April 3, 2014
Reiss on Paying off Underwater Mortgages
MainStreet.com quoted me in What Bills Should You Pay First? It reads in part,
Consumers started prioritizing their mortgage payments ahead of their credit card payments as of September 2013, according to a new TransUnion study.
This reverses a trend that began in September 2008 when the mortgage crisis drove consumers to pay their credit cards bills ahead of mortgages. Consumers have placed an emphasis on paying their auto loans before their mortgages and credit card payments by a wide margin – since at least 2003, TransUnion said. The study obtained anonymous consumer information from December 2002 through December 2012, and each monthly sample included about 2.5 million consumers.
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Many consumers were faced with devaluing home prices and chose to preserve their credit line, said David Reiss, professor of law at Brooklyn Law School in New York.
“The underwater mortgage may have seemed like a sinkhole when prices were dropping and putting limited funds into it might have seemed like throwing good money after bad,” he said. “When a household’s income can’t cover all of its expenses, it has to prioritize its payments. If the mortgage is underwater, it may make sense to use those limited funds to protect assets that are integral to daily living and wage earning like an auto or to focus on tools like credit cards that may have some use going forward, if there is still any available credit left.”
Homeowners have reversed that logic with the rebound of housing prices, Reiss said.”If homeowners have equity in their home from those rising prices, prioritizing the mortgage protects that equity and keeps the household in the house to boot,” he said. “Not everyone makes such a calculation, but many do.”
April 3, 2014 | Permalink | No Comments
April 2, 2014
Visualizing The Residential Mortgage Market
Compass Point Research & Trading, LLC has a nice graph, The Mortgage Market Overview, that helps to make sense of the massive U.S. residential mortgage market. It breaks down the $20 trillion dollar U.S. residential housing market into debt and equity and then further breaks down debt into the various available types, by market share: GSE; portfolio; private-label MBS; etc. A picture can be worth twenty trillion words . . ..
April 2, 2014 | Permalink | No Comments
April 1, 2014
Appellate Court of Illinois Denies Defendants’ Motion for Presentment and Cause to Vacate Judgment was Misplaced and Had no Legal Significance
The Appellate Court of Illinois in deciding Deutsche Bank Nat’l Trust Co. v. Cole, 2013 IL App (2d) 130450-U (Ill. App. Ct. 2d Dist. 2013) held that the trial court properly confirmed a judicial sale, as the plaintiff had no obligation to produce the originals of the mortgage and the note. Moreover under the appropriate standard, the court had subject-matter jurisdiction, and defendant failed to cogently explain plaintiff’s alleged lack of standing.
Lorie Cole, one of two property-owner defendants in a foreclosure action, appealed to this court after the confirmation of the judicial sale of the property and the denial of what the trial court treated as a motion to reconsider. This court, after considering the Cole’s appeal found that all of the issues that defendant Cole had raised were without merit, thus this court affirmed the decision of the lower court.
April 1, 2014 | Permalink | No Comments
Reiss on Rising Interest Rates
ABC News quoted me in Small Interest Rate Changes Mean Big Money for Home Buyers. The story reads in part,
As the economy continues to recover from the worst recession since the 1930s, mortgage interest rates remain at historically low levels.
The Primary Mortgage Market Survey, produced by Freddie Mac, reported in mid-March the average rate for 30-year fixed-rate mortgages was 4.32 percent; 15-year fixed-rate mortgages averaged 3.32 percent and interest rates 5-year Treasury-indexed hybrid adjustable rate mortgages averaged 3.02 percent. Nonetheless, Frank Nothaft, chief economist for Freddie Mac, speculated the Fed’s gradual tapering of its stimulus efforts may prompt a rise in mortgage interest rates.
If mortgage interest rates do rise significantly in the future, what, if any effect will there be on the home buying market? According to Steve Calk, chairman and Chief Executive Officer of The Federal Savings Bank, interest rates have never been the deciding factor for whether potential home buyers actually purchase a home.
“Whether interest rates are 5.5 percent or 7.5 percent, when people are ready to buy, they’ll buy a home,” Calk said.
Price, location, size, appreciation value – these are factors many would-be homeowners consider long before mortgage interest rates enter into the picture. However, once they begin actively searching for a home, interest rates often play a role in their ultimate buying decision.
This is especially the case when interest rates are high, according to David Reiss, Professor of Law at Brooklyn Law School.
“When people think about buying houses, they think about the price of the house. But what they really should be thinking of are the monthly costs. The average 25-year-old might not think about housing rates until they go to a mortgage broker.
“Then they discover that 8 percent interest may mean that instead of a $200,000 home they can only afford a $160,000 home,” Reiss said.
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Tight credit and persistent high unemployment have almost certainly played a role in depressing home buying figures during the recovery, as has the large numbers of home owners who perhaps bought homes at the height of the bubble who now find themselves underwater on their mortgages. However, many underwater homeowners could be missing out on a unique opportunity presented by the present financial climate. In a housing market where prices are depressed and borrowing is cheap, home buyers with solid incomes and good credit can find lenders willing to extend credit on favorable terms, ultimately putting them ahead financially, even if they sell their present homes at a loss, according to Reiss.
“Many people feel stuck in place because they are underwater or the market is bad. But although it may be counterintuitive, it could actually be a smart move to sell in a bad market. It’s a bit more sophisticated strategy, but you could move out of a cheap home into a better home for not that much money,” Reiss said.
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Education and due diligence in maintaining good credit are the most potent tools that potential home buyers can employ, whether they are seeking their first home, a larger home or are scaling down to smaller quarters as empty nesters. Obtaining prequalification can provide home seekers with a better idea of precisely how much house they can afford, Reiss said.
April 1, 2014 | Permalink | No Comments
Hawaiian Court Finds That Foreclosure was Permissible on 1250 Oceanside
The court in deciding In re 1250 Oceanside Partners, (Bankr. D. Haw., 2013) ultimately came to the conclusion that Oceanside was entitled to foreclose.
The debtor in possession, 1250 Oceanside (Oceanside), sought to enforce a promissory note and foreclose a mortgage made by defendants Lawrence Shaw and Lisa Shaw (the Shaws). The other defendants claimed interests in the mortgaged property. Oceanside now sought summary judgment. The Shaws argued that the court lacked jurisdiction, that Oceanside was not entitled to foreclose, and that if it was entitled to foreclose, it was not entitled to a deficiency judgment.
The court decided that there was no dispute as to any material fact. Oceanside was entitled to foreclose on the property, but it was not entitled to a deficiency judgment against the Shaws at this stage in the litigation.
April 1, 2014 | Permalink | No Comments
Tennessee Court Dismisses TILA, RICO, and RESPA Claims
The Tennessee court in deciding Mhoon v. United States Bank Home Mortg., 2013 U.S. Dist. (W.D. Tenn., 2013) dismissed the complaint of the plaintiff pursuant to 28 U.S.C. § 1915(e)(2)(B)(ii).
Plaintiff [Mhoon] filed a complaint against defendant U.S. Bank. This case was an action to prohibit a non-judicial foreclosure of real property. The complaint alleged that U.S. Bank was engaged in efforts to illegally foreclosure on Mhoon’s home. The complaint also alleged that U.S. Bank acted with gross negligence and violated its duty of good faith.
In addition, the complaint alleged breach of contract because U.S. Bank failed to send any and all acceleration, default, and foreclosure notices to Mhoon in the manner required by the deed of trust.
The complaint further alleged U.S. Bank violated Truth in Lending Act (“TILA”); violated Real Estate Settlement Procedures Act (“RESPA”) by failing to provide a good faith estimate; violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) statute and engaged in fraud; and lacked standing to initiate foreclosure proceedings on the Property.
The court ultimately held (1) plaintiff has not sufficiently plead a breach of contract claim; (2) plaintiff’s claims for gross negligence and violation of the duty of good faith fail as a matter of law; (3) plaintiff’s allegations based on violations of the TILA and the RESPA were barred by the applicable statute of limitations and failed to state a claim because U.S. Bank was not the originating lender; and (4) plaintiff’s claims for fraud violations of the RICO, and lack of standing all failed as a matter of law.
For those reasons, this court dismissed the plaintiff’s complaint pursuant to 28 U.S.C. § 1915(e)(2)(B)(ii).
April 1, 2014 | Permalink | No Comments
Appellate Court of Illinois Awarded Summary Judgment to Plaintiff Where Defendant Failed to Show That Plaintiff was an Unlicensed Debt Collector Under the Collection Agency Act
By Ebube Okoli
The Illinois court in deciding Kondaur Capital Corp. v. Sreenan, 2013 Ill. App. (Ill. App. Ct. 1st Dist. 2013) affirmed the judgment of the circuit court granting summary judgment for the plaintiff.
In the summary judgment motion, the plaintiff asserted that it was the legal holder and in possession of the note at issue pursuant to the assignment from PNC.
The court held that the circuit court did not err in awarding summary judgment to the plaintiff where the defendant failed to demonstrate that the plaintiff was an unlicensed debt collector under the Collection Agency Act (225 ILCS 425/1 et seq.).
The court also held that there was no abuse of discretion in refusing to strike affidavits in support of the plaintiff’s motion for summary judgment where the affidavits were premised upon documents that qualified as “business records” under Supreme Court Rule 236 (Ill. S. Ct. R. 236).
Lastly, the court held that any error in allowing the plaintiff to respond to the defendant’s affirmative defenses in the context of the plaintiff’s summary judgment motion was harmless.
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April 2, 2014 | Permalink | No Comments