Blog :: 2011

MERS

There's no shortage of news reports on the housing market.  However, much of those stories are from a human interest angle, showing the devastating effect of foreclosures on neighborhoods and families.  These stories are heartbreaking and important.

There are other stories too, namely the stories from an economic perspective, that are lacking.  Most people I talk to don't understand what exactly happened, mostly because there has been so little coverage explaining the issues around foreclosures and the secondary mortgage market.  I want to highlight a small, very specific part of this foreclosure crisis: MERS.

MERS is an acronym for the Mortgage Electronic Registration System.  It's a company, built and funded by  banks interested in trading mortgages.  The purpose of this company was to streamline the buying and selling of mortgages.  For example, if Sally obtained a mortgage from Bank 1, and that mortgage was sold to Bank 2, both banks would have to facilitate a new note and trust deed against Sally's property.  This means official, notarized signatures from both banks, and recording of that paperwork in the locale where Sally's house (and mortgage) are located.  This is not cost-effective, simple nor quick, especially for national and international banking corporations.  It makes mortgages difficult to trade, making them less liquid, resulting in fewer profits for banks from their mortgage division.

Enter MERS- Bank 1 could register Sally's loan with MERS, and MERS would handle the multiple transfers of that loan.  In essence, MERS was a tracking system.  MERS kept track of who owned that mortgage, whether it had been sold twice or thirty times.  No more pesky paperwork, no more recording new trust deeds with each transfer.

When the real estate market started to bomb, MERS also started handling foreclosures, processing paperwork for bank  #30, since they were left holding Sally's mortgage.  At face value, it doesn't seem that nefarious to create a company to handle paperwork for you.  But MERS has been sued in almost every state it does business in, because they don't OWN your mortgage.  They aren't listed as a trustee on your note and trust deed.  And in America, where home ownership is very strictly protected, only the actual owner of the loan can foreclose on your property.  So MERS, being a third-party, has no right to foreclose.

Currently, in Oregon, MERS has lost a least one lawsuit.  The judge sided with homeowners saying MERS had no right to foreclose.  MERS, and the banking industry, has appealed this decision.  If this decision is upheld,  it could transform the way the secondary mortgage market works.

Very interesting stuff, indeed.

Radon: Are you at risk?

Maintenance on your property is paramount;  it ensures you keep your biggest investment in its best condition and helps you avoid costly repairs.  In this post, let's highlight radon and its threat to your investment and your health.

Radon is a cancer-causing radioactive gas.  It is odorless and colorless, and is mostly concentrated in the lowest point in a home-the basement or crawl space.  It comes from the natural (radioactive) breakdown of uranium in soil, rock and water. A family whose home has radon levels of 4 pCi/l is exposed to approximately 35 times as much radiation as the Nuclear Regulatory Commission would allow if that family was standing next to the fence of a radioactive waste site. (25 mrem limit, 800 mrem exposure).

Many national and world health organizations recommend testing your home for radon because testing is the only way to know your home's radon levels. There are no immediate symptoms to alert you to the presence of radon. It typically takes years of exposure before any problems surface.

Are you at risk?  Here's a map of the high risk radon levels in Portland: Radon Risk Map

Testing is easy-ironically the most accurate test for radon is the cheapest!  Just grab a self-test at your local home improvement store- it's usually around $50, but it takes several months to accurately test.

If you have elevated levels of radon, a mitigation system can be easily installed, with little disturbance to your residence.  The cost ranges between $1200-3500 depending on the particular construction of your house.  (If the basement is finished, it can be more complicated to install a mitigation system.)   Call or email me today.  I'd be happy to provide you with a list of trusted providers.

Carbon Monoxide Alarms

If you're thinking about selling your residential property and  you have any gas appliances in it, you should know the Oregon legislature recently enacted  House Bill 3450 requiring carbon monoxide alarms in every residential building that is sold.  A detector is required within 15 ft of every bedroom in every residential sale.

The tragic story of a family that died in a vacation rental in Colorado was the impetus for this legislation.  The Lofgren's, and their two children, rented a vacation home in Aspen and all of them perished one snowy Thanksgiving weekend in 2008, from carbon monoxide inhalation.  It is still currently the subject of much debate and a lawsuit is pending as to the fault of this tragedy.

All gas appliances, when natural gas is combusted, create carbon monoxide, which is noxious.  The gas that is created is odorless, tasteless and if the concentration is high enough, deadly.  Common sources of carbon monoxide are water heaters, furnaces, gas fireplaces, gas ranges and ovens, to name a few.  Each of these appliances must be properly vented, or you risk carbon monoxide poisoning.

For landlords in Oregon, all residential units must currently have CO detectors.  If you are currently renting property in Oregon, please contact me and I'd be happy to forward the requirements for you.

Self-healing pipes?

Most of the houses in the metro Portland area were built before 1950.  Which means every system in most of our housing stock is over 60 years old (if it hasn't been replaced).  One of these systems is the water supply pipes.

I know you're probably like everyone else... you wake up, and stumble into the shower, and magically, water comes out of the spigot.  Did you ever wonder how that works?   All those pipes in your basement have water sitting in them, under pressure, just waiting for you to release it.  The handle to the sink, or the shower, or any other myriad of fixtures, has a value that opens, and water runs.

There are a number of different piping systems used in construction over the years. In Portland, most of the original water supply pipes are galvanized. And galvanized plumbing itself is a bit magical. What would you say if I told you galvanized pipes are known for their "self-healing" properties? (to a certain extent) Curious, are you? Let me explain.

Let's start with the water itself: there are minerals in the water supply coming into your house. These minerals chemically react with the galvanized steel pipes.  Initially, the reaction is rust, causing deterioration of the interior of the pipes. This causes the very typical loss in water pressure.  If you opened up your pipes, they would look like a web of clogged arteries.

The same chemical reaction between the pipe and water can also "heal" the pipe. Because of the contact with water and the constant pressure in the pipe, when a pin size hole in the pipe appears, it will usually rust over and continue to be serviceable.

Don't get me wrong-you will still need to budget an eventual replacement of those galvanized pipes.  But they're going to last a lot longer than they were supposed to because of a "magical" chemical reaction.

What does Title Insurance really do?

If you've bought any real estate recently, you know there are a TON of closing costs and charges. A big one is title insurance. Do you wonder what title insurance is and when it's used? Honestly, you'll probably never need it. It's a bit like earthquake insurance; it's almost never used, but when it is, it's well worth it. Before we get to the insurance bit, you need to know what "title" is. The most basic explanation of title is it's the trail of legal ownership and possession of real property. Title insurance insures you hold a clear title to your house (excepting, of course, the bank that holds your mortgage). It's particularly important on a house because any organization can file a lien against your property. When you don't pay your taxes, or stiff the contractor you didn't like, or decide to stop paying on those student loans, they all have a right to file a lien. And unlike most debt, the lien is attached to the house, not you. So when you sell that house, and the title company doesn't notice that nasty contractor's lien, the next owner of the house is responsible to pay him, NOT you. Weird and antiquated? Most definitely. And a huge liability risk, if the title company doesn't catch every lien on a property.

Most liens are recorded with the county, so they're relatively easy to discover. To further complicated matters, though, all liens DON'T have to be recorded to be valid. So instead of finding a carpenter's ants' nest, you might get a nasty letter in the mail about the paying that contractor that remodeled the bathroom for the previous owner.

Title insurance guarantees when you buy the house there are no other liens (besides the ones you agreed to pay) against the house. If a lien surfaces after you've closed on the house, the title company has to deal with this. I've only seen it happen once, but it was worth several thousand dollars.

So while were all really hoping against any earthquakes, you'll at least be insured for any title disasters. (Be aware, not all states require title insurance for transfers of property.)

Old growth Fir- Hardwood or Soft?

In my profession, we rely on generalizations. For the most part, they work (did you catch that? Yeah, generalizing is easy to do). One such generalization is that fir floors are soft wood, as opposed to oak or cherry (or a myriad of other woods) which are "hardwoods". Hardwoods are typically more desirable as a floor covering, because they weather abuse better. You can walk around in stilettos or your dog can run on the floor with his un-trimmed nails, and it won't dent or chip the floor. For the most part, this generalization is true. The trees harvested and milled today are barely 30 years old. 30 years isn't very old in the tree world. However, the trees milled to make the wood floors in most of Portland's old houses, were, on average, around 200-300 years old (depending on the year the house was built.) I spoke with a client just the other day, who had done some major remodeling on his house. He'd pulled down an exterior wall, and instead of 2x4's (the lumber typically used to frame a house today) he found 2X6's. This wood looked so interesting and the grain was so tight, he decided to salvage it and send it to a local mill to make wood floors for his remodel. The miller who processed the wood said it was 1000 year old Douglas Fir. He said after 1910, there were no trees left of that age. (His house was built in 1895.)  This fir-which would typically be considered soft-is harder than most "hard-woods" on the market today.

So although fir is most often a soft wood, there are always exceptions to the rule.