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Rural Housing Covers Lots of Ground

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | February 26th, 2016

Rural America may not be as far away as you think.

At least 50 million of us live in it, and it takes up at least three-quarters of the country's real estate -- making rural housing a huge market.

According to the Housing Assistance Council, a Washington-based nonprofit, non-metro areas make up 75 percent of the country's landmass and 17 percent of its population. But if you go by other definitions, such as "non-urbanized," rural areas count for 98 percent of these United States and a third of the country's population.

What's more, rural locations are much closer to big urban areas than you might think. In Ohio, for example, most of the state's 88 counties are considered partially or entirely rural. Only Cuyahoga (Cleveland) and Summit (Akron) don't qualify at all.

In Texas, Denton, Johnson and Ellis counties -- all near Dallas -- are called rural by Uncle Sam, as is Montgomery County, north of Houston. And in California, all of San Bernardino County and most of Riverside County are rural by government standards.

Financing for rural housing is a complicated mix of private banks and federal funding. It mirrors nonrural areas in that there are two government-sponsored enterprises designed to increase the funds available to your lender. But they are not necessarily the ones that initially come to mind.

Farmer Mac is a much smaller version of its residential cousins Freddie Mac and Fannie Mae, buying loans already made by local lenders on the so-called secondary market so they can have more money to lend out to people buying homes.

Then there is the Farm Credit System (FCS), which is similar in concept to the Federal Home Loan Bank System. FCS lenders, which don't take deposits, make home loans; however, their bigger business is in farm loans.

The farm mortgage is a fascinating hybrid of home loan and business loan. And while it is considered niche lending, it is a sizable niche.

Total farm mortgage debt stood at $315 billion in total credit as of 2013, the last year for which figures are available, according to the Department of Agriculture (USDA). That total is split between real estate and non-real estate debt (mostly equipment loans), with real estate being the bigger piece.

Farm mortgages also differ from their urban and suburban counterparts because of the size of farms: The land is often worth more than the improvements on it.

The biggest farm mortgage lenders are members of the FCS, which hold $85 billion in debt, according to USDA. Commercial banks, which hold $69 billion in real estate debt, are second, and insurance companies are a distant third at $12 billion.

USDA is also a residential lender through its Rural Housing Service and the Farm Service Agency. It also supports rural rental housing.

But just because some rural housing needs are taken care of by Farmer Mac and the FCS, that doesn't mean Fannie Mae and Freddie Mac -- by far the larger secondary market agencies -- are not players when it comes to the exurbs.

Under the Housing and Economic Recovery Act of 2008, the two government-sponsored agencies have a "duty to serve" three traditionally underserved markets: rural housing; manufactured housing, a substantial part of which is rural; and affordable housing preservation. The regulatory Federal Housing Finance Agency is currently considering how to implement this duty to serve.

Manufactured houses, still known in some parts as "trailers," are a staple of many rural communities. They're built in factories and trucked to their final destinations, where they are either placed on permanent foundations or left on their trailers so they can be moved again. Production of these homes has undergone a sharp drop since the housing crisis, but the market has been recovering in recent years.

According to the Census Bureau, shipments of new units reached 70,500 in 2015. That's up from 54,900 in 2012, 60,200 in 2013 and 64,300 in 2014. But it is nowhere near the 1999 peak of 374,000 units. The average sales price as of September 2015 was $70,700, the bureau reports.

Manufactured housing is a split category when it comes to lending. A loan on a factory-built house (as opposed to an on-site, "stick-built" property) counts as a regular mortgage and is eligible for purchase by Fannie and Freddie if the borrower owns the land beneath it. If not -- and a large majority of such houses are located on rented trailer park slots -- the loan is categorized as a much higher-priced "chattel" mortgage.

In the last 20 years or so, specialized lenders called Community Development Financial Institutions (CDFIs) have sprung up in many rural and tribal areas to promote economic development in low-income areas. And much of their efforts go toward housing.

The federal CDFI Fund, a unit of the Treasury Department, supports small lenders through annual grants that have totaled $1.4 billion to date. A second program, the New Markets Tax Credit, awards tax credits rather than grants.

In 2015 alone, the Fund said, its awards helped finance more than 25,000 units of affordable housing.

-- Freelance writer Mark Fogarty contributed to this report.

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Closings Gone Wrong: From the Funny to the Frightening

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | February 19th, 2016

Buying a house is a journey that ends at the closing table, with a mountain of papers that most people don't read, and never will.

But sometimes, the trip doesn't end where it should.

Take the case from a couple of years ago, when a California closing agent called the lender to say that he couldn't attend the scheduled settlement because he'd been arrested on the way there.

Or the 2013 closing in Texas that had to be adjourned because none of the participants, aside from the settlement agent, spoke English, and he could not communicate with them.

Or the instance in Massachusetts, when the closing attorney passed away two days before escrow and no one informed the other parties. The borrower showed up, the seller showed up and the title company rep showed up -- but not, of course, the deceased attorney.

Anomalies, you say? Au contraire. Andrew Liput, CEO of analytics firm Secure Insight, has been collecting these and other closing-time tidbits for a decade. And he swears they're all true.

But mortgage fraud, which often happens at the closing table, is no laughing matter. The FBI estimates that 13 percent of all mortgage fraud occurs at the settlement table, and Liput estimates around $650 million in lender or borrower money is lost because of it. Not a lot of money in the overall mortgage industry, perhaps, but as Liput eloquently puts it, "not chump change, either."

And it's not just dollars and cents at stake: People run the risk of having their personal information compromised.

"Closing is a mystery to most people," says Liput. "They show up excited, but they don't have a clue to what's going on. It's an environment that's a good breeding ground for fraud."

The message, then, is to keep your antennae alert to anything that might seem out of the ordinary. Stay vigilant to avoid falling prey to con artists. Liput has plenty of tales of fraud in his hip pocket to serve as warnings:

-- Last year, an Alabama man was convicted in a $15 million mortgage fraud scheme. During the investigation, it was discovered that not only did the perp orchestrate the massive fraud with the assistance of several professionals, he also contracted with another individual to kill the straw buyer. Testimony showed that the "hit man for hire" lured the straw buyer to a wooded area and shot him multiple times. Fortunately, the victim survived.

-- A Maryland title agent was sentenced to 51 months in prison, followed by three years of supervised release, for conspiring to commit wire fraud in connection with a mortgage fraud scheme that resulted in losses of more than $4.8 million.

-- In 2002, a title agent's license to issue title insurance policies was revoked after she was convicted of theft for fraudulently endorsing checks at the title attorney's office where she worked. Despite her conviction, she worked at another title agency from 2007 until 2010, this time as a manager -- and once again engaged in fraud.

-- A settlement agent from Tennessee operated for three decades without the required state business license, only obtaining one when finally confronted with evidence of the state law. He maintains that no one had ever asked him about it in 30 years of practice.

-- A Virginia attorney was using his personal, husband-and-wife joint checking account as his trust account, and had been doing so for more than 20 years. Lenders and warehouse banks were happily wiring funds into that account without ever verifying the account's type or its owner. Even more amazing, regulators never performed an audit.

-- In California, a mobile notary who was being sent to close loans in customers' homes was on the nationwide registered sex-offender list. Lenders had no idea their clients were welcoming this person into their homes. Neither did the company that hired the individual, because it failed to conduct complete background checks on its notaries.

-- A Maryland-area title company owner, who was closing loans for large national lenders, had been previously convicted of wire fraud and had his licenses revoked. Neither the lenders nor the title underwriter for whom the agent wrote title insurance was aware of his past, or the fact he was unlicensed.

-- In 2012, an employee at a major title company was charged with seven counts of grand theft and five counts of money laundering for his role in embezzling $469,000 for gambling purposes. This wasn't some run-of-the-mill title agent: He was the company's vice president, as well as its in-house counsel.

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Quick Takes: Builders' Timeframes, 'Zombie Debt' and More

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | February 12th, 2016

If your builder says he can construct your new home in three months, don't believe it.

According to 2014 data from the U.S. Census Bureau, the average completion time for a single-family house is twice that. And that doesn't count the 23 days it takes to obtain the necessary government approvals.

If you are building the house yourself, it takes even longer: 11.5 months, according to Uncle Sam's count. But if the house is being built by a contractor on your lot, it takes about eight months to be completed.

As noted, these are 2014 figures. It's very likely that it takes even longer to build a house today, because builders continue to have trouble finding the craftsmen needed to do the work. Indeed, the shortage of subcontractors has become acute in many parts of the country, according to the National Association of Home Builders (NAHB).

On average, 22 different subcontractors are used to build a typical house, NAHB says. When asked about 23 different jobs, builders reported "always" subcontracting a sizable chunk of them. Concrete flatwork, masonry, drywall, fireplaces, plumbing, electrical and carpeting, among others, all received "always subcontract" responses in the 90-percent range.

About two-thirds of builders reported that they subcontract 75 percent of the construction cost of an average single-family house. Any way you slice it, that's a lot of work -- and it likely won't be done in three months.

Not long after revered reverse-mortgage spokesman Fred Thompson passed away, Danny Glover has signed on as the latest celebrity to push the products.

The 69-year-old actor can be seen on various marketing materials, as well as the Facebook and LinkedIn pages for USA Reverse, an online lead generator. The company aims to help people understand Home Equity Conversion Mortgages, and also allows would-be borrowers to compare various reverse-mortgage lenders.

Glover, best known for the "Lethal Weapon" films and "The Color Purple," joins a long list of entertainers who have promoted reverse mortgages: Henry Winkler (aka Fonzie of "Happy Days"), James Garner, Pat Boone, Barbara Eden (Jeannie of "I Dream of Jeannie") and Robert Wagner. Glover is the first African-American to represent a reverse-mortgage company.

You've heard of "zombie homes" -- those distressed properties abandoned by financially strapped owners, but not yet foreclosed on by lenders.

But how about "zombie debt"?

That's the term coined by the Federal Trade Commission to cover bills you think are dead, gone and forgotten, but that somehow spring back to life. Zombie debt can wreak havoc with your finances, and especially with your ability to buy a house.

We're talking about debt you settled with a company or debt collector; debts that were discharged in bankruptcy; time-barred debts that are past the statute of limitations; debts that no longer show up on your credit report. Zombie debt can also include debts you never actually owed, such as those resulting from identity theft.

Before paying any of these bills, take a deep breath and look at them carefully. They could be fake, and the bill collector could be a con artist, so make sure you recognize them as your own. If they don't look familiar, obtain a free copy of your credit report -- annualcreditreport.com -- to see if the debt is listed there.

If the "walking dead" debt is a result of identity theft, you'll find tips and sample letters to help you dispute it at identitytheft.gov. But if it is yours, and it's come back to haunt you, federal law still gives you certain rights to protect yourself.

For example, if someone contacts you about a debt you thought was dead, you can ask the collector to send you a written validation notice detailing the amount owed and the creditor's name. By law, the debt collector has to send you this notice within five days of contacting you.

But don't ignore lawsuits. If a debt collector files a suit against you to collect a zombie debt, respond to the lawsuit -- either personally or through your lawyer -- by the date specified in the court papers to preserve your rights.

Don't accidentally reset the debt clock, either. If you make, or promise to make, a debt payment on a time-barred debt -- a debt too old for a collector to make you pay -- the statute of limitations clock may reset. Then, a debt collector can sue you for the full debt amount -- plus interest and fees.

Most real estate agents enter their listings on the multiple listing service on Fridays. But according to a survey by Atlanta realty firm Terrace 24, Thursday seems to be the best day to list a house.

Homes listed on Thursday sell faster and for more money, reports managing broker Mike Minihan. Those listed on Sunday, on the other hand, were on the market the longest.

Of the houses in the Atlanta-area sample that sold without a price reduction, those listed on Thursday were on the market a median of 19 days less than those listed on other days of the week. Also, homes listed on Thursday were more likely to draw offers above the asking price. And eventually, sellers of Thursday-listed houses reaped nearly 98 percent of what they asked.

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