Freddie Mac To Lower Standards To Get Mortgage

Freddie Mac and two nonbank lenders are loosening income and documentation requirements for mortgage applicants in a new pilot program.  The changes announced Monday are designed to help boost mortgage originations among first-time buyers, applicants with low-to-moderate incomes and those who live in underserved areas.

Under the Freddie program, applicants will be able use the income of people who will live with them but aren’t going to be on the mortgage to qualify.  In addition, income from second jobs that borrowers have held for a relatively short period will be factored in. The pilot also doesn’t require bank statements that would show a paper trail of how some borrowers save for their down payments.

Many of the pilot’s features are similar to what Fannie Mae currently allows on some mortgages it purchases but are new for Freddie Mac, which is among the largest purchasers of mortgages in the country. Freddie Mac says it purchases one in every four mortgages originated by lenders in the U.S.

The changes, which went into effect on Monday, will apply to people who sign up for a mortgage with Las Vegas-based Alterra Home Loans or Tustin, Calif.,-based New American Funding.

Freddie Mac will determine whether to expand it beyond pilot phase if performance meets expectations.

The pilot isn’t lowering down payment or credit score requirements. Rather it is loosening income criteria, including for applicants who have two jobs. Until now, Freddie Mac has required that borrowers who show their income from a second job when applying for a mortgage demonstrate that they have held that job for at least 24 months, a period that in the pilot is reduced to 12 months. Separately, self-employed borrowers will have more options to prove their business exists to the lenders.

In addition, borrowers who will be living with family or other individuals for at least 12 months after they purchase the home will be able to use those non-borrowers’ income to get approved for the mortgage. The income will be factored in to help improve the borrowers’ debt to income ratio, a key figure that compares borrowers’ monthly debt obligations to their gross monthly income.

Florida 4th DCA Holds Lis Pendens Expires at Final Judgment of Foreclosure; Opens Title Controversy

Plain English Summary:

A bank files a “lis pendens” or a notice with the court and is recorded with the county  (such as with deeds) which is notice to the public that there is a pending lawsuit involving the real property/home.  The issue in this case was does this notice expire at the final judgment in a foreclosure case, or once the auction/sale is conducted.

The town had placed 7 code violation liens on the property after judgment but before sale, and then 3 after the sale on the new owner who purchased the property at auction.  The town wanted to enforce all 10 liens.  The new owner wanted to pay nothing or as little as possible, arguing that the lis pendens expired on the date of the sale, and thus the 7 liens recorded by the town before the sale did not apply to him.

The appellate court found that, per statute, the lis pendens expires after the final judgment of foreclosure is entered, and thus all 10 liens were the responsibility of the new owner to pay the town for.  So any liens incurred between final judgment and sale, even though not the fault of the auction purchaser, fell on the purchaser to pay.

In a recent opinion by the Florida 4th District Court of Appeal (DCA), Ober v. Town of Lauderdale-By-The-Sea, the court found that property liens occurring after a foreclosure final judgment are not discharged by Florida’s lis pendens statute.  Opinion here.

A foreclosing bank recorded a lis pendens on real property and ultimately obtained a final judgment of foreclosure.  The sale was not conducted until 4 years following the final judgment.

After final judgment but before sale occurred, the town recorded 7 code violations liens on the property which violations occurred after foreclosure was final.  The property was sold and after title was issued, the town recorded 3 more liens on the property.

The 3rd party purchaser filed suit to quiet title to strike all 10 of the town’s liens against the property.  The town counterclaimed to foreclose the 10 unpaid liens.  The trial court granted the town’s final judgment of foreclosure and denied the 3rd party purchaser’s motion for final judgment to quiet title.

Thus, Florida Stat. § 48.23(1)(d) “not only bars enforcement of an accrued cause of action, but may also prevent the accrual of a cause of action when the final element necessary for its creation occurs beyond the time period established by the statute.”  Adhin v. First Horizon Home Loans, 44 So. 3d 1245, 1253 (Fla. 5th DCA 2010).  The Court noted that the statute does not provide an end date for the lis pendens.

On appeal the 3rd party purchaser argued the the lis pendens continues until foreclosure sale, and does not cut off at the final judgment of foreclosure.

The Court noted that statute 48.23(1)(a) states that “[a]n action in any of the state or federal courts in this state operates as a lis pendens . . . only if a notice of lis pendens is recorded.” The Court held that the “plain meaning of this provision indicates that the action itself is the actual lis pendens, which takes effect if and when a notice is filed,” and “[t]he lis pendens therefore logically must terminate along with the action.”

From this, the 4th DCA held that the action in this case was the foreclosure action, “which terminated thirty days after the court’s issuance of a final judgment.”   It further ruled that the Florida lis pendens statute “serves to discharge liens that exist or arise prior to the final judgment of foreclosure unless the appropriate steps are taken to protect those interests,” but “[i]does not affect liens that accrue after that date.”

The is likely to bring on further litigation as it raises questions regarding other types of junior liens, such as HOA or condominium liens.  If the HOA or condo, or even code enforcement or municipality/utility, records nothing until after the bank’s final judgment and then records its lien, is that lien then enforceable in full against the third party purchaser at auction by the holding of this opinion?