A federal judge declared the Obama administration’s health care law unconstitutional Monday, siding with Virginia’s attorney general in a dispute that both sides agree will ultimately be decided by the U.S. Supreme Court.
WASHINGTON — A U.S. judge in Virginia on Monday declared unconstitutional a key part of President Barack Obama’s landmark healthcare law in the first major setback on an issue that will likely end up at the Supreme Court.
U.S. District Judge Henry Hudson, appointed to the bench by President George W. Bush in 2002, backed arguments by the state of Virginia that Congress exceeded its authority by requiring that individuals buy health insurance by 2014 or face a fine.
"The Minimum Essential Coverage Provision is neither within the letter nor the spirit of the Constitution," Hudson wrote in a 42-page decision. However, he declined to invalidate the entire healthcare law, a small victory for Obama.
The Obama administration will likely appeal.
The U.S. Justice Department is confident it will ultimately prevail in defending a key part of President Barack Obama’s landmark healthcare law, a department spokeswoman said Monday.
Spokeswoman Tracy Schmaler expressed disappointment that a federal judge in Virginia declared a key part of the law unconstitutional but said the department continued to believe, as other judges in Virginia and Michigan have found, that the law is constitutional.
"There is clear and well-established legal precedent that Congress acted within its constitutional authority in passing this law and we are confident that we will ultimately prevail," she said in a statement.
First decision against the law
Virginia’s lawyers argued that the federal government could not regulate someone for not buying a good or service under the U.S. Constitution’s Commerce Clause and could not penalize them for failing to buy health insurance.
Hudson said that neither the Supreme Court nor the various appeals courts had ever extended the "Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market."
"This dispute is not simply about regulating the business of insurance — or crafting a scheme of universal health insurance coverage — it’s about an individual’s right to choose to participate," Hudson wrote.
The decision is the first finding against the law that was passed in March and aimed at overhauling the $2.5 trillion U.S. healthcare system.
Two judges rejected other challenges to the law, including one in Virginia last month.
The law has become a cornerstone of Obama’s presidency, aiming to expand health insurance for millions more Americans while curbing costs, and his Justice Department lawyers have been sent around the country to defend it in federal courts.
Republican leaders in the U.S. Congress have said one of their top priorities next year when they control the House of Representatives is to repeal the law. But chances of that are slim because Obama’s Democrats still control the Senate.
The Obama administration has vigorously defended the law and said that the state of Virginia did not have the legal standing to challenge it on behalf of its citizens, particularly for something that has yet to take effect.
The individual coverage mandate is a major component of the overhaul law, a bid by the Obama administration to expand coverage to the tens of millions of Americans who are without insurance and to thereby help lower exploding healthcare costs.
The decline in home prices is accelerating across the nation, according to a new report, and a record number of foreclosures is expected to push prices down further through next year.
But a second report released on Tuesday indicated that consumer confidence in the economy rose in November to the highest level in five months amid some more hopeful signs.
The Standard & Poor’s Case-Shiller 20-city home price index released Tuesday fell 0.7 percent in September from August. Eighteen of the 20 cities recorded price declines.
Cleveland recorded the biggest drop, 3 percent from a month earlier. Prices in San Francisco, Los Angeles and San Diego, which had been showing strength this year, also dropped in September from August.
Washington and Las Vegas were the only metro areas to post gains in monthly prices.
The 20-city index has risen 5.9 percent from its April 2009 bottom. But it remains nearly 28.6 percent below the peak, in July 2006. And home prices have fallen in 15 of the 20 cities in the last year.
Prices rose in many cities from April through July, mostly helped by government tax credits that have since expired.
The national quarterly index, which measures home prices in nine regions of the country, dropped 2 percent in the third quarter from the previous quarter.
In the other report, the Conference Board said that its Consumer Confidence Index for November rose to 54.1 points, up from a revised 49.9 in October. Analysts were expecting 52.0. November’s reading is the highest since June’s 54.3.
The November reading is the highest since June, when the index stood at 54.3 just as the economy’s recovery started to lose momentum. Economists surveyed by Thomson Reuters had expected 52.0.
It takes a level of 90 to indicate a healthy economy, which has not been approached since the recession began in December 2007.
One component of the index, how Americans feel now about the economy, rose to 24, up from 23.5. The other gauge, which measures how American feel about the economy over the next six months, rose to 74.2, up from 67.5 last month.
“Consumer confidence is now at its highest level in five months, a welcome sign as we enter the holiday season,” Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. “Consumers’ assessment of the current state of the economy and job market, while only slightly better than last month, suggests the economy is still expanding, albeit slowly. Hopefully, the improvement in consumers’ mood will continue in the months ahead.”
Others were less optimistic.
“The rise in consumer confidence in November is not consistent with a sustained acceleration in consumption growth at a time when income growth is weak, the unemployment rate is high and a double dip in house prices is under way,” said Paul Dales, United States economist at Capital Economics.
The consumer confidence index, which measures how respondents feel about business conditions, the job market and the economy over the next six months, has recovered fitfully since hitting a record low of 25.3 in February 2009. Economists watch confidence closely because consumer spending accounts for about 70 percent of economic activity and is crucial to a strong rebound. The improved confidence mirrors an increase in spending in November, fueled by early discounting on holiday goods that lured shoppers into stores.
The Conference Board’s index, based on a random survey mailed to 5,000 households from Nov. 1 to Nov. 19, showed that worries about jobs eased, but that concern remained high.
HOME buyers with sketchy credit who are unable to qualify for conventional mortgages may now find it more costly and difficult to obtain loans insured by the Federal Housing Administration.
New rules that went into effect this month adjust the two types of mortgage insurance paid by consumers for loans insured by the F.H.A., which is part of the Department of Housing and Urban Development.
One change raises the annual insurance premium, paid monthly by the borrower, setting it at 0.85 percent to 0.9 percent of the loan balance, depending on the down payment or equity owned; the amount used to be 0.5 percent to 0.55 percent. The other change lowers the one-time upfront insurance premium that borrowers must pay, to 1 percent of the loan balance from 2.25 percent.
The upfront premium is paid in a lump sum at closing or added to the loan balance, unlike the monthly premium, which is paid over the life of the loan in addition to the interest and principal.
The decrease in the upfront premium, welcome though it might seem to some customers, does little to offset the effects of the monthly increase, which Andre Harriott, the president of the Access Mortgage Corporation in New Haven, Conn., called “really pretty hefty.”
“Everyone is really living paycheck to paycheck,” he said.
F.H.A. loans are usually taken out by buyers who cannot qualify under the stiffer down-payment requirements of Fannie Mae or Freddie Mac, the government-controlled buyers of loans. F.H.A. requires 3.5 percent, while Fannie Mae typically requires 5 to 15 percent or more, depending on the type of loan.
The changes, under an example provided by the F.H.A., mean that a borrower who puts 3.5 percent down on a $154,000 house with a 30-year fixed-rate mortgage at 5 percent (such a consumer typically earns a gross annual income of $54,000, according to the agency) and who finances the upfront premium into the loan will see monthly mortgage payments, including taxes, interest and the two insurance premiums, rise to $1,238 from $1,205. The example is based on median data, including property taxes put at about 2.5 percent of home value. That increase includes the drop in the upfront mortgage insurance, to $1,486 from $3,344 — but also includes the rise in the monthly insurance premium, to $111 from $68.
Last August, President Obama signed into law a bill authorizing the F.H.A. to increase premiums to shore up its insurance funds; the agency had been authorized to raise the annual premium to as much as 1.55 percent.
Conventional loans, which conform to Fannie and Freddie underwriting guidelines, do not require upfront mortgage insurance. But some may require monthly private mortgage insurance, if the borrower puts less than 20 percent down toward the purchase, or has less than 20 percent equity in a refinancing.
F.H.A. borrowers, meanwhile, can stop paying the monthly mortgage insurance only after five years and when their loan-to-value ratio reaches 78 percent, at which point they have 22 percent equity in their home.
F.H.A. loans are typically offered by niche direct lenders, and because of the insurance, they often carry interest rates equal to or slightly below those of conventional loans.
In October, the F.H.A. set a minimum FICO score of 500 for borrowers who want an F.H.A.-insured loan — the first time a minimum was set. It also introduced a new minimum down payment of 10 percent for borrowers with FICO scores below 580. (Those above 580 still pay a minimum 3.5 percent.)
The issue for the F.H.A, Mr. Harriott said, is that the realm of borrowers has widened. “We see executives of little companies, teachers, people making $200,000 a year, doing an F.H.A. loan, because they’ve gotten into a financial situation,” he said, adding that F.H.A. loans are perceived as safe by investors because of the insurance.
ALWAYS Buy Real Estate via a Real Professional Closing At A Real Estate Attorney’s Office or Title Company. This article explains the many pitfalls of using a "Quit Claim Deed" (not Quick Claim)
– Mike Butler
Title insurance protects owners of real estate, and mortgage lenders, against any possible losses if the title to real estate is determined to be defective in some manner. If any type of encumbrance, lien or other defect to the title is discovered following the transfer of ownership or the placement of a mortgage lien, the owner and the lender are protected against losses associated with correcting the problem. If you desire to transfer or obtain an interest in real estate through a quitclaim deed, then you need to know whether title insurance is available.
Quit Claim Deed Function
The function of a quitclaim deed is to transfer the interest a purported owner of real estate may have in that property. Unlike a warranty deed, a quitclaim deed does not carry with it a guarantee that the title to the real estate is free and clear of any liens or encumbrances. The person conveying an interest in real estate with a quitclaim deed essentially is doing so in an "as is" condition.
Because no warranty or guarantee is made regarding the actual state of the title when a quitclaim deed is used, title insurance cannot be obtained. Title insurance is available when a warranty deed is used, because of the clear title guarantee associated with that type of instrument.
A primary reason why title insurance is not available with a quitclaim deed is because no title search is undertaken before such a deed is signed and filed. A title search is a thorough investigation of the state of the existing title to real estate to determine what liens or encumbrances, if any, exist.
The purpose of title insurance is to protect a person or other legal entity against losses that arise when a lien or encumbrance is discovered after a transfer of title occurs. In the absence of a title search associated with a quitclaim deed, no title insurance company will extend this type of protection to the property owner.
A person receiving a purported real estate interest via a quitclaim deed may receive no legal right to the property whatsoever. If the person seeking to transfer real estate with a quitclaim deed has no legal interest, nothing legally is conveyed. In the absence of title insurance–which is not available for a quitclaim deed–the person receiving the quitclaim deed has no legal recourse because the deed itself states that only the interest of the grantor, if any interest exists, is conveyed.
Question: What’s worse than having your house foreclosed upon?
Answer: having your house foreclosed upon twice . Unless, of course, you get it back the second time.
Homeowners in Massachusetts are now facing "back-to-back foreclosures," due to problems with property titles. When lenders are unable to get title insurance for the property on which they have foreclosed, they are now opting to try the whole process again. In Massachusetts, where the issue has affected at least hundreds, and "possibly thousands," of homeowners, it has become common enough to merit its own name: "re-foreclosure."
It sounds pretty awful. But the “re-foreclosure’’ storm clouds may have a silver lining for some homeowners: Sometimes, the banks lose the second time around.
From the Boston Globe article:
"Zepheniah Taylor lost his Dorchester three-decker to foreclosure two times in 17 months. Now the 59-year-old grandfather has returned home to stay. The scenario, once implausible, is becoming more common in the crazed and fast-changing world of foreclosures."
Also of note, homeowners are able to purchase their houses back at "current market value" — which means if the property value has deteriorated, as is often the case in neighborhoods with high foreclosure rates, the homeowner may be able to benefit by buying the property back at a cheaper price.
In the words of one such beneficiary: "I’m starting over fresh…It feels good. It is a new chance. "
But the whole process can be a little unsettling. In the words of Zoe Cronin, an attorney with Greater Boston Legal Services, a group that represents low income people: "They are weirded out…What is this? I got a letter saying I own my house again."
At the moment, it is still unclear how many properties and homeowners could be affected by these types of issues in the future.
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