will, on average, not add much in total fees and will add certainty to transactions. Lenders and Realtors will be able to give exact quotes for recording fees.
Five dollars of the new fee is designated for the removal of social security numbers from all public documents. The recording fee will revert to $25 upon the earliest of the following 1) the Register of Deeds has successfully redacted all social security numbers from electronic format; 2) January 1, 2012, unless an extension of time is granted by DOA; or 3) January 1, 2015.
New Rules for Correcting Errors in Recorded Documents
Errors in recorded documents are common and unavoidable. Everyone makes mistakes from time to time. It is how we correct those mistakes that separates us.
For over a decade, the tool for correcting a mistake was an “Affidavit of Correction.” If a deed or a mortgage contained an error, the title company or an attorney would record an Affidavit that described the error and showed how it was to be corrected. For instance, if a deed omitted a Buyer’s middle initial, the title company would file an affidavit of correction that stated: “The Deed recorded on May 24th omitted John D. Smith’s middle initial. The Buyer’s correct name is John D. Smith.”
In 2007, the Wisconsin Court of Appeals ruled in Smiljanic v. Niedermeyer, 2007 WI App 182, 737 N.W.2d 436, that using Affidavits of Correction to correct errors is not proper because there is no Statute in Wisconsin that authorizes the use of this tool. This new ruling not only made it much more difficult to correct errors, it called into question all of the past Affidavits that had been filed.
A new law now authorizes the use of Affidavits of Correction in certain circumstances and describes who must sign the document.
What May Be Corrected? A corrective instrument may be used to correct a legal description (such as a distance; unit, or building number; subdivision or condominium name, etc.), a party’s name or marital status, homestead information, dates, notary information, and a number of other issues.
Who May Sign? The new law provides that the person who may sign is a “…person having personal knowledge of the circumstances of the conveyance and of the facts recited in the correction instrument, including the grantor, the grantee, the person who drafted the conveyance that is the subject of the correction instrument, or the person who acted as the settlement agent in the transaction…” In other words, the title company, any party, or an attorney involved in the transaction can all sign.
In certain circumstances, however, only a party can sign. For instance, if a buyer is to be removed from title, THAT buyer must sign. If a parcel is corrected to add land, the Sellers must sign.
What About Old Affidavits of Correction? The new law “grandfathers” in old Affidavits of Correction if they would be valid under the new law.
The following chart provides definitions and differences for various terms and concepts you may encounter in short sales and foreclosures. For a brief explanation of the HAFA Process, see HAFA Explained – The New Federal Short Sale Program. The National Association of Realtors also provides excellent information and resources. These definitions and terms are a broad-brush attempt to offer clarity and understanding. Many terms only apply to Wisconsin.
| Term or Concept |
Traditional Short Sale |
HAFA Short Sale |
Foreclosure |
| HAMP | N/A | Mortgage Modification program through the Making Homes Affordable initiative. HAMP may be required for a HAFA Short Sale. | HAMP Loan modification may be an alternative to foreclosure. The program has been unsuccessful for most home owners. |
| HAFA | N/A | The short sale program offered through the Making Homes Affordable initiative. HAFA is designed to be a short sale alternative when a loan modification fails. | N/A |
| SSA Short Sale Agreement |
SSA Only Applies to HAFA: Lenders do not agree to a traditional short sale until the end of the process, only after approving all application materials AND the offer to purchase. |
SSA is the Lender’s Agreement that outlines the short sale for the home owner. This is agreed to at the time of listing. |
N/A |
| RASS Request for Approval of Short Sale |
RASS Applies to HAFA: Request for short sale approval is a long drawn out process of submitting information and often resubmitting it many times. |
The Seller or REALTOR submits the RASS within 3 days of having an accepted offer. The lender than has 10 days to approve or deny the request. If approved, lender must close when buyers are ready. |
N/A |
| Term or Concept |
Traditional Short Sale |
HAFA Short Sale |
Foreclosure |
| Principle Residence | Can do short sale if not principal residence. May have federal income tax consequences for amounts the lender does not collect. | The home must be the seller’s principal residence to qualify for HAFA. | N/A |
| Timing | Wildly varies, but “Short” does not usually describe the length of time. 3-18Months to complete. | Much faster than traditional short sale.
Less than 60 days From application to approval. Lender has 10 days to approve any accepted offer. Can close within normal timelines once the offer is approved. |
Foreclosures in Wisconsin can take 8-12 months where a seller does not contest the foreclosure (default judgment). It can take longer if the seller answers the complaint. I can take less time for abandoned or commercial property. |
| Default |  |
 |
The missed mortgage payment that leads to the filing of a foreclosure |
| Deficiency | Lender may or may not demand a deficiency. The Deficiency is the amount of money the lender is still owed. | Lenders cannot demand deficiency. | First Mortgage holders generally waive their right to a deficiency in order to speed up the process. 2nd or 3rd lenders usually still retain a right to deficiency. |
| Term or Concept |
Traditional Short Sale |
HAFA Short Sale |
Foreclosure |
| Loan Types and Underwriters | Virtually all lenders and underwriters will do short sales. Every lender or underwriter has different standards. | Only applies to non-GSE loans, meaning NOT Fannie Mae or Freddie Mac.
Only applies to lenders participating in the HAMP Program. |
All lenders can file foreclosure actions. |
| Mortgage Payments | Sellers generally do not pay mortgage payments during the foreclosure and short sale process. Essentially, they are there “rent free.” | Sellers must continue making mortgage payments, but not more than 31% of their gross income. |
N/A |
| Commission | Lender may negotiate to reduce it. Many investors and programs now require 6% if that is written in listing agreement. | Requires servicers to honor listing agreement if commission does not exceed 6% | N/A |
| REALTOR | Anyone can participate in a traditional short sale, including FSBO’s, Investors, or non-licensed individuals | HAFA short sales MUST be listed with a REALTOR. | N/A |
| Term or Concept |
Traditional Short Sale |
HAFA Short Sale |
Foreclosure |
| Initiating Short Sale Process | Seller, Realtor, or Attorney calls lender, but process generally starts once a Buyer accepts the offer. Process initiated by sending short sale “package.” | Seller calls lender and requests HAFA Short Sale. Lender must proactively offer short sale to individuals who try and fail at HAMP. May require application for HAMP first (although new guidelines allow for direct application for Short sale). | N/A |
| Cash at Closing | Sellers are rarely allowed any cash at closing. Many lenders require the seller to bring money to closing | Lenders can offer up to $3,000 as a cash incentive for sellers to do a HAFA short sale. | N/A |
| Credit Consequences | Consult a financial advisor or credit counselor. Short sales can have a significant impact on credit. | Consult a financial advisor or credit counselor. Short sales can have a significant impact on credit. | Consult a financial advisor or credit counselor. Foreclosure will be a significant impact on credit. |
Distressed Property Sales Continue to Increase
The percentage of Dane County home sales that involved distressed properties increased to over 25% in the first quarter of 2010. Wisconsin is not immune from the national foreclosure crisis. The good news, however, is that Wisconsin’s woes don’t compare to the hardest hit states and our housing market continues to outshine the national averages.
Nevertheless, a large percentage of Dane County sales in the first quarter of 2010 were foreclosure related. Indeed, the Distressed Property Index, developed by Homested Title and Dan Miller, indicates that distressed properties account for over 25% of all Dane County sales.
The Distressed Property Index measures the ratio of foreclosure filings to total home sales in Dane County. The index provides an estimate of the number of distressed properties sales in the overall market. A distressed property is one that has gone through some stage of the foreclosure process.
In March, the index topped 25%, suggesting that more than 25% of Dane County sales involved a distressed property.
The Index was created by Peter Zarov and Dan Miller as a way of providing critical information for Buyers, Sellers, and their agents.
The Index is published on a monthly basis at the Wisconsin State Journal and on Danecountymarket.com.
Foreclosures continue to rise in 2010, and with them, we continue to see more REO and Sheriff’s Sales. A sheriff’s sale is the judicial auction at the end of the foreclosure process. If there are no bidders, the bank retakes the property and sells it from its “Real Estate Owned” Department, or REO for short.
Both of these sales occur after a foreclosure, a judicial proceeding designed to end all ownership rights in former owners. This raises the question:
Do buyers of these properties really need title insurance?
The Answer is a resounding YES!
A Sheriff’s sale is designed to “strip” all interests and liens from the property and sell it free and clear to a new buyer. But, that does not always happen. Lien holders, like mortgages and judgments, that are not properly named or served in the foreclosure proceedings may retain an interest in the property. Taxes likely will remain due against the property. And, certain federal liens can be enforced months after the sale.
The Sheriff’s deed provides no warranties. This means that any title problems are solely the buyer’s responsibility. While title insurance will not entirely take the place of a warranty, it provides a level of protection and insurance in the event of a title claim.
Similarly, a Bank generally will transfer the property by “Special Warranty Deed” or “Quit Claim Deed.” These deeds also lack the full warranties of an ordinary deed. The warranty is the seller’s promise of good title. Without a full warrenty, buyers will not be able to go after the seller for most title problems.
Thus, the need for title insurance. A title insurance policy can protect buyers from liens such as past mortgages, judgments, taxes, or construction liens that might attach to the property.
Buying a property out of foreclosure without title insurance – whether at Sheriff’s sale or through REO – is a risky proposition. The cost of an owner’s policy of title insurance is a small price to pay to substantially minimize the risk.
Title insurance, however, is not the perfect solution. It won’t eliminate all risks. Title policies usually include certain “exceptions” or “exclusions” from coverage. The policy may not cover for some title risks such as adverse possession, boundary line disputes, construction liens, or matters not shown in the public record (among others). A full warranty deed would be the only protection from all title claims. But, Banks and Sheriff Sales don’t generally offer full, warranty deeds.
The trade-off when buying an REO or Sheriff’s sale is a great price in exchange for a little risk… unless you don’t bother with title insurance, in which case you’ll get a great price with a whole lot of risk.
This discussion is not intended as legal advice and should not be used outside of Wisconsin. Buyers of REO or Sheriff sale properties are urged to seek the advice of a qualified attorney.
Short Sale Seminar: May 26, 2010
Short Sale Seminar
May 26, 2010: 9am – 12pm
City Center West
525 Junction Rd.
Madison, WI 53717-2152
Licensed REALTORS and lenders are invited to attend this powerful seminar on short sales, foreclosures, and the new HAFA Program.
Attorney Peter Zarov will be breaking down the Agent’s responsibilities, the foreclosure time line, and the short sale process. This class will cover:
- Short sale time line
- Foreclosure process
- How to avoid liability during a short sale (Your referral team, common scams, etc.)
- The short sale packet and best practices to submit
- The NEW Federal HAFA Short Sale Program
- Transactional pitfalls that will kill the deal that can be avoided
Agents will a acquire critical knowledge of the foreclosure process in Wisconsin, short sale procedures, and the changes brought about by the new HAFA Program that went into effect on April 4, 2010. Surviving and thriving in this market requires a familiarity and understanding of these topics.
The Event is $15 and includes materials, bagels, pastries, coffee, and juice. We accept payment by credit card or check.
Attend This Event
For more information, go to www.homesteadtitle.net/seminars or subscribe to our blog at www.homesteadtitle.net/blog
