My New Blog

A real estate broker's commission may be determined using a percentage of the sales price, a flat fee, or a combination of both, according to a recent letter from HUD's General Counsel Helen Kanovsky.  The January 22 letter clarifies the distinction between using a formula to calculate a legitimate commission, as opposed to an unearned fee that violates RESPA.  Under RESPA, a real estate broker cannot charge a fee if no, nominal, or duplicative work is done.

According to the letter from Ms. Kanovsky, the new HUD-1 simplifies the reporting of the broker's commission because it is now reported in the 700-series as dollar amounts, rather than percentages.  If, however, the amount in the 700-series is more than the commission in the listing agreement or buyer's broker agreement, then HUD may review whether additional services were provided for the excess amount charged.  As an example, a listing broker charging the buyer an administrative fee absent any contractual relationship between the listing broker and buyer may be evidence of a RESPA violation.

This HUD letter provides REALTORS® with some guidance after a federal district court in Alabama invalidated a $149 administrative brokerage commission last year in the case of Busby v. JRHBW Realty, Inc. (2009) 642 F.Supp.2d 1283.  For more information on that case, see C.A.R.'s Realegal dated April 27, 2009.

Feb. 25, 2010 Page 1 of 4

Housing help for unemployed, underwater borrowers Under pressure to do more for troubled homeowners, President Obama is expected to announce a $1.5 billion program to help borrowers in five states hit hardest by the housing crisis. To read the full story, please click here:

High-scoring borrowers pay cards ahead of mortgages Consumers with high credit scores are more likely to default on mortgages than credit-card loans, said FICO, maker of the scoring formula most widely used by U.S. lenders.

Feb. 25, 2010 Page 2 of 4

Jumbo mortgage market is beginning to thaw The mortgage meltdown sent interest rates soaring and availability shrinking, but rates are declining and lenders are more wiling to make loans that top the limits for Freddie Mac, Fannie Mae, and the FHA.

Struggling homeowners warned against phony foreclosure ‘audits’ State officials warned struggling homeowners Monday about a new variation on loan-modification scams: "forensic loan audits."

Feb. 25, 2010 Page 3 of 4

Feb. 25, 2010 Page 4 of 4

In an effort to support REALTORS® and educate consumers about current opportunities in today's real estate market, C.A.R., in participation with the Los Angeles Times, will present the Southern California Home Buyer's Fair for consumers Saturday, March 13, and Sunday, March 14 at the Los Angeles Convention Center in downtown Los Angeles. The Fair is free to the public.

The Southern California Home Buyer's Fair will feature more than 50 educational seminars presented in English and Spanish for consumers, designed to address many of the concerns of first-time home buyers and arm them with all of the practical information they need to know as they begin the road to homeownership.

Please help us make this event a success with consumers by promoting the Southern California Home Buyer’s Fair to your clients. There is a fact sheet about the Fair at http://www.car.org/media/pdf/Fact_Sheet_2010.pdf. For complete information, go to www.homebuyersfair.com.

Thank you for your support!

Slightly more than 40 percent of home listings experienced at least one price reduction in January, compared with 44 percent in December, according to the report.  On average, homeowners within all markets studied reduced list prices by $21,925.
 
The Los Angeles, San Diego, and San Francisco markets were among those with the lowest percentage of price-reduced homes, with Los Angeles and San Diego both coming in at 32.6 percent and San Francisco at 31.9 percent.

New rule affects homeowners in foreclosure avoidance program
The U.S. Dept. of the Treasury and the Dept. of Housing and Urban Development (HUD) recently announced changes to its Home Affordable Modification Program (HAMP). The changes, designed to help improve the conversion from trial loan modifications to permanent modifications, take effect June 1. Mortgage servicers may elect to implement the changes sooner.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Under previous guidelines, homeowners were not required to document their incomes prior to receiving a trial mortgage modification. The trial modifications typically lasted three months, during which time the servicer was supposed to collect documents to verify the homeowner’s income. If the borrower met the monthly obligations, and submitted the required paperwork, the modification was supposed to be made permanent. However, many homeowners failed to provide the necessary paperwork, or the loan servicer lost the paperwork, resulting in just 66,465 permanent modifications out of the nearly 1.2 million trial modifications.
  
  
• The updated process requires that servicers collect three documents prior to granting a trial mortgage modification: A formal application, including a description of the hardship created by the mortgage; proof of income, such as two recent pay stubs or the most-recent profit and loss statement for self-employed borrowers; and a form authorizing the Internal Revenue Service to release tax data to the servicer.
  
  
• If the borrower meets the modified payment requirements for three months, the modification automatically will be made permanent. The Treasury Dept. also said it will allow servicers some discretion in making loan modifications permanent only if minor paperwork is missing. This discretion will help address a large backlog of incomplete modifications.
  
  
• Under the plan, servicers also will be required to respond within 10 days to an initial request for a modification. Once documents are provided, the servicer will have one month to let borrowers know whether they qualify for a trial modification.
  
  
• Servicers also must calculate whether the lender or current owner of the loan will benefit from a mortgage modification, or if foreclosing on the property is in the loan owner’s best interest. If the loan owner will benefit from a modification, the servicer is required to grant the modification. Requiring borrowers to provide financial documents upfront will enable servicers to decide if a modification or foreclosure is the best option.