Tuesday, March 25, 2014

news from the American Land Title Association - thought you might be interested

On Friday, President Obama signed the Homeowner Flood Insurance Affordability Act of 2014 (H.R. 3370) into law. H.R. 3370 helps ensure that property owners have access to affordable flood insurance and rolls back large flood insurance rate increases seen by many homeowners this year.

Most importantly, the law prevents the Federal Emergency Management Agency (FEMA, which manages the flood insurance program) from increasing premium rates when a property is sold or a new flood map is developed. The legislation also calls for refunds of some of the recent rate increases homeowners have paid. Further, it limits premium increases to 18% annually. To pay for these fixes, the bill requires policyholders to pay a $25 surcharge on residential policies and a $250 surcharge on the premiums for policies covering non-residential properties and non-primary residences.

Friday, March 21, 2014

I know you are getting sick and tired of hearing about Act 93, but I have news.

Examined a title in Somerset County yesterday and we have our first transaction impacted by Act 93 of 2013.  Our seller owns 5 properties in the county that have delinquent taxes owing for 2012 and 2013.

Since the 2013 taxes haven't yet reached the "claim absolute" stage, we aren't concerning ourselves with them.  The 2012 taxes, however, are claims absolute and therefore are "reduced to judgment" and must be paid in order to clear the title for our buyers.

Total additional tab to our sellers?  They are paying roughly $6000 to clear 2012 taxes on the 4 extra properties so that they can convey the 1 property to our insured buyer.

We can mark this one as a win for the municipality since the deal did not fall thru.  The sellers are elderly and own the property free and clear.

Friday, March 14, 2014

another unintended consequence of Act 93 of 2013

As we have discussed in previous posts, PA Act 93 of 2013 creates a system by which municipalities can file personal judgments against property owners who also have in rem delinquent property tax liens. I have been arguing that this new law will set in motion a whole lot of unintended consequences never envisioned by lawmakers.


Google that and you'll find that personal judgments are found in the FICO process and impact FICO scores, even when the judgment has been paid.  If you have a bad debt and a judgment related to one incident, they both impact the FICO score so theoretically if FICO has the ability to see an in rem property tax lien - possible in some counties - and also sees the Act 93 personal judgment, the property tax obligation has a two stage punch on the property owner's FICO score.

Judgments, whether satisfied or not, impact FICO and sit on a credit report for up to 7 years.

QUESTION:  How will lawmakers react when constituents start calling to say they can't get a new mortgage because Act 93 judgments - even if paid - are sitting out there lowering their credit scores?

Thus far most of my arguments against Act 93 of 2013 have been on behalf of consumers who own more than one property.  This FICO angle is a concern for EVERY property owner who gets into temporary financial difficulty.  Who doesn't know someone who had a bad financial set back beyond their control?  If a consumer gets behind on their property taxes for more than one year in PA, even if they pay the tax in the second year, their FICO credit score moving forward for the next SEVEN years will be lower.

Lower FICO credit scores .... what are the long term consequences?

Act 93 of 2013 was born in good intentions but the more we think about it the worse it looks, eh?

Wednesday, March 12, 2014

Are non-vested spouses obligated as borrowers?

I found your email address through a Google search I had made regarding being non-vested on a mortgage and what exactly that means.

I was married for the second time in 2011.  At that point, my husband had a house and a mortgage.  Last year, we re-mortgaged.  He stayed with the same bank and took a slightly higher interest rate than what is out there today by doing a re-mortgage for the same $ amount, without any fees and no points.  At that point, he told the bank he was now married.  I co-signed the paperwork and believe I am listed as non-vested on his mortgage.  I'm still not 100% sure what that means for me???  Now he is thinking of doing a totally new re-mortgage with a different bank for a lower interest rate, however, this time he would like to add a line of credit he has to the mortgage and possibly some other debt HE has.  Of course, he wants this to be a joint mortgage, but I have some concerns.  As a quick background, I left my first marriage with debt and finally am back on my feet again.  I don't want to go there again as I am almost 50.  He says this will help both of us because it will give us a lower interest rate and free up money for us.  I'm having difficulty trying to have him see my concerns.  I don't really want to assume additional debt.  Anything you could suggest? 


Good question, M.  

If you are asked to sign the NOTE, you are a "borrower" and thus obligated to repay the debt.  That's the question to ask. Is the lender expecting that you will sign the NOTE?  If the answer is no, then they will have you sign the mortgage and perhaps a couple of other documents as a non-vested spouse just as you did the last time.  These documents simply allow the lender to place a lien on the property that takes priority over your marital rights.

A lender wants first position in the event of the worst case scenario, a foreclosure. They do not want you to have the ability to stop the process.  So, you'll be required to grant permission for the lien but you would not be required to be a "borrower" for this purpose unless your husband needs your income to get the new loan.