Category Archives: Real Estate Law

FHA, Mortgages, Attorneys, and Title Abstracts

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This strikes me as so unreasonably funny, that I had to share this TRUE story with you all… I am never as amazed as when dealing with lawyers and government bureaucrats… but here goes… enjoy!!!


Part of rebuilding New Orleans (after Katrina) often caused residents to be challenged with the task of tracing titles to their homes… back potentially hundreds of years. With a community rich with history stretching back over two centuries, houses have been passed along through generations of family, sometimes making it quite difficult to establish ownership. Here’s a great letter an attorney wrote to the FHA on behalf of a client:

You have to love this lawyer ……..

A New Orleans lawyer sought an FHA loan for a client.. He was told the loan would be granted if he could prove a satisfactory title to a parcel of property being offered as collateral. It took the lawyer three months to track down the full title to the property which dated back to 1803. After sending the information to the FHA, he received the following reply.

(Actual reply from FHA):

“Upon review of your letter adjoining your client’s loan application, we note that the request is supported by an Abstract of Title. While we compliment the able manner in which you have prepared and presented the application, we must point out that you have only cleared title to the proposed collateral property back to 1803. Before final approval can be accorded, it will be necessary to clear the title back to its origin.”

Annoyed, the lawyer responded as follows:

(Actual response):

“Your letter regarding title in Case No.189156 has been received. I note that you wish to have title extended further than the 206 years covered by the present application. I was unaware that any educated person in this country, particularly those working in the property area, would not know that Louisiana was purchased by the United States from France , in 1803 the year of origin identified in our application.  For the edification of uninformed FHA bureaucrats, the title to the land prior to U.S. ownership was obtained from France , which had acquired it by Right of Conquest from Spain . The land came into the possession of Spain by Right of Discovery made in the year 1492 by a sea captain named Christopher Columbus, who had been granted the privilege of seeking a new route to India by the Spanish monarch, Queen Isabella. The good Queen Isabella, being a pious woman and almost as careful about titles as the FHA, took the precaution of securing the blessing of the Pope before she sold her jewels to finance Columbus ‘s expedition…Now the Pope, as I’m sure you may know, is the emissary of Jesus Christ, the Son of God, and God, it is commonly accepted, created this world. Therefore, I believe it is safe to presume that God also made that part of the world called Louisiana . God, therefore, would be the owner of origin and His origins date back to before the beginning of time, the world as we know it, and the FHA. I hope you find God’s original claim to be satisfactory.

Now, may we have our damn loan?”

The loan was immediately approved.

Closing Attorney Commits Mortgage Fraud

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Everybody sit down to read this one. You are going to be surprised. It has come to my attention that a local (Rhode Island) real estate attorney has been charged with mortgage fraud, in a large number of instances. What he did was this: for closings he did, he accepted the mortgage deposit from the buyers lender, and filed the proper documents with the town. In those documents, he also cleared the previous liens on the properties. All good so far, right?

What he did next will knock your socks off.

The guy then intentionally failed to pay of the previous liens, instead using the monies from the transaction to pay the previous mortgages monthly, as if the property had never been sold! Do you get that? He filed the documents that said that the previous lien holder had been cleared, and added the new lien(s) to the property. He then never paid off the previous liens, and instead PAID THE MONTHLY PAYMENTS. He never informed the seller’s lien holders that the property had been sold. So for each of these properties, there were two sets of lien holders, the previous owners mortgage holders, and the current owners mortgage holders, although he did cancel the previous ones at the town hall. So in effect, he stole the difference between the sale price and what had to be paid to the seller, if anything.

Of course, this has now come back to bite this guy, with the Sheriff showing up at his office and arresting him, charging mortgage fraud. This was only discovered because one of the properties he did this on was resold recently, and the lien holder from the previous seller was the same as the one financing the purchase to this second buyer of that property.

Are you amazed at this guy yet?

People, not only should you choose your Realtor carefully, but you should also choose the closing attorney just as carefully… I am not sure how one could know that this had been done since the town hall records would show only your current lien holders. Anyone have any ideas on this?

Sellers, be sure to check with your mortgage company to ensure that your loan has been cleared after the sale of your property. In instances like this, you are still on record for owing the money on your debt. You may of course discover this if you go to buy another house, but this guy got away with this for several years.

Now he will go to jail, very likely.

Extending the Tax Credit: Here is what is being discussed in Congress now

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Support for expansion and extension of the tax credit is growing in Congress. Here is a preliminary look at what might be coming down, extended out to people who are IN a Purchase Contract by the end of April, but closing before June, 2010.

Dodd-Lieberman-Isakson Amendment
$8,000 Homebuyer Tax Credit

The Issue:
• Ask your Senator to support the DoddLiebermanIsakson amendment by extending the
$8,000 firsttime homebuyer tax credit.
The DoddLiebermanIsakson amendment would:
• Extend the tax credit to June 30, 2010.
• Expand the credit by removing the firsttime homebuyer requirement.
• Raise the income limits to $150,000 ($300,000 for joint returns).
• For purchases made in 2010, taxpayers are able to claim the credit on their 2009 income tax return.
• Maintains that homebuyers do not have to repay the credit, provided the home remains their main residence for 36 months after the purchase date.
• The 36 month recapture provision is waived for a member of the Armed Forces on active duty who has to move because of a military order.

Why it is needed:
• The housing market remains fragile.
o The market has improved and prices have stabilized in many areas, but the market has not fully corrected. Retaining the credit sustains that recovery.
• The tax credit has been effective.
o NAR research suggests that as many as 355,000 sales this year can be directly attributed to the availability of the credit.
o One prominent economist attributes 400,000 sales to the availability of the credit.
• The tax credit stimulated market activity.
o The volume of housing sales has improved steadily every month since the credit was
enacted.
o The credit pulled people from the sidelines and created some momentum that had been
absent.
• Home sales continue to stimulate economic activity.
o The economy will never fully recover until housing markets fully recover. Thus, the
stimulus the credit provides is still needed. NAR estimates that every sale generates
approximately $60,000 of additional economic activity.

Will the Cap and Trade Bill Have an Impact on Housing Sales?

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In the interest of creating a better environment, new legislation that is along the lines of the Waxman-Markey Cap and Trade Bill is scheduled to be unveiled by the end of the month.  The bill will include language for a new National Building Code calling for homes to be more energy efficient.

With regard to new construction, there have been some notable innovations in green building designs and the use of these should be encouraged in new homes.

However, according to a recent article, the proposed code has a provision which would mandate that all housing transactions be required to undergo and pass an environmental inspection.  In older home sales this could be significant.  Windows that are not airtight and appliances that are not Energy Star certified would have to be replaced before the sale could happen.

The fear is that this bill could possibly affect the sales of “fixer-upper” homes; however, I cannot honestly see the government moving in with these types of restrictions at this point which would severely impact the sale of the huge inventory of foreclosure properties now sitting on the block with millions more expected.

Currently, sellers in Massachusetts and many other states are mandated to have smoke and carbon monoxide detectors as a requirement before any property can be transferred.  Also, owners with private septic systems must have a Title V inspection and it fails, they are required to remedy the problem by installing a new septic system.

Most people are onboard with these items since they have a huge impact on safety and protecting the environment.  However, if home sellers have to repair every problem prior to a sale, it could significantly drive up the cost of selling a home.

At a time when the country is spending countless sums of money to shore up the housing market with a first-time tax credit and the possibility of extending and expanding this program, it seems contradictory to come up with legislation that could sabotage these efforts.

I will be on the lookout for more clarification of this bill in the coming weeks and hope that the stir about it is more smoke than fire.

With the housing market still in a depressed state, it is hard to imagine that the government would choose this time to make housing sales more difficult.

Mandie Sullivan, Top Producer Buyer Agent!

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Just wanted to congratulate Mandie Sullivan on closing on 3 homes over the last month… and for having 2 more scheduled in the coming two weeks… Great Job! I will add that one deal has been delayed until the end of the month… seems the wife had no choice but to give birth Thursday! Today’s closing therefore was postponed… Of course, CONGRATULATIONS to the new parents of a 7lb 11oz baby boy!