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Tuesday, July 24, 2007

Where the Real Estate Market Got Too Hot

Burned Shell of 7802 Links Crossing Lane in SpringFor months, the giant, burned-out shell of a home has been sitting on an acre lot at the corner of Links Crossing Lane and Augusta Pines Parkway in Spring, less than half a mile from the baby Bermuda grass fairways of the Augusta Pines Golf Course and its 100,000-sf “southern style” clubhouse. But now Harris County Fire Marshal investigators are reporting that the fire that destroyed the 7000-sf McMansion in February was a poorly concealed arson. While owner Michael Macomber was vacationing in the Bahamas, a man named Adnan Aquil filled the home with 25 five-gallon cans of gasoline he had purchased over several days from Wal-Mart and arranged them so they would ignite spectacularly.

According to investigators, Macomber has now confessed that he paid Aquil $10,000 for his handiwork, before filing a $1.2 million insurance claim.

What made Macomber do it? Was he tired of being overextended on an overmortgaged, overpriced, and oversized home in an overmarketed subdivision in Northwest Houston?

“He was holding on to everything,” [Harris County Senior Arson Investigator Dustin] Deutsch said. “His credit score was getting impacted, payments were getting impacted. The county probably didn’t appreciate him bouncing his tax check. . . .”

Of course there’s more to the story:

“After further scrutiny of the closing paperwork, investigators determined that the residence’s value was grossly overvalued by a local real estate appraiser,” Harris County Arson Investigations officials stated in a media address. “It was also learned that Macomber grossly inflated his stated income to the mortgage company. This embellishment included forged financial documents and other misleading credentials.”

In return for paying an inflated price for the Augusta Pines McMansion in March 2006, Macomber allegedly received a $171,000 kickback from the seller. In all, seven people, including a neighbor couple, have been charged in fraud related to this home. According to KHOU, every house on the street has been foreclosed on.

Yes, it’s a short street.

Photo of 7802 Links Crossing Ln.: KHOU

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Wednesday, July 18, 2007

Why Mortgage Closing Costs Are So High in Texas

Bankrate’s annual survey of home-mortgage closing costs shows Texas has the second-priciest mortgage closing costs of any state. How come? Title insurance and title searches. Texas has the most expensive in the country:

. . . the insurance department sets (or “promulgates”) the rates, with heavy input from the title agencies and insurance companies. Because the state establishes the rates, title companies don’t compete for consumers by offering lower prices.

How do title insurers compete in states where regulators set prices? According to a report issued in April by the Government Accountability Office, “title agents do not market to consumers, who pay for title insurance, but to those in the position to refer consumers to particular title agents, thus creating potential conflicts of interest.” The report says the industry is rife with kickbacks and undisclosed referral fees among title agents, real-estate agents and lenders.

The study showed that title insurance in Houston (the only Texas city polled for the study) averaged $1,185.06 for a $200,000 mortgage, 68 percent higher than the national average of $707.30. Title search costs averaged $305.08, 54 percent higher than the national average of $197.71.

In his blog, report author Holden Lewis adds a personal comment:

As a native of the Lone Star State, I urge my erstwhile neighbors to ask their members of the Lege why they allow the insurance department to get bulldozed by the title insurance industry. Maybe Texas could set a reasonable objective to have the fifth-most expensive title insurance in the country? That’s doable, right? I mean, Texas doesn’t have to be No. 1 in everything. Or maybe the state could force title insurers to compete in a free market — although cartels are pretty good at making a mockery of a market.

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