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March 28th, 2010 10:21 AM by David W. Welch
I actually have not had this come up as an issue myself, probably because so many of the bank owned properties I have sold were cash deals. Some banks insist "owner of record" be the seller on the contract for sale and purchase. I am not a lawyer, so I am not completely sure why they would insist on this unless they don't really know which of the entities involved in the foreclosure is actually the owner until they get the title work completed. The lending side of the bank is having fits with the term "owner of record", because they want to know the title is going to be insurable before they will make the loan to purchase the property. So you could possibly have the REO side of the bank with a policy that contradicts a policy of the lending side of the bank. These are the types of frustrating situations that are really holding our real estate market back from recovery.
I believe it all starts with the inconsistent policies of HUD, FHA, Fannie Mae and Freddie Mac. I have written about the incongruity of Fed monetary policy with lending policy set by these other government entities. Now is not the time to worry about current buyers walking away from their homes. The reason it has been happening is because of the significant errosion of equity, the media's popularization of strategic default, and the recession. Buyers now are looking to take advantage of the lower values and interest rates, and it is highly unlikely that values will errode much further. In fact, if lending were less restrictive and banks more cooperative in the short sale process, sales would be quite robust. The economy is beginning to turn around, and the job market should begin to rebound with it. More jobs will create greater demand for homes and greater stability in the housing market. As far as the media is concerned, I believe most people have had enough of the op/ed being passed off as journalism.
I am poking a little fun at the "owner of record" issue, but it is causing real problems for buyers trying to obtain financing on REO's. I have had buyers trying to use Federal down payment assistance (which can only be used to purchase REO properties) turned down, because the bank would not accept contracts using down payment assistance. Loans turned down, because the buyer owns cash flowing rental properties and takes depreciation on them for tax purposes. Recently, another agent in my office had a contract declined, because USDA announced they are running out of funding for their mortgage program. Come up with consistent policies that encourage lending, and see what happens.
Orlando Real Estate, David Welch Real Estate Optimist