NAR Says Families Will Suffer if Foreclosure Freeze Continues

Washington, October 12, 2010


Thousands of first-time and move-up buyers who hoped to make a foreclosed property their new home now face uncertainty, anxiety and possibly remorse as they worry that closing on their desired property could be in jeopardy.

For many, the dream of homeownership could turn into agony if their home purchase is indefinitely delayed by a moratorium on foreclosures declared by some banks, the National Association of Realtors® said today. The moratoriums are needed, banks say, to review all of the foreclosures in their portfolios to make sure they’re in compliance with the law and that titles are clear.

NAR warned that a prolonged review process would have a damaging impact on many communities and hinder the nation’s economic recovery.

“As the leading advocate for homeownership issues, we understand that many lenders need a time-out to review their actions to ensure that homeowners are not improperly foreclosed on and that the lenders are following regulations and state laws. After that, the foreclosure process must resume quickly to return stability to families, the housing market and the economy,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates, Tucson, Ariz.

Over the past few months NAR has met with officials of top banks to discuss market issues. NAR urged banking leaders to seek resolution quickly through loan modifications and the short-sale process rather than through foreclosure. “We stand ready to help lenders develop better short-sale procedures,” Golder said.

“There are valid foreclosures that should move ahead quickly, and we shouldn’t lump them in with mortgages that are suspect. That would cause deep problems in an already fragile market and throw many families into uncertainty,” Golder said.

Golder said that she is receiving reports from Realtors® that the moratorium is already creating some anxiety among purchasers as transactions are being delayed and that some foreclosure listings are being removed from the market.

Compounding the problem is that the requirements for foreclosure vary by state, and practices to meet these requirements vary by firm. NAR is working with regulators, such as the Federal Housing Finance Agency; and encouraging them to identify and quickly address process problems.

In a letter today to the U.S Treasury Department, the U.S Department of Housing and Urban Development, and the Federal Housing Finance Agency, NAR stated the hope that banks would complete their foreclosure review expeditiously to assure that the rights of borrowers are protected and remove doubt that buyers will receive clear title to their purchase.

“NAR has long urged the lending industry to take every feasible action to keep families in their homes with a loan modification and, if that is not possible, to give them a ‘graceful exit’ through a short sale. These options are far better than a foreclosure, and nothing has driven this point home more clearly than the questions being raised about foreclosures. Lenders should place additional resources into processing loan modifications and short sales,” NAR wrote.

A year ago, NAR instituted a special short sale training program for its Realtor® members to work more closely with banks in expediting mortgages at risk by resolving them through short sales and loan modifications. More than 51,000 Realtors® have been certified in the program.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section.




Copyright National Association of REALTORS®, Reprinted from REALTOR.org with permission."

FORECLOSURES

Florida Chief Financial Officer Alex Sink has scheduled a meeting of lawyers working pro bono on foreclosure cases and the 12 largest Florida lending firms. "The purpose of our meeting is to find out how we can be more efficient and effective so our volunteer attorneys don't get frustrated and say, 'I don't have time for this,'" Sink says.

MORTGAGE MODIFICATIONS

Disagreement among Senate Democrats over how many struggling homeowners should qualify for court-ordered mortgage relief has stalled a key part of President Barack Obama's foreclosure prevention plan on Capitol Hill. Proponents are trying to work with lenders and other key players to reach a deal to move the legislation forward.

FORECLOSURES

Homeowners facing foreclosure could find help in an unlikely place - the company that insures their mortgage. Some PMI companies, like Genworth Financial, are helping to keep loans from failing and Florida is one of the states where the company has been most successful. In the past year, Genworth has mediated 901 workouts in the Sunshine State, second only to Texas.

HUD FORECLOSURE PROGRAMS

HUD is revamping two programs intended to help at-risk homeowners avoid foreclosure. Rules changed yesterday for the HOPE for Homeowners program, which only attracted 111 applications since its Oct. 1 debut. Changes to FHASecure will follow, HUD officials say. That program has helped only 4,000 homeowners in 15 months.

Buy a home in this troubled market and the property tax may shock you

TALLAHASSEE, Fla. – Oct. 9, 2008 – Real estate ads these days include listing after listing of bargain-basement prices. But those who buy a home in a foreclosure or a pre-foreclosure sale should know that future property bills may be no bargain.

Just because someone snags a home at a low price doesn’t mean the tax bill will tumble. Property taxes could be as high as ever.

Foreclosures and short sales – in which lenders take less than what is owed on the mortgage and forgive part or all of the remaining debt to avoid foreclosure – represent a large share of the real estate market in Broward and Palm Beach counties as more owners are unable to keep up with mortgage payments. But that doesn’t matter when local property appraiser offices draw up the tax rolls.

In fact, state regulations bar counties from factoring in foreclosures and other distressed sales in which the seller is forced to accept less money than the market price. Appraisers and some real estate agents worry unsuspecting buyers will expect a tax windfall.

“If you buy a home for $250,000, then you should pay taxes on $250,000,” Fort Lauderdale-based real estate agent Steve Cook said. “That’s what the buyer expects is going to happen. The average person is working so hard to get by, and they don’t understand the legalities of something like this.”

Buyers traditionally can expect their new home will be assessed at roughly 85 percent of the purchase price for property taxes, the difference being closing fees and other transaction expenses. When a home is purchased as a distressed sale, the property is assessed based on regular sales of similar homes in the area.

The tax ramifications of distressed sales were once an arcane corner of the law that interested few homeowners. Not any more.

The most recent data shows Broward County has the third-highest foreclosure rate in the state. There were 7,104 homeowners in some stage of foreclosure in August, up 5 percent from 6,782 a year earlier. Foreclosure filings in Palm Beach County have declined to 1,976 from 2,499 a year ago. Short sales are harder to track. However, a recent study by the Sun Sentinel showed 23 percent of sellers in Broward and 27 percent of sellers in Palm Beach unloaded their homes at a loss during the first half of the year.

The tax difference can add up.

Say someone pays $200,000 for a home. The home likely would be assessed at $170,000 so the property taxes would be about $2,700 after homestead exemptions are deducted.

Then assume this wasn’t a standard transaction, but rather a foreclosure or short sale. Similar homes in the neighborhood are valued at $300,000. That tax bill could top $5,400.

State law is specific that foreclosures can’t be used in setting property values. Short sales aren’t mentioned by name, but property appraisers consider them financially distressed sales and do not use them to set tax values. Assessors across Florida have asked the state Department of Revenue for a clear ruling on how to handle short sales.

Broward County Property Appraiser Lori Parrish has received so many questions that she’s posted a warning about taxes and short sales on her Web site. She said she should be allowed to consider short sales.

“In a down market, I should have discretion,” she said. “When these sales make up half the sales of a neighborhood, how do you not factor it in when they have become the market?”

Palm Beach County officials also do not consider short sales in setting a home’s value. However, the head of residential appraisals in Palm Beach County notes that a short sale can have an indirect effect.

In neighborhoods where there are numerous short sales, all property values can end up being driven down. With homes available at discounted prices in short sales, buyers are not willing to pay as much for other property. The lower prices fetched in standard sales then lowers the taxable value of the neighborhood when the appraiser’s office sets the next tax roll.

“It’s a tricky widget,” said John Thomas, assistant director for residential appraisal services in Palm Beach County. “If the home is in neighborhood that is so soft, the short sales will impact the market.”

Web-based foreclosure auctions spark controversy

LOS ANGELES – Oct. 7, 2008 – Will the Internet replace public foreclosure auctions?

Public auctions of foreclosed properties began in the 19th century as a practical way to ensure there was no chicanery between lenders and public officials.

Next month, Duval County, Fla., will become the first county in the country to hold an Internet foreclosure auction, forgoing the traditional courthouse sale in the hope of attracting buyers from other areas.

If the Web-based process works out well, and other states sign on, it will be an earth-shifting change in the way foreclosures are handled.

Some real estate professionals think it is a bad idea.

“There are things about the title that you just can’t find on the Internet,” says Bruce Norris, CEO of the Norris Group, a real estate investment firm in Riverside. “They can’t tell you whether you’re buying a first mortgage or a second mortgage. If you’re buying a second, then you don’t own the home free and clear.”