In my first article in this mini-series I touched on Sen. Barack Obama’s STOP FRAUD Act. As it turns out he is not the only Democrat that is clueless on the economy and real estate.

There is pending legislation out there that could throw an already crippled real estate industry into cardiac arrest.

Clinton and Obama on the Campaign Trail

We see Hillary Clinton’s and Barack Obama’s smiling faces plastered all over the news while they campaign their hearts out to ensure they receive enough delegates to fight for the Presidency of the United States. However, Democrats need to pay attention to what is going on behind the scenes of these nominees. As Senators, they vote on various bills and even cosponsor bills that can and many times are enacted into the United States law books. Instead of watching these two candidates shaking hands, making promises, and talking about what they would do in order to save the US economy and keep America out of recession, you need to see what is going on behind this façade and learn about the bills they are endorsing or even co-sponsoring.

Clinton and Obama both are cosponsoring a bill that has been introduced that will do damage to the US economy, the real estate market, the housing industry, and future homeowners.

S.2136 The Helping Families Save Their Homes Act, which was introduced by Senator Dick Durbin and cosponsored by both Hillary Clinton and Barack Obama along with the S.2133 Home Owners’ Mortgage and Equity Savings Act introduced by Senator Arlen Specter, will do more damage than good if enacted.

S.2136 would do away with a stipulation in the bankruptcy code that forbids adjustment to the debtor’s primary residence mortgage during Chapter 13 proceedings. Under this bill, Bankruptcy Judges would have the right to change the principal, interest rate, and terms of mortgages. Along with handing these abilities over to Bankruptcy Judges they would also have the power to extend the length of the loan, waive the counseling requirement for those whose homes are already in the foreclosure process, fight the excessive fees, preserve legal claims against greedy lending companies while debtors are in bankruptcy.

S.2133 is almost the same; it would give power to Bankruptcy Judges to amend mortgage loans on a debtor’s primary residence during Chapter 13 proceedings. However, under this bill bankruptcy judges are only permitted to decrease the principal of the mortgage when both the lender and the homeowner agree to the amount. The bill also allows bankruptcy judges to delay, stop, or roll back increases in mortgage interest rates, to relinquish prepayment penalties and to recover interest, fees, and fines when the creditor committed fraud or did not disclose the loan limits. Credit counseling would be postponed until after bankruptcy filing when foreclosure is forthcoming.

With these types of laws on the books, Americans will have a much harder time qualifying for home loans, as lenders will tighten their lending. Qualifying will become a nightmare for middle income Americans as larger down payments and higher FICA scores will be needed. Lending companies are not going to be left holding the bag when individuals end up in bankruptcy court.

This means, the fewer loans will be given due to lending companies being overly cautious which means less home sales, thus interest rates will rise. The higher priced homes will sit longer due to an increase in interest rates, as Americans will not be able to afford their mortgage payments on higher priced homes. The longer these homes are on the market, the lower the price of the home will go. When the housing industry is hurting so does our economy.

Instead of choosing a candidate for the Democratic candidate for Presidency based on what you hear and see on the campaign trail, vote by what the candidates are really doing to aid in helping Americans behind the scene.

Do your due diligence and investigate what types of legislation the candidates have either introduced or cosponsored. It will speak volumes about his/her common sense and appropriate responses to common issues.

~Rhonda McMillan
Broker

I was in total shock when I stumbled on Sen. Barack Obama’s proposed legislation STOP FRAUD Act S. 1222.

The implications for the real estate industry are terrifying. It would have been more appropriately named “Stop Real Estate Sales Act” because that is exactly what it will do.

It lumps real estate and mortgage professionals in a vague all inclusive manner to expose them to civil and criminal litigation for fraud on any transactions that utilized sub-prime loans. Penalties can be as high as $5,000,000 and up to 35 years imprison or both.

(1) CRIMINAL PENALTIES- Any mortgage professional who violates subsection (a) shall be fined not more than $5,000,000, or imprisoned not more than 35 years, or both.
(2) CIVIL PENALTIES- Any mortgage professional who violates subsection (a) shall be liable for an amount equal to the sum of all finance charges and fees paid or payable by the natural person, financial institution, or purchaser who was defrauded unless the mortgage professional demonstrates that such violation is not material.

The Stop Fraud Act defines a “mortgage professional” as;

(e) Definition- As used in this section, the term `mortgage professional’ includes real estate appraisers, real estate accountants, real estate attorneys, real estate brokers, mortgage brokers, mortgage underwriters, mortgage processors, mortgage settlement companies, mortgage title companies, mortgage loan originators, and any other provider of professional services engaged in the mortgage process.

This Will Open the Flood Gates On Litigation Against REALTORS®

Any one that has been foreclosed on would be able to sue their real estate agent and/or real estate broker for fraud in addition to asking criminal charges are brought forward.

This Bill also contains mandatory reporting for “any suspicious activity by an individual or entity”. Now we really go down a slippery slope here. I have been involved in real estate litigation before. The case of “if I did not know I should have known” was brought forward by the plaintiff’s attorney. Now while I did prevail, I would be at risk any time I walked into a court room.

By rising the bar on possible offenses to the level of fraud it would considerable lengthens the timeline on statutes of limitations. In the state of Missouri the statute of limitations on fraud is 10 years. In some instances in can be expanded to 15 years. The State only requires that I keep records for 5 years and the IRS only requires 3 years so how am I to defend litigation on a 10 year old transaction?

If Sen. Barack Obama’s Stop Fraud Act is passed it will also raise interest rates and make home loans extremely difficult to obtain. Mortgage companies and banks will scrutinize borrowers like NEVER before.

The main stream media has really dropped the ball on this story. Sen. Barack Obama introduced this Bill back in April of 2007. This is actually Sen. Barack Obama’s second attempt to pass such a bill. His first attempt was Bill S. 2280 [109th]: STOP FRAUD Act introduced Feb. 14, 2006. So if you know anyone involved in the real estate or mortgage industry, PLEASE sent them a link to this blog and make them aware of the professional danger they may be exposed to.

To read the Bill in it’s entirety you can do so at the PREN Real Estate Forums.

~Rhonda McMillan
Broker

Project Lifeline was yet another disappointing program that was launched this week with the pretense of a temporary solution to the ever growing foreclosure crisis faced by the housing industry.

Project Lifeline consist of six of the ten major mortgage companies giving a 30 day reprieve on foreclosures to homeowners that are 90 days or more delinquent on their home payments. This 30 day grace period is intended to allow homeowners that are in default to secure refinancing. Obviously the planners of this new program have not attempted to seek financing in today’s market let alone try to shop a bad credit loan in 30 days or less. (more…)

Since my last post “Lending Crisis May Soon Be Over” I have been inundated with phone calls and emails for an explanation of why I feel that the worst may be behind us in this recent housing market crisis.

We will undoubtedly feel the affect of the sub-prime fiasco through 2008. However, the figures of mortgages in default are minute when you look at the number of sub-prime loans and even smaller when you look at the total housing market. The figures simply do NOT justify the “Chicken Little” “the sky is falling” mentality of the liberal press.

The larger problem is the lack of confidence by consumers all of this negative press has brought about. Perception is the key and the perception of the crisis is far worse than the crisis itself.

Even for home owners that find themselves owing more on their home than it is worth can simply sit it out and wait for the market to rebound. And unlike finding yourself with stocks that have been devaluated your home is a usable and necessary asset that provides utility while you await a market correction.

In addition to pending legislation to assist distressed homeowners the suggestion by the Bush Administration that lenders work with troubled borrowers appears to have resonated. If you are in a situation where your ARM (Adjustable Rate Mortgage) has raised to a level that is no longer sustainable simply contact your lender. You will in all likelihood discover they will work with you. This will enable you to keep your home and credit rating which is far more desirable than the alternative.

Just remember that history teaches us that the real estate market will rebound. It always has. And you will once again find yourself with equity in your home. Stop listening to the doomsayers and research the REAL figures for yourself.

While I follow real estate markets nationwide I of course pay special attention to Columbia real estate trends. Just like the rest of the nation, new home starts in Columbia MO are down. This will reduce inventory and cause housing prices to stabilize. Sales of existing and new homes are down slightly but by no means dead. The only viable explanation for the recent downward trend in home sales is the negative press the housing industry is receiving nationally. Once excess inventory is absorbed the local market will get back on track.

With fewer housing starts in recent months in combination with stronger consumer confidence the panic selling should subside and the market stabilize.

But the worst is only over if we ignore an extremely biased main stream media and research the facts for ourselves.

~Rhonda McMillan
Broker