Second-home getaways often are used only during specific times of the year. For example, a riverfront cabin may go months — sometimes even years — without any occupants while other popular escapes in popular locations are jammed-packed every weekend with city folks fleeing the craziness of downtown.

Even though a second home may be placed on your mental “back burner,” make sure you stay current on all zoning, land-use and legal guidelines. If you wait too long to build or improve, the building environment may have changed dramatically.

For example, in Shelton v. Strickland, a landowner (Shelton) filed a lawsuit against his neighbor (Strickland) to have Strickland’s shed removed on one of the popular San Juan Islands in Washington state. The shed encroached onto Shelton’s property. The Stricklands countered by claiming adverse possession on the land. The trial court granted Strickland’s adverse possession claim, and the appeals court affirmed the claim. According to attorneys familiar with land-use cases, a person claiming adverse possession will prevail if he or she can show that the usage was open and notorious, actual and uninterrupted, exclusive, hostile under a claim of right, and for a period of 10 years.

The court held that these elements had been met and granted Strickland the land that the shed was on as well as an easement to maintain the shed. Here’s how it happened:

According to court documents, Mabel Hitching acquired title to the land — now owned by Edward and Margaret Strickland — from her parents in November 1933. The Hitching lot was improved with a single-family cabin and a shed. Cement work for the shed had a number “59″ inscribed on it, indicated the cement work had been completed in 1959.

The shed was shown to encroach upon the Shelton parcel in a survey recorded in April 1975. Mabel used the structure, built by her companion, Arthur Hedman, as a potting shed and painting studio until her death in 1982. Through her will, Mabel granted Hedman a life estate in the premises and he continued to live there until his death in 1985.

The property was left to Jack Ridley, Mabel’s nephew who recorded a conveyance from the estate to himself in 1986. In 1993, Ridley, a California resident who never used nor occupied the house, sold the property to the Stricklands.

The Stricklands used the shed as an office during construction of their new home. They made some repairs to the shed, but did not change its location. They continued to use the shed and were not aware of any evidence to suggest that anyone other than the previous owners of their property had ever used the encroaching structure.

Shelton purchased his property, overgrown and unimproved, from Peter and Jenny Wangoe in 1978. Even though Wangoe owned the property for more than seven years, he rarely visited and was not necessarily aware that the shed extended over the property line onto his land. The shed was visible from the street, court papers stated.

Shelton filed a complaint to quiet title to the property and moved for a summary judgment. The Stricklands countered with a summary judgment alleging adverse possession of the area encumbered by the structure.

According to Seattle attorney Scott Henderson, the court found that all of the elements — the usage was open and notorious, actual and uninterrupted, exclusive, hostile under a claim of right, and for a period of 10 years — were met for adverse possession.

“The case may have turned out differently if the shed was hidden or of a temporary nature,” Henderson said. “The court also finds that since there was no evidence that the Stricklands or any previous owners had abandoned or allowed another to occupy the shed (which would normally stop the 10-year timeframe from continuing) that the second and third elements were met as well.

According to Henderson, the court made quick work of the fourth element (hostility) by focusing on the precedent that “subjective beliefs are not relevant.”

“In other words, the fact that the Stricklands or their predecessors may not have known that they were encroaching does not endanger their claim so long as they held themselves in a manner consistent with ownership,” Henderson said. “Building a permanent shed and using it seems to fit the court’s bill.”

The court devoted most of its opinion to the final element — that an owner’s use of the claimed land must be for 10 years. In this case, the Stricklands themselves owned the land for fewer than 10 years. The court held that state law (Washington) provides “tacking” of a previous owner’s rights — that a current owner may take the period of possession of such previous owner as their own so long as there is a connection “or privity” between each owner.

In the end, the shed stayed.

Holding on to a family getaway property? Make sure you know what you actually have.

Wells Fargo CEO John Stumpf said Thursday that housing is in the worst shape since the economic devastation of the 1930s.
“We have not seen a nationwide decline in housing like this since the Great Depression,” Stumpf told those attending a Merrill Lynch & Co. (NYSE: MER) investment conference.
He anticipates hard times ahead for home owners in financial straits — and their bankers.
“I don’t think we’re in the ninth inning of winding this,” Stumpf said. “If we are, it’s an extra-inning game.
“The losses have turned out to be greater than expected because home prices have declined faster and deeper than expected,” said Stumpf, who took the reins at the nation’s fifth-largest bank earlier in June. California’s Central Valley and the Midwest’s auto-manufacturing states (namely, Michigan and Ohio) are creating significant mortgage losses for Wells Fargo (NYSE: WFC) and other lenders.
Wells expects additional loan losses in the current quarter and into 2008, especially in its home equity loan portfolio. The bank realized $153 million in home equity loan losses in the third quarter.
Still, Stumpf said the bank has “minimal” exposure to collateralized debt obligations and other troubled mortgage-related securities that have prompted other banks to write off a total of $40 billion — so far.
On Friday, Keefe, Bruyette & Woods downgraded its rating on Wells Fargo’s shares to “underperform” from “market perform.” In a note to clients, KBW analyst Frederick Cannon said the San Francisco bank enjoys a strong franchise but it will suffer significant loan losses in the declining housing market.
Stumpf told investors that he was unaware of some of exotic mortgage-related investments being made by competitors until reading about them in the newspaper.
“It’s interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine,” he quipped.
Stumpf’s comments this week were more pessimistic than his luncheon remarks last month to the Financial Women’s Association of San Francisco.
At that time, he was critical of some of the risky, exotic mortgages offered by competitors in recent years, such as adjustable-rate mortgages that give borrowers a choice on what monthly payment they’d like to make each month. The so-called option ARMs can have negative amortization which means the loan balance rises over time instead of being paid off.
Stumpf said Wells didn’t offer such mortgages because it didn’t seem right. The San Francisco bank’s federal regulators don’t allow negative amortization to occur with credit card debt, Stumpf observed, so why offer such loans on the typical borrower’s largest and most important asset?

Melville, N.Y.-based Lender Lead Solutions recently introduced Simple60, a new reverse mortgage product available to homeowners aged 60 and older. Reverse mortgages offered to date require that borrowers be at least 62 years old.
“For every 100 people I talk with about reverse mortgages, I lose 20 to 30 of them because one spouse is younger than 62 or they don’t want to pay the higher closing costs attached to the entire value of the home,” said David Peskin, Lender Lead Solutions’ chief executive officer. “We do not anticipate the Simple60 to be a substitute for the HECM. Rather, we look at it as an add-on for borrowers fitting in a specific niche.
“Census statistics tell us that the oldest of the baby boomers turned 60 last year, and more than 4.5 million seniors currently fall between the ages of 60 and 62,” Peskin said. “We feel this is the perfect time to introduce the Simple60 product.”
HECMs, or home equity conversion mortgages, are mortgages insured by the U.S. Department of Housing and Urban Development and account for nearly 85 percent of the reverse market. Closing costs on HECMs usually are computed on the home’s value, not on the amount borrowed. The HECM program has insured more than 240,000 reverse mortgages since 1990, while private “jumbo” reverse plans also have been available.
The Simple60 is geared to consumers who want to pull out $50,000-$75,000, typically for a specific purpose and a shorter period of time. While loan amounts vary depending on age and home value, a 60-year-old borrower with a home valued at $250,000 owned free and clear could qualify for $62,500 under the Simple60 program. Closing costs would be approximately $4,513, about one-third of the HECM closing costs. The interest rate on the Simple60 program is the 30-day LIBOR rate, plus 4 percentage points. Earlier this week that combined rate was 8.7 percent, similar to some home equity loans.
Reverse mortgages allow senior homeowners to receive proceeds from a lender — either in a lump sum, regular monthly payments, a line of credit or in a combination of those options. The loan amount plus the accrued interest is due when the house is sold, or the last remaining borrower dies or moves out of the home. The borrower can’t owe more than the value of the home and can prepay the loan at any time.
Wells Fargo Home Mortgage, the nation’s leading retail originator of reverse mortgages, announced it also has trimmed the margin it charges on the HECM adjustable by 50 basis points. Seniors who have already applied for a reverse mortgage with Wells Fargo will be offered the lower margin.
Reverse mortgages have been provocative and their history has a lot to do with it. Providential Home Income Plan Inc., a venture capital-funded company whose sole purpose was to originate and service reverse mortgage loans, offered a fixed-rate reverse mortgage in the early 1990s. While the company was one of the first to begin offering a program to enable seniors to tap the equity in their homes, some of the loans contained the controversial “equity share” component, giving the lender a significant portion of the appreciation in the home. Often, that portion was 50 percent of a rapidly appreciating home, leaving some homeowners or inheritors in debt when the senior died or moved out of the home. The “equity share” component no longer is included in reverse mortgages and is a key reason for the popularity of today’s products.
In 1996, Transamerica HomeFirst purchased the reverse mortgage servicing assets of Providential. Three years later, Financial Freedom, the Irvine, Calif.-based company specializing in jumbo reverse mortgages, purchased Transamerica HomeFirst.