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Monday, September 3, 2012

Lenders and local governments square off in game of chicken…


From a report by Dan Elsea, President of Brokerage Operations of Real Estate One, Michigan’s largest real estate company about a new glitch in the real estate system in parts of Michigan.

Here are the details of what is going on and how it might affect any pending or future bank-owned sales. The issue stems from those bank-owned properties (and those now owned by several of the Federal agencies that guaranteed loans)  where the Homestead Exemption was not rescinded when the bank took over the property. According to law, the bank should have been paying the non-homestead tax rate while they owned the property but in most cases that did not happen.  Recently the state/municipalities have begun filing tax liens for those shortfalls, causing havoc with the title insurance companies. This is only relevant for homes being purchased now, if a bank-owned home has closed with a title policy; that policy will cover any issues that might come up with these liens.

The result is, at the moment, in the following counties and for the listed banks, we have not been able to find any title insurance carrier who will write a policy for their properties.  Capital Title (a wholly-owned subsidiary of Real Estate One)  is working with all the major title insurance carriers to see if any will offer us a policy and many lenders have resolved their lien issues. Each bank needs to resolve their lien issues individually, so it is taking some time to resolve. This list is those remaining who are still working on a solution for their liens.

This is a game of chicken between the banks, state/municipalities and title insurers to see who blinks, much like the MERS issue last year.  I would anticipate it will be resolved soon, but in the meantime, most banks who are affected are offering an extension on the PA, allowing the buyers to cancel or go to close if the buyer can get a title policy (which of course no one can).  Before making an offer on a bank owned, be sure to confirm the bank is not on this list to avoid any delays in a closing and check with your title agency for any pending bank-owned sales to confirm a title policy is available.

This is a list of the Banks that are not able to get title polices in these specific Counties to cover the filed tax liens. If the bank is not listed in a specific county, they will be able to get a title policy for their properties in that county.

Wayne County

Federal National Mortgage Assoc. (FNMA)

HUD

Oakland County

HUD

Flagstar

Ingham County

Bank of America

Federal National Mortgage Assoc. (FNMA)

HUD

Wells Fargo

I've wondered for some time how the banks were able to get away with so much chicanery on foreclosures without someone coming after them. For the last few years, I’ve had to tell clients that there are no rules in dealing with banks on foreclosures, except those that the banks make up as they go along. I guess it took the budget pressures of the current recession to spur local governments into looking around for sources of more money. The local politicians undoubtedly thought that the banks would be targets that none of their constituents would want to defend and they are probably right about that; however, one wonders how successful they’ll be against HUD and Fannie May.

So, now in parts of Michigan we have yet another hurdle placed in the way of some real estate sales. It’s a little like one of those reality TV shows where they throw in a curve ball every week, another obstacle for the contestants to overcome; and in this version of reality our customers and us Realtors are the contestants.

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