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THE FORECLOSURE EXPLOSION AND OTHER LEGAL CHALLENGES IN THE CURRENT MARKET

By
Real Estate Agent with Security Pacific Real Estate

_______________________

THE FORECLOSURE EXPLOSION AND OTHER LEGAL CHALLENGES IN THE CURRENT MARKET

The following are ten issues which you should keep in mind as you navigate through the current

market:

1. Foreclosures

• There are two primary types of foreclosure, judicial and non-judicial

• Deficiency judgments are available only in judicial foreclosures

• Some holders of seconds are suing on the note when the first position is "wiped out"

• Refer clients to the proper experts to assess the best course of action

2. REO's

• What are REO's?

• REO's are bank owned and not subject to the Home Equity Sales Act

• REO's are bank inventory and often will be discounted substantially more than borrower

owned property

• REO's ordinarily do not require the same disclosures as a borrower owned property

3. Short Pay Transactions

• What is a short pay transaction?

• Short pay transactions impact less adversely on borrower's credit than foreclosure

• Certain procedures must be followed to obtain a short pay

• Disclosures must be made in a short sale transaction

4. Home Equity Sales Contracts and Loan Foreclosure Consultants

• Under what circumstances does one need to comply with these statutes?

• A person may have civil liability for failing to comply

• A person may have criminal liability for failing to comply

• Courts are divided where an NOD is recorded after the contract is signed by the parties?

5. Loan Fraud

• Types: Fraud for housing and fraud for profit (18 U.S.C. § 1014)

• Price inflation schemes: what are they and how to be avoided

• Implications: criminal, civil and license discipline

• Lender's consent is no excuse (U.S. v. Niro, U.S. v. Bush)

• Read CAR's "Mortgage Fraud - Avoiding Price Inflation Schemes" Q & A

THE FORECLOSURE EXPLOSION AND OTHER LEGAL CHALLENGES

IN THE CURRENT MARKET - CONTINUED

___________________________________________________________________________________

6. Seller Financing

• Defined: seller carrying back note secured by trust deed as part of sale

• Requirements: Seller Financing Addendum and Disclosure (SFA)

• Understanding the seller as "the bank", with foreclosure as only "remedy"

• The risks inherent in seller financing (e.g., foreclosure by senior trust deed)

• Putting an attorney's assets, not yours, at risk

7. Financial Market and Lending Trends

• The subprime crunch

• Creative financing (e.g., leases with options to purchase, seller trusts, etc.)

• Last minute review appraisals (often after contingencies removed)

• Post-close audits by lenders (even of performing loans)

• Pressure up and down the lender "food chain"

8. Property Value and Related Fiduciary Duty Issues

• This is likely to be the hottest area for claims

• Make sure buyers have opportunity to properly assess values which are in flux

• Be cautious with buyers over-extending themselves

• Defer to experts (appraisers, attorneys, mortgage brokers) but this does not insulate you

• Be particularly careful in dual agency situations

9. Seller's Disclosures and SPQ Issues

• Down Market makes sellers reluctant to disclose

• Use of SPQ more important than ever

• Do not rely on SPQ as sole information

• Push for inspections

• Make sure all forms, disclosures and disclaimers are provided and properly completed

10. Current Trends in Defects

• Water Intrusion

• Mold

• Geological

• All Minor Defects

• Roofs

 

Nicole "Nicky" Sensale
Brooksville, FL
Florida Equestrian Properties
great info!  I just printed it and put it in a file! thanks
Jan 30, 2008 05:23 AM
Thomas E. Elder
Mortgage Broker Compliance Consultants - Forest Hill, MD
Founder, Mortgage Broker Compliance Consultants
Very good info.   Extremely comprehensive.   Thanks
Jan 30, 2008 12:26 PM