Published on: March 2, 2014
LIFTING THE CLOUDS. The Massachusetts Legislature is moving to clean up the title mess created by a 2011 state Supreme Judicial Court ruling that a foreclosure was invalid because the financial institutions did not have physical possession of the mortgage when they initiated the foreclosure proceedings. That decision (U.S. Bank vs. Ibanez) clouded the titles of hundreds of properties purchased in foreclosure sales. The pending legislation, approved by the Senate and awaiting action in the House, would clear those titles three years after the foreclosure.
REMEMBER KELO? It just might qualify as a bumper sticker – like “Remember the Alamo” or “Got Milk.” Kelo refers to Kelo v. New London, Connecticut, in which the U.S. Supreme Court ruled that because a proposed mixed use development would generate higher tax revenues than the homes occupying the site, the city could take those properties by eminent domain. That was nine years ago. The homeowners who fought and lost that battle have relocated. The site has been cleared – and remains vacant. “It’s a vast, empty, bulldozed, weed-choked swath of acreage,” Housing Wire reported, and “ironically,” the article notes, the property today “is generating even less in tax revenue than the modest homes in the community that were dispossessed.”
TROUBLED NO MORE. It wasn’t so long ago when the word “troubled” regularly preceded any reference to Fannie Mae. But eight consecutive profitable quarters have erased that adjective. The company is writing a check for $7.2 billion to the government, representing its fourth quarter dividend. This means Fannie and Freddie Mac have now repaid a combined total of $192.4 billion to the Treasury, exceeding the $189.5 billion they received in government assistance.
STILL WAITING TO EXHALE. The anticipated shift from refinance to purchase mortgages hasn’t materialized. New loan originations, which have been declining all year, fell to a 19-year low in the week ending Feb., 21, according to the Mortgage Bankers Association. Existing home sales have also been moving in the wrong direction, but new home sales were surprisingly strong in January, adding to the confusion about whether the housing market is slipping or poised for stronger growth.
HOME IMPROVEMENT. Here’s a presumably positive indicator: Demand for home equity loans is soaring – suggesting to some analysts that the housing market and the economy are improving. Of course, a surge in home equity loans also preceded the last housing bust. Just saying….
TENANTS TODAY AND TOMORROW. A housing market recovery won’t make a serious dent in rental housing demand any time soon – at least, that’s what real estate industry executives are saying. Rising mortgage rates, conservative lending standards, down payment requirements and residual skittishness from the housing downturn will keep renters in place ‘for many years to come,” one recent market analysis concludes.
WHAT COVENANTS SAY AND DO. The evil that men do may live after them but restrictive covenants will come back to bite them. A North Carolina case (Warrender vs. Gull Harbor Yacht Club) clearly illustrates this principle. The underlying facts in this dispute between the owners of a yacht club and the residents of a homeowners association who had access to it are somewhat convoluted. But the essential facts are:
The general plan filed by the developer (Smith) who built the homes and the marina in the Gulf Harbor community specified that the marina was for the exclusive use of residents and their guests. But the developer retained the right to rent boat slips to non- owners until the slips were needed by owners, at which time the owners would be given preference “on a first come first served basis.” The plan also specified that the homeowners association, which residents were required to join, would be responsible for maintaining the marina, and that owners would be required to pay $36 annually for those costs.
Fast forward about 14 years, when most of the homes had been sold. Smith, who had retained ownership of the marina, sold it. About the same time, a majority of Gull Harbor owners approved a revision of the plan, increasing the annual assessment paid by owners from $36 to $60 per lot, but specifying that no more than $3,000 of the assessments could be used for marina maintenance.
The marina’s new owner executed 99-year leases for 22 of the marina’s 30 boat slips, 8 of them with individuals who did not own homes in the community. Some of the holders of those 99-year leases created a nonprofit corporation – the Gull Harbor Yacht Club (GHYC) – which acquired ownership of the marina after the owner defaulted on outstanding loans. Facing significant expenses for deferred maintenance on the marina, which the owner had neglected, the GHYC notified owners that it would charge them a “user fee” of $200 per year and require them to pay an additional $20 for a key to gain access to the marina boat ramp. Litigation ensued.
The trial court sided squarely with the owners on their contention that GHYC had violated the covenants, granting summary judgment in their favor, voiding the 99-year leases with non-owners, and giving the homeowners association “dominion and control” over the marina.
The Appeals Court agreed in part, but not entirely, with the general finding and rejected the remedy. The GHYC had argued that the covenants weren’t binding and that, even if they were, the club hadn’t breached them. The court found that the covenants were, in fact, binding on the owners as long as they were aware of them when they purchased the marina, but it found that the 99-year leases did not violate the restrictions. The court’s reasoning: The plan allowed GHYC to lease the boat slips to non-owners until home owners wanted them. There was no evidence that Gull Harbor residents had demanded the units and so no basis for arguing that GHYC had violated the covenant by failing to make the slips available to them.
The charging of fees, on the other hand, was problematic, the court said, because the revised plan capped the amount owners were required to contribute to marina maintenance at $3,000 annually. “GHYC could not, without violating the terms of the Revision, attempt to collect further maintenance costs above and beyond that which are specified in that document,” the court said.
But the relief granted for that breach –terminating the 99-yer leases and turning control of the club over to the homeowners’ association ― was inappropriate, the court concluded, because it was based on the finding that the 99-year leases breached the covenants, a finding the appeals court had rejected. The revised plan granted owners access to the marina, but it did not give them ownership or control of it, the court said. “Since the trial court’s relief went far beyond simply restoring the status quo required by the Revision, allowing all Gull Harbor lot owners to access the marina without the payment of an additional maintenance fee, the relief granted constitutes an abuse of discretion,” the court concluded.
The decision overturned the relief granted and remanded the case “for the entry of relief which appropriately restores the status quo in accordance with the terms of the Revision.”
“I’ve seen too many neighborhoods devastated, too many families devastated by giving them credit that they could not afford.” ―Ira Rheingold, executive director of the National Association of Consumer Advocates.
“I think that everybody should have an opportunity to own a home…We’ve got to rekindle hope in people, especially minorities who threw everything into the dream of homeownership and lost it.” ─ Bruce Marks, founder of the Neighborhood Assistance Corporation of America.
Two sides of a burgeoning debate over whether home ownership is a desirable/or achievable goal for everyone.