Introduction
Administrative home ownership laws cover a broad spectrum of laws governing home ownership, this include property taxation, deeds, mortgage lending, house purchases and condominium law.In the year 2006, research found that at least 34% of Americans had been defrauded of their homes. Losses to the industry range from hundreds of millions of dollars monthly. Hardworking American citizens whose only desire is to lead a normal life and own a beautiful or even modest home are defrauded of their savings by organized crime groups and left bankrupt and homeless. Through mortgage frauds and other fraudulent activities criminals can leave victims with damaged credit, and homes that they cannot sell. Property values can also be inflated through these crimes.
The United States government has taken the war against such fraudulent personalities seriously. Protecting home owners and buyers has become an increasingly personal battle for the government. Federal and administrative laws have been formulated to allow the government to prosecute any individuals and groups that may be tempted to engage in defrauding others of their homes and property.
Administrative law has been important in protecting the rights of the citizen when it comes to purchasing homes, property and constructing their own homes. Areas that previously 4experienced high rates of mortgage fraud are slowly but steadily showing change for the better. States such as Michigan which have taken introduction of administrative law seriously have seen a decrease in mortgage fraud from 17% to 14%. Of these fraud convictions have increased from a mere 354 convicted cases to 494 cases. The residents of Michigan are feeling more confident to purchase homes and property because of the new laws that protect their investments and cater for their rights.
In all American states that have introduced administrative procedures and laws to protect individual and group home owners, the progress is similar to that of Michigan. Administrative law may be making small baby steps but the impact is being felt by all present and future home owners.
Constitutional Underpinning Of Specific Laws
In the hope of protecting middle income and low income earners, the United States senate and congress have passed several laws that protect home ownership. Specific states have gone even further to include clauses that are more specific to the demographics of their home ownership patterns, (American Bar Association and ABA, 2004).
American Home Ownership Act Of 1934
Since the introduction of this act and its subsequent conversion into law in 1934, it has helped several individuals and families purchase homes through fair mortgages and affordable prices, (Rohe and Watson, 2007). Roy (2008), the act requires and has severally been amended to suit the changing home ownership environment and market for home buyers. American Bar Association and ABA (2004) shows that the most recent changes were proposed by Senator Jim Talett from Missouri, in may 2006.
The amendment made in 2003 succeeded in eliminating the then 3% minimum down payment required for mortgages. The research presented to the house at the time showed that many Americans could afford 2% or less for mortgages, but the 3% was either unaffordable or considered unreasonable by many Americans, (American Bar Association and ABA, 2004). Colleen (2003), states that because of the amendment a great barrier to home ownership was removed. The new rules offered a variety of down payment options.
A second amendment in the year 2006 increased and simplified the loan limits for home ownership. It was noted that in many states the loan limits were way much lower than the cost of houses in the state. This meant that even if individuals could secure FHA loans they might be unable to afford the houses, (Roy, 2008).
Rohe and Watson (2007), agree that the amendment to the act allowed more Americans not only to access easy home buying loans but also to be judged individually for credit. In the previous laws all people applying to be considered for home ownership loans were given standard premiums. Through the amendment home buyers could now request to be individually profiled. This way the government introduced risk based loan premiums.
Home Ownership And Equity Act
This act was formulated in 1994 and addresses practices that are deceitful and unfair when it comes to home equity lending, (Clarkson and Muis, 2008). The loans covered in this act have been commonly nicknamed as the “section 32 mortgages”. The act has covered balloon repayments extensively. Friedman (2000), balloon repayments are loans that require the investor to pay more that twice the principle sum before completing payment. The interest accrued is also not deducted from the principle amount. Many Americans had previously lost their homes through balloon loans. Smith and smith (2008), the act has prohibited such practices and made them criminal, discouraging properly registered financial institutions from engaging in such practices.
The law has also prohibited the practice of amortization, where consumers were required to make small payments that did not help in paying the loan and instead increased the principle amount lended, (Clarkson and Muis, 2008). For unknowledgeable home owners, they paid off mortgages for many years, only to loose their homes because they had not cleared the principle debt. The practice confused and bankrupted many American citizens before it was banned through the home and equities act of 1994, (Clarkson and Muis, 2008).
Rains (2008) another amendment was made to the act in 1998, this amendment went further to protect the home owner and creditors. The amendment was successful in prohibiting creditors from issuing home ownership loans while disregarding the credit history and ability to pay back the loans. Smith and smith (2008), whereas it is the right of a consumer to apply for loans as they wish, it is the responsibility of the creditor to determine whether the individual can be able to repay the loan. In doing so the creditor protects himself from loss and the client from loosing their home and credibility.
Michaelson (2009), it is the duty of the lender to confirm that the total monthly debt of the debtor does not exceed 50% of his income. If the debt does exceed the income, then the lender is required by law to suggest cheaper and more affordable loans to the client. Rains (2008), it is a backward and primitive society only that gives credit to clients who cannot possibly pay back only to go back and demand from them the asset they had given them credit for in the first place. Smith and smith agree that it is irrational for consumers to apply for home loans that they cannot afford, but it is also lacking in sense when the lender agrees to give the loan and later demand payment when they are well aware the client cannot afford it.
Community Reinvestment Act (1977)
The act was formulated and presented in order to reduce the unfair discrimination of low income earners in receiving credit. Low and moderate income neighbor hoods were experiencing severe shortages when it came to credit providers and mortgagers.
Norberg (2009), in 1961 a study conducted by the civil rights association found that the low income earners and especially Africa Americans were required to give deposits of down payments that were higher than the usual amount. They were also steered towards payment schedules that charged higher monthly charges and cleared mortgages faster.
The act required that institutions meet the needs of the entire community. Financial and mortgage institutions were required to come up with payment schedules and mortgages that could be afforded by all groups of earners. This required the institutions to re-adjust and repackage themselves for the benefit of the entire community they were serving, (Brandel and Teitelbaum, 1996).
Friedman (2000), the community reinvestment act succeeded in regulating and controlling lenders who mistreated low in come earners. Taking advantage of the lack of creditors for low income earners, the lenders took advantage and issued in adjustable rules and regulations in this communities. Defaulting mortgagers had their homes reposed, communities with low income earners showed the lowest percentage of home ownership, and the highest rates of repossessions.
Rains (2008), the lack of creditors in the communities, left home buyers and potential home owners vulnerable to fraudulent creditors. High rates of fraud that resulted in the loss of savings, investments and homes were reported in these areas.The government saw the need to force the lenders to provide credit to the low income earners. Though some economists saw these as forcing institutions to take risks, the risk was justified by insisting that the institutions conduct thorough financial investigations to future debtors, (Clarkson and Muis, 2008).
Residential mapping by the federal housing administration had made it impossible for some communities to access credit as they and been labeled “unsafe”. The financial institutions that ventured into such neighborhoods charged very high interest rates to cover what they considered as a risk to their investment. The result was that mortgages and credits for members of the community were impossible to afford. Home ownership was less than 4% in such neighborhoods, (Rains, 2008). Michaelson (2009), with the introduction of the act and its passing into law, American low income earners faced for the first time the probability of owning homes. Ownership of a home stopped becoming a dream and fantasy, and moved closer to reality.
Coupled with the adjustable rate interest and the individual premium rates for mortgages, home owners in low income neighbor hoods increased. Investing in a home mortgage became cheaper and safer than renting a house. Less and less people were becoming victims of fraud by fraudulent lenders. Retaining and managing a mortgage even with low incomes became a definite probability, (Norberg, 2009)
Home Ownership Preservation Act
Following in the steps of the home ownership protection act, congress introduced the home ownership preservation act in the year 2007. Senator Dodd while introducing the act stated that while previous laws had taken baby steps in protecting home owners, the new legislation would go further and take aggressive action against home predators. (Dodd, 2007). Michaelson (2009), the law came at an opportune time for Americans when foreclosures were crippling the economy and rendering the majority of American population bankrupt. Whereas previous legislation had tried but failed to protect the home owners from business and inopportune predators, the home preservation act took the battle for home ownership and faced it head on.
Dodd (2007), the legislation provided easy and available protection for all borrowers of home equity loans. Financial institutions and loan brokers were prohibited from using marketing gimmicks that steered home equity borrowers towards more expensive loans. The legislation demanded that brokers and loan institutions for home owners act in good faith and be fair in marketing their home equity loans. Roy (2008). Financial institutions and brokers are famous for masking hidden interest and costs in home equity loans. Consumers unaware of this take on more debts than they can afford thinking that they are well able to service the loans. The result is that many American citizens end up in more debt than they had foreseen and loose their property to fraudulent institutions that loaned them the credit.
Schkeeper (2008), the law allows for borrowers to demand a net benefit from the loans they are servicing. This means that the home owner should get what he needs from the loan, which is a home. The lender is required to adjust their inertest and demands to suit the client or refer them to other lenders that are more suited to the client’s needs. Smith and smith (2008), an emphasis is laid on the home protection act that requires lenders to investigate extensively the credibility of their clients. A lender, who fails to conduct extensive investigation to the client’s financial ability to repay the loan, suffers a great loss and is required to either service the loan themselves or wait until such a time that the client shall afford to pay the premiums.
Clarkson and Muis (2008), state that financial institutions prefer to adjust their loan repayments now to suit the client’s financial ability. Instead of turning away home owners lenders and their clients take the time to discuss steps that can be taken to adjust the loans and make them more affordable. Michaelson (2009), the legislation takes a step further to allow prosecution of defaulters to these standards. State attorneys are allowed to bring forth cases of companies and brokers who have misrepresented the home equity loans or have not been investigating their client’s financial ability before giving them loans. Dodd (2007), unlike current laws and legislature that demand that the debtor accuse the party responsible for any harm arising from mortgages, the act allows the borrower to go directly to the current mortgage holder and demand a solution to their problem. If and when a home owner faces damages of any kind arising from the liability, they do not have to suffer looking for the party responsible, they can instead just demand that the current mortgage holder take responsibility for their problem.
Private mortgage companies and brokers have to be very careful how they present different loans to prospective home owners, because depending on their presentation they may be held responsible for any debts and damages to the client accruing from the home loans, (Guttentag, 2004)
The American Home Ownership And Economic Act (2000)
The administrative legislation introduced by Representative Rick Lazio of New York, focused mostly on making mortgages more available for consumers who suffered in the hands of private mortgage companies. The legislation was the first to introduce adjustable rate mortgages. Crowe and Wertz (2008), when applying for a mortgage both the creditor and the debtor work out payment plans that are suitable to the income of the debtor. However, changes in the economic status such as loss of employment or reduction in income can cause the debtor to be unable to service their mortgage. Before the year 2000, this would have automatically led to repossession of the home by the mortgage holder. However presently, the mortgage holder is required by law to work out a new payment schedule with the client before repossessing the home.
Guttentag (2004), in 1994 home ownership with the help of mortgages was up to 64%. However changes in the economic status of the country, loss of income and decreasing investments led to mortgage defaults. At least 80% of the mortgages issued in that decade were recalled for lack of payments. American home owners decreased to a mere 31%. Michaelson (2009), after the introduction and subsequent passing into law of the American home ownership and economic act in 2000, the percentage of adjustable rate mortgages increased to 90%. Americans felt much more comfortable acquiring mortgages that could be adjusted incase of an increase or decrease in income. Dodd (2007), American home ownership was given a gentle yet firm boost by this act.
The act further declares that if a client or mortgagee defaults in payment on the day of termination of the mortgage, that is he is insolvent and unable to pay; but later acquires income or becomes solvent the termination of the mortgage shall be defaulted. The mortgage holder cannot recall the mortgage until the first day of the month following the date of termination. Royle (2005), there were some mortgage companies that reposed homes of clients as soon as the termination date was due, this despite 15.4% of the defaulters finding a means to earn the income in a short while.
Most importantly the act authorized federal banking agencies to purchase more mortgages and refinance them. This meant that defaulting Americans could apply to have their mortgages refinanced by federal financial institutions at lower rates, (Norberg, 2009).
Michaelson (2009), government security agencies were provided with tax incentives to purchase mortgage securities especially loans to low income earners. At least 50% of the mortgages purchased by these institutions were re-issued to low income earners at low interest rates and adjustable monthly payments. Norberg (2008), by the year 2007, government agencies such as Fannie Mae and Freddie Mac owned and financed $5.1 trillion in residential home mortgages for middle and low income earners. This is calculated to be about 50% of the United States mortgage market.
Deeds Registry Act
The act of acquiring and registering deeds for home and property buyers is one that has led to individuals and groups of people being defrauded of their savings and investments. Many people have lost their homes because they did not posses the deeds to the home or property.
The deed was first formulated in 1934 to allow American citizens and natives claim for the land they had settled on. Deeds were to be the notable and acceptable registration for private property. Claims to a property could only be addressed through deeds, (Burrell, 2006). Although many economists at the time viewed this as a step forward, the deeds act later generated several problems for Americans.
The first was the development of fake deeds. Property and home owners were defrauded of millions of dollars through schemes that elaborately created deeds. While consumers innocently invested their money and savings through brokers for properties, they ended up in possession of fake deeds.
In 1989, the Deeds act was amended to be more specific to the problems facing home owners. The amendment allowed the American government to keep copies of deeds as they transferred from one owner to another. This ensured that at any one time the home owners could demand that a copy of their deed be produced to verify ownership, (Burrell, 2006). The act also made dealing with fake deeds a criminal offense. Fraudsters could now be jailed and receive hefty fines for defrauding innocent American citizens.
Roberts, Dollar and Kraynack (2007), many individuals facing foreclosure had been defrauded of their homes by being convinced to deed their homes to other people so they can save it. Fraudsters had stolen hundreds of homes through this method because there was no law prohibiting this act. Introduction of the deeds act made prosecution of such individuals possible.
There have been cases where fraudsters have rented property, then acted as if they own the property and sold it to innocent bystanders. Under the deeds act, Americans are given the allowance to refuse payment on any aspect of the property until the deeds provided by the seller are verified in the state deed registration offices. Sellers cannot demand buyers pay the requested selling price or that they make a down payment on the mortgage until the buyers have verified the deed transfer, (Roberts, Dollar and Kraynack, 2007).
The act discourages impersonal property sales. Sales that are done through the internet were covered in the third amendment of the act. It is virtually impossible sometimes to identify sellers over the internet, and buyers should be wise enough to view the property before purchasing it. Although the act protects the buyer by introducing such scams as internet fraud and allowing federal prosecution, lack of knowledge is never an excuse to allow one to be defrauded. Further even with prosecution of these fraudsters where they are found, the buyer still experiences loss of savings, money and property, (Burrell, 2006)
Fraud Enforcement And Recovery Act 2009
Over half of the mortgages issued from the year 2005, were from private mortgage and lending firms who were initially not covered in the federal bank fraud criminal statutes. The act has expanded the justice department’s leeway to include prosecution of these private companies. The act redefines the term financial institutions to include private mortgage and brokerage firms. Federal officers can conduct private investigations into any of these firms, and from the results of the investigations prosecution can take place. (USA Government, 2010).
State officials and American citizens are glad because the act makes over valuing of properties to influence the mortgage rates a crime. Brokers and mortgage lenders who are tempted to manipulate any aspect of the mortgage and home ownership business will face prosecution and hefty fines under this act. Additionally any false claims by either the seller or the mortgage lender are made prosecutable by this act. Claims that are meant to attract home buyers or mortgagees that prove to be false result in the individual or company responsible liability. The burden of proof in these fraudulent cases moves from the buyer to the state and government. Cases reported are investigated and necessary action taken by the municipal and state governments, (Gonzalez, 2009).
The Helping Families Save Their Homes Act 2009
The act was introduced to protect American families from loosing their homes. With the depression in the economy, the housing market had become seriously affected. Loss of income and strenuous economic times were making it harder for American families to service their mortgage payments or even pay their property taxes. The act has succeeded in reducing foreclosures in the country, and the affordability of mortgages for home owners has been increased for ten million Americans, (Whitehouse press, 2010).
One of the commonly ignored issues has been the rights of tenants living in homes up for foreclosure. Such tenants have often found themselves without home, and evicted despite the leases that they may have already signed. The act requires that all leases in regard to property that is under foreclosure be honored except for month to month leases which should receive a 90day foreclosure notice.The act further provides that owners living in the homes threatened by foreclosure can apply to remain in the home while renegotiating with their lenders for new payment schedules that may ease their burdens.
Singer (2006), mortgage fraud, misusing lending practices and communities where there are too many foreclosures, often causes the property value of innocent home owners to depreciate leading them towards foreclosure too. Michaelson (2010) the 2009 act creates a 10billion fund that is aimed at assisting innocent home owners to refinance their mortgages and loans through the federal finance agencies and keep their homes. The fund will also assist people who purchased home that are now demanding high monthly mortgages that they cannot afford to sell them.
Wasik (2009), sometimes families and individual home owners when faced with foreclosure they panic and make wrong decisions. The 2009 act will see to it that individuals facing foreclosure can access proper foreclosure counseling from independent parities. This way the families can be able with the help of government financial advisers to research and find the best way to deal with their crisis.
In partnership with state governments and parastatals families facing foreclosure can be helped through negotiations with their loan providers. Modifications and changes to their loans can be made easily and with the help of responsible government officials, allowing families to keep their homes and pay back their mortgages and loans in a comfortable schedule, (Wasik, 2009).
The act amends the 2005 bankruptcy bill that allowed vacation home owners to maintain their homes even after defaulting in payment, while middle income borrowers faced foreclosure immediately after defaulting payment. This is regardless of the terms in the loan which may have been deceitful and unfair to the borrower. The act re-appeals this provision on behalf of middle and low income earners, allowing them to keep their homes while renegotiating terms of payment, (Michaelson, 2010).
Perhaps the most important feature of the act is accurate loan disclosure demanded by the act. This means that mortgage firms and lenders will be required to not only give the client an overview of the mortgage financial responsibilities but to go in-depth explaining to the client the current and future obligations that may arise from the mortgage. All potential home buyers must posses all and accurate information on the mortgages. The act creates a score card through which home buyers can evaluate different mortgages provided for their needs and pick that which they feel is best. The score will require that companies include the required tax and insurance premiums that are normally omitted from the calculation of mortgages. Future home owners will be able to tell their financial responsibility accurately and therefore pick the best plan for themselves.
Conclusion
The American home ownership dream has been threatened many times by different factors. At all this times the American government has stepped in to create laws that would protect the home owner. State and congress representatives have taken it upon themselves to pass laws that are designed for their specific states. Problems facing home owners in different states are not the same, and whereas government national laws cover all home owners, there may be need to redesign state laws to suit the needs of home owners in specific states. Congress and senate have lobbied endlessly for laws that protect home owners to be passed. Each administrative president has created laws that assist the home owner to protect his investment. Administrative law has taken the responsibility to protect the home owner and their investment from fraudulent sellers, mortgage frauds and other issues that have threatened the American home ownership dream.
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