Consumer Financial Protection Bureau - Regulation Update Signup Available

At our course at Chase Plaza this past Friday, 4/5/13, on Mortgage Mania we referenced the Consumer Financial Protection Bureau (CFPB) and its increasing function of regulating mortgages under the Conforming Loan Limit.

To receive the latest and greatest regulatory updates, each real estate professional should sign-up for email updates on their site, by clicking here.

The best way to add value to your clients is being in the know. So, sign-up NOW!!!

Mortgage Modifications - Supplemental Directive 13-02

On Friday, 4/5/13, Treasury issued new directives to the mortgage modification process.

To read the Supplemental Directive, click here.

Of note in this directive was a change in the categories for denial that give rise to a servicer's (lender's) inability to conduct a foreclosure sale following a denial. To clarify, a servicer cannot conduct a sale within 30 calendar days of a Non-Approval Notice to theoretically give the borrower an opportunity to correct their submission. The traditional five categories for Non-approval were:
(1) ineligible mortgage, (2) ineligible property, (3) offer not accepted by borrower/request withdrawn, (4) previously modified under HAMP Tier 2, and (5) borrower not a natural person.

However, what does ineligible mortgage or ineligible property really mean?

To clarify this confusion this directive deletes these categories and replaces them with the following clear reasons for denial of a modification:
(1) loan originated after January 1, 2009, not a first lien, or unpaid principal balance above program

limit, (2) loan paid off, or charged off and borrower released from liability for repayment, (3)
property condemned or more than four dwelling units, (4) loan subject to involuntary transfer to
a non-participant,

This change is another step in improving the Making Homes Affordable Program. By providing clearer understandings to borrowers and lenders for the framework to achieve a mortgage workout, the parties can intelligently negotiate a resolution.

HUD Launches Fair Housing Campaign - Brokerage Companies Need to Button Up

On April 3, 2013, the US Department of Housing and Urban Development kicked off Fair Housing Month with the launch of a national media campaign.

HUD's press release states: "The campaign, titled “Fair Housing Is Your Right. Use It,” includes English, Spanish, and Chinese radio and print public service advertisements (PSAs) that feature examples of actions which violate the Fair Housing Act and let the public know what to do if they experience housing discrimination."

To read the full press release, click here.
To see video from the campaign, click here.
To see the Public Service Announcements, click here.

While Fair Housing is nothing new, it will be on consumers mind this Fair Housing Month, so its important for brokerage managers to be more vigilant in reminding their agents to respect protected classes in housing. Also, remember that your local municipality: State, County, Town and Village may have additional Fair Housing statutes to protect citizens as the national Fair Housing Act is merely a floor of protected rights, not a ceiling. Also, agents in NYC should pay careful attention because the NYC Human Rights Law is the most protective of its kind in the nation.

Your Home's Price Today - The Calculator

Curious what your house should be worth based upon market trends? Go to the Federal Housing Finance Agency and use the House Price Calculator. This cool calculator projects what a given house purchased at a point in time would be worth today if it appreciated at the average appreciation rate of all homes in the area. 

Click here to give it a try. 

How will the new amendment to divorce law affect real estate?

On January 30, 2013 22 NYCRR 202.16a was amended. What does this mean? How will this affect your divorce? And why am I writing about this? The answers are: Keep reading, keep reading, and this is important. In that order.

22 NYCRR 202.16a is the counterpart to DRL §236(B)(2)(b) and it requires the plaintiff in a matrimonial action to cause the defendant to be served with a “notice of automatic orders” which informs the parties, inter alia, that neither party may in any way dispose of any property without written consent of the other party or by order of the court, except in the regular course of business, for customary household expenses, or in order to pay reasonable counsel fees in the divorce. We’ll refer to these prohibitions as “automatic orders”.

This is a terrific directive as it ensures that your soon to be ex-spouse will not sell your vacation home without your written consent during your divorce. You love that home, it has the biggest pool on the block, your kids learned to swim in the pool and your friends are openly jealous of what you modestly call your “vacation home” (truth: it’s a castle). You are not ready to part with it. So what happens if your unloved one (we’ll kindly refer to the unloved one as your “soon to be ex”) during your divorce sneakily sells the house for half its value (possibly accepting the other half of the payment as a promissory note, transfer of stocks, benefit to his/her business, or cash, as this is just the type of transaction a sneaky person will undertake)? Your soon to be ex will earnestly explain to the court that this is really his separate property, he purchased it with his own money, his name is solely on the deed, and besides, the real estate market is terrible and he sold it for the best price he could, the proceeds were used to pay off debts, and there is simply no money from the sale proceeds to share with you. But you know in your heart that your soon to be ex is doing what he best does-suavely talking his way out of yet another questionable and downright unethical act. What is your remedy?

Until the recent amendment of the law, your remedy was unclear, as the courts were divided on the appropriate remedy for a violation of the automatic orders. Some courts ruled that the violation of the automatic orders is not subject to a punishment of contempt of the Court (see Buoniello v. Buoniello, No. 35948/09 [Sup. Ct. Suff. Co., May 7, 2010]), while other courts held that the automatic orders are in fact orders of the court and a violation of the automatic orders may be subject to contempt of the court (see Sykes v. Sykes, 2012 N.Y. Slip. Op. 22049 [Sup. Ct. N.Y. Co. February 29, 2012]).

As of January 30, 2013 the following provisions have been added to the body of the automatic orders:

1.      “Upon service of the summons in every matrimonial action, it is hereby ordered that…” (body of the automatic orders follows, see 22 NYCRR 202.16a) (This clearly designates the directive prohibiting transfers during the divorce as “Orders”).

2.      “These automatic orders shall remain in full force and effect during the pendency of the action unless terminated, modified or amended by further order of the court or upon written agreement between the parties.” (This clearly sets forth the timeframe of the applicability of the orders).

3.      “The failure to obey these automatic orders may be deemed a contempt of the court.” (Our favorite new provision in the automatic orders.)

The recent amendment will serve to resolve the courts’ division on the appropriate remedy for a violation of the automatic orders.  Now all the courts will have contempt of court at their disposal to punish violators of the automatic orders. Now your soon to be ex will think twice before sneakily selling your vacation home during the divorce. And if he doesn’t, then jail may be his new home. Thank you Administrative Board of the Court for your recent amendment to 22 NYCRR 202.16a. We love it! May justice reign uniformly in the Matrimonial Parts of the Supreme Courts of the State of New York. 

Zoning Regulations are Concerning with Use of Land, Not Identity of User - Per the Court of Appeals

In Sunrise Check Cashing and Payroll, Inc. v. Town of Hempstead, the State's Highest Court ruled that "a zoning measure that prohibits check cashing establishments in a town's business district is invalid, because it violates the principle that zoning is concerned with the use of land, not with the identity of the user". 


While the Court does state that adult entertainment and pawnshops can be regulated based upon their negative secondary effects on the surrounding communities, check cashing is not a similar category. The court did therefore provide for the possibility that adverse secondary effects could justify zoning, but said that such effects were not proven in this case regardless. 

This opinion is important for commercial real estate professionals because it provides support for occupants' discretion in their business enterprises and is very pro-business while reducing barriers to entry. 

Mortgage Modifications: Introducing The Hope Loan Port

Some information on a great new system for mortgage modifications which is being shared by an Assistant Case Manager at Lieb at Law, P.C., Laura Palermo:            

            Applying for a loan modification can be a very frustrating and trying process. For some people it can take years for their application to be properly reviewed and decided on. That’s why I was delighted to hear about the new platform in use by many of the big Lenders, the Hope Loan Port. I learned about the new system while trying to submit a loan modification application to Bank of America on behalf of one of my clients. I was informed by the lender that they are no longer accepting third party submissions via fax and instead, the new preferred method is the Hope Loan Port.

            Upon visiting the Hope Loan Port website ( https://www.hopeloanportal.org/ ) I learned that the website has been created as a “neutral, national, non-profit, e-commerce platform” as a way to provide more transparency and productivity to the process of foreclosure alternative review (i.e. loan modification, short sale, or deed in lieu).

            In order to access and use the Port you must first register as a Counseling Agency.  There are two types of counseling agencies that can register for this platform, the government sponsored not-for-profit agencies which are affiliates of the National Foreclosure Mitigation Counseling Program, and there are for profit counseling agencies, such as law firms. The registration requires you provide your company information and designate one person from your company to be the contact person. The contact person is in charge of managing and maintaining user profiles and the account. After submitting the company and contact information you must agree to the terms and conditions of the site, and then wait for verification.

            About 24 hours after submitting the information we received an e-mail stating that our company was verified by the Port along with our login information minus our password which was supposed to arrive in a subsequent e-mail. We waited for two days and still did not receive our password. I contacted the website by using their “Contact Us” tab and submitting an e-mail requesting the password information be re-sent. Finally, a few hours later I received the password and was able to log in to the actual portal.

            In order to submit a case you must first input information about the Borrowers, the first step requires you to disclose the loan information including the loan number, borrower names, and property address. The second step requires you to disclose financial information including gross and net income, rent, unemployment, monthly expenses etc. From there, you enter the information found on the Request for Mortgage Assistance (RMA) including if borrower would like to sell or keep the property, if the property is listed for sale, if the property is owner occupied, reason for hardship etc. After completing this information you must then upload the supporting documents including the signed and dated RMA, bank statements, pay stubs, profit and loss statement, 4506-T, rental income information, and any other supporting documents based on the Borrower’s situation. Upon submission the Lender gains access and then can review the file and inform you via the portal of information or documents still needed. The Counselor is able to view the pending status and communicate with Lender throughout the review process.

            The website is not entirely user-friendly but they do offer and encourage training webinars.  It still has its glitches to work out as well but overall I feel this is a step in the right direction for the modification application process. Many Borrowers and counselors who have applied for a modification can tell you that it is by no means an easy process. Much of the time spent on the modification application is wrapped up in the submission and re-submission of documents and following up with the Lender to ensure receipt and review of those documents. It is my hope that the Hope Loan Port will eliminate a lot of this back and forth and will also de-mystify the process by creating and maintaining more transparency during the application review.  

            I am interested to see how they will further adapt the website to be more user/Borrower friendly. At this point in time only Counseling Agencies and the Mortgage Lenders or Insurers may access and use the portal. I am curious to see if eventually they will develop an access point for Borrowers so they may submit their modification application online on their own. 

Laura Palermo will keep us in the loop as this program gets perfected, but in the interim, this is an exciting new program that will hopefully help to organize the chaos now existing in the loan modification process. Go check it out!

Zissen Pesach and Happy Easter

Lieb School will be closed through April 1, 2013 in honor of the above holidays.

Registration and Enrollment may both occur during our closure by going to Lieb School's website.

ALERT - Court of Appeals answers how much is seller damaged when buyer breaches contract of sale?

New York's highest Court ruled on March 21, 2013 on an issue that matters to all real estate professionals - PAY ATTENTION

In White v. Farrell,  the Court answered the issue of "the measure of a seller's damages for a buyer's breach of a contract to sell real property".

The Court ruled: "the measure of damages is the difference, if any, between the contract price and the fair market value of the property at the time of the breach".

PAY ATTENTION: The Court expressly set the time for damages at the time of breach, not at the time of resale. Additionally, the Court said that the degree that the resale price should play on a determination of damages is determined by how long after the breach that the property was resold. 

New York now expressly utilizes the Time-of-the-breach rule as the measure of damages. While its excellent that the law is now clear, be mindful that ascertaining the fair market value at the time of the breach is a question of fact for a jury, unless the property was immediately sold at arms length at the time of the breach. Therefore, in this situation, both the seller and the buyer will want to retain expert appraisers to demonstrate their position with respect to fair market value at the time of the breach.

Alternatively, its suggested that a liquidated damages clause is utilized and avoids this dispute altogether - so - make sure that the contract of sale is drafted properly and spells out the damage in the case of breach. 

More Positive Housing Data in the News

In Saturday's New York Times, Floyd Norris, wrote an article entitled Off the Charts, Housing, Ailing for Years, Starts to Recuperate. The article addresses a Census Bureau report that single-family housing starts rose to the highlest level seen since 2008, which is terrific news especially when reflecting on the Great Recession and where the real etate industry has been during the last few years when every other sector started to show a rebound.

To visit the Census Bureau's website on New Residential Construction data, click here. This website is a great resource for Real Estate Professionals because you can analyze data from permits filed all the way through the characteristics of new homes such as the number of bathrooms to the number of fireplaces to even the materials of secondary walls. It also provides data on the all important topic of housing financing.

Yet, back to the article, the key for Real Estate Professionals should move away from the quantitive numbers or illustrative charts, both of which are important, but instead the focus should be that there is just another news article talking positvely about housing. This is particularly important to Real Estate Professionals because housing purchases, new construction and rennovations all deal with trends and emotion. The talk is positive - lets go ride the wave with positive energy and keep housing moving up.