Wire fraud has become rampant in our industry. The FBI has estimated that there are over 4,000 hack attempts per day nationwide. According to the Financial Crimes Enforcement Network (FinCEN) there have been 22,000 cases of reported wire fraud involving losses of over $3.1 billion dollars since 2013.
The real estate industry has been targeted by fraudsters because our business moves at a quick pace with a lot of funds on a regular basis. The criminals continue to strengthen their efforts to abscond with buyer, seller and REALTOR money. Below are some tips for how we can help educate our buyers and sellers about how important it is to be cautious in their transactions.
The biggest key to prevention is education of your customers. As a REALTOR you should be laser focused on educating the buyers and sellers about the growing risks of wire fraud. At every opportunity take the time to explain that wire fraud has become prevalent and explain how we, the title company, will deliver wiring instructions. Buyers and Sellers should understand that if they receive a phone call, fax or email regarding wiring of funds, they must call a previously validated phone number to verify the funding information. Always caution the client about contacting the title company from an email signature. Criminals have become sophisticated at sending fraudulent communications pretending to be the REALTOR, the title company and the lender. criminals send emails with identical looking signature blocks of one of the parties to the transaction but replace with phone numbers the criminal will answer if someone calls. A good tip is to ask your clients to program our phone number into their cell phones when they go under contract. This way they are only calling us on a trusted phone number and not from any other resource.
Buyers should be forewarned by their REALTOR that no one in the transaction should send them wiring instructions other than the title company. Even when the title company sends wiring instructions it should be only upon request from the customer and the customer should never initiate a wire without personally calling the title company from a verified phone number to verify the wiring instruction data.
A REALTOR should never take on the responsibility of sending wiring instructions to their clients. After having the conversation with your client to educate them on the red flags of wire fraud it is highly advisable that you have a disclosure signed by them confirming your conversation that includes a reminder to never send funds without contacting the title company first at a trusted number to confirm the instructions.
On the seller side of the transaction, you should counsel the clients to bring a physical copy of their wiring instructions to closing. The sellers should not email their account information out. Instead they should bring the instructions to closing. All sellers should be counselled to not respond to email inquiries requesting their account number or wiring information.
Also, make sure that we have your buyer or seller’s phone number. When we receipt the contract we will call your buyer and seller to talk to them about the transaction. We will reiterate the warnings that you are giving them and we will help remind them how important it is to follow our instructions.
Before you go under contract create a log of all approved parties’ phone numbers to give to your buyer or seller. Providing the clients with a verified phone number to use at the beginning of the transaction is a must. Programming the title company number into their phone should help minimize the possibility of a fraudster sending them a different phone number to use via email.
Many REALTORS today have a portion of the commission wired. If you fall into that group make sure you are available by phone to verify the wiring instructions. Criminals are hacking emails and sending in fake wiring instructions for commissions too!
You should implement Two-Factor Authentication. All parties to the transaction, especially real estate agents, should be encouraged to enable Two-Factor Authentication on the email service they utilize, especially real estate agents using public domain email systems such as Yahoo and Gmail. This site lists systems that implement Two-Factor Authentication: https://twofactorauth.org/. After you have turned on your Two-Factor Authentication make sure to change your password one time to clear out any prior access.
All email involving nonpublic, private and confidential client information should be sent utilizing secure email systems. Here is an article from the National Association of REALTORS (NAR) regarding NAR Best Practices https://www.nar.realtor/articles/internet-security-best-practices.
REALTORS should implement industry standard IT security and cyber protections of their email and computer systems including but not limited to: 1) utilizing strong antivirus software, 2) installing security patches for all operating systems and software applications, 3) logging out or locking their computer when leaving their computer unattended, 4) avoid clicking on suspicious links on websites or within emails and 5) avoid using free WIFI or free charging stations. Free WIFI pretending to be legitimate businesses is often operated by criminals and allows them to access everything being transmitted over WIFI.
When fraud happens. If you suspect a fraud is underway or has happened, act immediately! Contact as many people in your management team as well as at the time company. The bank and FBI need to be contacted immediately among other steps that must be taken. The Cybersecurity unit of the Department of Justice has published the following guidelines for reporting cyber incidents: https://www.justice.gov/sites/default/files/opa/speeches/attachments/2015/04/29/criminal_division_guidance_on_best_practices_for_victim_response_and_reporting_cyber_incidents2.pdf
ALTA Wire Fraud Resources:
ALTA notice about phishing emails: https://www.alta.org/news/news.cfm?20170801-Phishing-for-Wire-Transfers
ALTA Wire Fraud Red Flags: https://www.alta.org/news/news.cfm?20170725-Red-Flags-to-Protect-Your-Company-Against-Wire-Fraud
ALTA Sample Wire Fraud Warnings: https://www.alta.org/news/news.cfm?20170725-Sample-Wire-Fraud-Warnings-You-Can-Use
FBI’s Public Service Announcement regarding Business Email Compromise: https://www.ic3.gov/media/2017/170504.aspx
Our executive team at Texas National Title is committed to helping our clients talk to customers about preventing wire fraud. David Tandy (CEO) and Latra Szal (COO/Counsel) have been teaching many classes on the topic to local REALTOR groups. If you would like to schedule a class or conference for your office to discuss further please let me know and we will get something scheduled.
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We love the idea of public WIFI. It is everywhere. It is free. It is easy to connect to. It is convenient. But, is it too good to be true? According to Harvard Business Journal, “over half of the adults in the U.S. have their personal information exposed to hackers each year.” And, 89% of all cyber attacks involve financial or espionage motives according to Verizon’s annual Data Breach Investigation Report.
Hackers love free WIFI
Those same reasons why we love public WIFI are also why hackers love it too. With public WIFI, hackers can get unfettered access to unsecure networks full of personal information they can then use to hack into your life and business. They position themselves between you and your connection point. They then see everything you are sending to the hotspot and pass it on. In this position, they will see anything you transmit over the WIFI network, your email, username and passwords, credit card information, business network credentials… Once they have access to this information they can use it at their leisure and access your systems. Hackers also use unsecure networks to distribute malware which can infiltrate your computer.
One mistake people make using public WIFI
According to USA Today, “If I’ve said it once, I’ve said it a thousand times: Avoid doing anything you would not want anyone in the world to know on public WIFI. You may think you’re safe in that busy café or big-name hotel, but public WIFI is a major liability.” You never know when someone has spoofed a reputable brand’s WIFI network. USA Today’s Stephen Petrow was hacked on a plane, click here for his story. This could happen to anyone.
Jessica Edgerton, National Association of REALTORS Associate Counsel, warns REALTORS®, “Do not do business over free WIFI” in the NAR training “Wire fraud scams: how to protect your buyer clients”. There is just too much at risk in a real estate transaction to take a chance on an unsecure network.
Below are some steps to help safeguard yourself.
How to safeguard yourself and your business when using public WIFI
The vast majority of hackers are simply going after easy targets. Taking the following precautions should help to keep your information safe.
Now that you know that public WIFI is not secure – be cautious and remember that any device can be at risk. This includes your laptop, smartphone or tablet. Be suspicious of wireless networks, and refrain from connecting to unknown or unrecognized wireless access points.
Make sure to use your Virtual Private Network (VPN) that most businesses use for corporate email and Internet access through an unsecured connection, like public WIFI. This is your first line of defense when on public networks. If hackers do manage to get between you and your connection, the data will be heavily encrypted through the VPN and you will not be an easy target.
When you are web browsing make sure you enable to “Always use HTTPS” option on websites you use frequently or that require you to enter credentials. Hackers are smart and if they catch a username and password they will try all of the variations knowing that it will more than likely lead to a password to your online banking, corporate network, or other accounts. Remember, you never want to enter your usernames and passwords in an unencrypted manner. This opens the door for hackers.
When using the Internet on public WIFI, turn off your sharing in System Preferences or in your Control Panel. It is unlikely that you will want to share, so best to be safe. You can also let Windows do this for you by choosing the “Public” option when you first connect to the new network.
In the event that you do use public WIFI, avoid going to sites where a cybercriminal could capture your information, i.e. online banking, social media sites, online shopping… If you have to access one of these sites, then use your mobile phone network versus the public WIFI to help protect yourself.
Keep an Internet security solution running on your laptop to constantly scan for malware.
Secure your home wireless network
Having a home wireless network is awesome. You can work from anywhere in your home. It is easy, and becoming a standard in new smart homes. Make sure that you protect yourself at home too.
Make sure to change from the default password and use a complex password. Click here for tips for creating strong passwords.
This will keep your wireless device/network from announcing its presence to your neighbors and the world.
Change the default SSID name of your device. It is easy for hackers to guess your manufacturer’s default SSID name of your device. Make is harder by changing the default SSID name. And, remember to pick a name that is not easily identified.
In your connection settings, enable encryption. WPA encryption was the best, but even WPA2 was recently cracked. For the time being there is no safe public WIFI. To protect yourself, you must use a VPN service if you want to hide unencrypted traffic.
Make sure you have a great anti-malware product on all of your home computers and devices. When you set this up, remember to set it up to auto-renew so you do not go unprotected. Also, find a great IT resource to help you routinely review your computer and devices to ensure you are running optimally and that you do not have anything running in the background on your computer to compromise you or your network.
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In the Consumer Housing Trends Report 2016 the Zillow® Group covered the multi-faceted Millennial.
I found the report enlightening, debunking some of the myths about millennials, and uncovering that I may be a Millennial at heart.
Zillow stressed the importance of home and community for millennials. According to the report millennials under the age of 25 see their home “as a reflection of themselves rather than a financial investment”. This is unlike the older Baby Boomer generation who sees their home as a financial investment and avenue to build wealth for the future and for their family. In addition, more than 55 percent see themselves as involved in their community. They are active in their neighborhoods and the surrounding areas, not so much unlike my Baby Boomer friends.
Zillow confirmed that millennials are “delaying many life milestones that precede home ownership.” They are completing their education, marrying and starting a family later in life, and as a result renting
Further into their adulthood. Here are the stats Zillow revealed:
The report also debunked the myth that Millennials are only urban dwellers. According to the report:
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Zillow® Group Consumer Housing Trends Report 2016
Institutions supervised by the Consumer Financial Protection Bureau (CFPB) can assist consumers in disaster areas by:
Click here for more information on the CFPB’s Statement on Supervisory Practices Regarding Financial Institutions and Consumers Affected by Hurricanes Harvey and Irma.
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Listed below are excerpts from Rob Chrisman’s http://www.robchrisman.com/ daily blogs from August 22nd to September 7, 2017 regarding FEMA and lender disaster notices for your quick reference. Great advice for lenders, servicers and borrowers for dealing with disaster/flood related issues from Hurricane Harvey.
With the natural disasters already plaguing regions across the United States, the FEMA website lists all declared incidents with a link to provide details specific to that area, including leaking chemical plants.
Most investors and lenders rely on FEMA to define a disaster and the area impacted. Of course, any monies about to be lent, and recently lent, in a disaster area are questionable from an investor’s perspective. Is the borrower safe, will they make their payments, is the collateral sound? Typically a correspondent investor, such as Chase, will have verbiage in their contract referring the seller to it in the event an area is declared an investor and requiring additional appraisals.
Partners can access Sun West Seller Guide under HELP section in Sunsoft (login required). Please refer to Sun West Forward Mortgage Seller Guide (Section 404.07) and Sun West Reverse Mortgage Seller Guide (Section 3.23) for more details.
Plaza Home Mortgage is reminding its clients to follows its Natural Disaster Policy, GD-PO-008 (login required) for properties located in these areas.
Pacific Union is monitoring the impact of severe storms and disaster declarations across several states as published by FEMA. Currently, loans secured by properties located in impacted areas are subject to standard Pacific Union protocol. Standard requirements for disaster areas apply for these properties as they relate to expectations from appraisers for existing pipeline and new applications. For loans secured by properties in affected areas, the appraiser must comment on the disaster and if there is an impact to the property and value. In addition, all types of issued insurance policies (hazard, flood, windstorm, etc.) must have binding authority on the subject property. Upon delivery of a loan to Pacific Union Financial, the Correspondent must ensure that re-inspections have been completed and delivered to Pacific Union Financial for all impacted properties in accordance with Pacific Union’s Disaster Area Policy.
“The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and state bank regulators recognize the serious impact of Hurricane Harvey on the customers and operations of many financial institutions and will provide regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions in the affected areas to meet the financial services needs of their communities.
“Bankers should work constructively with borrowers in communities affected by Hurricane Harvey. The agencies realize that the effects of natural disasters on local businesses and individuals are often transitory, and prudent efforts to adjust or alter terms on existing loans in affected areas should not be subject to examiner criticism. In supervising institutions affected by the hurricane, the agencies will consider the unusual circumstances they face. The agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound banking practices as well as in the public interest.
Community Reinvestment Act (CRA): Financial institutions may receive CRA consideration for community development loans, investments, or services that revitalize or stabilize federally designated disaster areas in their assessment areas or in the states or regions that include their assessment areas. For additional information, institutions should review the Interagency Questions and Answers Regarding Community Reinvestment here.
Freddie Mac’s disaster relief options will be available to borrowers with homes in presidentially-declared Major Disaster Areas where federal Individual Assistance programs are made available to affected individuals and households. Until then, servicers may leverage Freddie Mac’s forbearance programs to provide immediate mortgage relief to borrowers affected by the storm.
“We strongly encourage the many American families whose homes or businesses are being impacted by Hurricane Harvey to call their mortgage servicer if the Federal Emergency Management Agency’s declaration is announced,” said Yvette Gilmore, Freddie Mac’s Vice President of Single-Family Servicer Performance Management. “Relief — including forbearance on mortgage payments for up to one year — may be available if their mortgage is owned or guaranteed by Freddie Mac.”
Freddie Mac disaster relief policies authorize mortgage servicers to help affected borrowers in presidentially declared Major Disaster Areas where federal Individual Assistance programs have been extended. Freddie Mac mortgage relief options for affected borrowers in these areas include suspending foreclosures by providing forbearance for up to 12 months, waiving assessments of penalties or late fees against borrowers with disaster-damaged homes, and not reporting forbearance or delinquencies caused by the disaster to the nation’s credit bureaus.
Lenders are reminded that Fannie Mae has selling and servicing policies to assist impacted borrowers (or potential borrowers) following a disaster, such as the hurricane on the Gulf coast. Refer to Assistance in Disasters for information on where to find Fannie Mae’s policies for providing assistance to borrowers impacted by a disaster. View the press release.
Due to the potential impacts of Hurricane Harvey to the southern Texas coast, at this time, and until all affected areas have been identified by the Federal Emergency Management Agency (FEMA) and other sources, Pacific Union Financial, LLC will temporarily suspend the funding of loans secured by properties in impacted areas.
AmeriHome, with FEMA’s DR-4332, reminded clients that policies vary based on program and re-inspection requirements for transactions with and without appraisals. Sellers are reminded that they are responsible for determining potential impact to a property located in an area where a disaster is occurring or has occurred, irrespective of whether the property was included in an area covered by a disaster declaration. Sellers are also reminded that appraisal waivers and reduced appraisal types, such as Fannie Mae’s PIW and Freddie Mac’s ACE, are not eligible in areas impacted by disasters. See the respective Agency requirements for details.
AmeriHome reminded clients that for loans on properties involving transactions with appraisals for Fannie, Freddie, VA, and USDA, if the appraisal is dated on or before incident period end date, including on-going disasters where an incident end period date has not yet been declared then the re-inspection date must be prior to the declared incident period end date.
For non-agency, Core Jumbo, or FHA, if the appraisal is dated on or before incident period end date, the re-inspection date must be after declared Incident period end date. (In other words, re-inspection may not be completed until after the declared incident period end date).
For properties without an appraisal, a property inspection is required if no incident period end date has been declared and Loan Purchase is on or after incident period start date, or the incident period end date has been declared and Loan Purchase is on or within 90 days after incident period end date. Re-inspection type can utilize any of the property inspection types in Seller Guide Section 10.10.7.1., AND include an interior inspection with photos.
Sellers must follow Wells Fargo standard Disaster Policy for all properties located in ZIP codes that Wells Fargo Funding has determined were impacted by Hurricane Harvey. Precautions must be taken for Loans originated within affected areas. Regardless of whether FEMA has formally declared a disaster, all transactions showing any indication of damage to the collateral should comply with the published Disaster Policy Guidelines as outlined for customers here (login required).
Customers of Chase can visit the Correspondent Site for more information on appraisal requirements, and re-inspection requirements.
And, the same with SunTrust – it is spelled out in SunTrust’s seller guide.
NewLeaf Wholesale reminded its brokers that If the subject property is located in an impacted area, with a completed appraisal dated prior to the incident start date, a 1004D re-inspection completed by the Appraiser must certify that the property is free from the applicable natural disaster damage. For appraisals in an impacted area dated during the incident period, the Appraiser must: Comment on the condition of the property and any effects on the marketability AND add detailed language into the body of the appraisal confirming that the property is free from the applicable natural disaster damage OR provide a 1004D re-inspection to certify that the property is free from the applicable natural disaster damage. For appraisals in an impacted area dated after the incident end date, the Appraiser must: Comment on the condition of the property and any effects on the marketability AND add detailed language confirming that the property is free from the applicable natural disasters damage into the body of the appraisal.
As of August 30th, Flagstar Bank is suspending funding in Texas counties: Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria and Wharton. Louisiana parishes include: Beauregard, Calcasieu, Cameron, Jefferson Davis, Orleans and Vermillion. Once funding has resumed, a re-inspection will be required in the counties identified. Loans that have already been issued a Final Approval Clear to Close status will be placed in an Approved with Conditions status until a re-inspection is performed. Please note that appraisal re-inspections are not required to be completed by the original appraiser; however, a Flagstar Bank eligible appraiser must be utilized. For loans that have an appraisal that was ordered via Loantrac, an appraisal re-inspection may be requested via the Appraisal Management module by selecting “Yes” to the “Do you need a property/Disaster Inspection” question.
M&T Bank will enforce the Disaster Re-Inspection Policy for all properties located in the affected counties of Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria, and Wharton.
Appraisals Completed prior to 8-28-2017 (Refer to Ex #03-600: Disaster Affected Areas, for expiration). For loans secured by properties, in the designated disaster areas, and appraised prior to the Federal Government / State Government declaration, please refer to the matrix for required Re-inspection guidance.
First Community Mortgage disaster policy and procedure can be viewed in its product full guidelines. View a copy of the FEMA declared disaster counties.
Wells Fargo Funding Sellers must follow its standard Disaster Policy for all properties located in counties identified by FEMA as being impacted. Precautions must be taken for Loans originated within affected areas. Regardless of whether FEMA has formally declared a disaster, all transactions showing any indication of damage to the collateral should comply with the published Disaster Policy Guidelines as outlined in Seller Guide Section 820.19: Disaster Policy and 820.20: When Required both found in our Conforming Underwriting Guidelines. (Government Loans must follow FHA/VA guidance.) Reminder: When the appraisal is completed on or after the disaster incident period end date, a full appraisal with exterior and interior inspection is required. This includes Loans where a PIW or equivalent was requested by the Automated Underwriting System (AUS).
PennyMac has posted Disaster Policy Implementation: Texas Hurricane Harvey. In response, FEMA has declared 18 counties in Texas as eligible for Individual Assistance. PennyMac’s Disaster Policy requires a post-disaster inspection on all properties located in counties eligible for Individual Assistance. Due to the continued impact of Hurricane Harvey, FEMA has not declared an incident end date and PennyMac will not be accepting post-disaster inspections and additional counties may be added. PennyMac has also paused funding in the additional counties where the Texas Governor declared a State of Emergency due to the ongoing rain and flooding and potential for additional damage. PennyMac will continue to monitor counties not yet declared for Individual Assistance for reinstatement.
AmeriHome is implementing re-inspection requirements for four additional Texas counties that were included in an amended State of Disaster declaration made 8/28/2017 by Texas governor Abbott. Those counties are Angelina, Orange, Sabine and Trinity. AmeriHome is also re-inspection requirements for FEMA declared Texas DR-4332 and Louisiana EM-3382.
“As we work together to support borrowers affected by Hurricane Harvey, lenders are reminded that Fannie Mae has selling and servicing policies to assist borrowers (or potential borrowers) affected by disaster. Refer to the Assistance in Disasters page for information about its policies for providing assistance to borrowers impacted by a disaster. Fannie will provide additional policy guidance in a separate lender communication.
In light of the devastation caused by Hurricane Harvey, if you have mortgages secured by properties in the affected areas that are in the delivery pipeline, you should remove these mortgages from a Guarantor pool or Cash commitment.”
Additionally, you should review Freddie Mac requirements related to properties affected by disasters to prepare to address impacted mortgages you originated and planned to sell to Freddie. “While it’s premature to determine the full impact of Hurricane Harvey, review the applicable sections of the Single Family Seller/Servicer Guide and your procedures for inspecting and updating a property’s value, condition and marketability when a major disaster or emergency occurs. Guide Section 5601.2 (c) – Requirements for properties affected by disasters, Guide Section 5601.2 (b) – Requirements for incomplete property improvement, Guide Section 4201.13 – Circumstances that adversely affect the value of the property.
We rely on you to determine the number of mortgages secured by impacted properties and the extent of damage to each property that may affect its acceptability as security for the mortgage.
As we continue to closely monitor the situation, we are grateful to our Seller/Servicers who are responding to requests for assistance from borrowers who are facing unexpected hardships because of the hurricane.”
As always, clients should read the full bulletins from lenders and investors.
Fannie Mae reminds clients that “Following a disaster, we rely on our customers to implement our disaster relief policies and assist impacted homeowners. We require servicers to assess property damage and the needs of homeowners in order to provide appropriate relief. In addition, our Account Teams work closely with our customers to determine physical and operational impacts to their business operations and their ability to service mortgages owned or guaranteed by Fannie Mae.”
“Citibank Correspondent Lending is ready to help residents regain pre-storm business functionality. Among other assistance, Citibank will work with you on a case by case basis regarding loan file delivery and lock expiration dates, consider rate lock extensions based on your business needs due to storm damage1and consider fee waivers on issues arising due to the impact of the storm.
“As a reminder, Lenders represent and warrant that the properties securing all loans submitted to Citibank for purchase consideration have not been negatively impacted by any natural or man-made disaster as of the date Citibank purchases the loan. The Lender also represents and warrants that the borrower’s credit qualifications for the underlying loan have not been negatively impacted by any natural or man-made disaster as of the date Citibank purchases the loan.
“Lenders must have a process in place for identifying disaster areas and potential impact to properties that are the subject of loans proposed for sale to Citibank. If the Lender’s disaster policy includes a requirement for re-inspection of the property, the re-inspection should be included in the closed loan file submitted for purchase (i.e. appraisal ordered prior to the storm with closing after the event).”
Citi’s note finished with, “For loans originated after the storm, it is important to note that section 501 of the Correspondent Manual. Lenders are responsible for ensuring that the borrower’s credit qualifications for the underlying loan have not diminished because of the storm. Property or Lender’s place of business must be located in a FEMA disaster area.”
Because of the Presidential Declaration of a Major Disaster Area (PDMDA) in designated counties in the State of Texas due to damage caused by Hurricane Harvey, FHA is issuing this reminder to mortgagees originating and/or servicing mortgages in the affected PDMDAs: FHA-insured mortgages secured by properties in a PDMDA are subject to a 90-Day moratorium on foreclosures following the disaster. HUD provides mortgagees an automatic 90-Day extension from the date of the moratorium expiration date to commence or recommence foreclosure action or evaluate the borrower under HUD’s Loss Mitigation Program.
Mortgagees should review complete servicing guidance in the Single-Family Housing Policy Handbook (SF Handbook) 4000.1, Sections III.A.2 and III.A.3.c relating to the servicing of mortgages in PDMDAs.
In preparation for assisting homeowners with longer-term recovery efforts, mortgagees should also review: FHA’s 203(h) Mortgage Insurance for Disaster Victims requirements in Section II.A.8.b of the SF Handbook. The 203(h) program allows FHA to insure mortgages for victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home. FHA’s 203(k) Rehabilitation Mortgage Insurance Program requirements in Section II.A.8.a of the SF Handbook. The 203(k) program provides mortgage financing or refinancing which includes the cost of home repairs – both structural and non-structural – into the loan amount. Mortgagees can find more information about the policies referenced above and other FHA PDMDA policies on the FHA Resource Center’s Online Knowledge Base.
Mortgage Solutions guidelines have been updated to address any property area located in a FEMA declared disaster area requiring individual assistance or as determined by MSF. Search for a specific property provided by Disaster Assistance.gov.
Conventional, VA and USDA: Properties with an appraisal effective date prior to the date of the disaster, appraiser to provide a 2075 drive-by, 1004D update/completion report, or Disaster Inspection Report, or Disaster Area inspection prepared by a certified appraiser to verify home is not affected Specific requirements must be met within the inspection.
Specific to Conventional properties, disaster inspections are not required for DU Refi Plus and LP Open Access transactions. Property Inspection Waiver (PIW) is not eligible in disaster-impacted areas. If a FEMA disaster is declared after the loan has closed with a PUW, one of the above-listed exterior inspection documents is required.
FHA Properties with an appraisal effective date prior to the date of the disaster, appraiser to provide a 1004D update report, prepared by a certified FHA Roster Appraiser to verify home is not affected. Disaster inspections are not required on new FHA transactions endorsed by FHA prior to the disaster date. Disaster inspections are not required for FHA Streamline without Appraisal transactions.
NewLeaf sent out, “All subject properties in the areas impacted by the disaster require evidence that the subject sustained no damage from the identified disaster for NewLeaf transactions. As the effects of Hurricane Harvey are continuing, please note impacted areas are subject to change without notice.
If the subject property is in an impacted area listed on the NewLeaf incident table with a completed appraisal dated prior to the incident start date, a 1004D re-inspection completed by the Appraiser must certify that the property is free from the applicable natural disaster damage. For appraisals in an impacted area dated during the incident period, the Appraiser must: Comment on the condition of the property and any effects on the marketability AND add detailed language into the body of the appraisal confirming that the property is free from the applicable natural disaster damage OR provide a 1004D re-inspection to certify that the property is free from the applicable natural disaster damage.
Prior to closing and funding, ResMac, Inc. will require a property inspection for any loan secured by a property in the FEMA declared Texas DR-4332. If the subject property is in one of the impacted counties and the appraisal was completed prior to the incident period end date, ResMac will require a post disaster inspection confirming the property was not adversely affected by the disaster. The inspection report must be dated no earlier than the date of disaster conclusion as determined by FEMA and/or the State of Texas. Clients may utilize any of the following re-inspection options to satisfy the post disaster inspection requirement, with a photograph of the subject property: Property Inspection Report (Fannie Mae Form 2075/ Freddie Mac Form 2070), or Appraisal Update and/or Completion Report (Fannie Mae Form 1004D/Freddie Mac Form 442), or Uniform Residential Appraisal Report (Fannie Mae Form 1004/Freddie Mac Form 70), Exterior Only Appraisal Report (Freddie Mac Form 2055), Individual Condominium or PUD Unit Appraisal Report (Fannie Mae Form 1073/Freddie Mac Form 465), Disaster Inspection Certification from a Licensed Certified Inspector.
Flagstar will apply a 15 day, no cost extension to loans in the counties/parishes impacted by Hurricane Harvey that meet the following criteria: Must have a lock expiration date that falls between Friday, August 25, 2017 and Friday, September 15, 2017. Loan must be in underwriting and is not funded or in a closing package received status (i.e. approved with conditions, conditions received, and final approval). Flagstar will reduce funding extension fees to 1 basis point per day on delivered loans provided that all conditions are cleared except for the appraisal re-inspection.
AXIS AMC has been through several disasters across the country, and has been here to help guide and navigate our industry partners through each of them. Axis expects to see a multitude of Disaster Certifications needed on properties in those markets that have been affected although lending partners and other clients may have different reporting requirements and needs. If possible, send Axis any policy or requirements that you feel are specific to you and Axis will try to accommodate.
CoreLogic estimates that about 70% of the flood damage in Houston was uninsured. Lenders are worried about everything from lost closing packages to forced-placed insurance policies. The ABA estimates about 1,000 bank branches were impacted by the unprecedented rainfall and flooding of Hurricane Harvey. Hurricane Harvey comes at a time when the National Flood Insurance Program owes $24.6 billion to the Treasury already. This will put pressure on a program that is expiring this month. The impact of Harvey following Katrina means bankers should prepare for extreme regulatory scrutiny around all things flood-related at upcoming exams.
With the odds increasing that Irma will impact U.S. holdings, including Florida, the Federal Emergency Management Agency (FEMA) is busy indeed. Those impacted should register with FEMA online, in person at a disaster recovery center or by calling 1-800-621-3362. They should also have their homeowner’s insurance company contact info, plus flood or earthquake insurance company, if either applies, and their mortgage servicer.
What if a borrower can’t pay their mortgage? If the disaster makes it impossible to make monthly house payments, borrowers should ask their servicer for mortgage forbearance. A forbearance allows one to stop making payments for an agreed-upon time. In a forbearance agreement, one might make partial payments or stop making payments for a specific time. Generally, a forbearance lasts up to six months and can be extended up to another six months. Interest still accrues during the time the debtor isn’t making full monthly payments. But under a forbearance agreement, the lender won’t charge late fees or report them to credit bureaus.
Of course, the lender/servicer will want the mortgagor to catch up on missed payments after the forbearance period is over. That might involve paying extra every month for a few years, modifying the loan, or reaching some other negotiated agreement. Freddie Mac spread the word that if applicable, a mortgage loan is in forbearance for 24 months, Freddie will repurchase the loan from its mortgage participation certificates.
Some borrowers talk with a Department of Housing and Urban Development-approved housing counselor before agreeing to forbearance. HUD: 1-800-569-4287.
There is also aid available. Direct federal aid consists mostly of loans from the Small Business Administration which oversees delivering disaster-related loans to individuals and families. The SBA extends loans at favorable interest rates to replace or repair primary residences. Someone can borrow up to $200,000 to cover renovation or construction costs, and regardless of whether someone is a renter or a homeowner, the SBA will lend you up to $40,000 to replace personal property such as clothing, furniture, appliances and vehicles.
FEMA offers grants to fill in gaps between insurance payouts and SBA loans. The maximum grant is $33,300 per household for disasters that happen in the fiscal year that ends Sept. 30, 2017. Grants can be used for expenses such as basic home repairs that aren’t covered by insurance, temporary rent and disaster-caused medical and child care. For more information, read the section called “What Does Individual Assistance Cover?”
The Federal Housing Administration has a program that’s designed to help disaster survivors rebuild or buy replacement homes. Under the Section 203(h) program, the FHA insures mortgages for people whose homes were destroyed or damaged in disasters. Borrowers don’t have to make a down payment.
Even when a house is destroyed the mortgagor should continue paying on the note until they have talked with the servicer and have reached a settlement with the insurance company. After all, the borrower promised to repay the loan when they signed the mortgage documents at closing. The borrower is liable for the loan debt, and making their payment is part of the borrower’s contractual obligation.
Servicers are contacting borrowers. In response to Hurricane Harvey, Freddie Mac is allowing servicers to “verbally grant” 90-day forbearances, and Fannie Mae is letting servicers grant 90-day forbearances “even if they cannot contact the impacted homeowner immediately.”
AFR Wholesale is conducting a webinar for brokers to provide answers and solutions to guide their customers with the best options to help them rebuild in the wake of natural disasters, like Hurricane Harvey. The webinar will focus on products, like the 203(h) mortgage insurance program that helps victims in Presidentially designated disaster areas recover by making it easier for them to re-establish themselves as homeowners. Scheduled for this Friday, September 8th from 2-3PM EST, those interested in this timely webinar on disaster relief resources can register here.
Wells Fargo is taking steps to assist borrowers in the Hurricane Harvey affected areas. If you’re aware of a Wells Fargo Home Lending borrower in need, share the following information: Wells Fargo Home Lending customers can contact us at 1-888-818-9147, Monday through Friday from 6:00 a.m. to 10:00 p.m. CT, and Saturday from 8 a.m. to 2PM CT. All Wells Fargo customers can reach us at 1-800-TO-WELLS if they need assistance or have questions. Our mobile response unit will be deployed to the affected area once the situation is stabilized. Wells Fargo customers will be able to receive in-person assistance with their mortgage, home equity or auto loans. Wells Fargo is waiving ATM fees for customers in the affected areas, as well as reversing other fees – such as late fees – for all our consumer products, including credit cards and checking accounts.
On 9/1/2017, with Amendment #3 to DR-4332, FEMA announced federal disaster aid with individual assistance for 3 additional Texas counties.
The Texas Appraiser Licensing and Certification Board (TALCB) has announced that any appraiser license that expires in the month of August will be extended 30 days due to delays caused by Hurricane Harvey. In addition, open applications for licenses that expire between August 21, 2017 and September 30, 2017 will be extended by 30 days. If a Pacific Union Financial loan file includes a Texas appraisal license with an expired license that is within the dates detailed above, include a screenshot of the TALCB announcement with the appraiser’s license in the loan file.
Loans secured by properties located in impacted areas are subject to suspension of funding or proceeding with caution according to standard Pacific Union protocol. Standard requirements for disaster areas apply for the funding of properties as they relate to expectations from appraisers for existing pipeline and new applications. For loans secured by properties in affected areas, the appraiser must comment on the disaster and whether there is an impact to the property and value. In addition, all types of issued insurance policies (hazard, flood, windstorm, etc.) must have binding authority on the subject property. Its Disaster Area Policy, Pacific Union reserves the right to impose restrictions and/or suspend funding, without notice, in additional areas subject to any adverse event that may impact the safety/habitability/value of impacted properties.
Mortgage Solutions Financial has posted revised information on affected areas due to Hurricane Harvey. Lenders are reminded its disaster policy must be followed.
PennyMac posted updates to Texas Hurricane Harvey requirements.
FAMC is requiring disaster re-inspections that are dated after the incident end date on properties affected by Hurricane Harvey. Due to unprecedented levels of rainfall and the ongoing flooding caused by this event, the extent of all impacted areas is currently unknown. Once the incident end date is established by FEMA, it will be published on the Disaster County Detail Worksheet located on the FAMC website.
M&T Bank will enforce the Disaster Re-Inspection Policy for all properties located in the affected counties. For loans secured by properties, in the designated disaster areas, and appraised prior to the Federal Government / State Government declaration, refer to the M&T Bank matrix for procedures.
Before going on, readers should a commentary piece yesterday was written by NerdWallet’s Holden Lewis. The article for those impacted by disasters is titled, “What to do after a disaster hits your home, mortgage,” was published on Sept. 1 and can be found on this page. Credit is due where credit is due, and in this case to Mr. Lewis – my apologies.
Of particular interest to lenders looking to pick up a point or two is the Community Reinvestment Act (CRA) information. “Financial institutions may receive CRA consideration for community development loans, investments, or services that revitalize or stabilize federally designated disaster areas in their assessment areas or in the states or regions that include their assessment areas. For additional information, institutions should review the Interagency Questions and Answers Regarding Community Reinvestment here.”
Freddie Mac confirmed that its disaster relief options, like Harvey, will be available to homeowners in impacted areas. “Freddie Mac’s disaster relief options will be available to borrowers with homes in presidentially-declared Major Disaster Areas where federal Individual Assistance programs are made available to affected individuals and households…Freddie Mac mortgage relief options for affected borrowers in these areas include: Suspending foreclosures by providing forbearance for up to 12 months; Waiving assessments of penalties or late fees against borrowers with disaster-damaged homes; and not reporting forbearance or delinquencies caused by the disaster to the nation’s credit bureaus.”
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The IRS has provided tax relief to victims of Hurricane Harvey. Those in Texas who have been affected by the storm have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments. This includes an additional filing extension for taxpayers with valid extensions through October 16, and businesses with extensions through September 15.
Currently, the IRS has said individuals who reside or have a business in Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria, and Wharton Counties may qualify for tax relief. For up-to-date information, please see IRS News Release: Tax Relief for Victims of Hurricane Harvey in Texas.
REQUIREMENTS FOR POSTPONEMENT OF 1031 EXCHANGE TIME PERIODS
If the taxpayer is considered an “affected taxpayer,” then additional guidance concerning their 1031 exchange is provided in Revenue Procedure 2007-56. Section 17 of Revenue Procedure 2007-56 provides postponement provisions specific to 1031 exchange deadlines that apply in the case of Presidentially-declared disasters. Section 17 extends the 45- and 180-day periods in forward and reverse exchanges that fall on or after the date of a Presidentially-declared disaster by the later of 120 days or the date specified in the relevant IRS News Release, but not beyond the due date for filing the tax return for the year of the transfer.
To qualify for an extension of the IRC Section 1031 deadlines, the relinquished property must have been transferred on or before the Presidentially-declared disaster, and the taxpayer is an “affected taxpayer” or has difficulty meeting the 45-day identification period or 180-day exchange deadline. For these purposes, “difficulty” generally includes, but is not limited to, the following:
Every taxpayer should be directed to their tax advisor to determine whether they are eligible for the relief and to obtain additional information with respect to their particular circumstances. Learn more @ https://apiexchange.com/tax-relief-victims-hurricane-harvey/.
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According to CNBC not buying a home is the single biggest mistake of a millennial. Financial author David Bach says that, “millennials are making a big mistake by not owning a home.” According to his calculations today’s homeowner is on average 38 times wealthier than a renter.
Rent vs. buy
There is a lot of debate out there on if it is better rent or buy. According to Trulia buying is 28% less expensive than renting nationwide. For those of you in the Austin-Round Rock area buying a home is 45% cheaper than renting.
Trulia makes this calculation based on the following assumptions: a $1,650 monthly rent, $230,000 target home price, staying in the home for 7 years, a 25% income tax rate, and a 3.65% mortgage rate.
Zillow also offers a breakeven horizon calculator to calculate how many years it will take before the cost of buying will equal the cost of renting. For Austin, TX, using the same $1,650 monthly rent and $230,000 target home price, after 1 year and 11 months, buying will be cheaper than renting when you out 20% down. If you put 10% down, after 2 years and one month buying will be cheaper than renting.
Making the investment
Bach argues that you have to live somewhere for the rest of your life, so you might as well invest in a home that you could own permanently. By the time you spend all of your money on rent, you come up empty handed with no investment.
For those considering home ownership for the first time, here are a few tips offered by the financial author.
Tips for first-time homeowners:
Remember, your first home is more than likely not going to be your dream home. This is ok. Get in a home and begin to build your wealth. Bach says that by the time you are in your 50’s or 60’s you should be able to retire off the money from your home.
The decision is yours
As with any financial decision you make, it depends on your personal situation. Home ownership needs to be the right decision for you and one that you enter into both prepared and cautiously. It takes financial stability and responsibility to be a homeowner, and you need to fully understand the cost associated with your home. Make sure you partner with a trusted lender to understand your financial situation, a REALTOR® as you embark on this decision, and title company to help you through the homebuying process. The American Land Title Association offers a Home closing 101 to help you through this process.
With home prices remaining moderate with only slight increases and continuing low interest rates, my bet is that the American Dream is still a safe bet – no matter what generation you are.
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At the National Association of Real Estate Editors (NAREE) Conference in Denver, Douglas Yearley, CEO of Toll Brothers presented the Keynote Address “A Vision for Homebuilding”. Here is a snapshot of his state of builder/buyer.
Business is good
Toll Brothers announced earlier this summer that they had the best spring selling season that it has had in the past ten years. This can be attributed to many things:
There are low inventories in most markets in used homes, and we finally have release of pent up demand. As the economy improves and personal balance sheets improve, pent up demand could bring people off the sidelines.
A slow recovery
According to Toll Brothers, we have seen a slower recovery than past cycles:
We are not quite where we should be. We are still behind the demand, but this only leave room for growth.
Buyers buying new and where the sun shines
There is a 32% premium from a new home to used home. The average is 18%. People are gravitating to buying new homes as the used inventory is older. And, energy efficiency and the opportunity to customize home is driving the premium.
More than 50% of Toll Brothers’ business in done in the West. Denver to the West is where builders are focused. Builders are focused on pro-business states, where land is available and where people want to live – where the sun shines. Boomers are buying in Florida, no big surprise here. And, Texas, a pro-business state, is doing very well in Dallas.
Demographics – the Boomer is driving growth
Baby boomers continue to drive Toll Brothers’ business. As they did for years when they moved to suburban areas to “move up”, and still today as they downsize and prepare for the next stage of their life. Many are buying into active-adult communities or are buying second homes in Palm Springs, Florida and Scottsdale, Arizona.
Design trends – casual family-friendly spaces
According to Toll Brothers the open, casual living with free flow indoor and outdoor space has completely caught on. People want casual environments where living space is connected. And, where the outdoors is a continuation of the home. Where the back of the home will be one big wall of glass making the outdoors, the indoors.
There is also a trend for multi-generational living. With additional living space with a sitting area, little kitchen area, direct access outside and separate entry in the home for older generations living with their family.
And, smart home solutions are evolving and expanding with the ability to remotely control the home.
Labor on the rise
We went from two million houses a year to 500,000. Labor dramatically went away. And, every market has a different issue; there is no national plumber. As we get further into recovery, we are seeing improvements and a return of the builder labor market. Contractors are ramping up their businesses. There is still cost pressure, but according to Yearley, it is definitely less now than it was a year or two ago.
Getting creative with land acquisition
For Builders it is all about the land – whether you are building one home or a master-planned community. You are stuck with the land once you buy it. Builders have to be much more creative in how they look for buy land because people want to live differently. Buyers want to live in a more connected community. And, creativity comes into play due to the availability of land in urban areas. An example of this creativity in land acquisition is buying a car dealership and renovating it. Or, building a park with the mixed use and condo development as part of the sales price for the land, like Maxwell House, former Maxwell House Coffee plant, in Hoboken, NJ. This was the largest in the world and a landmark on the Hudson River since 1939. What was a tragedy for Hoboken is now a trendy redevelopment leveraging both the best of the outdoor and the indoor space.
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