Subscribe

Click here to Subscribe!

Click above to receive Gracy Blog updates right in your inbox!

Gracy on the Web

Facebook
LinkedIn
Twitter

Gracy Blog

Welcome to our blog! Check back here often to get the latest in local and national real estate news, statistics, and discussions. Click here to subscribe to our RSS Feed.

There are positive signs spanning the spectrum indicating a turning real estate market despite some weak spots across the country.

Just a few days ago, USA Today reported that the number of existing homes for sales had dropped 22 percent from a year ago and now totals just 2.37 million units.  This is down 41 percent from the peak reached in mid 2007. That said, the National Association of Realtors ® reported rising prices in 74 of the 146 markets they track in the first quarter of 2012 versus declines in 72 locales. Even more significant is the dramatic decline in some of the hardest hit markets:

  • March inventory in Phoenix declined 64 percent from a year ago according to Arizona State University real estate expert.
  • NAR reports very tight inventories in Phoenix, Orange County, California, Naples, Florida, Seattle, suburban Washington, DC and North Dakota (driven by the energy boom being experienced in that state).
  • While mortgage delinquency rates remain above average (with average being 2 percent), they dropped from 6.19 percent in Q4 2011 to 5.78 percent in Q1 2012 according to TransUnion  (based on a sample of 10 percent of US mortgage holders) and are down from a 7 percent peak in Q4 2009. Click here for article.
  • All-cash transactions in Q1 2012 made up 31 of all sales—and I doubt these people would be buying and paying cash if they thought property values would decline further
  • 22 percent of all buyers were investors
  • Condominium prices rose 3.4 percent when compared to Q1 2011
  • Q1 2012 existing home sales were up 5.3 percent from the same period in 2011 and are now running at annualized rate of 4.57 million
  • Total existing home sales in Q1 2012 were at the highest level since 2007
  • Move.com reports that many of the hardest hit markets are now among the top recovering markets

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% (investmentwatchblog.com) to a high 28% (mortgagenewsdaily.com). 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 Forbes.com

Read Stewart Press Release