If you are a struggling homeowner and have sought relief via a loan modification, there may be new pressure on lenders to negotiate a modification. Last week, New York’s Appellate Division, Second Department, ruled in US Bank N.A. v  Sarmiento that Wells Fargo, a well-known lender, could not collect interest or fees on a loan that had accrued while a borrower, Sarmiento, pursued a loan modification. Sarmiento attended 18 settlement conferences and remained persistent in obtaining a loan modification yet the decision indicates that Wells “delayed and prevented any possible resolution of the action.” Wells is cited for various delays and miscommunications which when considered wholly, led to the determination by the court that Wells failed to negotiate in good faith. This court decision yielded a long-awaited definition of “good faith” with regards to negotiations in foreclosure conferences.  The court concluded that Wells’ conduct indicates a “disregard for the settlement negotiation process” which increased the balance on Sarmiento’s loan.

This decision gives hope to borrowers frustrated with the often drawn-out process of obtaining a loan modification. If a lender loses documents, repeatedly requests the same information, fails to review the application in a timely manner, denies an application without adequate grounds or deliberately or recklessly delays the process in any way, a borrower now has the option to demonstrate the lender’s failure to negotiate in good faith. This could translate to thousands of dollars lost in interest and legal fees for lenders.

Hopefully, this will put pressure on lenders to remain timely and organized in their evaluation of a borrower’s loan modification application for if they don’t comply with good faith guidelines, they could be at risk to lose a great deal of money. But remember, “good faith” is a double edged sword, as borrowers must also negotiate in good faith by putting forth a purposeful and honest effort at a settlement conference to reach a resolution.

If you are a licensed real estate agent and have ever used or are still using air drones to take photographs of properties to improve your listings, stop now and do not do so again. The Department of Transportation’s Federal Aviation Administration has recently provided clarification on the FAA Modernization and Reform Act of 2012, prohibiting the commercial use of model aircraft.  

Under this Act, a model aircraft is defined as an unmanned aircraft that is flown recreationally within visual sight of the aircraft operator. There are numerous statutory requirements that aircraft operators must adhere to when flying model aircraft, such as the weight of the aircraft and where and when the aircraft can be flown. However, the most important statutory requirement for real estate agents is that the aircraft must be used only for recreational purposes.

Millions of Americans have joined aircraft clubs in order to build and fly model aircraft and have used model aircraft to take aerial photographs and video of their communities, gardens, and farms. This is allowed. If you are using a model aircraft to take photographs for pleasure and do not intend to use or sell the photographs for your business, then you do not violate any statutes. Real estate agents, however, use model aircraft for commercial purposes, violating the statutory requirement of recreational use. For example, many real estate agents use model aircraft to take aerial shots of properties for their listings, especially if the properties are large and have a high sales price. With high commissions at stake, real estate agents are willing to put forth the extra effort to take these aerial photographs and improve their listings to catch a worthy buyer’s eye. It is important to note that if a real estate agent is caught using model aircraft to take photographs of properties for listings, the Federal Aviation Administration, under this Act, may fine this real estate agent (or exact punishment in any other way it deems necessary) for the violation of this statutory requirement.

Since the Federal Aviation Administration has the power of enforcement, it is wise to avoid using model aircraft for commercial purposes at all costs.

Stay tuned for an update on what kind of fines the FAA can exact on violators.

ELIGIBILITY OF FLOOD RISK REDUCTION MEASURES UNDER THE HAZARD MITIGATION ASSISTANCE (HMA) PROGRAMS

On June 18, 2014, the Federal Emergency Management Agency (FEMA), which is an agency of the United States Department of Homeland Security that coordinates the response to a disaster that has occurred in the United States, announced a new policy entitled “Eligibility of Flood Risk Reduction Measures under the Hazard Mitigation Assistance (HMA) Programs.” This new policy, which applies to Federal, State, tribal, and local authorities involved in the administration of HMA Programs, describes a change in FEMA’s HMA Program guidance concerning the types of physical flood risk reduction projects FEMA may consider for funding under its HMA Programs.

The HMA Program authorities are provided by the National Flood Insurance Act of 1968, as amended, to use assistance made available from the National Flood Mitigation Fund for carrying out and planning activities designed to reduce the risk of flood damage to structures covered under contracts for flood insurance. FEMA’s HMA Programs include the Pre-Disaster Mitigation Program (PDM), a Hazard Mitigation Grant Program (HMGP), and the Flood Mitigation Assistance (FMA) Program. The HMGP and the PDM Programs provide assistance to State, tribal, and local governments for hazard mitigation activities that are cost-effective and substantially reduce the risk of future losses from major disasters. These HMA Programs are one way FEMA supports mitigation against flooding and other disasters.

Prior to this new FEMA policy, the 2013 HMA Unified Guidance stated that only “minor localized flood reduction projects” are eligible for funding under the FMA, PDM, and HMGP. Further, the guidance stated that “major flood control projects” related to the construction, demolition, or repair of dams, levees, dikes, floodwalls, seawalls, breakwaters, groins, jetties, and erosion projects related to the beach nourishment or re-nourishment, are ineligible activities under all programs (emphasis added). However, FEMA has now revised the HMA Program guidance after a review of relevant legislation, regulations, and policy to allow for the construction, demolition, or mitigation of dams, dikes, levees, floodwalls, seawalls, groins, jetties, breakwaters, and erosion projects related to beach nourishment or re-nourishment under the HMGP and PDM Programs.

Under all HMA Programs, approval of an eligible project must not result in a Duplication of Programs (DOP) with other federal agencies. This doctrine of Duplication of Programs prohibits FEMA, or any other federal agency, from using its assistance to fund projects or programs if funding for similar activities is available under a more specific federal authority, unless there is an extraordinary threat to lives, public health or safety, or unimproved real property. The DOP issue is of particular concern in determining eligibility for flood risk reduction projects because other federal agencies may be funding similar flood risk reduction measures under more specific authorities. This new FEMA policy addresses the DOP issue by speaking about how the DOP may affect the eligibility of HMA flood risk reduction projects and how applicants may screen projects for potential duplication prior to application.

HMA Programs are established by Sections 203(PDM) and 404 (HMGP) of the Robert T. Stafford Disaster and Emergency Assistance Act, 42 U.S.C §§5133, 5170c-(b)(2) and by Section 1366 (FMA) of the National Flood Insurance Act of 1968 (NFIA), as amended by the Biggert-Waters Flood Insurance Reform Act of 2012, 42 U.S.C §4104c. The HMA Programs are also governed by Title 44 Code of Federal Regulations (C.F.R.) Part 9, Part 10, Part 13, Part 59, Part 65, Part 79 (FMA), Part 80, and Part 206, Subpart N (HMGP).

For more information on FEMA’s Eligibility of Flood Risk Reduction Measures under the Hazard Mitigation Assistance (HMA) Programs Policy, visit http://www.fema/gov/hazard-mitigation-assistance-policy.  

There are many towns on Long Island that pride themselves on their quaint, small-town characteristics and their colonial history. Residents of these towns often worry that their communities will be tarnished or disrupted by an excavation site in their backyards.

However, New York’s highest court has recently upheld the power of local governance to regulate businesses in its borders. According to this ruling, towns have the right to ban fracking by using local zoning ordinances if fracking disrupts the character and integrity of these communities.

Fracking is a method of hydraulic extraction. High-pressure fluid is injected into cracks in the earth to release a higher quantity of oil and gas. There is a huge movement in the United States against the use of fracking as it has numerous environmental risks, such as groundwater contamination and earth tremor causation.

The towns Dryden and Middlefield, both located in upstate New York, are rural communities that rely heavily on agriculture and small town tourism. In the mid-2000s, two companies, Norse Energy Corp. and Cooperstown Holstein Corp., had tried to develop and extract natural gas in the areas. Responding to rigorous protests, the Town Boards of Dryden and Middlefield banned the use of fracking due to the environmental and health implications involved in the controversial method. Nonetheless, the two companies maintained that state law was on their side and that they had the right to develop in the areas.

The New York Court of Appeals has upheld the decisions of the lower courts by ruling in favor of the towns. Pursuant to the Municipal Home Rule Law, by banning fracking, both towns were exercising their local governance rights in the preservation of the character, welfare, and aesthetics of their communities. If fracking threatens the integrity of a town, that town should be able to reject it based on the Home Rule Law.

Interestingly, this ruling was not based on any scientific conclusion that fracking is harmful to the environment. Oil companies that want to pursue fracking may do so in areas where fracking is not restricted or banned by local ordinances. Instead, the decision discussed the towns’ objection to fracking on the ground that it would cause heavy traffic congestion in the towns and industrialize the small-town, rural areas.

Also, this decision is of note as it comes out the exact opposite of the Court’s February 14, 2013 decision in Sunrise Check Cashing and Payroll Services v. Town of Hempstead, in which the Court declared that the Town of Hempstead could not ban check cashing establishments from the area because its zoning ordinance did not demonstrate that the business had a negative impact on the community. Consequently, reading these decisions together yields an understanding that a town can ban businesses such as adult entertainment and fracking for having negative impacts on the community, but cannot ban check cashing and fast food businesses as there is no objective negative impact. So, the Sunrise case reminds us that this latest decision on fracking is not to be read broadly in garnering an understanding that a town has free rein to prevent any business it dislikes from existing in its borders. Instead, a town must have a legitimate objective belief that the subject business negatively impacts the community, beyond conjecture, in order to block it from the Town’s jurisdiction.

If you are a struggling homeowner and have defaulted or are at risk of default on your mortgage loan, an application for the Home Affordable Modification Program (HAMP) may be your best chance of obtaining an affordable loan modification.

Previously set to expire in December 2015, the Home Affordable Modification Program has recently been extended by the Obama Administration through December 2016. This federal loan modification program has been successful in providing reductions in monthly mortgage payments for millions of homeowners nationwide. Unlike Lender-based modifications, this program has two tiers, one of which requires a debt-to-income of 31% in its modification terms and another which requires a 10% reduction in monthly mortgage payments. If a homeowner is not eligible for Tier 1, then he or she will be reviewed for Tier 2, thus giving homeowners two chances to obtain lower, affordable monthly mortgage payments in their application for HAMP.

Oftentimes, Lenders that have their own loan modifications will only add the arrears to the principal balance without changing any other terms of the loan, thus creating monthly mortgage payments that are, in fact, higher than the original payments. Struggling homeowners often cannot accept a modification with higher payments because their hardships are long term or even permanent.

HAMP, however, requires affordable mortgage payments as part of its program and now will continue through the remaining term of the Obama Administration.