Law Blog

Sanctuary. Adobe. Spacious. Luxurious. Vacant??  Times have changed when it comes to the words landlords used to describe the once highly competitive apartment and other rental spaces market.  Apartments with 5, 10, 15+ applicants the second it is advertised has dwindled down do a couple, if that, and landlords are finding themselves desperate to fill vacancies.

If you are a renter, like myself, and able to afford city life then this is the prime-time to enter into a lease in an apartment at a lower rental cost.  I have seen some of my friends move out of their beautiful high-rent apartments in attempts to save money by moving home, getting roommates or moving to a cheaper location.

Perhaps “Renters Paradise” was a little much for my blog title, but the number of vacant apartments out there is almost at unprecedented levels.  Unfortunately, so too are the factors that tether this fact back to reality: unemployment and economic uncertainty.

According to a recent study, U.S. apartment vacancies are nearing a record low.  Currently at 7.5% and projected to increase, the rising figure reflects the difficult economic times.

Not surprising, the struggling real estate and rental industries are accompanied by an increase in legal problems and litigation.  A study conducted by LegalMatch, looking nationwide at the past 12 months saw a rise in legal inquiries across the board in the Real Estate category.  Landlord tenant issues are on the rise as landlords are feeling the pinch and tenants are demanding more concessions and lower rents. I agree with a recent Yahoo News article that attributed much of the rental issues to the employment problems that have befallen the 18-24 year old category.

Obviously, the effects increased vacancies are having will not be isolated.  An interesting prediction regarding falling home prices relationship to the rental market was articulated in a recent Wall Street Journal article.  The author felt that falling home prices could hit landlords in two ways: “they could force landlords to lower rents to keep up, and could spur some renters to purchase homes. Still, the number of renters who move out to purchase homes isn’t expected to surpass levels seen during the housing boom earlier this decade.”

Whether a renter or buyer these are really interesting times to explore your financial options and research the best financial approach to housing for you!  Don’t be afraid to negotiate your rent, demand concessions at your current location, or look into buying.

You’ve always paid your mortgage on time but now you find yourself unemployed.  You’ve tapped out your savings. You haven’t paid your mortgage in 3-months and discovered a Notice of Default in your mail.  Not only are you put on notice of a default, but since this notice is also recorded with your County Recorder’s office, there are others on the lookout, too.

Take the experience of Charleen Trana a 78 year-old widow living in her San Fernando home of 50 years, worth at least $350,000.  (Dreams Foreclosed: The Rampant Theft of American’s Homes Through Equity Stripping Foreclosure “Rescue” Scams) Because her disabled son was having difficulty maintaining jobs, Trana took out a $100,000 mortgage on her home to help him.  However, when Trana’s health began to fail, her costs skyrocketed.  She fell behind in her mortgage payments. Trana received a notice of default, but that wasn’t all that she received.  Some very nice men approached her days later and offered to rescue her home from foreclosure. Desperate, Trana signed her property deed over to these men for a small sum down.  She also signed inch-thick documents with the promise that these rescuers would not only pay off her mortgage but, in exchange for rent, Trana could continue to live in her home.  But, there was a catch; the rescuers failed to pay-off the mortgage, leaving Trana on the hook both for the mortgage and the rent while they held the deed (and equity) to her home! 

Trana’s story is not atypical.  Indeed, the Federal Trade Commission (FTC) just announced a new crackdown in foreclosure equity stripping schemes.  (Federal and State Agencies Crack Down on Mortgage Modification and Foreclosure Rescue Scams)  One of these schemes concerns loan modification scams.  Firms involved in these scams use on-line ads, spam, and direct mail targeted to homeowners in financial distress, promising high success rates at modifying their mortgages and saving their homes.

While LegalMatch does not specifically track foreclosure equity scams, we have had an explosion of customers contact us during the past year either because a foreclosure had been filed against them or because there was a foreclosure judgment. 

RECENT EXPLOSION OF LEGALMATCH CUSTOMERS SEEKING ASSISTANCE WITH FORECLOSURES

If you suspect that you’ve been approached by a rescuer, contact your local District Attorney and report the individual(s) to the FTC.  If you’ve been a victim of a loan modification or a foreclosure equity scam, you may either be able to file criminal charges or bring a lawsuit against the rescuer for damages.  LegalMatch has many experienced real estate attorneys who can assist you in determining the best course of legal action.  Whatever you do, don’t sign your property deed over until you’ve consulted your local agency or licensed attorney to ensure that you aren’t a victim of a foreclosure equity scam!

Federal Trade Commission Home Equity Scams

National Consumer Law Center

U.S. Dept. of Housing and Urban Development Guide to Avoiding Foreclosures

The collapse of the United States housing market was a crucial part of our recent economic downturn. According to LegalMatch data compiled since 2005, foreclosure rates (compared to the past three years) skyrocketed during 2008. This massive upswing in foreclosures may have been the shock that caused the global economic house of cards to tumble in 2008 and 2009.

According to LegalMatch statistics, foreclosure rates from 2007 to 2008 jumped by over 150%. This staggering increase closely mirrors the precipitous drop off of home prices in the US during 2008, when the median value of an American home dropped by 18% in twelve months.

LegalMatch data correlates with national statistics compiled by industry experts showing a 76% increase in foreclosure rates between 2006 and 2008. Are house prices to blame for this huge downturn? Partially. A number of home owners and home speculators alike took advantage of a lull in interest rates between 2000 and 2005 when introductory interest rates on adjustable rate mortgages dropped to the 4-6% range. During this time housing prices were also artificially high and seemingly rising without end, so buyers saw a potential win-win situation. Sub-Prime Adjustable Rate Mortgages ( ARM) fueled the flames of the bubble and allowed speculators and new home buyers alike to enter the market at cut-rate introductory rates that jumped massively one or two years down the road.

Home owners who saw low rates and rising prices in 2005 and 2006 took the bait, thinking things would continue to get better. When interest rates continued to rise and these so called “exploding” ARM loans almost doubled between 2006 and 2007, owners who failed to sell prior to 2008 saw the value of their homes plummet to prices far below the amount owed on their mortgage. Unable to keep their heads above water, homeowners with upside-down mortgages in 2007 and early 2008 faced foreclosure judgments in mid-2008 and 2009, as shown by the LegalMatch stats above.

This enormous well of unpaid debt coincided with the breaking news of financial collapse of some of the nation’s biggest financial firms such as Bear Sterns, Lehman Brothers, and the now infamous AIG. It is no coincidence that trillions of dollars in investments insured and managed by these firms was inextricably tied into these bad loans and defaulting homeowners. Securities backed by these worthless mortgages are the kinds of things people are referring to when they talk about “toxic assets.”

Although it was not the sole cause, the housing crisis has a tremendous impact on the financial health of this country. When it dramatically explodes like it did in 2008, the shockwaves spread everywhere throughout our economy. As these trends continue to shake out we will be watching the data, so stay tuned for more updates on where the housing market, and our economy, may be headed.

Last year, thousands of clients came to LegalMatch.com seeking foreclosure attorneys. Data compiled from LegalMatch.com databases indicates that California and Florida are first and second in the nation for the total number of homes going into foreclosure. Florida, for instance, accounted for 15% of the total number of people seeking foreclosure attorneys through LegalMatch. Florida, however, only accounts for 8% of the total number of owner occupied homes in the United States, according to latest available data from the U.S. Census Bureau. Many other states are not far behind Florida’s unfortunate ratio. Below are some of the states with similarly disproportionate representation:

% of Total U.S. Foreclosures Reported in 2008 to LegalMatch, By State 

% of Total Owner Occupied Households in the U.S. (U.S. Census 2007 Estimates)

Not coincidentally, these states also represent a veritable who’s who of states on the list of Top 10 Worst Foreclosure Rates by State.

For all the states doing poorly, there are also states doing well.  New York, for instance represents 9% of the nation’s owner occupied housing units, but only accounts for 3.4% of LegalMatch customers seeking Foreclosure attorneys. Texas is similarly doing well, accounting for 5% of LegalMatch foreclosure respondents, but over 10% of U.S. owner occupied homes.

More analysis may show why these states were hit particularly hard. Some factors may include demand, differing mortgage and foreclosure policies, and vastly different housing markets. California and Florida, for instance, are always roller coaster rides for housing booms and busts. People frequently flock in and out of the states as markets rise and fall. Stay tuned for more analysis as we watch how these numbers shake out over time.