KeNo's Housing and Economic Portal: Friday August 5 Housing and Economic stories

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New CA law gives added protection to short sale hopefuls - (www.signonsandiego.com) A new California law will further protect homeowners pursuing short sales by barring first and secondary lienholders from going after sellers for money owed after the short sales close. Gov. Jerry Brown signed Senate Bill 458, authored by Senate Majority Leader Ellen Corbett (D-San Leandro,) into law on Friday. A short sale is a transaction in which the homeowner owes more on the loan than the property is worth. To sell the home, the lien holder or lien holders must approve the sale because the amount owed to the lien holder will be "short" of what is currently owed by the borrower. Real estate tracker DataQuick said short sales made up 17.7 percent of Southern California home resales in June. The new law builds on the protections offered by a previous law, SB 931, which required the first lien holder in a short sale to accept an agreed-upon payment as the full payment for the outstanding loan balance. The previous law did not address junior lien holders. The new law, which became effective immediately, now prohibits secondary lien holders from pursuing deficiencies after a short sale closes.

Vancouver Realtor® Charged in Slavery Case - (www.theprovince.com) A Vancouver couple who allegedly brought a Filipina nanny into their home, stole her passport and forced her into domestic slavery are facing additional charges following an arraignment hearing Thursday in B.C. Provincial Court. Oi Ling Nicole Huen and Franco Yiu Kwan Orr were each charged under the Immigration and Refugee Protection Act in May with organizing the illegal entry into Canada of a 38-year-old woman. The couple have now also been charged with employing a foreign national, while Orr faces an additional charge of misrepresentation, after allegedly providing false information in a 2008 application for a temporary work visa for the woman. Investigators say the couple took the woman's passport from her and forced her into servitude 24 hours a day, seven days a week.

Son of Fannie and Freddie? Maybe Not, But Still Scary - (www.thefiscaltimes.com) Is the Federal Home Loan Bank System, which issues more debt securities than any other entity in the country besides the federal government, taking too many risks? The FHLB was established during the Great Depression to provide low-cost “advances” to financial institutions so they could push money out into communities. And over the years it has advanced hundreds of billions of dollars to its almost 8,000 member banks (it had $804 billion in outstanding debt at the end of the first quarter) and never suffered a loss. Now some wonder if it is going too far out on the financial limb. As demand for advances has declined amid the slowdown in mortgage lending, the 12 regional Federal Home Loan Banks have excess capital that needs to be returned to members or put to work. A rising portion of that money is going into the securities markets. Edward J. DeMarco, acting director of the Federal Housing Finance Agency, which regulates the FHLBs as well as mortgage giants Fannie Mae and Freddie Mac, has spent much of the past year warning the FHLBs about the dangers of investing in securities.

Officials warn that foreclosure probes may prove inadequate - (www.centralvalleybusinesstimes.com) Since flawed foreclosure practices by the nation2019s biggest banks became last fall's biggest scandal, federal bank regulators and the attorneys general of all 50 states launched simultaneous investigations[1]. But there are an increasing number of warnings that neither of those efforts have addressed the full scope of the problem. Most notably, Elizabeth Warren, a senior Obama administration advisor warned [2] about the ongoing probes in Congressional testimony last week: "I think there's a real question about whether there's been an adequate investigation." After news about fraudulent and missing mortgage documentation raised questions last fall about the legitimacy of foreclosure actions, all 50 states launched a joint investigation. A group of federal bank regulators launched a separate investigation. As we'd noted [3], some observers had low expectations for the federal investigation all along, especially given the involvement of the historically bank-friendly [4] Office of the Comptroller of the Currency.

Strict lending is good for you and the economy - (www.firsttuesdayjournal.com) Only homebuyers capable of putting down a minimum 20% down payment, with jobs to make mortgage payments and carry the property they purchase are truly qualified to receive home loan financing. This was not a practice in the norm during the Millennium Boom when the Federal Reserve (the Fed) flooded the markets with money and Congress eased lending regulations, allowing mortgage lenders to originate risky and imprudent loans. [For more information on the important real estate fundamentals including the 20% down payment principle, see the June 2011 first tuesday article, The 20% solution: personal savings rates and homeownership.] After some wrist slapping from legislation and the media, the banks, lenders and GSEs are again learning how to make mortgage loans and are now reinstating past discarded standards in their lending policy manuals. This is a positive step toward establishing healthier habits for American financial institutions. [For more information on past and current American housing policies, see the June 2011 first tuesday article, Subsidizing the American dream.]