Tuesday, December 15, 2009

RECENT RULING MAY HELP HOMEOWENERS TRYING TO AVOID FORECLOSURE / LV HOME PRICES RISE AS SALES TAKE SEASONAL FALL

In a recent report from the Las Vegas Review Journal by reporter John G. Edwards, homeowners fighting back foreclosure may have some hope to delay the process. This ruling made by U. S. District Judge Kent Dawson “makes it harder for lenders to foreclose on home mortgages” as it challenges the electronic system of recording the ownership of residential mortgages for the mortgage banking industry.

About half of all U.S. mortgages “whose loans have been securitized, sliced and diced are now held" by Mortgage Electronic Registration Systems Inc., or MERS, according to a blog posted by securities analyst Barry Ritholtz.

According to the article, “The case, heard by a panel of federal judges in November, concerned whether Mortgage Electronic Registration Systems Inc. could foreclose on residences on behalf of lenders.”

The electronic system records the ownership of residential mortgages for the mortgage banking industry.

Dawson said the company could not foreclose on a home, because it did not provide evidence that it held the note on the residence and didn’t show that it was an agent of the lender.
The case started in bankruptcy court two years ago.

MERS officials asked bankruptcy Judge Linda Riegle for permission to start foreclosure proceedings against a property owned by Lisa Marie Chong. Bankruptcy trustee Lenard Schwartzer objected, saying the electronic system was not a “real party in interest” in the mortgage loan.

Like many mortgages, Chong’s loan had been securitized, meaning it had been pooled or packaged into a security held by investors.

Mortgage Electronic Registration Systems Inc. was unable to show that it had possession of the note. The bankruptcy judge ruled in Schwartzer’s favor. The decision was appealed to federal court.

In his decision Tuesday, Dawson said "the registration system does not lose money when borrowers fail to make payments on home mortgages." Dawson found that the Mortgage Electronic Registration must at least provide evidence that it was a representative of the mortgage loan holder, which it failed to do.

“Since MERS provided no evidence that it was the agent or nominee for the current owner of the beneficial interest in the note, it has failed to meet its burden of establishing that it is a real party in interest with standing,” Dawson said, affirming the bankruptcy court ruling.

Real estate attorney Tisha Black Chernine said the ruling is good news for struggling borrowers and homeowners in general.

“It will have a dramatic effect on lenders being able to foreclose,” she said.

Because the decision makes it more difficult to foreclose, she hopes lenders will be more willing to negotiate with homeowners struggling to meet mortgage payments by approving short sales or making other concessions.

In a short sale, a lender agrees to allow a homeowner to sell his home for less than is owed.
This is particularly helpful, because many homeowners owe far more than their homes are worth since home prices have fallen. Houses sold in short sales typically go for 30 percent more than homes sold after foreclosure, Black Chernine said.

Appraisers looking at the short sale price will use it in determining the market value. Thus, avoiding foreclosure results in higher market values for other houses, she said.
“It should help buoy home prices,” Black Chernine said.

Bill Uffelman, chief executive officer of the Nevada Bankers Association, predicted that most foreclosures will be able to proceed, because the real mortgage owners and notes will be able to be identified in most cases.

However, he said, many homeowners facing foreclosure may be able to stay in their homes longer because of the delay.

“In the end in 99.9 percent of the cases, ownership of the note will be proved,” he said.
While the decision is believed to be the first of its kind in Nevada, the Kansas Supreme Court made a similar finding in a similar case.

LV MEDIAN PRICE RISE, SALES SLOW DOWN TYPICAL OF HOLIDAY SEASON
On another front, the recent statistics released by the Greater Las Vegas Association of Realtors show that Las Vegas’ median price of homes sold in November was $140,000, about $900 higher than October. The median price was $138,000 in September.

The traditional holiday sales slowdown of homes and condos took place in November while prices edged up slightly again, according to the report.

Analysts say the increase is a further reflection that home prices have stabilized for now. Overall, home prices are down 25 percent from November 2008.

Condo prices fell 2.9 percent in November to $68,000. Prices are 25 percent below where they were in November 2008.

Demand for homes and condos tend to soften in November, December and January because of the holidays, but sales last month eclipsed November 2008.

The GLVAR reported 3,117 sales of new homes in November, a 43 percent increase over November 2008. The 726 sales of condos and town homes was 85 percent higher than November 2008.

Compared to October, however, sales of homes fell by 12 percent and sales of condos and town homes fells by 15 percent.

Despite the slowdown, GLVAR President Sue Naumann said the extension of an $8,000 tax credit for first-time homebuyers and creation of $6,500 tax credit for other buyers should spur sales in 2010.

Investors and first-time buyers continue to dominate the sales market, according to the GLVAR.

The percentage of homes purchased with cash in November was 41 percent, nearly matching October, Naumann said. Many investors rely on cash deals.

The number of sales of foreclosed upon homes continued to drop in a reflection of limited supply that’s on the market, analysts said. The GLVAR reported 61 percent of all sales in November were bank-owned properties, down from 64.5 percent in October.