Monthly Archives: October 2010

Title Insurance Issues

Title Insurance Talk: mortgage broker advertises interest rates tied to affiliated title insurance

A friend showed me the mortgage rate section of the Tribune Review last weekend and pointed to a mortgage company listing that had asterisks next to a few interest rates. These asterisks pointed to a note that the rates were only available if the transaction was a purchase and the borrower used a particular title provider.

Clearly the mortgage broker sought to avoid Pennsylvania’s discounted refinance title premiums as part of this package deal. Only purchases transactions are eligible so there’s enough cash in the pot to subsidize the rates. The consumer appears to be getting a deal with the package.

What do you think about this offer? Is it a problem under RESPA or PA lending or insurance law?

I’ve pondered on it and I’m really not sure. It’s very much like the deals offered to buyers in construction transactions. You get the good price if you use the affiliate. If you don’t use the affiliate, you pay higher than market. As far as I could tell these interest rates weren’t especially low.

What’s also interesting is that I did some checking around and found that the mortgage broker is an attorney who is operating the title services business through the law firm and not as a title agent. He’s working under the approved attorney program. That means that TIRBOP r

via Title Insurance Talk: mortgage broker advertises interest rates tied to affiliated title insurance.

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RESPA: HOME EQUITY PROTECTION ACT OF 2010 SEEKS TO BAN PRIVATE REAL ESTATE TRANSFER FEES (ALSO KNOWN AS “CAPITAL RECOVERY FEES”) :: RESPA Lawyer Blog

US House Representative Maxine Waters and Rep. Albio Sires introduced a bill called the “Home Equity Protection Act of 2010” on Wednesday. The bill seeks to amend the Real Estate Settlement Procedures Act “RESPA” by prohibiting the collection of private transfer fees, also known as capital recovery fees or resale fees.

Often a housing or condominium developer establishes a legal covenant which requires the purchaser of a home in a large subdivision or condominium to pay a private transfer fee back to the developer or are allocated to the homeowners or condominium associations maintenance funds when they sell their home. The fees sometimes are often around one (1) percent of the sales price and the private transfer fee can often last as long as 99 years.

The private transfer fees have been controversial because some home buyers have claimed they were unaware of the restriction and in some cases the covenant doesn’t require the homeowners signature at all. The proponents of making the private transfer fees illegal believe the fee strips the homeowners of their equity when they sell their property. Those in favor of keeping the private transfer fees intact believe it helps keep condominium and homeowners associations afloat by giving them needed capital to operate.

The Federal Housing Finance Agency proposed a similar rule which could prohibit Fannie Mae and Freddie Mac from insuring or purchasing mortgages that include private transfer fees. Several trade associations, including the National Association of Realtors and American Land Title Association, have applauded the legislation and are in favor of banning the private transfer fees.

via respalawyer.com

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Property Value Declines Now Becoming Property Tax Collection Declines, But Down Just 1.8 Percent in 2010 (Yet Values Have Plummeted in Many Markets Since 2006– Wall Street Journal

From: Ted C. Jones
Sent: Thursday, October 07, 2010 5:35 AM
Subject: Property Value Declines Now Becoming Property Tax Collection Declines, But Down Just 1.8 Percent in 2010 (Yet Values Have Plummeted in Many Markets Since 2006– Wall Street Journal

http://online.wsj.com/article/SB10001424052748703735804575535893686052782.html?mod=WSJ_WSJ_US_News_5

While it’s no surprise that property tax collections are down in 2010, and are expected to drop even more in 2011 and 2012, what is a shock is just how little total property tax collections declined—just 1.8 percent in 2010.  Property tax collections grew 4.9 percent in 2009 even though property values declined.

Since the peak U.S. home prices recorded in 2006 (based an average of the monthly median existing home sales price of $222,000), prices dropped 22.2 percent in 2009 to an average monthly median of $172,742.  And for the first eight months of 2010 that remains little changed with an average $173,700 price (a year-over-year gain of less than 6/10ths of 1 percent).  Commercial real estate values, as proxied by the MIT Real Estate Group analysis of the National Council of Real Estate Investment Fiduciaries (see my blog August 27, 2010 http://blog.stewart.com/?p=636), are down at least 27 percent from the peak. 

So why so little decline in property tax collections when values are down 20+ percent and taxes off less than 2 percent?  Property tax collections are based on both the assessed value of the real estate and the property tax rate.  And yes, you got it, property tax rates rose in the face of declining property values.  Property tax rates, however, are not equal across the country.  To get an idea of how widely they range and to view the relative burden of property taxes on homeowners, The Tax Foundation  reports annually respective tax rates and burdens across the country.  Comparative property tax rates can be seen at http://taxfoundation.org/taxdata/show/1888.html.  The Tax Foundation ranks the top 792 country property taxes as a percentage of the home value.  Nationwide, 2009 saw an average rate of 1.04 percent, up from 0.96 percent in 2008 (an increase of 8.33 percent). Wow.  The report, which can be downloaded as an Excel file, includes data for 2005 through 2009. 

So what can we conclude regarding property taxes?  There will be continued pressure by local governments to raise the tax rate despite declining real estate values.  One would hope, however, that local and state governments would place as much vigor in reducing spending as they do in increasing tax rates—in addition to accurately appraising properties.  

And for consumers, visit with local real estate specialists, find out your realistic market values and appeal you property tax assessment if they taxing authority has you overvalued.  While you can’t, on an individual basis, dispute the property tax rate, assessed values should be based on realistic market values.

Ted

Ted C. Jones, PhD

Senior Vice President-Chief Economist, Stewart Title Guaranty Company

Director of Investor Relations, Stewart Information Services Corporation

 

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