Have the rules regarding the MARS disclosures changed?

Arizona’s Anti-Deficiency Statutes to Remain Unchanged

As a result of legislation that was signed by Governor Jan Brewer last week, the Arizona Anti-Deficiency statutes will remain unchanged.

Earlier this summer, the Governor signed SB1271, which effectively changed the rules on how and when lenders could pursue a borrower after a default of a mortgage loan. The statutes have been in place in Arizona for decades, and they protect a residential homeowner from being sued by a lender after a default, such as a foreclosure. With those statutes in place, after a lender foreclosed against a homeowner, in most cases, they were unable to pursue the homeowner for the deficiency. SB 1271 would have changed that, and many of the provisions of the bill were ambiguous as to the definition of a resident or occupant. This ambiguity could have thrown thousands of homeowners into a situation whereby they could have faced additional costs after a foreclosure.  Thus, The Arizona Association of Realtors along with many other consumer groups lobbied the Governor and the Arizona Legislature to draft legislation to repeal 1271 before it went into effect on September 30,2009.

The Arizona Legislature and the Governor did just that. During a special legislative session this summer, HB 2008 was drafted and approved and Governor Brewer signed the bill last week. HB 2008 repeals SB 1271 and its change to the anti-deficiency statutes; thus, the statutes remain as they were.

HVCC Creates Havoc 

Are you confused by the HVCC (Home Valuation Code of Conduct)? Don’t feel bad, most people are. This new rule went into affect May 1, 2009 and has done nothing but create havoc for all concerned in a typical real estate transaction.

The original intent of the rule was to create a separation between a lender and the appraiser, so that the lender would not exert undue influence on the appraiser to appraise the property for more than it was worth. Sounds good on paper, but on the street it creates confusion and tension between lenders, buyers and their agents. NAR has lobbied Congress to impose a moratorium on the rules, so that everyone could obtain a better understanding. As of this date, the rules are still in place.

Without going into the complicated and gory details, there is one misconception that impacts agents. Many believe, since they have been told this, that they cannot talk to or interact with the appraiser, give them comparables or assist them in any way. That is flat-out; not true… The HVCC does limit the lenders ability to talk to the appraiser, but does not limit the agent’s ability to do so. Thus, we may still meet the appraiser at the property, provide them comparables or other data and assist in the process. We may provide updates comparables after an appraisals is done, just as we always have. If you attempt to do just that, and the appraiser tries to stop you, remind them that the HVCC rules allow for this.

Our National Association has an excellent flow chart dealing with the HVCC and can be found at http://www.realtor.org/wps/wcm/connect/f57e63804e57784890e4b3d4f1772a7a/HVCC+Flyer+6.16.09.pdf?MOD=AJPERES&CACHEID=f57e63804e57784890e4b3d4f1772a7a

As a listing agent, getting listings on short sales can be challenging. With so many variables and every lender acting differently, it can be daunting to stay on top of all the issues. While there are so many steps to insure that a short sale transaction moves smoothly, I could never cover them all here. Yet, one issue looms large and if not done properly, could cause you considerable grief and aggravation possibly resulting in a failed transaction.

The issue is obtaining the HUD-1 that the lender will require when considering a short sale transaction. Most often, the process starts with you going to a title company and asking for a short sale HUD-1. With that request, most title companies will simply ask you and/or the seller about the current liens. Since the seller owns the home, they should be the one to answer those questions. So, let’s assume the seller tells the title company that they have one lien; that being the lender who is considering the short sale.

Thus, the title company prepares the short sale HUD-1, most often without doing a title search, and shows the liens that the seller tells them about. That’s the problem. By not doing a title search, and by not grilling the seller with questions which might uncover additional liens, the HUD-1 is prepared with incomplete information which is a recipe for doom. 

If done that way, the lender approves the short sale and everything moves forward. The buyer deposits their money, pays for an inspection, appraisal, and loan application and incurs various other costs, while assuming they are buying the house. Low and behold, much later in the process, the 2^nd lien pops up, typically a Home Equity Line of Credit (HELOC) or some other lien, which the seller either forgot about or did not realize was part of the transaction. Closing is delayed as the 2^nd lien holder is contacted and typically offered pennies on the dollar. Many of them say no, and the deal fails.

Is there a lesson to be learned? Yes. When ordering that HUD-1, either insist that the title search is done in conjunction with the preparation, or very soon thereafter, so that if another lien shows up, everyone will know about it long before the 1^st lender approves the short sale and the buyer spends any money. If the title company refuses to accommodate that request, find another title company, as some do this as a matter of course, but many do not.

If so, the Federal Tax Credit for 1^st time homebuyers, of up to $8000 will come to an end on November 30. With September almost here, that gives buyers about 90 days to find a house, write an offer, get an accepted deal, have it financed, get it closed and have title transferred all before the November 30 deadline.

You might think that is plenty of time, but keep in mind the typical transaction now is either a short sale or a foreclosed, lender-owned property. Either could take weeks to obtain an accepted offer, with more time needed for repairs and other issues. The typical 30 day from offer-to-closing contract is a thing of the past, at least for now.

Thus, a typical 1^st time homebuyer might need to make numerous offers and then do it all again if an appraisal comes in lower, repairs are overwhelming or any other reason why a sale might fall apart.

Remember that the federal program offers a tax “credit”, not a deduction. There is a difference, but be careful in giving tax advice to your buyers. If you have any serious, potential 1^st time homebuyers, then have them first visit with their accountant to determine the benefit available to them at this time. Once they are comfortable with that, then start showing them houses.

A word of caution; be careful what you promise… Promising the credit to a buyer who ultimately does not receive it will be an issue you will need to defend. Always tell your buyers that they must comply with the federal requirements and that you have no control over how the credit is applied. For example, if you sell them a house with a November 30 closing, and for some odd reason, it closes December 1, they will not receive the credit. If you promised they would, you could find yourself if a very uncomfortable position.