About Dan Krell

July 6, 2010October 5, 2019

Who’s looking out for your interests?

When people buy and sell real estate, they entrust professionals they hire with some of their most sensitive information, at times when they are most vulnerable, with the expectation that the professional act in their best interest. The Maryland Real Estate Commission’s form, “Understanding Whom Real Estate Agents Represent,” reminds consumers that the ultimate responsibility of protecting their interests falls on their shoulders. Although the form itself is used to assist consumers in understanding the duties and loyalties of real estate agents in various forms of agency relationships (e.g., a listing agent’s “duty of loyalty” is to the home seller, a buyer’s agent is expected to negotiate “in the best interests of the [home] buyer,” etc.); the paragraph on page two gives consumers the reminder that to protect their interests, they should read all documents carefully and to seek legal advice from an attorney and financial advice from an accountant.

The consumer reminder might be taken as somewhat of a warning that real estate can sometimes be a dirty business. It is true that most real estate practitioners operate within the law and ethical guidelines, however some do not. It is reasonable to think that recent economic conditions purged the industry of bad elements, think again. Some actions are egregious and are clearly intended to defraud the public; while other actions may appear to be innocuous, but could be construed as deceitful business practices.

Blatant scams are devised every day to appear to be legitimate but have the intention of exploiting the public; recent examples include the rise of foreclosure relief scams across the country. Unfortunately, some of these cons are not always obvious until law enforcement catches up to the perpetrators. Take for example the recent indictment of a Towson, MD title company president who allegedly did not send payoffs to existing mortgage and lien holders and allegedly transferred the funds for his personal use (www.justice.gov/usao/md/Public-Affairs/press_releases/press10a.htm).

Even business tactics that seem harmless, but can have detrimental effects, are sometimes used by real estate agents. One example is overvaluing a home by estate agents just to get a listing. This occurs with the intention to later “convince” the seller to lower the price (the effects of purposefully over pricing a home in a downward market can cost the home seller money). Another example is akin to a “bait and switch:” this agent advertises a fictitious home at such a low price it gets home buyers to call him. When I called on behalf of my client to view the advertised home, the agent told me that the advertisement is for informational purposes only.

Before you hire a real estate professional (including real estate agents) it is always a good idea to check out their licensing credentials, as you can sometimes run across someone who is not licensed; Maryland licensing agencies allow consumers to check a professional’s license status online. Many consumer advocates recommend that before you hire a professional you should interview several and ask for recent client references.

Who are you trusting with your real estate transaction and what are they telling you? The old saying that “if it sounds too good to be true, it probably is” may be true, but it is ultimately up to you to decide. Remember that the ultimate responsibility to protect your interests falls on your shoulders.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 5, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

June 29, 2010October 5, 2019

Employment is the key to a stable housing market

by Dan Krell © 2010

The one question that everyone is asking, “where is the housing market headed?” A new focus is needed to stabilize the housing market as the national home buyer tax credit expires (state home buyer tax credit programs, such as California, may continue through the end of the year), and criticism for government foreclosure relief programs increases.

As the national home buyer tax credit sunsets, some in the industry (such as the National Association of Realtors) are scrambling to get a further extension. Proponents of the tax credit point to home sales spikes through the year as evidence of the tax credit’s efficacy. A June 25th NAR press release (realtor.org), described efforts to extend the closing deadline to assist those who could not close by the June 30th target. An amendment to extend the deadline was inserted into H.R. 4213: “American Workers, State, and Business Relief Act of 2010,” which passed both the House and Senate, but still needs to go to conference prior to becoming law.

Doubt remains over the efficacy of the home buyer tax credit; many critics applaud its none too soon conclusion. Putting aside the reports of fraud and abuse by those who have undeservedly filed for the credit, Fannie Mae’s March revised 2010 housing outlook (Economic and Mortgage Market Analysis; March 17, 2010) expressed doubts over continued effectiveness. The report cited various reasons that the most recent tax credit would not be as successful as prior tax credits. June’s Economic and Mortgage Market Analysis (FannieMae.com) reported that the most recent tax credit in fact only temporarily boosted home sales in April. April’s increased sales may have been due to many home buyers seeking to meet the initial qualifier for tax credit (which was to have a contract on a principle residence).

In addition to increasing home sales is the attempt to keep distressed home owners in their homes. Reports criticizing government mortgage modification and relief programs citing a lack luster performance seem to be appearing with increased frequency. Take for example the an April 20th Bloomberg story citing the Special Inspector General for the Troubled Asset Relief Program, Neil Barofsky (“U.S. Treasury’s Housing Program Fails to Stem Foreclosures, Watchdog Says”). Mr. Barofsky criticized HAMP (Home Affordable Modification Program) saying it has made very little progress. Additionally, it is estimated that 40% of those helped will eventually default; which could stem from HAMP’s high median debt to income ratios of 61.3% after lowered mortgage payments (FHA guidelines allow for a maximum overall debt to income ratio of 41%).

Since the fourth quarter of 2008, housing indicators have been inconsistent (much like other economic indicators). Even though doubt exists about tax credit and foreclosure relief effectiveness others argue the future of housing may lie with employment and personal earnings.

A recent Florida Realors® study (“The Face of Foreclosure”; floridarealtors.org) points out the correlation between unemployment and foreclosure. The April 6th 2010 press release quoted, Florida Realtors® vice president of public policy, John Sebree, as saying “…In most cases, it was a combination of rising living costs, unemployment or decreased pay, health issues and other factors that caused homeowners to get into trouble. Simple answers and trite political responses just don’t tell the whole story.”

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 28, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

June 22, 2010October 5, 2019

The fight against mortgage fraud

Last week, the United States Attorney for the District of Maryland, Rod J. Rosenstein announced recent results from local efforts of Operation Stolen Dreams. Coordinated through the Financial Fraud Enforcement Task Force, Operation Stolen Dreams has been described by the Department of Justice as the “largest collective enforcement effort ever brought to bear in confronting mortgage fraud.”

For those who don’t remember, the Financial Fraud Enforcement Task Force (StopFraud.gov) was established in November 2009 by President Obama as an interagency effort to “hold accountable” those who contributed to the recent financial crisis and to prevent a future crisis. Comprised of 20 federal agencies and 94 United States Attorneys’ Offices, as well as state and local authorities, the Task Force is the broadest coalition ever established to combat financial fraud.

The June 17th U.S. Attorney press release was not a final declaration but rather an interim report to make the public aware of the success of recent cases pursuing and prosecuting those who engaged in financial fraud, which includes mortgage fraud, mortgage modification scams, and other activities. Not only has Operation Stolen Dreams succeed in criminally prosecuting 1,215 defendants nationwide, civil enforcement efforts have recovered more than $147 Million.

Recent fruits of the operation include the superseding indictment of a Bethesda man and the conviction of a College Park/Laurel duo. On June 16th, a superseding indictment was issued against a Bethesda man who allegedly used his position as a mortgage originator for a Laurel mortgage company to allegedly participate in a mortgage fraud scheme that defrauded lenders (and others) of over $7.4 Million. The seventeen count superseding indictment chronicled the alleged mortgage fraud activities from 2005 to 2007.

On Jun 10th, a College Park/Laurel duo, were convicted of multiple counts of wire fraud. Testimony recounted how the two, who were employed in the mortgage industry, used straw buyers and stolen identities to purchase properties which almost immediately went into foreclosure- resulting in a loss of $664,493 for a local lender.

In addition to assisting the Financial Fraud Enforcement Task Force in Federal cases, the Maryland Mortgage Fraud Task Force also investigates State and local financial crimes. Among the many cases that have been investigated, some have resulted in the closing of mortgage modification and loss mitigation businesses that allegedly defrauded home owners seeking financial relief.

Recently, a case investigated by the Maryland Mortgage Fraud Task Force resulted in an indictment that was issued against a Montgomery County real estate agent for allegedly defrauding the County. It is alleged that the real estate agent used straw buyers to purchase moderately priced dwelling units (MPDUs are homes that are made available to homebuyers who meet specific requirements to purchase through Montgomery County). Additional allegations include mortgage fraud as well as allegedly violating the MPDU program guidelines by renting out these homes.

U.S. Attorney Rod J. Rosenstein was succinct when he stated, “…Our goals are to punish con artists who have committed mortgage fraud and deter others from following in their footsteps.” Mortgage fraud is being pursued as never before. It is without a doubt that federal and local investigations are making an impact on fraudsters and scammers. To assist consumers to protect themselves from fraud, the Financial Fraud Enforcement Task Force website, StopFraud.gov, has many resources; including how to report suspected mortgage fraud.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 21, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

June 15, 2010October 5, 2019

Moving day does not have to be stressful

If it’s not the negotiating, the inspections, the mortgage process that makes you uneasy about the buying/selling process, then it’s the thought of moving. Yes, thoughts of moving and all that may go along with it can make even the most stable person break down.

The two main pieces of advice most professionals offer about moving include planning and organization. Planning your move will keep everything in perspective as you create parameters within which all the activities of your move will be completed. Organizing allows you to keep track of your activities and belongings during your moving period.

Much of the stress that is felt during the move stems from feelings of being overwhelmed by thoughts of everything that must be accomplished during your move. Mitigating the stress and emotion of the move is easier when you have a timeline (of actions and goals) that ends on the day you vacate the home. Having a daily goal will allow you to focus on the task at hand without getting distracted. Each day’s goal can be determined by going into each room noting what needs to be accomplished, including any ancillary activities that need to be completed.

An important aspect of a move is organizing what items are coming with you and what items can be thrown out or donated; this should be easy if you have already de-cluttered your home prior to selling. Staying organized during unpacking can be accomplished by making notes of room destinations for boxes; the notes can be detailed to include whose belongings are in each box as well the contents.

Moving to a new home is not a cheap endeavor; you are sure to spend money on the move even if you’re a do-it-yourselfer. The cost of moving can vary depending on the moving company and services you choose. Doing it yourself is not always the least expensive route; the total cost of a truck rental, packing supplies and your time may compare to the price of a limited service mover. If you’re busy, then you might appreciate a full service moving company that will do all of the packing for you. À la carte moving services may be easier on your pocketbook and also eliminates services you may not need. When shopping for a moving company, make sure they are reputable by checking their credentials and ensuring they are bonded and insured.

Portable storage units have become the “hybrid” of moving because it allows you to do all the work of loading your possessions into a container, but the delivery of the storage unit is carried out by a moving company. The storage unit can either be delivered to your new home or placed in storage until you are ready to unpack.

Moving into a new home is often associated with life events- the good ones and sometimes the not so good ones. Besides having to move, life events have their own challenges; so it’s often helpful to recruit as much help as possible, not just for the physical labor but for the emotional support too.

Although planning and organizing can minimize stress and drama, your plan may need to be flexible to adapt to any unforeseen obstacles; as Robert Burns’ poem To a Mouse testifies: “The best-laid schemes o’ mice an ‘men…(often go awry).”

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 14, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

June 8, 2010October 5, 2019

There are two sides to Strategic Default

As Strategic Default gains popularity among home owners; more questions are raised.

Imagine, if you will, having the ability to separate yourself from your most troubling problem: a burden so great, you cannot sleep at night; a hardship so severe that it interferes not only with daily living, but family relationships; a misfortune so cruel, it causes daily misery.

No, this is not the “Twilight Zone,” but it must be how some home owners feel about owning a home with negative equity (the mortgage balance is higher than the value). The reality is that 41% of home owners recently interviewed for the “Trulia Realty Trac Survey: American Attitudes toward Foreclosure” (May 20, 2010 Truliablog.com) indicated that they would walk away from an upside-down mortgage.

Recently, a home owner confided to me of their regret of missing an opportunity for a strategic default. Now their options are very limited. Although they have been paying their mortgage in a timely manner, their plan was to downsize and then walk away from the larger mortgage.

According to nationally featured Youwalkaway.com (a website that advocates taking “financial control”), there is a distinction to be made between “walking away” and “strategic default”; the distinction is basically about the ability to make the choice. Walking away describes what financially challenged home owners do when they have no other option; whereas strategic default is when a financially sound home stops paying their mortgage because they decided that the consequences of foreclosure is an acceptable part of their long term financial plan.

If strategic default doesn’t appear to be the epitome of self importance in a world reeling from financial abuses, Freddie Mac Executive Vice President Don Bisenius (in a May 3rd Freddie Mac news report; FreddieMac.com) offers another view on the issue. Although he explained that strategic default is a personal choice, it usually does not take into account of externalities (“spill-over” effects). In other words, Mr. Bisenius explains that the person considering strategic default typically has a narrow focus and ignores the consequences of their actions on their neighbors and their community. In addition to becoming an eyesore as well as attracting unintentional animal and human activity, foreclosures have the potential of bringing down home values ultimately costing neighbors and the community financial and emotional capital.

Certainly, the consequences of not paying your mortgage are dire. Among which include: losing your home, negatively affecting your credit, and the possibility of being sued by your lender (state laws differ on deficiency judgments). Clearly anyone would be affected by these consequences; however some believe that the personal long term benefit far outweighs any consequences.

There is the growing ethical and moral debate about strategic default. Although for some home owners, “walking away” is the final chapter of failed attempts at mortgage modification and short sales; while for others, it is a deliberate maneuver to attempt to cut their short term losses in the belief that they are better off in the long run.

Since the long term benefits of strategic default is tied to future events, it may be possible that we may one day determine that the hedging against our homes and communities for a short term personal gain was “short sighted” due to the long term personal and collateral losses; which, in the end may say more about a person than their financial savvy.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 7, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.