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Posts Tagged ‘closings’

Up, Up, and Away

Rates on the Rise, But Sales Remain HOT

Mortgage rates spiked over the last two weeks. In fact, since the end of April, the average rate on a 30-year fixed rate mortgage increased by nearly 25%.

Pressure From The Fed Kept Rates Low

The Fed had helped keep mortgage rates low through a bond purchase program called Quantitative Easing (QE for short). But, recent announcements by Fed Chairman Ben Bernanke signaling a slow down or end to QE spooked the market.

Mortgage rates jumped and have continued to rise since those announcements.

Real Estate Market Continues Hot Streak

Despite rising rates, the real estate market remains hot. Realtors continue to be overwhelmed with activity and many sellers are seeing multiple offers near or at asking price.  Homestead’s numbers are no different. After an incredible year of growth in 2012, we have seen a 30% year over year increase in closings. And, despite the jump in interest rates from April to June, our new orders have not slowed.

Homestead’s growth is both a function of a strong market and of our strong commitment and passion to making the closing process easier for our customers and clients. Our values of caring, empathy, flexibility, loyalty and a hands-on, education based approach have cemented a loyal following of Realtors and do-it-yourself sellers.

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DEED PROCESSING NOTICE – Don’t Fall For it!

Home owners are being targeted for a simple, yet effective scam. At least two companies are offering to send copies of “grant deeds” for a charge of $86. They recommend that homeowners obtain this deed in order to confirm their ownership in the property. Yet, these public records are readily available for almost no cost.

Why Do Many Officials Call This A “Scam?”

These companies send official looking notices that often include warnings of late fees, compliance response deadlines, or the phrase FINAL NOTICE. While these sales pitches are not illegal, they are deceptive. As the Lake County Recorder of Deeds in the Chicago area noted: “It is not against the law, but it breaks the spirit of the law . . . It is very, very deceptive.” Officials Warn Homeowners of Deed Scams, Chicago Tribune.

The companies often charge $86 for the deed but also include a $35 late free for not meeting a fictional deadline. It is only in the fine print that they disclose that this is not a bill and that you could receive the same information from the County Recorder (or register of deeds).

Deeds Can be Obtained Inexpensively or Free

In fact, copies of deeds, mortgages, or any recorded document may be obtained from your local Wisconsin Register of Deeds office, for a very nominal fee. Generally the fees are $2.00 for the first page, and $1 for each page thereafter. Deeds are usually one or two pages.

In addition, homeowners should have received a copy of their deed from their title company when they purchased. Homestead Title and many other title companies will provide a duplicate to their customers at no charge.

Homestead Title Company is always happy to assist Dane County homeowners with such requests.

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2011 December Home Sales Report – Wisconsin REALTORS® Association.

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The Banks’ Dilemma:

To Foreclose or Accept a Short Sale?

Over the past 4 years, short sales – house sales in which the bank holding a mortgage agrees to accept less than the full amount due – have proliferated. Short sale experts have worked hard to dispel the myth that banks never negotiate and never accept less. But now, a recent New York Times article suggests that there may be some truth to that myth.

In a recent article, the Times reported that banks are resisting short sales and putting more focus on foreclosures. In fact, there are some incentives for banks to foreclose, even when a short sale will reduce risk and financial losses. New accounting rules allow banks to delay the “write down” of their loss until the house later sells. In a short sale, by contrast, the bank must take the loss immediately. In addition, the bank with which realtors and home owners negotiate are only one interested party; they are the servicer. Short sales usually also need to have the approval of investors, underwriters, and/or private mortgage insurance companies. And, while the recent foreclosure freeze highlighted the risks associated with foreclosure, banks face many risks in short sales, including fraud. A bank’s decision to agree to a short sale may involve far more than a simple cost-benefit analysis assumed by Realtors, attorneys, and distressed homeowners.

The Times article states that banks are “historically reluctant to do short sales” and suggests that they may be more likely to foreclose, even in the face of a good offer. This has not been our experience, based on anecdotal evidence. Rather, most banks appear very open to negotiating short sales, especially when there is a bona fide buyer in the wings. A large number of short sales are closing. Homestead Title is analyzing data over the past 3 years to determine the percentage of sheriff’s sales in Dane County in relation to the percentage of foreclosure filings.

Homestead Title offers expertise and guidance throughout the short sale process. Owner and attorney Peter Zarov often teaches seminars on foreclosures, short sales, and distressed properties. We will continue to provide updates, information and resources on these topics.

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At least three major lenders have suspended foreclosures in nearly two dozen states, including Wisconsin. Allegations of misconduct and flawed practices in foreclosure lawsuits prompted GMAC, Bank of America, and JPMorgan Chase to put the brakes on foreclosures and halt post-foreclosure REO sales of properties in at least 23 states. Indeed, many title insurers have also suspended issuing title insurance policies for REO sales from these companies. Now, according to the New York Times, lawmakers in Washington and many states are calling for a freeze on all foreclosures. Foreclosure Furor Rises; Many Call for a Freeze, Oct 5, 2010.

At issue are flawed or false affidavits – sworn statements by the lenders’ employees who were to have reviewed the files for accuracy and correct documentation. Rather than actually review the files, these companies allegedly used “robo-signers” — employees who signed thousands of affidavits per month with no knowledge of the content and, in many cases, without even bothering to read the Affidavits.

Some Affidavits dealt with lost or missing assignment of mortgages. The bank that made the original loan often assigned or sold their loan to another bank. That bank, the new owner of the mortgage, must prove to the court that they have standing to file the foreclosure action; in other words, they are the proper party with an appropriate interest to foreclose.  They need to produce the original Assignment of Mortgage document as proof. During the hay-day of loose lending practices, many banks lost or even never had the original Assignment of Mortgage documents.

The solution: sign an affidavit that swears that the bank keeps original documents like this and the signer can’t find the original after a thorough search and investigation for the lost affidavit.

The problem: the person signing that affidavit allegedly never made a thorough investigation and has no knowledge of the file. How could he when he signed thousands every month.

In most foreclosures, the home owner never contests the foreclosure action because the homeowner had stopped paying many months earlier. These flawed affidavits usually present only procedural flaws, not real defenses on the merits. Thus, they likely only serve to slow the process and delay the inevitable.  In some cases, however, the injustice may rise beyond a lack of due process. 

No one knows the affect that this temporary moratorium will have on the real estate market or the foreclosure crisis. Yet, it certainly has created more risk and costs for lenders during the foreclosure process.  One affect may be to encourage lenders to seek foreclosure alternatives, such as short sales and deeds in lieu of foreclosure. Only time will tell.

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A deed is the legal document that transfers ownership rights (called “Title”) from one owner to the next. There are many different kinds of deeds in Wisconsin, and the type of deed used has important legal ramifications. A clear understanding of the different kinds of deeds also illuminates why title insurance is so critical.

What Deeds Do

A deed transfers an interest in property from one party to another. In addition, a deed may contain other important language that can affect the new owner, including among others, warranties and reservation of rights.

Warranties

A deed may contain certain warranties or promises. Warranties are the Seller’s promise to the Buyer regarding the title interest that the buyer will receive. The standard Warranty Deed contains the following warranty:

Grantor warrants that the title to the Property is good, indefeasible in fee simple and free and clear of encumbrances…

Thus, a Warranty Deed offers a legal promise that the buyer will receive good title. By contrast, a Quit Claim Deed contains no warranties at all. Other deeds may have limited warranties.

Reservation of Rights

Deeds may also contain reservations of rights. For instance, a deed may reserve interest or rights in the seller or grantor, such as a life estate. A deed might also contain provisions for easements or other restrictions. In other words, deeds may contain limitations on the rights the new owner will receive.

Various Types of Deeds

There are many different types of deeds, including Warranty Deeds, Quit Claim Deeds, Trustees Deeds, Sheriff’s Deeds, and Personal Representative Deeds. The major difference between each kind of deed is the level of warranties provided.

Type of Deed

When Used

Warranties

Warranty Deed In most standard sales. Warrants good, indefeasible title in fees simple, free and clear of encumbrances. This is the strongest warranty and generally gives the new owner the right to seek redress or damages from the seller in the event of most title problems.
Quit Claim Deed Many inter-family transaction, between neighbors, divorce Contains no warranties at all. A seller conveys, and the buyer receives, whatever interest the seller has in the property, even if that interest is nothing at all.
Sheriff’s Deed Sale at the end of Foreclosure Like a Quit Claim deed, there are no warranties. The Buyer gets whatever interest the sheriff was able to convey (which could be nothing at all).
Personal Representative’s Deed Used to transfer property rights from a deceased person’s estate. Involves Probate Court. Like a Quit Claim deed, there are no warranties. Generally, the Personal Representative is unwilling to warrant or promise anything relating to property that he/she has never personally owned.
Special Warranty Deed REO (Bank Owned) Sale Provides very limited warranties. Generally only warrants that the Bank had title sufficient to sell the property.

 

Title Insurance and Deeds

A title insurance policy insures that the new owner will receive good, indefeasible title, free and clear of encumbrances other than exceptions noted in the policy. You may notice that this is almost exactly what a seller Warrants in a warranty deed. Title insurance can be viewed as an insurance policy in the event that a seller breaches a warranty and is unable to pay. And, after all, how many sellers could come up with the kind of money needed to pay for a breach of a warranty?

But what if the seller gave no warranties at all? What if the deed is a Quit Claim Deed, a Sheriff’s Deed, or a Personal Representative’s deed. Then title insurance becomes even more critical. The Title policy would be the buyer’s only recourse in the event of a title defect.

Title Insurance policies always protect buyers against certain unforeseen title problems. This is often added protection above and beyond the buyer’s right to seek redress from the seller. Whenever the buyer has no right to seek redress from the seller – when there are no warranties – it becomes imperative that the buyer receive a title insurance policy.

Giving Legal Advice

This information is intended to serve as a warning to Realtors and other non-attorneys to steer clear of giving legal advice. It is important to understand the characteristics and limitations of each kind of deed. It is even more important to leave the legal advice to attorneys. If a question or issue arises involving which type of deed is appropriate, always consult an attorney.

This information was provided by Attorney Peter Zarov. The information provided is not to be construed or used as legal advice and may not be accurate outside of Wisconsin.

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