All Posts Tagged With: "Mortgages"
Real estate news is one of the most popular subjects online, especially those stories and features which offer enduring interest to readers over time.
That seems like a simple formula but it’s amazing how much appears online which is neither reality-based nor especially logical. So, as a place to start in the quest for evergreen articles and blog items, we need information which is both factual and logical.
To validate material online we need to use links and references. This is now the accepted norm, while before we counted on print editors and fact checkers to assure that content was accurate and really worth our time. In effect, readers must also be editors, as has been pointed out by Ryan Holiday in Trust Me, I’m Lying.
Another way to validate material is to use a spellchecker. The question is not whether or not you have great spelling skills, but whether humans make mistakes and read past errors. They do, so use a spellchecker.
Next we need to write with spirit, animation, sparkle and fire. Nobody likes dull stuff, so our prose has to include adjectives, illustrations, examples and a currency to which people can relate.
Five Keys To Real Estate News
What catches people’s interest?
First, things which are usable, that answer a question right now.
Second, feature items which involve the first, the largest, the tallest, the oldest, etc.
Third, how-to pieces that help readers better understand how things work.
Fourth, there are certain topics which always interest readers: They include interest rates, VA financing, FHA mortgages, foreclosures, Fannie Mae, Freddie Mac, the Federal Reserve, buyers, sellers, trends, bargains, tips, tricks, money and wealth.
Fifth, celebrity counts. We want to know where Hollywood stars live and how much politicians paid for their houses.
Perhaps most importantly, one needs to write in plain language. A big vocabulary is great but try to translate information into words people can readily understand without a quick trip to the dictionary.
Here’s a short list of such OurBroker postings which readers seem to like.
Popular Real Estate News
Mortgages shouldn’t be a big worry, but for a lot of Americans that hasn’t been the case during the past few weeks. The national government closed its doors from September 30th through October 16th. More than 800,000 federal workers were not paid as a result — but many, many more outside the government lost hours, income and opportunity because of the national shutdown. Even national cemeteries and the Grand Canyon were closed.
Think of the government shutdown as a warning shot. If federal workers do not have assured paychecks then who does?
It’s nice that some mortgage lenders have instantly offered forbearance to workers directly and indirectly impacted by the shutdown, but that’s not universally the case. And, it’s good, I guess, that mortgage rates have fallen since the start of the government shut-down and the near default on the national deficit.
Mortgages & Paychecks
If you live paycheck to paycheck then in time you will lose, the only question is when. You’ve got to protect your interests so here are five basic steps to take:
First, bulk up savings. It’s usually said that you should have the equivalent of six mortgage payments on hand and in cash. You need this cash not only for financial emergencies but also because things can change — what if you lose a job?
Second, you need a budget. How much do you spend each month? Where can costs be cut?
Third, re-think big costs. Do you need a new car or just a really good used car? The difference can mean thousands of dollars in savings. Take a very careful look at how CarMax sells and finances used cars before looking elsewhere.
Fourth, look at refinancing. Mortgages are now less expensive then before the federal shut-down and deficit debacle. Speak with lenders for details.
Fifth, the economy is changing. What skills do you have going forward? We now live in a world with downsizing, offshoring, outsourcing, smartsizing, rightsizing and a hundred other cutesy terms that mean we are losing jobs and income inside our borders. In fact, household income today is less than it was in 1999! Protect yourself. Look into the fields that are expanding and areas that are necessary and local such as car repair, nursing and plumbing.
It used to be that one person with a high school education could support a family. Then it took two people. Then you needed a college education. Now two people with college educations may well delay marriage, starting a family or buying a home because the national economy is so fragile.
Don’t be a victim. Save and be prepared for the tough economic times which lie ahead.
The state of New York is cracking down on lenders who charge from two to ten times the going rate for “force-placed” homeowners insurance. Under new rules such alleged price gauging, kick-backs and “reverse competition” are out, at least in the Empire State.
But while New York moves ahead to end a legalized scam with mark-ups of as much as 1,000 percent, lawmakers in other states are doing nothing to curb homeowners insurance abuse. Also unprotected are taxpayers, meaning that if a property with a federally-insured loan is lost it is taxpayers who will foot the bill for any losses.
Force-Placed Homeowners Insurance
What is force-placed homeowners insurance and how does it work?
When you get a mortgage there is a requirement to pay property taxes and homeowners insurance. These requirements make perfect sense because if taxes are unpaid the property can be sold at public auction by the local government. As to homeowners insurance, that’s necessary because the property and it’s “improvements” — the house and any other structures on the property — are security for the loan. To assure that the value of the security is not lost to fire or other hazards lenders require that owners maintain adequate levels of homeowners insurance.
“Force-placed insurance,” says New York’s Department of Financial Services, “is insurance taken out by a bank, lender, or mortgage servicer when a borrower does not maintain the insurance required by the terms of the mortgage. This can occur if the homeowner allows their policy to lapse (often due to financial hardship), if the bank or mortgage servicer determines that the borrower does not have a sufficient amount of coverage, or if the homeowner is force-placed erroneously.”
Well, so what. If the homeowner does not carry insurance then surely the lender should be allowed to step-in and get the required insurance — with the bill going to the property owner.
That would be fine if lenders charged reasonable fees. However, according to New York, “the premiums charged to homeowners for force-placed insurance can be two to ten times higher than premiums for voluntary insurance — despite the fact that force-placed insurance provides far less protection for homeowners than voluntary insurance. Indeed, even though banks and servicers are the ones who choose which force-placed insurance policy to purchase, the high premiums are ultimately charged to homeowners, and, in the event of foreclosure, the costs are passed onto investors. And when the mortgage is owned or backed by a government-sponsored enterprise, such as Fannie Mae or Freddie Mac, those costs are ultimately borne by taxpayers.”
And it gets worse:
“Certain force-placed insurers competed for business from the banks and mortgage servicers through what is known as ‘reverse competition.’” That is, rather than competing by offering lower prices, the insurers competed by offering what is effectively a share in the profits. This profit sharing pushed up the price of force-placed insurance by creating incentives for banks and mortgage servicers to buy force-placed insurance with high premiums. That is because the higher the premiums, the more that the insurers paid to the banks. This troubling web of kick-backs and payoffs at certain force-placed insurers helped push premiums sky-high for many homeowners.”
Here’s what the New York rules will do when they become effective:
___ Force-placed insurers will not issue force-placed insurance on mortgaged property serviced by a bank or servicer affiliated with the insurers.
___ Force-placed insurers will not pay commissions to a bank or servicer or a person or entity affiliated with a bank or servicer on force-placed insurance policies obtained by the servicer.
___ Force-placed insurers will not reinsure force-placed insurance policies with a person or entity affiliated with the banks or servicer that obtained the policies.
___ Force-placed insurers will not pay contingent commissions based on underwriting profitability or loss ratios.
___ Force-placed insurers will not provide free or below-cost, outsourced services to banks, servicers or their affiliates.
___ Force-placed insurers will not make any payments, including but not limited to the payment of expenses, to servicers, lenders, or their affiliates in connection with securing business.
___ Force-placed insurers must provide adequate notification requirements to ensure homeowners understand their responsibility to maintain homeowners insurance, and that they may purchase voluntary homeowners insurance coverage at any time.
___ Force-placed insurers must not exceed the maximum amount of force-placed insurance coverage on New York properties.
___ Force-placed insurers or affiliates must refund all force-placed insurance premiums for any period when there is overlapping voluntary insurance coverage;
___ Force-placed insurers will be required to regularly inform the Department of loss ratios actually experienced and re-file rates when actual loss ratios are below 40 percent – helping make sure that premiums are not inflated.
With any luck — and despite cries of outrage and “over-regulation” — the New York decision will spread to other insurance regulators nationwide.
Lenders are getting hammered with claims that they refuse to make loans, thus artificially creating a “tight” mortgage market.
This is a great urban myth, somewhat like large alligators in the sewers of New York. But it doesn’t make sense and — oh yes — it plainly is not true.
Let’s start with logic. Why are lenders in business? To originate loans. How do they make profits? By making loans. What does a lender want to do with every borrower they encounter? Get them a loan. What happens to lenders who don’t make loans? They quickly make new job plans.
Or, let’s look at it this way. Imagine that Lender Smith has $100 million a vault and lends none of it. How much money does Smith make? That would be zero, nil, zip because money in a vault — while nice to look at — generates nothing. Taking the same money, stick it under a mattress, and you get the same result.
How much money is Smith losing? At first it might seem as though Smith has no loss because he stuck $100 million in a vault and still has $100 million in crisp cash. But in terms of buying power — the real measure of wealth — Smith is a loser. The reason is that inflation erodes the value of money and at this writing inflation is at 2 percent. The $100 million placed in a vault last year can now only purchase the equivalent of $98 million.
Because of inflation and the erosion of buying power Lender Smith is forced to make loans, invest elsewhere or see the value of his wealth reduced. Smith knows this — and now you too.
Now let’s move on to facts and reality.
The Mortgage Bankers Association said that in the first quarter originations for properties with one to four units amounted to $482 billion — up from $373 billion a year earlier. The MBA also said in July that it expects originations in the second half of the year to total $606 billion, up from the $527 billion it had forecast at the beginning of the year.
But wait, what about credit scores? Can you get a mortgage with a credit score below 720?
Sure. There is plenty of mortgage money out there for borrowers with imperfect credit. More than 40 percent of all FHA borrowers have credit scores between 620 and 680.
The next time someone tells you that the mortgage marketplace is tight or only those with perfect credit can get a loan, ask if news was delivered by an alligator, a large one from beneath Manhattan.
A new study by the National Association of Hispanic Real Estate Professionals (NAHREP) estimates that immigration reform would create three million new home sales, $500 billion in additional mortgage originations, and $28 billion in new real estate commissions within five years of passage.
These are huge numbers, enough to pressure real estate prices higher because of increased demand and to create millions of hours of new work plus a wide range of additional factory orders.
“If we can get past the anti-immigrant sentiment that has so strongly colored the national conversation around immigration reform, we will see just how much our U.S. economy has to gain by legitimizing these people,” said Juan Martinez, NAHREP president.
Martinez said “foreign-born householders have a high value and strong desire for homeownership. They have been here in our midst for years, working and participating in our economy. Legitimizing them through immigration reforms would finally give them the access and the confidence to buy homes.”
NAHREP says passage of new immigration rules would create solid economic benefits in the housing sector was well as throughout the economy.
- Assuming past purchase trends among foreign-born householders remain consistent, half or up to 3 million of the 6 million undocumented immigrants that are expected to pursue legalization, will also buy a home once they have legal status;
- Many of the undocumented foreign-born householders have age and income characteristics associated with potential homeownership with household incomes of about $40,000;
- Up to 3 million undocumented foreign-born householders could potentially afford a home worth $173,600, the national median sales price of a home. This would generate more than $500 billion in new mortgages, and about $25 billion in mortgage origination and refinance income;
- Assuming an average of 5.5 percent in sales commissions for these home sales, these purchases would create $28 billion in income within the real estate community;
- Home purchases by 3 million legitimized immigrants would create $180 billion in additional consumer spending within local communities based on the average $60,000 in associated purchases estimated by the National Association of Realtors in 2012.
- *These estimates are factored over a five-year period.
“Immigration reform would unleash pent-up demand for homeownership by millions of undocumented immigrants. It would help re-establish homeownership as a driving force in building wealth and accelerate the recovery of the nation’s economy,” said Alejandro Becerra, a former senior housing fellow, researcher, author and recipient of the 2011 HOPE Award.
Is it time to end the mortgage interest deduction? For the first time in years the question is a matter of serious debate in Washington.
Right now residential mortgage interest deduction (MID) is generally allowed on first- and second- home debt worth as much as $1 million plus an additional $100,000 for a home equity line of credit (HELOC) or a second loan in general.
For instance, if you have a 3.5 percent mortgage rate and $1 million in qualified borrowing you could reduce your taxable income by $35,000 ($1 million x 3.5 percent). If you’re in the 40 percent bracket for combined federal and state income taxes you would save $14,000.
One idea is to simply lower the allowable deduction. Two years ago the Simpson-Bowles report (a report from the bi-partisan National Commission on Fiscal Responsibility and Reform) suggested a $500,000 cap on qualifying residential debt with no write-offs for second homes or HELOCs.
And, indeed, allowing deductions on residential debt of as much as $500,000 would work for most borrowers if only because the typical home sells for $178,700 according to the National Association of Realtors.
At this point you will hear shouts of pain and outrage by those who believe the mortgage interest deduction is sacred, something left to us by Washington and Jefferson.
It wasn’t. We only started income taxes — and deductions — in 1913 with the passage of the 16th Amendment.
It is now possible to seriously talk about an MID reduction for two reasons. First, the government is starving for money — a condition which actually elates some voters and politicians who worry that government is “too” big. Second, with mortgage rates now at or near historic lows there is less to write off and thus less taxpayer pain if the deduction is reduced.
So, how might we revise the mortgage interest deduction?
We don’t want to make it too low — say zero or $100,000 — because too many homeowners would be impacted. That would be politically impossible.
But, we want to do “something” that will show public resolve — without destroying home values in high-cost metro areas and with them the rest of the economy.
What we need is some magical arrangement that allows a smaller write-off than today but a reduction which does not impact too many people. In the spirit of such a quest I would suggest a new MID that looks like this:
- Financing on first and second homes would be allowed (remember, if you get rid of the second home deduction you hurt many local economies along beaches and mountains as well as in resort areas).
- An interest deduction would be allowed on total financing worth as much as the FHA loan limit for a single-family home in most areas — that’s currently $417,000.
- Write-offs in the future would only be allowed for new FHA loans, VA mortgages, conventional loans and portfolio mortgages which were originated with a fully-documented loan application and where the cost of all points and fees is less than 3 percent of the mortgage amount. This would make toxic lending with no-doc loans virtually impossible.
- Also, we should allow a write-off for an additional $100,000 for HELOCs and second trusts — this is money often used to pay for tuition, home repairs and business start-ups — all things we want to encourage.
In considering this issue let’s not forget that the tax revenue raised by lowering the MID has consequences to the extent that buying, selling and home repair are impacted. This is especially true in high-cost areas. What we gain in new MID revenues we might lose in the form of less construction, fewer jobs, etc. It’s hard to know where the balance is, except to say that a $517,000 cap seems financially, politically and practically possible at this time.
America’s major banks now hold derivatives with a notational worth of $225 trillion – about a third of the world total. No kidding. Trillion.
And that’s up from a mere $120 trillion six years ago. Rather than being weened off derivatives, America’s big banks are more deeply entrenched then ever.
Hopefully Wall Street has it figured out just right and there won’t be any major losses, say a few billion here or there. After all, when has Wall Street ever been wrong about financial instruments?
“Derivatives are dangerous,” says Warren Buffett. “They have dramatically increased the leverage and risks in our financial system. They have made it almost impossible for investors to understand and analyze our largest commercial banks and investment banks.”
While many in Washington would like to limit derivatives trading, make such trades open to public scrutiny or both, Wall Street is vehemently against regulation.
In fact, there’s a simple way to resolve derivative worries. Allow unlimited derivatives trading — but only by individuals and partnerships willing to personally take the risk of profits and losses.
What’s A Derivative?
In basic terms a derivative is a bet tied to the movement of anything that can be valued. We could have a derivative bet which says the price of a mortgage-backed security (MBS), Hungarian currency or lemonade indexes will go up by a certain date. If the value rises then one party to the derivative will make money and the other will lose. And vice versa.
Notice, however, that derivatives are not like stocks or bonds — or mortgages or home loans.
First, unlike mortgages there’s no limit to the size of a derivative bet or the size of the derivative marketplace because none of the bettors actually are required to own the underlying asset. For instance you might bet that the price of oil will rise or fall without owning a single drop. The bet concerns the movement of value and not the ownership of the oil.
Second, there’s huge leverage because not much cash is needed to enter into a derivative agreement.
Third, if you bet on a derivative you typically make an off-setting bet to limit risk. Hopefully you do it right.
According to the Bank for International Settlements (BIS), the notational value of derivatives at the end of 2011 was $648 trillion.
The gross credit exposure from these securities was believed to be $3.912 trillion according to the BIS — that’s up from $3.5 trillion at the end of 2009.
But what if the estimates are wrong? For instance, let’s say losses are just one tenth of one percent bigger than expected. Not a big deal, except in the context of international derivative levels that’s more than $640 billion.
Do taxpayers have exposure? You bet. According to the FDIC, at the end of June 2012 all depository institutions held derivatives with a notational value of $224,998 trillion. However, such bets are not spread across the entire banking system. Banks with at least $10 billion in assets hold virtually all derivatives, securities with a notational value of $224.803 trillion. While the FDIC insures deposits in some 7,200 banks and savings associations, only 59 FDIC-insured institutions have deposits of more than $10 billion. Your little community bank, savings association or credit union likely has no derivatives department.
Derivatives are simply bets. They finance no factories, no research, no colleges, no homes and no cars. Any jobs they produce are incidental and inconsequential relative to the potential risk they represent, the risk that credit exposure has been incorrectly figured by hundreds of billions of dollars if not more. Since big banks hold virtually all derivatives, and since taxpayers can face massive costs if big banks fail, it follows that something should be done to limit taxpayer risk.
“In banking,” said Buffett in 2003, “the recognition of a ‘linkage’ problem was one of the reasons for the formation of the Federal Reserve System. Before the Fed was established, the failure of weak banks would sometimes put sudden and unanticipated liquidity demands on previously-strong banks, causing them to fail in turn. The Fed now insulates the strong from the troubles of the weak. But there is no central bank assigned to the job of preventing the dominoes toppling in insurance or derivatives. In these industries, firms that are fundamentally solid can become troubled simply because of the travails of other firms further down the chain. When a ‘chain reaction’ threat exists within an industry, it pays to minimize links of any kind.”
How can we control derivative worries? If they’re so necessary and safe, let bankers and traders take the risk. Personally.
This can be done with regulations which restrict the ownership of derivatives and derivative interests to individuals and partnerships. Federally-regulated banks, savings associations and credit unions would be prohibited from originating, buying, selling, brokering, owning, trading, holding or financing derivative interests, directly and indirectly, for themselves or for another party.
Such rules, of course, would apply to regulated financial institutions as well as their subsidiaries and partnerships, both in the US and abroad. And the regulations would also apply to financial products which fit within the definition of a derivative, even if called something else.
Under this system, derivative profits would be owned entirely by individuals and partnerships. And derivative losses? They too would be owned entirely by individuals and partnerships. No longer would taxpayers be forced to pick up the pieces if something goes wrong.
For those who believe in less government regulation here’s your chance….
This posting has been updated and expanded from material published originally by the author on the Huffington Post.
A new proposal floating around Washington could require lenders to make a no-point, no-fee loan option available to prospective borrowers. This so-called “zero-zero” plan would not be the only pricing lenders could offer, instead it would be one choice of many lenders could offer under a proposal from the Consumer Financial Protection Bureau.
The purpose of the zero-zero proposal is make loans easier to compare. For example, today you might see a loan at 3.5 percent and 1 point or 3.625 percent and no points. Which is the better loan?
A “point” is equal to one percent of the loan amount. If we have a $100,000 mortgage a point will cost a borrower $1,000 at closing. Since the lender is getting $1,000 up front and making a $100,000 loan, the effective interest rate in this example is 3.581 percent.
Why? With a $100,000 loan at 3.5 percent the monthly payment for principal and interest is $449.04 over 30 years. However, if $1,000 is paid up front then the initial debt is $100,000 but the amount advanced is really $99,000. If the monthly cost for a $99,000 loan is $449.04 then the interest rate is 3.581 percent over 30 years.
And the cost for a $100,000 mortgage at 3.625 percent over 30 years? That would be $456.05 for principal and interest.
In other words, paying points can make sense for some borrowers — those with cash who expect to be long-term property owners and will stick with a single loan. However, many borrowers will do better with a higher rate and no points regardless of whether they’re using FHA mortgages, VA loans or conventional mortgages.
Points & Taxes
To make the points issue a little more complex one has to consider taxes.
According to the IRS, points — also called loan origination fees, maximum loan charges, loan discount, or discount points — may be fully deductible in the year paid, may be deductible over a period of years with refinancing and in some cases with a home sale may actually be deductible by both the seller and the buyer. For details, speak with a tax professional — and bring aspirin.
True Rate Comparisons
If the CFPB proposal goes through lenders will have to offer a zero-zero alternative for most borrowers, meaning that the offered rate will have to reflect all points and loan fees. This rate might seem “higher” than today’s rates but actually the comparison is not apples-to-apples — the right comparison is a zero-zero interest level versus the rates you see today plus points and loan fees.
The argument is made that zero-zero loan rates will “force up” mortgage rates but nothing has changed about the loan except that pricing will be easier to see and understand. That would help some people avoid foreclosures and short sales and make the lending system less risky — things that should be encouraged.
Is mortgage redlining still plaguing communities of color?
A new report from seven housing and policy agencies suggests evidence of a two-tiered mortgage market in which borrowers and communities of color are increasingly cut off from prime conventional financing.
Origination data from seven cities in 2010 show that borrowers in diverse communities receive government-backed loans (FHA and VA) significantly more often than borrowers in predominantly white communities. Researchers analyzed Home Mortgage Disclosure Act (HMDA) data and compared lending statistics based on race, ethnicity and neighborhood composition.
Cities included in the study were Boston, Charlotte, Chicago, Cleveland, Los Angeles, New York City and Rochester, N.Y. The data is part of the sixth edition of the “Paying More for the American Dream” series produced by seven community housing agencies and advocacy groups spread across the country.
Organization leaders claim the disparities raise red flags regarding fair lending. Alternatively, the report also says that government loans are often the best option for prospective borrowers:
“As lenders continue to cut back on conventional lending in communities of color, government-backed loans, particularly FHA loans, have become the primary home-purchase mortgage product for many. FHA loans can offer certain advantages. Borrowers with lower credit scores, for example, can qualify for FHA loans, which also typically require smaller down payments than conventional loans. Indeed, government-backed loans may be the only viable loan option for many borrowers. FHA loans can also present drawbacks, however. They are typically more expensive, for example, and can take longer to be approved than conventional loans.”
Government Loans Becoming the Gateway
The new report — “Paying More for the American Dream VI: Racial Disparities in FHA/VA Lending” — details interesting data:
- Government-backed loans made up two-thirds of all purchase loans and nearly a third of all refinance loans in communities of color.
- Homebuyers in communities of color purchased with a government-backed loan twice as often as borrowers in predominantly white communities
- Homeowners in diverse communities utilized VA and FHA refinance loans three times as often as homeowners in more homogenous communities
- Black borrowers represented 3 of every 4 government-backed purchase loans, while 2 of every 3 purchase loans that went to Latino borrowers were either FHA or VA.
Policy Prescriptions and Enforcement
“These patterns are symptoms of a deeper problem: the lack of access to prime conventional loans by borrowers and neighborhoods of color – in other words, ongoing redlining,” said Spencer Cowan of the Woodstock Institute, a nonprofit research and policy organization and one of the report’s sponsors.
The report’s authors recommended a handful of economic, enforcement and policy changes, including an updated Community Reinvestment Act and requiring banks to adequately maintain REO properties.
This series examining racial and economic disparities in the mortgage market began in 2007. It’s a join project of the California Reinvestment Coalition, Empire Justice Center, Massachusetts Affordable Housing Alliance, Neighborhood Economic Development Advocacy Project, Ohio Fair Lending Coalition, Reinvestment Partners, and Woodstock Institute.
About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender. Follow him on Google+.
The Oakland branch of the Occupy movement has passed a resolution favoring the seizure of foreclosed and abondoned homes.
There are a lot of homes available for squatters in the state because of unpaid mortgages and loans. California has the nation’s second-highest foreclosure rate according to RealtyTrac. Nevada ranks #1.
While the Occupy movement started in New York with Occupy Wall Street, it has a large number of local groups. Because the groups are independent, the views of one local chapter may not represent the views of related organizations or groups with similar names.
In this case, a Twitter announcement mentions that the Oakland group’s general assembly passed a proposal to encourage squatters. Think of it as squatting and squat-ins.
A New Trend?
It’s likely that the Oakland idea will spread nationally for several reasons.
First, there are a lot of unoccupied homes.
Second, there are a lot of people who need housing, lack jobs and are seeing an end to unemployment benefits.
Third, evicting people is not a fun job — there are already a huge number of foreclosures to process and over-worked local sheriff offices might not get around to a given property for a long time, perhaps months or even years.
Fourth, squatting provides a direct and visible way to confront lenders. While few may understand the complex financial instruments or arcane bets made by Wall Street, foreclosures are easy-to-see and local. Squatting can be a form of civil disobedience which is non-violent and results in public sympathy.
Is there a defense by lenders to avoid TV crews and lots of local coverage? Look for more lenders to suddenly adopt rental programs for foreclosed properties. For instance, since 2009 Fannie Mae has had a Deed for Lease program. In essence the idea is to allow foreclosed families to rent back their property. This allows borrowers to remain in place while giving Fannie Mae monthly income and fewer maintenance and security headaches.
It’s actually possible — though highly unlikely — to gain title to property through squatting under a concept generally called adverse possession or — formally — an easement by prescription.
The rules for adverse possession vary by state but are typically similar to the standard used in Pennsylvania:
“Adverse possession is commonly known as squatters rights. It is a legal doctrine that allows a person to acquire ownership of the property of another. Adverse possession involves the taking away of property rights by operation of law. Thus, while not typically a local government matter, it is a significant issue of fundamental importance. Paramount among the elements required for adverse possession is proof of possession for 21 years.
“However, mere possession of the land by a claimant is not sufficient to confer title under this doctrine. The claimant also must establish by credible, clear, and definitive proof that all the other constituent elements of adverse possession exist. The possession must be actual, continuous, exclusive, visible, notorious, distinct, and hostile.”
Adverse possession can work in a number of situations — think of a fence built six inches over a property line. The fence stays in place for years and years, no one complains, and over time it redefines the property boundaries largely by the fact that it’s in place and accepted. The extra six inches of land was never sold off but title changes through the magic of adverse possession.