Miami Real Estate Blog

MIAMI (AP) – May 28, 2010 – A Miami judge has ruled that a lawsuit filed over faulty Chinese drywall can proceed as a class action involving 152 homes in Miami-Dade County.

Attorney Victor Diaz says the ruling Thursday marks the first state class action approved in the country. There are thousands of similar cases pending in several states, and some individual settlements have been approved.

Under the judge's order, people living in several Miami-Dade neighborhoods can decide whether to become part of the lawsuit. Unless there is a settlement, a trial is expected by late summer.

Chinese drywall has been linked to possible health problems along with corrosion of wiring, air conditioning units, computers, doorknobs and jewelry. Homes often have to be gutted to fix the problem.

Copyright 2010 The Associated Press.

WASHINGTON – May 21, 2010 – Congress is getting tougher on both borrowers and lenders blamed for inflating a housing bubble that, when it popped, plunged the nation into a severe recession two years ago.

Under sweeping financial overhauls that have now passed the House and Senate, homebuyers won't be able to get a mortgage without producing pay stubs or other evidence they can make their monthly payments. A new consumer watchdog will police lenders who offer impossible-to-resist subprime mortgages and then jack up the interest rates to impossible-to-pay levels.

The bills, which still have to be blended into one that could reach the president's desk this summer, also shine more light on complex but hidden financial instruments, the "derivatives" that made long-odds bets on whether Americans could make payments on mortgages they never should have qualified for.

The legislation takes aim at the credit and securities markets that collapsed when those bets turned out to be wrong, prompting Congress and the Federal Reserve to put up more than $2 trillion to prevent a panic that might well have triggered a global depression.

Still, for all their ambition, lawmakers left some gaping questions on how to tackle some of the most significant financial sector weaknesses exposed by the 2008 financial meltdown – from mortgage giants Fannie Mae and Freddie Mac to unsettled disputes over banks and their derivatives business, and requirements that they hold more capital. And in the rough and tumble give and take of writing laws, they rejected tougher measures that would have forced behemoth banks to downsize, required securitizers to retain some credit risk in their loans, and compelled homebuyers to put a downpayment on their loans.

If anything, however, the political environment has grown more populist since the House passed its legislation in December – a trend that will likely protect the tougher provisions in both bills.

Here's a broad look at elements of the bill and what they do and don't do to avoid a repeat of a financial crisis:

Lending

In passing its sweeping rewrite of financial regulations, the Senate does not embrace Shakespeare's admonition: "Neither a borrower nor a lender be."

But it makes it tougher.

Mortgage brokers won't be able to make money on high interest loans; buyers won't be able to lie about their ability to pay as loan officers look the other way.

The Senate rejected a proposal that would have required homebuyers to place a minimum 5 percent downpayment on their mortgages. It also rolled back a provision that would have required lenders who sell their mortgages to hold 5 percent of the credit risk as "skin in the game," designed to ensure they wrote safe loans. Instead, lenders who write loans that meet strict underwriting standards could sell their loans and avoid the risk retention requirement.

Lending would be overseen by a new agency. The House sets up a stand-alone Consumer Financial Protection Agency with rule writing powers. The Senate sets up an independent bureau within the Federal Reserve and its rules could be vetoed by the oversight council of regulators. House Financial Service Committee Chairman Barney Frank indicated the agency would not likely end up in the Fed, but otherwise said the authorities of the two entities were similar.

"I thought we'd have a major fight over the independence of the CFPA," he said. "Not a problem."

Fixing the government-sponsored mortgage giants Fannie Mae and Freddie Mac was put off for another day.

The two companies lowered their standards for borrowers during the housing boom and now those high-risk loans are defaulting at a record pace. The government has been forced to rescue them to the tune of $145 billion.

Administration officials have said an overhaul of the two will be a priority next year. And, as a Band-Aid measure, the Senate approved a provision ordering a study, which is already under way at Treasury.

"What we did - and I would be the first to admit it, being the author of the provision - is fairly anemic in light of what we need to be doing," Senate Banking Committee Chairman Christopher Dodd conceded.

Too big to fail

The legislation creates a liquidation system for large, interconnected firms, whereby the Federal Deposit Insurance Corp. would step in to wind down large firms that pose a risk to the system. Shareholders and unsecured creditors would be wiped out, management would be fired and counterparties in their complex transactions would not necessarily be made whole.

The Senate eliminated a $50 billion liquidation fund, prepaid by the largest financial institutions. The House has its own fund. Frank, no fan of the fund, said Thursday that it would come out during a House-Senate conference on the bill.

That means that taxpayers would have to front the costs of a liquidation. And though the Senate bill specifically says taxpayers will suffer no loses when a large firm fails, the Senate bill gives the FDIC up to five years to wind down a firm.

Both bills would require banks to hold more money to cover their debts. The House bill has a specific leverage cap on financial institutions of 15-1 debt-to-net capital ratio. The Senate requires banks with more than $250 billion in assets to meet capital standards at least as strict as those that apply to smaller banks. That provision passed unanimously, but policy makers are taking a second look, saying that standard could have unintended consequences. It could be altered or removed in negotiations with the House.

Markets

Both the House and the Senate require complex securities known as derivatives to lose their unregulated status and be traded or cleared through exchanges. That would provide a third party to help back up the bets in the event one of the two participants in the trade defaults. The House bill, however, grants more corporate exceptions from regulation than the Senate bill does.

The Senate bill has a provision that would force banks to spin off all their derivatives business. That means they would not only be unable to make their own derivatives bets, they also could not make derivatives markets for their clients. Bank regulators and administration officials fear that provision could drive derivatives into unregulated markets. They say that, too, will be altered or removed in discussions with the House.

Copyright © 2010 The Associated Press, Jim Kuhnhenn, Associated Press writer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Associated Press writers Charles Babington and Anne Sanner contributed to this report.

NEW YORK – May 10, 2010 – The rate of late mortgage payments dropped in the first quarter for the first time since 2006, according to credit reporting agency TransUnion.

The 60-day delinquency rate slipped to 6.77 percent, from 6.89 percent in the fourth quarter of 2009. That was the first decline after 12 consecutive quarters of steady increases, TransUnion said.

The first-quarter figure still represents a substantial jump from a year ago, when delinquencies were at 5.22 percent. But F.J. Guarrera, vice president in TransUnion's financial services business unit, said it's still good news.

"To see it turn down is a very, very strong sign," Guarrera said, adding that positive economic indicators like Friday's increase in job creation make the outlook even better.

"We cannot characterize it as a trend yet, but we anticipate that things will continue to improve." TransUnion expects another decrease for the current quarter, and then for the delinquency rate to stabilize for the rest of the year.

TransUnion measures the rate using mortgage payments that are 60 days late, or two skipped months. The figure is considered an important indicator of likely foreclosure, because of the difficulty someone in financial distress would have coming up with three payments to bring their mortgage current.

The company forecasts the delinquency rate will be about 6.3 percent by the end of the year.

In the first quarter of 2011, TransUnion expects late mortgage payments to start a significant decline. By the end of next year, the rate could be close to 5 percent, Guarrera said.

Historically, mortgage delinquencies hovered around 1.5 or 2 percent.

Delinquency rates remain the highest in the four states hit hardest by the housing market collapse: Nevada, at 15.98 percent, Florida, at 14.65 percent, Arizona, at 10.94 percent and California, at 10.68 percent.

TransUnion said the rate could top 18 percent in Florida by the end of the year. Nevada and Arizona will likely remain close to their current rates through 2011.

"I really do believe it will take longer in those states for improvement," Guarrera said. These states were left with a bigger surplus of housing that remained unsold during the recession. The surplus will likely keep pressure on housing prices, and make it harder for homeowners to refinance or get out from under mortgages that exceed the value of their homes. That increases the temptation to walk away from a mortgage and let the house slip into foreclosure.

California could see a slight decline in delinquencies by the end of 2010.

Delinquency rates remain the lowest in North Dakota, at just 1.76 percent, and South Dakota, at 2.44 percent.

The figures are culled from about 27 million randomly sampled credit files in TransUnion's database, representing about 10 percent of U.S. consumers who have active loans outstanding.

While the overall news is positive, Guarrera said it's still difficult to predict what might happen in coming months. "There's still a lot of uncertainty in the housing market," he said. "There's still a lot of delinquency out there, and home values have not started to improve."

Copyright © 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

WASHINGTON – April 13, 2010 – U.S. taxes can be offset by a number of real estate-related credits and deductions, and the IRS offers information on each.

Karen Russell, real estate industry liaison for Georgia, and in this instance, Florida as well, compiled a list of educational documents for the real estate industry to share with homebuyers and sellers.

“I am sharing the following links regarding credits available to first time homebuyers and long-term homeowners wishing to replace their primary residence,” Russell says. “This information can be printed and placed for easy viewing” by interested buyers and sellers.

Energy Incentives for Individuals: http://www.irs.gov/newsroom/article/0,,id=206875,00.html

Seven Facts about the Non-business Energy Property Credit: http://www.irs.gov/newsroom/article/0,,id=214979,00.html

First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=204671,00.html

Seven Important Facts about Claiming the First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=202222,00.html

Five Tips About the First-Time Homebuyer Credit Documentation Requirements: http://www.irs.gov/newsroom/article/0,,id=219518,00.html

Ten Important Facts about the Extended First-Time Homebuyer Credit: http://www.irs.gov/newsroom/article/0,,id=215827,00.html

© 2010 Florida Realtors®