Sometimes it's tempting to purchase a plot of land and build a custom home. However, understanding the risks associated can help you avoid costly mistakes. One risk particularly is called copyright infringement.  Brokers, keep this in mind as you work with clients who are buying to retrofit or develop real estate. 

Copyright infringement on architectural designs has recently been addressed by the Second Circuit United States Court of Appeals on June 5, 2014 in the case James E. Zalewski, Draftics, LTD. v. Cicero Builder Dev., Inc., et al.

Mr. Zalewski is an architect who licensed several builders to use his architectural designs. He claims that these builders infringed on his copyright by customizing his designs and building homes based on his designs without his consent.

Mr. Zalewski points to the vast similarities between his designs and the Defendants’ designs, arguing that these similarities prove that the Defendants knowingly took from his work and infringed on his copyright.

Before you apply for a loan modification, it is wise to understand and have realistic expectations about the process. The Home Affordable Modification Program, now in its fifth year, is the federal modification program that has, to date, successfully provided for over 1.3 million permanent loan modifications nationwide. Many homeowners, however, do not know the steps in the HAMP modification process and feel frustrated or upset if they receive a modification with terms that are not what they expected. What homeowners must realize is that a HAMP Tier 1 loan modification requires a 31% debt-to-income ratio and must be reviewed in a ‘waterfall’ process, meaning that the Lender must modify the loan by specific means in a specific order.

The waterfall process is as follows:

1. Capitalization: When the Lender adds unpaid interest and unpaid tax and insurance payments to the principal balance. Late fees may not be capitalized for HAMP modifications.

2. Interest rate reduction: When the Lender reduces the original interest rate of the loan. Oftentimes, the Lender reduces the interest rate to 2% for the first five years and then gradually increases the interest rate on the loan every year until it reaches the current market value.

3. Term extension: When the Lender extends the life of the loan. The cap on a term extension for HAMP is 480 months or 40 years.

4. Principal forbearance: When the Lender forbears a portion of the principal balance. This portion of the principal balance becomes a “balloon payment,” which must be paid in full at the loan’s maturity or when there is a transfer of the property. It does not accrue interest.

If the debt-to-income ratio is not 31% after the Lender capitalizes the loan, then the Lender must then try to reduce the interest rate and so on until it achieves the desired ratio. If the ratio is still not 31% after the Lender has gone through the entire waterfall process, then the homeowner will be deemed ineligible for HAMP Tier 1 and then will be reviewed for other loan modifications, if available.

Yesterday, the New York Attorney General, Eric Schneiderman, announced the New York State Mortgage Assistance Program to help homeowners avoid foreclosure. 

Long Island, with its beautiful, expensive real estate, was devastated by the economic crisis in 2008 and is still struggling to recover six years later. It currently has the highest rate of defaulted mortgage loans and some of the highest foreclosure rates in New York State. In order to speed up the recovery process, Mr. Schneiderman launched this program yesterday to help struggling homeowners borrow up to $40,000 to stave off foreclosure. This program will become effective in September and will be available to Long Island before the rest of New York State, using the money from the National Mortgage Settlement of 2013 to fund these loans.  Many homeowners have been denied for loan modifications in the past because they were unable to pay off their arrears or because there were liens against their property. These loans, which are interest-free and not due until the mortgage is paid off in full, will help struggling homeowners pay off the obstacles to their loan modification approval and allow them to keep their homes.

If you're thinking about landscaping your backyard, installing a wooden deck around your pool, or doing any other project that involves digging, remember to first call National Grid's 811 service. By calling this number, you confirm with National Grid that your digging will not interfere with power lines or pipe lines that are located close to the surface. 811 is a free service that helps keep you and your utilities safe and allows the area to enjoy its services uninterrupted.

Bank of America is under scrutiny by the United States Department of Justice for its unscrupulous financial practices. In order to prevent another economic collapse, the federal government believes that Bank of America, along with other large financial institutions, must be penalized for their actions.

Allegedly having handled shoddy and fraudulent loans, Bank of America is in negotiations to settle civil probes for 12 billion dollars. The amount of this settlement may go up, and if a deal is reached, at least $5 billion will go towards consumer relief by way of loan modifications with principal and monthly payment reductions and other forms of help for defaulted loans. This potential settlement, of course, is great news for the struggling homeowner and represents an enormous fine against the financial behemoth of Bank of America.

If a deal cannot be reached, the Justice Department will most likely proceed with a lawsuit against Bank of America for its fraudulent practices.

Please go here if you like to read more.

Nationwide foreclosure activity is at its lowest point since 2007. The amount of auctions, defaults, and repossessions have substantially decreased across the country. Only 17% of all mortgaged homes are seriously underwater as opposed to 29% in 2012, and negative equity is down overall.

It is anticipated that we will also start to see a decline in short sales in 2014 due to two major reasons:

a. The Mortgage Forgiveness Debt Relief Act has not been passed for 2014. This means that borrowers are liable for the income tax on the forgiven debt in a short sale. In many cases, this kind of tax bill is too high and the borrower must default on his or her tax bill. The IRS can subsequently garnish wages, freeze bank accounts, and place liens on assets without having to first obtain a judgment. Many borrowers are unwilling to put themselves in such a position and would rather let the property go to foreclosure than to have the IRS go after them for money they do not have.

b. Lenders are less likely to approve short sales today because they know they can successfully sell the properties at auction or as an REO (bank-owned property) at a higher price because fair market value for real estate is on the increase.

Please note that the total amount of foreclosures (percentage of units by area) in Suffolk County is higher than the national average and the New York State average, and the amount of Suffolk County homes in pre-foreclosure is on the rise. Overall, however, foreclosure auctions are down in Suffolk County just as the rest of the nation. Keep this in mind, brokers, as you navigate the real estate in Suffolk County.

Updates to the tax laws of New York are available here and are effective as of April 1, 2014!

New changes in tax laws that affect a person’s estate that you should be aware of:

On March 31, 2014, Governor Cuomo signed legislation that makes broad changes to the New York State Estate and Gift Tax Laws, as well as some technical changes to certain trust income tax rules. 

Pursuant to New York Tax Law §952(c), estate tax exclusions will be rising dramatically each year from the current New York State amount of One Million Dollars ($1,000,000.00) to Five Million Two Hundred Fifty Thousand Dollars ($5,250,000.00) by 2017, which is the current federal estate tax exemption amount. Estate tax exclusion means the dollar amount a person’s estate can pass free from New York Estate Tax. More specifically, for individuals dying on or after April 1, 2014, and before April 1, 2015, the estate tax exclusion amount will be Two Million Sixty Two Thousand Five Hundred Dollars ($2,062,500.00). For individuals dying on or after April 1, 2015, and before April 1, 2016, the estate tax exclusion amount will be Three Million One Hundred Twenty Five Thousand Dollars ($3,125,000.00). For individuals dying on or after April 1, 2016, and before April 1, 2017, the estate tax exclusion amount will be Four Million One Hundred Eighty Seven Thousand Five Hundred Dollars ($$4,187,500.00). Lastly, for persons dying on or after April 1, 2017, and before January 1, 2019, the estate tax exclusion amount will be Five Million Two Hundred Fifty Thousand Dollars ($5,250,000.00).

Pursuant to New York Tax Law §954(a), gifts made by a New York resident within three (3) years of that person’s death on or after April 1, 2014, and before January 1, 2019, will be added back into that person’s estate. Bringing these gifts back into the deceased person’s estate will now increase that person’s gross estate and this may make those gifts subject to the New York Estate Tax now, depending on the size of the estate, as discussed in the previous paragraph.

Pursuant to Part X, Section 8 of the new tax laws, the New York State Generation Skipping Transfer Tax is repealed. Prior to its repeal, this tax imposed a generation-skipping transfer tax on outright gifts to persons who are two (2) or more generations below the transferor, or on distributions from certain trusts that are held solely for the benefit of said persons.

These are only a few changes to the current New York State laws that are affecting estate planning in the future. To summarize, these new laws will narrow and ultimately eliminate the estate tax exclusion gap between the New York and Federal estate tax exclusion amounts. For the next five years, however, as the tax estate exclusion amount increases and the taxable gift laws apply, estate planning will become more complex.

See all the recent changes in the New York State laws, effective April 1, 2014, on page 488. 

Starting in June 2014, judges on Long Island will take on a substantial role in Foreclosure Settlement Conferences as issues arise in foreclosure litigation. The purpose of this new policy is to solve homeowners’ issues in an efficient way and help more homeowners obtain loan modifications in an area of the country where the percentage of foreclosures is still quite high.

New York requires judicial intervention in the foreclosure process. It is New York State Law that the courts must hold Foreclosure Settlement Conferences for all residential foreclosure actions involving home loans originating between January 1, 2003 and September 1, 2008, or nontraditional home loans. Previously overseen only by Court-appointed referees, these conferences allow borrowers to discuss workout options with their mortgage lenders in order to avoid foreclosure. However, the process has always been flawed, as lenders oftentimes would send representatives who not only did not have knowledge of the cases but also had no authority. This new policy is supposed to address these types of issues quickly, correct the flaws of the Foreclosure Settlement Conferences, and protect borrowers against the wrongful practices of these mortgage lenders. A judge is much more equipped to handle these issues than a referee, allowing for fewer foreclosures on Long Island.