01.30.08
Posted in Education at 3:38 pm by Jeanne
Newark, N.J. A 35-count indictment charging 13 individuals in a scheme to fraudulently obtain more than $20 million in home equity and business lines of credit has been issued. Seven more people pleaded guilty in the scheme, whose victims include at least 16 different lenders. The indictment alleges that four of the defendants were loan brokers with American Macro Growth (AMG) in Palisades Park.
AMG allegedly helped its clients use the same properties as collateral for multiple home equity lines of credit even though the loan amounts far exceeded the value of the properties that were to serve as security. In one instance, an AMG client allegedly used less than $300,000 of equity in a Palisades Park property to obtain approximately $2.14 million in credit from nine different banks, effectively stripping the banks of security for the loans.
The indictment alleges that AMG and its clients executed the scheme by closing on multiple HELOCs in such a short period of time that the earlier lenders’ security interests would not be publicly recorded at the time that later lenders closed on subsequent loans. It also alleges that AMG misrepresented clients’ income and other important information in order to increase the amounts that clients would be eligible to borrow.
AMG’s clients allegedly paid large commissions to AMG for assistance. One client allegedly paid defendant $122,529 in commissions for his help in obtaining $1.72 million in lines of credit from at least seven different banks. The victims of the scheme include Banco Popular, Bank of America, Bank of New York, Citibank, Commerce Bank, Fleet Bank, JPMorgan Chase Bank, HSBC Bank, Hudson United Bank, North Fork Bank, PNC Bank, Sovereign Bank, Wachovia Bank, Washington Mutual Bank, Wells Fargo Bank and Countrywide Home Loans.
The FBI and Federal Deposit Insurance Corp. is investigating this case. Assistant U.S. Attorney Bradley A. Harsch is prosecuting.
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01.28.08
Posted in Education at 5:08 pm by Jeanne
The New York Times reported on January 22, 2008 that a buyer was suing her buyer agent because she believes that she paid too much for her house. She blames the agent for not disclosing information about similar homes in the neighborhood selling for less. Well, I think MOST people who bought last year feel that way.
Court question is, did the Agent violate the duty of loyalty by putting his own interests (i.e. commission) first? Okay - lets expand that concept to other real estate professionals in similar scenarios -
• What are the obligations of Agents/ Appraisers/ Loan companies and other real estate professionals when buyers are buying in a volatile market where home prices are dropping and the Buyer says we helped him pay too much?
• On the other hand, what are the obligations of Agents/ Appraisers/ Loan companies, etc. when Sellers are selling in a market where home prices are increasing and the Seller thinks they didn’t get paid enough?
• Is “reasonable value” a fact? After all, what is fact when it comes to price negotiation in progress for reasonable value, aka fair market value when we have been taught that fmv is the price determined between a willing buyer and a willing seller?
• How much information in terms of comparables and appraisal is enough for buyers to make intelligent choices? How much research should a buyer do on his or her own? Does that research amount and quality differ for sophisticated vs. non-sophisticated buyers? Are real estate professionals supposed to assume the role of appraisers? Then again, is value strictly sale price, or does it have to do with a buyers lifestyle and choices of neighborhood, etc? Being near a lake, a golf course, a particular school, on a cul de sac…
So, when someone says they paid “too much” for a property and complains later on, is that really the Professional’s fault? If so, it would appear there is new liability for a real estate professional. If the courts feel the professional did not fulfill his fiduciary duties of loyalty, disclosure and reasonable care and diligence, just how much liability does the professional (and the company he/she works for) have? And, once again, do we as professionals have enough errors and omission insurance to pay for these supposed errors?
I believe most of us believe the decision to buy was made by the buyers themselves, who voluntarily executed the Purchase Agreement. Buyers are certainly aware of the market conditions at the time of buying a new home, aren’t they? However, in light of this case, what could a careful real estate professional do to protect himself? Certainly disclose anything and everythin that may impact the offer price (Comparables sales). But, is that enough? The good old USA is a litigious society, and perhaps it is NOT redundant to have yet another disclaimer reiterating that “fair market value is the sale price between a willing buyer and a willing seller, and that that the Agent/ Appraiser,… etc. has no control and takes no responsibility for future values.”
The industry will be watching this case carefully because there are plenty of disgruntled homeowners out there who feel that they never would have bought the property if they had “good professional representation.”
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01.25.08
Posted in Education at 12:11 pm by Jeanne
Its a sign of the times, stock prices reflecting the woes of the industry. Fitch Ratings placed The First American Corp. on negative ratings watch Friday after seeing the company’s pre-announced fourth-quarter earnings. Fitch said the company’s title insurance segment would be negatively impacted by the mortgage industry’s ongoing woes.
Fitch put First American’s ratings on a “rating watch negative,” saying that it anticipates perhaps lowering credit ratings a full notch on seeing year-end results. A downgrade on First American’s debt ratings would leave them high enough to be considered investment-grade designations. First American, Fitch is anticipating a loss for the fourth quarter that will not exceed $50 million.
Tuesday of last week, First American said it would spin off its title company into a separate company from its title related businesses.
Meanwhile, Mortgage insurer Old Republic International Corp. on Thursday said its fourth-quarter earnings fell nearly 81 percent on losses in both its mortgage guaranty and title insurance businesses, but the results met Wall Street expectations.
The company reported net income of $20.2 million, compared with $104.6 million, during the same quarter a year ago. Old Republic reported a $112.6 million quarterly pretax loss in its mortgage guaranty business, compared with earnings of $46.4 million in the year-ago period. The composite ratio, which measures the amount of expenses and claims an insurer pays out compared to underwriting premiums, rose to 194.6 from 76 in the year-ago period. A ratio above 100 means the insurer paid out more in claims and expenses than it generated underwriting insurance. The company also reported a $15.7 million quarterly pretax loss in its title insurance business, compared with earnings of $300,000 in the year-ago period.
For 2007, Old Republic reported net income of $272.4 million, or $1.17 per share, compared with $464.8 million, or $1.99 per share, in 2006.
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Posted in Education at 12:03 pm by Jeanne
A group of about 40 interested abstract and title professionals from at least 18 states gathered in New Orleans for the 5th annual NALTEA conference January 18-20. The group discussed serious concerns about privacy issues relating to land records, and the outlook for the smaller title players the future.
Two particularly interesting speakers went through Louisiana history and land records. Debbie and Chuck Thibodeaux, of TENSTAR Corporation shared many interesting facts about Louisiana and the influences exerted upon the state’s people due to the various cultures that called this area home over the years.
LA was primarily settled by black slaves and by French prisoners, who were evicted from France and sent to Louisiana to settle New Orleans when the King was unable to get people to move to the “new world.” Debbie told me she was born and raised in Martinsville, LA an hour or so away from New Orleans in an area refered to as Le Petit Paris, where everyone spoke French on a day to day basis. She said that in the 1970’s, when she was in public school, all her textbooks, newspapers and other reading materials were in French. One day they were told that some new teachers were being brought in to teach them English. They called the teachers Mlles. Americaines. I had no idea that there were parts of the country so different in the 1970’s. But then again, we still had segregation in the 1960’s.
While Louisiana is different from the other 49 states, because its law is based on French Napoleonic Code, and its rules and regulations remain different from those maintained and followed in other states, as Debbie and Chuck also went through a number of documents used in LA, that were not familiar in name, they were variations of a theme for documents familiar to us all, with Parishes in place of counties, etc.
Another outstanding speaker was Matthew Monson, an attorney who defended an abstractor, who according to custom left off a couple of parcels from a search that were clearly not intended to be searched, but which lead to a law suit against him. The case was fascinating, and reminded us all to be sure to review our professional liability insurance!
Blaine Ardoin from the LA Land Title Association said that he felt the conference was very good, and especially enjoyed the education, saying how hard it is to get excellent speakers for title abstractors and examiners. Many of the persons who took the prep session for the NALTEA Certified Examiner Designation said they were pleased with the review. The test itself was deemed difficult, but fair.
In addition to working sessions, there was an amazing Ghost Tour of New Orleans, led by an author of paranormal activities who has been seen on BBC, PBS, and many other TV programs. She did an excellent and scary job of leading us through the haunts of the city. Along with Bourban Street Jazz, outstanding Cajun restaurants, and a preliminary mardi gras parade, it was an event to be remembered.
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01.11.08
Posted in Education at 12:20 pm by Jeanne
I received an email newsletter from an attorney colleague of mine, Darity Wesley, who owns a company called Privacy Solutions Because of her expertise in all the new Privacy Laws, (Gramm, Leach, Bliley, etc.) and the fact that she is an amazingly fun person, I pay attention to her emails. Her last one was most appropriate, because I am once again considering that horrible topic of My Last Will.
Her email said “By now most everyone knows, or should know, that sending an email is about as public a statement as you can make. That email can be forwarded around the world several times over within hours. This is particularly important to remember in a business context. Yes, while email is great for documenting facts, figures and tasks, it is not so good for recording personal subjective topics or things that should remain private. Rule of thumb - write any email as though anyone might read it.
But, here’s something that not many people are aware of: Who owns the email you send? Answer: The Internet service provider!”
What does this mean to us? I don’t know about you, but I keep emails for years. Interesting links, photos, communications with clients, tax records, all stay in folders so I can refer to them as needed. When I move on (to a hopefully better place) I want my family to have access to it all. But, because of the first-rate privacy policies of AOL, EBay, G-Mail, Yahoo, etc., my heirs would have to fight for access to needed information.
Darity suggests, that we make sure we have a known place where passwords are kept, possibly along with other estate information, and we should clearly state how to handle emails and computer information in our will. Whether or not you want email info available to others upon death, specify that in your will. What does your Last Will and Testament say about email? I know I am going to add passwords and rights to email in mine. Thanks, Darity, it never would have occurred to me.
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01.09.08
Posted in Education at 12:47 pm by Jeanne
It is a sign of the times. As are going all Real Estate related stocks, it appears Investors are dumping Old Republic International Stock. In my opinion, it is likely with two significant concerns.
First, the mortgage market is nil, nada, zilch, meaning the expensive cost of all those bricks and mortar offices with heavy staffing costs makes Old Republic National Title losses obvious problems in the near to not-so-near future. You just can’t dump expenses fast enough in a market like this.
And, second, ORI recently bought significant stakes in private mortgage insurer stocks MGIC and the PMI Group, Inc. to complement its own PMI subsidiary, Republic Mortgage Insurance Company. MGIC and PMI being two of RMIC’s principle competitors. But, the record numbers of sub-prime mortgage foreclosures are expected to wipe out any profit in the near future for its recently acquired PMI Companies.
At the time it seemed a good buy for ORI, due to the significant drop in stock price of the two PMI Cos., but now, with heavily hit losses and a bleak future for MGIC and PMI, Old Republic International Stock has dropped from a 52 week high of $23.28 down to $13.96 as of this writing. Will the stock value come back, yes, the magic question is when.
For more detailed info, see Bloomberg at http://www.bloomberg.com/apps/news?pid=20601213&sid=a6XpBWWdHTfU&refer=home
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