Monday, September 30, 2013

HUD Delays “Dual Agency” Short Sale Ban

Last week, the U.S. Department of Housing and Urban Development (HUD) postponed a dual agency ban on FHA short sales and deeds-in-lieu of foreclosure transactions, according to Realtor Mag.  You may remember reading about this ban back in July, when HUD issued a letter to mortgage servicers making clear that dual agency transactions wouldn’t be allowed on any pre-foreclosure transactions as of October 1, 2013.  What does that mean, exactly?  In short, the ban would effectively “prevent real estate professionals from representing both buyers and sellers” in these transactions.
As you might imagine, the National Association of Realtors (NAR) was up in arms over the potential ban.  Indeed, the NAR lobbied vehemently against the HUD policy.  As such, it looks like the NAR may be claiming a victory here, as HUD indicated last week that “it would be reissuing its July guidance to servicers” and would also “be removing the dual agency language” from that guidance.
As the real estate market continues to rebound, many people across Illinois and the country will be thinking about purchasing short sale properties.  How will the changes to the ban affect these potential homeowners?  In short, a change to the guidance is likely to make the process easier for both the buyer and the seller, since real estate agents will be able to continue representing both parties in these transactions.  If you have questions about buying a short sale or general questions about the housing market, don’t hesitate to contact an experienced real estate attorney today.
Timeline of the HUD Dual Agency Ban
According to, “the HUD prohibition had first been outlined in a July letter to mortgage servicers describing new anti-fraud requirements for short sales and deed-in-lieu of foreclosure transactions.”  The new guidance, HUD emphasized, was intended to “prevent fraud and abuse in pre-foreclosure sales,” as the HUD Inspector General had observed conspicuous signs of fraud and abuse in many of these transactions.
The new guidance would have significantly limited the role of real estate professionals in pre-foreclosure sales.  Naturally, the NAR objected to the HUD policy at the outset.  Gary Thomas, the NAR President, drafted a letter to HUD that emphasized the organization’s reasons for opposing the policy.  Thomas explained that HUD never provided any statistics or reports that depicted evidence of any short sale frauds or abuse by real estate agents.  In his letter, Thomas stressed that “NAR takes fraud very seriously . . . . If there is evidence of fraud by our membership, we would like to be part of an effort to develop policies that effectively address these issues.”  
The letter, according to, also emphasized that the new HUD policy would prevent real estate agents and brokers from effectively serving their clients.  For instance, homeowners face a greater risk of foreclosure if they can’t find a real estate agent who has specialized knowledge about short sales to list their homes.  Given that HUD has indicated that it won’t be enforcing this policy as of October 1, it looks like the NAR won the fight.  However, not all consumer advocates are happy about HUD’s shift in position.
Does NAR Control HUD?
In an article released by Consumer Advocates in American Real Estate (CAARE), consumer advocates emphasized its concern about the influence NAR might have within HUD.  The report drew up a timeline, explaining how HUD decided to lift its ban on dual agency after engaging in talks with the NAR.
We’ll have to wait and see if HUD continues to see fraud and abuse problems in pre-foreclosure transactions after electing to life the ban on dual agency.  In the meantime, the experienced real estate lawyers at the Emerson Law Firm can answer your questions today.  Don’t hesitate to contact us.
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Wednesday, September 25, 2013

More Mortgage-Related Payment Mistakes?

Last May, we told you about significant errors that occurred with the mortgage settlement checks that went out to the millions of homeowners who were eligible for funds.  Now it looks like more financial mishaps are plaguing the mortgage industry.  This time, it looks like Fannie Mae is to blame.  According to an article in, Fannie Mae overpaid mortgages servicers by about $89 million in “expenses related to default servicing” last year.
The Office of the Inspector General of the Federal Housing Financing Agency (FHFA) explained in its report that Fannie Mae outsources certain tasks to management consulting firms, and it relied on Accenture for its reimbursement review process.  In short, Fannie Mae grossly overpaid its services “because a manual review by a third-party vendor resulted in account errors,” according to a news release from the Credit Union National Association.  This comes on the heels of a recent news report in National Mortgage News that while Fannie Mae overpaid $89 million last year, it also “incorrectly denied $27 million in reimbursements last year.”
Details of the FHFA Report—What Did Accenture Do Wrong?
According to, the FHFA’s report explained that Accenture employees’ accounting errors, which were mostly manual one (and thus not made by an electronic processing system), occurred for several different reasons.  First, it looks like different reviewers inconsistently applied guidelines for the reimbursement review process.  Next, Accenture devoted a limited amount of resources to avoiding these inconsistencies, adding insult to injury.  In addition, the subject matter itself was relatively complicated, naturally leading to some margin for error.  And finally, Accenture employees were dealing with such a large volume of servicer claims that they likely weren’t as careful as they should have been.
What are some of the examples of the claim overpayments?  For instance, some of the overpayments were connected to duplicate claims—in other words, claims were submitted and paid more than once, and Accenture didn’t notice the error.  In most of these cases, there is no reliable mechanisms to catch duplicate claim errors.  According to the FHFA report, “Fannie Mae has no remedial measures to recover overpayments on 99 percent of claims because it only samples 1 percent of claims for accuracy.”  Only 1 percent of claims are sampled for accuracy?  This seems strikingly low.
Unlike the erroneous overpayments, Fannie Mae tends to find out when a servicer is underpaid.  The FHFA report explained that when a servicer receives a payment that’s less than the correct amount, “it often contacts Fannie Mae to discuss the underpayments and resubmits the claim at no additional cost.”
How Will Fannie Mae Mitigate its Losses?
The Inspector General for the FHFA encouraged Fannie Mae to “put in place a system that would aggregate data about claims and raise certain ‘red flags’ that would bring potential errors to the processors’ attention.”  For example, so-called ‘red flags’ would arise anytime a duplicate payment was issued, or if Fannie Mae were to receive more than one claim for the same loan service.  As of right no, there’s no such system in place.  As well, such a system would also catch generally odd submissions for reimbursement, such as those arriving outside the typical months for expected servicing or those submitted with an excessive frequency.
The Inspector General also wants Fannie Mae to “more effectively use its processing accuracy data and publish overpayment reduction targets and data annually,” according to
Do you have questions or concerns about mortgages and the mortgage-servicing industry?  Experienced real estate attorneys can answer your questions today.  Don’t hesitate to contact the experienced attorneys at the Emerson Law Firm today.
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Monday, September 23, 2013

More Homeowner Support On the Way in Illinois

The Illinois hardest hit program will soon be drawing to a close.  Indeed, the deadline to apply for this federally funded program is September 30th, a date that Illinois set back in July based on the numbers of people likely to require financial assistance.  Now, the state is realizing that more homeowners may require government help after the program ends, according to an article in the Chicago Tribune.
What was the hardest hit program and how will its absence affect Illinois homeowners?  If you have questions or concerns about the hardest hit program coming to an end, the experienced foreclosure defense attorneys at the Emerson Law Firm can discuss your case with you today.
A Quick Reminder: The Hardest Hit Program
You might remember that the hardest hit program began in September 2011 when the Obama administration worked to provide relief to homeowners in states that were especially affected by the housing market crash.  What were the aims of the program, exactly?  It offered homeowners 10-year forgivable loans if they could meet certain eligibility criteria.  These loans then would allow them to “bring past-due mortgages current and make monthly payments for up to 18 months” while they worked to “get back on their feet,” reported the Chicago Tribune.
How much were the loans for?  When the program started, the loans were capped at $25,000, but by April 2012 the cap increased to $35,000.  With the increase in the potential loan amount, the hardest hit program gradually “widened the pool of potential participants because it offered more money to help seriously delinquent borrowers become current on their loans.”  And in many cases, it worked.  According to Illinois’ report to the Treasury Department, more than fifty percent of the homeowners who applied for assistance through the hardest hit program received it.  As of June in Illinois alone, that totals more than 7,000 people and nearly $122 million in funds.  So it looks like the hardest hit program has been successful by the Treasury Department count.  But what’s being done now that the program is drawing to a close?
Additional Illinois Measures to Aid Struggling Homeowners
You might reminder that Illinois Governor Pat Quinn signed a bill to extend the foreclosure grace period last June.  That bill originally went into force in 2009 and was intended to give homeowners a 90-day grace period to work out a plan to avoid foreclosure.  Quinn extended that bill, the Homeowner Protection Act, through year 2016.  With the bill extension, homeowners will be eligible for that 90-day grace period for at least the next several years.
What else?  The Illinois Building Blocks Program is on the rise.  It’s an initiative to “encourage eligible homebuyers to purchase vacant properties in 15 depressed communities by offering mortgage financing and $10,000 down in payment assistance.”  According to the Illinois Housing Department Authority (IHDA), about 250 homes have already been sold through the program, and another 427 people have plans to buy through Building Blocks.
The IHDA is also keeping tabs on mortgager service improvement.  According to Mary Kenney, the IHDA executive director, Illinois has seen some progress.  For instance, loan modifications through the federal government have effectively assisted many families in the state.  At the same time, however, Kenney emphasized that the state government plans to “continue to help struggling homeowners,” and that the IHDA “is trying to evaluate how it can assist in a continued recovery of the state’s housing market.”
Do you have questions or concerns about the housing market in Illinois?  Or are you having difficulties with your monthly mortgage payments?  An experienced foreclosure defense attorney can assist today.  Don’t hesitate to contact us.
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Monday, September 16, 2013

Why Do Short Sales Take So Long?

Earlier this month, the Chicago Tribune ran a story about a woman who had been hoping to buy a short sale property in Michigan.  According to the article, this woman’s personal story exposes some of the difficulties potential homebuyers encounter when they try to buy a short sale.  Short sales are basically “pre-foreclosure” sales, or a final effort to sell a house before it officially goes into foreclosure.  Over the past couple of years, short sales have been popular options for Americans looking to buy a home.  But are they the best option?
In a previous blog post, we told you about some of the “short sale snafus” that people often encounter.  Generally, one of the most frustrating issues about these sales are their uncertain time periods.  But many potential homebuyers also encounter pricing problems between the seller and the lender, as well as lenders who push for foreclosure when the short sale isn’t going quickly.  Experienced real estate attorneys can help to guide you through this confusing process.  If you have questions about buying a short sale, contact the Emerson Law Firm today.
One Woman’s Short Sale Story
To get a better idea of some of the hang-ups associated with buying a home as a short sale, it might help to take a closer look at the story of the Michigan homeowner whose personal account appeared in the Chicago Tribune.  The article explained that she made an offer on a property, but her offer “went nowhere,” and the house ended up in foreclosure.  The woman moved her family into the house, but Freddie Mac told her that it “doesn’t allow tenants to purchase occupied homes.”  She contacted her congressional representative, but it didn’t go anywhere.  Next, she wrote to the Chicago Tribune.
According to the newspaper, the woman’s letter said, “I have great credit and have been preapproved for the purchase.  And I will gladly accept the home as is without our government having to spend one more dime of your money or mine.  It seems so simple.  Can you help point me in the right direction?”   
The newspaper quickly heard from a spokesperson for Freddie Mac, who agreed to track down this case.  Only a few weeks later, the woman’s sale had gone through.  Yet, the Chicago Tribune remained interested in piecing together the timeline of a foreclosure.  What takes so long?
A Short Sale Timeline
It can take nearly a year (and sometimes even longer) for an offer on a short sale to be considered.  Why is this the case?  A big issue is communication between the buyer, the seller, the lender, and the servicer.  According to the article, “the right people aren’t getting the right information in a timely manner.”  And moreover, the poor communication between the parties involves leads to an “opaque process” that continues to “confound borrowers, buyers, sellers, lenders, and servicers alike.”
In this specific case, the owner of the property hadn’t been in contact with the lender and the investors, and no one could find him.  As a result, the eager homebuyer couldn’t continue with the sale, and she and her family were left in the dark.  In other words, if a seller can’t be reached, a property can’t be sold.  Once the property was foreclosed on, Freddie Mac had a clear title on the property, which allowed the buyer to move forward with the home.
There is a lesson to be learned here.  Short sales are especially complicated because they involve a lot of different parties, and they all have to communicate and negotiate with one another before the buyer can move forward on the short sale.  Freddie Mac says that the key to buying a short sale is staying “in constant contact with the servicer.”  In short, communication is essential.
If you’re considering a short sale, you’ll need an attorney on your side to handle the complications associated with these properties.  Contact the experienced lawyers at the Emerson Law Firm today to discuss your case.
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Tuesday, September 10, 2013

Real Estate Woes and “Zombie” Foreclosures

According to a recent news report from, real estate attorneys and professionals currently face a new threat of “zombie” foreclosures.  No, the term isn’t supposed to imply an end to the real estate world as we know it.  Indeed, house prices continue to rise across the country and many commentators describe the housing market in terms of recovery.  Rather, according to, these “zombie” foreclosures “take place when a bank initiates foreclosure on a property but then abandons the process, leaving the property in a sort of no-man’s-land—vacant but not for sale.”  An article in the Chicago Tribune earlier this year described the properties as “homes that, like their pop culture namesakes, aren’t exactly alive—but they’re not dead either.”
The “zombie” foreclosure phenomenon is nothing new.  Commentators have been discussing the sheer number of these properties for months now.  However, we didn’t know these properties would continue to plague the real estate market amidst its attempts at recovery.  Attention to the “zombies” makes clear that foreclosure problems remain alive in Illinois and across the country.  If you’re at risk of foreclosure or have questions about avoiding foreclosure, the experienced attorneys at the Emerson Law Firm can talk with you today.
Hundreds of Thousands of “Zombies” in America
How many properties fall into this “zombie” foreclosure category?  Many real estate professionals remain shocked by the high number of “zombies” across the country.   An article in the Chicago Tribune this past April reported that there were more than 300,000 “zombie” foreclosures in the United States.  The number has declined, but according to RealtyTrac, the numbers remain a bit staggering.
As of now, there are about 167,000 properties across the country that we can classify as “zombie” foreclosures.  In addition to those properties, RealtyTrac believes “there are hundreds of thousands of unlisted REOS and even more properties winding through lengthy judicial foreclosure procedures.”  RealtyTrac explained that these “unlisted foreclosures and bank walkaways” were rare to see at the height of the foreclosure crisis, but the number of “zombies” have “mushroomed” as the market has begun its recovery.  As a result, there are a lot of properties out that that are “stuck in foreclosure limbo.”
Are some banks guiltier than others?  Bank of America has more “zombies” than any other bank, according to RealtyTrac, with nearly 24,000 foreclosures currently in limbo.  Well Fargo is close behind with nearly 23,000, while JPMorgan Chase is dealing with more than 16,000 “zombie” foreclosures.
And which states have the most of these “zombie” properties?  According to, Florida has the highest number of unoccupied properties, with a total of more than 55,500.  But Illinois isn’t safe from this epidemic.  The experts at RealtyTrac estimate that there are about 1 million vacant properties “that need to be sold but are currently out of reach for most real estate agents.”  This comes on the heels of news reports that the real estate market is currently up against inventory shortages.  
RealtyTrac emphasizes the importance of turning these “zombie” properties into homes available for purchase if we want to see a market recovery.  At the same time, the prevalence of these properties shows us the “cracks in the foundation of the recovery,” as the Chicago Tribune reported.  Right now, we’ll have to wait and see.
In the meantime, if you have questions or concerns, don’t hesitate to contact an experienced foreclosure defense attorney today.
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Monday, September 9, 2013

New HUD Guidance to Help Manage Reverse Mortgage Risks

Just last week, the U.S. Department of Housing and Urban Development (HUD) published new guidance intended to help with the risks associated with the Federal Housing Administration’s (FHA) reverse mortgage program, which is also known as the Home Equity Conversion Mortgage Program (HECM).  In addition to providing reverse mortgages through the FHA, HUD has been helping with housing market recovery by providing housing counseling grants to organizations across the country.  
In early August, we told you about the problems the FHA has been experiencing with the HECM program.  In particular, we explained that the FHA has been making plans to crack down on its rules for reverse mortgages.  Many senior citizens across the country have been using reverse mortgages as a way of avoiding foreclosure, and HUD wasn’t prepared for this problem.  The new guidance from HUD is intended to “strengthen and protect FHA’s Mutual Mortgage Insurance Fund (MMI),” according to a HUD press release.
What is FHA’s Mutual Mortgage Insurance Fund?
In short, the MMI is a fund that provides insurance for mortgages made by the FHA for single-family homes.  When purchasing a home with a mortgage through the FHA, the borrower pays into the MMI.  And in the event that the borrower defaults, the MMI pays the lender.
And just as a reminder, reverse mortgages typically are geared toward senior citizens who “have equity in their homes and want to supplement their income.”  According to HUD, the only reverse mortgages for seniors that are insured by the federal government are those through the HECM program.  They’re only available through an FHA-approved lender, and order to be eligible, senior citizens must meet certain borrower, property, and financial requirements.
How Will the New Guidelines Help?
According to Federal Housing Commissioner Carol Galante, the recent changes “will realign the HECM program with its original intent which will aid in the restoration of the MMI fund and help ensure the continued availability of this important program.”  In other words, the new guidelines will make some changes to the HECM program so that the reverse mortgage option can remain in place for seniors.  Galante explained that the FHA hopes the guidelines will make sure that the HECM program “is a financially sustainable option for seniors” that can provide them with extra money to live comfortably in their homes through old age.
The HUD press release reminds us that in recent years, the demographics of those participating in the HECM program shifted to include riskier borrowers who in turn “added significant risks to the MMI fund.”  In particular, the HECM program began to see borrowers shifting from adjustable rate mortgages with access to a credit line to fixed rate mortgages where the borrower takes all available funds at once.
In response to the FHA’s annual report to Congress on the status of the MMI fund, Congress passed the Reverse Mortgage Stabilization Act of 2013.  This new law authorizes the HUD Secretary to make changes to HECM if they’re “necessary to improve the fiscal safety and soundness of the program.”
In addition, FHA-approved lenders will also receive a new guide assessing financial risk when it comes to reverse mortgages.  According to HUD, the guide will help lender to implement certain risk management reforms, including:
·      Changing mortgage insurance premiums and principal limit factors
·      Restricting the among of money that seniors can borrow at the closing of a reverse mortgage
·      Requiring a financial assessment for HECM borrowers
·      Requiring borrowers to set aside some of the loan proceeds at the closing in order to pay property taxes and insurance
If you’re a senior who is concerned about avoiding foreclosure, or if you have questions about financial stability and the reverse mortgage process, contact the experienced attorneys at the Emerson Law Firm today.
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