Bank Runs, Mortgages, and Property Fraud

Man reviewing bank code

1 big thing: Bank runs and real estate

If you haven’t heard, two banks failed last week because of old-fashioned panicked bank runs, and the banks couldn’t cover the demanded withdrawals.


Why it matters: For the housing market, the collapse of two banks, one being the third-largest bank failure in US history, meant lower mortgage rates and optimism for even lower rates to come.

  • At least it’s not as bad as 2009 through 2012 when 440 banks failed. Back then, I had a subscription to FDIC’s weekly bank failure notice email blast to find out every Friday evening if one of our banks failed.

What’s next: The Fed meets next week to determine what to do with its lending interest rate.

  • Before the banks’ failures, the consensus was that the Fed would raise its rate another half a point.
    • According to a Bloomberg survey of economists and other experts, there’s an 80% chance that they’ll only raise a quarter of a point with a 20% chance they’ll hold steady and do nothing.
    • No one expects a half-a-point or more increase in the Fed lending rate.
    • The Fed had continued aggressively raising its rate, trying to bring down inflation, until something broke. Now that confidence in the banking system is threatened, the Fed should back off.

Bond traders seeking higher returns and yields turned away from their bearish outlook and bought 10-year bonds. This in turn pushed mortgage rates down.

  • Mortgage rates fell from a high of 7.05% on a 30-year fixed to 6.76% last week.

The bottom line: The recent bank failures have positively affected the housing market. The upcoming Fed meeting will determine whether or not there will be a further decrease in lending interest rates. While mortgage rates don’t always track with the Fed’s rate, it’s a good indicator of things to come.

2. New bill to reduce property fraud

Florida Sen. Jennifer Bradley introduced Senate Bill 1436 on Tuesday to combat real property fraud.

Why it matters: The bill, if it becomes law, would require clerks of court to create, maintain, and operate an opt-in recording notification service.

  • It would also require REALTORs and title agencies to mail notices to property owners at the time of listing and closing.
  • And it gives victims the right to file a lawsuit for quieting title against attempted fraudulently recorded deeds through a summary procedure.
Man reviewing bank code

The recording notification system requirements match the functionality of systems that are in place in many Florida counties. Still, the bill goes into much more detail about how the systems must function.

  • There are no rules currently on how these ad hoc systems are required to appear, be accessed, or work.
  • This would standardize the systems statewide and specify that each person’s e-mail address may be used to monitor at least five different names for recording notifications.

The bill requires Clerks to also provide a simplified form of complaint that victims can complete and file to strike a fraudulent instrument from the records to quiet the title in the victim.

  • The bill doesn’t allow a prevailing party in such quiet title actions to get their attorney’s fees, court costs, or any other monetary compensation from the fraudster. This is consistent with the current laws on the books.

Within five days of signing a listing agreement, REALTORs would be required to send a copy of a signed listing agreement to the address of the property owner shown on the tax records.

  • If the owner was different in the previous year, another statutory notice would be sent to that owner too.

Title agents also would be required to physically mail statutory notices to the owners listed on the tax records within five days of opening a new title order for a sale or refinance of the owner’s property.

Finally, the bill prescribes a form to be used for quitclaim deeds and requires that all deeds include the mailing address of each witness under their signatures.

Our thought bubble: Professionals should adopt the listing and title order opening notifications, in addition to the witness addresses, even if this bill doesn’t pass.

Yes, but: Without funds appropriated to clerks for the electronic notification system and the summary quiet title actions, we don’t see this bill becoming law this year.

3. Catch up fast

life preserver

1) Big banks are coming to the rescue of mid-size First Republic Bank by depositing $30 billion of their own funds for at least the next four months to ensure enough funds are available to cover depositors’ demands for withdrawals. Bloomberg

2) According to Zillow’s recent Home Price Expectations Survey, zoning reforms nationwide would have the biggest and most immediate effect in creating more affordable housing. The Title Report

3) Florida surpassed New York but is still behind California in the top-10 states with the most valuable housing markets. Zillow

4) Insurers slashed Hurricane Ian payouts far below damage estimates, documents and insiders have revealed. The group that did the investigation plans to file criminal charges against those insurers. Washington Post

5) Bank runs happen because humans are like stampeding animals. Our instincts drive us to run even when we have no idea why. When mixed with social media, panic can spread much faster than it did in the past. The Free Press

4. Pic of the day

Tis the season for Orlando’s bougainvillea bushes to be in overdrive. They’re beautiful, but anyone who has ever had to trim one knows how painful they can be if one of their inch-long thorns finds its way through your skin.

The bottom line: As the old saying goes, every night has its dawn, and every rose has its thorn.

Orlando’s bougainvillea bushes

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