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?
Thursday, August 09, 2012
Wednesday, August 08, 2012
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.pdfWe will continue to monitor if other jurisdictions follow suit, but for now, be guided accordingly.
Tuesday, August 07, 2012
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.
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 03, 2012
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 01, 2012
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.
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.
Wednesday, July 18, 2012
Applications must be submitted by September 30, 2012
To read the program guidelines, click here.
The program provides a zero-interest deferred loan of $10,000 to assist with the down payment toward the purchase of an owner occupied, single family residence.
To qualify, the applicant, must not have owned a home during the 3-year period immediately prior to this purchase; have annual income <= 80% of the area median income; have annual household income of >= $30,000; attend mortgage counseling; occupy the property as a principal residence; among others.
Maximum FMV of residence bought under this program must be <= $362,790.
A great program that is worth taking a look at.
To read the program guidelines, click here.
The program provides a zero-interest deferred loan of $10,000 to assist with the down payment toward the purchase of an owner occupied, single family residence.
To qualify, the applicant, must not have owned a home during the 3-year period immediately prior to this purchase; have annual income <= 80% of the area median income; have annual household income of >= $30,000; attend mortgage counseling; occupy the property as a principal residence; among others.
Maximum FMV of residence bought under this program must be <= $362,790.
A great program that is worth taking a look at.
Reminder
Tonight, the Suffolk Bar Association is hosting representatives from the Town of Brookhaven, including Tullio Bertoli, Commissioner of Planning, and Robert Quinlan, Town Attorney, who will both comment on Brookhaven's aspects of the HUB. If you are a member of the Bar Association, please attend at 6:30pm in the Board Room.
Andrew M. Lieb
Real Property Committee Chair
Tonight, the Suffolk Bar Association is hosting representatives from the Town of Brookhaven, including Tullio Bertoli, Commissioner of Planning, and Robert Quinlan, Town Attorney, who will both comment on Brookhaven's aspects of the HUB. If you are a member of the Bar Association, please attend at 6:30pm in the Board Room.
Andrew M. Lieb
Real Property Committee Chair
Tuesday, July 10, 2012
In an issue often debated and recently re-visited by the Civil Court, Kings County, a residential landlord does not have a duty to mitigate damages when a tenant breaches the lease by vacating the premises prior to the expiration of the term. See Kings Holding, LLC v. Terrick, 2012 NY Slip OP 51153U. The Court cited to the previous holding of Holy Properties v. Cole Products, which found that the duty to mitigate does not exist concerning commercial premises, and additionally cited to Rios v. Carrillo, which subsequently adopted the holding of Holy Properties by finding that the duty to mitigate does not exist concerning residential premises. It is important to note that in Holy Properties and Rios, both holdings of the Second Department, the leases governing each respective premises specifically provided that the landlord was under no duty to mitigate damages or that the tenant remained liable to landlord for rent upon the cancellation of the lease except as provided by law.
Furthermore, the landlord is not entitled to rent until the lease term has expired and there is a surrender of the premises by operation of law. In Kings, the surrender occurred after the landlord had submitted a "move out form" to the tenant after the tenant had moved out without notice, notified the tenant of the amount owed in arrears and informed the tenant that it was withholding the security deposit. This date of surrender actually occurred one month after the tenant physically left the premises. The date of surrender will be case specific, but may be interpreted from the conduct of the parties, the abandonment of the premises by tenant and the landlord's acceptance of tenant's surrender.
Furthermore, the landlord is not entitled to rent until the lease term has expired and there is a surrender of the premises by operation of law. In Kings, the surrender occurred after the landlord had submitted a "move out form" to the tenant after the tenant had moved out without notice, notified the tenant of the amount owed in arrears and informed the tenant that it was withholding the security deposit. This date of surrender actually occurred one month after the tenant physically left the premises. The date of surrender will be case specific, but may be interpreted from the conduct of the parties, the abandonment of the premises by tenant and the landlord's acceptance of tenant's surrender.
We previously blogged about 2 proposed items of legislation that were designed to both ensure proper paperwork in foreclosures and to eliminate the shadow docket of foreclosures that have been commenced, but have not moved past the foreclosure settlement conference stage of a residential foreclosure action.
The first proposal would require that attorneys for the lenders submit a "certificate of merit" at the start of the action, which would swear that all paperwork was proper at that time instead of just requiring such a sworn statement post settlement conferences, as is now most common. This would have been beneficial because now lenders and borrowers are engaged in a lawsuit that often is put on hold as the lenders' attorneys attempt to verify the propriety of documents without success and borrowers are stuck in limbo while they await if the lender was even the proper party to the action.
The second proposal would have created a criminal penalty for the submission of fraudulent foreclosure documents, such as robo-signed assignments of the note and mortgage. This proposal would have heightened the level of caution applied to lenders submissions of foreclosures and also would have prevented the incorrect lender from prosecuting a foreclosure action.
While both proposals are not moving forward, the importance of these proposals having had been made should not be lost on the reader. The key is that many eyes are watching the unscrupulous conduct of lenders and that this fact, alone, puts the banks in check when attempting to foreclose on a homeowner's residence. Yes, lenders of defaulted loans have a right and should be permitted to obtain the security for the payment of their loan; the house. Yet, taking someone's home should be only undertaken under a proper legally defensible claim as the impact is far reaching and devastating to the homeowner.
These results may have done more good than one may think. Now, all borrowers' attorneys are on notice that they should be even more vigilant in forcing a lender to prove their case in foreclosure. Do not just accept that the lender is in the right. Instead, question their claims and tactics before waiving the white flag of defeat. Only than is justice served.
Friday, July 06, 2012
A brokerage commission is generally due when a real estate broker procures a ready, willing and able purchaser for a transaction. Nonetheless, it is often the case that real estate brokerages work very hard to procure a purchaser just to have their work-product utilized by a competitor to procure the purchaser and earn the commission. This is the situation that the NYS Court of Appeals recently faced when deciding Malone v. Ralph Rieder, which can be read here.
The issue presented to the Court was if the procuring brokerage was unjustly enriched at the expense of the due diligence brokerage and hence, did the procuring brokerage owe the due diligence brokerage a portion of their commissions?
The Court answered the question with a striking NO. The rationale says the Court is that there was no business relationship or connection between the 2 brokerage companies. Therefore, the relationship between the 2 brokerage companies was too attenuated to justify the claim and the case was dismissed.
The lesson here is that one needn't be concerned about the acts of unknown parties and one can protect oneself by acting as a good-faith purchaser for value. To illustrate, here, the defendant purchased the due diligence reports from the seller and therefore was an innocent party and consequently not liable for unjust enrichment to the due diligence brokerage.
Real estate brokers should take comfort in the Court's decision because they needn't probe the underlying relationships between the businesses with whom they contract and other entities tangentially involved but with whom they have no direct connection.
The Court did state however that the claims against the first procured purchaser who did not proceed with the transaction and the seller remain pending - so this remains as the best route for the due diligence brokerage to obtain recourse for its loss.
