Don't Gamble with your exchange funds!

Folks that were using LandAM as their exchangor when LandAm filed for bankruptcy, LOST their exchange funds!

This keeps happening! A few years ago some of the exchange companies went under and the people with their funds in an exchange lost those funds.

Don't let this happen to you:


You may have heard that LandAmerica Financial Group, Inc. and its subsidiary LandAmerica 1031 Exchange Services (LES) filed for bankruptcy protection in November, 2008. As a result, investors who had exchange accounts with LES were unable to access their funds.

Recently, the bankruptcy court issued two rulings which found that the exchange funds held by LES in either a commingled account or a separate sub-account did not belong to the individual Exchangors, but must instead be included in the bankruptcy estate. As a result, these exchange deposits became part of the general pool of money that is available to pay all the creditors of LES.

So what went wrong for the LES clients? How is First American Exchange Company different?

Most importantly, there was a provision in the LES exchange agreement where the clients explicitly gave up all right, title and interest in the exchange funds to LES. Such language is not contained in any of the exchange documents used by First American Exchange Company.

LES held some funds in a master account with sub-accounts used to identify each client's funds. The majority of the funds were held, commingled, in the LES operating account. At First American Exchange we never commingle client funds, nor do we use a master/sub-account structure. We set up an individual account for each client at an FDIC insured bank, identified with our client's name and tax identification number. Our clients receive all the interest earned on the account as reported on the 1099 issued directly by the bank. Funds are released only after receiving a written direction from our client.

LES invested a large portion of exchange funds in auction rate securities, which had become illiquid. First American does not invest exchange funds in securities. Client funds are only placed in fully liquid demand deposit accounts in highly rated banks. Deposits are monitored on a daily basis by our corporate treasury department.

Finally, the court held that state law determines whether exchange funds are a part of the bankruptcy estate, and in this case the court looked to Virginia law. First American's exchange agreement is governed by California law, which provides that exchange funds held by a Qualified Intermediary are not subject to attachment by the intermediary's creditors. This law helps protect exchange funds from outside claims.

If you're thinking refi - you'd better think fast!

Did we chat about this?

Mortgage rates rise to 7-month high - San Jose Mercury News

WASHINGTON — Rates for 30-year home loans jumped to the highest level in seven months this week, leading to a slowdown in refinancing activity, Freddie Mac said today.

The average rate for a 30-year fixed mortgage was 5.59 percent this week, up from 5.29 percent last week, Freddie Mac said. The last time the average 30-year fixed rate mortgage was higher was the week ended Nov. 26 of last year, when it averaged 5.97 percent.



Now's the time - If you've got an adjustable, 5 year fixed, or anything other than a regular old 30 year fixed, now's the time to get movin on that refi. Lock it in sooner than later.

Health Alert: Your home may be making you sick

New car smell is toxic - as are many of the building materials in homes.

If your home is new or if you've done upgrades, think about testing the interior levels of formaldehyde.

I have one owner that just replaced baseboards and interior doors to "cute up" his house. It looks great but the interior levels of formaldehyde are now above the safe limits - like a WAY above.

The good news is that opening the doors and windows helps to lower the levels significantly. I don't know how quickly the gas fills the house but, with summer coming and many folks switching over to A/C, this may mean your interior levels could spike sharply.

Also, if your kids have behavioral problems - think about their environment. Kids are more susceptible to black mold, radiation [sometimes found in granite], formaldehyde[injected into wood products], etc.