Homeowner Equity is on the Rise

With home prices inching up, more Americans are emerging from being underwater (owing more on their mortgage than their home is currently worth).

Several reports have tried to estimate how many homeowners came out from being underwater last year. CoreLogic reported that about 1.4 million borrowers moved above water for the first nine months of 2012. Zillow recently estimated that 2 million homeowners emerged last year. And J.P. Morgan Securities reported that the number of underwater homeowners fell from 11 million to 7 million in 2012.

“Estimates can vary for a number of reasons,” The Wall Street Journal reports. “Underwater borrowers can move back to positive equity by paying down their loan principal or by seeing prices rise. Properties can also ‘exit’ negative equity when they go through foreclosure or when the bank approves a short sale. In those cases, borrowers aren’t being returned to positive equity – instead, they simply cease to be borrowers.”

Many of the largest home gains across the country came in areas that had a high number of underwater borrowers.

“If this correlation persists in the coming years, the underwater problem could fade much faster than implied by the speed of national house prices appreciation,” Goldman Sachs researchers told The Wall Street Journal.

 

 

4 Big Short Sale Hang-ups

As the market rebounds, short sale activity is increasing lately, but these transactions can take up to three times longer than a traditional transaction. A lot of things can go wrong in that timeframe.

These are the most common delays, according to a recent article by George “Gee” Dunsten, a real estate broker and president of Gee Dunsten Seminars.

Title issues

Be sure to do a title examination at the beginning in order to identify all individuals on the deed and mortgages – and determine all lien holders.

Lack of communication with the lender

Lost documents and misunderstandings commonly cause delays. Make it a habit to follow up with the mortgage servicer twice a week to prevent entirely avoidable problems.

Delaying the start

Some short sales don’t begin until a contract to purchase has been initiated, but this can add up to two extra months to the process. The lender won’t even look at a buyer contract until a seller candidate for a short sale is approved and the market value has been determined, Dunsten says.

Incomplete packages

Make sure you carefully submit all documents completely and accurately. Submitting incomplete packages is another common cause of delays. All homeowner financial information needs to be kept current and forwarded to the servicer every 30 days if possible, says Dunsten.

Can a mortgage insurer sue after short sale?

Question

I completed a short sale on my home, and the agreement didn’t address whether I still was on the hook for the forgiven debt. I was just served with a lawsuit from a mortgage insurance company that wants me to pay the deficiency”.

What’s going on?

Answer

Here’s an answer from Florida attorney Gary M. Singer, who is a board-certified expert in real estate law in Florida:

I’m seeing more of these lawsuits. A common misconception about private mortgage insurance is that it protects the borrower. In reality, while the borrower pays for this insurance, it actually is designed to protect your lender if you default on the mortgage. Not all loans have PMI. But if yours does, and you complete a short sale or lose the home in foreclosure, your lender can make an insurance claim with the PMI company. The company then can stand in your lender’s shoes to try and collect the money back from you, a legal concept known as “subrogation.”

The theory is that because your actions resulted in the insurer having to pay the claim, the company can seek repayment from you. You can respond to this lawsuit by making the company prove it has the right to collect the deficiency, just as you would make the lender prove it has the right to foreclose.

You may be able to settle with the insurer for less than the full amount you owe. Of course, if the deficiency had been previously waived by your lender in the short sale or foreclosure, you don’t have to worry about any of this.

That’s why it’s so important to make sure the lender forgives the debt.

About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

 

 

Continued Florida market upswing seen in January 2013

Florida’s housing market reported increased sales, higher median prices, more pending sales and the continued shrinking of inventory levels in January 2013, according to the latest housing data released by Florida Realtors®.

“This year started out strong for Florida’s housing market,” said 2013 Florida Realtors President Dean Asher, broker-owner with Don Asher & Associates Inc. in Orlando. “Homes sales continue to rise, mortgage rates remain near historic lows and the inventory of for-sale homes is lower than it’s been in years. Plus, the time it takes for a home to sell is dropping; the median days a home is on the market declined about 15 percent for both single-family homes and for townhome-condo properties. However, overly restrictive credit requirements remain an obstacle for many potential buyers, who find it difficult to access affordable financing options.”

Statewide closed sales of existing single-family homes totaled 13,679 in January, up 11.7 percent compared to the year-ago figure, according to data from Florida Realtors Industry Data and Analysis department in partnership with local Realtor boards/associations. Closed sales typically occur 30 to 90 days after sales contracts are written.

Meanwhile, pending sales – contracts that are signed but not yet completed or closed – for existing single-family homes last month rose 31 percent over the previous January. The statewide median sales price for single-family existing homes last month was $145,000, up 12.4 percent from the previous year.

According to the National Association of Realtors® (NAR), the national median sales price for existing single-family homes in December 2012 was $180,300, up 10.9 percent from the previous year. In California, the statewide median sales price for single-family existing homes in December was $366,930; in Massachusetts, it was $303,500; in Maryland, it was $243,741; and in New York, it was $229,000.

The median is the midpoint; half the homes sold for more, half for less. Housing industry analysts note that sales of foreclosures and other distressed properties downwardly distort the median price because they generally sell at a discount relative to traditional homes.

Looking at Florida’s year-to-year comparison for sales of townhouse-condos, a total of 6,670 units sold statewide last month, up 2 percent compared to January 2012. Meanwhile, pending sales for townhouse-condos in January increased 17 percent compared to the year-ago figure. The statewide median for townhouse-condo properties was $112,000, up 18 percent over the previous year. NAR reported that the national median existing condo price in December 2012 was $184,100.

According to Florida Realtors’ data, this is the 13th month in a row that statewide median sales prices for both single-family homes and for townhouse-condo units seen a year-over-year increase.

The inventory for single-family homes stood at a 5.6-months’ supply in January; inventory for townhouse-condos was at a 6.2-months’ supply, according to Florida Realtors.

“I’m particularly impressed with the rise in percentage of list price received by sellers,” said Florida Realtors Chief Economist Dr. John Tuccillo, referring to the January data. Sellers of single-family existing homes in January received an average of 92.2 percent of their original list price; sellers of townhome-condo units received an average of 93 percent.

“This can encourage other potential sellers to come forward, thus easing the market’s inventory crunch,” Tuccillo noted. “But, despite the progress of Florida’s housing market, it’s still being held back by the difficulty consumers have in accessing credit.”

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 3.41 percent in January 2013, down from the 3.92 percent average during the same month a year earlier.

For the detailed 2013 report click here.