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from Local Attorney, Michael H. Wasserman

Wednesday, September 16, 2009

FHA CONDO GUIDELINE CHANGES - DELAYED

Back in June, HUD issued FHA Mortgage Letter 09-19, announcing several dramatic changes to mortgage loan guidelines effecting condominiums. For the first time, FHA direct endorsement lenders will be able to approve condominium projects in whole, rather than on an ad hoc or "spot approval" basis.

Those changes are all ON HOLD for at least 30 days. The Federal Housing Administration is delaying the Oct. 1 effective date of its new condominium policies while it finalizes several modifications. "We'll be issuing new guidance soon, with several modifications to the policy described in Mortgagee Letter 09-19," a HUD spokesman said, with a November 2 effective date.

Title Insurance Company Woes Continue -

The slow real estate markets continue to wreak havoc on title insurance companies.

Fitch Ratings, has downgraded the financial strength rating of Stewart Title Guaranty Co., from "A-" to "BBB+" and the default rating from "BBB" to "BBB-."

Separately, Fitch also downgraded First American's default rating from from "BBB" to "BBB-" and the senior unsecured debt rating from "BBB-" to "BB+".

WHY THIS MATTERS:
Title insurance is only as sound as the company that provides it. A policy is of little good to a homeowner if the title insurer is insolvent and cannot pay claims. Thus, a careful Buyer wants to make sure that the title insurance issued will come from a strong, secure entity.

In Chicago, Sellers select the title company and purchase the title insurance that protects Buyers.

That decision is almost always left to the Seller's attorney who, more often than not, recommends an insurance company that will pay the attorney a compensation for cases they work together on.

Buyers want quality, but many attorneys use different critera: chose the insurer that pays highest compensation, or the one that is closest to the office.

WHAT YOU SHOULD BE DOING NOW:
Buyers can, and should, demand that title insurance be provided by a first class company. If a title claim arises, Buyers want to know that they have reliable insurance to cover any risk of loss.

Sellers should do so as well. If the insurance does not cover a claim, Buyers will likely sue their Sellers for a breach of (title) warranty. Absent title coverage, those Sellers will have to defend lawsuits and pay damages on their own. out of pocket.

I demand quality insurance for all of buy Chicago area home buying clients. I recommend only the best title companies to sellers as well.

UPDATE - Sept 17:
Yestterday, Fitch also dropped Fidelity National's (parent of Chicago Title, Ticor and LandAmerica) default rating by two notches, from "BB" down to "B+."