Foreclosures are falling fast. Since reaching a peak in September 2010, the number of foreclosures has plunged 68 percent – from 117,225 nationwide to 38,000 as of July, according to CoreLogic's July 2015 National Foreclosure Report, released this week.

In the past year alone, foreclosure inventory has fallen by nearly 28 percent and completed foreclosures have dropped about 24 percent. Completed foreclosures are the total number of homes actually lost to foreclosure.

Since the financial crisis began in 2008, about 5.8 million completed foreclosures have occurred across the country.

But the number has slowed significantly. As of July, the national foreclosure inventory is about 1.2 percent of all homes with a mortgage – the lowest since December 2007.

The number of mortgages in serious delinquency – 90 days or more past due – is also falling, dropping by 23 percent year-over-year. About 3.4 percent of total mortgages were considered in serious delinquency as of July – also the lowest rate since December 2007.

"Job market gains and home-price appreciation helped to push serious delinquency and foreclosure rates lower," says Frank Nothaft, CoreLogic's chief economist.

Five states alone accounted for nearly half of all completed foreclosures nationwide, according to CoreLogic. Those five states with the highest number of completed foreclosures for the 12 months ending in July were: Florida (98,000), Michigan (47,000), Texas (33,000), California (27,000) and Georgia (27,000).

Meanwhile, the five areas with the highest foreclosure inventory (as percentage of all homes with a mortgage) were: New Jersey (4.8 percent), New York (3.7 percent), Florida (2.7 percent), Hawaii (2.5 percent) and the District of Columbia (2.4 percent).

The average employee isn’t getting a big raise this year—but apartment rents are growing more quickly than ever.

“Across most markets, renters are paying a higher percentage of their incomes in rent,” says Luis Mejia, director of U.S. multifamily research with the portfolio strategy division of research firm CoStar.

That’s not stopping apartment rents from going up. That’s partly because the average income is surprisingly high for households living in rental housing with unrestricted rents. These households can, on average, afford to pay and they don’t have that many attractive alternatives. For now, for-sale housing is not a lure for these renters, who may not have gathered the necessary funds for a down payment, according to experts. Eventually, however, they may look for cheaper housing in other neighborhoods, bidding up the prices for market-rate apartments in new areas and gentrifying new neighborhoods.“Eventually, budget-constrained renters will look for more affordable options in neighborhoods that haven’t been exposed to significant demand, or are more distant from the central districts but still accessible to employment centers,” says Mejia.

Most of the renters who live in “market-rate” apartments, in which the rents are not restricted by affordability programs, have enough income to pay for current rent increases, at least for now, according to researchers. “The average annual household income for residents of market-rate apartments is around $85,000, well above typical household income for the U.S. populace as a whole,” according to Greg Willett, chief economist with RealPage, Inc., a company that provides property management software for the multifamily industry. Willett’s data is based on the 10 million apartments that use RealPage’s software.

“We think that info pulled from market-rate apartment users of RealPage products lines up pretty well with the characteristics of the market-rate stock that exists in the U.S. as a whole,” says Willett. For example, the proportion of class-B and class-C stock is about the same in Real Page’s large sample as in the U.S. overall.

The average income of $85,000 that RealPage reports is not as high as it might sound at first, since many of the households may have two or more people earning incomes. However, it’s enough to pay the average of $1,200 that these households pay in monthly rent, which works out to just 17 percent of their average income, says Willett. Apartment market research firm MPF has a few caveats: rents are higher compared to incomes in West Coast markets and for younger people.

Most of these renters seem willing to accept rising rents. The average lease renewal rates are now relatively high compared to years past, according to researchers including MPF. “Rents will continue to grow faster than wages and inflation,” says Douglas Robinson, spokesperson for NeighborWorks, an organization that supports affordable housing. “Bottom line is people need to live somewhere, so they will pay the higher rent and make it work in terms of budget.”

MPF’s data may show that the nation’s problem with unaffordable housing is worse than many thought. About 30 percent of U.S. households earn $30,000 or less a year (once again, that’s household income, not individual income). That’s not enough money to afford the rent on an average market-rate apartment almost anywhere across the country.

“A significant chunk of the very low-income households likely live in rental single-family home product,” says Willett. Roughly half of the nation’s rental housing is located in single-family homes.

This may present extra challenges for low-income people, since these single-family homes may be more likely than apartments to be located far from jobs or infrastructure like light rail stations and bus stops. In the past, when many low-income people were crowded into inner-city neighborhoods, they were more likely to be near employment opportunities, mass transit options and social services.

“Transit costs can surprise a person who lives in the suburbs and commutes into a job center,” says Robinson.

Demand is also high for government-subsidized “affordable” apartments with restricted rents, though the number of these apartments is much smaller than the number of low-income families, according to numerous experts.

Rents for market-rate apartments are expected to keep growing quickly. “Reis is expecting to see rent growth accelerate in 2015,” says Michael Steinberg, analyst for economics and research at research firm Reis, Inc.

Effective rents will likely increase by 3.8 percent in 2015, according to Reis. That’s roughly twice the rate of inflation. It’s also faster than the 3.5 percent rent growth in 2014 and 3.2 percent rent growth in 2013.

Rents will grow quickly, even though developers plan to finish hundreds of thousands of new apartments by the end of the year. These new apartments will cause the vacancy rate to increase slightly, to reach 4.6 percent by the end of the year. That’s the wrong direction for vacancies to go, but the vacancy rate is currently so low that a slight increase won’t change the dynamic by much.

“There is some concern about the direction of fundamentals, but we are coming from a very strong performance,” says Reis’ Steinberg. “Even with the amount of new supply, vacancy rates are still pretty low. 

The cities where developers are opening the most new apartments are handling the new supply pretty well, at least for now.

“Looking at rent growth performances, there’s really only one spot [major metro apartment market] that is having trouble digesting new supply,” says Greg Willett, chief economist for RealPage Inc. “That’s Houston.”

But developers aren’t finished. Even as they race through an incredibly busy year for new construction, apartment developers are now planning even more new projects. They still often choose to start construction in the same cities and the same submarkets within those cities where they have been busy building since 2010. “We’re tending to continue to build most heavily in the same spots,” says Willett.

Banks seem very willing to finance these new developments. “You will have a number of lenders offering financing—no matter where,” says Michael Riccio, co-head of national production for CBRE Capital Markets. That includes nearly all property markets—with the possible exception of more troubled markets like Houston and Washington, D.C. “Houston might be the outlier.”

So far, the news is good from many apartment markets where developers have built large numbers of new apartments relative to market’s inventory of existing apartments. The towns that have best handled a lot of new construction include Denver, Colo.; Seattle and Charlotte, N.C., according to MPF Research, a division of RealPage.

“Charlotte, in fact, may be the real surprise performer on this list. The metro is dealing with a lot of new supply stunningly well,” says Willett. Occupancy rates and rent growth in Charlotte remain notably stronger than the historical norm. “That performance speaks to the strength of Charlotte’s overall economy, the favorable characteristics of the metro’s renter base, and the general upward movement of this locale in terms of overall desirability as an apartment investment choice.”

Out of the top 10 metro markets where developers are building the most new apartments, relative to the existing industry, only Houston seems to have been seriously damaged.

In Houston, rents for class-A apartments only grew 1.8 percent over the last year, compared to 5.2 percent per year on average over that last three years. Another 32,000 apartments are still under construction, according to Willett. There’s a real possibility that average rents may fall at the top end of the market over the next 12 to 18 months. “Construction activity is only part of the story,” says Willett. Economic growth generally and job production specifically have fallen in Houston with the price of oil.

Developers continue to start in construction projects in same places where they have already built many new apartments. Charleston, S.C.; Nashville, Tenn.; Austin, Texas, and Charlotte top MPF’s list of the top 10 metro markets, even though they have already absorbed thousands of completed new apartments. Houston comes in eighth on MPF’s top 10 list, with many projects that started construction before the crash in the price of oil.

There are just two cities where apartment developers have deeply cut back on new construction after a building boom in recent years. There are still 20,651 new apartments under construction in the Washington, D.C., metro area, down steeply from the 30,095 apartments under construction in late 2013. In Raleigh/Durham, N.C., developers are now building 6,960 new apartments, a little more than half the 11,423 developers had under construction in late 2013.

Developers also continue to start projects in same submarkets—often downtown. About a third of all new apartment construction is being built downtown, according to data from CoStar.

For each of the metro areas on MPF’s top 10 list for new construction, the apartment inventories are growing faster downtown than for the metro area as a whole. That’s creating huge changes for these downtown areas—many of which did not have many apartments before the last few years. The scale of this new construction downtown could create problems, since downtown apartments tend to be luxury high-rise projects that are expensive to build and that relatively few potential renters can afford. 

“We are starting to see vacancies tick up in downtowns across the country,” says Jay Parsons, director of analytics and forecasts for MPF Research at RealPage.

Developers are relying less on downtown as they plan future projects—though they are still disproportionately focused on downtown markets. “The urban core submarkets generally now account for less of total ongoing construction than they did two to three years ago,” say Willett. “That’s an encouraging shift.”

Over the next five years, the housing market will see around 1.5 million eligible return buyers jump back into home ownership. These return buyers, nicknamed 'boomerang buyers,' lost their homes during the housing crisis, and they've restored their credit and are ready to impact housing again.

Since 2006, 950,000 of these former owners have already purchased a home again, and boomerang buyers will continue to be an important market for real estate professionals to target.

"Now fueled by a gradually improving economy and the strong rebound in home prices, some of these former distressed owners have returned to the market, and more will likely become eligible in coming years," says Lawrence Yun, chief economist with the National Association of REALTORS®.

A recent study from NAR showed the states that will be most impacted by return buyers are California, Florida and Arizona. Additionally, a study by Realty Trac notes that Phoenix, Miami, Las Vegas, and Tampa, Fla. should also see an increase in boomerang buyers.

In a new interview with the Associated Press, one of these return buyers, Debbie Cooley-Guy describes her housing journey. "I used to look at people like me and think, 'How did you let this happen? In hindsight, I had set myself up so well. Just because you can afford things, it doesn't mean you should buy them." But her story is one with a happy ending. After agreeing to a short sale, getting rid of her debt, repairing her credit, and saving up money, Cooley-Guy got an FHA loan and re-entered the housing market.

Cooley-Guy's story will become more common, since close to 700,000 of the 7.3 million homeowners who went through foreclosure or short sales are now are eligible to get a mortgage again this year, reports Daren Blomquist, vice president of Realty Trac.

The market will see an influx of buyers with past credit problems who are looking for mortgages, and not just foreclosures or short sales, says John Councilman, president of the Association of Mortgage Professionals. "We have a lot of people with issues and many are coming back into the market."

Disclosure problems are the single biggest source of negligence actions against practitioners.

Three years ago, I was buying a small investment property and my real estate agent marched into my office unannounced. She tossed onto my desk a stack of property disclosure forms that the seller and [listing] agent had filled out and asked if I had read them. I told her I hadn’t yet had a chance to look at them as carefully as they required. This was an inexcusable omission on my part since, as an attorney who has worked with property buyers, sellers, and agents on hundreds of matters, I know how important it is to review such disclosures carefully.

As it turns out, the disclosures made it clear the property needed to be tented, which is a procedure exterminators use to encapsulate and fumigate a property that has signs of termites. I ended up buying the property despite the termite situation, but the story illustrates the key role my agent played in making sure I had read and understood the disclosures before I made my decision. In my several decades of practicing real estate law and serving on several legal committees for the California Association of REALTORS®, the single biggest legal liability I continue to see facing real estate professionals is negligence on property condition -disclosures.

Disclosure requirements differ by state, but most states today have some form of property disclosure form that sellers are required to complete. In California we have a state-mandated disclosure form as well as additional forms that are more detailed, including a buyer’s advisory. This gives buyers several opportunities to understand potentially troubling issues with a property. As a real estate professional, you can help your client by pointing out any inconsistencies between the reports.

A problem might be described differently on two separate forms, or there might be a mismatch between the written description of a problem on one form and its visual depiction on another. These inconsistencies are a red flag that the property needs a thorough going-over by a property inspector.

If your state doesn’t have a multiple disclosure requirement, it’s no less important for you to understand what the disclosures you do have are saying so that you can point potential problems out to your clients, like my agent did for me. If you just pass the disclosure form along to your client, then you could become a target if your client finds an issue such as an insect infestation after purchase and sues you. You could be cited for negligence for failing to point out problems or not making an effort to explain them.

Whether you’re found to be negligent, either in a lawsuit or an arbitration proceeding, will depend on the facts of the case. But you can do more to protect yourself by not only pointing out issues to your clients but also documenting that you actually did so. It’s important to send your concerns in an e-mail so you both have a record of it.

Written communication is always a good practice, but it’s especially important if you’re working in a hot market in which properties are seeing multiple offers and buyers are paying more than the listing price. After spending top dollar for the property, the last thing they want to see is a property condition they weren’t aware of but that was in fact disclosed.

If you approach property condition disclosures with skill, care, and diligence, and you’re equally careful about documenting what you tell buyers about the findings, you’ve done what you can to protect yourself should something turn up after purchase, and you’re less likely to be part of the next negligence case to come across a lawyer’s desk.

Existing-home sales were back on the rise in July, marking the third consecutive month of increases, while low inventories of homes for-sale and rising prices were the reason behind first-time buyers falling to their lowest share since January, according to a new report from the National Association of REALTORS®. Total existing-home sales – which include single-family homes, townhomes, condos, and co-ops – rose 2 percent in July to a seasonally adjusted annual rate of 5.59 million. Sales are at the highest pace since February 2007, and are 10.3 percent above a year ago."The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more household to buy now," says Lawrence Yun, NAR’s chief economist. "As a result, current home owners are using their increasing housing equity toward the down payment on their next purchase."

Here's a look at five main indicators from NAR's latest housing report:

1. Home prices: The median existing-home price for all housing types was $234,000 in July – 5.6 percent above a year ago. "Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand," says Yun. "REALTORS® in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains."

2. Housing inventories: At the end of July, the inventory of homes for-sale fell 0.4 percent to 2.24 million existing homes available for sale. The inventory now is 4.7 percent lower than a year ago and at a 4.8-month supply at the current sales pace.

3. First-time home buyers: The percentage of first-time home buyers fell for the second consecutive month, reaching 28 percent in July – the lowest share since January. Last year at this time, first-time buyers comprised 29 percent of all buyers.

"The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face," says Yun. "Rising rents and flat wage growth make it difficult for many to save for a down payment, and the dearth of supply in affordable price ranges is limiting their options."

4. Days on the market: Properties stayed on the market for an average of 42 days in July, below the 48 days average from a year ago. Forty-three percent of homes were on the market for less than a month in July. Short sales were on the market the longest at a median of 135 days while foreclosures were on the market for 49 days and non-distressed homes sold in 41 days.

5. All-cash sales: The percentage of all-cash sales rose to 23 percent of transactions in July, down from 29 percent a year ago. The share of individual investors – who account for the bulk of cash sales – was 13 percent in July, down from 16 percent a year ago.

6. Distressed sales: The percentage of foreclosures and short sales declined to the lowest share since NAR began tracking it in October 2008. Distressed sales fell 7 percent in July month-over-month and are 9 percent below a year ago. In July, 5 percent of sales comprised foreclosures while 2 percent were short sales. On average, foreclosures sold for a discount of 17 percent below market value while short sales sold for an average discount of 12 percent.

"Five years ago, distressed sales represented 33 percent of the market in July," says Chris Polychron, NAR's president. "For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments."

Are you thinking about buying or refinancing a home in the near future? If so, chances are you're getting all kinds of advice from well-intentioned friends and family.

Just remember to keep this important piece of advice in mind: Don't listen to everything you hear. According to industry professionals, some words of wisdom are not wise at all.

To help you separate the bad advice from the good, check out five common statements that should cause you to cover your ears immediately.

The common perception is that a 30-year fixed-rate mortgage is always the best option, because it typically offers lower monthly payments than other shorter-term mortgages. But the kicker is that interest payments over the course of the loan can be quite substantial when compared to mortgages with shorter terms and lower interest rates.

Consider this example based on rates from Freddie Mac, as of March 20, 2014:

A 30-year loan on a $200,000 property with a 4.32 percent interest rate has a monthly payment of $992 and interest payments totaling $157,153 over the life of the loan. On the other hand, a 15-year loan for the same property with a 3.32 percent rate has monthly payments of $1,412 and yields $54,187 in total interest paid. So by opting for the shorter mortgage, you could save more than $100,000 in interest, which is worth it if you can meet those higher monthly payments.

Whether or not a 30-year fixed mortgage is the right choice depends on the borrower's goals and financial situation, says Houtan Hormozian, vice president of Crestico Funding, a Los Angeles-based mortgage brokerage firm.

For example, if you have cash saved up for job, family, or medical emergencies and you already have college and retirement funds set up, then a 15-year mortgage might be a better option. Without money saved up, losing a job or an expensive surgery could deal a hard blow to someone's finances, including their ability to make mortgage payments.

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An adjustable-rate mortgage (ARM) is a loan with an interest rate that is fixed for a period of time then adjusts, causing the ARM payments to increase or decrease.

ARMs get a bad rap, because they're seen as risky products that contributed to the housing bubble, easy credit, and ultimately, the subprime mortgage crisis.

"The 30-year fixed-rate mortgage is the most popular type, because everyone is afraid of adjustable [rates]," Hormozian says.

In fact, only 3 percent of homebuyers chose adjustable-rate mortgages in the first half of 2013, reports Freddie Mac. With that low figure it's easy to get scared off, too. But the fear associated with ARMs is somewhat unjustified, according to Hormozian.

"Depending on the consumer, circumstances, and knowledge of their economic situation, there could be an ARM that fits them," says Frank Percival, board president of the Washington Association of Mortgage Professionals.

One major benefit of an ARM is that it typically will have a lower interest rate than fixed-rate mortgages at the outset. For example, a 5/1 ARM will have an initial fixed rate for the first five years then adjusts afterward.

This is a great option for homeowners who plan on moving out of their house before the rate adjusts. However, this does carry some risk, since personal finances and the condition of the housing market may make moving difficult in a set amount of time.

So choosing an ARM may come down to your financial situation and your aversion to risk. Percival explains that if a homebuyer with a 5/1 ARM saves $200 a month in interest compared to a 30-year fixed mortgage, it may make sense to choose that type of loan. However, if someone wants to err on the side of caution, given the risks discussed, a 30-year fixed mortgage might be the more sensible choice.

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"When the housing market was bad a year or a year and a half ago and the values of homes were low, people were encouraged from realtors [and] buddies at work to walk away from their home," says Percival. He calls this "one of the worst pieces of advice in recent history."

If desperate homeowners took that advice, they would usually do a short sale on their home. What exactly is that? It's a real estate transaction in which a lender agrees to let the borrower sell his or her property for less than - or "short" of - what is owed on the mortgage.

Even if your home is underwater, it's a bad idea, asserts Percival. If homeowners can still afford to make their mortgage payments, then they shouldn't do a short sale.

"People who didn't have medical emergencies or lose their jobs were dropping their keys and leaving their homes," Percival says. This is a dumb choice, he adds, since it's possible that their home value could go have gone up.

Plus, if you do a short sale, you may have to wait several years to qualify for a home again, says Percival. The reason? Because a short sale usually lowers your credit score just as a foreclosure would, according to myFICO, the consumer division of FICO. Shortsellers may be able to qualify for a mortgage in as little as two years, but this may depend on a variety of factors, like how much you are able to put down.

Beyond your own finances, short sales have a far-reaching effect, according to Percival.

"Every short sale or foreclosure reduces the value of every home in the neighborhood," he says. "If folks would have waited for the recovery to kick in and housing prices to go up, they could have sold it at a profit. People just wanted to walk away from debt."

First-time homebuyers are particularly susceptible to bad advice. For example, homeowners who can't afford a large down payment may hear that a government-backed FHA loan is their only option, since the down payment requirement can be as low as 3.5 percent of a house's purchase price. But that's not necessarily the case.

Some homeowners might be surprised that getting a conventional loan might be better suited - and easier - for them than an FHA loan, says Aaron Vantrojen, president of the Arizona Association of Mortgage Professionals, says.

The standards to qualify for an FHA loan have tightened, says Vantrojen. Plus, the FHA loan has become more expensive in recent years due to its rising mortgage insurance premium (MIP).

According to the U.S. Department of Housing and Urban Development, the mortgage insurance on an FHA loan must be carried for the life of the loan. On the other hand, the private mortgage insurance (PMI) on conventional home loans can be dropped when equity in the home reaches 20 percent, Vantrojen says.

As a result of dropping the insurance premium, homeowners can save thousands of dollars in the long run. "The annual mortgage insurance for FHA loans is so high, we are trying to get people into conventional loans if they qualify," Vantrojen says.

The biggest advantage FHA loans have over conventional loans is the low down payment requirement. But conventional loans, with a 5 percent down-payment required, might be a better deal when you factor in the mortgage insurance payments, says Vantrojen.

"I will always look at options for conventional loans [for homebuyers]," says Vantrojen, president of Geneva Financial, a mortgage banking firm based in Tempe, Arizona. "The guidelines for conventional loans are changing, and a person who couldn't qualify for one a month ago might be able to qualify now."

[Click to compare loan products and interest rates from multiple lenders now.]

If you're in the market for purchasing a home loan and in need of a little guidance, you might want to think twice about listening to someone who tells you: "Trust me, I know what I'm talking about."

"One of the most common mistakes is not getting advice from a mortgage investment advisor," says Hormozian. "Any time you don't seek advice from a professional, you could be in trouble."

But not all mortgage professionals are created equal, which is why Hormozian says homebuyers should make an effort to consult and get the opinions of established mortgage advisors, licensed mortgage companies, and reputable professionals when they are ready to purchase a loan.

"At the end of the day, my job is to make sure my client will have a comfortable life and a sound investment," Hormozian says. "If I feel they are going to have a hard time making a payment or living up to that liability, I have to advise against it."

For example, if someone tells you it's a great idea to buy investment property as a source of instant income, you better consider the source. Instead of talking to real estate agents, homebuyers should talk to unbiased resources, who could help them avoid potential mortgage heartaches, says Vantrojen.

 "Do your due diligence, talk to industry professionals - people who have been real estate investors and [who] can tell you the highs and lows of owning real estate," he explains.

If owning a new home for you and your family is a main objective, Percival says it might be a good idea to check whether you are dealing with licensed mortgage professionals. He suggests verifying mortgage loan originators (MLOs) and their MLO license numbers through the National Mortgage Licensing System (NMLS), which performs this service for free.

NeighborWorks America announced on Tuesday that $63.1 million had been awarded by the National Foreclosure Mitigation Counseling (NFMC) program for assistance and counseling for families and individuals facing foreclosure. The funds were awarded to 29 state housing finance agencies, 18 HUD-approved housing counseling intermediaries, and 67 community-based NeighborWorks organizations. More than 167,800 families who face foreclosure are expected to be assisted by the funds. The organization notes that even though the number of households facing foreclosure has dropped below the peak from a few years ago, “many hundreds of thousands of homeowners will still face trouble with their mortgages this year.”

As a result of these awards, more than 1,100 nonprofit counseling agencies and local NeighborWorks organizations all over the country are expected to be engaged in the NFMC program. These organizations provide families at risk of losing their homes with free assistance, help them determine eligibility for the various state and federal foreclosure prevention assistance programs, help them understand the complexities of the foreclosure process, and identify courses of action so these homeowners can make informed decisions, and take action when possible. Although the funds will go a long way to help, demand for NFMC grant funds was in excess of $100 million, meaning that some families who request help will not be getting it.

Research conducted for NeighborWorks America found a 33-percent decline in serious mortgage delinquency for homeowners who received pre-purchase guidance from NeighborWorks compared to similar homeowners who did not receive the same help. Not all the work the organization does involves counseling, however. One example other home-advocacy works is a move to purchase two historic homes in Deadwood, South Dakota, move them to make way for a casino parking lot, and rehab and renovate them so families can move into them by summer. NeighborWorks Dakota Executive Director Joy McCracken said that the board of the organization voted to accept a donation of the two houses and use grant funds to fix them up “after determining that it fits within our mission of providing decent, safe and affordable housing.”

It’s not just fraudsters and criminals who warrant mention in our scam of the day features; sometimes, state governments and their officials make the cut as well. In California, governor Jerry Brown and other government officials are being sued by three nonprofit home owner counseling organizations, claiming that $369 million of funds meant to help struggling homeowners was instead diverted to pay down the state’s debt. California was awarded a portion of the $25 billion national mortgage servicing settlement in 2012, with the funds to be used for home loan counseling and other educational services to help home owners avoid foreclosure.

The National Asian American Coalition (NAAC), along with the COR Community Development Corp. and the National Hispanic Christian Leadership Council (NHCLC) were all plaintiffs in the suit. Robert Gnaizda, general counsel to the NAAC said “We made it clear to the governor at that time that we did not agree with his decision.” Gnaizda further explained the delay in filing the suit: “But we didn’t want to bring a case when the state was in such an enormous fiscal crisis. With the governor now talking about possible surpluses of up to $10 billion before he finishes his second term, we decided to proceed with our case.”[1] California does not appear to be the only state guilty of diverting funds, as half of the 49 states in the settlement have used around $1 million of money earmarked for home owner counseling for other purposes.

The plaintiffs are making their displeasure with the lack of refunding the diverted funds known. Faith Bautista, chief executive of the NAAC said, “The state attorneys general and banks finally put money aside to help homeowners and where did the money go? Somewhere else. They always have other priorities for their money.” According to California law, funds can be transferred to the state’s general fund only “if the transfer does not interfere with the object for which the special fund was created and the transferred amount is repaid when feasible.”[2] It is not clear how California will respond to the suit, or how other states in the same position may try to make changes to avoid further suits.

What do you think? Did distressed homeowners get the short end of the stick again with states diverting funds in this manner?  Or was the state justified? You know how we feel about this already: sad to say, not a big surprised.

Federal prosecutors announced that seven people, including a Fannie Mae employee, have been charged in a North Texas identity theft ring that illegally gained access to the personal information of 1,100 Fannie Mae customers.  Charges against the seven included bank fraud and aggravated identification theft, and was based on alleged involvement from 2009 through last year.[1]

Among the defendants is 40-year old Katrina Thomas of Garland, Texas, who worked as an underwriter for Fannie Mae.  She is accused of forwarding customer information to others who then used it to illegally access bank accounts.  It was not clear exactly how much money had been illegally seized in the scheme.  Authorities say Bank of America and JP Morgan Chase customers were also targeted.

The defendants used the ill-gotten funds to buy luxury goods and rent hotel rooms.  When one of the other defendants was taken into custody from a luxury Dallas hotel room he had rented with another person’s personal information, he had in his possession several fake IDs, counterfeit checks, and a computer containing a template for Texas Department of Public Safety Temporary Driver’s License, presumably to create the fake IDs.[2]  Unfortunately, stories like this show just how many different ways a person’s identity can be stolen.  Have you been the victim of identity theft?