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Foreclosures jump in Utah
Dateline: Tuesday, April 29, 2008 by Http://deseretnews.com/article/1,5143,695274654,00.html |
 Foreclosures jump in Utah
Increase is 78% over year ago; state`s filing rate is 18th in U.S.
By Jasen Lee
Deseret News
Published: Tuesday, April 29, 2008 12:36 a.m. MDT
The foreclosure rate in Utah jumped by nearly 78 percent in the first quarter of this year, compared with the same period last year, according to a report released Monday.
The RealtyTrac report also showed that the number of foreclosures in the Beehive State increased 34 percent from the fourth quarter 2007 to the first quarter of this year.
Utah ranked 18th in the nation in the number of homes in foreclosure. One in every 274 households in Utah had received a foreclosure filing in the first quarter, compared to the national average of one in 194 households.
Nationally, Nevada topped the list, with one in every 54 households receiving foreclosure filing, followed by California at one in 78 households, and Arizona at one in 95.
"Utah had previously avoided some of the spikes in foreclosure activity that we were seeing in other areas," said Daren Blomquist, RealtyTrac marketing and communications manager. "This quarter was the quarter where Utah and the Salt Lake City are really did see a good-sized jump in foreclosure activity."
Blomquist said the Salt Lake City metro area saw a 69 percent increase in foreclosures in the first quarter of this year, compared with the same period last year, and a nearly 23 percent increase since the fourth quarter of last year. Salt Lake ranked 58th among the top 100 U.S. metro foreclosure markets at a rate of one in every 255 households receiving a foreclosure filing.
Realty Trac publishes a national database of foreclosure and bank-owned properties from approximately 2,500 counties across the nation.
Metro areas in California and Florida metro areas accounted for 13 of the top 20 metro foreclosure rates, with the California cities of Stockton and Riverside-San Bernardino taking the first and second spots, according to the report.
One in every 30 Stockton households received a foreclosure filing during the quarter, followed by Riverside-San Bernardino, with and one in every 38 households. Las Vegas was third at one in 44 households; Bakersfield, Calif. was fourth at one in 51; and Sacramento ranked fifth, at one in 55 households.
As many families struggle to pay their mortgages, a report released Monday by Hope Now, a Bush administration-organized effort to help at-risk borrowers, showed that nearly 503,000 borrowers received some form of mortgage-loan assistance during the first quarter of 2008, although most of the help was temporary. Members of Hope Now include Bank of America Corp., Citigroup Inc., Washington Mutual Inc. and Wells Fargo and Co.
Another likely residual effect of the housing crunch is an increase in the percentage of vacant homes for sale in the United States, which set a new record high in the first quarter of this year, the government said Monday.
A Census Bureau report showed that 2.9 percent of U.S. homes, excluding rental properties, were vacant and up for sale, compared with 2.8 percent in the fourth quarter of 2007. It was the highest quarterly number in records going back to 1956.
Vacancy rates in the West had the biggest rise, increasing to 7 percent in the January-March period, compared with 6.5 percent in the fourth quarter of last year.
Nationally, the vacancy rate, including new and existing homes, has been rising steadily since mid-2005. The report did not break down vacancy rates by state or city.
Contributing: Associated Press
E-mail: jlee@desnews.com |
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Jumbo mortgages caught up in subprime fallout
Dateline: Tuesday, April 22, 2008 by Http://www.heraldextra.com/content/view/263260/18/ |
Tuesday, 22 April 2008
Jumbo mortgages caught up in subprime fallout
Brendan M. Case - THE DALLAS MORNING NEWS
DALLAS -- For months, mortgage lenders have been backing away from borrowers with spotty credit, all but closing down the so-called subprime mortgage market.
More surprisingly, they`ve also been increasingly loath to lend to high-end borrowers who might want to finance a high-cost home.
That means doctors, lawyers, business owners and corporate execs looking for jumbo mortgages -- those more than $417,000 -- are apt to pay significantly higher interest rates than people with similar credit scores in line for smaller loans.
"When the subprime mess came to full fruition, jumbo loans got thrown in with all the subprime loans," said Tom Parker, president of Home Team Mortgage, the in-house mortgage company of Ebby Halliday Realtors in Dallas. "The liquidity not only for subprime loans dried up, but also for jumbo loans."
That`s reflected in the divergence of two key interest rates over the last 12 months.
A year ago, a 30-year fixed-rate jumbo came with an average rate of about 7 percent in Dallas, according to Bankrate.com.
That was only slightly higher than the 6.75 percent someone might pay on a smaller mortgage with otherwise comparable terms, known in the industry as "conforming" loans.
Since then, conforming loans have gotten cheaper, with average interest rates at 5.87 percent last week. But jumbos have become pricier, with interest rates ranging above 7.5 percent in recent weeks before dropping to 7.19 percent last week.
The difference adds up, and many say higher jumbo costs are contributing to a growing slump in some high-end home markets that are seeing declines in sales and prices.
If jumbo loans had drifted down to 6 percent, a person taking out a $500,000 fixed-rate mortgage for 30 years would pay just under $3,000 a month in principal and interest, or nearly $1.08 million over the life of the loan.
At 7.5 percent, the same borrower would shell out almost $500 more each month -- and an extra $180,000 over the life of the loan.
That math made Clayton Roberts think twice about taking out a 30-year fixed-rate loan when refinancing his home recently, even though that was the only kind of mortgage he had used in 15 years of home ownership.
Roberts, 48, a Dallas anesthesiologist, wanted to combine two home loans to cut his monthly payment. He had taken out a loan last year to build a pool and pay for a landscaping project. But with the high interest rates on fixed-rate jumbos, "it just doesn`t make sense," he said.
Instead, the doctor ventured into unfamiliar territory, opting for a jumbo loan on which he pays only interest for five years, at a rate of about 6 percent. After that, he will have to pay off the outstanding principal and interest over 25 years, at an interest rate that will be determined later.
Roberts is not the only one following that strategy, despite the risk that interest rates could rise, said Gary Akright, president of Dominion Mortgage Corp. in Dallas.
"One way you can do it is to take an interest-only feature," he said. "Are you subject to rate volatility? Absolutely."
Prime jumbo mortgages are actually less risky than conforming mortgages of the same quality.
In January, about 1.3 percent of prime jumbo mortgages were 60 days or more past due, compared with 2.2 percent of prime conforming mortgages, according to First American CoreLogic Inc.`s LoanPerformance, which tracks mortgage data.
But jumbo delinquencies are rising rapidly. In January 2007, less than 0.6 percent of prime jumbo loans were delinquent by 60 days or more. That means the percentage of troubled jumbo loans has more than doubled in 12 months.
Moreover, lenders feel safer making the smaller conforming loans because they can sell them to government-sponsored entities such as the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corp., Freddie Mac.
But many investors now shy away from mortgage-backed securities, given the recent credit problems.
"There`s no appetite on Wall Street to buy those notes anymore," said Mike Anderson, CEO of Reliance Mortgage Co. in Dallas. "I don`t care what the quality is." |
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Foreclosure future grim for Utahns
Dateline: Thursday, April 17, 2008 by Http://deseretnews.com/article/1,5143,695271092,00.html |
By Jasen Lee
Deseret News
Published: Thursday, April 17, 2008 12:36 a.m. MDT
Utah`s housing bubble is forecast to burst in a big way, with one in 25 Utah homeowners projected to be in foreclosure in the next two years, according to a report released Wednesday by The Pew Charitable Trusts.
The report attributed the rise in foreclosures to subprime loans made in 2005 and 2006. In those years, 24 percent of home loans in Utah were subprime.
The outlook is grim in several other states, as well, including Nevada, where one in 11 homeowners are projected to be in foreclosure in the next two years, and Arizona, where one in 18 homeowners may face the same circumstance. Rounding out the five states with the highest projected foreclosure rates were California at one in 20, and Utah, which tied with Colorado at one in 25, or a 4 percent rate of foreclosure.
"Is the American dream slipping away?" asked Shelley Hearne, managing director of Pew`s Health and Human Services program, in a letter introducing the report, titled "Defaulting on the Dream: States Respond to America`s Foreclosure Crisis."
Because of foreclosures in their communities, 40 million homeowners could see their property values and their municipalities` tax bases drop by as much as $356 billion, largely over the next two years, said Hearne, a professor of health policy and management at Johns Hopkins University.
"The stakes are incredibly high. Homeownership is the primary vehicle through which American families build financial security," she said. "It also is an essential building block of state and local economies."
Jim Wood, director of the University of Utah`s Bureau of Business and Economic Research, said that Utah`s previous highest rate of foreclosures was about 2 percent in 2002, coinciding with the last recession. He noted that foreclosures are closely tied to unemployment rates and rapid home price appreciation, which Utah was able to avoid for the most part during the national housing boom, due to the state`s strong, stable economy.
The Pew report`s prediction of a 4 percent foreclosure rate "would be close to an all-time high," he said "It`s quite pessimistic — double what we`ve been before."
He attributed the state`s recent housing bubble to overly optimistic beliefs by those in the housing industry, combined with eager homebuyers and sellers, which prompted a home-building run-up during the past few years.
Hearne said that the Pew study is the first comprehensive look at what all 50 states and the District of Columbia are doing to try to address the subprime mortgage fallout. The study was a joint effort between the Pew Center on the States and Pew`s Health and Human Services Program.
"Stronger standards from federal policymakers could have helped avert this crisis," Hearne said. "Future legislation must consider ways to strengthen standards to prevent more troubling loans from being made."
Fourteen states, including Utah, have created statewide foreclosure task forces to bring government, lenders, consumer advocates and experts together to address the crisis.
The Pew researchers analyzed two principal data sets: the Mortgage Bankers Association 4th Quarter National Delinquency Survey, and the Center for Responsible Lending`s foreclosure projections and subprime spillover data.
The Mortgage Bankers Association quarterly data are based on survey sampling techniques and offer a point in time picture of loans in various stages of delinquency or in the foreclosure process, the report said. The MBA foreclosure estimates refer to all loans in the foreclosure process, as well as loans that are seriously delinquent, or more than 90 days past due.
The Center for Responsible Lending`s estimates evaluate the total number of subprime loans disbursed during 2005 and 2006 and give the number of loans the analysts expect will be foreclosed upon. This estimate includes foreclosures that will occur in 2008, as well as subsequent years.
Wood said resets of variable-rate subprime loans have contributed to the increase in foreclosures, both nationally and in Utah.
"We will probably go well above the national average," he said, "but 4 percent seems high."
E-mail: jlee@desnews.com |
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Frank threatens tough mortgage rules
Dateline: Tuesday, April 15, 2008 by Http://deseretnews.com/article/1,5143,695270647,00.html |
By Julie Hirschfeld Davis
Associated Press
Published: Tuesday, April 15, 2008 9:10 a.m. MDT
WASHINGTON — Democratic efforts to let bankruptcy judges rewrite mortgages for strapped borrowers won`t make it through Congress this year, the chairman of the House Financial Services Committee said Tuesday.
Rep. Barney Frank, D-Mass., told The Associated Press in an interview that the only thing lawmakers can do to get lenders to help struggling homeowners avoid slipping into default is to threaten the lenders with tougher regulation in the future.
Read the article at: http://deseretnews.com/article/1,5143,695270647,00.html |
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Foreclosures in Utah up dramatically
Dateline: Tuesday, April 15, 2008 by Http://deseretnews.com/article/1,5143,695270431,00.html |
By Jasen Lee
Deseret News
Published: Tuesday, April 15, 2008 12:38 a.m. MDT
Utah`s foreclosure rate jumped dramatically in March — 93.40 percent — from the same period a year ago, according to a monthly report released Monday by market research firm RealtyTrac.
On a month-to-month basis, however, Utah saw a 4.50 percent decrease in filings from February.
Read the article at: http://deseretnews.com/article/1,5143,695270431,00.html |
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Job growth continues slowdown in Utah, but still outpaces nation
Dateline: Tuesday, April 15, 2008 by Http://www.sltrib.com/business/ci_8933624 |
 By Lesley Mitchell
The Salt Lake Tribune
Article Last Updated: 04/15/2008 01:09:30 PM MDT
Utah`s job growth in the year that ended in March slipped to 2.1 percent, the state said today, continuing a pattern of decline.
In all, the state created 26,200 jobs over that one-year period.
Utah`s job creation rate is down sharply from a peak nearly two years ago, when in the period that ended June 30, 2006, the state`s economy added 54,000 jobs, for an employment growth rate of 5.4 percent.
Even with the slowdown, job growth in Utah remains higher than the U.S. rate of 0.4 percent.
Utah`s employment growth is slowing down in great part because of the sharp downturn in the residential real estate market along the Wasatch Front. As home sales have declined from a blistering pace, people working for home builders, mortgage and title companies, and other companies related to real estate have lost jobs in recent months.
As a result, Utah`s unemployment rate for March rose slightly, to 3.3 percent, meaning 46,200 Utahns were out of work last month. The U.S. unemployment rate also moved up, to 5.1 percent.
http://www.sltrib.com/business/ci_8933624 |
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Wachovia loss casts cloud on banking
Dateline: Tuesday, April 15, 2008 by Http://www.sltrib.com/business/ci_8926722 |
Analysts forecast Q1 losses at WaMu, Citi as investors doubt banks can survive tough year
The Associated Press
Article Last Updated: 04/14/2008 11:29:23 PM MDT
NEW YORK - The shocking first-quarter loss at Wachovia Corp., a company long viewed as a relatively conservative player during the mortgage boom, suggests that 2008 will be at best a rebuilding year even for the nation`s better-positioned banks.
Results this week from large banks such as JPMorgan Chase & Co., Citigroup Inc., Washington Mutual Inc. and Wells Fargo & Co. should shed more light on how much fixing-up the industry has to do. So far, it`s not looking pretty - and that means fewer loans for consumers, skimpier dividends for shareholders and more job cuts.
Wachovia`s $393 million quarterly loss was accompanied by a 41 percent dividend cut, plans to eliminate 500 jobs in its corporate and investment bank, and a move to sell $7 billion worth of stock. Many banks have already tried to raise cash through stake sales - Wachovia itself raised $8.3 billion earlier this year, Citi has raised about $20 billion, and WaMu has raised $5 billion, just to name a few.
Read the rest of the article at: http://www.sltrib.com/business/ci_8926722 |
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REPORTING MORTGAGE FRAUD IN UTAH
Dateline: Thursday, June 28, 2007 |
 REPORTING MORTGAGE FRAUD IN UTAH
When you are aware of mortgage fraud in Utah, please report it to the following State & Federal Agencies. You should give all relevant information to each of the investigatory agencies. You should be able to identify a victim, potential defendant, the acts that constitute mortgage fraud. Essentially, report the “who”, “what”, “where”, and “when” of the case.
Department of Commerce
Division of Real Estate
Dee Johnson
Phone: (801)530-6747
Web Address: www.realestate.utah.gov
Email: realestate@utah.gov
Complaint Form: http://www.realestate.utah.gov/complaint.html
Department of Insurance
Fraud Division
Doug LeDoux
Phone: 1-877-372-8315
Web Address: http://www.ifd.state.ut.us/
Email: DLeDoux@utah.gov
Department of Public Safety
State Bureau of Investigation
James Vaughn
Phone: 801-955-2100
Fax: 801-955-2188
Web Address: http://sbi.utah.gov/index.html
Email: jvaughn@utah.gov
FBI
Sojna Sorenson
Phone: (801) 579-1400
Web Address: http://saltlakecity.fbi.gov/
Email: SaltLakeCity@ic.fbi.gov
If it is an FHA loan or HUD property
US Dept. of Housing and Urban Development
Office of Inspector General
Phone: 1-800-347-3735
Fax: (202) 708-4829
Web Address: http://www.hud.gov/offices/oig/hotline/
Email: hotline@hudoig.gov
REPORTING A CRIME OF MORTGAGE FRAUD TO LOCAL LAW ENFORCEMENT
Please send your information to the local law enforcement agency too. Local law enforcement will likely not have the expertise to readily know what part of the transaction constituted fraud. However, if you give them enough information about the fraud, then they may be able to conduct an investigation and get a county prosecutor to prosecute the case.
You want to make sure you can identify a victim, potential defendants, and articulate with specificity what conduct was fraudulent, (i.e. false documents, second contracts, ID theft, false statements to consumers, etc.)
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Do I Really Have to Pay My Loan Officers As Employees?
Dateline: Friday, February 2, 2007 |
 Do I really have to pay my loan officers as employees?
Wow! This is a hot topic, and a complex issue. The answer is not as cut-and-dry as we would all like. However, it might be instructive to remember the wise words of Ben Franklin when he said, “Certainty? In this world nothing is certain but death and taxes.” The likelihood that the IRS is eventually going to want, and get, their taxes is great.
The IRS uses the common law test to determine if an employee relationship does or does not exist. The common law test is fact intensive and each situation is a little different and requires specific analysis. There is however, guidance available.
But before we get into what guidance is available for the mortgage industry, let us first address another question regarding real estate agents. Many of you may be asking yourselves, “isn’t the mortgage industry just like the real estate industry? And aren’t almost all real estate agents independent contractors?” Well, to answer these questions, the real estate industry in 1982 requested and received as part of the Tax Equity and Fiscal Responsibility Act (TEFRA) a special carve out called Section 3508. (I.R.C. § 3508 (1994). Section 3508 is part of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248, § 269(a), 96 Stat. 324, 551-52 (1982) (codified at I.R.C. § 3508 (1994)) This carve out classifies licensed real estate agents as statutory non-employees. Thus, real estate agents by definition are not employees and the comparison is irrelevant with regard to the treatment of loan officers.
However, The IRS itself has specifically addressed the issue regarding the treatment of mortgage loan officers twice. The first in 1957 in a Revenue Ruling and the other in a 1996 Private Letter Ruling. (Note: both rulings found that an employer/employee relationship existed.)
The Private Letter Ruling, although non-binding, is instructive. It found that,
“While the parties may have intended to create an independent contractor relationship, the right of control retained by the Firm is sufficient to create an employer-employee relationship.” (Private Ruling 9648003 at p. 31, emphasis added.)
The analysis regarding right to control, weather or not the firm exercises that control, is likely impacted by the Utah licensing laws. The definitions of prohibited conduct in the Utah Code make it a violation for a Principal Lending Manager (PLM) to fail to exercise reasonable supervision over the activities of the mortgage officers licensed under that PLM. (Utah Code Section 61-2c-301 (1)(s).)
Thus, PLMs are required to exercise “reasonable supervision”. This denotes a certain level of oversight and control that must be exercised.
Additionally, the control person by definition is, “an individual who is designated by an entity as the individual who directly manages or controls the entity´s transaction of the business of residential mortgage loans secured by Utah dwellings.” (Utah Code Section 61-2c-104 (j) emphasis added.) Once again, the Utah Code envisions management and control of loan officers.
Thus, not only does a licensed mortgage company have the right to control the actions of a loan officer, there is some affirmative duty to do so. In the analysis regarding the common law test, these laws will be used by the IRS or state agency to argue that an employee relationship is created.
Another state law that potentially influences the relationship between mortgage company and loan officer is the requirement that a loan officer can only conduct the business of residential mortgage lending for one company at a time. (Utah Code Section 61-2c-201 (6)(7)(8)&(9).)
Once again, this prohibition on doing loans for more than one company allows the IRS or other state agency to argue that an employee relationship exists between licensed mortgage company and licensed loan officer.
These state laws definitely make the analysis easier for the IRS and/or a state agency when auditing a mortgage company.
The potential impact on a company for misclassification is significant.
The IRS may assess the firm three years of back withholding for each "employee" misclassified regardless of whether or not that "employee" has paid the self-employment and income taxes pertaining to the income. (Internal Revenue Code §§ 3509, 6501 (1994).) Also, the IRS can assess the firm an effective penalty of 1.5% of the wages that should have been withheld and 20% of the unpaid social security taxes for each misclassified employee for the past three years. (I.R.C. section 3509.) The IRS prevents employers from offsetting against this amount taxes already paid by the independent contractor. Finally, if the employer fails to file the correct forms (informational returns, Form 1099), the employer will pay even a steeper fine on misclassified employees. (I.R.C. § 6653(a) (1994). In such cases, they must pay a penalty of three percent of the wages that would have been withheld and 40% of the unpaid FICA taxes for the past six years.) Finally, if the "employer" is thought to have intentionally misclassified the employee, a 100% penalty on the amount of the taxes owed is payable. I.R.C. § 6672 (1994). Section 6672 applies to responsible officers of the corporation as well. This penalty is not dischargeable in bankruptcy. (32 San Diego L. Rev. 895 at 906)
Thus, you can see, misclassification of employees can result in enormous liability, some of which may not be discharged in bankruptcy.
Relief from this liability may be available for the employer who misclassified their loan officers as independent contractors. This relief is found under Section 530 of the IRS Code. In order to qualify for this relief the employer must have, I. A reasonable basis for not treating the workers as employees, at the time it began the treatment, II. The employer must have treated all similar workers similarly (i.e. all loan officers as independent contractors), and III. The employer must have filed Form 1099-MISC for each worker without error. (IRS Publication 1976 (9-96))
In discussing the reasonable basis for your treatment of loan officers as independent contractors, most likely a mortgage company will rely on the argument that a significant segment of the industry treats similar workers similarly. This is by no means a slam-dunk argument. First of all, all available evidence is going to be viewed regarding the treatment of loan officers at the time the employer began treating them as independent contractors. Which brings up the question, “How does a mortgage company document or in most cases, how did the company document at the inception of the business practice that a significant segment of Utah’s mortgage industry treated loan officers as independent contractors?” I do not have an answer to this question. But asking the previous questions seems to raise the question, “What is a significant segment of the industry?” Without elaborating further, you may be able to see the problem a mortgage company is going to have when requesting Section 530 relief. The mortgage company is going to find it difficult to document that it was basing its decision to pay loan officers as independent contractors based on a reasonable basis, especially if that company was basing its decision off of the real estate model.
In conclusion, if you want to minimize liability and risk, you should pay your loan officers as employees. Otherwise, if the IRS does ever audit your payroll, then you may be looking at hefty legal bills with no real assurance that you will prevail. If you are paying your loan officers as independent contractors, you should consult a qualified tax attorney with experience in dealing with the IRS. Please make sure your tax professional is aware of the mortgage licensing laws and how those laws can impact the analysis of the Common Law Test. Until there is a court case or other binding precedent put in place, the answer will always be unsatisfactory as to whether you can pay a loan officer as an independent contractor. Thus, you may wish to classify your loan officers as independent contractors, but the safest way to avoid potential IRS tax liability (taxes, interest and penalties) is to classify them as employees.
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