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Community Rallies Around Fla. Real Estate Wire Fraud Victim

A single S. Fla. mother lost half of her $63K down payment to wire fraud criminals and thought she lost her dream house – one that she worked multiple jobs for many years to afford. But after a TV news story, RE industry pros and strangers stepped in to help.

MIAMI – Patricia Verlino, a South Florida resident, thought she lost the chance to buy her dream home after a wire fraud scam duped her out of a $63,000 down payment – her life savings. But more than $30,000 in crowdfunding donations from strangers and the community helped her partially recover funds and still close on the home.

Real estate wire fraud has been around for a while, but as long it continues to reel in victims, it won’t go away. While scammers continue to find novel ways to steal other people’s money, it usually involves a buyer who is persuaded, often through a fake “verify your information” email, to give away their email password. Once a scammer has that password, they log in to the buyer’s account and monitor the transaction. Then, the day money must be wired, they email the buyer, act as if they’re (usually) the title company, and instruct them to wire the money to them via a fake account.

A growing number of homebuyers face the threat of wire fraud in a real estate transaction, and in many of cases, it ends with the buyer losing a home and their entire down payment.

Verlino spent years working multiple jobs in order to save for a $63,000 down payment to buy a home of her own. Then she lost it.

As with most wire fraud cases, Verlino’s real estate transaction seemed to be going smoothly. She received an email that appeared from her original title company that provided instructions of how to wire her funds prior to closing. She followed the directions.

But the email was fake. Verlino’s two payments – which totaled $63,000 – were wired to a scammer instead.

It was “the worst thing you can go through,” Verlino told Fox News.

Verlino reported the case to police and was able to recover $30,000 before the wire transfer was finalized – but she lost half of her money and didn’t have enough to close on the house. However, after help from the community, strangers and real estate industry professionals, Verlino was able to raise the funds needed to close.

“It’s a wonderful feeling when you see a team of industry professionals come together for the greater good,” Kevin Tacher, owner of the title insurance company Independence Title, told Fox News. A local furniture company, City Furniture, also donated furniture for her children’s bedroom.

Source: “Mom Robbed of $63k in Real Estate Scam Closes on House Thanks to Donations From Strangers,” Fox News (July 6, 2021)

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Best Cities for Relocating Americans? 3 Fla. Cities in Top 6 Spots

Since 2017, many people moved to warmer climates. While Las Vegas ranked No. 1, Jacksonville, Tampa and Orlando made up half of the top six destinations.

NEW YORK – Americans have been on the move since the pandemic, but “relocating” didn’t start with the first sign of a virus. As a trend, many Americans moved to warmer weather climates, with Las Vegas, Phoenix and Jacksonville the top three metros for the largest share of homeowners move in since 2017, according to a new study from LendingTree.

In a list of 50 metros, the four included Florida cities ranked:

3. Jacksonville: 1.04 million total household – 21.99% moved in since 2017

5. Tampa: 2.13 million households – 20.81% moved in since 2017

6. Orlando: 1.60 million households – 13.99% moved in since 2017

30. Miami: 3.63 million households – 11.8% moved in since 2017

On the other hand, metros like Los Angeles, San Jose, Calif., and Pittsburgh saw the fewest number of homeowners move in over the past few years.

LendingTree analyzed Census Bureau data of the 50 largest metro areas to pinpoint the largest share of homeowners who relocated in 2017 or later. Researchers also looked at how long homeowners have lived in their homes, as well as local home price growth.

Metros with the largest share of recently moving homeowners have also seen home prices appreciate faster than metros where owners are more likely to stay in place longer.

Source: “LendingTree Finds the Metros Where Homeowners Most Recently Moved,” LendingTree (July 7, 2021)

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New App Is the Airbnb of Private Pool Rentals

A new app allows homeowners with pools to rent them out by the hour – mostly in the $15 to $60 range – and help offset the cost of pool maintenance.

ORLANDO, Fla. – It’s a hot, roasting, sweltering Florida summer day. You long for a way to cool off, but even though Florida is home to more than 2 million pools, you don’t have one.

But now a marketplace app is letting the pool-less dive into their neighbors’ swimming holes. Swimply is the Airbnb of pools, and it’s growing in popularity around the country and in metro Orlando.

For pool owners such as Jack Lazinsk, it’s a way to turn his unoccupied patio into an asset. “We don’t use our pool much,” he said. “The kids do, but to be honest, they haven’t been in it this year since school got out.”

The way it works: Hosts list their pools and set their own hourly rate, with some going up to $100 an hour or more. Swimply takes 15%. Guests book the pools, sometimes with an extra charge for the more guests that are coming.

Simply has 15,000 pools listed nationwide and 140 in metro Orlando.

Lazinsk, 41, said he was interested the moment he saw the idea on an episode of “Shark Tank.” “Before me and the spouse could even talk about it, I was already downloading the app,” Lazinsk said.

“Owning a pool is expensive,” said Sonny Mayugba, Swimply’s vice president of growth. “This is a way to cover some of those costs.”

And those costs have gone up this year, as a chlorine shortage has left pool owners scrambling to keep their swimming spaces clean.

Though the app launched in 2018, Mayugba said it exploded in popularity during the pandemic, experiencing 4,000% growth over 2019. “Since people couldn’t travel, they were looking for anything to do,” he said.

Lazinsk said having people use his pool during the pandemic never presented a sanitation issue for his family. “We just did a very thorough restroom cleaning each time,” he said.

Pandemic or no, some people may be wary at the idea of inviting strangers to use their pool. But Lazinsk said they don’t really interact and no one has abused his property.

“When it’s good, they’re very clean, they don’t make a mess,” he said. “We’ve maybe found a diaper in the trashcan or something.”

The company also offers $1 million in liability insurance and $10,000 in property insurance to its hosts.

Later this year, Mayugba says they plan to add a new feature: Joyspace. This is for other amenities people have at their houses and want to share. “Minigolf courses, tennis courts, basketball courts, climbing walls, outdoor kitchens,” he said. “It’s amazing what people have built in their homes that they’re willing to share.”

The 32-foot-by-16-foot pool at Lazinsk’s Sanford home is listed on the app for $15 per hour, with an extra $3 per hour per guest over five guests. While Mayugba offers tales of hosts making tens of thousands of dollars, Lazinsk hasn’t quite seen those returns. Over the past year and a half, Lazinsk’s average has been between roughly $25 and $50 a session, though he has had a few over $100.

Still, he says it’s been worth it. “In my mind, it keeps it clean and becomes a profitable venture – instead of just sitting there.”

© 2021 Orlando Sentinel. Visit orlandosentinel.com. Distributed by Tribune Content Agency, LLC.

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Hurricane Season, Multifamily Housing and Preparing

WASHINGTON – Tropical Storm Elsa’s move across Florida and the Southeast is a pointed reminder for multifamily property owners to take serious stock of their strategies for preparing and dealing with hurricanes.

The 2020 hurricane season saw record breaking activity, and 2021 isn’t likely to offer much reprieve. Although Elsa was initially predicted to hit U.S. land as a Category 1 hurricane, the tropical storm traveled through Florida, Georgia the Carolinas, leaving behind destruction and flooding.

And although Elsa marked one of the first major storms of the season, it certainly won’t be the last. NOAA predicts this season could see 13 to 20 named storms, of which six to 10 could become hurricanes, including three to five major hurricanes.

With all this at play, another active hurricane season may seem overwhelming for our industry. Here are a few steps to ensure you’ve made all the necessary preparations as the season gears up.

WASHINGTON – Tropical Storm Elsa’s move across Florida and the Southeast is a pointed reminder for multifamily property owners to take serious stock of their strategies for preparing and dealing with hurricanes.

The 2020 hurricane season saw record breaking activity, and 2021 isn’t likely to offer much reprieve. Although Elsa was initially predicted to hit U.S. land as a Category 1 hurricane, the tropical storm traveled through Florida, Georgia the Carolinas, leaving behind destruction and flooding.

And although Elsa marked one of the first major storms of the season, it certainly won’t be the last. NOAA predicts this season could see 13 to 20 named storms, of which six to 10 could become hurricanes, including three to five major hurricanes.

With all this at play, another active hurricane season may seem overwhelming for our industry. Here are a few steps to ensure you’ve made all the necessary preparations as the season gears up.

Ask the experts

It is never too late to implement preparedness measures. FEMA’s Business Ready Hurricane Toolkit is a valuable resource for apartment firms looking for guidance and steps to take in mitigating the risk posed by the looming storm season. The toolkit can help firms identify their risk and develop emergency plans and provides practical checklists.

While the country is well on its path to recovery from the COVID-19 pandemic, FEMA recently issued its COVID-19 Pandemic Operational Guidance All-Hazards, which called attention to the threat that disasters pose in disrupting pandemic mitigation efforts, especially vaccine rollouts. FEMA’s document offers apartment firms critical direction on response and recovery operations amidst lingering COVID-19 protocols and can be applied to any disaster operation from hurricanes to wildfires and flooding.

NMHC’s guide on establishing an Incident Response Plan for hurricane season and other disasters can also help inform a firm’s efforts.

Find out who has you covered

Familiarizing yourself with your firm’s insurance policies and their coverage is critical to your preparedness planning. This includes checking if your coverage is up to date, its policy limits, deductibles and limitations. If the valuation of your property has changed in the past year from construction or renovation, this should be reflected in your policy.

Whether your insurance policy is through a private company or through the National Flood Insurance Program (NFIP), there are often policy limitations property owners overlook. The NFIP, for example, only provides up to $500,000 of coverage per building and carries a range of policy limitations that could leave financial risk caused by flooding events to go unmitigated.

Similarly, some private flood insurance policies do not cover flooding caused by wind, which can include storm surges created by hurricanes. Because of this, it’s important owners have a thorough understanding of their policies and they should consult their insurance brokers about additional policy options to better protect their assets.

Even if your property has not needed flood or other catastrophic coverage in the past few years, you still may not be off the hook. An increase in extreme weather events means property owners outside coastal areas and known flood zones should review their insurance policies and preparedness plans.

Do some resident outreach

Flood insurance can offer a critical financial shield not just for property owners, but for residents as well. Traditional renter’s insurance does not cover the value of residents’ possessions in the aftermath of flooding. So as hurricane season kicks off, owners should encourage their residents to take out flood insurance policies. Policies are available through the NFIP at relatively affordable rates. If residents are on stable financial grounds after a storm, property owners have greater visibility into rent revenue streams post storms.

Now that your residents are prepared going into hurricane season, what happens if a storm is on its way? If a violent storm is predicted for the area, owners have a hefty to-do list for safely securing the property. Even so, communicating with residents should be the upmost priority. If local officials make evacuation plans for the region, it’s critical residents are aware of these plans, including details like the locations of shelters on higher ground.

Residents should have all the resources and information needed to help them weather this tumultuous time. Links to the local disaster or emergency management agency, personal safety tips, relevant checklists, basic instructions for minimizing property damage and the FEMA mobile app are all resources that will go a long way. Removing furniture and other items from balconies and using flashlights instead of candles in the event of a power outage should be included on checklists.

Pick up the pieces

After a storm or other natural disaster has hit the area, it can be challenging for property owners to get their residents and community back on their feet. In a worst-case scenario, owners may need to inform residents about alternative housing options and financial assistance.

FEMA and the Red Cross track shelter information and locations and FEMA’s Transitional Sheltering Assistance program is available for residents in need of shelter for an extended period of time. For financial assistance or low-interest loans to cover personal property damage, let residents know they can go to DisasterAssistance.gov to begin the qualification and registration process for these and other similar programs.

What else can property owners do to help residents during this time? In the aftermath of past storms, many firms choose to freeze rents, waive late fees or lessen lease terms to help their residents through this challenging time.

Another critical step firms should take after a storm causes property damage is to contact their loan servicers and insurance companies. Thoroughly photographing and documenting any damage is crucial to filing a claim. On the operational front, many government agencies have disaster recovery guidance and protocols. These resources can answer important questions surrounding occupancy standards, vacant units, evictions, Section 8 residents and post-disaster relief.

Focus on resiliency

Although NOAA predicts this hurricane season won’t be as busy as last year, it only takes one storm to greatly damage a community. Beginning with this year’s hurricane season, NOAA has raised the number of storms classifying an “average” season highlighting that extreme weather events are intensifying and increasing in occurrence.

This means the safety and financial risk hurricanes pose to property owners and residents isn’t going anywhere fast. But owners don’t have to be left defenseless during the stormy season. Even with varying resources, all apartment firms can take thorough stock of the risks they face and plan all the steps they can take to lessen the blow. With an all-hands-on-deck approach to planning, this hurricane season can be safer for your residents and community.

2020 States News Service

It is never too late to implement preparedness measures. FEMA’s Business Ready Hurricane Toolkit is a valuable resource for apartment firms looking for guidance and steps to take in mitigating the risk posed by the looming storm season. The toolkit can help firms identify their risk and develop emergency plans and provides practical checklists.

While the country is well on its path to recovery from the COVID-19 pandemic, FEMA recently issued its COVID-19 Pandemic Operational Guidance All-Hazards, which called attention to the threat that disasters pose in disrupting pandemic mitigation efforts, especially vaccine rollouts. FEMA’s document offers apartment firms critical direction on response and recovery operations amidst lingering COVID-19 protocols and can be applied to any disaster operation from hurricanes to wildfires and flooding.

NMHC’s guide on establishing an Incident Response Plan for hurricane season and other disasters can also help inform a firm’s efforts.

Find out who has you covered

Familiarizing yourself with your firm’s insurance policies and their coverage is critical to your preparedness planning. This includes checking if your coverage is up to date, its policy limits, deductibles and limitations. If the valuation of your property has changed in the past year from construction or renovation, this should be reflected in your policy.

Whether your insurance policy is through a private company or through the National Flood Insurance Program (NFIP), there are often policy limitations property owners overlook. The NFIP, for example, only provides up to $500,000 of coverage per building and carries a range of policy limitations that could leave financial risk caused by flooding events to go unmitigated.

Similarly, some private flood insurance policies do not cover flooding caused by wind, which can include storm surges created by hurricanes. Because of this, it’s important owners have a thorough understanding of their policies and they should consult their insurance brokers about additional policy options to better protect their assets.

Even if your property has not needed flood or other catastrophic coverage in the past few years, you still may not be off the hook. An increase in extreme weather events means property owners outside coastal areas and known flood zones should review their insurance policies and preparedness plans.

Do some resident outreach

Flood insurance can offer a critical financial shield not just for property owners, but for residents as well. Traditional renter’s insurance does not cover the value of residents’ possessions in the aftermath of flooding. So as hurricane season kicks off, owners should encourage their residents to take out flood insurance policies. Policies are available through the NFIP at relatively affordable rates. If residents are on stable financial grounds after a storm, property owners have greater visibility into rent revenue streams post storms.

Now that your residents are prepared going into hurricane season, what happens if a storm is on its way? If a violent storm is predicted for the area, owners have a hefty to-do list for safely securing the property. Even so, communicating with residents should be the upmost priority. If local officials make evacuation plans for the region, it’s critical residents are aware of these plans, including details like the locations of shelters on higher ground.

Residents should have all the resources and information needed to help them weather this tumultuous time. Links to the local disaster or emergency management agency, personal safety tips, relevant checklists, basic instructions for minimizing property damage and the FEMA mobile app are all resources that will go a long way. Removing furniture and other items from balconies and using flashlights instead of candles in the event of a power outage should be included on checklists.

Pick up the pieces

After a storm or other natural disaster has hit the area, it can be challenging for property owners to get their residents and community back on their feet. In a worst-case scenario, owners may need to inform residents about alternative housing options and financial assistance.

FEMA and the Red Cross track shelter information and locations and FEMA’s Transitional Sheltering Assistance program is available for residents in need of shelter for an extended period of time. For financial assistance or low-interest loans to cover personal property damage, let residents know they can go to DisasterAssistance.gov to begin the qualification and registration process for these and other similar programs.

What else can property owners do to help residents during this time? In the aftermath of past storms, many firms choose to freeze rents, waive late fees or lessen lease terms to help their residents through this challenging time.

Another critical step firms should take after a storm causes property damage is to contact their loan servicers and insurance companies. Thoroughly photographing and documenting any damage is crucial to filing a claim. On the operational front, many government agencies have disaster recovery guidance and protocols. These resources can answer important questions surrounding occupancy standards, vacant units, evictions, Section 8 residents and post-disaster relief.

Focus on resiliency

Although NOAA predicts this hurricane season won’t be as busy as last year, it only takes one storm to greatly damage a community. Beginning with this year’s hurricane season, NOAA has raised the number of storms classifying an “average” season highlighting that extreme weather events are intensifying and increasing in occurrence.

This means the safety and financial risk hurricanes pose to property owners and residents isn’t going anywhere fast. But owners don’t have to be left defenseless during the stormy season. Even with varying resources, all apartment firms can take thorough stock of the risks they face and plan all the steps they can take to lessen the blow. With an all-hands-on-deck approach to planning, this hurricane season can be safer for your residents and community.

2020 States News Service

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FHA and VA Buyers Struggle to Compete in Today’s Market

Only 30% of sellers are OK with a VA or FHA loan because buyers can’t easily forego things like inspections to compete – plus the home appraisals often come in low.

WASHINGTON – House hunters with conventional financing are edging out buyers using government-backed loans.

A new study of real estate agents by the National Association of Realtors® (NAR) found that 89% of sellers would likely accept an offer from a buyer with conventional financing, but only 30% would be willing to accept one using a Federal Housing Administration (FHA) or Veterans Affairs (VA) loan.

In a recent Urban Institute (UI) article, researchers Janneke Ratcliffe and Laurie Goodman said rejection of government-backed loans puts buyers with lower incomes at a disadvantage, notably those with lower credit scores and less wealth.

As a result, homebuyers making an offer using FHA or VA financing find it difficult to compete against buyers offering cash or using conventional financing. Some real estate pros say it’s because VA and FHA loans tend to have “low appraisals,” which makes it difficult when home prices are rising fast and homes are selling quickly.

Also, government-backed loans can take longer to close. The average time to close on an FHA or VA purchase loan in the first three months of 2021 was 57 and 58 days, respectively, compared to 51 days for conventional loans.

VA and FHA buyers also have less latitude to waive appraisals or inspections to close on a transaction quickly, a common tool used by buyers today to win bidding wars. FHA and VA buyers can’t generally waive these contingencies due to their loan guidelines.

The problem is reflected in the percentages of approved VA and FHA loans. The share of FHA-insured mortgages dropped to 14% of total mortgages in May. In years past, FHA loans accounted for about 20% of the mortgage market, according to NAR data. The share of VA-guaranteed loans also decreased to 7% in May.

UI’s Ratcliffe and Goodman are calling on the Department of Housing and Urban Development (HUD) to help level the playing field for those using VA and FHA loans. They want HUD to consider eliminating some of the home inspection requirements and offer more flexible appraisals that are similar to conventional financing.

“Reducing these barriers can help government borrowers gain more equal footing with conventional borrowers,” they write. “It is just one of many steps that could shrink the racial homeownership gap and make the mortgage market fairer and more equitable for all borrowers.”

Source: “Sellers Are Rejecting FHA/VA Backed Offers,” Mortgage News Daily (July 6, 2021) and “More Homebuyers Making 20% Down Payments and Waiving Appraisal and Inspection Contract Contingencies,” National Association of REALTORS® Economists’ Outlook blog (June 23, 2021)

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Experts Say Foreclosure Spike Unlikely as Owners Exit Forbearance

Mortgage bankers say most (77%) homeowners in forbearance already have a payment plan in place – and many who don’t will likely sell rather than go through foreclosure. For most sellers, high home prices will allow them to pay off the mortgage and not even ding their credit scores.

WASHINGTON – The national forbearance moratorium for federally backed mortgages ends on July 31. But rather than go into foreclosure, most homeowners will exit with a payment plan in place, according to most housing analysts – and a foreclosure spike big enough to significantly affect the housing market’s health is unlikely.

About 2.7 million homeowners are behind on their mortgage payments, and 1.8 million are seriously delinquent (90 days or more past due and in foreclosure). But 77% of homeowners in forbearance programs have a loss mitigation repayment plan in place, according to the Mortgage Bankers Association.

About 15.3% of homeowners have already exited their forbearance period without a workout plan – about 400,000 homes.

As National Association of Realtors® (NAR) researcher Gay Cororaton notes in a recent post at the association’s Economists’ Outlook blog: “There is no data on whether these homeowners exited forbearance without a loss mitigation plan in place because they can affordably pay the mortgage, or whether they will likely end up in foreclosure and on the market. If all these 400,000 homes go into foreclosure and get listed, that will add about 24 days of supply to the housing market given the current monthly sales pace of 483,333 existing homes.

“If only one-third of these homes end up on the market, that’s 133,200 homes, which will add just 8 days of additional supply. If two-thirds of these homes end up on the market, that’s about 268,000 homes, which will add 17 days of supply. Given that only 1 in 10 borrowers are opting to list their homes, the more likely scenario is that one-third or even less of the 400,000 that exited forbearance could end up as listed homes, adding some relief to the tight supply – not a glut that could depress prices.”

Homeowners with Federal Housing Administration (FHA)-backed mortgages may be most at risk since more are delinquent on their loans, according to an analysis from the American Enterprise Institute. Nearly 15% of 7.6 million FHA mortgages outstanding were delinquent as of May, according to the study, and about 11% were considered “seriously delinquent.” These include loans that are in forbearance, which during the pandemic has allowed struggling homeowners to pause their mortgage payments.

The number of Americans still requesting forbearance has fallen in recent weeks. Many Americans who already exited forbearance have resumed making their payments or were able to modify their loans.

“If a modification is unable to address the delinquency, the next option is for the borrower to sell the home,” according to the report, written by American Enterprise Institute Housing Center Director Edward Pinto and Research Fellow Tobias Peter. “Given the rapid level of home price appreciation, this alternative should allow many distressed owners to avoid foreclosure, pay off the mortgage, cover selling expenses and maintain one’s credit record.”

Struggling homeowners who can’t modify their loan or sell may face a foreclosure.

“As a result, a buyer’s market could develop in ZIP Codes with heavy exposure to such borrowers,” the researchers wrote, notably areas where there is a high concentration of FHA loan delinquency.

Source: “These Are the Cities With the Biggest Share of Homeowners in Danger of Foreclosure,” MarketWatch (July 6, 2021) and “The Forbearance Period Is Ending: What’s the Impact on Foreclosures, House Prices, Supply, and Homeownership?” National Association of REALTORS® Economists’ Outlook blog (June 28, 2021)

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Mortgage Rates Move Lower Again

The average 30-year, fixed-rate mortgage dropped to 2.9% from last week’s 2.98% in Freddie Mac’s weekly survey. The 15-year loan and ARM rates also declined.

MCLEAN, Va. – The 30-year fixed-rate mortgage (FRM) averaged 2.90% this week, according to Freddie Mac’s weekly survey. It’s a notable decline from week’s 2.98% average, but it continues a months-long pattern of rates slightly above or below 3%.

“Mortgage rates decreased this week following the dip in U.S. Treasury yields,” says Sam Khater, Freddie Mac’s chief economist. “While mortgage rates tend to follow Treasury yields closely, other factors can be impactful, such as the labor markets, which are continuing to improve per last week’s jobs report.

Khater still thinks economic growth will “gradually drive interest rates higher – but homebuyers and refinance borrowers still have an opportunity to take advantage of 30-year rates that are expected to continue to hover around 3%.”

Mortgage rates, week of July 8, 2021

  • The 30-year fixed-rate mortgage averaged 2.90% with an average 0.6 point, down from last week’s 2.98%. A year ago, the 30-year FRM averaged 3.03%.
  • The 15-year fixed-rate mortgage averaged 2.20% with an average 0.7 point, down from last week’s 2.26%. A year ago at this time, the 15-year FRM averaged 2.51%.
  • The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.52% with an average 0.2 point, down from last week’s 2.54%. A year ago, the 5-year ARM averaged 3.02%.

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Why Is the Market White Hot? No, It’s Not the Pandemic

The groundwork for today’s inventory shortage was created during the 2008-2009 Great Recession. The pandemic merely made existing problems worse.

NEW YORK – Today’s market problems – a shortage of affordable housing, historically tight inventory of homes for sale and rising prices – wasn’t caused by the latest pandemic-caused economic slowdown. It goes back to the Great Recession.

Experts say the U.S. housing market was already being roiled by forces fueling the current housing-price explosion even before the pandemic.

Matthew Murphy at New York University’s Furman Center for Real Estate & Urban Policy said supply shortages were evident heading into the pandemic, adding that “the context here to this current housing moment is that we were still recovering from the 2008-2009 foreclosure crisis.”

Meanwhile, the National Association of Realtors® has been pointing to an “underbuilding gap” of between 5.5 and 6.8 million housing units since 2001.

According to the National Association of Home Builders, none of the new single-family homes built across the United States in 2020 were priced under $100,000, while just 1% fell in the range of $100,000 to $150,000 – yet demand for single-family homes soared during the pandemic, and monetary policy accommodated this frenzy. The result has been a shrinking base of available homes for aspiring buyers.

The pandemic added to the existing problem. Experts say, for example, that more older Americans have been hesitant to let people into their homes or visit open houses because of COVID-19.

“You project out a year or two, and when rates have gone up, borrowers are going to look at increased prices and a new loan on a purchase and realize that staying in their own home is cheaper on a month-to-month basis,” says Todd Teta at ATTOM Data Solutions.

Source: NBC News (07/06/21) White, Martha C.

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Adjustable-Rate Mortgages Staging a Comeback

An “every penny counts” approach by buyers boosted ARMs 12.5% year-to-year, even though average ARM rates (2.54%) are only a bit lower than FRM rates (2.98%).

CHICAGO – Adjustable-rate mortgages (ARMs) dropped in popularity after the 2008 financial crisis, but they’re starting to reemerge as buyers contend with record high home prices. “The epic surge in home prices has people looking to save money on monthly payments anywhere they can,” says Matt Graham, chief of operations at Mortgage News Daily.

Applications for ARMs were up 12.5% year-to-year for the week ending June 18, according to the Mortgage Bankers Association (MBA).

With an ARM, buyers usually get a lower mortgage rate. In exchange, however, they also agree that the rate can go up (or down) after a set number of years, usually five or 10. If national mortgage rates go up in that time, they’ll likely face higher monthly mortgage payments. Given today’s historically low mortgage rates, that means today’s FRM borrowers will be paying more when their loan adjusts at some future date.

Some borrowers may think they’ll refinance to a fixed-rate mortgage or move before the loan adjusts. Some may assume they’ll be in a better financial position to pay a higher amount five or 10 years in the future. For still others, the lower rate offered via an ARM may be their only option if they want to buy rather than rent.

The average rate for a 5-year hybrid adjustable-rate mortgage was 2.54% for the week ending July 1, according to Freddie Mac. The average rate for the 30-year fixed-rate mortgage was 2.98%. Those two rates may not be far apart, but even minor differences in rates can quickly add up.

Still, lenders say that only the most qualified borrowers are getting approved for ARMs; they tend to have higher credit scores and put more money down than fixed-rate mortgage borrowers. There is also more education around these loans than in the days of the financial crisis. Interest-only ARMs are also less prevalent. (With an interest-only ARM, borrowers don’t start paying anything toward their principal until a time established in the loan documents.)

ARMs are a relatively small part of the mortgage market, comprising just 3.6% of applications for the week ending June 25, according to the Mortgage Bankers Association.

In general, financial experts say ARMs are less useful if homeowners plan to stay in their homes for decades. But for those who plan to stay in their homes for less time, ARMs may be a more attractive option.

ARMs are most popular among borrowers seeking higher-priced mortgages. The average ARM loan size was $904,000 compared to $317,500 for a fixed-rate loan for the week ending June 25, according to the MBA’s data.

Source: “Why More Homebuyers Now Are Turning to This Much Riskier Type of Mortgage,” realtor.com® (July 5, 2021)

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Fannie Exec: Think Hard Before Turning Equity Into Cash

Owners dazzled by their home’s equity sometimes keep more than they should in a cash-out refinance – but that can lead to foreclosure if home prices drop even a bit.

COLUMBIA, S.C. – National home prices have grown by about 15% over the past year, giving homeowners greater equity and financial security.

At the same time, rising prices have helped drive an increase in cash-out refinancing, where homeowners refinance to a lower mortgage interest rate while also taking money out by tapping into their increased home equity. In fact, according to Fannie Mae and Freddie Mac data, in 2020 approximately $185 billion of equity was extracted through cash-out refinances – the most since 2007, right before the Great Financial Crisis.

In many cases, a cash-out refinance makes sense, allowing a family to cover a medical emergency or a longer-term investment such as college tuition or a home renovation. But cash-out refinances can also carry risks that every homeowner – and every lender – should consider, especially during times of rapid home price increases such as now.

The risks of cash-out refinances

The first risk is simple. Home prices go up and they go down. We’ve seen several cycles over the past few decades where home prices in many major markets dropped significantly. If a home’s value falls below the loan’s value, the borrower’s equity evaporates.

The second risk is using a home’s equity for quick cash instead of a cushion or a tool for building wealth. In a worst-case scenario, a homeowner might decide to use the family home as an ATM machine, taking out large amounts of money and making a risky assumption that home prices will keep going up indefinitely.

Between 2005 and 2007 in the run-up to the Great Financial Crisis, millions of borrowers extracted equity from their homes, fueled by skyrocketing prices, lax lending standards and speculative investors. Irresponsible lenders profited, but borrowers had to live with the fallout. The result was a tragic spiral of underwater mortgages, foreclosures and bankruptcies for families, and instability and weakness for the broader economy that took years to recover from. The financial health of some borrowers caught in that spiral has never recovered.

Today, thanks to more responsible lending standards, many of the factors that led to the 2008 crisis are not present. The financial industry has learned many lessons from that time. Fannie Mae, for example, now requires that cash-out refinance loans be no greater than 80% of the home’s value. We also require at least six months of verified reserves for homeowners whose monthly debt payments are 45% or more of their monthly incomes. These standards help protect consumers and the housing finance system against risks, such as falling home prices or economic shocks.

In fact, the overall picture of today’s cash-out refinance market is one calling for caution, but not alarm. According to Fannie Mae and Freddie Mac, only 36% of 2020 refinances resulted in a new mortgage balance that was at least 5% greater than the previous balance. Compare this with 78% of refinances from 2005 to 2008.

Before pushing refinance envelope

As home prices continue to rise, however, the temptation to push the envelope will likely grow for both lenders and homeowners. Homeowners considering a cash-out refinance need to keep a few key facts in mind:

  • A mortgage is secured by your home. Unlike credit cards and many other loans, missing the monthly payments on your cash-out refinance loan could cost you your home.
  • Refinancing is not free. Typically, closing costs run from 2% to 5% of the loan amount, skimming off some of the homeowners’ equity. In addition, while Fannie Mae and Freddie Mac won’t back a cash-out refinance loan with less than 20% equity, if a homeowner and lender choose to go that route, the homeowner should expect an annual mortgage insurance premium of 0.40% to 2.50% of the loan balance.
  • Home prices can fall. No one knows for certain where home prices are headed. Anyone who says otherwise may not have your best interest at heart. Fannie Mae economists believe that home prices will continue to grow through the end of 2022, but that’s just our projection. If you enter into a cash-out refinancing assuming it’s a certainty, you could be putting your home at risk.
  • Houses require upkeep. Roofs need to be repaired. Aging appliances need to be replaced. Maintenance costs can be expensive. By preserving home equity, families have a resource they can tap to make needed investments in their homes to maintain and enhance their property.
  • There are other refinance options. A non-cash-out refinancing that lowers your interest rate can lower your monthly house payment, taking pressure off your budget. A refinancing that shortens your term can help you build equity faster.

These facts underscore one overriding truth: Homeownership can be one of the most effective ways of building wealth. However, entering into a long-term mortgage and building equity requires care and diligence.

But the payoff in the years to come can be tremendous, helping families weather financial shocks and save for things like retirement and even passing wealth on to children or grandchildren. Pulling cash out of a home puts those long-term benefits at risk, so weigh the costs, benefits and risks carefully.

© Copyright, 2021, Columbia Daily Tribune. Sheila C. Bair is the chairwoman of Fannie Mae’s Board of Directors and former chairwoman of the Federal Deposit Insurance Corporation.

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Spread Your Wings: Identify Your Area’s Top Feeder Market

Florida Realtors economist: Need to find an untapped source for new clients? Look past your own turf to the largest source of movers coming from a different county or state. If 10% of your new residents come from Any County, N.Y., spend some marketing dollars in Any County.

ORLANDO, Fla – Most movers tend to be from your own backyard. If your marketing efforts are already solid in your area, it may be worthwhile to expand your boundaries. Check out the proportion of movers moving from outside your county – there could be new doors to clients in a neighboring county or even in another state.

To spend marketing dollars wisely, consider where movers originate.

Excluding movers from abroad, about one-in-five Florida movers within the United States arrived with out-of-state license plates, according to the 2019 American Community Survey. A similar trend is observed using the 2019 permanent individual and family change-of-address (COA) filings from the United States Postal Service (USPS).

Permanent change-of-address filings can be a proxy for migration, but it isn’t a perfect measure. The USPS only tracks intra-country filings. Further, individuals represent one mover, but a family filing indicates an indeterminate number of movers. The 2020 American Community Survey results are not yet derived, but the latest change-of-address forms have been tallied and can provide insight into more timely migration patterns.

Florida’s top states for permanent residential COA filings in 2020 are New York, Georgia, California, New Jersey and Texas. These states were the five largest in 2019 as well. Bit before blasting the Big Apple with your contact information, take a look if New Yorkers should be your prime target.

New York is king in Central and South Florida, but Georgia movers are prominent in the northern part of the state. Alabama and Texas stake a claim in the Panhandle. Not to be forgotten, some Midwestern states (Michigan and Ohio) squeak into a number one spot. Along with Indiana, Illinois and Pennsylvania, the states near the Great Lakes are silent contributors in the second, third and fourth place for many counties.

With knowledge of the top origin state for your area, the volume of filings will factor into your marketing equation. Is there enough movement to warrant further analysis of how to target these out-of-state buyers? Another perspective to consider is the proportion of filings. Even with a large dot, Miami-Dade’s movement from New York are only 2% of its filings.

To see a more complete picture of migration outside your county, use the Census Flows Mapper. The latest data represent 2014-2018 but the tool provides the most robust information on migration patterns. A good marketing strategy should consider both the volume and proportion of movers, as well as advertising saturation from competitors.

Lest overlooking a larger target, the remaining four-in-five Floridians moved from somewhere in the Sunshine State. These moves could be intra- or intercounty, and the majority of filings for most Florida counties tend to be within the county itself. But in many cases, movement from an adjacent county is worth exploring.

The following table presents which Florida county contributed the most permanent residential COA filings in 2020. Many counties show a sizable portion of moves (up to one quarter or more!) outside the county itself but just next door. For instance, 23% of Clay county movement was from neighboring Duval county.

Even small percentages, like Broward’s 11% from Miami-Dade, may be a significant pool of connections (over 17,000 filings).

Real estate is ripe with opportunity – so reach out and grab it! However, a word of caution: the permanent change-of-address filings data reveal migration trends, but it doesn’t guarantee the person moving is a buyer. On the other hand, renters unfamiliar with your area could benefit from Realtor® services too. If appropriate, apply the knowledge of the best out-of-county and state networks to widen your scope.

Erica Plemmons is a Florida Realtors economist and Director of Housing Statistics

© 2021 Florida Realtors®

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Baltimore System Provides Instant Info on Vacant Homes

The city put a QR Code on the front of every vacant house. Realtors, neighbors and curious onlookers can quickly find out who owns the property via their cellphone.

BALTIMORE, Maryland – Hundreds of QR codes have appeared on boarded-up homes throughout Baltimore over the past month, as part of a city effort to help residents seeking information on vacant properties.

Last year, the Baltimore City Council moved to require housing officials to place signs on the city’s roughly 15,600 vacant properties, about 1,350 of which are city-owned, advertising how neighbors can access information about each one.

When scanned, a QR code on the signs directs residents to a preexisting Department of Housing and Community Development page, where they can search for ownership information and other records. The signs also direct residents to call 410-396-0896 to access the information, or dial 311 if the property needs to be cleaned or boarded.

The signs could be a boon for activists eager to inform communities about vacant properties, and for neighbors seeking contact information for owners when problems arise. But reaching owners can prove challenging, and that’s just the first step in a long process aimed at reducing blighted property.

As of June 29, city officials had placed the signs on 655 vacant properties, said Tammy Hawley, spokeswoman for the city’s housing department. Code enforcers have been placing signs on the relevant properties while making their rounds, Hawley said. Originally, the bill called for property owners to place the signs themselves or face daily fines. But officials cited logistical problems with that requirement.

The department is hopeful the signs will raise awareness among city residents about the challenges of tackling vacancies and blight.

“We think that this helps everyone understand what we’re up against with these absent owners,” Hawley said.

“It’s not about shaming,” Hawley said. “It’s about pride in our city.”

© 2021 Baltimore Sun. Distributed by Tribune Content Agency, LLC.

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Condo Q&A: Many at Fault for an Accident – So Who Pays?

The line between “a condo owner’s obligation to fix” and “the association must fix” isn’t always clear, especially if a number of people contributed to the problem.

FORT LAUDERDALE, Fla. – Question: A few weeks ago, another apartment in our condo was having their hot water heater replaced. The management company only placed signs in one section notifying that the water would be shut off. We lost water in my unit, so I went outside to investigate. Seeing no one around, I noticed that the main water valve was shut off. When I opened the valve, it apparently caused an overflow where they were working, damaging the unit where the heater was being replaced.

Who is responsible for the damage? – Jerry

Answer: There are two questions to be asked: Who is responsible for the damage, and who is liable for it.

There is a lot of blame to go around. The management company should have properly notified the residents it was shutting off the water. The contractor should have physically tagged the valve so that no one accidentally turned it on. And you should not have messed with the valve.

Condo residents are not empowered to fix or work on the common elements of their community – that is the association’s role.

Responsibility differs from liability. Determining liability is different in each state. In Florida, we follow the “comparative negligence doctrine,” while in some other states, each negligent party is equally and fully liable for the damage they helped cause.

Comparative negligence means that a court will split up the damage to each responsible party in proportion to their share of the fault.

For example, in your case, the management company and contractor were only slightly to blame for not putting up adequate notice of the work, so they may be responsible for a smaller portion of the costs.

Because you took it on yourself to turn the valve back on rather than calling the management company to report the water issue and letting them handle it, you may be responsible for the more significant part of the damage.

You never know how a judge or jury will see things until after a trial. Litigation is time-consuming and expensive for all involved, so it would be best to work things out without going to court to begin with.

© 2021 Sun Sentinel (Fort Lauderdale, Fla.), Gary M. Singer. Distributed by Tribune Content Agency, LLC

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Federal Reserve Member Wants to Slow Housing Market First

When the Fed moves to slow inflation and moderate the economy, Boston Fed Pres. Eric Rosengren thinks housing should be targeted first to avoid any “boom and bust.”

BOSTON – In a recent interview, Federal Reserve Bank of Boston President Eric Rosengren warned that the United States cannot afford a “boom and bust cycle” in the housing market that would threaten financial stability.

“It’s very important for us to get back to our 2% inflation target, but the goal is for that to be sustainable. And for that to be sustainable, we can’t have a boom and bust cycle in something like real estate,” he says.

“I’m not predicting that we’ll necessarily have a bust. But I do think it’s worth paying close attention to what’s happening in the housing market,” he adds. “You don’t want too much exuberance in the housing market. I would just highlight that boom and bust cycles in the real estate market have occurred in the United States multiple times, and around the world, and frequently as a source of financial stability concerns.”

Rosengren says the housing market should be a factor as the central bank considers slowing or removing some of the hefty monetary support for the economy introduced during the coronavirus pandemic.

To keep the economy moving during the pandemic slowdown, the Fed has been purchasing $40 billion in agency mortgage-backed securities (MBS) per month, along with $80 billion in monthly Treasury debt as part of its asset purchase program.

“When it is appropriate” to trim that bond buying, Rosengren said MBS purchases should be reduced at the same rate as Treasury purchases. “That would imply that we would stop purchasing MBS well before we stopped purchasing Treasury securities,” he said.

Source: Financial Times (06/28/21) Politi, James; Smith, Colby

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Where Can Buyers Find a Fla. Home for Around $250,000?

NAPLES – Real estate experts across the state have witnessed the rapid rise of the mid-pandemic housing market. Some house hunters sought bigger spaces to work from home, while some existing homeowners held on for dear life, causing an inventory shortage that can hardly keep up with demand.

A handful of markets have started to see median sale numbers drop in May, signaling a shift and perhaps a long-awaited slowdown of rising prices.

What a prospective homebuyer can get for $250,000 depends on where they decide to live. But wherever they’re looking, Realtors say the options out there are limited.

Here’s a glimpse at what the regions across Florida are seeing:

South Florida/Treasure Coast houses for sale

While the median sale prices in Broward and Miami-Dade counties signaled a potential cooling of the housing market, figures in Palm Beach County keep punching up. According to May numbers released by the Broward, Palm Beaches & St. Lucie Realtors, Palm Beach County’s median figure rose to $475,000, up from $466,000 in April.

In May 2020, Palm Beach County’s median sale price was $365,000. Broward had dipped slightly in May to $463,750 while Miami-Dade dropped to $500,000, down from $515,000 last month.

“I have been pretty shocked by the rapid price appreciation across the tri-county area (in South Florida), Palm Beach in particular,” said Ken H. Johnson, a real estate economist at Florida Atlantic University.

Barry Gardner, a Realtor with Atlantic Florida Properties in Lake Worth Beach, said the further north you go, the more affordable homes get. While that was a trend before the pandemic, the hot market has certainly exasperated that dichotomy, he said.

“Because of the massive price increases in this area, (homeowners say), ‘I’d love to sell my home, but where can I go?’” Gardner said. “They look at it, ‘Maybe if I move 50, 80 miles (north), the prices will be a little lower.”

The cost of a single-family home in Palm Beach County in April was 56% higher than in St. Lucie County. But looking at the condo market, those prices in St. Lucie were 9% higher than in Palm Beach County.

The inventory of homes below $250,000 were incredibly low in the Treasure Coast, especially when excluding those age-restricted communities or those requiring homeowner’s association fees.

St. Lucie County’s May median sale price grew to $299,000, while Indian River County went to $340,000. Martin County saw a drop from April to May, from $490,000 to $469,900.

North Central Florida houses for sale

Central Florida is one of the more affordable regions in the state. The median home price in Alachua County was $307,100. Polk County had the second-highest median at $260,250 and Marion’s median sits at $225,000. Alachua’s median home price increased 16% from April 2020 to April 2021, from $246,000 to $285,250. And inventory in that same period decreased more than 56%.

“In my 40 years I have never seen inventory this low, ever,” said Patti Moser, president of the Gainesville Alachua County Association of Realtors, adding that many homes are selling above the list price.

People are coming into Florida from all over, particularly the Northeast and California. Some markets, like Pensacola, are seeing an influx of people relocating from Atlanta and Chicago.

Greg Pittas, president of the Ocala Marion County Association of Realtors, said similar trends are underway in neighboring Marion County. They are down 63% compared to inventory this time last year.

Polk County’s median home prices are up 18.3% compared to the same time last year. The most popular homes in the Lakeland market run between $200,000 and $300,000, fetching between 19 and 25 offers apiece. Many homes can go for upwards of $20,000 above asking price.

Southwest Florida houses for sale

Southwest Florida counties have a wide range of median home prices. In Hendry County, on the southwest side of Lake Okeechobee, the median in April was $209,000. On the coast in Collier County, the median in May is $650,000, the highest of the state’s metropolitan statistical areas. Collier County also had the highest year-over-year change at 44%, according to Florida Realtors®. Just to the north in Lee County, the median sales price is $365,000.

Jason Jakus, broker/owner of Your Next Home Advisors in Fort Myers, said a recent search of the MLS showed 20 single-family homes under $250,000 in the small town of LaBelle.

“That’s less than what’s normally out there,” he said. “Inventory in Florida, in general, is at the lowest we’ve seen in a long time. But still, when you have a city the size of LaBelle, it’s actually really good, compared to other cities, in Lee or Collier counties.”

The available homes all have three bedrooms and two bathrooms, with a two-car garage.

In Clewiston, prices are a bit more affordable and get better the further inland you go, but inventory is tighter, Jakus said. “Clewiston has got a lot of trailers and mobile homes, so there are not as many single-family homes,” he said.

In 2011, the median $250,000 Lee County home was built in 2002 and was about 1,630 square feet. A median home for that price in Lee County today was built in 1970 and is 1,150 square feet, Grimes said from the data he viewed. About 64% fewer homes have sold for that price in that time.

First Coast/Space Coast houses for sale

The Jacksonville metropolitan statistical area – which includes Duval, Baker, Clay, Nassau, and St. Johns counties – had a median sale price of $315,000 in May, a nearly 19% change over the past year.

The median sales price of a home in Flagler County is $294,120, a slight drop from $300,000 in April.

As of late May, Flagler County’s beachside, which includes Flagler Beach and the ritzy Hammock Dunes area, had zero homes for sale in the $250,000 range, according to Ryan Ford, president of the Flagler County Association of Realtors. Ford is also vice president and managing broker of the Palm Coast office of Watson Realty Corp.

The lowest-priced beachside listing in the county had an asking price of $379,900.

In Volusia County, the median sale price was $280,000. For the first time ever in April, the median percent of original list price received for existing homes sold in Volusia County hit 100%, meaning that half sold above the asking price, according to the last monthly county-wide home sales figures, provided by the West Volusia Association of Realtors.

In April, the Daytona Beach Area Association of Realtors reported 134 new listings under $250,000.

“A year ago, it would have been at least several hundred at that price range,” said Alisa Rogers, the association’s president and a broker associate with 1st Florida Realty in Daytona Beach. “The homes you are finding on the beachside for $250,000 or less are mostly fixer-uppers, if you can even find one.”

Some homes on the mainland are going under contract within 24 hours, she noted.

In Brevard, median prices are going up, and up and up. In 2019, the median list price of a residential property was $232,297 and the median sale price was $225,000. The next year, the median list price was $257,000 and the median sale price was $250,000. In the first five months of 2021, the median list price was $267,945 and the median sale price was $265,000, with the sale price exceeding the list price in both April and May.

The median sale price in May reached $290,000.

Florida Panhandle houses for sale

The median sale price in Leon County in May was $267,000, a slight increase from April. An average single-family home in Leon is a 1,600-square-foot home with three bedrooms and two bathrooms.

Closed sales were up 33.7% compared to May 2020, but that was also the month with the lowest closed sales in five years, according to Steven Louchheim, CEO of Tallahassee Board of Realtors. Comparing May 2021 and May 2019, the rate of sales is up by 10%.

Farther west, the Pensacola area real estate market has thrived during the pandemic, and Realtors say the influx of remote workers and families relocating from large cities out-of-state like Atlanta or Chicago have been driving up housing prices. Florida Realtors reported that the metropolitan statistical area that covers Escambia and Santa Rosa counties had a median sales price of $275,000 in May, up more than 20% in the past year.

The houses that are for sale recently aren’t listed long, with the average number of days on the market at only 20 compared to the same time last year when it hovered around 55.

In the $250,000 range, buyers often need to look outside the city limits and, as of Thursday, Zillow showed only 37 homes for sale in Escambia between $245,000 and $255,000. In the same price range in Santa Rosa, there were only 14 listings.

© 2021 Journal Media Group. Florida reporters Dave Berman of Florida Today, TaMaryn Waters of the Tallahassee Democrat, Laura Layden of the Naples Daily News, Clayton Park of the Daytona Beach News-Journal, Paul Runnestrand of the Florida Times-Union, Emily Mavrakis of the Gainesville Sun, Lamaur Stancil of the TC Palm, David Dorsey of The News-Press, Maya Lora of The Lakeland Ledger and Emma Kennedy of the Pensacola News Journal contributed to this report.

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Condo Q&A: Can Domestic Partner Run for HOA Board?

Also: Can a treasurer, on her own, give cash gifts to outgoing board members? And does a law require owner notification before sending assessment issues to an attorney?

NAPLES – Question: Can a domestic partner of an owner run for the homeowners’ association (HOA) board of directors? The partner is not listed on the property title itself, nor named in a trust, so would not be covered by those co-ownership statutes. – W.M., Naples

Answer: Chapters 718 for condominium, 719 for cooperatives, 720 for HOAs and 617 for not-for-profit corporations do not require a person to own a lot or unit in the community to serve on the board of directors.

However, most governing documents do. So, you need to check the governing documents to determine the eligibility requirements to serve as a director. If the documents are silent, then the domestic partner could serve on the board as long as he or she is 18 years old, not a convicted felon without his or her civil rights restored for at least five years, and is not indebted to the association for any monetary amount.

However, if the governing documents require directors to be owners or the spouse of an owner, and if the domestic partner is not named on the deed and is not legally married to the owner, then he or she would not be eligible.

Question: I live in a condominium community. At a board meeting, the treasurer, on her own and with no record in the board of directors’ meeting minutes, gave a cash gift to outgoing board members who served eight years. Even her husband, who served for seven years but left the board a year ago, received the same amount. Is this a violation of a trustee’s fiduciary responsibility? What can we do to have our money restored to our treasury? Can penalties be imposed? We owners want to do something to protect our assets. By the way, not one member of the board objected. – D.K., Bonita Springs

Answer: Yes, this is improper for several reasons. First, the Condominium Act prohibits directors or officers from being paid for their service unless the members have voted to approve the payment. Second, the treasurer would not typically have the authority to make a unilateral decision like this without a vote of the board. Third, the treasurer has a conflict of interest by giving association funds to her spouse and finally, this is an improper use of association funds because making cash gifts to others is not a common expense. The money should be returned by those who received it.

Question: Our HOA has five board directors. Routinely two of the board directors meet privately to discuss HOA business in preparation for the formal board meeting. Is this meeting of the two members legal and/or proper? – M.K., Naples

Answer: The law provides that when a quorum of the board meets and discusses association business it constitutes a board meeting and must be properly noticed. The owners also have the right to attend all board meetings, except board meetings with legal counsel to discuss proposed or pending litigation or personnel matters. In this case, you indicate the board has five directors. Two directors do not constitute a quorum; therefore, the meetings are not considered board meetings and notice would be required.

Question: Our HOA board directors voted via email not to publish HOA monthly financials on our website. Is it legal that they made this decision via email? – M.M., Marco Island

Answer: The Condominium Act and HOA Act both prohibit board members from voting by email, so the vote was not legal. The board should ratify and affirm this decision at a properly noticed board meeting.

Question: I live in a small condominium community that has always had a no smoking policy at the pool, however, it was never put in writing and the new board has decided that smoking is allowed. Are there any laws that would reinstate the nonsmoking policy? – A.C., Naples

Answer: First, you need to check the governing documents and determine if the board has rule-making authority at all. Most documents do provide for it, but some do not. Others provide for it, but still require the members to approve the rule. If the board does have such authority, then it could impose a no smoking rule at the pool and later another board could rescind the rule. There are no laws that prohibit smoking at a pool, as long as it is outdoors. If the pool was an indoor pool, then the Clean Indoor Air Act would prevent smoking.

Question: I recently attended your 2021 legal update webinar. You mentioned a new law about a courtesy reminder letter before an assessment account can be sent to the attorney for collections. Can you explain that law? – C.D., Naples

Answer: As of July 1, per the new law for Condominiums, Cooperatives and Homeowner Associations, the manager or association needs to send a letter to all persons who are late in paying their assessments before sending any person to collections with the attorney. If the letter is not sent, then no attorney fees can be incurred later.

The notice must be sent by first class mail (but does not have to be sent certified). It must be sent to the owner’s chosen mailing address as listed in the file, and if the mailing address is not the unit, then the letter must also be sent to the unit address. The sender may complete an affidavit attesting to the fact that they sent the letter. If they do, the affidavit creates a rebuttable legal presumption that the sender did everything right, which would be important later if the collection matter is contested in court.

This should not be too difficult since most associations already send a friendly reminder late notice before a file is sent to collections. But now they get 30 days to pay which may be longer than some associations presently allow. The Statutes contain a form letter for this purpose, and you should use that letter.

The question of whether the community association manager or association may add a fee for sending this letter to the debtor is an area of uncertainty. Many already do, but the issue is that since this statutory form does not list such a charge, does that mean they cannot add it on? The Statute only says attorney fees cannot be incurred if the letter is not sent. It does not say costs cannot be incurred so, thus the debate.

Attorney Richard D. DeBoest is a shareholder at the law firm of Goede, Adamczyk, DeBoest & Cross. The information provided herein is for informational purposes only and should not be construed as legal advice.

The publication of this article does not create an attorney-client relationship between the reader and Goede, Adamczyk, DeBoest & Cross or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

© 2021 Journal Media Group

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Fed: Low Loan Rates Led to Refis, but Fewer Blacks Did So

3 Fed banks looked at home refis in the first 9 months of 2020. They found that 6% of Black borrowers switched to a lower rate compared to 12% of white borrowers.

ATLANTA – The Federal Reserve Banks of Atlanta, Philadelphia and Boston estimated that only 6% of Black borrowers refinanced their mortgages from January to October 2020, compared to 12% of white borrowers, 14% of Asian borrowers and 9% of Latino borrowers.

Just 3.7% ($198 million) of an estimated $5.3 billion of savings for all households that refinanced in that period went to Black households.

Data from Freddie Mac indicate that historically low rates plus people staying at home longer led millions to renegotiate the terms of their mortgages, with 8 million refinances transpiring throughout last year.

The mortgage giant estimates that refinancing could save nearly half of Black and Latino households around $1,200 annually. Although borrowers with variable mortgages could do well when central banks lower interest rates, America’s most popular home loan is the 30-year fixed mortgage, which requires refinancing to take advantage of reduced rates.

“The Fed is in this era of monetary policy accommodation, but I would argue it benefits people who are already more well-off,” says Freddie Mac’s Sam Khater.

Fed researchers also cite practical and historical variables hindering Black and Latino mortgage refinancing, such as average closing costs of about $5,000, the pandemic’s disproportionate economic impact on Black and Latino households, and a legacy of discrimination.

“For a lot of people, they may have struggled to qualify for their first mortgage and they may be able to make those payments, and so they think well, I don’t want to go through the ordeal of qualifying for a mortgage again,” adds University of Pennsylvania Professor Benjamin Keys.

Source: Wall Street Journal (06/23/21) McCorvey, J.J.; Carpenter, Julia

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Facebook Advertising: What Should Realtors Consider?

Few online advertisers provide access to more people than Facebook, and they offer a range of ad types. The simplest: Post something on your page and pay to “boost” it.

NEW YORK – In January, Facebook ranked as the leading social media platform after surpassing 1 billion signed-in accounts. The online communication platform has more than 2.6 billion active monthly users.

Facebook also owns WhatsApp, Instagram and Facebook Messenger, which similarly have more than 1 billion users.

Compared with other types of online advertising, Facebook can be more cost-effective – and it allows users to measure ad statistics to ensure better targeting.

Video ads allow real estate professionals to highlight their services and hold viewers’ attention if they keep them short, about 15 seconds or less. Even when short, videos should include a call to action, such as visiting a webpage.

According to one study, image-only ads outperformed others in generating unique leads. Agents can post the image-only ads on their page and then “boost” their post.

Poll ads are a mobile-only Facebook ad format. They can be effective for running several items or components at once and in comparison.

Meanwhile, carousel ads allow agents to add a maximum of 10 videos or photos in a collective panoramic format. These ads can be used as tutorials and for highlighting multiple products and services that lead to different websites.

In addition, slideshows are a simple method to create video ads from still photos, write-ups or other short video clips. They typically consume less data and can be enhanced with music from the ads manager.

Source: Realty Biz News (06/01/2021) Shepardson, Ben

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Home Equity Loans Barely Ding Credit Scores

Borrow money to fix up a home prior to sale? Sellers planning to buy again could hurt their credit score – but the impact isn’t huge and it takes a few months to show up.

NEW YORK – Credit scores are important to qualify for a mortgage and snag the best rates. And what consumers do with their finances leading up to the application process can have a big impact on how high – or low – their credit score gets.

With home prices rapidly rising over the past year, homeowners are sitting on a lot of equity, and some are being tempted to take a portion of it out to use for other purposes, like paying for remodeling projects, medical expenses or for other reasons.

Americans often look at potential financing through a home equity loan and wonder how much it will hurt their credit score, especially if they’re saving to buy another home.

LendingTree researchers analyzed more than 500 home equity loans requests in 40 of the largest metros to find out the type of impact that can have on credit scores. On the one hand, they may sell their current home for more money if they use its equity to make improvements. On the other hand, their next home could cost them more per month if their lower credit score forces them to secure a higher interest rate.

Many borrowers do see a credit-score decrease after taking out a home equity loan. But the decline tends to be fairly small – and their credit score usually recovers in less than a year, the LendingTree analysis finds. It also usually takes a few months before their credit score hits bottom and begins to turn around. That recovery takes an average of about 96 days to recover from their pre-loan levels after taking out a home equity loan.

Certain areas of the country may see less of an impact after a home equity loan than others. In LendingTree’s study, it included three Florida markets:

  • Miami: An average initial credit score of 730 goes to 16.23 points after taking out a home equity line of credit. It takes 122.68 days to bottom out, and another 102.8 days to return to its pre-loan level. Total time of a home equity loan impact: 225.65 days
  • Orlando: An average credit score of 710 goes down 25.74 points to 108.3. It takes 87.35 days for the full downgrade to occur, and another 87.35 days to bounce back. Total loan impact: 195.65 days
  • Tampa: An average credit score of 727 drops 21.61 points after taking out a home equity line of credit. It takes 88.89 days to bottom out and another 81.29 days to bounce back. Total loan impact: 170.18 days

Source: “LendingTree Study: New Home Equity Loans Don’t Have a Notable Impact on Credit Scores,” LendingTree (June 29, 2021)

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iBuying Returning to Pre-Pandemic Levels

It rose 21% quarter-to-quarter nationally, though down 6.1% year-to-year. In three Fla. cities noted in the study, about 1 out of 100 sales go to iBuyers.

SAN FRANCISCO – After pausing business during early in the pandemic, iBuyer activity is starting to catch up with levels they enjoyed prior to the pandemic, a new report finds – though not in significant enough numbers to greatly impact local markets.

In the first quarter of this year, the nation’s leading iBuying firms purchased 4,383 homes, nearly 21% higher than in the previous quarter. The 1Q numbers are still down 6.1% year-to-year, however, according to a new report released from Redfin measuring iBuying business.

In three Florida cities cited in the study, however, the iBuying numbers are a bit higher:

  • Jacksonville: Down 1% year to year, 1.3% of all home sales
  • Lakeland: Up 290.0% year to year, 1% of all home sales
  • Orlando: Down 15% year to year, 1.3% of all home sales

iBuyers are usually real estate companies that purchase houses from homeowners in quick cash transactions. In exchange for a quick close, cash sale, flexible move-out dates and no seller obligation to make repairs, an iBuyer generally charges a higher fee than a traditional real estate agent. Large iBuying firms include Opendoor, Redfin, Zillow and Offerpad, among others.

iBuyers comprise a small part of the overall housing market. Nationally, it’s just 0.5% of home sales, according to Redfin’s report.

“Business really started ramping up in January and February,” says Allister Booth, an acquisitions specialist at RedfinNow in Los Angeles. “Since then, we’ve just had a constant barrage of deals. We’re back to full speed and are buying more homes than we were last year. After we buy and renovate those homes, we know we’ll be able to sell them because there are so many more buyers in the market right now than there are homes available.”

iBuyers tend to purchase homes for less than the metro area’s median price – a median of $302,050 in the first quarter.

The top markets for iBuying activity lately, according to Redfin’s report, are Raleigh, N.C. (iBuyers purchased 2.9% of homes that sold during the first quarter); Charlotte, N.C. (2.7%); Durham, N.C. (2.6%); San Antonio, Texas (2.6%); Tucson, Ariz. (2.3%); and Phoenix (2.2%).

Source: “iBuyer Home Purchases Inch Back Toward Pre-Pandemic Levels,” Redfin (June 25, 2021)

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Buyers Usually Can’t Get Insurance if Storms Threaten

Transaction reminder: If a hurricane threatens Fla., property insurers won’t issue new policies, so lenders won’t issue new loans. But the rules vary by insurer.

ORLANDO, Fla. – Hurricane Elsa is the first 2021 storm to possibly hit Florida, but it doesn’t have to make landfall to impact real estate transactions scheduled to close soon. For most property insurance companies, new policy issuance shuts down after the National Hurricane Center (NHC) issues a hurricane warning or watch.

If a storm is imminent, all property insurers shut down. However, each one has internal rules on when they will/will not issue a policy. And the triggers for coverage suspensions differ for private insurance companies and state-run Citizens Property Insurance Corp.

Most private insurance companies rely on the NHC’s issuance of tropical storm or hurricane watches or warnings, and they suspend writing new policies or allowing people to purchase additional coverage only in those areas of the state impacted by the watch or warning. This means restrictions only in certain geographical areas of the state.

Citizens Property Insurance, however, suspends writing coverage throughout the state when a storm threatens any part of Florida. A transaction closing in Miami, for example, could be impacted by a hurricane threatening Pensacola.

Insurance companies have stopped issuing policies during hurricane threats for a long time in order to keep skittish homeowners from adding coverage a few hours before a storm makes landfall near their home.

The rule only impacts new polices, though. Homeowners who already have coverage don’t need to worry. However, that’s also the reason hurricane preparation guides advise reviewing insurance policies at the beginning of the hurricane season. Homeowners might not obtain necessary coverage if they wait.

Hurricane watch versus a hurricane warning:

  • A hurricane watch means conditions are right for dangerous weather. It means “watch out” for events that could come and go quickly, such as a tornado or thunderstorm, and for tropical weather that is not yet a threat. It means be ready to act.
  • A hurricane warning means dangerous weather is on the doorstep. A warning means it’s time to evacuate or move to shelter.

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Q&A: After Surfside, What Should I Know About Condos?

FORT LAUDERDALE, Fla. – Many of us live in high-rise buildings in South Florida. And even if we don’t, we have to wonder about the condition of our apartments, condos and homes after the Surfside catastrophe.

We asked construction specialists and attorneys about the questions we should all be asking about the condition of our living spaces and what kinds of updates they need as they deteriorate from heat, humidity, hurricanes and climate change.

Question: What kinds of questions should condo owners, likely with little knowledge of building construction, be asking now?

Answer: Ask about the age of your building, when the last inspection was and what kinds of repair work are planned in the near future, said Boca Raton attorney Peter Sachs, who is certified in condominium and planned development law. You will also want to know how much money is in the building’s reserve fund, and if and when an extra financial assessment is coming, he said.

You have the right to inspect your building’s records, which would include finances and repair work. Florida law requires that condos maintain their official records for seven years.

Question: Who’s at fault when there’s a serious structural problem in a building? Is it the architects, the builders, the engineers, the inspectors or city officials? Or all of the above?

Answer: The architect, builder and engineer are all potentially culpable, as is the condo board if they do not act to fix the problem, Sachs said.

He said the architect would be responsible if there is a serious design flaw, and the engineer if the calculations, supervision or drawings are deficient. The builder would be to blame if corners were cut on materials or if construction failed to comply with the building code. The builder may also be liable for the failings of the architect or engineer.

The board, too, has obligations to residents, he said.

“The board has a fiduciary duty to act in the best interests of the unit owners. If the board is negligent and fails to act, or unduly delays, it may be held liable,” Sachs said.

But city officials are off the hook, according to Sachs.

“The city officials are protected by the doctrine of sovereign immunity,” he said. “Barring criminal conduct (the building official accepted a bribe to look away from a potential problem), it is highly unlikely that a city or its employees would be held legally responsible.”

Question: How often should structural engineers inspect high-rise buildings?

Answer: Miami-Dade and Broward require inspections when a building turns 40, but there’s no similar mandate in the rest of the state, said Peter Sachs, a Boca Raton attorney certified in condominium and planned development law.

The boards that supervise the buildings should take the initiative and conduct a thorough inspection at least every 10 years, and more often is better, said Yaniv Levi, president of Coast to Coast General Contractors in Hollywood.

“It would behoove the association to do it yearly or bi-yearly,” he said. And he recommends the building get a new coat of paint, which also serves to weatherproof it, every seven to 10 years.

Question: How quickly should buildings fix leaks and other water intrusions?

Answer: Immediately, said Yaniv Levi, president of Coast to Coast General Contractors in Hollywood. “As soon as the leak is identified, they should find the source of the intrusion,” he said. “If you catch it early, it won’t develop into something major.”

Question: How can I find out if my building was constructed under the highest safety codes?

Answer: If it was built in 2002 or later, you should have the best building codes or close to it. If your building was constructed before 2002, it likely does not meet the highest standards unless it was damaged by a storm and had to be upgraded.

After Hurricane Andrew in 1992 mowed down entire blocks of cheaply built houses, Florida adopted a statewide building code that has become a national model. So when Hurricane Wilma struck Fort Lauderdale 13 years later, new downtown buildings, such as the 42-story Las Olas River House, held up well. Older buildings constructed before the building code sustained severe damage.

Question: What should owners do if they believe their board is ignoring a safety issue?

Answer: You should ask to have the issue brought up at the next board meeting, said Hallandale Beach attorney Larry Tolchinsky.

“Get it on the record that the board is ignoring the issue,” he said. “Thereafter, file a lawsuit against the board.”

Boca Raton attorney Guy M. Shir agreed that you may need to take matters into your own hands. Call the local building or code enforcement department to report your concern, and put it in writing, Shir said. And if you can afford it, you may want to hire your own engineer.

“In the end,” Shir said, “it’s (your) property, investment and life/safety issues.”

Question: Should condos have rainy-day accounts to pay for property improvements?

Answer: There’s often resistance from condo owners when a board of directors wants to add to the monthly maintenance fees, said West Palm Beach attorney Michael Gelfand, who is certified in condominium, planned development and real estate law.

“The board is caught between irreconcilable goals: perfect safety, which is impossible, and the owners not wanting their assessments to go up,” he said.

Condo associations are required by law to budget for reserve accounts for repairs of significant components, such as painting/waterproofing, roofs and paving, but frequently owners vote down these budgets as well as expensive structural work, Gelfand said.

These repairs are often expensive. In emails released by the town of Surfside, an engineer said Champlain Towers South, the collapsed building, needed to spend about $9 million to repair cracked columns and crumbling concrete. The board took out a $12 million loan to do the work.

The loan meant owners at Champlain Towers South were facing payments of anywhere from $80,000 for a one-bedroom unit to about $330,000 for a penthouse.

Beyond the legally required reserve accounts, boards of directors take an assortment of approaches. Some have no reserves at all, while others have accounts dedicated to repairs needed every five to 10 years, said Mike Ryan, a Fort Lauderdale attorney and mayor of Sunrise.

“Some condos cater to people with fixed incomes. It’s difficult for them to suddenly get hit with an assessment,” Ryan said. “It’s up to the board how they want to handle this. It’s wise for them to put aside money. If you defer too long, it becomes too costly.”

The best strategy for the condo board is often to take the monthly maintenance fees and set aside some of that money for a rainy day fund, he said. This will lessen the financial impact on individual owners when a sudden major repair is needed and the board must ask each homeowner for money.

Question: What if an owner can’t afford the assessment?

Answer: “It’s like a lifeboat,” said West Palm Beach attorney Michael Gelfand, who is certified in condominium, real estate and planned development law. “If you can’t pull your weight, you’re off.” The association may foreclose on your unit. Otherwise, their accounts will run a deficit and they won’t be able to pay the bills.

Sometimes the association will borrow money from a bank to pay for these large expenditures, Hallandale Beach attorney Larry Tolchinsky said. “For those unit owners that can’t afford to pay, the association will likely spread the payments over time,” he said. “Up to 10 years in some cases.”

Question: “We moved from Massachusetts to the Lotus development in West Boca in June 2020. Since we made our deposit in March 2019 the market value of our home is up 86%, due to constant price increases.

I’m wondering if enough owners will now start selling their high-rise condo units that the values of these units will drop significantly. At the same time, will the prices of semi-attached condos, or low-rise units increase significantly? I can see a number of owners moving to what they will now perceive as ‘safer’ housing. I can also see a number of snowbirds deciding to sell before prices drop, then renting for the season or buying a winter home in low-rise or garden-style units.” – Arthur Missan

Answer: Ken Johnson, a real estate economist at Florida Atlantic University, said he does not anticipate significant effects on prices because of the Surfside collapse. He said buyers likely will perceive the collapse as a freak accident that’s unlikely to be repeated.

“I expect to see an increase in the demand for satisfactory property inspections contingent upon closing,” he said. “However, I do not see any price impact due to this horrible tragedy. Most know that this sort of thing is unlikely to ever happen again. As for a moving strategy, I don’t really see one with the average cost of a move, all things considered, being between 10% and 20% of selling price.”

Question: In terms of safety, is it better to live on a high floor or a low floor?

Answer: “In my personal opinion, there are risks in both cases,” Hallandale Beach attorney Larry Tolchinsky said. “Living on the ground floor can have flooding issues. Perhaps issues with crime. Higher floors take longer to escape from the building and they have wind issues.”

Question: Is it going to be harder to find concrete repair firms now that everyone is thinking about these questions?

Answer: “Perhaps, but my belief is the collapse was more complicated than just issues related to concrete repair,” Hallandale Beach attorney Larry Tolchinsky said. “Certainly, the cost of having a firm perform these repairs is going to skyrocket. This is based on the level of data and certifications that will likely be needed to be provided to boards and governmental agencies to perform this work. Also, the high demand for building materials and the lack of skilled workers given the tight labor market will make it harder to find concrete repair firms.”

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40-Year FHA, VA Home Loans Coming in October?

Ginnie Mae – the funding arm behind FHA and VA loans – created a new “pool type” to secure “modified loans with terms up to 40 years.” It’s essentially the funding groundwork to release a new type of 40-year loan that Ginnie Mae expects to start offering in October.

WASHINGTON, DC – Ginnie Mae announced the creation of a new pool type to support the securitization of modified loans with terms up to 40 years – essentially the groundwork that must be done before offering 40-year home loans to the public, though these are earmarked for homeowners at risk of losing their home.

The current max for pool types is 30-year loans. This new product – to be known as Pool Type C-ET – will allow lenders who service Ginnie Mae programs to offer a loan modification with a lower payment, albeit one that takes longer for the homeowner to pay off.

Once the pool has been established, a 40-year home loan’s use and terms would be set by the groups that rely on Ginnie Mae for funding. Those include:

  • The Federal Housing Administration (FHA, which is under the Department of Housing and Urban Development, or HUD)
  • Office of Public and Indian Housing (PIH, which is also under HUD)
  • Department of Veterans Affairs (VA)
  • U.S. Department of Agriculture (USDA) Rural Development

“It’s important that Ginnie Mae issuers have secondary market liquidity for options that our agency partners determine are appropriate for supporting homeowners in distress,” says Michael Drayne, Ginnie Mae’s Acting Executive Vice President. “Because an extended term up to 40 years can be a powerful tool in reducing monthly payment obligations with the goal of home retention, we have begun work to make this security product available.”

Highlights of the new C-ET pool type

  • It would be a “Custom” pool, having a single loan and $25,000 minimum pool size
  • Eligible collateral will consist of p modified loans whose original terms are greater than 361 months and less than or equal to 480 months
  • All modifications after a mortgage’s origination must be occasioned by default or reasonably foreseeable default
  • There won’t be restrictions on loan amounts, as long as the eligible collateral otherwise meets the requirements set forth by the participating agency.

“The challenges of the last year require meaningful solutions to help keep people in their homes,” says Alanna McCargo, HUD senior advisor to Secretary Marcia Fudge. “As interest rates rise, this 40-year feature will enable more payment reduction options to help homeowners.”

Ginnie Mae expects that the new pool type to be ready by October, although actual use depends on authorization of extended term modifications by FHA, VA, USDA and PIH.

Ginnie Mae is a wholly-owned government corporation that attracts global capital in support of homeownership for veterans and millions of homeowners. It’s the only mortgage-backed security to carry the explicit full faith and credit of the United States government.

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Drop Your Homeowners Insurer for State-Owned Citizens?

FORT LAUDERDALE, Fla. – State-owned Citizens Property Insurance Corp. is becoming the go-to insurer for Florida homeowners besieged by high prices and wishy-washy private market property insurers.

One day your insurance company wants you and offers you a great deal to sign up. The next day it’s jacking up those rates or declining to renew your policy. Who needs that?

Citizens, owned by the state of Florida, can seem like a better choice. With rate hikes capped by state law at 10% annually, thousands of homeowners are making the switch. In fact, Citizens has grown rapidly since the third quarter of 2019, when it had 423,000 policies, to mid-June, when it tallied 626,607.

Citizens had the third-lowest annual premium among 27 companies on a price comparison app featured on the website of the Florida Office of Insurance Regulation. In South Florida, agents say Citizens is by far the cheapest choice available to homeowners.

Many consumers have no choice. In sections of Broward and Miami-Dade counties, virtually no private market insurers are willing to cover homes they believe will result in claims that cost more than the premiums they’ll produce. For those homeowners, it’s Citizens or nothing.

“It depends on how price-sensitive the consumer is,” said Paul Handerhan, vice president of the consumer-focused Federal Association for Insurance Reform, based in Fort Lauderdale. “If they’re on a fixed income and can’t afford private coverage, then they’ll have to go with Citizens.”

Other homeowners, hit by numerous price hikes over the past several years, might be turning to Citizens because they see an opportunity to save money. It’s just insurance, after all, which people buy with the hope of never actually having to use it.

But the fact that it’s cheaper doesn’t necessarily make Citizens a better option, insurance experts say.

“Don’t think you’re comparing apples to apples,” Handerhan said. “You’re not. You could end up in a worse financial position if you have Citizens and something bad happens.”

They advise homeowners to think carefully about potential scenarios that could leave them with less or no coverage from Citizens, or with no flexibility to customize their policies to fit their particular needs. They also point to a worst-case scenario that could leave Citizens customers on the hook to pay hefty special assessments if a massive storm should leave the company unable to pay all of its claims.

So if private market insurance is available to you but you’re still thinking about switching, here are a few things you consider first:

Citizens doesn’t really want you

Citizens doesn’t want to insure homes that would be more appropriately covered in the private market. The lawmakers that created the option intended for it to be available for properties that no insurer can cover at an affordable price – older homes in hurricane-prone coastal regions. They don’t want to cover houses in the Orlando area, or even west of Interstate 95 in South Florida. So they wrote all sorts of poison pills into the laws governing Citizens’ operation to make sure Citizens doesn’t become too enticing.

As more customers discover Citizens, lawmakers make those pills more sour, as they did during the most recent legislative session as Citizens started to grow again. Among them: That 10% cap on annual average rate increase will increase by 1 percentage point each year until the annual cap reaches 15%.

Another: Currently homeowners are eligible for Citizens if all competing private market offers are at least 15% higher than what Citizens charges. Starting July 1, though, those competing offers will have to be at least 20% higher.

Also, Citizens doesn’t insure homes valued at $700,000 or more in most Florida counties, and doesn’t insure homes valued at $1 million or more in Miami-Dade or Monroe counties.

Personal liability coverage is limited

Citizens caps coverage at values below what private insurers are willing to offer, and for some risks, doesn’t offer coverage at all.

For example, at Citizens, personal liability coverage is capped at $100,000. This is coverage that would kick in if someone like a friend, neighbor or relative slips and falls on your property and breaks a limb or worse.

Many common scenarios could trigger someone to file a claim against your policy: If your tile floor is wet and your visitor doesn’t realize it. Or a throw rug buckles under their feet. A delivery worker could slip on an algae-covered sidewalk leading up to your front door on a rainy day. A lawn maintenance worker could be injured by a falling tree limb while working in your backyard.

The possibilities are endless, but if you have Citizens insurance, you’ll be covered only for the injured person’s first $100,000 in medical care and lost wages. If their costs exceed that amount, they might sue you personally for the remainder. Private market insurance policies typically offer $300,000 in liability coverage and give you the option to purchase more coverage.

Animal coverage isn’t offered

Those personal liability coverages offered by private market insurers will pay victims who get bit by your dog on your property or even on walks around your neighborhood. The same goes for cat bites or scratches, bird pecks, or freak squirrel attacks. Citizens offers no coverage for animal accidents.

Mold coverage is capped at $10,000

Common in Florida, mold can grow silently inside walls for months or years if you have an unseen plumbing leak, water around your foundation, a leaking roof, or poor ventilation. Eventually the mold can spread through your drywall until the point of eventually rendering your home unhealthy or uninhabitable. The cost to replace mold-infused walls can increase rapidly once workers start tearing them down and discover the extent of the damage.

Citizens caps mold coverage at $10,000, while private market insurers allow you to buy much more. That could be critical if you want to avoid a huge, unexpected cost in case the unthinkable occurs.

Water backup excluded

While no homeowners insurance policy covers flooding that occurs from torrential rain or an overfilled tributary or body of water, many insurance companies will offer the option to cover damage caused by water backup from municipal sewers or failure of sump pumps, which are used to prevent flooding of homes in flood-prone areas. Citizens offers no such option.

Water damage coverage capped at $10,000

Citizens limits coverage of water damage caused by faulty plumbing systems, water heaters, appliances, or fire suppression systems to $10,000 unless you agree to allow repairs by contractors that belong to Citizens’ managed repair program. While other companies followed Citizens’ lead by creating their own managed repair programs a few years ago, many other companies did not.

Also, Citizens will perform emergency cleanup of water damage for free but limits payouts to $3,000 if the policyholder chooses the cleanup company.

While Citizens created the cap to reduce overbilling by contractors it did not control, its managed repair contractors are typically instructed to make repairs that return the property to its pre-loss condition and nothing more.

That can be a problem if the homeowner wants to take the opportunity to upgrade damaged materials, Handerhan said.

“If the original kitchen counter material is linoleum and the homeowner would like to upgrade to marble, they have the ability to negotiate with a contractor they choose,” he said. “It becomes complicated if they have no ability to shop for their own contractor. Their negotiation ability becomes a lot less.”

Sorry about your carport and pool enclosure

The outdoor structures most likely to be mangled in hurricanes or tornadoes – carports, pool enclosures, aluminum screen rooms or anything covered by aluminum, fiberglass, plastic. vinyl, fabric or screening – aren’t covered.

You’ll pay more if Citizens can’t pay

One of the biggest disadvantages of buying a Citizens policy is the potential of being billed if Citizens can’t pay all of its customers’ claims after a major disaster. True, the company currently is sitting on a $6.4 billion surplus. But that could quickly disappear if a powerful hurricane hits a major metro area like South Florida. If that happens, all Citizens customers would face assessments of up to 48% of their annual premiums to make up the shortfall. And that’s just the first of several special assessments Citizens customers would have to pay until the company made all of its customers whole.

Price is the only advantage

Currently, Citizens’ lower prices is about the only argument for choosing the so-called “insurer of last resort,” agents say.

Dulce Suarez-Resnick, vice president of Miami-based agency Acentria Insurance, produced a sample quote for comparable coverage for a hypothetical house in Central Broward with $337,000 in dwelling coverage and $168,500 for contents, plus a 2% hurricane deductible. Quotes from two private market insurers came in at $5,528 and $5,465 while Citizens’ quote was $4,953. Neither private-market policy came in at least 15% higher, the minimum required to qualify a homeowner for Citizens. Even if they were 15% higher, the savings wouldn’t justify a switch to a policy with fewer benefits, she said.

About the only good alternative involving Citizens is if a homeowner can pair a wind-only (hurricane) policy from Citizens with a policy from a private market carrier that covers all of the other risks, Suarez-Resnick said. “Otherwise, the customer should talk to their agent and make changes to their current policy to help reduce their premium,” she said.

Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents, says customers should weigh the savings they could get from Citizens with the potential higher out-of-pocket costs they might face after a loss.

“Even if it’s solely about price, there is a cost – and that’s basically the lack of coverage,” he said. “The private market is simply a better option – if they can find coverage there.”

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Phone Running Out of Juice by Mid-Afternoon?

Certain apps may be draining the battery. And if your phone seems sluggish, check available memory. Some apps take a lot, which can slow down operations.

SAN FRANCISCO – Some smartphone apps may be slowly draining your phone, according to new research from pCloud, which offers cloud storage services. Certain apps not only zap the battery power from your phone, they also hog memory and can make cellphones slower.

pCloud conducted a study to find which mobile applications are most demanding on smartphones. The study evaluated the 100 most popular apps to pinpoint how pressing they are on phones. They factored in features that the app uses, such as location, camera, battery consumption and whether a dark mode is available.

Among the biggest violators? Fitness tracking and social network apps – and travel and transportation apps may take up the most memory. Video conferencing apps can also drain your phone, the study finds.

20 apps that can wear out your phone the most

  • Fitbit
  • Verizon
  • Uber
  • Skype
  • Facebook
  • Airbnb
  • BIGO Live
  • Instagram
  • Tinder
  • Bumble
  • Snapchat
  • WhatsApp
  • Zoom
  • YouTube
  • Booking
  • Amazon
  • Telegram
  • Grindr
  • Likee
  • LinkedIn

Source: “Secret Phone Killers: Which Apps Are the Most Demanding on Your Phone?” pCloud (2021)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

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Scam Warning: ‘Pay a Fine or Lose Your Real Estate License’

A scam reported out of Pa. specifically targets real estate licensees. The caller says the agent missed jury duty and, unless they pay a fine, may lose their license.

HARRISBURG, Pa. – A license scam isn’t new, but its appearance in the real estate industry may be. In general, the scams tell callers to “pay a fee or you’ll lose your license.”

In an article from the Pennsylvania Association of Realtors, a county sheriff has reported on a new scam that directly targets the real estate industry. According to an article in “Just Listed,” the association’s email newsletter, “The scammers claim to be calling from a specific judge or sheriff’s office and say that the person has failed to show up for jury duty, and now they must pay a fine or risk the loss of their real estate license.”

Sheriff Nicholas Chimienti Jr., the sheriff of Dauphin County, Pa., says the scam has been reported in at least several counties. “I’ve spoken with several real estate professionals over the past week who have reported being victims of this type of scam. Real estate professionals are being targeted … Unfortunately, many people never report these types of cases.”

Source: Pennsylvania Association of Realtors

© 2021 Florida Realtors®

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FHFA Changes Modification Rules – More Owners Qualify for Refi

More at-risk homeowners with a loan-to-value ratio less than 80% can now qualify for a lower-interest-rate refinance if Fannie Mae or Freddie Mac own their loan.

WASHINGTON – In an effort to help more homeowners hurt by the pandemic, the Federal Housing Finance Agency (FHFA) announced changes to loan modification terms. Homeowners once turned down for a lower-interest-rate refinance (refi) may now qualify.

The new option applies to loans backed by Fannie Mae or Freddie Mac – more than half of all U.S. conventional mortgages. The updated terms are specifically for borrowers with permanent COVID-19 hardships.

Until now, only borrowers with mark-to-market loan-to-value (MTMLTV) ratios greater than or equal to 80% were eligible for a possible interest rate reduction. MTMLTV is a ratio that compares the balance remaining on the mortgage to the current market value of a home. Homeowners with less than 20% home equity could not do a refi.

Now, FHFA says its Flex Modification terms will be adjusted for COVID-19 hardships and make it possible for eligible borrowers – regardless of the borrower’s loan-to-value ratio – to refinance their mortgage.

“Allowing more families to qualify for an interest rate reduction will prevent unnecessary foreclosures, help strengthen (Fannie Mae and Freddie Mac’s) books of business, and make sustainable homeownership a reality for more families currently living with the uncertainty of forbearance,” FHFA Acting Director Sandra L. Thompson said when announcing the change.

© 2021 Florida Realtors®

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Florida Realtors: Take Home Safety Steps for July 4

Many people look forward to traveling, beaches and fireworks this July 4th – but remind Fla. homeowners to take steps to help make their homes safer over the holiday.

ORLANDO, Fla. – Have big plans for this July 4th? With the pandemic easing, many families across Florida and the nation will spend the Fourth of July holiday away from home, traveling to see relatives and a fireworks display, or maybe basking in the sunshine on the state’s beautiful beaches.

To fully enjoy those activities and other summertime pursuits spent away from home, Florida Realtors®  suggests that homeowners take precautions to protect their residences when they’re not around. Crime rates across the country often start to peak as temperatures rise during the warm weather months – the same time that many families leave their homes unoccupied and unprotected.

Homeowners can take these simple precautions to make their homes less of a target for criminals:

No “Home Alone”: Before leaving your home during the day, make it look as if someone is still at home by using timers on lights in various rooms. Even though daylight hours are longer during the summer, it may still get dark faster than you expect or you may return home later than anticipated, and taking this step ensures that your home appears occupied at all times.

No Sharing on Social Media: Sharing your vacation plans on social media sites isn’t wise. That’s the same as announcing to the world you’ll be gone and the house will be empty – a perfect target for burglars or vandals. The same goes for phone messages.

No Open-Door Policy: Ensure that all doors leading to the home and garage are locked, even when leaving for short periods of time. The typical burglary takes less than five minutes and unlocked doors, combined with an empty home, put out the “welcome mat” for crime. Make sure windows are locked, too.

Someone to Watch Over Me: Be landscape smart. Shrubbery and other plants can grow very rapidly during the warm, wet summer months. Keep them trimmed so neighbors can easily see your home. Also, a burglar could see an unkempt yard as a sign of an empty home.

A Key Reminder: When leaving home, take your house keys along or leave a spare set with a trusted neighbor. Never leave a key under a welcome mat, in a mailbox or other hiding spots – most burglars know where to look.

Crime Doesn’t Take a Vacation: If you’re planning to be away from home for more than a day or two, ask a neighbor pick up your mail and newspapers – or arrange to cancel the paper and hold the mail. Disable your garage door opener and manually lock it from the inside, and don’t forget to check that the door leading from the garage to the home is locked, too.

© 2021 Florida Realtors®

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Mortgage Rates Slide Below 3% Again

The average 30-year, fixed-rate mortgage has jumped over and under the 3% mark for months. This week it slid just below again, averaging 2.98%.

MCLEAN, Va. – For weeks, the average 30-year mortgage rate has been hovering around 3% without much indication on when it might significantly change. This month’s mortgage report from Freddie Mac found that last week’s average, which was over 3% (3.07%), again dipped low enough to average 2.98%.

“Economic growth remains steady and is bolstering more segments of the economy,” says Sam Khater, Freddie Mac’s chief economist. “Although low and stable mortgage rates have kept the housing market booming over recent months, a deterioration in affordability and for-sale inventory has led to a market slowdown.”

Average mortgage rates for the week of July 1, 2021

  • The 30-year fixed-rate mortgage averaged 2.98% with an average 0.6 point, down from last week’s 3.02%. A year ago, it averaged 3.07%.
  • The 15-year fixed-rate mortgage averaged 2.26% with an average 0.7 point, down from last week’s 2.34%. A year ago, it averaged 2.56%.
  • The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.54% with an average 0.3 point, up slightly from last week’s 2.53%. A year ago, it averaged 3.00%.

© 2021 Florida Realtors®

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Can Tenant Claim ‘Emotional Support Animal’ at Any Time?

RE Q&A: A condo board denied a tenant’s dog that was 30 pounds above their weight limit, but she later got documentation showing it’s an emotional support animal. Can she do that? Also: Condos, HOAs, noise and pickleball.

NAPLES, Fla. – Question: A tenant seeking approval to reside in our condominium has a dog weighing 60 pounds. We have a 30-pound limit on all dogs. When we denied the application because of the dog, the tenant then claimed that the dog is an emotional support animal and provided a letter dated after our original denial from a mental health professional. Do we have to allow this dog? – T.A., Naples

Answer: There are multiple issues here, but the short answer is that the weight of a valid emotional support animal is irrelevant. If a dog is also an emotional support animal, it is not subject to pet restrictions based on weight, size or even breed. That is because the emotional support animal is viewed as a medical device and not as a dog.

The bigger issue is whether the request is valid in the first place. Emotional support animals provide a valuable medical benefit for many, but it is no secret that there are also abuses of the laws just to circumvent otherwise valid pet restrictions. If the disability is not readily apparent, the association is permitted to request reasonably reliable medical documentation from a health care provider in the relevant field. This information should provide the board with a sufficient basis to determine whether the emotional support animal is necessary to allow full use and enjoyment of the premises. The relevant laws and the analysis are the same whether the requesting party is an owner or a tenant.

The fact that the letter from the medical professional is dated after the original denial may mean that the person only sought the medical opinion when it became necessary to find a way to bring the dog into the unit. Alternatively, it could just mean that the tenant has been receiving valuable medical care for years but never previously requested the letter.

There is a relatively new Florida statute as well, which requires certain minimum requirements when the health care provider is from outside of Florida. There can be serious consequences for denying an appropriate request for an accommodation to the association’s pet policies for an emotional support animal, and thus we always recommend having the request and supporting documents reviewed by a licensed Florida attorney to determine if the request is consistent with federal and Florida laws governing this issue.

Question: We want to construct some new pickleball courts at our amenity center because there is so much demand to play. Some owners are objecting to the new courts, arguing that they will be too loud. Can they prevent the association from installing the courts? – B.B., Naples

Answer: This is a very popular question. The two main issues involve objections over noise and the association’s discretionary ability to alter its common areas to construct popular amenities.

First, owners living close to the proposed pickleball location will likely argue that the noise created by pickleball constitutes a nuisance. This will generally require the association to perform an analysis of its specific nuisance provisions in the covenants and also to review other covenants applicable to recreational areas. For example, if the proposed pickleball location is on a platted tract dedicated as a recreational tract, it is a good argument that the objecting owner had knowledge that noise and activity was always a possibility. Just because tennis is generally quieter than pickleball, that doesn’t necessary mean that owners consented to noise levels generated only by tennis. Additionally, there are noise engineers that can perform an analysis of your property and natural features that would amplify sound. The engineer can recommend mitigating improvements that can further minimize an owners’ objection.

The second issue is typically whether the board had the discretion to approve pickleball courts without membership approval. In a condominium, for example, it would be a material alteration to construct new pickleball courts or to convert existing tennis courts into pickleball courts. So, in a condominium, it is possible that the owners would need to approve the change.

In an HOA however, there is no statutory concept of material alterations and thus each HOA needs to analyze its own specific covenants to determine whether it has a self-imposed restriction on alterations to common areas or amenities.

In short, the noise objection is a common one, but an objection that can largely be overcome with reasonable options to mitigate sound and the fact that noise was always a possibility in a recreation area. Before moving forward with construction, however, we recommend you consult your legal counsel to review your specific governing documents (for condominiums and HOAs) to determine whether the board has the discretion to make this improvement or whether a larger vote is required by the membership.

The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, Adamczyk, DeBoest & Cross or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

© 2021 Journal Media Group. Attorney Steven J. Adamczyk is a shareholder at the law firm of Goede, Adamczyk, DeBoest & Cross.

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