by: Peter J. Gallagher
Do sellers of real estate have a duty to warn potential buyers about murders or suicides that occurred at the property they are trying to sell? The answer in most states, somewhat surprisingly, is no. As MSNBC reported in a recent article, “3 BR, hot tub, 3 murders: How homicide homes hold their secrets,” only two states – Alaska and South Dakota – require that sellers’ agents reveal whether a homicide or suicide occurred in the property within the previous 12 months. According to the article, five other states – Connecticut, Delaware, New Hampshire, North Dakota, and Oklahoma – require that agents “truthfully answer the question” if a prospective buyer asks about “past bloodshed.” The article further reports on a study, which showed that so-called stigmatized homes languish for longer on the market and ultimately sell for less if their macabre history is revealed, either by sellers or through the grapevine.
Finally, lest you think potential buyers are just being overly paranoid, consider the tragic ending to the story of the man profiled in the MSNBC piece:
Days after closing on his dream home – a brick colonial near the Washington, D.C., school he was toiling to save – principal Brian Betts learned of his property’s ghastly past.
Inside the house, 11 months earlier, an intruder had shot and killed a 9-year-old girl and her father. Horrified, Betts demanded the transaction be rescinded. When that effort failed, he invited two ministers to pray over his new place. Then Betts tried to paint over the grim history, refinishing the woodwork and refurbishing the kitchen.
Seven years later, in April 2010, a robber shot and killed Betts in his bedroom.
by: Peter J. Gallagher
The New York Times is reporting that the government is soliciting ideas for turning its glut of vacant, foreclosed houses into rental units that could be managed by private parties or sold in bulk ("U.S. Seeks Ideas On Renting Out Foreclosed Property"). The goal of the program would be to "stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values" and "clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction." The request for ideas comes from the Federal Housing Finance Agency, the Department of Housing and Urban Development, and the Treasury Department, and you can click here to submit your ideas.
As the article notes, the percentage of homes owned by the government that are currently in foreclosure is somewhat staggering:
Of the 248,000 homes owned by Fannie Mae, Freddie Mac and the F.H.A. at the end of June, 70,000 were listed for sale, said Corinne Russell, a housing finance agency spokeswoman. The remainder were not yet on the market or the agencies had already received an offer from a prospective buyer.
But it is possible that hundreds of thousands of more homes that are now in the foreclosure process could come into the possession of the federal government in the next few years, housing experts say.
The government is now looking for a few good men ideas for how to deal with this crisis. Among those already proposed are "rent-to-own programs, in which previous homeowners or current renters could lease properties as a path to ownership, and ways in which the properties can be used to support affordable housing."
If you have any thoughts, be sure to let us know when you let the government know.
by: Peter J. Gallagher
According to a recently concluded, year long study by the Washington Post, HUD is dysfunctional. The paper — which reported its findings in an article last week entitled "A Trail Of Stalled Or Abandoned HUD Projects" — " looked at "every major project currently funded under the [HOME Investment Partnerships Program], analyzing a database of 5,100 projects worth $3.2 billion, studying more than 600 satellite images and collecting information from 165 housing agencies nationwide." The study concluded that HUD "delivers billions of dollars to local housing agencies with few rules, safeguards or even a reliable way to track projects." This, in turn, has led to "widespread misspending and delays" in the program, which was developed more than 20 years ago to deliver decent housing to the working poor.
While the article focuses primarily on the conditions in Washington D.C., it also discusses more systemic problems, and uses an example from Newark, New Jersey in this regard. The article notes that two partially completed duplexes sit empty in a Newark neighborhood "blighted by boarded-up homes lost to foreclosure." While the city paid nearly $400,000 to build the houses, the developer delayed for more than 10 years, and ultimately folded and never finished the project. The money has not been repaid. In response to the Post's investigation, HUD claimed that it did not need a a more robust enforcement effort to correct problems like these, and indicated that it is "focused more than ever on delayed projects and recouping money," and that the situation "will get cleaned up.”
by: Peter J. Gallagher
In a move that will forever change the opening montage of the Sopranos, Real Houswives of New Jersey, and Mob Wives (yes, I have watched these last two), Slate is heralding "The Death Of The McMansion." The article notes that the "the long recessionary cold-shower will dampen the exuberance that characterized the boom years of 2000 to 2005," and inspire people to seek smaller homes that are closer together. Urban town homes and housing closer to cities or urban centers are also likely to grow in popularity as rising gas prices increase the cost of commuting. These same rising costs will make "large houses with soaring entryways and expansive family rooms," which were so popular in the recent past, less popular in the future. On the flip side, the article forecasts fewer big houses on big lots, and fewer "planned communities in the distant hinterland." Of course, the author does posit a possible alternate future than the one the current data appears to forecast:
An alternative scenario is that American optimism will prevail and it will be business as usual, as happened during the boom of the 1950s following the Great Depression, or during the period following the Energy Crisis of 1973, when car buyers, after a brief flirtation with Japanese compact cars, embraced minivans and SUVs. But I wouldn't count on it.
For the sake of future casts of trashy reality television, lets hope this latter prediction holds true.
by: Peter J. Gallagher and Steven P. Gouin
Our regular followers know that many of our pieces focus on the foreclosure industry, and with good reason, as over 2 million American homes are currently in foreclosure. Add to this troubling statistic the recent allegations of shoddy paperwork at many of the nation's largest mortgage companies and the law firms representing them, and you have the makings of a compelling story of a giant foreclosure-induced catastrophe. While homeowners have been feeling the pain from this crisis for years now, the catastrophe struck close to home recently for many of the banks and mortgage companies at the heart of the foreclosure crisis.
In an article entitled “Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers,” the Huffington Post is reporting that a recent federal audit conducted by the Department of Housing and Urban Development (HUD) revealed that five of the nation's largest foreclosure firms, including industry giants like CitiBank and Bank of America, are guilty of fraud under the Federal False Claims Act. Specifically, the audit concluded that the banks “filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.” According to the article, federal prosecutors are debating whether to use the audits as the basis for criminal and civil sanctions against the mortgage companies.
At the same time, the New York Times is reporting that New York Attorney General Eric Schneiderman has requested information and documents from three major banks – Goldman Sachs, Bank of America, and Morgan Stanley – about their mortgage-backed securities operations (“NY State Investigates Banks’ Role In Financial Crisis”). This suggests that Mr. Schneiderman may be launching an investigation into the banks' practices, which many believe led to billions in mortgage losses. One of the most interesting aspects of the article is the suggestion that, by requesting this information from the banks, Mr. Schneiderman is “operating independently of peers from other states who are negotiating a broad settlement with large banks over foreclosure practices.” The article notes that Mr. Schneiderman has been unwilling to join this proposed settlement because the banks are demanding that it include a clause whereby regulators agree not to conduct additional investigations into the banks’ activities during the mortgage crisis.