New rules on subprime lenders

Note the new rules that have come down regulating much of the subprime market.

The rules are likely to make it harder for some borrowers to qualify for loans, although many lenders have been tightening their standards in response to rising levels of foreclosures and mortgage delinquencies.

The most important change is that financial institutions are told that adjustable-rate mortgages should be given only to borrowers who would qualify to meet the loan terms even after the rate resets higher.

Note the new rules have come down from the various federal financial regulators...many of the state banks, ect. are not impacted.

FTC consumer mortgage report

Interesting FTC report on consumer loans here.

From the executive summary:

**Current mortgage cost disclosures failed to convey key mortgage costs to many consumers.

**Prototype disclosures developed for the study significantly improved consumer recognition of mortgage costs, demonstrating that better disclosures are feasible.

**Both prime and subprime borrowers failed to understand key loan terms when viewing the current disclosures, and both benefitted from improved disclosures.

**Improved disclosures provided the greatest benefit for more complex loans, where both prime and subprime borrowers had the most difficulty understanding loan terms.

Home income streams...

Saw this nugget in "Zillow" Mary's column:

Wrapmyhouse.com.

CHA senior housing options

CHA is finishing a $400 million renovation effort at its senior-only buildings. The CHA operates 55 buildings for seniors with a total of 9,500 apartments, making the agency one of the city's largest senior landlords....

To qualify for an apartment, a single-person household cannot have an annual income of more than $41,700. The limit for a couple is $47,700. Applications can be picked up at any CHA building or call 312-935-2660.

A golf ball through the pantry window...

Interesting article about the "threats" of homeowner living along golf courses.

In Rehoboth, Mass., Joyce Amaral collected 1,800 golf balls from her property abutting Middlebrook Country Club, then lugged them into court when she sued the club. Ms. Amaral’s house was hit so regularly, her landscapers wore hard hats. Balls set off the burglar alarm and dented her car.

Although the club existed decades before the house was built, a court ruled that the balls — and the golfers looking for them — were a trespass. The parties settled this month, with the club agreeing to shorten the No. 9 hole, which should keep the Amaral property out of the line of fire.
But Pete Cuppels, the club’s owner, said the settlement would probably put his low-cost nine-hole course out of business.

“I’ve already had to take $50,000 from my retirement account to pay for legal fees, both the plaintiff’s and mine,” Mr. Cuppels, 68, said. “We modified the hole before the settlement, and we’ve already seen a big drop in return business. I feel worse that my name is on a ruling that could be like the Roe v. Wade of golf law. If the precedent is that golf course owners are responsible for every crooked shot hit by a novice or a good golfer, we’re all in trouble.”

I think this is a rare success. Generally the homeowner assumes the risk. That said, I think Makray Memorial Golf Club in Barrington shortened one of their holes due to homeowner concerns...not sure if litigation is pending.

The five elements of Adverse Possession are?

1) Continuous; 2) hostile/adverse; 3) actual; 4) open, notorious and exclusive; and, 5) under a claim of title inconsistent with that of the true owner...in case you were wondering. Saw a rare Adverse Possession case reported and I couldn't resist posting about it. Miller v. Metropolitan Water Reclamation District of Greater Chicago , No. 1-06-1230 (June 22, 2007) 5th div. (O'BRIEN) Affirmed. Unfortunately for P's in this case the D's were a public municipality and thus essentially immune from adverse possession actions.

Next week, the Rule Against Perpetuities.

Radon disclosure

New law, if Blago signs off:

"House Bill 1425 (Reitz, D-Sparta; Trotter, D-Chicago) creates the Illinois Radon Awareness Act. It requires before the sale of any residential real property that the seller give to the buyer a new statutory form that states the property may present the potential for radon exposure. Exempts seven other kinds of transactions such as under a court order, judicial deed, and from one co-owner to another. Passed both chambers. Effective January 1, 2008."

Different markets and different shaped recoveries...

Good piece from Forbes about the recovery of different real estate markets...

Market corrections follow three basic recovery patterns: a V-shaped recovery where a market experiences a sharp, fast decline but comes out strong once it hits bottom; a U-shaped recovery, where prices decline gradually and recover slowly; and an L-shaped pattern, a hard, fast fall with a paltry price bounce-back after the market trough.

The differences between a V-shaped market and a U-shaped one have to do with barriers to growth. High vacancy rates and high investor share can hurt a market, but if the local economy remains strong and housing stock affordable, it's only a matter of how long it takes to absorb the excess inventory.

Questions brokers can't answer...

Nice overview piece regarding public housing laws. Just a friendly reminder to know your "protected" classes. Be careful what you put in writing, most importantly. Also, beware of a lot of the not-for-profit housing groups who are putting out "test" clients just looking for discrimination.

The strict interpretation of fair-housing laws prohibits brokers from providing information about people that could be construed as discriminatory in any of 14 protected categories. The categories include familiar ones like race, religion, sex and disabilities and less well-known ones like familial status, marital status, citizenship and occupation.

Another cash-out mechanism

Anyone experienced with Rex & Co.? I'm just starting to read about them in the media. Essentially they're offering to pay homeowners cash now in exchange for taking a percentage of the home's sale when that occurs.

This is from their Website:


1. The homeowners decide how much cash they want to receive (up to $300,000) or the percentage of the future change in value of the home they’re willing to share (up to 50 percent).

2. The homeowners and REX & Co. agree to the value of the home based on various valuation tools, including a neutral 3rd party appraisal.

3. The homeowners receive the Advance Payment in cash immediately upon entering into the REX Agreement—with no interest or monthly payments and may use the money with no restrictions

4. A REX Agreement typically remains in place until the earlier of 50 years* or when the homeowner sells the home—at which time REX & Co. will share in the gain or loss on the home value.

*40 years in Illinois and 30 years in North Carolina.

Real estate commissions rise slightly

Kennth Harney's column from Sunday's Tribune reported that the average real estate commission on closed sales rose slightly last year for the first time in several years.

According to a review of revenue and cost data from hundreds of brokerages by the industry publication Real Trends, the average commission rose by nearly one-fifth of a point to just under 5.2 percent.

Sort of strange at first glance with the market weakness we're seeing but as I read the piece it's quite logical. The demand for the best real estate agents is higher when the market's tight and they can keep their commissions high. Also, when housing prices were rising it was easier to drop a commission because you knew the price would be larger even with a lower commission.

I found it interesting that many of these top sellers suggested increasing the Buyer's agent commission to entice more lookers. As a non-agent, how do or would an agent know the % commission that Buyer will get on a transaction?

Counsel your clients

Don't be this attorney that we had a closing with the other day:

The transaction itself was pure vanilla...we had a well-healed buyer purchasing a condominium in Northbrook. So Seller and his lawyer first schedule closing on a Monday before my client had gotten mortgage approval so we spend one day scheduling/cancelling that transaction. Then, solely because Seller/lawyer had scheduled Seller's purchase closing at 130pm on Wednesday they HAVE TO close the sale at 11am Wednesday. Of course I'd told Seller's lawyer I was in court in downtown Chicago until 11am and I'd be really late...and I was! And I had the Buyer's funds. So a couple totally uncessarily stressful days with phone calls, scheduling, ect.

Counsel clients about setting closings too close to one another...don't do it. Don't schedule movers, ect. I expect "stress" when I'm in domestic relations court with bickering spouses; I don't need it in non-descript ho-hum real estate closings due to lawyers not thinking ahead!

BuySide

Another short piece about BuySide from the Sun-Times.

FSBOs win in Madtown!

This was an informative article about a study done by Northwestern economists comparing FSBOs against agent listed properties in Madison, WI. Here's the Madison FSBO Website. The FSBO sellers got a higher sales price on average.