Jeremy Cohen - Infinite Title

It's no secret that the GSEs have been demanding billions of dollars in loan buybacks over the past year, but now Freddie Mac is warning that some of its seller/servicers may not meet their repurchase obligations.

"Some of our seller/servicers failed to perform their repurchase obligations due to lack of financial capacity, while many of our larger seller/servicers have not fully performed their repurchase obligations," the GSE says in a public filing. As of March 31, Freddie had $4.8 billion in outstanding buyback requests pending. Roughly 34% of those requests were outstanding more than 90 days.

The secondary market agency warned that its credit losses may increase if customers do not fulfill their buyback obligations. Freddie executives also are concerned that collection efforts could "negatively impact" their relationships with seller/servicers who have the financial capacity to perform buybacks but chafe at such requests for one reason or another.

In the first quarter, seller/servicers reimbursed Freddie $1.3 billion for breaches of representations and warranties, compared to $789 million in the same period in 2009. Fannie Mae reported $1.8 billion of buybacks in the first quarter, compared to $1.1 billion a year ago. Fannie expects its buyback requests will remain high for the rest of this year.

Collection efforts could "negatively impact" their relationshisps with seller/servicers who have the financial capacity to perform buybacks but chafe at such requests for on reason or another? Not one reason or another, just ONE REASON. They don't want to service these loans, they want to make new ones. Better, new ones. That's the only way out of this alive for them, it's Economics 101.

They chafe?? It's because they're getting screwed! Freddie's LP says "Green Light, Full Speed Ahead" and then the lender is forced to service a deal they probably didn't want to make in the first place?

Not good.

Listen I understand that my opinion is both worthless and probably dead wrong. Either way, this caught my eye.

OK. Let me preface this buy saying that not too long ago, I was caught in the miserable predicament of a 'bidding war' over a home that I had absolutely fallen in love with.

This was up in Boston, not down here in Florida. Houses up there have so much character and charisma and history built into them that sometimes, the thought of losing it over a few thousand dollars that, after amortization, doesn't affect your monthly nut THAT significantly.

Long story short there, a gentleman had just sold a very popular restaurant in the North End, right off of Hanover Street, and he was up against a ticking 1031-Exchange clock.

Sure enough, after selling an iconic Bostonian eatery, he had more cash on hand than I did and made an offer the seller couldn't refuse (while accompanied by Luca Brazi).

Just kidding about the Luca part, but even in 2005 when anyone could raise a loan amount by a hundred thousand dollars and feel confident the deal would go, it wasn't something I was going to do. The two fireplaces, fenced in yard, location location location and overall coolness of the house almost got me to bite, but cooler heads (Thanks, Sis) prevailed.

At the time, that was going to have been my first home purchase. I remember the adrenaline rush supercharging through my body after I had seen the inside for the first time, the initial phone call I made to my beloved father where I screamed 'I LOVE IT!!!', and I remember practicing how I would tell the ladies out and about in the city that I had just purchased a new home in Boston Proper.

Alas, it was not meant to be. I went back to my apartment and laid in candle lit darkness for about 48 hours before my best friend James had a 'Wedding Crashers' style intervention and remind me, aloofly, "it's just a house J".

But it wasn't. It's the equivalent, to this day, of the 'one who got away'.

Six weeks later I was outbid on a second home I had a love affair with, and began to think I'd never buy a home unless it was something absolutely nobody else wanted.

So what was the purpose of those boring few hundred words above? So I can segue into the fascinating article I read earlier tonight and referenced in the title of this entry.

"How to Best the Other Home Buyers" http://www.smartmoney.com/personal-finance/real-estate/how-to-best-the-other-home-buyers/?cid=sm_pfspend_rss&mod=smartmoney

And let me preface my actual point by saying I think my agent, who was a referral from a friend, was in cahoots with the listing agent on the first home. I won't defame him in a public forum, but he made zero attempt to get the price reduced, even in the face of some egregious lack of maintenance to crucial parts of the home. Suffice to say, I "fired him" and hired a nice little Jewish lady named Marcia Silverstein who, when it came to talking turkey, wasn't too nice. As a member of the tribe however, I loved having her on my side.

Anyway, the article linked above touches on some excellent methods regarding how a buyer can separate themselves from their competition (other buyers).

I'm only going to address two of them - the two I know work the best. Unfortunately for me, I don't know they work the best from personal experience, only professional experience.

Arrange a Phone Call From the Lender to the Listing Agent and/or the Owner

Nothing is more soothing to a jittery seller who may or may not being moving out the same day they sign than confirmation from the highest authority involved in the transaction, the head underwriter of the buyer's application. A simple 'Yes Mrs. Jones, Mr. Smith and his wife are approved and in my opinion, they will be able to sign and take title several days before your deadline' will make everyone involved feel great. The seller - barring a short sale - is seeing dollar signs and believe me, so is the listing agent!

Almost every single morsel of stress, skepticism, pessimism and fear will all but evaporate. I spent seven years as a wholesale broker and all of you would agree, that phone call from the head UW will put the listing agent, generally the most hysterical party involved, at ease. Well.........at as much ease as a listing agent can find themselves.

Set a Limit

I chose these two because they go hand in hand with one another. If you're the seller of a home, particularly a home with equity and a mortgage with a low balance or no mortgage at all, you're probably not going to try to squeeze another $6,500 out of the transaction.*

Sure some people do, but I'm enjoying writing this so I don't want to even think about them right now.

A motivated seller wants to field an offer from the most qualified borrower out there. That, my friends, is called leverage. If you're income and reserves are substantial enough - you may very well be approached with a P&S the same day you express interest.

It happened to me TWICE. I had superior credit, a 401K worth about a year of PITI, and a fantastic salaried job with, how did we say it, 'an excellent prospect of continued employment'. Both sellers jumped at the chance to sell me their beloved homes, but both times I ran into an actual cash buyer with 100K, cash on hand. Even with an approve/eligible and a full mortgage commitment, it's tough for any seller to turn that down. I don't blame them.

However, don't ever find yourself in the middle of a bidding-war crossfire. As the article by SmartMoney points out, you never know who's bidding what, and that is where the Realtors make their money. A $225K offer can become a $250K offer which can become a $275K offer all because of the mystery cash buyer ready to snap up your home the second you ask to sleep on it.

Meanwhile, the agents split five thousand dollars you didn't have to pony up in the first place. Call their bluff and dare them to act!

Mortgage applications are up this quarter, rates are down. That means one thing and one thing only: BUYER'S MARKET. In 2010 the buyer is King. Act accordingly.

What is meant by "Title?"
"Title" is the foundation of ownership property. It means that you have a legal right to possess that property and to use it within the restrictions imposed by authorities or limitations on its use-superimposed on the basic right to possession by previous owners.

What is Title Insurance?
The legal answer is "the application of insurance principles to hazards inherent in real estate titles."

Do I need Title Insurance?
Most definitely! Title insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.

Why does buying a home differ from all other purchases?
No other property has a useful life that compares with that of land. Owners die, new ones succeed, but land goes on forever. Owners of goods may change their locations at will, but land is immovable, it lends itself to the absorption of innumerable rights. Over the ages, this so impressed lawyers and jurists that they formed a separate body of laws for land. These laws, creating many types of rights in land, are so numerous and so complex it is impossible for there to be a mathematical certainty of ownership.

But the lender already requires Title Insurance, won't that protect me?
Not necessarily. There are two types of Title Insurance. Your lender likely will require that you purchase a Lender's Policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it.
An Owner's Policy on the other hand is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner's title policy covers the full cost of any legal defense of your title.

What is meant by a title defect?
Anything in the entire ownership of a piece of real estate which may encumber the owner's right to the "peaceful enjoyment" of the property or which may cause the owner to lose any portion of the property.

The contract I signed makes the sale subject to title to the property's being good. Doesn't that protect me?
If anything should happen to defeat the title, your cause of action would be against the seller, and his ability to pay. Attorney's fees and expenses would not be covered.

The real estate broker said the title is good. Isn't that good enough?
No one can be sure the title is clean.

What happens if my home is protected by title insurance and it's challenged?
You notify the title insurance company and they defend the title, even if it goes to court. The title company bears all expenses.

How much does Title Insurance cost?
The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you purchase your home. Yet it continues to provide complete coverage for as long as you, or your heirs, own the property.

Should I shop around for the best Title Insurance deal?
Florida regulates the rates on the premiums for title insurance. The only costs that may differ would be the actual fees, such as search and examination, closing, and miscellaneous fees such as wire transfers, FedEx or courier fee and endorsements.

Can Infinite Title handle the closing?
Yes. We act as a central clearinghouse for the parties involved-collecting necessary documents, insuring adherence to the lender's title instructions, making arrangements for proper payment and distribution of funds. We are fully prepared to work with you from the beginning of your transaction all the way through to conclusion.

What items are needed at closing?
You will want to have these items complete or in hand when you come to the closing (please confirm with your escrow officer prior to closing):

Buyer
Buyer's copy of purchase agreement
Cashier's check for amount needed to close
Proof of purchase of insurance for fire, casualty, etc.
Photo identification (passport, driver's license, or state-issued identification card)

Seller
Seller's copy of purchase agreement
Any unrecorded instruments that affect the title
Proof of satisfaction of any mechanics' liens, chattel mortgages, judgments, or mortgages that were paid prior to the closing
Photo identification (passport, driver's license, or state-issued identification card)

Eventually, the excessively high loan limits that FHA permits in high cost areas will subside, slowly but surely, which will incourage more privatized residential financing. With that comes less compliance/documentation/paperwork.

Clearly, a lot of those things are necessary to prevent a totally toxic portfolio, but the private sector is a little less militant when it comes to crossed T's and dotted I's. Anyone in the business now knows that some of the most minute issues can hold a loan up for weeks.

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FHA Home-Financing Volume Sign of ‘Very Sick System' (Update2)

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By Jody Shenn and John Gittelsohn

May 24 (Bloomberg) -- Loans guaranteed by the Federal Housing Administration, the U.S.-owned mortgage insurer, may be involved in more home-purchase transactions than borrowing financed by Fannie Mae and Freddie Mac.

FHA lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that's still a "government-financed market," David Stevens, the agency's head, said today at a conference in New York, citing research by consultant Potomac Partners.

"This is a market purely on life support, sustained by the federal government," he said at the Mortgage Bankers Association conference. "Having FHA do this much volume is a sign of a very sick system."

The FHA, which backs loans with down payments as low as 3.5 percent, insured $52.5 billion of home-purchase mortgages in the first quarter, compared with $46 billion of purchases of the debt by Fannie Mae and Freddie Mac, according to data compiled by Washington-based Potomac Partners.

The FHA and Fannie Mae and Freddie Mac, which regulators seized in 2008, have been financing more than 90 percent of U.S. home lending after a retreat by banks and the collapse of the market for mortgage bonds without government-backed guarantees

FULL ARTICLE HERE - http://www.bloomberg.com/apps/news?pid=20601206&sid=amJbN2aGCF84