Wednesday, August 29, 2012

The end of Fannie Mae and Freddie Mac is Coming

Over a year ago, on February 11, 2011 the Obama Administration first announced the winding down of Fannie Mae and Freddie Mac in its Housing Report. The Long Island Education Board's blog on the report can be found by clicking here.

Now, the process continues as Treasury just announced steps its undertaking to expedite the process by modifying its Preferred Stock Purchase Agreement with the Federal Housing Finance Agency, the conservator of Fannie and Freddie. To read Treasury's Press Report, click here.

According to Treasury, new steps are being implemented to prevent Fannie and Freddie from retaining a profit and reentering the market in their prior form.

The takeaway is that the decentralization of mortgages is no joke and is coming. Get ready.

Fannie Mae Selling Guide Updated

Just this past week, Fannie Mae issued its Selling Guide with other updates. To see the guide, click here.

Two highlights from the Guide are as follows:

  1. Maximum LTV for ARMS are reduced from 97% to 90% with Desktop Underwriting & from 95% to 90% for Manual Underwriting. 
  2. Minimum credit score requirement is increased from 620 to 640 for manually written loans. 
These changes become effective on 10/20/12. 

If you are a mortgage banker, mortgage broker, or real estate salesperson; this guide is a must read.

Wednesday, August 22, 2012

LEGAL real estate INTERNSHIP OPPORTUNITY - attention Law Student's

Lieb at Law is Hiring! Excellent opportunity to learn the residential real estate practice first-hand while managing files under the guidance of experienced attorneys. 

Law student responsibilities include daily file updates to clients and real estate brokers in acting as the firms liaison from retention to attending closings. Issue spotting is a must. Be prepared to manage expectations and learn everything that can go wrong in a sale or purchase of residential real estate. To get this position, you must be ready to succeed, work in a team environment and process quickly. Must embrace education and technology. 

Those that succeed in this role will have the opportunity to advance. Can lead to Junior Associate Position. 

TO APPLY: Email Cover Letter and Resume to careers@liebatlaw.com 

*No Phone Calls or Faxes.
*Paid and Part Time (flexible to class schedule)
*Position is in Center Moriches Office

Politics - Eminent Domain to address Foreclosures

First, San Bernardino County, California, sought to seize upside-down mortgages and restructure them with more favorable terms to borrowers utilizing the government's compulsory sale powers by way of Eminent Domain.

Next, the idea was floated in Chicago.

Now, there is talk about its utilization in New York.

But, what are all of these politicians actually talking about?

As the advocates would put it, private investors will provide a municipality with the requisite funds to seize the underwater properties at market value, discounted from the loan amount as the properties are upside-down, and than purchase the restructured loans back from the government. Yet, there are many secondary effects as the introduction of this new approach to mortgage modifications adjusts the risks inherent in making loans and will likely change future loan terms for all.

Traditionally, Eminent Domain is utilized by municipalities for roads, schools and to facilitate up-zoning efforts in redeveloping districts. The concept being floated is to utilize Eminent Domain instead to force mortgagees to sell their notes and mortgages to the government for less than what is owed and to allow the government to flip the loan, at market value for the real estate, not based upon the agreed upon terms between mortgagor / mortgagee, to a new investor who will provide better terms to the borrower/mortgagor.

Can this be done in New York?

Looking at the applicable New York Statute, which is the Eminent Domain Procedure Law, Section 103 defines Real Property as follows: includes all land and improvements, lands under water, waterfront property, the water of any lake, pond or stream, all easements and hereditaments, corporeal or incorporeal, and every estate, interest and right, legal or equitable, in lands or water, and right, interest, privilege, easement and franchise relating to the same, including terms for years and liens by way of mortgage or otherwise.

As can be seen, a lien / mortgage is included. So, technically it appears on first glance that this is possible.

If it is, how much must the government pay for these underwater loans?
According to In re Public Park in City of New York, the Appellate Division held that the amount should be determined as follows:
If the portion of the land taken which is subject to the ... mortgage has a value in excess of the amount of the mortgage, then his interest is measured by the face of his mortgage and interest. If the value of the land is less than the face of the mortgage, then his interest is the value of the land, less, of course, a proper apportionment of taxes and assessments.

So there you have it, its the value of the land (at the time of the Eminent Domain) minus taxes and assessments.

Yet, interestingly, the statutory purpose for Eminent Domain in New York contains a wrinkle, which states, in pertinent part, as follows: to give due regard to the need to acquire property for public use as well as the legitimate interests of private property owners, local communities and the quality of the environment, and to that end to promote and facilitate recognition and careful consideration of those interests; 

So the question becomes, is this proposed utilization of Eminent Domain a "public use" at all or is it instead, a public purpose, which is not written as the statutory purpose for Eminent Domain?
You see the public isn't using the land at all. Instead, the public is trying to fulfill the purpose of helping homeowners in distress. Therefore, the utilization of Eminent Domain to rescue underwater homeowners in New York state appears questionable at best.

Tuesday, August 21, 2012

Comment on Federal Regulations on Servicing of Mortgage Loans

The Consumer Financial Protection Bureau is asking for your help in reviewing proposals at Regulation Room and reacting to them concerning regulating the mortgage industry. Click here to help make a difference in how mortgages are serviced into the future.

Regulation Room is a place where people talk to people talking to government. Each issue has its own summary for reading, discussing and commenting to the agencies that make the regulations.

Don't complain about the future of your industry, shape it.

Monday, August 20, 2012

Be careful when adding your spouse to a deed in only your name

Gifting your spouse a half interest in your separate real estate creates a presumption that the property is marital and subject to equitable distribution, so says the Third Judicial Department in Campfield v. Campfield, which can be read by clicking here

More strikingly is the fact that the Court refused to Order a credit to the original owner spouse for the value of her contribution of separate property to the acquisition of a marital asset. This is the traditional approach that most matrimonial attorneys are familiar with.

The Third Department distinguished the scenario of inheriting money and purchasing marital property where a credit would be given from the situation before it when a party already owned property and than added a spouse's name to the property. 

The Third Department controls from the Canadian border in the north to the lower Catskills in the south and from the Vermont and Massachusetts borders in the east to the Finger Lakes in the west.  The Third Department includes just over half of New York's land area and contains about one seventh of the State's population.

Making Home Affordable - New Handbook Available - Version 4.0

To access the new Handbook for MHA, inclusive of HAMP and HAFA, click here. While reviewing the Handbook you should be aware of the case of Flagstar Bank v. Walker wherein the Court held that the statutory good faith standard for a CPLR 3408 Foreclosure Settlement Conference is compliance with the Handbook. To review the case, click here.

This Handbook is the rules for banks / servicers to modify mortgages, so pay careful attention to detail and make sure that they comply.

Friday, August 17, 2012

Architectural Work is not only protected in copyright by the Architectural Works Copyright Protection Act

In an interesting appeal before the Second Circuit Court of Appeals, captioned as Scholz Design, Inc. v. Sard Custom Homes, LLC, Prudential Connecticut Realty, & Coldwell Banker Residential Real Estate, LLC, the Court held that the Copyright Act's protection of 'pictorial, graphic, and sculptural works' also protects architectural works from infringement. Therefore, graphical renditions of architectural work, before they are made into final construction drawings, which  have sufficient detail to enable constructions of homes based upon them, also contain protected expression.

The pictures at issue in this case were front elevation drawings showing the appearance of the front of the houses surrounded by lawn, bushes, and trees.

This decision is huge for the architectural industry as it greatly expands our understanding of protected works for architects. Moreover, the decision highlights the risks that real estate companies face by promoting protected works on their sites without express permission. All brokerage houses should carefully perform due diligence on the sketches of buildings that they post on their websites before approving such a posting.

To read a copy of the decision, click here.

Follow Up to Last Night's CE Course Mortgage Mania at Newsday

We had a great course last night at Newsday for our local real estate agents called Mortgage Mania, where the students each earned 3 continuing education credits. While the slideshow was visible on the projected screen, some students inquired if I could re-post the links onto the blog as they couldn't see them on the handout.

So here goes:


Credit Scores- 3 Bureaus:


FHA: RULES


For HUD’s Latest Rate Update:




I also wanted to thank Todd Triolo, our friend and mortgage expert, for his insights that he shared with the class as we learned. 

Todd can be reached at DE Capital Mortgage, LLC | 124 E Main St | Babylon, NY 11702
MAC M6652-011 Phone (631)422-8288| Cell 631-834-9283| Fax 866-917-0776 

Wednesday, August 15, 2012

Building is Up Nationally, Down Locally

Confidence for "newly built, single-family homes improved for a fourth consecutive month" says the National Association of Home Builders/Wells Fargo Housing Market Index when discussing the national trend.

To read the NAHB's press release, click here.

Unfortunately, the Northeast did see a significant decline in the same period. So we are left with mixed news at the Long Island Education Board. Let's hope that the national growth trend comes to town.

Water Recycling Showers - Wow - What's Next?

A great article on Business Insider about the future of showers, click here, to read. This shower cuts water consumption by 70% by automatically filtering the used water. It is estimated that the shower's cost can be recouped in 3 to 4 years of savings on your water bill. Real estate professionals who are interested in being green should read this article as this technology is estimated to be less than a year away from stores & now is the time to start talking about this great advancement. Soon home purchasers will want to know if the listing has such a shower. What's next?

Tuesday, August 14, 2012

Suffolk Bar - Real Property Committee Meeting - 8/15/12 - 6:30pm

For all those interested, the Suffolk Bar's Real Property Committee will be joined by Peter Johnson, Esq., the Town of Smithtown Town Assessor to discuss the tax grievance process within the Town.

Thursday, August 9, 2012

Suffolk County's Economic Recovery is in the Sewer

As a real estate professional I am often faced with many people in foreclosure. I experienced the housing market slump live and in person. I know of the decline in the real estate industry in Main Street and I have a few thoughts about Wall Street. So, as you can tell, I have spent a lot of time thinking about how a recovery can be achieved and I have realized that the answer lies in the sewers. No, not as a metaphor for failure or as a depository for a magic bullet, but instead, I believe that the answer actually lies within the sewers. You see many businesses would like to open throughout Suffolk County, but they are stopped because of our lack of sewers. Just across the street from my law firm is vacant space that would make a perfect Starbucks or Hamptons Coffee Shop, but for the fact that the lack of waste water permits will prevent their opening. To solve this problem and enable economic growth locally we as a County need more sewers. In fact, to protect the water supply and to provide for generations to come we need more sewers. So, I point you all to the Suffolk County Sewer Study, click here, to learn more about the development of sewers in our County. I ask you all to contact your legislator and support the increase of sewers. I charge you with checking out the Village of Patchogue's model of development where sewers are ever expanding and to ask yourself, is the answer to our economic recovery in the sewers?

Wednesday, August 8, 2012

NYC LOCAL LAW – FORECLOSURE FILINGS


Effective June 15, 2012, pursuant to Local Law 4 of 2012 a lender foreclosing a mortgage on residential real property must notice the New York City Department of Housing Preservation and Development within fifteen (15) days from commencement of suit, discontinuance of action, entry of judgment, and the transfer of title by Referee to purchaser at sale. Here is a link to the same:
http://www.nyc.gov/html/hpd/downloads/pdf/Foreclosure-Notification-Rules-Proposed.pdf

We will continue to monitor if other jurisdictions follow suit, but for now, be guided accordingly.

Tuesday, August 7, 2012

Bad Faith Negotiations = $200K Exemplary Damages Principal Reduction

In Bank of America v. Lucido, Justice Spinner, Supreme Court, Suffolk County found in his equitable powers that the bank's bad faith misrepresentations on their appraisal, ability to offer a principal reduction pursuant to the pooling and servicing agreement in the face of their denial of the same, inability to have an individual with settlement authority appear at the conference, prior counsel's inappropriate conduct, and 34 months of bad faith negotiations should result in punitive damages.

The decision is particularly interesting because Justice Spinner had previously been reversed on appeal when he cancelled a mortgage following similar conduct in Indymac Bank v. Yano-Horoski. It appears the Judge is  testing the authority of the Supreme Court to impact settlement conferences pursuant to CPLR 3408. This is a very important measure for all settlement conferences in the macro because it gives practitioners a clearer idea of what the ramifications for bad faith negotiations can be. Now lets see if the decision is modified on appeal.

To read the Lucido decision, click here.

Friday, August 3, 2012

Open meeting with Town of Southold Supervisor Scott Russell


Forwarded email from my friend Joan Bischoff:

---

To all owners/managers of RE companies on the North Fork

Dear colleagues,

Town of Southold Supervisor Scott Russell and Phillip Beltz asked me to make you aware of the following meeting:

Please attend a meeting between Real Estate professionals and Town of Southold Supervisor Scott Russell, the Town's Economic Advisory Council and the Town's new business liaison John Stype.

Meeting is scheduled for Thursday, August 9th at 7:00 p.m. at the Peconic Lane Community Center (next to the Recreation Center.)

All attendees are requested to fill out a business questionnaire:
  tiny.cc/southold

I encourage you to send this invite to all your agents and look forward to seeing you there.
For details please see attached invite.

Sincerely,


Joan Bischoff van Heemskerck
Managing Director North Fork & Shelter Island
Associate Broker, Town and Country Real Estate
O: 631 765 0500 C: 631 948 0234 F 631 765 0400
jbischoff@1townandcountry.com

Wednesday, August 1, 2012

Loan Modifications: HARP & Principal Reduction Alternative = Denied

Yesterday, the Federal Housing Finance Agency (FHFA), which administers both Fannie & Freddie, issued a statement that HARP modifications will not include principal reductions. To review the statement, click here.

The Principal Reduction Alternative (PRA) is a program under the Making Home Affordable umbrella designed for assisting homeowners whose home values are less than the amount they owe on their mortgages. PRA was launched in 2010 for loan-to-value ratios above 115%, in which principal forgiveness was the first step in the modification process to lower the loan payment, before reducing the interest rate or extending the term.

According to FHFA, PRA "would not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers". In fact, FHFA was concerned with the moral hazard that PRA would cause in furthering strategic default by borrowers who sought to obtain a principal reduction.

To read the Acting Director, Edward J. DeMarco's letter to Congress explaining this announcement, click here.

It appears that this announcement will kill most principal reductions offered by non-GSEs (not Fannie / Freddie loans) as well. The analysis is thorough and Fannie / Freddie have always set the benchmark for the mortgage industry. The takeaway from this announcement is that modifications are going to focus on reducing interest rate and extending the loan term as opposed to reducing principal, which was the way the programs worked prior to the implementation of the PRA option in 2010. To be clear, the reason that the 2010 program was just analyzed by FHFA is that Fannie & Freddie were only recently requested to follow a program utilized by non-GSEs. Yet, this announcement has given lenders an iron wall to hide behind should they also not wish to follow the program, but they were following the program anyway because they were worried about having a public relations backlash.

Do you think that principal reduction should be part of helping struggling homeowners? Or better yet, as Mr. DeMarco's letter states do you think that principal reduction will create more artificial struggling homeowners? I guess we will never know if the chicken or the egg came first when it comes to principal reduction.