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Bill's Blog
This is a follow up to the "Short Sale Problems" article published on March 28, 2012.

The FHLMC has adopted an alternative for Texas and other states in which title companies are prohibited from executing the affidavit and indemnity described in my earlier transmission. We are beginning to see short sale lenders waiving the requirement that the title company sign the affidavit in exchange for an agreement by that title company not to close a sale of the subject real property for a period of 12 months following the closing of the short sale. While there are grumblings about this in many quarters; we may have a way forward.

Great article from Dr. Ted Jones on the increasing demand for second homes. Although we are not a “bargain price” market, this is a trend that will still impact Austin as our rents continue to rise and more people hear about Austin’s strong job market and interesting culture.  This trend also continues to support the downtown condo market with its declining number of units left to sell (or rent!). Read the full article here. 

Current estimates of homes that are underwater (worth less than the debt) range from 22.8% ( to a high 28% ( While across the country we have struggled with solutions to this problem it is recognized that foreclosures have a more deleterious effect on the market than short sales. It, therefore appears, that we are going to see more short sales across the country.

The problem is that many in the real estate community have figured out how to game the short sale process to the further detriment of the lenders accepting the short payoff. Recent schemes involving short sales include:

  1. Falsifying a short sale listing to indicate there is an offer so as to discourage legitimate offers.
  2. Manipulating the short sale price by making the property look worse than it really is.
  3. Flipping the property for a higher price (there are several complicated schemes here).
  4. Skimming equity by manipulating the closing numbers or by “phantom repairs”.
  5. Engaging in a short sale for a relative and returning the property to the relative with reduced debt

As a direct result of these schemes and scams, the FHLMC (Freddie Mac) has required all parties, including the realtors and title company, to execute an affidavit affirming that the transaction is arms length and further, providing for indemnification of the lender if the arms length attestation is not true.

The problem was that indemnification was required by all. This was problematic for realtors and title companies because even if one of the parties was not aware of, or had not participated in any fraud they still provided indemnification to the lender. So the result was that we were indemnifying for things we knew nothing about and could not control.

The National Association of Realtors, the American Land Title Association and other trade organizations prevailed upon the FHLMC to modify the indemnity document to provide that each party would provide indemnity only for irregularities known to that party. In the latter part of last year, FHLMC acquiesced and now the short sale affidavit and indemnity provides that it is executed only to the best knowledge and belief of each party to the transaction.

Problem solved, right? Not so fast, at least not so fast for Texans. Title insurance in Texas is governed, and oversight is provided, by the Texas Department of Insurance, TDI. TDI maintains a Basic Manual that sets out the rules and regulations by which Texas title companies and underwriters are required to operate. The basic manual includes Procedural Rule 35 which is a “Prohibition Against Guarantees, Affirmations, Indemnifications, and Certifications.” So now the question is: Does Procedural Rule 35 prohibit all Texas title companies from executing the FHLMC affidavit and indemnification? Even though the industry’s position on the execution of the affidavit was mixed (some would execute the affidavit and some would not because of P-35), the Commissioner of the Texas Department of Insurance has removed all doubt. In March the Commissioner, Eleanor Kitzman, has provided unequivocally that execution of “the short sale affidavits seek assurances beyond the scope of the title agents knowledge”. Accordingly, execution of these affidavits and indemnities by title companies is not allowed in Texas because they are violations of P-35.

Lastly, in this regard, please note that a title company that violates this order is subject to fine and/or suspension.

Forbes includes Gracy's parent company, Stewart Information Services, in top 100 of 8,000 NYSE-Listed Firms

Investor’s trust had greatly diminished over the last few years with economically distressful headlines filled with corporate scandals, bailouts and bankruptcies about some of the country’s largest public companies. Forbes turns to GMIRATINGS (GMI) who assigns each company an accounting and governance risk score, or AGR, every three months based on proprietary modeling designed to identify practices that historically have had a high correlation with increasing shareholder risk. Trustworthy companies of the GMI Ratings (GMI) are ones that do not have elevated risks and are models of openness and integrity.

GMI Rating for Stewart Information Services

  • Current AGR Score (as of 3/13/12): 97
  • Average AGR Score (last four quarters):84
  • Market Value ($M): 266

GMI examined more than 8,000 companies traded on U.S. exchanges where Stewart Title is recognized within the Small Cap. category. See a full list of honorees.

Qualifications include: market caps of $250 million or more, “conservative” or “average” ratings over the last four quarters and having no amended filings with the Securities and Exchange Commission, no SEC enforcement actions, and no material restatements. Honorees had to also Rank high in GMI’s Equity Risk Ranking, which indicates a positive forecast for equity returns, and have minimal likelihood of financial distress as measured by GMI’s Bankruptcy Risk model.

Read full story from

Read Stewart Press Release

Be Sure to Use Gracy Relocation Tools.

Austin is the No. 6 U.S. destination city for relocation according to a report from U-Haul International Inc.  The report, titled "The 2011 Top 50 U.S. Destination Cities," ranks destinations for movers traveling more than 50 miles. Data was compiled from more than 1.6 million U-Haul truck transactions in 2011.

Austin 360 BridgeThe top 10 cities are:

  1. Houston
  2. Orlando, Fla.
  3. Las Vegas
  4. Chicago
  5. San Antonio
  6. Austin
  7. Atlanta
  8. Sacramento, Calif.
  9. Kansas City, Mo.
  10. Denver

If you are working with Relocation clients, be sure to use the Gracy Relocation Tools

  • Gracy Relocation Guide (Printed copies can be provided for a fee)
  • MLS Area Profiles (Online profile of most MLS areas including zip codes, school districts, and neighborhood lists)
  • MLS Statistics (Gracy Title compiles statistics by MLS Area each month and makes them available on the web and through our exclusive iPhone App)
  • Net Sheet App (Create a Buyer’s or Seller’s Net Sheet with this great tool for the iPhone or Android)
  • Market Overview (This is a 30 minute, or one hour if MCE, overview of the Austin Market presented by Gracy’s CEO.  Learn what makes Austin such a Relocation magnet)
  • Work with your favorite Gracy Closer and your favorite Sales Executive

As a bonus, here’s a great Cost of Living Wizard from Home Fair. You will be surprised how often the combination of housing costs and average incomes shows Austin to be more affordable than the city your relocation clients are moving from.