Housing and Community Development

The Great Recession hit rural areas hard as median incomes fell, poverty rates increased and the metropolitan-nonmetropolitan wage gap continued to grow.  In addition, nonmetro areas continue to lose young adults through out-migration, and rural populations are increasingly relying more heavily on transfer payments due to rising medical costs and an aging population.

According to the Uniform Law Commissioners (ULC), the Uniform Assignment of Rents Act establishes a comprehensive statutory model for the creation, perfection, and enforcement of security interests in rents. When a creditor takes a mortgage on rental property (whether residential, commercial or industrial), does that creditor have a protected interest in the rent (income) from that rental property in the event the debtor/owner of the property defaults on the mortgage? The answer is generally and surprisingly no.

The practice of “robo-signing” by banks and other loan servicers in the mortgage foreclosure process has resulted in new legislation in Illinois and a first-of-its-kind lawsuit in Ohio.

This Act prohibits the running of a transfer fee covenant with the title to real property. The Act defines a transfer fee to mean a fee or charge payable upon the transfer of an interest in real property, or payable for the right to make or accept a transfer of an interest in real property, regardless of whether the fee or charge is a fixed amount or is determined as a percentage of the value of the property, the purchase price, or other consideration given for the transfer. The Act defines a transfer fee covenant to mean a declaration or covenant purporting to affect real property which requires or purports to require the payment of a transfer fee to the declarant or other person specified in the covenant or declaration, or to their successors or assigns, upon a subsequent transfer of an interest in real property. 
The Act provides that a transfer fee covenant shall not run with the title to real property and is not binding on or enforceable at law or in equity against any subsequent owner, purchaser, or mortgagee of any interest in real property. Any lien purporting to secure the payment of a transfer fee under a transfer fee covenant is void and unenforceable. 
The Act specifies various types of consideration, commissions, interests, charges, fees, rent, reimbursement, taxes, assessments, or fines that do not constitute a transfer fee and are not not subject to the prohibition. 

This Act enables a court to stay mortgage foreclosure proceedings against members of the military under certain conditions. It also invalidates a foreclosure by advertisement or the sale of mortgaged property of members of the military under certain conditions. It prohibits a person from selling or foreclosing real estate owned by members of the military if the person knew the foreclosure or sale was invalid, and prescribes a civil fine of $2,000 for a violation. The Act directs the Attorney General to deposit such fines in a Military Family Relief Fund established under state law.

With foreclosure rates high in parts of the Midwest, many states have responded with new legislation.

Indiana tax relief measure will be on ballot; Wisconsin and Iowa have proposals of their own

CSG South

September 2008 proved to be the start of an extremely stressful period for the U.S. economy with a series of decisive events unrelentingly battering American consumers, corporations and every level of government. Early on in the month, the U.S. Treasury Department assumed conservatorship over Fannie Mae and Freddie Mac, the beleaguered for-profit, shareholder-owned companies that were required by government charters to provide low-cost capital to secondary mortgage markets. Soon after, Lehman Brothers, the 158-year old investment bank founded in Montgomery, Alabama, filed for bankruptcy. Then, within weeks, we witnessed the collapse of several other storied American financial institutions.

These disturbing events and the initial defeat of a financial bailout plan sponsored by the Bush Administration in the U.S. House of Representatives in late September caused the Dow Jones Industrial Average (DJIA or the Dow) to careen 778 points downward, the Dow’s largest, single day drop in history. Not only did the 2008 losses extinguish $7 trillion in shareholder wealth, the declines were even more pronounced since they extended into almost every industry with renowned blue-chip companies such as General Motors, Citigroup and Alcoa losing more than 70 percent of their value and all but two of the 30 DJIA industrials (Wal-Mart and McDonalds) falling by more than 11 percent.

How do all these seemingly disparate trends impact state finances? This Special Series Report hones in on the extent to which the 16 SLC state revenue inflows were reliant on the housing and construction sectors between fiscal years 2002 and 2008, sometimes directly and, other times, indirectly. The comparison of revenue data for this seven-year period will facilitate a review of not only the gradual ebb and flow of these categories but also the sharp fluctuations in revenues, including the steep drop-offs experienced in several states that were particularly reliant on the housing and construction sectors for their overall economic performance.

State Suggested Legislation: This Act allows a plaintiff to commence a single judicial foreclosure action, joining as defendants multiple obligors with separate time share estates and the junior lienors thereto, under specified conditions. The action shall be deemed a single action, suit, or proceeding for purposes of payment of filing fees, so long as the plaintiff complies with the provisions of the bill. Each timeshare estate foreclosed shall be subject to a separate foreclosure sale, and any cure or redemption rights shall remain separate.

Suggested State Legislation: This Act requires a mortgagee, trustee, beneficiary, or authorized agent to wait 30 days after contact is made with the borrower, or 30 days after satisfying due diligence requirements to contact the borrower, as specified, before filing a notice of default.