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Year: 2011

Defaults rise according to S&P Indices

First mortgage and bank card default rates rose to 2.17 percent and 4.91 percent in November, up from 2.08 percent and 4.85 percent in October, according to data from S&P Indices and Experian.

“As we indicated last month, the weight of first mortgage default rates tends to drive the trend in the national composite,” said David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices in a release. “First mortgage default rates rose for the third consecutive month, leading the same pattern for the composite. Since August, first mortgage default rates have risen from 1.92 percent to the 2.17 percent November rate, or 0.25 percentage points.”

Carowinds Holding property foreclosed

The former King’s Gym and Pro Shop, a 25,706 square-foot building at 3722 S. Tryon St., was sold at on Dec. 16. Built in 1983, the building was owned by Charlotte-based Holding, LLC and foreclosed by RBC Bank. The property has a tax value of approximately $2.2 and RBC Bank bid about $1.5 million on the $1.6 million mortgage at the
foreclosure sale. The property was
previously used as a gym and fitness
center with locker rooms, a restaurant area and had a golf driving range.
A previous listing on LoopNet highlighted the property’s features, promoting the driving range as a possible soccer field and “Golf tiers (that) could be for weekend flea market, possible use for ethnic
community and consulting center.”
Foreclosure Trustee Charlotte attorney William Parise would not comment on
the sale and representatives from RBC Bank said it was company policy to not comment on client matters. According to company spokesperson Stacey Forley, Carowinds Holding, LLC is not affiliated with Sandusky, Ohio-based theme park company Cedar Fair which owns the Carowinds theme park.

Cassidy Turley earns LEED Gold

The Charlotte office of St. Louis-based , a commercial real estate services provider, has been awarded Leadership in Energy and Environmental Design gold certification from the U.S. Green Building Council for its office
interior.

Located on the 34th floor of the Duke Energy Tower, the 11,500-square foot office houses 35 associates.

The Charlotte office is the most recent addition to a growing list of Cassidy
Turley corporate offices to achieve LEED certification, which includes St. Louis, Washington D.C., San Francisco and
San Jose.

Cassidy Turley employs 3,400 people in 60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions and completed transactions valued at $18 billion in 2010. It manages 455 million square feet on behalf of
private, institutional and corporate clients and supports more than 25,000 domestic corporate services locations.

Agents of Change

People buy all kinds of things on the Internet. Cars, TVs, computers, clothes and even groceries get sold at various online retailers. But if you’re thinking of buying your house solely on the web, several Charlotte-area Realtors say – not so fast.

More and more agents in the modern real estate world find themselves almost replaced by the web. Buyers come to their initial meetings or home tours armed with gigabytes of data and hours of research. And while some Realtors say this can be a good thing, for others it is a source of frustration with buyers and sellers acting like they don’t need a licensed professional at all.

For , a Union County Realtor with Charlotte-based Allen Tate Co., dealing with buyers who think they’ve got it all figured out thanks to the web can be frustrating.

“I had a customer who came to me and said he wanted to live in the Albemarle Road and north area,” Bee said. “But a lot of the listings he brought to me were outside that geographic area. Customers do need us and I think it is a misnomer to say that we are being replaced.”

The worst experience for some Realtors is the feeling that the Internet-friendly buyer or seller is really just wasting everyone’s time. Lisa Archer, a Charlotte Realtor with Austin, Texas-based Keller Williams, has seen her fair share of time waster thanks to the web.

“A friend called me and said her buyers from California were killing her,” Archer said. “They sent her a list from the Internet. She drove around and found four houses they wanted to see but two were under contract and two didn’t meet their criteria. She told them driving around or searching was fine, but this kind of thing was wasting everyone’s time.”

But Archer is no Luddite when it comes to new technologies in the real estate world. In fact, she’s the farthest thing from a techno-phobe with her own blog she co-writes with fellow Realtor Laurie Davis as The Geeky Girls at www.thegeekygirls.com. Her agency also has launched its own mobile app, which she calls a measure to stem the tide of bad information clients get from various lists on the Internet.

“I had a client who was pulling listings from Trulia and they were like four years out of date,” Archer said. “The average buyer goes to four websites if they’re techie and they have their list. I have to convince the buyers that I have their best interest in mind and am looking for the very specific criteria they told me. We’ve gone so far as to have our own app now because we want to be sure that we have the right information that is up-to-date and we get all kinds of notifications when people use it.”

Bee said she tries not to get frustrated with buyers who are getting their information from the web and tries to see it from the buyer’s perspective.

“They don’t know what they don’t know,” Bee said. “I think some of it is the press and the overall perception that the listing info is out there and they can do it on their own. Until they try a transaction without us, then they’ll realize what they don’t know.”

Bee said she frequently cautions clients, and potential clients, that big name websites like Trulia and Zillow don’t always update information from the MLS. And often the Internet searchers are surprised when she tries to explain to them that estimated values on certain websites don’t always line up with values in the Charlotte-metro market.

“But the buyer wants to offer whatever the estimate is and they want to stick to it,” Bee said. “There is a lot of misinformation on the web – about real estate, healthcare or even cooking. We have a responsibility to advise our clients what the real picture is, but ultimately we have to present the offer as they direct us.”

And if that means the offer on a property is incredibly low balled and Bee knows it won’t be accepted, sometimes she just has to bite the bullet and make the offer. She’s been on the other side of that low offer, too, she said.

“I have had offers presented to me where the agents apologized for the offer because we both knew that it was too low,” Bee said.

For Debe Maxwell, owner of Charlotte-based Savvy+Co. Real Estate, clients using the Internet generally starts with a frustrating case of mistaken identity.

“I get calls all the time for other people’s listings and they think that I’m the listing agent,” Maxwell said. “I’ll meet them in person, but when they say, we’ve got a bunch of other appointments lined up I’ll state the importance of having their own representation.”

She said she sees many people who pull their list of homes they want to tour, then call and make appointments themselves.

“I’ll get to the house and they’ll see my name is not on the sign,” she said. “Then they get that ‘aha’ moment and I see they were looking for the listing agent. I give them my spiel which usually works in person.”

Archer’s app helps her firm get around the cases of mistaken identity.

“The app is a one stop shop from A to Z and it only calls us, it doesn’t call the listing agent,” Archer said. “Typically when buyers send me a list, I try to work with them. But some people are serial lookers and they want to go out a lot of times and see one house per trip. That’s a waste of time.”

Maxwell agreed that the web can be a time-waster as clients miss the important details. But most of all, she said they don’t realize how much of a Realtor’s job is not about providing information and home tours, but about being a competent negotiator.

“You need your own representation in any deal,” Maxwell said. “It really is bothersome that some of these sites have estimates that are far too low. The disclaimer on some of these sites mentions that, but who reads the disclaimers?”

Bee added that web is not as much of a time saver for Realtors as many people think.

“Who do you think is putting the photos and slideshows on the web?” she said. “The Internet has made it more work for us but easier for the consumer. Keeping all those listings up to date and looking good is time-consuming. We’re blogging, doing videos, topography, virtual tours and then providing event information.”

And she had one final warning about the idea of the web replacing the Realtor: “If anyone thinks the Internet is going to replace us, I would caution them to remember “2001: A Space Odyssey” and what happened with HAL 9000.”

BAUGHMAN can be reached at [email protected]

Check the statute of limitations for lenders

Dear Benny: I had two properties foreclosed on this year. Although we had short-sale offers on both properties, for some reason the banks would not accept the offers. One of them was my primary residence, which had a first loan of $417,000, and a second in the amount of $180,000. The second home was an investment property, for which the first loan was $290,000 and the second loan was $60,000.

I have some assets, including a commercial building that produces very little income due to the fact that there is a large vacancy within it. Because of the vacancy, my income is less than $10,000 a year.

Will the lender come after me for unpaid debt in regards to the aforementioned foreclosed properties? If so, how will it know whether I have assets or not? Can the lender put a lien on my commercial property? What are the statutes of limitations for the lenders? Is there anything I can do to get out of this mess aside from declaring bankruptcy? – Kim

Dear Kim: I am surprised that you were getting different answers, especially from attorneys. All of your questions are state-specific, and depend on the various laws in your state.

For example, in general, the statute of limitations around the country is three years. That means that when three years pass after an event for which you could have been sued over, the courts will not allow such lawsuits to proceed. The purpose of a statute of limitations is to make sure that if you have a valid claim, you should bring it promptly. Otherwise, witnesses forget facts or die; documents get stale, and it is unfair to file a so long after the event took place.

However, state law differs, both with respect to the number of years as well as to the type of incident involved. For example, in many states you cannot file a libel suit after one year. Additionally, if a document is under seal (i.e., with a notary seal or even just the letters LS – for “legal seal”), many states allow such matters to be brought for a much longer period of time, even up to 12 or more years.

Additionally, state laws differ on whether a lender that has foreclosed can sue the borrower for a deficiency judgment, a situation that could happen if, for example, a borrower owed $250,000 on the mortgage but the lender received only $150,000 from the sale, leaving a deficiency of $100,000.

In the District of Columbia where I practice law, a lender can sue for the deficiency. However, in some 10 states such as Alaska, California, Arizona and Minnesota, laws have been enacted that specifically prohibit a lender from suing for the deficiency.

Dear Benny: When it came time to sign our mortgage loan, a great deal of emphasis was put on the fact that nothing in the loan could be changed – it had to be signed as written. No one would tell us why. Can you? – Mona

Dear Mona: That’s not completely accurate. I have often changed terms and conditions of a client’s loan when we were at the settlement (escrow) table. However, I needed the lender’s approval, and depending on the change, we needed corrected loan documents.

However, the great majority of loans are sold by the original lender. And the buyers of these loans want to make sure that there are no hidden changes in the documents that could hinder the holder of the papers from collecting on the promissory note or foreclosing on the property.

In other words, uniformity is important, and thus lenders do not want their legal documents changed.

KASS is a practicing attorney in Washington, D.C., and Maryland. Questions for this column can be submitted to [email protected].

Boomers help children, buy homes

An interesting trend is surfacing in today’s housing industry. More first-time homebuyers are being financially assisted by their parents.

This is particularly noticeable when the parents are among the baby boomer generation. They are showing an intense interest in helping their children and grandchildren become homeowners.

A national survey recently commissioned by Better Homes and Gardens Real Estate LLC, a major broker franchise network, found that baby boomers are part of a growing trend – helping their children or grandchildren become homebuyers.

According to the survey, 1 in 5 baby boomers has already gifted, loaned or co-signed a loan to support their children or grandchildren in purchasing a home, and more than two-thirds of baby boomers want to provide this type of support in the future.

Looking ahead, 1 in 10 baby boomers will “definitely” provide their children or grandchildren with financial support for a down payment on a home.

Aside from the good investment rationale, baby boomer respondents cited that the willingness to provide financial support to their children and/or grandchildren was out of love. By providing financial support to assist in the first-time home buying process, respondents stated they could ensure their children and/or grandchildren would benefit from their estate and fulfill a large part of achieving the American dream.

“In today’s economy, saving enough money for a down payment can be a struggle for young adults,” said Sherry Chris, president and CEO of Better Homes and Gardens Real Estate. “Baby boomers are a unique generation that has driven the economy for the past 30 years. Our survey data shows that they are using what they’ve earned and what they’ve learned to invest in the future and help their children and grandchildren realize the American dream of homeownership.”

Another interesting point revealed in the survey: Baby boomers show more interest in “gifting” or loaning money than in co-signing loans.

Q: Is there a holiday moratorium on foreclosures?

A: Both Fannie Mae and Freddie Mac announced moratoriums on all single-family homes and two-to-four unit properties over the holidays. Both companies will enforce the moratorium from Dec. 19 through Jan. 2.

The suspension will not affect the pre- or post-foreclosure processes. Servicers may continue the administrative processes involved in foreclosures, but evictions will be delayed until after the start of the new year, it was announced.

Q: Who is guarding homeowners from
online mortgage rescue scams?

A:  The Office of the Special Inspector General for the Troubled Asset Relief Program is waging a strong battle against mortgage and foreclosure rescue scammers that advertise online. The agency recently announced it halted 85 online scams that promised to help homeowners pursue mortgage loan modifications.

Some scammers disguise themselves as government agencies by using government seals or adopting names that are similar to those of a government agency, the agency revealed.

The agency also noted that scammers often ask homeowners for an upfront fee to help them pursue a modification through the Home Affordable Modification Program. They then advise the homeowner to discontinue his or her mortgage payments and terminate any contact with his or her lender.

Q: Are home sales starting to grow?

A: Sales are increasing in most markets. Pending home sales (contracted but not yet closed) for single-family homes grew by 10.4 percent in October from a month earlier, according to the National Association of Realtors.

Sales surged in the Northeast region, up 17.7 percent in October from a month earlier. Pending home sales in the West fell, but by only 0.3 percent.

Q: Is there a downside to purchasing a
home warranty contract?

A: One downside is expressed in a letter posted on the Trulia.com website:

“I am a seller with an opportunity to purchase a home warranty, and while it seems like a good thing, I am concerned with all the small print which seems to benefit the warranty company at my expense. I do not want to purchase ‘peace of mind’ only to discover at a later date that some small print exception disallows a claim.”

However, it should be noted that most homebuyers today view the protection from a home warranty contract to be worth its expense. But it’s important to shop and compare offers from different warranty companies.

WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.

If you’re a believer, take a word to the wise

Dear Mr. Berko: I have $86,000 in CDs and have never been in the market. My new broker and I feel that the stock market will be great in 2012 and 2013, and he has advised that I invest in three mutuals. But I would also want to own different, good stocks too.

Could you tell me the names of maybe six top stocks that’ll do real well in the market? I’ll tell them to my broker, and we could put half the money in his mutuals and half in your stock picks. Please pick some good ones for me because I’d really like to make good money in the market in 2012. – SA, Chicago

Dear SA: If you believe that the political solutions to Europe’s economic problems will be successful; that Europe’s banks won’t suffer the ignominy of begging for new capital; that the European economy will prosper; that Europe’s problems are finally over; or that the kerfuffle across the pond will not affect our economy or our banks, then you share a majority opinion with wise investors who are buying U.S. stocks.

If you believe that there is little risk in China; that Chinese real estate is far from a bubble; that inflation is less than 5 percent; that Chinese banks are strong; and that China’s economy is not dependent on demand from Europe or the U.S., then you share a majority opinion with wise investors who are buying U.S. stocks.

If you believe that U.S. employment will be strong in 2012; that consumer income and spending will grow; that housing prices will begin to improve; that U.S. exports will continue to boom; and that corporate profits will continue higher this year, then you share a majority opinion with wise investors who are buying U.S. stocks.

If you think that Congress will come to a consensus on the national debt and the deficit; that Congress will balance the budget; that Social Security and Medicare are untouchable; that interest rates will remain low; that federal spending will decline; and that the administration will create new jobs, then you share the majority opinion with wise investors who are buying U.S. stocks.

And finally, if you believe that Occupy Wall Street is a fad that will soon fade into the ethers; that OWS protests won’t continue spreading to major cities across the U.S. and Europe; and that the anger won’t give way to violence, then you share a majority opinion with wise investors who are buying U.S. stocks.

So if you honestly in your heart of hearts believe all of this, then you should believe that the following six issues will help make your first venture into the stock market an overwhelming success.

Procter & Gamble (PG-$64.14) is an $85 billion consumer packaged goods company with 129,000 employees and a 3.3 percent dividend that has been increased for 30 consecutive years. Apple Inc. (AAPL-$385) is a magnificent manufacturer of communications devices that employs 61,000 folks in the U.S. and 70,000 in China, and there’s rumor that AAPL may initiate a dividend in 2012. Goldman Sachs ($95), which has 39,000 employees and yields 1.8 percent, is the most powerful investment bank in the world, and its officers and directors are on a first-name basis with the world’s most important politicians, industrialists and billionaires — and their mistresses.

(WFC-$25) has more than 9,000 branches in 39 states and may be the largest bank in the U.S. serving ordinary Americans; WFC has $76 billion in revenues, a profit margin of over 20 percent (wow) and a 48-cent dividend that should be increased in 2012. Whirlpool (WHR-$46.74) may be the finest manufacturer and marketer of home appliances in Europe, North America and Latin America, and the company boasts $19 billion in revenues, 71,000 employees and a swell 4.3 percent yield. Temple-Inland’s (TIN-$31.50) 10,600 employees helped the company sell over $4 billion of corrugated packaging and boxes used in bulk shipping, and they also manufacture wall board, particle board and gypsum building products. The TIN dividend yields 1.6 percent and could be raised in 2012.

If you and the majority of wise investors are right, 2012 should be a wonderful year for you.

Berko can be reached at P.O. Box 8303, Largo, FL 33775 or email him at [email protected].

On the level: Reggie Daniel

Charlotte native Reggie Daniel took a circuitous career route before ending up in foodservice consulting and facility design.

He played keyboards in a Charlotte rock ‘n’ roll band in the 1960s, restored classic cars, was an aspiring political cartoonist and studied graphic design — all before launching Charlotte-based Daniel Design Inc. in 1985.

Over the years he’s designed kitchens, foodservice and dining areas across the country, including at some of Charlotte’s most well-known venues: Gateway Village, Ericcson Stadium (now Stadium) and Hearst Tower.

In January, after 26 years of owning and operating his own business, he’s going to merge Daniel Design with Atlanta-based Camacho Associates, another foodservice-design company.

How did you end up designing kitchens and dining areas? When I was in college, I had every intention of becoming a graphic designer. But about 18 months after I graduated, some friends who were working for this restaurant-design company in Atlanta kept needling me to join them, so I sort of got suckered into the foodservice industry. I would design a facility, order the equipment, oversee its installation and work the first week in that facility, so if there was a problem the chef knew who to point a finger at. I did that for about eight years. It was very good on-the-job training.

What led you to start Daniel Design? The company I was working for got purchased by another company, and I didn’t like the new owner, so I decided at that point it was time to do my own thing. Because of my art background I was able to do a lot of things my competitors couldn’t. They could tell you how many bolts were in a stainless steel refrigerator, but they didn’t understand anything about colors, textures and lighting. It gave me an edge and helped me do a lot of high-end projects.

What prompted the move to Charlotte in 1998? I got tired of the traffic. My office was in downtown Atlanta, and if I had to go to a meeting I had to plan on at least a one-hour drive just to get there. It was so much wasted time. Right now I’m about seven minutes from Uptown. And Charlotte has really come into its own. It’s been a better market for me compared to Atlanta.

Why merge with Camacho? I’ve known the owner (James Camacho) for about 30 years and we’ve always been friendly competitors. I needed the support and backup. I was getting tired of running the business side of things. I called him one day and said, “I’m either going to merge or sell the company, and I’m giving you first option.”

Will the merger change they way you operate your business? It will increase the number of jobs I do. It will also take me out of the day-to-day grind of filling out paperwork and let me do more of what I like to do: going after projects and design work. It will allow me to express myself more creatively.

If you won $20 million in the lottery, what would you do with the money? I’d pick friends and family members who could use it the most and give them a big chunk of it and change — their lives. I’d put some away for security and travel.

MF Global an opportunity for Fed to prove itself

Dear Mr. Berko: My brother is an Ohio farmer who lost $63,000 that he put for safekeeping and a good yield at MF Global. Two of his neighbors also suffered losses that have put them in a serious bind because it was money they needed for feed, seed and expenses. All have had money at MF Global for years, but after Jon Corzine took over, the money disappeared.

The government was quick to help , Citigroup, JP Morgan and Merrill Lynch when their clients were at risk and even lent money to smaller banks when they were in trouble. There are people in Ohio and Indiana who need this money. Corzine should be held responsible, and the government should bail out my brother and others who were bushwhacked by Corzine, don’t you think?

Several of us would appreciate your thoughts. – TP, Columbus, Ohio

Dear TP: I know very little about MF Global. But I do know that Jon Corzine, a.k.a. Boom-Boom, who managed MF’s huge portfolio, used to be a Marine sergeant. Boom-Boom is also a former U.S. Senator, a past governor of New Jersey and a previous CEO of the most influential, profitable, feared and powerful investment banking firm in the world: Goldman Sachs.

Boom-Boom pledged Phi Beta Kappa and earned an MBA from the prestigious University of Chicago. And it’s hard to imagine a better training ground for acquiring the very special skills to make $1.2 billion disappear so quickly, smoothly, quietly and fingerprint-free – a feat so impressive that the deans at our Ivy League MBA schools are certain to design several of their future MBA courses around the technique.

Boom-Boom is a brilliant, articulate fellow with a Rolodex of like-minded, helpful friends, including close associates who manage the inviolable Vatican Bank, which no government would dare challenge. Boom-Boom knows more about cash-flow analysis, balance sheet ratios and income statements than a bathtub full of CPAs.

Still, it’s a wonder that Boom-Boom, who could easily micro-manage a beehive, has no idea where the money went.

But I believe him and can’t imagine that an ex-Marine (a branch of the service for which I have enormous admiration) would not be completely forthcoming. I can’t imagine that the man wouldn’t be candid with his friends on the Senate Agricultural Investigating committee. And I find it incredulous that a former U.S. Senator, who spent $62 million of his personal money to win a Senate seat, would participate in any form of financial impropriety. Nor would I believe that an ex-governor of the Garden State would deign to betray the trust of the people who elected him.

So those who would question Boom-Boom’s probity should be mindful of his selfless contributions to our nation as an U.S. Senator, as the governor of a state some consider worthy of financial emulation and as the CEO of the most prominent investment bank in the world.

It’s sad that so many folks lost a billion-plus dollars through MF Global. But rather than spending so much unproductive time and wasting important resources lambasting Boom-Boom, the government ought to use its time and resources to design a solution to make investors whole again. Failing such an initiative, I propose that cherubic Timothy Geithner tell the Federal Reserve to lend $1.2 billion to MF Global’s trustees, who would then write checks to the thousands who were snookered by MF’s strange, inexplicable loss.

And why not? Protecting investors’ money from fraud is the responsibility of the Commodity Futures Trading Commission (CFTC), a quasi-governmental organization that has been telling investors for years that their money was safeguarded by the CFTC’s iron-clad requirement for segregation of customer funds so this kind of “funny stuff” can’t happen. The Fed did this with alacrity for Goldman Sachs, Merrill Lynch, numerous investment banks, money center banks and regional banks.

The Fed should consider the MF debacle an opportunity to prove that the guarantee of the CFTC is not a hollow promise but more importantly to help MF’s clients. I’d certainly prefer that the Fed assist MF Global’s small client base than continue lending hundreds of billions to stuffy EU banks who don’t look down their chins at us but rather look down their noses at us.

Berko can be reached at P.O. Box 8303, Largo, FL 33775 or email him at [email protected].

Tree laws are branching out, just try not to kill it

DEAR BENNY: I live with my girlfriend at her house. I am trying to fix our backyard and we have a neighbor behind us with a 100-year-old oak tree. There are two main trunks of that tree hanging over our fence line. We are not talking about some small branches, but a main trunk and top canopy is 40-45 feet over our property. It hangs over our house – and to make matters worse there is a visible crack and you can see the water line below that crack.

We went to an attorney and he sent a certified letter to the neighbor stating not only that it is a nuisance but the roots of the tree are encroaching on our property and has damaged our fence and the foundation of our property.

Of course, they went to their attorney and made up all sorts of lies.

We have pictures of everything. Do you believe that if I ask my attorney to file a nuisance claim against them, a judge will see it our way? We cannot go outside and enjoy our property with family or friends because of the damage that the oak tree does. By the way, acorns fall in our yard every other day and I have to bag approximately three to four bags; each bag weighs around 100 pounds.

Can a judge order the neighbor to remove the trunk and root system out of our yard so we can enjoy it? I do not want the whole tree cut; I just want what is inside of our property removed. – Paul

DEAR PAUL: I can appreciate your anguish and frustration over this matter. However, I am surprised about the advice provided by your attorney. While he wrote the appropriate letter to the neighbor, the fact is that in every state in this country, “self-help” is permitted.

That means that you have the absolute right to cut any tree roots that are in your property, and can cut down any tree limbs or branches that overhang onto your land. You cannot, however, trespass onto your neighbor’s property.

However, what do you do about the situation in which cutting the roots kills the tree, and then if it falls can cause damage to person or property?

I had a similar case years ago with a large walnut tree. My clients filed suit against the neighbor claiming private nuisance, and the judge ruled in my clients’ favor. My clients got some money for the damage to their garage (which was caused by the encroaching tree roots) and to pay for the removal of those roots. However, because everyone wanted to save the tree, the neighbor was forced to secure it so that it would not fall should it ever die because of the cut roots.

Tree law around the country is evolving. While every state allows a property owner to exercise self-help, some courts have modified this by holding that if self-help causes the neighbor’s tree to die, the tree owner must be compensated by the person who cut the branches or roots.

I suggest you have your attorney determine and tell you what the law is in your state.

KASS is a practicing attorney in Washington, D.C., and Maryland. Questions for this column can be submitted to [email protected].

More homeowners opt for ‘Strategic Default’

Strategic defaults, the practice of homeowners defaulting on their mortgage even though they have the financial capability to make the payments, are on the rise.

The primary reason is the increasing number of underwater home loans – mortgages that have a higher balance than the property is worth in today’s market. Also, another key motivator is the continuing unemployment problem.

Falling home prices, the possibility of a long-term underwater home loan and advice from certain influencers, may have encouraged others to simply stop paying on their home mortgage. This may have deleterious consequences in some markets, according to a study by the Mortgage Bankers Association.

“Recently, the overwhelming media coverage of the current financial crisis has made homeowners aware — or at least alerted them to become aware — of their equity position in their home,” said Michael Seiler who headed the study for MBA.

“While the merits of such a choice can and will continue to be debated, what is indisputable is that the possibility to strategically default has certainly been brought to the attention of current homeowners like never before, with potentially negative consequences for housing markets,” said Seiler.

Making the decision to strategically default on a home mortgage can have serious consequences. Certain legal effects are determined by the state in which you reside. Different states treat defaults on mortgage debt differently. Most notably distinguishing whether it is recourse debt or non-recourse debt, meaning whether the mortgage lender can pursue claims against the defaulted debtor or not.

Also, mortgage refinancing may be treated differently from an original, un-refinanced mortgage, and mortgages on second homes may be treated differently from mortgages on primary residences.

The temptation to strategically default is often very powerful. After deciding to not make payments any more, the borrower can live (free of the costs of payment or rent) until the lender forecloses, which may take from several months to a year. A borrower may use this time to pay off or negotiate other debt.

However, it should be noted that of the borrower’s house will result in a negative entry on the borrower’s credit rating. In the future, it could make obtaining loans more difficult or more expensive for the borrower.

With otherwise good credit, a new mortgage from U.S. government agencies will be denied until 3 to 7 years have passed since the actual date of foreclosure.

Q: How much can be saved by purchasing a Real Estate Owned home?

A: Freddie Mac reports its REO homes sell for an average of 94 percent of market value. Because Freddie Mac-owned homes are well maintained and priced right for the local market, most sell close to full estimated market value.

Freddie Mac sold more than 80,000 single-family REO homes in the first nine months of 2011, which the company says is a record. According to a Freddie Mac report, it is selling more homes than it’s taking in through foreclosure.

Q: How many mortgages are now delinquent?

A: Surprisingly, 6,298,000 mortgages were unpaid nationwide as of the end of October, according to Lender Processing Services. That’s a very large number, but the data shows that it’s actually been on a fairly steady decline for nearly two years now.

At the start of 2011, the total number of non-current mortgages in the U.S. stood at 6,870,000. In January 2010, it was 8,118,000. LPS’ report indicates mortgage delinquencies are declining, while the nation’s foreclosure inventory is growing.

Q: How much do home values rise in a normal market?

A: Zillow Real Estate recently conducted an interesting survey. It revealed that more than 42 percent of prospective homebuyers believe home values increase by about 7 percent each year.

“This estimation is out of line for the current economic times and high even for years prior to the housing crisis. In a normal market, home values tend to increase by only 2 percent to 5 percent per year,” according to Zillow. “While home buyers revealed a lack of understanding of home values, respondents answered about 65 percent of questions correctly.”

WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.

Appraisers hope for the end of bank-owned AMCs

In 2009, about two years after the real estate market started its collapse, a new federal law took effect.

The federal Home Valuation Code of Conduct was created to reduce conflicts of interest in the process of appraising homes. Real estate agents and brokers were no longer allowed to order appraisals. Lenders were now in control of doing that, and demand for appraisal-management companies shot up.

The law made angry. They began complaining that AMCs, which lenders hire for help with finding appraisers, were giving work to inexperienced appraisers for as cheaply as possible to pump up their profits.

Appraisers lamented bank-owned AMCs – but maybe they won’t have to anymore.

Observers say the bank-owned AMC might be a thing of the past, thanks to the Dodd-Frank Act.

And that would make some appraisers in the Charlotte area happy.

Dodd-Frank, which President Barack Obama signed into law in July 2010, included a provision requiring banks to cap their appraisal fees at 3 percent of the total home loan.

Bill Garber, director of government and external relations for the Appraisal Institute, a trade organization based in Chicago, said banks that own AMCs have been trying to get around the cap by bundling the AMC fee with the appraisal fee.

“If these fees are separated, as authorized by Dodd-Frank, those bank-owned AMC fees would fall into the 3 percent cap,” Garber said. “If that occurred, it could force any bank that owns an AMC to sell off its operations to avoid the 3 percent cap issue altogether.”

Some Charlotte-area appraisers would like to see banks jettison the AMCs once and for all.

Among them is Everett Helms, a Charlotte-based appraiser who is opposed to banks owning AMCs.

“What this means is the banks have complete control over who is doing the appraisal assignments,” he said. “If you don’t have a good relationship with the bank then you may not get any assignments from them. The assignment process is based off of a rotation, but when you have complete control over the fees and who gets paid what, they can starve you to death with the cutbacks in fees.”

For now, at least, Dodd-Frank isn’t going to get rid of the AMC owned by Charlotte’s biggest bank, , according to an official with the bank.

There are no plans to spin off Landsafe because of Dodd-Frank, said Terry Francisco, senior vice president of corporate communications for the bank.

Francisco defended Bank of America and LandSafe, saying they “have long-standing policies in place to ensure fair, accurate and independent property valuations.”

did not return calls. The bank owns Rels Valuation as its own AMC.

For Will Granger, an appraiser in Charlotte, the idea of banks owning AMCs has been frightening from the start.

“The banks will gear up and have their own staff and probably hire some new people off the street without a lot of work experience on hand and go at it,” he said. “The banks want to get somebody to do more, do it faster and do it for less money. They are just squeezing human beings every which way.”

Granger worries the pressure from bank-driven AMCs will force more appraisers out of the business.

“I think there are going to be some appraisers that haven’t been around as long as I have, they may drop out,” he said. “The latest polls I’ve seen show 14 percent of appraisers in the U.S. are not going to renew their licenses.”

Margie Gosser, of Gosser Appraisals, has been an appraiser in the Charlotte area since 1985. She said when banks own AMCs appraisers don’t get paid the fees they’re accustomed to or even a living wage.

“The AMC finds the cheapest and the quickest appraiser they can,” she said. “I have lost an assignment over a $5 difference in fee. The Bank of America and Wells Fargo AMCs mandate the fair and reasonable fee for an appraiser is $175 for a full report. The typical report is 12 to 16 hours of work. I don’t need a calculator to know that not only is not a fair fee. It is a disgrace.”

Concerns about inaccurate appraisals are what led to the HVCC. Then-New York Attorney General Andrew Cuomo was the driving force behind the effort to improve the reliability of home appraisals. Cuomo won Fannie Mae’s and Freddie Mac’s support for the legislation. Since its creation, HVCC has been criticized for making appraisals more expensive for consumers and encouraging the use of inexperienced appraisers.

Helms’ main concern is that only appraisers who give banks the kinds of appraisals they want are going to be given work by bank-owned AMCs.

“Let’s say you have an appraiser that is not making deals work and maybe it is because they shouldn’t be making those deals work,” Helms said. “They may find themselves off the list of available appraisers. If the bank wants to take you off the list, they can.”

The power banks have when they own AMCs doesn’t just trouble appraisers.

“A bank like Bank of America can push around a third-party appraiser,” said Tony Plath, associate professor of the department of finance at the University of North Carolina at Charlotte. “They can say, ‘Give us the number we want on the appraisal or we’ll take our business elsewhere.’”

BAUGHMAN can be reached at [email protected].