Legal/Legislative Updates

FHA RISING. The Federal Housing Administration (FHA) has almost succeeded in rebuilding its insurance fund, which has been stuck for several years below its federally-mandated capital levels. A recent report by Moody’s analytics concludes that the fund will have “close to” the 2 percent reserve cushion it is required to maintain. Huge losses, attributable primarily to the FHA-insured reverse mortgage (HECM) program, forced the agency to accept federal funds last year (a $1.7 million infusion) [Read More...]

SECURITY LAPSES. It seems that the Consumer Financial Protection Bureau (CFPB), which enforces data security and consumer privacy requirements for financial institutions, has some lapses of its own in those areas. The Government Accounting Office (GAO) has identified 11 steps the CFPB should take to strengthen its privacy and data security practices and policies. Among other problems, a GAO audit found, the CFPB lacks “written procedures and comprehensive documentation” for several procedures, including those related [Read More...]

FEELING MUCH BETTER.   As the effects of the “Great Recession” recede, community association managers and board member are feeling a lot better about the communities they oversee. Almost 90 percent of the 1000 respondents to CAI’s annual “State of Associations” survey described the overall health of their associations as “excellent,” and more than half (55 percent) expect their associations to be in even better economic shape five years from now. VAPORIZING.  The companies selling [Read More...]

BETTER OR WORSE.  It’s either getting easier or more difficult to obtain a mortgage, depending on which of any number of competing studies you want to choose. The Federal Reserve’s most recent survey of senior loan officers found that nearly 24 percent of banks have eased their credit standards in the past three months – at least as they apply to borrowers “with solid credit and incomes,” according to the Wall Street Journal. But Ellie [Read More...]

PET FRIENDLY.   Renters are finding more pet-friendly apartments ― a good thing for them, since nearly half of all households own at least one dog or one cat. Nearly three-quarters (72 percent) of renters responding to a recent survey said they are pet owners. That’s down slightly from 75 percent in 2013, but still way ahead of the 43 percent responding positively in 2012. This doesn’t mean that pet restrictions have disappeared, however. Only [Read More...]

GUILTY OF MURDER.  The Dodd-Frank Financial Reform law killed the housing market! That is the less-than-subtle conclusion of an article written by two Bank of America Merrill Lynch analysts, who blame the myriad mortgage-related rules spawned by the legislation for the sluggish housing recovery. “We think persistently low mortgage application volumes and [the] extremely weak new home sales reports for May and June are natural outcomes of the legislation,” analysts Chris Flanagan and Adam Katz, [Read More...]

RETHINKING FHA CERTIFICATION.   Since the Federal Housing Administration (FHA) tightened the criteria condominium communities must meet to obtain FHA certification (a requirement for borrowers who want to use FHA financing to purchase condominium or refinance an existing mortgage) the number of condominiums seeking certification has slowed to a trickle. The Washington Post reported recently that only about 10,000 of an estimated 140,000 condominium developments nationally have obtained FHA certification. California Realtors have launched a campaign [Read More...]

NO IDLE THREAT.   Massachusetts Attorney General Martha Coakley, who had threatened to sue Fannie Mae and Freddie mac, has made good on that threat. She recently filed suit against the two GSEs and the Federal Housing Finance Agency, which oversees them, for violating a state law designed to help troubled borrowers remain in homes they are losing to foreclosure. The law prohibits provisions, which Fannie and Freddie include in foreclosure sales, barring purchasers of [Read More...]

FEELING DOWN.   Feeling more upbeat about the economic outlook? We’ll take care of that right now. The International Monetary Fund has slashed its growth forecast for this year from 2.8 percent to 2 percent, and is now predicting that the U.S. won’t see full employment again until sometime near the end of 2017. UNSETTLING OR OVERSTATED?   The severe economic restraints on young adults will create serious and long-term impediments to economic growth, Wall [Read More...]

THEY LIKE WHERE THEY LIVE.  Notwithstanding periodic reports of heavy-handed condominium boards and the owners furious with them, most residents like the common interest ownership communities (CIOCs) in which they live. And every year, the Community Associations Institute (CAI) publishes a survey confirming that conclusion. This year’s survey, conducted for the Foundation for Community Association Research, found once again that nearly two-thirds of the 65 million owners and renters living in CIOCs rate their experience [Read More...]

GSE REFORM. Despite the loss of what could prove to be crucial support from several Senate Democrats, the Johnson-Crapo bill to restructure the home finance system made it out of the Senate Banking Committee with a bipartisan 13-9 margin. The legislation, which would replace Fannie Mae and Freddie Mac with a federal reinsurance fund to back up private-sector mortgage originators, has emerged as the primary vehicle for restructuring the mortgage market. But critics on both [Read More...]

RISK MANAGEMENT? It appears there may be more than one way to duck those rising flood insurance premiums. The FBI is reportedly investigating “unusual” alterations tin FEMA’s flood maps that inexplicably removed some properties from “high risk” zones where insurance is required. A NEGATIVE TREND. A growing number of condominium associations aren’t as financially sound as they once were. Association Reserves, an industry consulting firm, estimates that 70 percent of association-governed communities are underfunded today, [Read More...]

ALL CASH. Cash transactions made up more than 80 percent of condominium sales in Florida and Nevada in January ― the largest percentages among the 25 markets analyzed by CoreLogic. Massachusetts was at the bottom of the cash purchase list, at 36.7 percent, just above Virginia, at 32.4 percent. Restrictive lending requirements and other lingering effects of the downturn have “pushed condo cash shares much higher than pre-recession levels over the past five years and [Read More...]

DEVELOPER RELIEF. Condominium developers may win relief from the Interstate Land Sales Full Disclosure Act (ILSA). The law requires developers to provide specific pre-contractual and pre-closing disclosures to borrowers and to register development projects with the Consumer Financial Protection Bureau (CFPB). Although the law was not aimed at condominium developments, federal and state courts have ruled that a condominium unit represents a “lot” which is subject to the disclosure and registration rules. Many condominium buyers [Read More...]

APPRAISAL RULES. Federal regulators have issued new rules governing the state registration and supervision of appraisal management companies (AMCs), which serve as intermediaries between appraisers and lenders. Although states aren’t required to establish a regulatory structure for AMCs, federally-regulated financial institutions can obtain appraisal services only from those that are subject to state oversight. READY TO BOUNCE. Real estate brokers, emerging from a miserable winter, are expecting an exceptionally sunny spring. “Because we’ve had a [Read More...]

BLAME THE WEATHER.  Economists are blaming the unusually harsh winter for declines in home sales, manufacturing and consumer spending, among other key indicators. Some were beginning to worry that the weather might not be entirely responsible, but a stronger-than-expected February employment report appears to have eased those concerns, at least for now. ANOTHER INDEX. The unemployment rate and consumer confidence index are key gauges of economic health, but they aren’t the only ones. The “divorce [Read More...]

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 [Read More...]

DATA DISASTER. The fallout from the gargantuan data breeches at Target and other retailers continues to spread. Banks estimate that the massive data breach at Target alone has cost them $172 million – so far. The costs for consumers will be both direct and indirect. Ken Harney points out in a recent column that fraudulent use of stolen credit card information could saddle innocent owners with charges they didn’t incur and credit accounts they didn’t [Read More...]

BANNED IN BRITAIN. The Federal Drug Administration is still considering whether and how to control e-cigarettes, but Great Britain has made that decision. Regulators there have banned the sale of e-cigarettes to anyone under the age of 18, citing concerns about potential adverse health impacts and the need for more research on the product. FLOOD GATES. The Independent Insurance Agents and Brokers of America has joined a long list of real estate industry trade groups [Read More...]

HEALING PROCESS. A strong sales pace has reduced the inventory of unsold existing condominiums and co-ops to a 4.6 months’ supply. Average prices have increased by 17.7 percent over the past year, according to industry statistics. . CONSTRUCTION COSTS. The rising price of lumber – up 30 percent over the past year – is narrowing the construction cost gap between high-rise and garden-style apartments as wood frame becomes almost as expensive as steel. BOOMERANG BOOST. [Read More...]

GOING UP. This won’t come as a surprise to most condominium owners, but maintenance costs have been rising steadily. They increased 3 percent in 2012 compared with the previous year and are 25 percent higher than they were a decade ago. That’s according to data compiled by the Institute of Real Estate Management, which estimated the average cost of maintaining a single condominium unit at more than $2,400 per year. GOING DOWN. Foreclosure rates have [Read More...]

RECOVERY MODE. Home owners are recovering equity at the fastest pace on record, erasing the negative equity that has prevented many from selling their existing homes and purchasing another. But they are missing more payments on home equity lines of credit – a disturbing trend. COSTLY RULES. Standard & Poor’s is predicting: a)That the new mortgage rules set to take effect in January will increase mortgage origination costs for lenders; and b) that lenders will [Read More...]

NO WORRIES.  Painful resets of adjustable rate mortgages forced thousands of homeowners into default during the housing downturn. But Lender Processing Services sees no risk that scenario will be repeated in the current cycle. The company’s self-described “in depth analysis” found that 63 percent of hybrid ARMs have already reset and three-quarters of the remaining 37 percent were originated after the downturn, under tighter underwriting standards. Most borrowers with ARMs originated during the bubble years [Read More...]

NO FRACKING. Homeowners considering selling the mineral rights on their the damage caused by “fracking” (a technique for removing natural gas from underground rock) has led Fannie Mae and Freddie Mac to re-emphasize policies prohibiting mortgages on any property that contains hazardous materials – specifically including oil and gas. The GSEs also have the right to exercise the “due-on-sale” clause, requiring immediate payment of the outstanding mortgage balance, if they discover violations of this policy. [Read More...]

TAXING DISTINCTIONS. The IRS has adopted new regulations outlining the tax treatment of real estate improvements and “repairs” for business and rental properties. Although the regs answer many long-standing questions about the distinction between repairs and improvements, the answers may not be entirely welcome. The bottom line appears to be: More expenses will be classified as improvements, which must be depreciated, rather than as repairs, which can be deducted. IMAGE PROBLEM. Congress ranked below witches, [Read More...]

DOWNER. A prolonged Congressional stalemate that keeps government offices closed could stall home sales and derail the housing recovery, analysts have warned….Consumers weren’t exactly turning handsprings before the government shutdown, but the standoff in Washington has reduced their assessment of the economy to the lowest level in more than a year. ENERGY INCENTIVES. Commercial real estate trade groups are urging Congress to extend the Sec.179d tax incentive for energy-efficiency upgrades to commercial buildings. That incentive [Read More...]

LOOKING UP.  The condominium conversion market is beginning to show signs of life. Developers who completed apartment projects a year or two ago are positioned ideally to capitalize on the growing demand for condominium units, analysts say. EXTREMELY UNPREPARED.  Insurers are well-prepared to handle extreme weather events as they occur, but not nearly as well-positioned to cope with the ongoing “base-line” challenges created by climate change, a report by Ceres, a nonprofit advocate for environmental [Read More...]

EQUAL TREATMENT. Congress is considering and likely to pass legislation that would require FEMA to provide the same coverage for condominiums and co-operatives it offers to owners of single-family detached homes. Under current FEMA rules, condominiums and co-ops that suffer storm damage are eligible for loans, but not for grants, because they are defined as “business associations” and not as residences.   TAKE THAT! The Federal Housing Finance Association, which oversees Fannie Mae and Freddie [Read More...]

COVER UP. Fannie Mae and Freddie Mac are disguising billions of dollars in losses, delaying a day of financial reckoning that the Inspector General for the Federal Housing Finance Agency says they should confront now. NOT MAKING IT EASY. Speaking (more positively) of the GSEs, Fannie and Freddie both reported their seventh consecutive profitable quarters, posting second quarter gains of $10.1 billion and $5 billion, respectively. Fannie will pay another $10.2 billion in dividends to [Read More...]

SHAKING IT UP. President Obama is proposing the equivalent of a neutron bomb strategy for revamping the housing finance system ─ eliminate Fannie Mae and Freddie Mac but leave in place (with some federal support) the 30-year mortgage the quasi-governmental entities have made possible. RIGHTING A WRONG. Lawmakers from New York and New Jersey are sponsoring legislation that would alter a long-standing FEMA policy that denies flood insurance coverage to condominiums and cooperatives because they [Read More...]