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New online help from Fannie Mae

Since the start of the housing downturn, the number of Web sites and foreclosure-prevention companies claiming to offer help to struggling borrowers has greatly increased. While some of the businesses are legitimate, others are fraudulent and offer services that consumers may be eligible to receive free of charge.

MAKING SENSE OF THE STORY FOR CONSUMERS

• This month, Fannie Mae – the government-sponsored entity that helps set lending standards for most mortgages—started a Web site, KnowYourOptions.com. The site contains elements distinguishing it from those aiming to prevent foreclosure. All of the information on the site is available in Spanish or English.
• KnowYourOptions.com provides video explanations of what users might accomplish in each of the tabbed section of the site. In the “Take Action” section, for example,” struggling homeowners are advised that the first step to take in seeking help with their mortgage is to contact their mortgage company.
• Other features of the site include contact information for mortgage companies and loan counselors, calculators to determine if the borrower is eligible for assistance, and information on commencing short sales or deeds-in-lieu of foreclosure.
• Another helpful Web site for consumers is Hope LoanPort, which allows struggling homeowners and housing counselors to submit financial documents to mortgage companies and track the status of their efforts to avoid foreclosure. Hope LoanPort was created by Hope Now, a consortium of 12 mortgage companies and 250 counseling agencies.

• In the second quarter of 2010, 64 percent of first-time buyers could afford to purchase an entry-level home in California, according to the First-time Buyer Housing Affordability Index published by the CALIFORNIA ASSOCIATION OF REALTORS®.
• The median price of an entry-level home in California was $266,750 in the second quarter of 2010, with an estimated monthly payment of $1,470, including taxes and insurance.
• The minimum household income needed to purchase an entry-level home in California in the second quarter of 2010 was $43,960.

• Although many home renovations improve the look of the property, some may not increase the home’s value, while others actually can make it more difficult for the homeowner to resell. Some renovations, like in-ground swimming pools may discourage a buyer who views it as requiring too much upkeep. While in-ground swimming pools may work in areas with warm climates year-round, like many areas of California, it is unlikely a homeowner will recoup the costs associated with installing it.  

• First-time home buyers easily can become overwhelmed with the various loan choices available. Experts recommend first-time home buyers apply for a loan with an interest rate fixed for the duration of time the buyer plans to live in the home. Hybrid loans may be an option worth considering, as they are fixed for a certain period and later change to an adjustable-rate mortgage. This may be a viable option for a buyer planning to stay in the home for just a few years. However, most buyers should consider a 30-year fixed-rate loan.   

• Companies promising to reduce or eliminate credit card balances and other debt for customers no longer will be allowed to charge an up-front fee. The Federal Trade Commission (FTC) recently announced new restrictions to crack down on the debt settlement industry. Beginning Oct. 27, debt settlement companies only will be able to charge a fee once a customer’s debt has been reduced, settled, or renegotiated.

• The new FTC regulations also require debt settlement companies to disclose to customers how long it will take to get results, how much it will cost, and any negative consequences that could arise from the process.

Most people are trying to cut costs these days. Some even wonder if it's necessary to pay for title insurance when they buy or sell a home. Skimping here could end up costing plenty if you discover a title defect after you own the property.

Title insurance is paid for once at closing and covers the property for as long as you own it. It protects the purchaser from financial loss deriving from defects in the title to the property. The premium cost varies depending on the title insurance company, and is usually based on the purchase price.

Who pays the title insurance premium often depends on local custom and can vary from one county to the next. For instance, if you were to sell a home in Los Angeles County, where the seller usually pays for title insurance, and buy in Alameda County, where the buyers usually pay, you'll pay for title insurance twice during one move. Buyers typically pay the premium to cover their lender's interest in the property.

The payment of title insurance is not set by law and can be negotiated between the buyer and seller, although local custom usually prevails. Whatever is agreed to in the purchase agreement will dictate who pays the premium.

A buyer who was an attorney thought title insurance was expensive and a waste of money. Given his legal expertise, he decided he'd search the title record himself to avoid paying the title premium. In the end, his agent talked him out of the do-it-yourself approach based on the risks involved.

Title insurance companies search the title to a property to make sure that there aren't any defects in the chain of title. They also look for liens and easements recorded against the property, as well as establish who has marketable title to the property.

In one case, the title company discovered when searching the chain of title that when the property sold to the current owner, an heir to the estate had not signed the deed transferring title. This meant that person still had rights to the property.

Fortunately, the title company located the heir, who was reputable. She relinquished any interest she had in the property. If the heir hadn't been cooperative, the current owner could have made a claim against the title insurance company that issued title insurance to him when he bought the property.

Title companies usually issue a preliminary title report, which is an offer to provide title insurance on the property. It is not the insurance policy, but it shows the results of the title search.

You and your real estate agent or real estate attorney should examine the preliminary report carefully to make sure the person who has marketable title to the property is the person who signed the purchase agreement. Also check for liens secured against the property.

Easements grant the right to use the property to someone other than the owner. Common easements are for utilities, sewer, and drainage. Ask the title company to provide written copies of any easement and CC&Rs (covenants, conditions and restrictions), and to locate the easements in color on a copy of the parcel map. You can't build over an easement.

Both CC&Rs, typically found in condominiums and planned-use developments, and easements restrict your use of the property. Make sure you understand how these will affect your ownership interests before you complete a purchase.

If you find defects in the title, make it a condition of the purchase that the seller cures the defects before closing. Make sure that your purchase agreement includes a clause that gives you that right.

THE CLOSING: Ask your title officer, REALTOR® or attorney for answers to any title-related questions.

Dian Hymer is a nationally syndicated real estate columnist and author.