The latest on real estate recordings and new technology from the Middlesex North Registry of Deeds in Lowell
Articles in yesterday’s Boston Globe and New York Times both suggest that the nation’s housing market is slowly starting to rebound. Both total sales and median price for sales in both June and July when compared to a year ago show a slight increase.
Locally, evidence of a market turnaround is more elusive. Looking at sales with prices above $75,000 and below $750,000, we find the following: For Lowell, in July 2009, the median sales price was $179,000 while in July 2008 it was only $173,500. That represents an increase of 3%. In the towns, the median price in July 2009 was $305,750, but in July 2008, the median was $316,450. That represents a 3% decrease.
Despite these figures, I believe the real estate market in the towns is bouncing back slightly, while Lowell remains troubled due primarily to the high inventory of foreclosed properties. Still, the situation is much better than it has been. For example, here’s what I wrote on August 14, based on mid-month recording statistics:
Besides the continuing trend of fewer foreclosures, the most important observation we can make is that homes in the towns seem to be holding their values pretty well. This conclusion is based on the significant increase in the number of suburban mortgages being recorded. In Lowell, on the other hand, the number of mortgages being recorded is down slightly, but it’s down nonetheless which suggests that any rebound in home prices has not yet reached the city of Lowell.
Homeowners often contact us asking us how they might determine the year in which their homes were constructed. Here’s an inquiry I received yesterday by email:
Hi. A fellow old-home owner in Lowell referred me to your website as a good source of historical info about our house. When I do a search on the address, I only see info going back to 1990. I’m looking for info back to 1890! Does the system contain old info? I’m trying to determine the actual year the house was built. I’ve seen conflicting dates on various documents, from 1860, to 1880, to 1905, to even 1917!
Here’s my reply:
All of the land ownership documents (deeds, mortgages, etc) going back to 1629 are available on our website (www.lowelldeeds.com) although they are in several places, depending on their age. The more recent ones are on masslandrecords.com while the older ones - before 1950 - are on www.lowelldeeds.com. Unfortunately, the name index used to find these documents only goes back to 1976 online. We have it all the way back to 1629 but that’s only available here at the registry. It is in electronic form, however, and if you bring in a 16 gigabyte flash drive (also known as a “thumb drive”) we will give you a copy at no charge. The files for the index are so large that we have not yet been able to get them on the internet.
More to your inquiry, records here at the registry of deeds are primarily concerned with who owns the land and not what is built upon the land, so nothing we have would tell you precisely when your home was built. The best you can do with our records is draw inferences from the various deeds and other documents. For instance, if someone bought the property for $1000 and a year later sold it for $5000, you could infer that something had been built upon it in the interim.
If you decide to come to the registry to conduct your research, we’re open from 8:30 am to 4:15 pm Monday thru Friday. On whatever day you do make it to the registry, please stop by our Customer Service desk and ask for me. If I’m available, I’ll show you how to use the computers; if I’m not, just ask anyone at the Customer Service desk to help you.
Sorry I can’t be more helpful than that, but if you have any more questions, please let me know.
August is a popular month for vacations here at the registry, so I usually spend more time than usual working at our Customer Service Counter which gives me a valuable opportunity to assist customers who call or visit the registry of deeds. Those in the real estate related professions typically have straight forward questions, but members of the public often have more complex inquiries.
This summer, many of these calls are requests to “take a name off of a deed” or make some other change to the ownership of property. These calls make it clear that much of the public is under the impression that we here at the registry maintain some kind of master list of who owns what property and that we either cross out or write in names as ownership circumstances change. In response to these questions, we try to provide a simple explanation of the role played by deeds in land ownership. We then explain that to change ownership, a new deed must be created. That leads to the inevitable question, “can I do that myself?” That’s a tough question to answer. Technically, the answer is yes, but we emphasize that real estate law is complex and that one or two words in a deed could completely change the meaning of the document. Because the asset involved - a home, typically - is worth so much money, it’s reckless for anyone to put it at risk by trying their hand at deed drafting to save the cost of hiring a lawyer to do it. Some people see the wisdom of that approach and call an attorney. Others insist that they can’t afford an attorney and will have to do it themselves. At that point, all we can do is suggest they visit a law library for further assistance.
For months now attorneys have been telling me that as many as two-thirds of the sales or refinancings that come through their doors are scuttled when the appraisal comes back with a lower than expected value. Recent comments, and our own statistics, suggest that this phenomenon is more often true for properties in Lowell than for those in the towns in this registry district, but it remains a system-wide obstacle to the recovery of the real estate market.
While many of the properties being valued have certainly lost considerable value, there may be more going on here. Today’s New York Times carries a front-page story detailing how the appraiser’s profession was upended by a new “Code of Conduct” that went into effect in May. The main feature of this code is that the lender, and not the real estate broker or the mortgage broker, selects the appraiser.
The intent of this rule was to insure the independence of the appraiser by eliminating any incentive he had to shade his valuation upward for the benefit of the broker or mortgage originator who both get paid only if the deal goes through. But with the lender making the decision, many local appraisers have been forsaken by major lenders who have turned to larger, centralized appraisal firms to do the work. The concern now is that the appraisers working for these firms are inexperienced and not locally based and are therefore less likely to accurately value the property. At least those are the concern raised by the article. Still, based on the comments of local attorneys, there is some validity to these concerns.
The New York Times reports today that foreclosures are rising in some parts of the country, not because of homeowners falling behind on their mortgages, but because they have failed to pay their real estate taxes. This situation is somewhat foreign to us here in Massachusetts where the philosophy and the practice by municipalities is to encumber the property with a lien and then to wait until the present owner sells or refinances and brings the taxes current. In other parts of the country, however, governmental entities (usually towns or counties) routinely sell tax liens to private investors who charge interest of up to 18% and aggressively foreclose on homeowners who are in arrears. These investors are quite sophisticated (“you don’t get 18% return on a CD!”) and have their own organization - the National Tax Lien Association - complete with a sophisticated website.
The governmental entities find the practice of selling tax liens attractive because it results in a rapid infusion of cash into the treasury. But this practice also results in more foreclosed and vacant homes which causes further deterioration of the neighborhood. It would seem that a better approach would be to work with the homeowners to find ways to make the taxes current.
We’re in the midst of a study of home sales in Lowell during the month of June that we hope will provide a sense of what is going on in the real estate market. Looking at the prior sales history of the 146 properties sold in Lowell during June confirms that real estate values remain considerably lower than when they reached their peak during the 2003-2006 bubble. On the other hand, the current value of properties that last sold in 2000 remains higher than the earlier purchase price.
Here are some examples of bubble property sales:
In 2005, 119-121 Livingston St sold for $415,000. In 2009, it sold for $180,000.
In 2005, a condo at 16 Merrimack St sold for $142,100. IN 2009, it sold for $75,000.
In 2005, 52 Kinsman St sold for $240,000. In 2009 it sold for $135,000.
In 2005, 590 Pine St sold for $305,000. In 2009, it sold for $228,000.
In 2002, a condo at 18 Hampton Ave sold for $210,000. In 2009 it sold for $168,000.
Here are some examples of pre-bubble sales:
In 1998, 809 Chelmsford St sold for $128,000. In 2009, it sold for $199,000.
In 1999, 73 Magnolia St sold for $138,000. In 2009, it sold for $223,000.
In 2000, 25 Putnam Ave sold for $165,000. In 2009, it sold for $214,900.
In 2000, 250 Butman Rd sold for $230,000. In 2009, it sold for the same price.
In 1999, 16 Wetherbee Ave sold for $194,000. In 2009 it sold for $334,900.
These are just a few examples that illustrate the variability of prices during the past decade. If you bought ten years ago (and refrained from refinancing to extract increase equity during the boom), your house is probably worth considerably more than you paid for it. If, on the other hand, you bought five years ago, your house is worth less than you paid for it.
Back in January we noticed that many of the foreclosure deeds being recorded had been signed many months before they were brought to the Registry of Deeds. We never could figure out the cause of the delay. Recently, we examined all foreclosure deeds for Lowell recorded between January 1, 2009 and June 30, 2009 to measure the date intervals between the various events in the foreclosure process. There were 121 foreclosures in this group. Because a handful seemed to have extremely long time intervals, I chose to calculate the median (the middle number of the group with half the numbers greater and half less) rather than the average. Here is what we found:
From the recording of the order of notice to the foreclosure auction: 54 days.
From the foreclosure auction to the signing of the foreclosure deed: 23 days.
From the foreclosure auction to the recording of the foreclosure deed: 66 days.
From the recording of the order of notice to the recording of the foreclosure deed: 148 days.
These numbers should provide some context when our readers look at the foreclosure statistics we publish from time to time.
At 3:53 pm today, the deed conveying Lowell’s Doubletree Hotel from LHG, LLC to University of Massachusetts Building Authority was recorded in Book 23270, Page 250. The purchase price was $14,722,500. There’s no mortgage. So the Doubletree era comes to an end and the UMass Lowell Inn & Conference Center officially begins.
A front-page story in today’s Globe says the Massachusetts economy seems to be rebounding, led by strong home sales in June. This would indeed be good news, but we haven’t seen any indication of it here in the Middlesex North District. In a Lowell Sun story that appeared on Monday, I said that while the significant decline in local foreclosures is a positive indicator, there is little else to suggest optimism. Overall activity at the registry is just stagnant. The number of tax liens being recorded is up. The number of executions being recorded is up. Many of the deeds being recorded have a foreclosure in their recent past suggesting that their present sale is at a discount. Although I don’t have the exact figures yet, the percentage of home sales involving previously foreclosed properties is disproportionately large. This means that other homes aren’t selling as well which is probably because sellers feel obliged to keep the asking price high in order to realize enough on the sale to pay off the existing mortgage. Buyers, on the other hand, see previously foreclosed homes going at discounts and are unwilling to pay higher amounts. And even if they are, lenders are hesitant to finance it.
All we can do is continue to monitor this. Late Friday afternoon we should be able to post some comparative stats for July, so please check back then.
The Middlesex South Satellite office here in Lowell, which has been operated by the Secretary of State’s Office since July 1, 2009, will remain open for the foreseeable future. Most recently, this office was to close tomorrow (July 24) to coincide with the activation of electronic recording in Cambridge on Monday, July 27, 2009. The primary reason the life of the satellite office is being extended to provide overlap with the rollout of e-recording in Cambridge. The satellite office might close once electronic recording has proven itself in Cambridge, but no final date has been established.
Boston.com is reporting a June spike in “foreclosure petitions” which I believe refer to complaints file in the Land Court under the Servicemembers Civil Relief Act. That legal proceeding yields an Order of Notice that is eventually recorded at the registry of deeds, so filings in the Land Court would be an early indicator of the numbers of Orders of Notice we might see here in the coming months. Thus far, there has been no uptick in the number of Orders of Notices recorded. In June 2009, there were 61 and in June 2008, there were 72. May 2009 saw the exact number as June - 61. And the numbers for the first three weeks of July - 46 - are on a pace to reach 60 by month’s end and are nearly identical to the 47 filed last July.
Even though our recording statistics do not show any increase in the rate of foreclosures, such an upturn would not come as a surprise. Unemployment is still high and the economy remains in tough shape. We’ll keep a close watch on this situation and will promptly report any changes.
There’s been a steady wave of newspaper reports predicting a surge in defaults on consumer loans, particularly credit card accounts. Here at the registry we get a glimpse of this type of activity by tracking Executions recorded by the Sheriff’s Department. For the first three weeks in July of last year, there were 33 Executions recorded for the Middlesex North District. For the first three weeks of THIS July, there have been 90 - an increase of 270%. Besides the random retailer such as Sears and Jordan’s Furniture, the majority of the plaintiffs are credit card issuers and “debt management” companies. Here are the most frequent creditors:
Citibank - 14 executions averaging $10198
Capital One - 10 executions averaging $3192
LVNV Funding LLC - 9 executions averaging $4103
Arrow Financial Services LLC - 8 executions averaging $4103
CACH LLC - 5 executions averaging 4086
This is a small sample, so it’s too early to draw any major conclusions. Still, we will continue to watch this closely.
Last week, a customer came to the registry seeking to “release a lien” she said she had placed on a condominium owned by her ex husband. Upon further review, the “lien” was an Ex Parte Order issued by a Marital Master from Rockingham County, New Hampshire. The parties were divorced in New Hampshire, but the husband owned two condominiums in Massachusetts. As part of the divorce settlement, he had agreed to sell the Massachusetts properties and distribute the proceeds equally between the parties. While this order did not explicitly encumber these properties, it was recorded at the Middlesex North Registry of Deeds with marginal references made to the applicable deeds and therefore created some doubt about the state of the title to the property.
If I remember Civil Procedure and Real Property correctly from law school, a court in one state has no jurisdiction over property in another state. If that’s the case, the question then becomes whether we should record an order issued by a court in another state. Even if the court lacks jurisdiction, by allowing such an order to be recorded, we essentially legitimize it, since it’s unlikely that a Massachusetts lawyer representing a buyer or lender would OK a transaction with such a document hanging around on record. On the other hand, if we refuse to record it, do we run the risk that there is some exception to the general jurisdictional law that we have overlooked and thereby frustrate the legitimate actions of a court in another jurisdiction.
This month’s AARP Bulletin contains an article warning homeowners to be on alert for house stealing which is described as “a fast-growing and easy scam.” In this scenario, the wrong-doer creates a fraudulent deed that purports to transfer ownership from the true homeowner to the thief. Once this new deed is recorded, the bad guy either sells to some unwitting cash-paying buyer, or more likely, refinances and pockets the cash received from the new loan. Elderly homeowners are prime targets for this type of scam because many of them have already paid off their mortgages, so the granting of the new loan is not contingent upon the pay-off of an existing mortgage.
The AARP publication lays some of the blame for this type of vulnerability on registries of deeds, stating:
The signatures of “sellers” are forged, and paperwork is filed with the city or county recorder’s office. In many states, deed recorders and those who oversee property closings are not required to authenticate the identities of buyers or sellers.
I can’t imagine the registry of deeds doing more to authenticate the identities of the parties to a sale than what we do now – which is to ensure that all deeds are acknowledged by a notary or some other public official. Without the acknowledgement, the document will not be recorded but it’s unrealistic to give the registry the responsibility of authenticating identities.
The AARP ends with some advice to homeowners that includes the following:
“From time to time, check all property records with your local deed recorder’s office to ensure all documents and signatures are legitimate” (that’s OK).
“Some deed-recording offices use software that alerts homeowners whenever a transfer is made on their property. If yours doesn’t, ask why not.” (we don’t and such a system would cost a substantial amount to set up and operate yet would provide very limited protection).
A Globe article earlier this week described the apparent futility of efforts to reduce foreclosures by modifying mortgages that are already in distress. The article cites a new study by the Federal Reserve Bank of Boston which concludes that banks are only willing to help mortgagors who don’t really need the help in the first place and avoid attempts to modify the loans of those in the most financial distress because the bank is likely to lose money on them.
The FRB study, which is available online here, also concludes that securitization does not play a major role in this hesitancy to modify mortgages. By securitization, the study refers to the theory that modifications were not occurring because investors who purchased shares of pooled mortgages were sabotaging such efforts in an attempt to maintain the high initial returns on their investments. The FRB study concludes that mortgages controlled by investors are modified at the same rate as mortgages held by banks, so the data does not support singling out the investors as the cause of the poor incidence of modification.
There is a sense left after reading the study that money from the federal government for mortgage modifications would be more effectively spent by giving it directly to the borrowers for use in making current their delinquent loans rather than giving it to financial institutions (as is now the case) who don’t seem to be using the money for the purposes intended.
Last week I wrote a post about In re Giroux, a Bankruptcy Court case (District of Massachusetts) in which the judge held that a second mortgage on which the acknowledgement clause was incomplete (”. . . then personally appeared ____ and acknowledged the foregoing . . .”) was improperly recorded by the registry of deeds. The court held that for a document to be recordable, the acknowledgement clause had to be complete. Since then, we have come across numerous already recorded documents that suffer from this same defect. An attorney also contacted me to say he had discovered two such documents in the chain of title of a property he was examining.
I’m not really sure how we at the registry should react to this case. Our attitude, and the attitude of the Deed Indexing Standards, has been to liberally interpret that acknowledgement - if there’s something there that looks like an aknowledgement by a notary public, we’ll take the document. But this case suggests we must set the threshold for recording much higher; that we should closely examine the acknowledgement clause of each document and, if there are any departures from the standard wording, we should not record the document. I suspect that this is not the last time I’ll be writing something about this case.
A recent decision by the United States Bankruptcy Court for Massachusetts dealt with the sufficiency of the acknowledgement of a mortgage. The case is In re Giroux, a May of 2009 decision and the alleged defect occured when the notary public failed to insert the borrower’s name into the notary clause (”Then personally appeared ______________ and acknowledged the foregoing to be his free act and deed”). The court held that even though the notary signed the notary clause which was located on the same page as the borrower’s signature, the absence of the borrower’s name in the middle of the clause invalidated the acknowledgement. Consequently, according to the court, the registry of deeds should not have recorded the document. Since the mortgage was therefore void, the lender was left as an unsecured creditor of the bankruptcy estate.
Ironically, the court cited the Massachusetts Deed Indexing Standards as support for its holding. The intent of the Indexing Standards was to be fairly liberal about what constitutes a sufficient acknowledgement, so the holding in this decision was certainly unexpected. Over the coming days, we’ll read the decision more closely, as well as the cases and statutes cited, to see whether it will alter our own standards for accepting documents for recording.
Last week I commented on a story about the new reality of appraisals – that more and more often current valuations of properties are jeopardizing deals because the appraisal comes back for less than the agreed upon price. Now, another hindrance to the recovery of the real estate market has arisen. Mortgage interest rates have increased and are at their highest since last November. While rates are still low by historic standards, the increased amount of interest tends to increase the monthly payments to an amount high enough to disrupt deals. As fears of inflation continue to grow, it’s likely that interest rates will stay high or get higher. Of course, if potential buyers adopt the view that interest rates will only rise, that might be enough motivation to jump into the market and cause an increase in sales.
A recent story in the Globe detailed the negative influence that appraisals are having on the real estate market. Many sales and refinancings have been scuttled when the appraisal comes back and values the property at less than the agreed sales price or the amount needed to pay off the existing mortgage. This is not necessarily a bad thing, and if it had happened more often during the irrational run up to the peak of the real estate bubble, perhaps the severity of the present economic crisis would have been averted or lessened. Nevertheless, judging the value of real estate is an art not a science, so when an property with a P&S for $225,000 has an appraisal come back at $220,000 and thereby blow up the deal, it would be understandably frustrating for all involved. A number of factors are contributing to make the business of appraising properties tougher than ever: The slow market yields few comparable sales; Many comparable sales are of properties owned by lenders who gained title through foreclosure and who heavily discount the resale price and thereby artificially drive down values of like properties. And appraisers are naturally wary of setting a current value which, in a steadily declining market, might seem overpriced in just a few months. While this new diligence in valuing property will be beneficial in the long run (assuming the cautionary impulse continues with the return of rising prices), in the short term, it certainly is contributing to the persistent slowness of the real estate market.
Robert Shiller, a Yale economists, suggests that US housing prices will continue to decline for a long time. He cites the bursting of the Japanese real estate bubble in 1991 and the resulting 15 straight years of declining prices as one example. In the most recent US experience, the bursting of the real estate bubble in 1990-91, it was not until 1997 that US home prices began to rise again. Shiller says that real estate does not follow the traditional rules of economics. In that universe, when the value of an asset declines, owners of the asset tend to sell quickly which allows the bottom of the market and the subsequent rebound to occur in relatively short order. Real estate doesn’t follow this curve for a couple of reasons. Most folks don’t own homes as speculative investments, so it’s an easy jump from home owner to home renter. That kind of switch brings massive lifestyle changes and occurs not for investment reasons, but usually as a result of severe economic stress. Consequently, most people who contemplate selling their home also plan to buy a replacement - they’re not “getting out of the market” like someone who was dumping all of their stock, for example. While a declining market favors home buyers, the home buyer is also a home seller and is thereby punished by that same market. This combination results on a type of paralysis that makes the effects of a declining market linger.
[powered by WordPress.]
23 queries. 0.668 seconds