What is a Preliminary Title Report?

The preliminary title report reports the condition of title for a specific piece of real estate. It is a preliminary commitment by the title company for title insurance. The “final” title report is issued soon after closing. The real estate purchase agreement (RPA) usually includes the instruction for escrow to order the preliminary title report. The ordering happens as soon as the buyer or seller or their real estate brokers open escrow. The preliminary report includes information about the property that the buyer should know, such as current title vesting, easements, loans, and other encumbrances against the property.

Who compiles the preliminary title report?

The person who compiles the report is known as a title examiner. The examiner issues the preliminary report based on their findings from researching the title through every record available for the property. Chain of title means the sequence of historical transfers of title to a property; each sale or transfer is a “link” in the chain. The title examiner makes sure all the links are present. When one of the links is missing, it is a “break in the chain of title.” For example, there is a period with no recorded owner preceding the current owner because a prior deed wasn’t recorded. This search determines if the person selling the property has legal ownership.

The portion of the report detailing the history of property ownership is an abstract of title. In the report, the general heading of Title Search includes the search for existing encumbrances. Abstract of title is a detailed history of property ownership; title search is a detailed listing of encumbrances. The abstract and search are compiled into and become the preliminary title report.

How do they do a title search?

  • A title company examiner searches the records of the county recorder, county assessor, and governmental taxing agencies that may affect title.
  • Some title companies have their own records department, known as a title plant. They keep duplicates of recorded documents from offices and courts at the federal, state, county, and municipal levels.
  • A title examiner has four primary determinations:
  1. The exact description of the property
  2. The estate interest in the property
  3. The vesting of the estate interest
  4. The exceptions affecting the vested interest, such as liens, encumbrances, and miscellaneous defects

The title search and subsequent preliminary title report reveal the following:

  • The vested owner’s name, as disclosed in the public records
  • Current real estate property taxes, including whether they are paid or unpaid, and the date of the last property assessment
  • Outstanding liens, encumbrances, covenants, conditions, restrictions, and easements
  • A plat map of the subject property that shows the location and dimensions of the property

The preliminary title report also lists the items the escrow agent needs to remove from the report to transfer title to the buyer, clear of the ones the buyer did not agree to assume in the RPA.  A “clear title” is free from liens and other encumbrances that might put the new owner’s ownership in jeopardy.  With a clear title, ownership is not in question.

Who gets the preliminary title report?

Copies of the preliminary title report are sent to the buyer, seller, lender, and real estate brokers for review and evaluation. Buyers and sellers, and their brokers, should review the report for items that might adversely affect the sale or the buyer’s intended use of the property. It is also essential to verify that the title report has the correct property address and escrow company file number. Only the items listed as of the date on the report are included in the preliminary report. Items discovered after the issuance of the preliminary report are delivered in a supplementary report. When there are references items like Covenants, Conditions, and Restrictions (“CC&Rs”)  and easements recorded against the property, the buyer should request copies of these documents from their escrow officer or title examiner, as listed on the report’s cover page.

Most RPAs include a contingency allowing the buyer an opportunity to review the report and object when there are items that interfere with the buyer’s intended use of the property. For example, if the buyer is buying a large lot and intends to store an RV, but the CC&Rs prohibit RV parking, the buyer could object to the report and terminate the transaction. Likewise, when undisclosed easements or rights-of-way are listed. The title report will also include a plat map of the property. Property dimensions on this map should not be considered conclusive but should be questioned by the buyer when differing from those represented by the seller.  If there are questions about actual boundary lines, the buyer should order a property survey.

What should you do with the preliminary title report?

In summary, always read the title report and its attachments. If there are questions, the buyer should contact their escrow agent or title examiner for clarification, or enlist the help of a lawyer. Real estate brokers are not qualified or allowed to give advice on title matters or interpret title reports. Still, they should be able to direct their buyer’s attention to matters of concern for further investigation.

On presenting multiple offers

Five Ways for Presenting Multiple Offers

Presenting multiple offers can be stressful for buyers and sellers and their real estate brokers. For listing brokers, offers should not be presented with favoritism or in any way designed to manipulate the seller into accepting one offer over another. The best practice is to present all offers before discussing which offer is best for the seller.

REALTOR® Code of Ethics, Standard of Practice 1-7: When acting as listing brokers, REALTORS® shall continue to submit to the seller all offers and counter-offers until closing unless the seller has waived this obligation in writing.

Listing brokers are to get the highest price and most favorable terms for their clients. Buyer brokers are to help get their clients to purchase the property at the lowest possible price and terms favorable to the buyer. Regardless of these competing dynamics, the real estate broker cannot make disclosures that are not in the client’s best interest and must always act honestly toward all parties.

REALTORS® shall submit offers and counter-offers objectively and as quickly as possible.” (Standard of Practice 1-6)

Here are five different ways for a seller and their broker to deal with multiple offers:

  1. Inform all buyers that other offers exist and to deliver their “highest and best” offer
  2. Inform all buyers that multiple offers will be all be presented on a specific date and time
  3. Present offers as they come in and counter them one at a time while making the other offers wait for the outcome
  4. Present all offers, counter one offer and reject all other offers
  5. Accept the best offer and reject all other offers

Always check with the seller before disclosing the existence of other offers. If the seller agrees to disclose other offers to one buyer, the disclosure should be given to all buyers since you, as a REALTOR, have a duty to practice fairness with all parties.

Remember, the listing broker must present all offers unless told otherwise by the seller. And, it is not up to the broker to decide how to present multiple offers or which to accept; it is up to the seller.

1031 Tax Deferred Exchange

Benefits of the 1031 Tax Deferred Exchange

When Section 1031 tax deferred exchange requirements are met, the real estate transaction will qualify for deferral of capital gain taxation

When a taxpayer sells a business or investment property, there might be a financial gain resulting in income taxes. The Internal Revenue Code in Section 1031 (IRC Section 1031) provides an exception that allows postponing the payment of the tax owed on the gain if the proceeds are reinvested in like-kind property. This gain is deferred; it is not tax-free. IRC Section 1031 is more commonly known as the 1031 Tax Deferred Exchange.

The like-kind exchange can include like-kind property exclusively, or it can include like-kind property with cash, liabilities, and unlike property. When cash, relief from debt, or property that is not like-kind is received, this can trigger some taxable gain in the tax year of the exchange. When an exchanger exchanges for like-kind property of lesser value, the transaction can include deferred and recognized gains, those that must be paid, for the amount not reinvested.

When Section 1031 requirements are met, the real estate transaction will qualify for deferral of capital gain taxation until the substitute property received in exchange is finally sold outright unless exchanged for another like-kind property. There isn’t any limit on the number of 1031 exchanges a taxpayer can perform. Other names for the like-kind exchange are 1031 Exchange, an IRC Section 1031 Exchange, a Like-Kind Exchange, a Tax Deferred Exchange, and Starker Exchange.

(Watch this OnlineEd video that summarizes the main points and benefits of the tax-deferred Exchange)

Section 1031 Vocabulary

  • Relinquished Property – the property in an exchange that is being given up for the new property; the sold property.
  • Replacement Property – the property in an exchange that gets traded for the old property; the purchased property.
  • Exchanger – The party who is performing the tax-deferred exchange.
  • Boot – The portion of a tax-deferred exchange that is taxable.

Type and Character of Property

To qualify as a tax-deferred exchange, the relinquished property must be of the same kind of property as the replacement property. This same kind of property is called like-kind property. Like-kind refers to how the property is held by the investor, not by the type or character of the property. Property that does not qualify as like-kind property that is part of an exchange is called boot or taxable boot. The exchanger (the investor) must have held the relinquished property for investment or for productive use in their trade or business and intend to do the same with the replacement property at the time the exchange is made.

Examples of Like-Kind Property

  • Residential for a bank building
  • Swampland for an apartment building
  • Bare land for a rental house
  • Single-family rental for multi-family rental
  • Non-income producing for income-producing
  • Duplex for a grocery store the exchanger intends to operate

Examples of Unlike Property

  • Personal use real property
  • Cash
  • Dealer property such as inventory
  • Paper (notes, mortgages, trust deeds, and land sale contracts)

Remember, when Section 1031 requirements are met, the real estate transaction will qualify for deferral of capital gain taxation; the transaction is not tax-free. For more information about this subject, visit the Beutler Exchange Resource Library or your qualified tax professional. This article is not intended as tax advice.

Handing out a business card

How To Tips for Business Card Etiquette

“It’s nice to meet you! May I give you my business card?”

Knowing the proper way to treat and hand out your business card says a lot about you, the respect you have for yourself, and the person you are giving it to. Always be courteous and ask permission before giving out your business card, and only give it to someone who asks for it or after you ask permission to give it.

How to offer a business card

  • Always have cards on hand. Card exchanges and business socializing often take place at unlikely times and places.
  • Be courteous when offering your card and attempt to limit distribution to qualified leads. Handing out 200 cards to everyone at a trade show will not be as productive as taking the time to find 10 qualified leads at the same seminar.
  • Always give your card to someone who asks for it — and be sure to ask for theirs in return.
  • Hand out pristine cards. Your card should adequately represent who you are and the pride you take in your profession. Throw away old, torn, or worn-out cards.
  • Use a business card case that properly represents your professionalism. Keeping your cards in your billfold or floating around in your purse makes for a disorganized impression. It also gives the message that you don’t really take the business card exchange ritual seriously.
  • If appropriate, take the time to write a quick note on the card to help the recipient remember you, what you talked about, and why your card was given.
  • Don’t hand out more than one card per contact unless more is asked for. If the person you are giving the card to does not have a card of their own, offer two of your cards and ask them to write their contact information on the backside of one and then return the card to you.
  • In meetings, don’t slide your card across the conference table. Instead, stand up and hand your card to each individual as introductions are made.
  • If you offer one person a card in a group, offer your card to everyone in the group.

How to accept a business card

  • Always accept an offered business card.
  • If you give a card, ask for a card.
  • Say Thank You! as soon the card touches your hand.
  • Look at the card for a few seconds as if digesting the information and then compliment the card, font, or logo, if appropriate.
  • Put the card in your business card case. Don’t disrespect the card or giver by putting it in your back pocket or other places that say you don’t really care it was given.
  • Follow up within one or two days from receiving a business card. Let the giver know you appreciated meeting them, your conversation, or information exchange.
  • It’s okay to request a business card, but if the person you are requesting it from maintains a higher position than you, wait for them to offer a card. For example, you wouldn’t ask the CEO of major companies or politicians, such as your state senator or the President of the United States, for a personal business card.f

How to design a business card

  • Avoid having too much information on your business card; don’t clutter it up with too many trade or professional designations that won’t mean anything to the public.*
  • Use professional paper and printing.
  • Use a graphic designer or online business card templates to help you design your card.
  • Include your essential contact details, including your name, company name, email address, and telephone number.
  • Avoid trade designation initials that might confuse your prospects. ABR, SFR, GRI mean nothing to a potential real estate client.*
  • Make sure your colors, font, and other information are easily readable by business card scanners or when converted to other types of electronic format.

* Design separate cards for giving out to your associates. These cards should include your trade or professional designations or designation initials.

Your business card will maximize your chances of successfully making qualified contacts. Remember, your card should represent you as a professional and convey how you think about yourself and conduct business. Don’t skimp and keep it professional.

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OnlineEd is a provider of pre-licensing, post-licensing, and continuing education for real estate and mortgage brokers. For more information about OnlineEd, please visit www.OnlineEd.com.

Differences Between Mortgage Prequalification Letter and Preapproval Letter

Typically, when the buyer uses financing to purchase a house, the buyer will get evidence from their lender to show the seller they do indeed qualify for that financing. This evidence will take the form of either a lender prequalification letter or a preapproval letter. The letter is given with the buyer’s offer to the seller in hopes that the seller’s acceptance of the offer is not delayed by checking the buyer’s financial status. While the prequalification and preapproval letters may sound similar, they are not. Let’s look at how these two letters differ and why a seller might insist on one over the other.

Lender Prequalification Letter

With a prequalification letter, the lender relies on information provided only from the buyer, such as income, credit score, debt and assets. A lender usually obtains this information in a telephone interview or by the buyer providing general information on the lender’s website. The lender or software then returns an estimate of how much mortgage a buyer can afford. However, a preapproval is only an estimate of what the buyer can afford, provided everything they have told the lender is true. In short, a prequalification letter won’t mean much to a seller since it relies on unverified information given by the buyer in exchange for the letter.

Lender Preapproval Letter

A preapproval letter is when the lender verifies the borrower’s information and reviews supporting documentation to determine how much they are willing to lend to that borrower. The lender’s required documents for their preapproval letter are the same as needed when applying for a mortgage. These documents include pay stubs, W-2s, federal tax returns, bank and other financial account statements, and a credit report. Because it is based on verified information, the preapproval letter is by far the better choice for the seller when analyzing the financial ability of a would-be buyer.

Note: A preapproval is not an approval or loan commitment. Preapproval does, however, speed up the loan underwriting and approval processes. Preapproval also gives the seller a reasonable assurance that the buyer can get financing and close the transaction. When choosing between similar offers, most sellers will prefer the preapproved buyer.

Prequalification is the easiest way for a buyer to estimate how much home they can afford. Preapproval is better than the prequalification estimate because it verifies the buyer’s financial information. Buyers who are serious about their house hunting should contact a qualified mortgage professional to find out how much they can afford, and so sellers will take them seriously when they make an offer.

technology and the realtor

2020 Saw Highest Number of Home Sales Since 2006 Says REALTOR® Annual Survey

Realtors® cited a lack of inventory as the leading reason limiting potential clients from completing a transaction, according to the National Association of Realtors®’ (NAR) 2021 Member Profile, an annual report analyzing members’ business activity and demographics from the prior year. However, in spite of a global pandemic, its drastic impacts on how business was conducted, and a dwindling housing supply, 2020 saw the highest number of homes sold since 2006 (5.64 million) and NAR’s membership increased from the previous year (1.48 million at the end of 2020, up from 1.4 million at the end of 2019).

“Realtors® continued to serve clients’ needs despite the challenges 2020 brought to the real estate market,” said Jessica Lautz, NAR vice president of demographics and behavioral insights. “Economic lockdowns and historically-low inventory coupled with surging home buying demand only showed the resilience of our members and industry.”

Key Survey Takeaways

real estate business

(c) Can Stock Photo / ferli

Business Characteristics

The majority of Realtors® – 68% – hold sales agent licenses, which is up from 65% last year. Twenty percent hold broker licenses and 13% hold broker associate licenses. Seventy-three percent of members specialize in residential brokerage. Relocation, residential property management and commercial brokerage are members’ most common secondary specialty areas.

Members typically have eight years of real estate experience, down from nine years in 2019. Eighteen percent of those surveyed have one year or less experience – nearly identical to 17% last year – while 15% of Realtors® have more than 25 years of experience, down from 17% a year ago. Appraisers, broker-owners, and managers had the most experience, while sales agents were typically the newest to the field with five years of experience. Consistent with recent surveys, nearly four out of five members – 79% – were certain they’ll remain in the real estate industry for at least two more years.

Business Activity

The typical member had a slightly lower sales volume ($2.1 million vs. $2.3 million) and fewer transactions (10 vs. 12) in 2020 compared to 2019.

The typical Realtor® earned 15% of their business from previous clients and customers, unchanged from last year. The most experienced members – those with 16 or more years of experience – reported a greater share of repeat business from clients or referrals (a median of 37%), compared to no repeat business for those with two years of experience or less. Overall, Realtors® earned a median of 19% of their business from referrals, a slight drop from 20% in 2019. Referrals were also more common among members with more experience, with a median of 27% for those with 16 or more years of experience compared to no referrals for those with two years of experience or less.

Income and Expenses

The median gross income for Realtors® was $43,330 in 2020, down from $49,700 in 2019. Realtors® with 16 years or more experience had a median gross income of $75,000, a decrease from $86,500 last year, as income was typically commensurate with experience. One out of four Realtors® earned $100,000 or more. Total median business expenses for members were $5,330 in 2020, a decline from $6,290 in 2019.

Realtor demographics

(c) Can Stock Photo

Demographic Characteristics

Seventy-eight percent of Realtors® were White, down slightly from 80% last year. Hispanics/Latinos accounted for 9% of Realtors®, followed by Black/African Americans (7%) and Asian/Pacific Islanders (6%). New members tended to be more diverse than experienced members. Among those who had two years or less of experience, 34% were minorities.

Sixty-five percent of Realtors® were women, a minor increase from 64% last year. The median age of Realtors® was 54, down slightly from 55 last year. A third of members were over 60 years old and 5% were age 30 or younger.

More than nine in 10 members – 93% – had some post-secondary education, with a third completing a bachelor’s degree, 6% having some graduate school education, and 13% completing a graduate degree.

The marital status of Realtors® remained nearly unchanged from 2019. Sixty-nine percent of Realtors® were married, 15% were divorced, and 11% were single or never married. The typical Realtor® household had two adults and no children.

Two-thirds of members – 66% – reported volunteering in their community. Volunteering was most common among members aged 40 to 49 years.

“Realtors® come from all walks of life and serve as pillars in their respective communities,” said NAR President Charlie Oppler, a Realtor® from Franklin Lakes, N.J., and the CEO of Prominent Properties Sotheby’s International Realty. “As champions for consumers, Realtors® combine hard work, dedication and trusted expertise to help individuals and families achieve the dream of property ownership.”

technology and the realtor

(c) Can Stock Photo

Technology and Realtors®

The coronavirus pandemic has forced businesses of all types to rely heavily on technology for communicating with consumers and remaining competitive in the marketplace. On a daily basis, the strong majority of Realtors® use a smartphone with wireless email and internet capability (96%) and a laptop or desktop computer (92%). The smartphone features that members use most frequently on a daily basis are email (95%) and social media apps (57%). Text messaging (93%) is the top method of communication for members with their clients, followed by phone calls (90%) and email (89%). Nearly seven in 10 members – 69% – have their own website.

“Realtors® used emerging technologies in 2020 to bridge the gap when pandemic precautions were in place,” Lautz said. “Members have now pivoted and embraced these tools to showcase listings and help buyers strategically find and secure the limited number of properties available.”

 

© Can Stock Photo / EyeMark

Office and Firm Affiliation

Despite an ever-changing housing market, Realtor® office and firm affiliation remained stable compared to a year ago. A slight majority of Realtors® – 53% – worked with an independent company and 88% were independent contractors at their firms. Forty-two percent of members worked at a firm with one office and 26% worked at a firm with two to four offices. The typical Realtor® had a median tenure of five years with their current firm, up from a median of four years in 2019. Eight percent of members reported working for a firm that was bought or merged. Errors and omissions insurance is the most common benefit provided by members’ firms.

Survey Methodology

In March 2021, NAR emailed a 93-question survey to a random sample of 161,155 Realtors®. Using this method, a total of 10,643 responses were received. The survey had an adjusted response rate of 6.6%. The confidence interval at a 95% level of confidence is +/- 0.95% based on a population of 1.4 million members. Survey responses were weighted to be representative of state level NAR membership. Information about compensation, earnings, sales volume and number of transactions are characteristics of calendar year 2020, while all other data are representative of member characteristics in early 2021.

For more information from NAR’s 2021 Member Profile, visit https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-nar-member-profile.

The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.

[Source: NAR’s 2021 Member Profile, visit https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-nar-member-profile.]

 

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, please visit www.OnlineEd.com.

OnlineEd® is a Registered Trademark.

Justice Withdraws from Settlement with National Association of Realtors

 

Settlement will not adequately protect the department’s rights to further investigate Realtors

 

Realtors settlement with justice stalled

National Association of Realtors (NAR) policies affect millions of real estate agents and real estate consumers. Data shows consumers paid over $85 billion in real estate commissions last year. The Justice Department

previously filed a complaint and proposed settlement alleging that the National Association of Realtors established and enforced policies that illegally restrained competition in real estate services

. The settlement sought to remedy those alleged practices and encourage competition among Realtors®. However, it also prevented the department from pursuing other antitrust claims against NAR. The justice department settlement is now being withdrawn.

On July 1, 2021, the Justice Department’s Antitrust Division filed to withdraw the proposed settlement with NAR. In addition, the department is voluntarily dismissing its complaint without prejudice. It was determined that the settlement will not protect the department’s rights to investigate other conduct by NAR that could potentially affect competition and harm consumers. The justice department wants to allow for a broader investigation of NAR’s rules and conduct.

“The proposed settlement will not sufficiently protect the Antitrust Division’s ability to pursue future claims against NAR,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division. “Real estate is central to the American economy, and consumers pay billions of dollars in real estate commissions every year. We cannot be bound by a settlement that prevents our ability to protect competition in a market that profoundly affects Americans’ financial well-being.”

Under a stipulation entered by the court and signed by the parties, the department has sole discretion to withdraw its consent to the proposed settlement. The proposed settlement may also be modified with consent from the department and from NAR. The department sought NAR’s agreement to modify the settlement to adequately protect and preserve the department’s rights to investigate and challenge other conduct by NAR. Still, the department and NAR could not reach an agreement.

According to the complaint, NAR’s anti-competitive rules, policies, and practices include prohibiting MLSs that are affiliated with NAR from disclosing to prospective buyers the commission that the buyer broker will earn; allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free; enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered; and limiting access to the lockboxes that provide licensed brokers with access to homes for sale to brokers who work for a NAR-affiliated MLS. These NAR rules, policies, practices have been widely adopted by NAR-affiliated MLSs resulting in decreased competition among real estate brokers.

The National Association of Realtors is a trade association of more than 1.4 million-member REALTORS® in real estate brokerages across the United States. There arRealtor key box accesse over 1,400 local REALTOR® associations (called “Member Boards”) organized as Multiple Listing Services through which REALTORS® share information about homes for sale in their areas. Among other activities, the National Association of Realtors establishes and enforces rules, policies, and practices for its Realtor Member Boards and their affiliated Multiple Listing Services.

The Justice Department hopes to increase competition to benefit consumers and allow for more innovation in markets by having the National Association of Realtors repeal and modify its rules for greater transparency to homebuyers about the commissions when representing homebuyers, cease misrepresenting that buyer broker services are free, eliminate rules that prohibit filtering multiple listing services listings based on buyer broker commissions, and change rules limiting access to lockboxes to only REALTOR-affiliated real estate brokers.

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For more information about OnlineEd and their education or learning management systems for real estate brokers, principal brokers, property managers, and mortgage brokers, please visit www.OnlineEd.com.

Oregon Lawmakers Vote to Ban Client ‘Love Letters’ in Real Estate Transactions

“A seller’s agent shall reject any communication other than customary documents in a real estate transaction.”

By Jeff Sorg, OnlineEd Blog

(June 15, 2021)

 OnlineEd – The 2021 Regular Session of the Oregon Legislature has passed House Bill 2550. In short, the Bill directs the seller’s agent to reject any communication from a buyer to a seller as necessary to help the seller avoid selecting a buyer based on violation of federal fair housing laws. In addition, the bill amends the seller’s duties in a real estate transaction as outlined in ORS 696.805. The enrolled bill, awaiting Senate President signature, specifically states:

“In order to help a seller avoid selecting a buyer based on the buyer’s race, color, religion, sex, sexual orientation, national origin, marital status or familial status as prohibited by the Fair Housing Act (42 U.S.C. 3601 et seq.), a seller’s agent shall reject any communication other than customary documents in a real estate transaction, including photographs, provided by a buyer.”

Because most Oregon real estate brokers had already determined these types of letters to be discriminatory, this law is not expected to greatly impact the Oregon brokerage community.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of publication date but is not guaranteed by the author and may have been obtained from third-party sources. In addition, due to the fluid nature of the subject matter, regulations, requirements and laws, prices, and all other information may or may not be correct in the future and should be verified if cited, shared, or otherwise republished.

OnlineEd® is a Registered Trademark.

CFPB Warns Loan Servicers to Prepare for Wave of Mortgage Foreclosures This Fall

By Jeff Sorg, OnlineEd Blog

(April 1, 2021)

“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months.”

WASHINGTON, D.C. –The Consumer Financial Protection Bureau (CFPB) today warned mortgage servicers to take all necessary steps now to prevent a wave of avoidable foreclosures this fall. Millions of homeowners currently in forbearance will need help from their servicers when the pandemic-related federal emergency mortgage protections expire this summer and fall. Servicers should dedicate sufficient resources and staff now to ensure they are prepared for a surge in borrowers needing help. The CFPB will closely monitor how servicers engage with borrowers, respond to borrower requests, and process applications for loss mitigation. The CFPB will consider a servicer’s overall effectiveness in helping consumers when using its discretion to address compliance issues that arise.

“There is a tidal wave of distressed homeowners who will need help from their mortgage servicers in the coming months. Responsible servicers should be preparing now. There is no time to waste, and no excuse for inaction. No one should be surprised by what is coming,” said CFPB Acting Director Dave Uejio. “Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families.” The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides borrowers with federally-backed mortgages with access to forbearance, and private lenders have also provided similar assistance. As of January 2021, approximately 2.7 million borrowers remained in such programs, with 2.1 million borrowers in forbearance and at least 90 days delinquent on their mortgage payments. Another 242,000 mortgages not in forbearance programs were at least 90 days delinquent. Industry data suggest that nearly 1.7 million borrowers will exit forbearance programs in September and the following months, with many of them a year or more behind on their mortgage payments. Beginning with the expiration of the federal foreclosure moratoriums at the end of June 2021, mortgage servicers will need ramped-up capacity to reach out and respond to the large number of homeowners likely to need loss mitigation assistance. To meet this surge, servicers will need to plan now. In its oversight of mortgage servicers, the CFPB is focused on preventing avoidable foreclosures. The CFPB will pay particular attention to how well servicers are:

  • Being proactive. Servicers should contact borrowers in forbearance before the end of the forbearance period so they have time to apply for help.
  • Working with borrowers. Servicers should work to ensure borrowers have all necessary information and should help borrowers in obtaining documents and other information needed to evaluate the borrowers for assistance.
  • Addressing language access. The CFPB will look carefully at how servicers manage communications with borrowers with limited English proficiency and maintain compliance with the Equal Credit Opportunity Act and other laws.
  • Evaluating income fairly. Where servicers use income in determining eligibility for loss mitigation options, servicers should evaluate borrowers’ income from public assistance, child-support, alimony or other sources in accordance with the Equal Credit Opportunity Act’s anti-discrimination protections.
  • Handling inquiries promptly. The CFPB will closely examine servicer conduct where hold times are longer than industry averages.
  • Preventing avoidable foreclosures. The CFPB will expect servicers to comply with foreclosure restrictions in Regulation X and other federal and state restrictions in order to ensure that all homeowners have an opportunity to save their homes before foreclosure is initiated.

Provided that servicers are demonstrating effectiveness in helping consumers, in accord with today’s compliance bulletin, the CFPB will continue to evaluate servicer activity consistent with the Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act on April 3, 2020, which provides flexibility on certain timing requirements in the regulations.

[Source: CFPB Media Release]

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

All information contained in this posting is deemed correct as of publication date but is not guaranteed by the author and may have been obtained from third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices, and all other information may or may not be correct in the future and should be verified if cited, shared, or otherwise republished.

OnlineEd® is a Registered Trademark.

Centers for Disease Control and Prevention Announces Extension of Moratorium on Residential Evictions

The CFPB and FTC are working with CDC to make renters aware of their rights

By Jeff Sorg, OnlineEd Blog

(March 30, 2021)

 

WASHINGTON, D.C. – The COVID-19 pandemic has created a financial crisis that threatens the ability of millions to stay in their homes. Renters and homeowners experiencing pandemic-related unemployment or wage reduction are struggling to make monthly payments. A recent CFPB report found that over 11 million families are behind on their rent or mortgage payments: 2.1 million families are behind at least three months on mortgage payments, while 8.8 million are behind on rent.

Today, the Centers for Disease Control and Prevention announced an extension of its moratorium on residential evictions to keep people in their homes, out of shelters, and to stop the spread of COVID-19. Renters have struggled to exercise their rights under the CDC’s eviction moratorium, and news reports indicate many renters have been forced out of their homes despite federal protections.

CFPB Acting Director Dave Uejio and FTC Acting Chairwoman Rebecca Slaughter:

“We have directed our staff to investigate eviction practices, particularly by major multistate landlords, eviction management services, and private equity firms, to ensure that they are complying with the law. Evicting tenants in violation of the CDC, state, or local moratoria, or evicting or threatening to evict them without apprising them of their legal rights under such moratoria, may violate prohibitions against deceptive and unfair practices, including under the Fair Debt Collection Practices Act and the Federal Trade Commission Act. We will not tolerate illegal practices that displace families and expose them—and by extension all of us—to grave health risks.”

The CFPB and FTC are working with CDC to make renters aware of their rights under the eviction moratorium and to help them to understand how to complete declarations needed to stop evictions. Renters can learn about their eviction and debt collection rights and how to get help with housing costs at www.consumerfinance.gov/renters.

The CFPB is also regularly providing updated information on a wide range of mortgage relief options and rental protections available to consumers. These updates can be found here: www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/

[Source: CFPB Media Release]

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