Walk Aways

Wachovia this AM – another lender talking about borrowers walking away from the mortgages, and acting surprised.

This is the housing industry’s fault.  We’ve told people that a house is more than a roof over your head, it’s an investment.  We loaned them money like it was a margin account – based on the asset value, not on ability to pay the loan.

Guess what – they are treating it just like an investment.  When you are underwater on an investment, you get out, take your lumps and move on.  We shouldn’t be surprised homeowners are doing the same.

First Appraisers, Next Title Agents?

Tanta, who writes for one of the best economic / mortgage lending web sites out there, Calculated Risk, has an excellent review of the proposed new Fannie rules for appraisals.   I think her analysis is spot on, and she goes one step further to point out another suspect relationship in the lending industry:

1. So much for “synergy.” I only hope that if this puts a stop to large lenders buying appraisal firms (and destroying appraiser independence), we can next move on to large lenders buying title companies (and destroying escrow officer independence).

Thanks Tanta!

Will Civil Suits Clean up Real Estate?

The participants and those who regulate them appear unwilling/unable to police the real estate industry.   As reformers begin to despair, hope for reform comes from an unexpected source: the multitude of civil cases, both large and small,  that in aggregate may motivate the leaders of the real estate industry to clean up their mess.

The Other Side of New Mexico Title Insurance

A number of title insurance and real estate bloggers had publicly fretted over the apparent disservice being done to the consumers of New Mexico when Title Insurance reform wasn’t placed on the legislative calendar.  I refrained from jumping in largely because I know little about the system of title insurance in NM, and couldn’t comment on the facts.  I was troubled that the reporting I had reviewed appeared to be one sided and very light on statistical evidence, but I didn’t have any evidence to refute it.  It appears the issue may not be so cut and dry as others would have you believe.

Now the other side of the story is being presented, though apparently not getting much media attention.  In a letter to the editor in Alamogordo Daily News, a Title Insurance Professional points out some of the popular facts appear to have been misrepresented:

From the Frying Pan to the Fire

A response to a recent post on Litton Loan Servicing for Carlyn caught my eye:

Now that my home is in foreclosure & I desparately tried to refinance Litton is sold.
They hurt so many people & now I have to sell my home & rent it in order to avoid a sheriffs sale.

My life is in such turmoil now. I am very happy this happened to Litton.

I hope to be homeowbner again soon I only wish I did not have to sell my home & pay rent to gain it back.

Litton you have made so many Americans lose the American Dream.

My heart went out to them – they are suffering the nightmare of foreclosure. Then I read the post again, specifically:

Title Agents – Why Good Funds are so Important

Make sure the money is in the bank, unless you want to become mortgage lender.  See this Q&A on Mortgage 101.com.  The question says it all:

Q: I recently purchased a house and a week after the closing I learned that the lender backed out of the deal. Now it appears that the title company had already paid off the seller and holds the deed to my house and is requesting monthly payments.

The response has more details. 

Fraud Drives Mortgage Meltdown (WSJ)

It didn’t take long for the industry as victims theme to emerge in the media.   Today’s Wall Street Journal’s “Fraud Seen as a Driver In Wave of Foreclosures” (paid) says it all.  The industry is quickly taking the position that their problems are mostly the result of fraud.  I fault the Journal for bending their lead to the industry message, but do give them credit for exposing the heart of the matter for those willing to read further into the article:

“Yet the system itself bears blame. The evolution of mortgages into a securities instrument turned loan origination into a competition. Caution gave way to a push for speed and volume. Embroiled in an all-out war for market share, issuers reduced barriers to credit, for example, by offering so-called “stated-income” loans, which require no proof of income. “

Expect similar reportage, with less focus on the systemic causes in other media outlets.  We might as well start calling the current unpleasantness the “Fraud Bubble.”

Professional Liability Carriers Taking a Stand

Independent contractors/Signing Agents are a tool typically used by out of state lenders and title insurance providers. It is my opinion that they are not the right tool for an insured transaction.

There is a limited market for the services of an independent contractor with extensive industry experience and their use should be limited to uninsured transactions. I do not question the time and effort expended by these contractors; however, the mere ability to complete a Notary Acknowledgment does not qualify someone to meet with the consumer.

And the E&O providers must have the same thought, after all, they are privy to the claims that you and I might otherwise never hear of. No longer interested in the risk, the E&O providers are raising the bar. We recently received our application for the renewal of our professional liability coverage (E & O), and we were offered the following options:

Damage Assessment

So the party’s over and it’s time to clean up. What’s the damage?

The land records –clearing title has become a nightmare. Almost every search comes back with an issue. Errors abound and more and more problems will surface. This will be a problem for years to come.

The abstractors – many of the good ones have been driven out of the business by price pressure, or by frustration over demands to cut corners. Years of experience thrown into the shredder. We will feel their loss every time someone has to train a wet behind the ears searcher that there’s more to a title search than printing out the face pages of documents. More frightening, do you know of anyone under the age of 25 who wants to grow up to be an abstractor?

Fast, Cheap or Right?

“You can have it fast, cheap or right – but you can only pick two”

It’s one of my favorite sayings from my years as a consultant.

It highlights the service industry tradeoff between speed, price and quality. We sometimes forget that we can’t have it all.

During the last several years the title industry has been focused on fast and cheap. You couldn’t avoid it. Press releases, marketing copy, ads in trade journals, all shouted: “two day turn around,” “instant commitments,” “lowest cost.”