Chapter 11 Industry Issues

Introduction Times of adversity, as we see some of our real estate markets, bring about increases in mortgage fraud, short sales, foreclosure and unlicensed activity with some people trying to ash n on the hardship of others. This Chapter covers each of theses industry issues, including property management as I relates to these industries. Page 173

Mortgage Fraud.) Schemes Identity Theft Deed Scams Unrecorded Second Mortgages Inflated Appraisal Equity Skimming Equity flipping Property Flipping GREED Page 223

Short Sales Definition A lender accepts less than the amount of he mortgage balance due on the property Generally occurs when a home owner get dealing with the mortgage and may default Lender will net more by this methods than taking he property back in foreclosure Deficiency Judgment IRS consequences to deficiency $$$ Page 224

Short Sales Fraud These tranacion are usuallyu very challenging “buyers” are not really buying but from the deal for friends or relative who eventually gets it back Buyer ”front" for investors who intend o buy it for ivest,en purpewses or sell to another legitimate buye a a higher price Pay a secndary lender under the table to remove their lien so is lien holsder wil agree to short sale These tranacion are usuallyu very challenging Page 224

HAMP/HAFA HAMP HFA for non HAMP qualifiers Home Affordable Modifiaion Program Stops foreclosure Provides for loan mods ( reduces mionhtky poayuenst) Loans after 1/109 Ends 12/31/12 HFA Home Affordable Foreclosure Program for non HAMP qualifiers Incentices for Short sales and Deed in Lieu $$ Incenties for Borrows $$$ Incentive for Lenders to chose over forclsure Page 224-225

Foreclosure Judicial Foreclosure A legal Process whereby the property is sold t satisfy the debt. AT the end of he sale the property is free of the foreclosed mortgage an “Junior liens. Page 177

Foreclosure Judicial Foreclosure In Illinois) Property is sold by eh court After Borrower defaults and loan Is “accelerated” File a suit to foreclose Sold to highest Bidder Page 225

Foreclosure Redemption Rights After Default by Before the sale Loan can be reinstated ( pay all payment due plus other charges) ( 90 days after service of Summons) Loan can redeemed up to 7 months after service of summons and before entry if judgment. 30 days after Judgment ( defaulted owner must vacate) New owner gets Sheriffs deed. Page 226

Foreclosure Deficiency Judgment If the sale doe not provide enough money to cover the debt Mortgaaee may file a “deficiency judgment” from the balance . Page 226

Foreclosure Deed In Lieu of Foreclosure Friendly Foreclosure Deed In Lieu of Foreclosure Borrower gives lender the deed and lender cancels the debt Some disadvantages to the lender vs. foreclosure Page 227

REO Real Estate Owned Lender owned property after foreclosure or Deed in Lieu Assume payment of taxes, insurance and the eventual sale of eh property. Lenders become Property Managers Sometimes sell as is =, sometimes they will rehab Environmental problem can be a big lender risk ( typically I commercial property) Page 226

Unlicensed Activity Those engaging in the real estate business in violation of eh License Act IDFPR fines up to $25,000/occurrence Page 226

Disability Considerations Landlord Must make Reasonable Accommodation at their expense Disabled tenants an make modification at their expense but must return to its previously condition Cant increase Security deposit but can create an escrow account Page 177

Exceptions to Acts Single Family House Owner Never RACE Owner Occupied less than 4 units Single Family House Owner Private Clubs or Religious Organization for just their member Housing for eh elderly( all over 62 or 80% over 55) Cant Advertise or use a Licensee Page 177

Property management Achieve owners objective Generate Income Property Managers Responsibilities Achieve owners objective Generate Income Preserve or increase the value of he property Typically need a license if you do this for “others” Page 177

Property management Property Management Agreement( page 229) Page 229

Blockbusting Steering Redlining Don’t Limit “Choice” Illegal practice of encouraging people to sell because of racial “Change” in eh neighborhood) Steering Don’t Limit “Choice” Illegal practice of channeling home sellers to particular neighborhoods based on their “class” Redlining Illegal practice of not making loans based on eh location of a property” Page 179

Advertising Language should not indicate and preference or limitation Use the Fair Housing Logo an “ we do business in accordance with the Federal Fair Housing Laws Use a Variety of Media Page 180

Management Functions 2. Tenant Selection 3. Collecting rents 1. Set Rental Rates with Owner 2. Tenant Selection 3. Collecting rents Page 229-232

Chapter 11 Industry Issues Review Quiz