A Look Back--Part I Mortgage Industry

June was a big month in the housing industry this year. We celebrated National Home Ownership month, and we saw an end (an almost end) to the National Tax Credit for certain homebuyers. I started thinking about what the real estate market was like 30 years ago...how has it changed? For the better or worse?

We have seen a lot of change in the mortgage industry and how mortgage loans are processed. Fax machines were not a staple in offices and overnight mail was very expensive. Most items were ordered via courier or regular mail and business was done very locally. A credit report took 4 days to receive. The loan officer sent a check for about $65 to the local bureau and waited for the report to be ready for pick up. Appraisals took a full two weeks to complete and were hand delivered as well. Verification of Deposits, Verification of Mortgages, Verification of Rents, and Verification of Employment were all mailed out and the mortgage company waited for the originals to be completed and returned. The borrower did not submit underlying documents such as tax returns, bank statements, or paystubs. The only supporting documents were the "verifications"!

According to the US Census Bureau, the median sales price in 1980 was $93,400 for the United States. The rate of default was much lower back then, but that is understandable considering conventional loans required at least 20% down. There were no "Alt A" products in the 80's. The primary loan products were Conventional (20% down) and VA.

All in all, mortgages took 45-60 days to complete. Not at all unreasonable considering most escrows run well over 30 days. Have things really changed that much or are we just headed full circle?! Paula Hester--Escrow Admin DFW

Email Scams!!

They have been around for a long time--the Nigerian e-mail, 419, advanced fee scams--you know the ones. The perpetrators send a random e-mail or fax stating they are from a foreign country and need assistance getting large sums of cash out of their country. All the recipient has to do is send them wiring instructions and provide some personal information. The e-mail claims the participant who assists will be compensated for his/her efforts with a flat fee or a percentage of the funds.

Here are some partial examples of scams received by escrow companies such as ours:

This is an official requisition for your Escrow services on behalf of Germany S.U.G. Group Co., Ltd.

We are based in China and our principal activity is Supplies and manufacturing of Machineries and Tools. we have a dire need for USA liaison/receiving representative to assist us with receiving payments from our delinquent customers in USA, indebted to us in quite substantial and various amounts of monies and we request for your services accordingly.

And...

My name is Mr. Ping Chang. I work with a senior investment consultant for the DBS Capital Investment Ltd. here in Hong Kong. I also work as part of the regional team that covers the entire Asian region. I had taken pains to find your contact through personal endeavors.

Approximately five years ago, an investor (Mr. Anthony-deceased nine months ago) invested a total of US $22.5m (Twenty Two Million, five hundred thousand United State Dollars) with my department. With interest at today's value....

The email goes on to request money from the receiver (as they all do). We have seen these and other less obvious email scams in our local offices. One transaction required a buyer to deposit a 10k earnest check with our office. Instead, the customer gives us a check for 106k and asked for us to wire back the difference before the check bounced!

These are not just internet scams that pray on the general public. There are lots of scams aimed at real estate professionals under the guise of purchasing property or developing a new subdivision. The Secret Service has this message posted to their Web site:

"If you have received an e-mail or fax from someone you do not know requesting your assistance in a financial transaction, such as the transfer of a large sum of money into an accounty, or claiming you are the next of kin to a wealthy person who has died, or the winner of some obscure lottery, DO NOT respond. These requests are typically sent through public servers via a generic "spammed" e-mail message. Usually, the sender does not yet know your personal e-mail address and is depending on you to respond. Once you reply, even to tell them you are not interested, they will often continue to e-mail you in an attempt to harass or intimidate you. If you receive an unsolicited e-mail of this nature, the best course is to simply delete the message."

Taken in part from Fraud Insights Newsletter Volume 5, Issue 6--Fidelity National Financial

Execution of Documents

How documents are executed (or signed) can be one of the single most important factors of how enforceable a contract may be in case of a dispute. Anytime the property is being sold, the seller should reflect the actual title owner and any spouse. There are exceptions to the spouse rule, of course, but generally speaking on residential property you will include the spouse whether listed as an owner or not.

If the record title owner is deceased, that title owner should NEVER be listed as the seller on the contract. If the deceased owner had a will and probated the will, then the court appointed representative will be listed as the seller.
For example: Paula Hester, Independent Executor for the Estate of Mickey Mouse, deceased.
It is really important that the seller's capacity be listed--Independent Executor, Dependent Executor, etc.

If the deceased seller died without a will, then we would simply list all of the heirs individually as the sellers. Each seller/heir would be required to sign all documents. To determine the heirs without a will, Affidavits of Heirship would be prepared.

If the record title owner is a coporation, then the corporation name will be listed as the seller.
For example: Fidelity National Title Agency, Inc.
The documents will be signed by an authorized corporate representative and would be listed like this: Mickey Mouse, President World Wide Cartoons, Inc.

Another common type of sellers are Trusts. A Trust seller would look like this:
Paula Hester, Trustee of the Paula Hester Living Trust.
The contract signature line would look the same as above.

If the parties are using a Power of Attorney, the seller would be the actual seller's name, but the signature line would look like this: Paula Hester, by Mickey Mouse Attorney in Fact.

There are many different types of entities that you may encounter as sellers or buyers! Don't be afraid to ask questions or look to us for assistance in completing your contracts!

Paula Hester
Escrow Admin DFW

Selling REO Properties

With the large number of REO properties for sale, it is inevitable that you will close on at least one property this year. Agents repeatedly tell me how difficult these closings can be because of the difficult of working with an instutional seller. I have closed foreclosed homes many times and believe if you keep a few tips in mind, your process will be much smoother for your buyer!

1. Know and understand the process. With a bank seller, nothing can be turned quickly. Every amendment, contract offer, or issue goes through the representative for the seller, to the seller and up the chain of command before a response will be heard. The seller's representative will be handling hundreds of properties with buyer's agents just like you. Don't wait until the last minute for an amendment. This is the most common mistake we see in foreclosure closings. Sellers will not sign the HUD unless the HUD completely matches the contract--including amendments. Bank sellers do NOT sign amendments at the table.

2. Make sure the contract accurately reflects "the deal". Is the buyer's name styled EXACTLY like the buyer intends to take title to the property and take out his mortgage? Once the contract is done, the seller has a deed drawn and delivered to the title company. Remember, the seller is across the country from us and won't be here at closing. Those deeds are done in advance so we can close quickly. If loan documents are delivered and the names don't match...guess what? Delayed closing! If the contract is written as a cash deal, the seller does not expect a note/deed of trust to be included at closing. If the buyer decides to get financing, even private money financing, the seller will require an amendement. Don't wait until the last minute for the amendment.

3. Know the players. In most of the deals we handle, FNT is the ESCROW company only. We don't prepare the title work or sign for the seller. But every REO account is different. Know who is involved and what their role is going to be in your closing so you can prepare your client!

4. Be diligent. This is a business transaction for the seller. If it's not in writing, don't expect the seller to give it to the buyer. The seller expects the buyer will have read and understood the contract. Suggest the buyer hire an attorney to review and explain the REO addendums to him/her. Once the terms are in place, there is little negotiating room.

There are great deals out there for buyers of foreclosed properties. With a little extra planning, the closing can be as smooth as buying property from an individual seller!

Paula Hester--Escrow Admin DFW

Going Green

Precise Land Surveying started going green over 15 years ago when green was still only known as a color. When Gary Vike, President of Precise Land Surveying, opened Precise Land Surveying in 1992 he immediately realized that the land surveying industry needed to be updated. He observed that the surveying process was slow, inaccurate, and not customer friendly. So what did he do? He changed it! Gary hired IT Experts, Process Engineers, and Customer Service Advisors and together they created a new process that gave the speed and accuracy that their customers wanted. What was the common problem? Paper! Too much paper! The average file was jammed with paper making most telephone books jealous. Client’s files would get lost, misplaced, misfiled, and the common question of the day “Who has the Smith file?” So the Precise Team designed a software called S-Track that makes the process virtually paperless. S-Track is able to receive orders from a client by paperless fax, email, or online and immediately puts the job into a digital queue that allows multiple departments to work on one job at the same time. The Research Department, CAD, Field Department, and Surveyors could all work on a job without having to wait for one department to pass along the file. Gary also had scanners placed in his field trucks to allow work to be transferred to S-Track without having to drive back and forth to the office. This increased speed for his clients and reduced fuel consumption. Since a plat is required for every survey, Gary purchased digital plats that reduced drive and research time at County Court Houses. Throughout this whole process the client is kept up to date by emails and has access to a dedicated Customer Service Department to answer any questions. What was the end result from this new process? First of all, 11 tons of paper and thousands of gallons of fuel is eliminated per year. Secondly, and most importantly, the client has an easy way to order, the survey is usually delivered within 48 hours or sooner as needed, and constant electronic updates from Customer Service gives peace of mind until they have an accurate survey in hand. Precise Land Surveying has a 99% accuracy rate compared to the Industry at 70%. This process took time to evolve and it is still Gary’s number one goal to improve daily. The common question of the day now is “How can we make this better for our customers?” The Precise team recently implemented a new Green tool. They have placed printers and laptops at their larger client’s offices to be able to print surveys right at their desk without having to deliver them by courier to reduce time and fuel. Precise has also become more flexible growing beyond doing business in the DFW area. Precise now has the ability to do surveys in Austin, San Antonio, and Houston. So what can we learn from Precise? Going Green is Good for Customers. To learn more about precise land surveying visit www.preciselandsurveying.com or call at 877-581-7072.

Many of our local Fidelity National Title offices use Precise Land Surveying. Although the buyer does have the choice in survey companies, we commonly order the surveys as a courtesy to the real estate agent. We love Precise for several reasons: 1) Accuracy- they are unbelievably accurate- and 2) Marketing - they offer free customization of their products for real estate agents. If you're looking for a great surveying company, we highly recommend Precise Land Surveying.

Amy Torres
VP/ Director of Sales
Fidelity National Title- DFW

Seller's Disclosure of Haunted Houses?!!

In one of the most often cited cases regarding the disclosure of haunted houses, the Supreme Court of New York ruled in Stambovsky v. Ackley, 169 A.D.2d (NY App.Div.1991) that a seller is exempt from disclosure except in cases of fraud or misrepresentation. The owner had advertised the home as being haunted. It was featured in Reader's Digest and included in a five home walking tour of the city. Several members of the family reported the presence of polergeists (yikes!) and of receiving gifts from them!

Upon entering into the contract, the seller (nor her agent) told the buyer about the home's history. Buyer, from out of town was unaware. Once he became aware, he wanted to rescind the contract . The court ultimately ruled mostly in his favor.

Interesting lesson here....disclose, disclose, disclose!!!!

Seller Financing...A Thing of the Past?

With the ton of new laws and regulations happening in 2009 and 2010, you may have missed the one that impacted seller financing!! Under the Safe Act, states were to pass legislation to ensure mortgage originators were properly licensed and registered with the state. That's good, right?! We want better educated and knowledgeable loan officers in our industry...

But what about private money financing? That is where the problem lies....now anyone that loans money for real estate purchases must be licensed by the State of Texas as a mortgage originator. No longer will the seller be able to simply carry the note himself/herself when the borrower cannot obtain financing through traditional loans.

There is an exception for seller financing your homestead, however!! So where your seller is selling her homestead, the law would allow for her to carry the note just as we always have.

I think we have over-regulated at this point. I really believe we could have protected our buyers by means other than cutting off a source of financing especially where we have so few options now. What do you think? Is this consumer protection or over-regulation?!

If you want more information on the new law check out our local HUD website here:

http://portal.hud.gov/portal/page/portal/HUD/states/texas

Have a great weekend everyone!

Paula Hester--Escrow Administrator DFW