California to Receive $18 Billion in Mortgage Settlement

On February 9, Attorney General Kamala D. Harris announced that California secured up to $18 billion for its distressed homeowners as part of a $25 billion national multistate settlement with the country’s five largest loan servicers. More than $12 billion will be used to offer short sales or write down loans over the next three years for about 250,000 underwater homeowners in California, according to the attorney general. Relief will go to areas hardest hit by the foreclosure crisis within the first year of the settlement.
Although the actual settlement has not yet been released, the attorney general has stated that other financial benefits for California include $849 million for refinancing 28,000 borrowers who are underwater but current on their payments; $279 million restitution for 140,000 homeowners who were foreclosed upon between 2008 and 2011; $1.1 billion for unemployed homeowners, transitional assistance, and repairing blight; $3.5 billion to extinguish unpaid loans that remain after foreclosure for 32,000 homeowners; and $430 million to the state attorney general’s office for costs and fees. As part of a California guarantee, if the lenders fail to reduce principal balances by a minimum of $12 billion, they will be required to pay fines up to $800 million to the state.
The loans involved in this settlement are those owned or serviced by Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial Inc. The settlement releases the five named lenders from certain federal and state claims pertaining to robo-signing and other foreclosure misconduct by the lenders. It does not affect any individual’s rights to bring legal action against a lender. It also does not apply to the majority of mortgage loans, which are those owned by Fannie Mae or Freddie Mac.
This mortgage settlement does not change any homeowner’s existing financial relationship with a settling lender. It does not relieve homeowners from any obligation. It does not require a settling lender to stop any foreclosure.
Homeowners seeking relief under the settlement agreement should contact their loan servicer or a HUD-approved housing counselor. More information including detailed FAQs is also available from the California Attorney General’s website, or visit the National Mortgage Settlement website.

While I’m not an attorney (blatant disclaimer!) and I don’t practice law, I think it’s important as a professional practitioner and part-time professor (have you ever seen so many P’s?!) to keep up on current events that might affect my business and my clients. So here’s a recent legal issues in the real estate industry:

Court Holds that the Statute of Limitation for Breach of Fiduciary Duty is Four Years

In case you are not aware, “Fiduciary Duty” is what I pound into my real estate student’s heads as often as possible. It simply means that our client comes first under any and all legal & ethical circumstances (i.e, I don’t have to help my home owner cover up a murder . Among other things, full disclosure, honesty and complete ethics must be practiced with all parties involved in a real estate transaction, but the term “Fiduciary” just means that you go that extra mile for your own client.

Well, according to Thompson v Canyon (2011) 198 Cal.App.4th 594 there is a limit to how long this Fiduciary Duty is required.

In this case, a San Francisco homeowner was facing foreclosure and listed her home for sale with a licensed real estate agent. The buyer said he’d buy the house and sell it back to the homeowner (which was not yet illegal in 2004), however, once the buyer got the house, he did not sell it back to the homeowner as he said he would. The homeowner then sued the buyer and lost. Then the homeowner sued the broker, at which point the Court determined that the four-year period of fiduciary duty was expired.

This case is precedence-setting because the statute has never been exercised before. It’s also important for real estate professionals who are only obligated to keep files for 3 years, recognize that they should now keep them for four years. In my opinion, if the buyer had made an oral commitment to sell back the house to the homeowner, and the agent was aware of that fact, then the agent should have included that as a contract contingency. Again, this is just my opinion, but the agent DID have a fiduciary interest to protect his home owner-client so if he WAS aware that the buyer had made that promise, his due diligence would have been to make it a part of the contract.

What’s important to remember if you are buying or selling a house, is that your agent owes you, legally, the most honest, fair and ethical treatment possible, and that if you feel that the duty was somehow failing, you have the right to file a claim (within the four year period). I am not a big fan of law suits and feel that California courtrooms are replete with frivolous lawsuits. However, in the instance where someone has been clearly mistreated or dealt with in a manner that was anything less than honest and ethical, then vengeance is mine, sayeth the Tambo.

If you’re thinking of buying or selling a home in the Sacramento or Carmichael Areas, just give me a call.

Tamara

Many buyers with FHA government backed loans do not know that the FHA requires two appraisals on a flipped property to ensure buyers are not getting ripped off. The buyer must absorb this cost and this can mean around $400 extra if you are wanting to purchase a flipped property.

If you are an investor, you should be aware 1) that the FHA requires a home inspection within the 90-day period and 2) that due to the 90-day period, you are going to eliminate a lot of potential FHA buyers.

- Original Youtube vid – Buying or Selling a Sacramento Flipped Property 01/05/2011
Home Buyers
- Home Sellers

1D outlines the close of escrow you are agreeing to. Thirty days is the average turnaround of escrow, however many lenders can get your loan funded much sooner, particularly if there are no credit or serious issues. This is good to understand as price is not the only competitive force in real estate.

Shorter escrow can mean the difference between you being successful in a bid vs. another buyer. Even ten days shorter escrow can make a huge difference, especially on foreclosed properties where banks are gunning for a quick turnaround.

Buyers should consult with their agent and lender on the best escrow timeframe to indicate on the Residential Purchase agreement. It is crucial to be as realistic as possible because if you do not close when you say you are going to in term 1D, you could stand to lose your deposit.

- Original Youtube vid – Why Time of Escrow Counts When Buying a Sacto Home 01/03/2011
- Home Buyers