In September 2015, Southold passed a law, Southold Town Zoning Code §280-4, prohibiting all transient rental properties, also known as short-term rentals. Thereafter, local folklore emerged about grandfathering a house around the law. Don’t believe the folklore.

As a matter of background, prior to the transient rental law, Southold homeowners were generally able to rent their homes with no minimum durational restrictions. Now, all dwellings located in Southold, except for those on Fisher’s Island, are prohibited from leasing their homes for a period of less than 14 nights. Moreover, when a property is listed on a short-term rental website, the law presumes the dwelling is being used as a transient rental property. This law does not affect the hospitality industry as applied to licensed bed and breakfasts, hotels, and motels. Therefore, if you wish to stay in Southold for a duration of less than 14 nights, you must stay at a motel, hotel, or bed and breakfast.    

As to grandfathering a house around the law, for a non-conforming use to legally continue it must:

• Have been in existence on the effective date of the Southold’s Zoning chapter, April, 9, 1957; 

• Not been enlarged, altered, extended, reconstructed or restored; and 

• Never be changed to a conforming use. 

This last requirement is why Southold residents will functionally be unable to grandfather around the Southold transient rental law. Simply stated, once a homeowner’s property is used for a conforming use that nonconforming use no longer falls under the grandfathering exception. In a short-term rental, once the rental period is over, possession is transferred back to the homeowner in a conforming use. So, the only way to get grandfathering is to always have continuous occupancy at a home by tenants without ever having a break in rentals. This functionally doesn’t happen. Sometimes the best way to challenge a law that you don’t like isn’t to find a way around it, but instead to become active in local government and have the law changed to your liking.

The Making Home Affordable (MHA) Program, which was launched in 2009 to assist millions of distressed homeowners facing foreclosure, is set to expire on December 31, 2016. Under this program, homeowners with non-GSE mortgages (i.e. mortgages not owned or guaranteed by FannieMae or Freddie Mac) may apply and be reviewed for refinancing, loan modifications, short sales, deeds-in-lieu, and unemployment assistance with their lenders in accordance with stringent guidelines set forth in the Making Home Affordable Handbook. Many homeowners who were approved for loan modifications under the Home Affordable Modification Program (HAMP) were also eligible for free HUD-approved credit counseling to assist them in creating a household budget that lowers the risk of default in the future.

Previously set to expire on December 31, 2015, MHA was extended through 2016 due to its widespread success and the continuing need for relief for millions of homeowners nationwide. However, the number of applications under the MHA program have declined overall in recent years due to both the stabilizing housing market and drop in the unemployment rate. At the end of 2015, RealtyTrac reported that there were 1,083,572 properties with foreclosure filings nationwide—a significant drop from the peak of 2,871,891 properties with foreclosure filings in 2010. As of May 2016, RealtyTrac reported a total of 896,913 properties in default, at auction or repossessed by the banks.

The Obama administration has not yet announced another one-year extension to the program through 2017, and it is unclear at this time whether such an extension will be granted. The unknowns that are involved with the looming presidential election make the possibility of an extension even less clear. Though the foreclosure rate is down, there is still a great need for the MHA program for the many properties currently in foreclosure and the many millions more that are still at risk for default.

Homeowners who are still facing the possibility of foreclosure may apply for any of the foreclosure alternative programs under MHA on or before December 31, 2016 deadline.

Though it is not necessary to have a decision on the application for a loan modification, short sale, or deed-in-lieu by the end of 2016 to be eligible under the MHA program, servicers are required under the MHA program to design policies and procedures that ensure that permanent modifications are effective by December 1, 2017 and short sales and deeds-in-lieu are closed by December 1, 2017.

Struggling homeowners should apply now to take advantage of the foreclosure alternatives provided by the MHA program before the deadline of December 31, 2016. If homeowners do not apply by that date, they will be limited to applying for lender/servicer in-house programs, which are usually limited in scope and may not be as affordable or reasonable as the offers under the MHA program.

The candidates for the 2016 election should take a position on the possibility of extending the MHA program through 2017 in order to help the millions in foreclosure and in default. 

The U.S. Department of Treasury recently released Supplemental Directive 16-04 (Making Home Affordable Program – Handbook for Servicers Version 5.1).  This Supplemental Directive announces the release of Version 5.1 of the Making Home Affordable (“MHA”) Handbook (the “Handbook”).  This newest version of the Handbook consolidates the “sunset” provisions provided by the U.S. Department of Treasury in Supplemental Directive 16-02 (MHA Program Termination and Borrower Application Sunset) and Supplemental Directive 16-03 (MHA Program Termination and Borrower Application Sunset II) into one location for ease of reference.

Distressed homeowners who are facing foreclosure must submit their request for mortgage assistance under the MHA program by December 31, 2016.  After that date, lenders will no longer be required to comply with the MHA guidelines set forth in the Handbook.  This will leave many distressed homeowners with few remaining options and most will face the possibility of foreclosure.

The MHA program was announced in 2009, by the Obama Administration, as a relief to distressed homeowners.  The MHA program’s objective is to provide guidelines to lenders to modify the terms of eligible mortgages so that “at-risk” homeowners would be able to reduce their monthly mortgage payments and to avoid foreclosure.  According to the most recent MHA Program Performance Report, during the last 7 years, the MHA program has only helped 2.5 million of the 7 to 9 million homeowners that were identified as “at-risk” by the Obama Administration in 2009.  This means that the remaining 4.5 to 6.5 million “at-risk” homeowners who do not submit their request for borrower assistance by December 31, 2016, will be faced with foreclosure.

Congress’ decision to abandon the MHA program seems misguided because of the time and resources it has invested in the program.  Most importantly, the termination of the program on December 31, 2016, leaves up to 6.5 million “at-risk” homeowners scrambling to submit requests for assistance of face the possibility of foreclosure.