Bank of America became the third servicer to freeze their foreclosures, to learn more click here.

This is the text from my new article published in Homes of the Hamptons.

In a crashing economy, where everyone is trying to earn a buck on someone else’s back, it’s most important to know that your representative truly has unfettered allegiance to your best interest. Does a seller really want his agent telling the buyer that he would accept $50,000 less than he is listing his home for? Or, does a buyer want her broker sharing the fact that she recently inherited $1,000,000 and has a gapping whole in her pocket, plus her kids have already picked their rooms in their new house? These types of situations happen all of the time in residential real estate transactions, where a broker puts their personal desire to ‘close’ as many transactions as possible ahead of their fiduciary duty to provide a consumer with the best representation possible. The thought goes like this – why only represent the seller when you can also represent the buyer? In fact, many brokerage firms are known to only push their own deals.

Did you know that this situation, called a Dual Agency, is permitted by the NY Real Property Law? According to the Department of State’s Counsel’s Office “Dual agency arises when a real estate broker or salesperson represents adverse parties (e.g., a buyer and seller) in the same transaction”. In fact, this activity is so widespread that there is even a modified type of dual agency available called a “designated sales agent” where a smokescreen of allegiance is offered to both the buyer and seller. In this situation, a brokerage firm will assign different salespeople to represent the seller and the buyer. Yet, both salespeople work at the same firm for the same broker. If this situation exists, the broker’s fiduciary duty goes out the window. No longer can a seller or buyer rely on their agent’s undivided loyalty. Instead, they are paying a great deal of money while being stabbed in the back throughout the process. You see, a broker can make double the money and close a transaction faster when they are on both sides of the negotiation.

This is where information becomes power for consumers.Where knowing is the whole battle. It’s a time for consumers to open their eyes and for the law to protect. Thankfully, the law recently became a little stronger in this area. Just this past month, the NY legislature saw fit to protect consumers. Starting on January 1, 2011, an amendment to §443 of the NY Real Property Law “will allow consumers to select and allow a "dual agency" relationship in advance of it actually occurring”. The new amendment will permit general consent by sellers and buyers to any potential dual agency situation prior to one presenting itself during the transaction solicitation process. This should provide for greater clarity to consumers who are traditionally ill informed about the dual agency relationship having only previously engaged in a few, if any, real estate transactions.

Before this law takes effect, agents only have to address a dual agency situation with consumers as it emerges, on a given showing, by requiring the buyer and seller to each sign a new disclosure form on the fly. Now, under the new amendment, brokers can obtain consent from buyers and sellers in advance and avoid a recurring nuisance in the process. Furthermore, by executing an advanced disclosure form, brokers can avoid sanctions by the Department of State from failing to immediately provide the form to each consumer prior to such a showing. To illustrate the importance of complying with the agency disclosure rules, in 2007 a broker was sanctioned $2,000 for delaying a few days before he provided copies of an agency disclosure form, which ambiguously stated that the broker was the agent of both the seller and the buyer, instead of using the term dual agency. In addition, the amendment extends the requirement of written disclosure concerning dual agency from residential transactions, where written disclosure forms have been required for years, to condominiums and cooperative apartments, which previously only required verbal disclosure. This is an important change because condominiums and cooperatives are an ever increasing choice by consumers, especially in 55+ communities.

During the next few months it’s imperative that brokers provide training to their agents on compliance with the new amendment and on the terms and affects of different types of agency. It’s important to create uniformity in the process at each firm and for brokers to use the amendment as an opportunity to heighten their respect for the concept of a fiduciary relationship. It’s time for the emergence of an independent seller’s and buyer’s broker with unfettered loyalty in representation. It’s time for the demise of dual agency.

For information on applying to become a Fannie Mae listing broker*, appraiser, repair contractor, eviction attorney, maintenance company, or closing agent/title company - click here.

Freddie Mac's website that sells their inventory of foreclosed properties can be found by clicking here. Not to be outdone, Fannie Mae's website that sells their REOs can be found by clicking here. Happy hunting.

This is a link to the new handbook provided by the government for servicers to comply with the Home Affordability Modification Program.

Previously, I had directed students to Supplemental Directives, which detail requirements in each individual topic. This handbook should minimize the need to read Supplemental Directives because it reorganizes the topics coherently for functionality and practicality. As always, stay tuned to new versions, which will of course optimize this product.

A brand new program by FHA, click here to learn more.

To learn about mortgagee (lender) guidelines, click here.

This new program expires 12/31/2012.

Here are the requirements for participation:

1. The homeowner must be in a negative equity position;


2. The homeowner must be current on the existing mortgage to be refinanced;

3. The homeowner must occupy the subject property (1-4 units) as their primary residence;

4. The homeowner must qualify for the new loan under standard FHA underwriting

requirements and possess a “FICO based” decision credit score greater than or equal to 500;

5. The existing loan to be refinanced must not be a FHA-insured loan;

6. The existing first lien holder must write off at least 10 percent of the unpaid principal balance;

7. The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent;

8. Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent;

9. For loans that receive a “refer” risk classification from TOTAL Mortgage Scorecard (TOTAL) and/or are manually underwritten, the homeowner’s total monthly mortgage payment, including the first and any subordinate mortgage(s), cannot be greater than 31 percent of gross monthly income and total debt, including all recurring debts, cannot be greater than 50 percent of gross monthly income;

10. FHA mortgagees are not permitted to use premium pricing to pay off existing debt obligations to qualify the borrower for the new loan;

11. FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance; and

12. The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification as described below.

My firm recently was confronted from a loan servicer (mortgagee and / or agent) that we needed our authorizations to have specific names of individuals rather than the firm's name as the authorized agent. This requirement conflicts with what I have been suggesting to students at my classes at both the Real Estate School and while teaching MCLEs for First American. I always advise using the firm's or business' name (broad authorization) so you can easily have coverage in negotiating with a servicer if you are unavailable personally, but a colleague is available.

I hate giving out bad advice, so I looked into it further and learned the applicable definitions under the Power of Attorney Laws. I know that an authorization is not necessarily a Power of Attorney and that a servicer can require what they want, but if they do not like your authorization, simply using a Power of Attorney would also do the trick and servicers cannot reject a properly executed Power of Attorney under law.

To find the applicable rule, look under Title 15 of Article 5 of the General Obligations Law, Section 5-1508(4). This section provides that "any person, other than an estate or trust, may act as an agent, co-agent or successor agent under a power of attorney". A "Person" is defined in Section 5-1501 as being "an individual, whether acting for himself or herself, or as a fiduciary or as an official of any legal, governmental or commercial entity (including, but not limited to, any such entity identified in this subdivision), corporation, business trust, estate, venture, government, governmental subdivision, government agency, government entity, government instrumentality, public corporation, or any other legal or commercial entity."

Therefore, an entity can be designated as an agent under the Power of Attorney Law and I stand by my recommendation to use your business entity if you are performing Foreclosure Defense, Short Sales or Modifications and need to negotiate with the servicer on your client's behalf.

To read an interesting article on the topic click here.

Here is some food for thought - What is the legality of these types of searches with respect to NY Criminal Procedure Law under the Aerial Surveillance Doctrine in the first place?

The general rule is that warrantless aerial surveillance of an open field does not violate the Fourth Amendment rights of the occupier of the land. So why are they changing their practice in Riverhead? Perhaps lobbying works.

While some in the industry may find this video offensive as it offers a negative perspective of real estate agents, it was put on the Real Estate Section's listserve from the NY Bar Association to illustrate the misnomer that a modification application stops foreclosure. Simply put - It does NOT!!!

Homeowners must be made aware that the only thing that stops a foreclosure is a written modification agreement coupled with a discontinuance of the foreclosure action. Hopefully all industry players can come together to educate homeowners on this important fact.

To view the video, click here

Please provide your thoughts.

If you have not read about Florida's Foreclosure ONLY Courts, which are run by Retired Judges, you can read all about it in a NY Times article by clicking here.

The article discusses many positives of the Florida Courts including the ambitious goal of reducing the foreclosure backlog by 62% within a year. Such a reduction is certainly something that we could use in the NY Court System, which is continuously being strained by the mortgage meltdown. Yet, the article also discusses a negative consequence that has emerged from using Retired Judges in specialized Courts. Defense attorneys are claiming that a presumption in favor of the banks is emerging where questionable claims with incorrect documentation are achieving auctions and evictions. I am not clear how these Courts cause such a presumption, but the claim is that a correlation has been noticed.

In contrast to Florida's system, NY, which has also tailored its Court System to the foreclosure crisis. NY has created a new judicial position, entitled Foreclosure Referee, to conduct Foreclosure Settlement Conferences. Such conferences are designed to modify mortgages and avoid adjudication. Unfortunately, many cases are not modified in these Foreclosure Settlement Conferences as many Bank Attorneys do not come to the conferences with any intention of making a deal without respect to the CPLR's requirement to negotiate in good faith. Therefore, NY cases are being sent back to the Supreme Court for adjudication. In this sense, NY has added a layer to our Court System while Florida has moved a large case load away from their cohort of Judges.

My feeling is that a combined approach would work best. Retaining the Foreclosure Settlement Conferences, but having Judges preside at the conferences and keep the case if adjudication proves necessary. In this sense, the Judge could form a prejudice against a party who did not comply with the CPLR by failing to make a good faith effort to settle.

To read CPLR 3408 and subsection (f)'s requirment of negotiating in good faith click here.