LIEB BLOG

Legal Analysts

Tuesday, August 09, 2011

Anti-Deficiency in Short Sales: California

Anti-Deficiency in Short Sales: California
On July 15, 2011, a new law was enacted in California which prohibits deficiency judgments in short sale transactions. Short sale transactions are sales by homeowners to third parties, requiring lender approval, for less than the amount of the loan.

This applies to all 1-4 unit residential mortgages, whether first or later, and to borrowers as individuals, partnerships, LLCs, or corporations.

Originally, a law was enacted which prohibited deficiency judgments, but applied only to first residential mortgages by individuals.

This law may affect the bargaining position of homeowners with lenders regarding short sales, as it becomes a less attractive option for a lender where they are unable to get a deficiency judgment for the remaining amount of the loan. Many times lenders do waive this right, however, taking it off the table from the outset may be damaging to a homeowner's ability to procure the same, and further limits their options in foreclosure.

Although this law has not yet been enacted in NYS, California's enaction of the same, as well as the current state of the market and housing may appeal to NYS legislators and therefore it is something to keep an eye on into the future.
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HUD SAFE ACT

HUD SAFE ACT
On June 30, 2011, HUD (The U.S. Department of Housing and Urban Development) enacted the "Final Rule" for Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE), which lays out the minimum requirements for states concerning licensing and registration of mortgage loan originators.

This is important to pay attention to as licensure requirements are necessary in order to qualify as a loan originator, however it is also important to note who is exempt from the same. Further inquiry must always be made into state laws as they are free to expand on the minimum requirements laid out by HUD. However, after the original passage, states regulated tax-exempt organizations as well, so part of the purpose of this new Act is to remove that power from the states to do that.

This primarily affects non-profit organizations and HUD agencies, which provide services in foreclosure defense and inability to procure housing of financially distressed individuals.

SAFE Act's new standard for licensure is whether one is "engaging in business of a loan originator" and "take a residential mortgage application and offer or negotiate terms of a residential mortgage loan for compensation or gain".

These requirements are not limited to first loans, but also refinances, as these are not modifications, but instead are actually new loans in law and fact.

The new standards, differentiated from the 2009 act, allow HUD agencies and non-profits as exceptions to the requirements by way of codifying their role as different from a loan originator and therefore not requiring licensure. HUD has made it clear that this determination will be made based on the substance of a position, and not on its name. Consequently, a nonprofit's status under 501(c)(3) does not end the inquiry. Further analysis is required regarding the nonprofit's purpose, structure, incentives, and loan options. In fact, 7 criteria are used in order to further qualify:

1. Maintains tax-exempt status under section 501(c)(3) of the Internal Revenue Code of 1986
2. Promotes affordable housing or provides homeownership education, or similar services
3. Conducts its activities in a manner that serves public or charitable purposes
4. Receives funding and revenue and charges fees in a manner that does not incentivize the organization or its employees to act other than in the best interests of its clients
5. Compensates employees in a manner that does not incentivize employees to act other
than in the best interests of its clients
6. Provides to or identifies for the borrower residential mortgage loans with terms that are favorable to the borrower and comparable to mortgage loans and housing assistance provided under government housing assistance programs
7. Meets such other standards that the state determines appropriate

Also excluded from licensure requirements are government employees, bona fide nonprofit organizations that act as loan originators, although only in the course of their duties, and individuals who only engage in modifications or are 3rd party loan modification specialists. However the latter category could be subject to licensure under SAFE, but this is subject to determination of the Consumer Financial Protection Bureau (CFPB) as HUD has chosen not the regulate the same. Further, appendices of SAFE provide examples of the type of person not subject to the Act.



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Saturday, July 30, 2011

Know Before You Owe - RESPA

Know Before You Owe - RESPA
Just last week, on July 21, 2011, the Real Estate Settlement Procedures Act (RESPA) was shifted by the Department of Housing and Urban Development (HUD) to being administered and enforced by the Consumer Financial Protection Bureau (CFPB). To visit the CFPB's website, click here.

In one of CFPB's first initiatives, the Bureau is researching Mortgage Disclosure Statements and making changes for the stated purpose of Simplicity. To have your voice heard on this initiative, click here.

The purpose of the Bureau's initiative is to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the Bureau to combine the 2 page Truth in Lending Disclosure Form and the 3 page Good Faith Estimate Form.

Lieb at Law supports this initiative because we know from experience that home purchasers do not read forms when they are cumbersome. The key is simplicity with easy to access graphical layouts. We hope that this project is only the start in simplifying imperative consumer information for home mortgage borrowers.
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Friday, July 29, 2011

Foreclosure Primer by Justice Whelan

Foreclosure Primer by Justice Whelan
If you want to learn about the current landscape of foreclosure law, this opinion is the most thought-out and well drafted I have seen on the topic. Take a read by clicking here.

Also interesting is the discussion of the mortgage expert who was used in this matter by the Defendants. I have never heard of such a tactic and the Court seems dismayed as well as to why a purported expert would advance the papers as opposed to the Defendant's attorney. Yet, the key to this blog post is not what is peculiar, but instead how Justice Whelan so aptly explains the current laws in this field.

This is a must read by attorneys entering the field or anyone facing a foreclosure predicament.
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Let's Go Islanders

Let's Go Islanders
There is a very important vote for the future of Long Island coming up on August 1st, which is Monday. While this is not a political blog and I am not going to take a stand on the varying estimates that this arena may cost homeowners in tax payments, I will submit that the Islanders remaining on Long Island is crucial for our region's identity, particularly our real estate market.

Growing up on Long Island, I always knew who I was, an Islander. I was a fan of the team since an early age from watching the glory this team creates when they score a goal or knock an opponent to the ground. Yet, that is not why I am a fan or why I am writing a politically charged post on a blog designed for the real estate community. Instead, I am writing to endorse the new arena proposal for only one (1) reason, IDENTITY. I am an Islander. We only have one (1) professional sports team. The team represents us throughout the entire Country as our ambassadors. The team lets out-of-staters know who we are; that we exist. They are the welcome wagon to our beaches, restaurants, entertainment and wineries. The Islanders represent Long Island and it is imperative for our community to keep our team.

Now the owner, Charles Wang, may be bluffing when he states that this is his last go at saving the Islanders in Long Island, but I don't like playing with fire. Let's keep our team. If you are a Nassau County resident I strongly suggest voting YES for the coliseum on Monday.

Thank you. Let's Go Islanders.
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