Florida Bankruptcy, Foreclosure, Short Sales

This is the best explanation of the foreclosure process that I have found.  Follow the link below to read the entire article.

Mortgages, Foreclosures, and Short Sales

Anatomy of a Mortgage

A mortgage is a loan backed by real estate.

When you borrow money to buy a home, you sign an I.O.U. (also called a “promissory note”) and agree to repay the loan in steady monthly installment payments. To protect the lender (the bank) you are required to “give the bank a mortgage” on the property. The mortgage is a document that connects the promissory note to your home. The mortgage says to the bank “If I don’t pay you back on time you can have my home auctioned off and use the proceeds to help repay the loan.” A loan backed up by a mortgage is called a mortgage loan. Sometimes it is called a “home equity loan” or a “home equity line of credit.” Any loan that is backed by the creditor’s right to auction off a piece of land is a mortgage, no matter what they call it.

First mortgage and second mortgages.


What is the difference between a first mortgage and a second mortgage? It’s like an ice cream parlor. On a busy day, you go in and take a number. If you are first, your number says #1. A line forms behind you as others pull numbers 2, 3 and 4. When the person behind the counter is ready, you hear “Now serving number one” and you step forward. You have certain rights that that point. You are entitled to first pick of everything. If you have enough money, you could presumably buy all the ice cream in the store. So, you have the right to be completely satisfied before anyone behind you gets anything. OK, let’s say you buy some ice cream and leave. Now the customer holding #2 steps up (he is now #1, in a sense) and he has the same kinds of rights you had. Mortgages are like that. The first mortgage has a right to auction off your home if you don’t pay and will receive all the money necessary to pay back his loan before the second mortgage gets any money at all. Mortgages get their “number” in the order they are “recorded.” More about this later.

Florida Bankruptcy, Foreclosure, Short Sales.

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Appraiser as an Expert Witness

The 1993 U.S. Supreme Court case Daubert v. Merrill Dow Pharmaceuticals created a new rule regarding the admissibility of expert testimony in all types of court cases by establishing new criteria and designating the judge as “gatekeeper” to evaluate the scientific methodology. The judge acts as a gatekeeper by considering a list of four factors which aid in determining the reliability of the testimony. The four factors are the following: whether the theory can be and has been tested, whether the theory has been subjected to peer review and publications, whether there is a known rate of error the court should consider, and whether the technique is generally accepted in the relevant scientific community.

Some courts have interpreted Daubert to apply to all expert testimony regardless of whether or not it is scientific in nature, while others have ruled that Daubert did not apply to expert testimony that just involves specialized knowledge. In 1999, the U.S. Supreme Court ruled in Kumho Tire Co. v. Carmichael that all expert testimony, whether scientific knowledge or specialized knowledge, be judged according to the same strict standards outlined in the Daubert ruling.

It is expected that the fourth factor of the Daubert criteria will be increasingly emphasized. The judge may look at how well the expert appraiser uses the generally accepted methods of appraisal practice. The judge may also look more closely at the number of years of service as well as generally recognized appraisal designations acquired after meeting minimal experience requirements. It will be important for the appraisal expert for either side to be prepared for a reliability attack. Appraisers need to be able to explain both their qualifications as an expert and the reasons for their opinions. They need to be capable of thoroughly explaining in their appraisal reports how they arrived at their conclusions. Appraisers need to be consistently applying the standardized criteria of the appraisal profession and should go back and review the generally accepted appraisal principles. They also should be acquainted with new knowledge and be aware of changes in the generally accepted appraisal principles.

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Is That Addition Living Area?

Realtors, have you ever shown a home that includes a new addition or the conversion of another space, like a garage or porch?  Of course you have.  And the next thing you did was review the listing to see if it was included in the GLA by the listing agent.  In the past you may have simply viewed the area to see if it was completed in a workmanlike manner and advised your client. (social ring)

Not so fast!  In order to ensure a smooth closing it would be wise to give more consideration to the addition.  While real estate appraisers have always been required to determine if the space meets a reasonable definition of living area, lenders are requiring additional documentation from the appraisers.  Lenders require that appraisers must document in the appraisal if the addition was built with permits.  Permitted additions should be included in the gross living area, assuming it meets the other requirements.

If the addition was not permitted or the documents cannot be obtained, don’t fear the area can still be considered as living area if:

The non-permitted additions do not increase the FOOTPRINT of the original construction and:

  1. They were completed in a workmanlike manner.
  2. The addition is similar or superior in quality to the original home.
  3. The addition is typical in the market area.
  4. The appraiser is able to demonstrate market acceptance by providing similar comparable sales.

If the addition does increase the FOOTPRINT of the original home, be careful.  The appraiser will be asked to verify the permits and also determine if it was built to code.  Because it is way beyond the scope of the appraisal and most appraisers are not qualified to determine if it was built to code, appraisers should describe the area to the lender and disclose all known facts.  Our experience has been that lenders will be reluctant to lend on properties with this situation.

So be especially careful if you are listing or selling a home that includes an addition that increases the footprint of the home.  Make sure the necessary documents are available to the appraiser to eliminate possible lending issues.

If permits were not pulled or cannot be found for additions that increase the footprint, the appraiser will be asked to describe the obsolescence to remove the addition and return the structure to it original state.

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Now is the Time to Buy!

Fla. in top five for home price appreciation

 NEW YORK – May 10, 2012 – Tighter housing inventories are starting to lift home prices, says Anand Nallathambi, CoreLogic’s CEO.

CoreLogic’s latest home price index, which includes distressed sales, shows a slight month-over-month nationwide increase of 0.6 percent in home prices from February to March. But some markets are seeing much more of a price boost this spring, including Florida, which ranked No. 5 overall for home price increases.

“This spring, the housing market is responding to an improving balance between real estate supply and demand, which is causing stabilization in house prices,” says Mark Fleming, CoreLogic’s chief economist. “Although this has been the case in each of the last two years, the difference this year is that stabilization is occurring without the support of tax credits and in spite of a declining share of REO sales.”

States with highest appreciation

According to CoreLogic, the following states had the highest appreciation in March (this includes distressed sales):

• Wyoming: +5.9%
• West Virginia: +5.3%
• Arizona: +5.1%
• North Dakota: +4.7%
• Florida: +4.5%

States with biggest depreciation

Meanwhile, the states with the greatest depreciation, when also figuring in distressed sales, are:

• Delaware: -10.6%
• Illinois: -8.3%
• Alabama: -8%
• Georgia: -7.3%
• Nevada: -5.8%

Source: Melissa Dittmann Tracey, Realtor® Magazine Daily News

© 2012 Florida Realtors®

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Pinellas County Home Foreclosure Filings Spike as Prices and Sales Level Off

Whether it was the anticipation of the foreclosure settlement or simply because lenders must eventually move their distressed inventory, initial foreclosure filings in Pinellas County rose sharply in December and January.  This follows the huge drop in filings after the disclosure of the robo-signing scandal in 2010.

Much has been made about the real estate shadow inventory and its effect on home prices.  As a real estate appraiser, my prior analysis showed a distinct link between the available inventory and home values.

With 717 initial real estate foreclosure filings in Pinellas County in January as compared to roughly 400 per month this past summer we could be seeing the beginning of an increased supply of foreclosed homes.  Of course with the Florida foreclosure timeline over 800 days what really matters to the inventory is the number of properties that have made it through the foreclosure process and made it onto the real estate market.  While there does not appear to be an increase in REO (real estate owned) properties recently listed, if lenders have become more aggressive foreclosing on properties, we would expect it to show up first in the number of initial filings.

The number of home sales continues to edge upward with a very slight increase over last January.  As the real estate market continues to work off the overhead of distressed homes, a more rapid resolution to the shadow inventory is necessary for a healthy housing market.  2012 maybe the year that the housing market takes a big step toward normalcy and could provide the last best opportunity to snap up properties at historic bargains.

As the premier provider of real estate appraisals and property valuations in the Tampa Bay area, Marsh Bilby and Asset Value Appraisal and Consulting assists banks, mortgage companies, Attorneys, Realtors, loss mitigators and home owners with a complete line of real estate appraisal and valuation products.

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Fannie and Freddie’s Role

Fannie, Freddie Suits Negate Dodd-Frank

By PAUL SPERRY Posted 02/10/2012 06:33 PM ET

New evidence Fannie Mae and Freddie Mac hid their subprime exposure from Wall Street delegitimizes both the diagnosis of the crisis and its prescription — the Dodd-Frank Act.

First the diagnosis.

After the crisis, President Obama joined Senate Majority Leader Harry Reid and then-House Speaker Nancy Pelosi in framing Wall Street while exonerating Washington-based Fannie and Freddie and the affordable-housing charter that has governed the agencies’ mortgage underwriting since the early 1990s.

To officially certify their false narrative, the Democrat troika appointed a commission to “investigate” the root causes of the crisis. The Financial Crisis Inquiry Commission (FCIC) concluded that — surprise! — Fannie and Freddie played only a “marginal” role in the mess.

But recently filed SEC lawsuits against Fannie and Freddie for massive fraud contradict that finding.

They offer a mountain of evidence that the government-sponsored mortgage giants played a leading role in the crisis.

Instead of $600 billion in subprime and other risky mortgages, Fannie and Freddie held or guaranteed $1.6 trillion. That means they failed to disclose a whopping $1 trillion in risk to investors.

The new total is close to the $1.8 trillion estimated by former Fannie chief credit officer Ed Pinto and cited on these pages the past couple of years. The SEC complaints completely discredit the findings of the FCIC, which rejected Pinto’s data and validated the phony numbers.

When at the start of the investigation the evidence fell into FCIC Chairman Phil Angelides’ lap, he “began a concerted effort to suppress it,” according to FCIC Commissioner Peter Wallison. Here’s what happened:

• After Pinto in March 2010 provided commission staff with a 70-page memo containing Pinto’s data, Angelides refused to set up a meeting between the commission and Pinto.

• After Wallison asked that Pinto be given a chance to testify in an open hearing, Angelides declined to let the American public hear his testimony.

• Instead, Angelides in August 2010 circulated a staff memo to all the commissioners challenging Pinto’s data as “flawed,” then refused to give Pinto a chance to respond.

• After Wallison pressed the issue, Angelides tried to discredit the data in the media by having a leftist think tank founded by Angelides’ partner, John Podesta, put out a report smearing Pinto. (The report by the Center for American Progress’ David Min has now been rendered a howlingly bad piece of scholarship.)

• After a fed-up Wallison included Pinto’s research in a 100-page dissent from the FCIC’s majority report last year, Angelides censored it almost in its entirety from the copy of the report he made available for purchase in bookstores.

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The Hidden Truth

Audacity Of Dishonesty Hijacks Truth In Lending

Subprime Scandal: Announcing a massive $26 billion mortgage deal with “abusive” banks, the president blamed everybody for record foreclosures except the party most culpable: government.

Speaking Thursday from the White House, Obama scolded “irresponsible” and “reckless” lenders, who “sold homes to people who couldn’t afford them.”

He also cited buyers who bought homes bigger than their budgets, and Wall Street bankers who packaged the shaky mortgages and traded them for “profit.”

“It was wrong,” he asserted. And now the nation’s “biggest banks will be required to right these wrongs.”

Obama acts as if the private sector bears all the responsibility for the mortgage mess. But he and his attorney general know it’s merely a scapegoat for the reckless government housing policies they and their ilk drafted and enforced in the run-up to the crisis.

Starting in the mid-1990s — in a historic first — it became federal regulatory policy to force all U.S. lenders to scrap traditional lending standards for home loans on the grounds they were “racially discriminatory.”

President Clinton fretted that blacks and other minorities could not qualify for mortgages at nearly the same rates as whites and Asians. So Clinton codified more “flexible” underwriting standards in a “Policy Statement on Discrimination in Lending,” and entered it into the Federal Register.

At the same time, he set up a little-known federal body made up of 10 regulatory agencies — the Interagency Task Force on Fair Lending — to enforce the looser standards. It threatened lenders to either ease credit for low-income borrowers or face investigations for lending discrimination and suffer the related bad publicity. It also threatened to deny them expansion plans and access to Fannie Mae and Freddie Mac.

“The agencies will not tolerate lending discrimination in any form,” the 20-page document warned financial institutions. The task force enforced these policies throughout the Bush administration.

According to Peter Ferrara, senior fellow at the Carleson Center for Public Policy:

“This overregulation reached the point of forcing lenders to discount bad credit history, no credit history, no savings, lack of steady employment, a high ratio of mortgage obligations to income, undocumented income, and inability to finance down payment and closing costs, while counting unemployment benefits and even welfare as income in qualifying for a mortgage.

“This” he said, “turned into government-sanctioned looting of the banks.”

The Justice Department — along with HUD, which regulated Fannie and Freddie — proved the most aggressive members of the fair-lending task force. Eric Holder, then acting as deputy AG, ordered lenders to actually “target” African-Americans for home mortgages they couldn’t otherwise afford. Obama cheered Holder on as an inner-city community organizer who also pressured banks to ease credit for home borrowers.

In other words, the same two officials now leading the charge to punish “abusive” lenders had egged them on before the crisis.

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Market Bottom or Beginning of Final Leg Down

In my last newsletter I discussed the sharp drop in available housing inventory and how it has been leading to an increase in the average sale price of residential properties.  The chart below is of Pinellas County and reiterates this fact.  Year over year the total number of sales has increased 16% while the current inventory of homes has decreased almost 42%. The result has been a modest increase in prices of 3.5%.  As depicted in the chart below, the pace of declining inventory and increasing sale price has accelerated in the last six months.  Since the low in February 2011 the average sale price in Pinellas County has increased 22%.  Is this the sign that the housing market has recovered or is there something else at play?

August 2011 Average Sale Price and Current Inventory

It is pretty obvious that the decline in inventory has led directly to this increase, but what about the “Shadow Inventory” we hear so much about?  Continue reading

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Market Conditions

Far and away the Number #1 question I am asked is, “Marsh where is the housing market headed?” or some variation thereof.  While I am have always freely given my advice when asked, often contradicting the conventional wisdom (see housing bubble and burst), I have been encouraged to more widely disseminate my views.  Contrary to the typical prognosticators in the industry, I perform valuations and market analysis daily.  I have my ear to the ground and can recognize pivot points before they are revealed in the national press.  Perhaps more important is that my analysis is focused on the Tampa Bay market only.  I do not pretend to know what is going on in Las Vegas, I know what is going on here.

What has been most striking over the last several months is the sharp decline in housing inventory and months of supply.  It is very clear that home sales are far out pacing new supply which is driving the average price of a home up sharply.  Continue reading

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Shadow Inventory?

Shadow Inventory Gets More Shadowy

Tim Cavanaugh | April 26, 2010

If you’ve been trying to keep track of the “shadow inventory” of homes that are destined to be foreclosed and come onto the market within the next few years, you’ll be glad to know that the hard-to-determine statistic has been narrowed down: It’s either 1.7 million houses or 12 million houses.

That’s the skinny from a site called CapitalGainsAndGames.com, which cites some comments made last week by Amherst Securities analyst Laurie Goodman:

Laurie Goodman told the National Economists Club today in D.C. 7.2 million are already in the delinquency pipeline, and 250,000 are going delinquent each month bringing the total to 12 million. “Once you’re 60 days delinquent, a foreclosure is highly probable,” she said. Goodman is a Senior Managing Director of Amherst Securities and is widely recognized as the best housing finance economist on Wall Street. Continue reading

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