Monday, March 28, 2011
1700 Foreclosure Cases Suspended After Law Firm Admits Altering Documents
3:20 pm cdt
A Cook County Circuit Court judge has taken the unusual step of temporarily halting at least 1,700
mortgage foreclosures after a law firm told the court that the cases contained altered documents, the Tribune has learned.
Fisher and Shapiro LLC, one of the top three law firms used by mortgage servicers to handle their local foreclosure
actions, reported to the court that, in a breach of protocol, affidavits in the cases were changed. Among other things,
fees were added after the documents were signed by servicers.
As a result, Moshe Jacobius,
presiding judge of the Circuit Court's Chancery Division, has stayed the cases. The delay will not necessarily prevent delinquent
borrowers in Cook County from losing their homes to foreclosure, but it likely will
give some homeowners time to seek assistance or to make arrangements to live elsewhere.
of sloppy paperwork and improper foreclosure procedures by mortgage servicers and their law firms have rocked the lending
industry, which has been overwhelmed by the number of cases. There have been instances of lenders and lawyers signing foreclosure
affidavits without reviewing the documents for accuracy, a legal violation that has come to be known as robo-signing.
Accusations of shoddy foreclosure procedures have sparked investigations by all 50 attorneys general and
individual state agencies into mortgage servicers' and attorneys' back-office procedures.
admission to the court by Fisher and Shapiro does not involve rubber-stamping of documents but rather removing the signature
page, altering the affidavit's content and reattaching the signature page, the court said.
changed contents included the addition of attorneys' fees, insurance costs, preservation costs, inspection costs and taxes
on the property, costs that may have been incurred before or after the servicer signed the original affidavit, Jacobius said
in his order dated March 2.
The firm's admission signals a note of caution to purchasers
of distressed homes, which represent about 50 percent of local home sales, because of potential lingering legal issues if
the title transfer process was faulty. .
It's uncertain why the documents were altered
or who ultimately bears responsibility. It's also unclear whether affected homeowners and servicers, as well as housing
counselors, are aware of the court's decision: As of Friday, some were not.
But what is
certain is that the additional time needed to resolve the cases will further slow the foreclosure pipeline. Last year, 50,621
notices of initial mortgage default were filed in Cook County, and 70,550 cases remained active at year-end.
Fisher and Shapiro was ordered to vacate all judgments of foreclosures and any judicial sales that have occurred
and refile those motions with the court.
Attempts to reach Bannockburn-based Fisher and
Shapiro were referred to managing attorney Lee Perres, who did not return phone calls.
similar to robo-signing in that it's a high-volume pattern and practice of cutting corners, expediting the process through
making false representations," said Daniel Lindsey, an attorney at the Legal Assistance Foundation of Metropolitan Chicago,
which is not directly involved in the matter. "The fallout is this order and some delay, and maybe (it will) help some
people figure out some alternatives."
The court's order specifies that Fisher and
Shapiro notify parties affected by the stay. But some homeowners whose cases were affected and who remain in the properties
say they have not received a notice.
Chicagoans Steve and Maria Schmidt, for example,
knew nothing of the order, which lists the foreclosure case filed against their Lake Shore Drive condominium about a year
ago on behalf of Wells Fargo Bank. But the delay doesn't matter much to the couple, who last week closed on a short sale
of their unit.
Most of the foreclosure cases identified by Fisher and Shapiro were filed
within the past three years, but a few date to 2001, and some appear all but closed. Most, but not all of the cases, are
of residential properties. Actions to vacate judgments and resolve the affected cases will not begin until April 4, the
The Illinois attorney general's office said it was aware of the order. So
was the Illinois Department of Financial and Professional Regulation, which confirmed it is investigating the matter because
of concerns that mortgage servicers may be signing legal documents before they are completed to speed the foreclosure process.
"Law firms are agents of the servicing companies," said Brent Adams, secretary of the department.
"The party to the lawsuit is the servicing company, the named plaintiff. The servicing company bears a certain amount
of responsibility as to how litigation is handled. It's not permissible to say it's just the law firm's fault."
The Illinois Attorney Registration & Disciplinary Commission cannot confirm nor deny investigations
into attorneys' actions until a complaint is filed, a spokesman said Friday.
Wednesday, March 16, 2011
Rental Market Projected to Improve as Vacancies Drop
11:24 am cdt
Posted yesterday at 6:14 a.m.
Renters beware: Double-digit rent hikes may be coming soon amid rental vacancy rates that have dipped below
the 10 percent mark, where they had been lodged for most of the past three years.
people are starting to get rid of their roommates and move out of their parent’s basements,” said Peggy Alford,
president of Rent.com, predicting the vacancy rate will hover at a mere 5 percent by 2012. With fewer units on the market,
prices will explode.
Rent hikes have averaged less than 1 percent a year
during the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to
spike 7 percent or so in each of the next two years — to a national average that will top $800 per month.
In the hottest rental markets, the increases will likely top the 10 percent mark annually for the
next couple of years. In San Diego, Alford anticipates rents will rise more than 31 percent by 2015. In Seattle rents will
climb 29 percent over that period; and in Boston, they may jump between 25 percent and 30 percent.
is a sharp change from the recession, when many Americans couldn’t afford to live on their own. More than 1.2 million
young adults moved back in with their parents from 2005 to 2010, said Lesley Deutch of John Burns Real Estate Consulting.
Many others doubled up together.
As a result, landlords had to reduce prices and offer
big incentives to snag renters.
Now that the recession is easing, many of these young
people are ready to find new digs, mostly as renters, not owners. Plus, the foreclosure crisis continues unabated, and the
millions losing their homes are looking for new places to live.
many not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real
estate analyst with CoStar, which tracks multi-family housing trends.
be an envelope of two or three years,” said Macke, “when the rise in demand for rentals will exceed the industry’s
ability to meet it.”
Plus, Alford added, “there’s been a shift in the
American Dream. We’re learning from our surveys that a huge proportion of people are choosing to rent.”
They’ve experienced the downsides of homeownership — or seen friends and family suffer
— and don’t want to take the risks or pay the higher costs of homeownership.
homeownership costs are particularly high, there are many more renters than owners. In Manhattan, for example, only about
20 percent own their homes; in San Francisco, about of third of the population does; in Los Angeles, less than 40 percent;
and in Chicago, about 44 percent.
There’s one factor that could rein in rent increases:
the huge number of foreclosed homes that could hit the market over the next few years.
many markets, like Phoenix and Las Vegas, there are neighborhoods filled with recently built, single-family homes going for
fire-sale prices. When the cost of owning homes falls well below the costs of renting them, more people will buy.
“That’s always been the biggest competition for rentals,” said Deutch.
Tuesday, March 8, 2011
Foreclosures Make Up 26% of Home Sales
CNN Money is reporting that home prices are down but sales are up, somewhat contradictory trends.
8:32 pm cst
Home prices fell nearly 6% during the six months ended Dec. 31, sending values to their lowest levels in
the post-bubble period, S&P/Case-Shiller reported on Tuesday. On Wednesday, the National Association of Realtors reported
that sales of existing homes rose for the third straight month.
"At least it's not
a double whammy where both sales and prices are dropping," said Stuart Hoffman, chief economist for PNC Financial Services
Group. "Deals are getting done."
That's because 26% of all homes sold last year
were foreclosures and short sales, according to a RealtyTrac report released on Thursday. That's down slightly from 2009,
but a jump compared to 2008.
Homes already foreclosed on and repossessed by banks, called
REOs (real estate owned), sold for an average of 36% less than normal sales, RealtyTrac reported. Meanwhile, the discount
for homes sold while they were still in the foreclosure process (short sales) was 15%.
"It's like the post-holiday sales at Macy's where they're trying to clear out
unwanted inventory," said Anthony Sanders, a real estate professor at George Mason University.
Where the sales are
Nevada had the highest percentage of distressed
sales of any state at 57%. That was, however, less than 2009, when 67% of sales there were foreclosures. In Arizona, 49%
of sales were distressed properties; in California, 44%; and in Florida, 36%.
properties sold for the biggest discount -- 50% off -- in New Jersey.
These homes have
attracted bargain hunters, including individuals or groups looking to buy and hold properties, according to Hoffman. They
hope to buy at such a good price that they can rent out the properties and make a profit.
folks are cash investors who are going in and offering very low bids," he said.
reported that all-cash sales went up to 32% of the total, up from 26% a year earlier. It estimated the percentage of investor
purchases hit 23%, up from 17% a year ago.
"Unprecedented levels of all-cash purchases
-- primarily of distressed homes sold at deep discounts -- undoubtedly pulls the median price downward," said NAR president,
These investment opportunities are not going away. Nearly 30% of mortgage
borrowers are underwater on their loans, owing more than their homes are worth, according to Stan Humphries, chief economist
for Zillow, the real estate web site.These owners are very vulnerable to foreclosure so
the number of distressed properties that will go on sale only the next year or two will probably remained high.
Wednesday, March 2, 2011
Sellers Must Prepare for Repairs
12:29 pm cst
From Amy Hoak at Chicago Marketwatch — A visit from the home inspector can
be nerve-wracking for a seller, especially in a market like this — when the potential buyer isn’t afraid to
demand that a long list of problems be addressed before the sale is finalized.
No matter how much you do to prepare the home, brace yourself. “The first thing for people to realize when selling
their house is the inspector is always going to find something wrong,” said David Tamny, owner of Professional Property
Inspection in Columbus, Ohio.
Often, problems are minor and inexpensive enough
for the seller to either fix or allow a credit for in the home price, he said. It’s the discovery of major deficiencies
— or an unwillingness to negotiate — that can kill a deal completely, Tamny said.
Still, it’s in a seller’s best interest to have the home as ready as possible before the inspection.
It can cost more to address a problem — by lowering the sale price — once it turns up in an inspection, said
Dan Steward, president of Pillar to Post, a home-inspection company. “For every real dollar of cost, the buyer thinks
it’s $2 or $3 more,” he said.
The thorough way to prepare
is to do your own inspection before you list the home on the market. A pre-listing inspection will tell you exactly what
needs to be fixed before you begin your search for a buyer.
often don’t spend the money on hiring someone because they know a buyer will bring in his or her own inspector anyway,
Tamny said. When problems are identified during a pre-listing inspection, that could also mean the sellers have an obligation
to disclose more information to prospective buyers, he added.
To save money,
ask an experienced real-estate agent to give the house a good look-over instead, said Brandi Pearl Thompson, an agent in
the Chattanooga, Tenn., area. They might not have the expertise of a home inspector, but often they’ve been through
enough sale negotiations to spot common red flags.
also inspect their home with a critical eye, Thompson said. Don’t stop at eye-level; look at walls from floor to ceiling,
under sinks, on the floor near the base of appliances — everywhere — to check for signs of water damage, for
example. Also check faucets, door handles, and other details of the home as you’re walking through it.
“Walk out of the house, turn around and walk in with fresh eyes,” she said.
An inspector will be looking for problems with the home’s heating and cooling systems, electrical problems, signs of
water damage, mold or leaks, termites, and structural or plumbing problems. They’ll also take a look at do-it-yourself
projects, making sure, for instance, that ceiling fans are installed correctly and backyard decks are safe.
As much as you can, get your house ready by fixing the problems or have a plan on how you
will address them when the buyer inquires about the issues.
to the little things, too. Make sure everything is clean, the gutters are clear, take care of flaking paint and make sure
windows open and close, Tamny said. Replace cracked caulking, fix leaky faucets and broken windows, Steward said.
You might also want to have the furnace and air-conditioning systems serviced by a professional
to make sure they’re in good shape, Thompson said.
kill the deal
Still, even after you prep your home for the inspection, expect
some problems to surface — and for the prospective buyer to present you with a to-do list.
With plenty of inventory to choose from and a desire to get the best deal, today’s buyers are driving
hard bargains. And while it’s often the most expensive problems that could kill a sale, a long list of little issues
could also cause a buyer to back off.
Sometimes “buyers get
overwhelmed and decide not to pursue a remedy. They’re overwhelmed with the stuff that is going wrong,” Tamny
Also, if big problems that weren’t disclosed turn up during
an inspection, buyers can get skittish. “If nothing is disclosed and the buyer’s inspector finds stains or an
active water leak, there’s a red flag,” Steward said. “It doesn’t always make a deal fall apart;
it makes a deal not progress smoothly because the buyer is now worried… ‘If I didn’t see that, what else
didn’t the seller tell me?’”
Some buyer requests
will be reasonable; in other cases, especially when it’s cosmetic in nature, a seller would be justified in declining
a request, Thompson said. But even when negotiations get tough, remember the buyer still wants to buy your home.
“Keep in mind they still kept your home in mind over the others,” Thompson
said. “And once someone falls in love, they do tend to overlook some of the little things.”
Tuesday, March 1, 2011
Getting a Mortgage Before the Door Shuts
The Wall Street Journal reported yesterday that new mortgage loans are starting to get costlier.
10:17 am cst
The mortgage market is facing pressures from new laws and regulations, still-declining home prices
and the ongoing need for government-owned mortgage players to shore up their finances. The Mortgage Bankers Association
predicts mortgage originations, which reached $3 trillion in 2005, will be less than $1 trillion this year, the lowest level
"The price of mortgage money is going to go up, and the availability
of mortgage money may also be impinged," says Keith Gumbinger, vice president at HSH
Associates, which tracks mortgage data.
The silver lining is that the rate for a 30-year
fixed loan is hovering around 5% for those with good credit. That is up about a percentage point from last year's lows but
is still an attractive rate by historical standards, though expected to keep climbing as the economy improves.
Home prices in some areas are still falling, but they are bottoming out or firming up in others.
It may not be the perfect time to buy a home—but better mortgage options today may be a worthy trade-off to the possibility
of lower prices tomorrow.
Still not convinced? Consider the following:
• New costs.Fannie Mae and Freddie Mac, which provide liquidity
to the mortgage market by buying mortgages and selling securities backed by them, are adding new fees to loans to people
with the best credit and raising existing loan fees. Freddie's new fees start March 1, while Fannie's kick in April 1.
Neither Fannie nor Freddie have been assessing fees on most loans for borrowers with credit scores
above 720, even if the down payment was small. But citing a need to address risk and price their services appropriately,
they will assess a fee of 0.25% to 0.5% of the loan value on borrowers with credit scores of 720 or higher who put down less
than 25% of the purchase amount. The current fee for those with credit scores of 700 to 719 who put down less than 20% of
the purchase price will double to a full percentage point of the loan value from half a point.
expect the higher fees will translate into slightly higher mortgage rates.
the Federal Housing Administration, saying it needs to bolster its capital reserves, is raising its required annual mortgage-insurance
premium for FHA loans by 0.25% of the loan value. As a result, FHA loans—which are aimed at first-time home buyers
and those with moderate incomes—will include an upfront mortgage insurance payment of 1% of the loan amount and an
annual premium of 1.1% to 1.15% when the increase goes into effect on April 18.
regular loans, private mortgage insurance—which is required when you put down less than 20% of the home's value—is
tougher to get than it once was. Generally, it is available only for buyers who make a down payment of at least 5% and have
a credit score of 700 or higher.
• Dodd-Frank fallout.
The Consumer Financial Protection Bureau, established by the Dodd-Frank financial overhaul, opens its doors for business
in July and is expected to take a close look at how interest rates and closing costs are disclosed to borrowers. That could
create new costs that lenders are likely to pass along to consumers. In addition, a Federal Reserve rule that takes effect
April 18 will change how mortgage brokers are paid, a move intended to curb practices such as steering home buyers to higher-cost
The new rules, which limit the kinds of compensation brokers can receive, have
brokers in a tizzy. The brokers claim the changes will raise mortgage costs and put some of them out of business, shrinking
the market. How it will play out isn't clear, but given both the changes and the Fannie and Freddie pricing, mortgage prices
may vary more than usual, say those in the industry—making it wise for borrowers to shop for rates even more aggressively.
• More restrictions. Earlier this month, the
Obama administration proposed a wide-ranging overhaul of the mortgage market, including phasing out Fannie Mae and Freddie
Mac, requiring a down payment of at least 10% and reducing the share of FHA loans, which are almost 30% of the market now,
up from a historical market share of 10% to 15%.
In addition, the administration recommended
letting Fannie and Freddie loan limits for high-cost areas fall back to $625,500. The limits were temporarily increased
to $729,750 in 2008 when the market for "jumbo" loans—those above the loan limits—all but disappeared,
and that increase is now scheduled to expire Sept. 30. (The $417,000 loan limit for homes in most other markets would remain