The Closing Disclosure Replaces the HUD-1 in Real Estate Transactions in 2015

According to the Consumer Financial Protection Bureau, the new form, "The Closing Disclosure form replaces the current form used to close a loan, the HUD-1, which was designed by HUD under RESPA. It also replaces the revised Truth in Lending disclosure designed by the Board under TILA."

Consumers must receive this form "at least three business days before the consumer closes on the loan." Strikingly, if many possible loan components are changed following the provision of The Closing Disclosure form, such as changing the product or adding a prepayment penalty, a "consumer must be provided a new form and an additional three-business-day waiting period after receipt".

Look forward to this final rule, which is effective on August 1, 2015.

Ringing in the New Year With Real Estate Brokerage Advertising Regulations

If you've been following our blog, you've known for months about the Real Estate Brokerage Advertising Regulations which became effective on January 2, 2014. Hopefully you have been preparing to ensure compliance, but if you haven't, here's one last reminder that you most likely need to overhaul the way you advertise.

The Department of State has overhauled the Advertising Regulations found in 22 NYCRR 175.25. If you've visited their page before, make sure you refresh your browser to see the updated January 2014 regulations. What used to be two paragraphs has exploded into twenty-eight paragraphs over two pages covering everything from for-sale signs to e-mail correspondences. Even the simplest things fall under the new regulations. For example, salespersons and brokers must display their full licensed names on their advertisements, no nicknames, and phone numbers must be clearly labeled based upon their type (cell, desk, home, etc). By defining advertising as "promotion and solicitation related to licensed real estate activity" the Department of State has thrown a broad net in order to capture as much activity as possible under the new regulations.

It is imperative that brokers become familiar with the new regulations so they understand what they need to change, and it is even more important that brokers conduct trainings with their agents who most likely are unknowingly violating the new regulations on a regular basis. Determining what information is required on each type of advertisement requires a careful reading of the regulations. Consult your trusted attorney for guidance so you can avoid potential penalties and continuing running your brokerage without a hiccup.

Ocwen is Finally Accountable for its Actions

The Consumer Financial Protection Bureau (CFPB) and 49 states have signed a proposed court order requiring Ocwen to spend $2.1 billion on loan modification programs and relief to victims of foreclosure. 

Ocwen is the largest non-bank mortgage servicer in the United States. It was alleged by CFPB that for years, Ocwen has illegally delayed loan modifications, charged improper fees, provided incorrect updates to consumers who were applying for loan modifications, erroneously reviewed foreclosure documents, and inaccurately applied and tracked monthly mortgage payments. 

Like GMAC, Bank of America, Citi, JPMorgan Chase, and Wells Fargo, Ocwen is alleged to have deceived and abused the system for too long and must be punished for its illegal practices.

Under the Order, Ocwen is required to comply with the provisions of the 2012 National Mortgage Settlement and must comply with the new mortgage servicing rules that are taking effect January 2014. A knowledgeable, responsive single point of contact must be established for borrowers applying for relief, so that the loan modification process will be clearer and quicker than ever before. Instead of being sacrificed, borrowers will now be protected and given a fair shot at saving their homes.

Borrowers should be overjoyed that there will be more communication between servicer and borrower, and that borrowers who were improperly foreclosed on between 2009 and 2012 may receive compensation. It is a great step forward in the mortgage servicing world. 

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Andrew M. Lieb reappointed as Special Section Editor for Real Property to The Suffolk Lawyer

We would like to congratulate our Managing Attorney, Andrew M. Lieb, on having been re-appointed as the Special Section Editor for Real Property to The Suffolk Lawyer, law journal.

Andrew M. Lieb reappointed as Co-Chair of the Real Property Committee to the Suffolk County Bar Association

We would like to congratulate our Managing Attorney, Andrew M. Lieb, on having been re-appointed as the Co-Chair of the Real Property Committee to the Suffolk County Bar Association for the 2013 - 2014 term.

Welcome to the World - Spencer Nate Lieb

Lauren and Andrew Lieb are thrilled to introduce their son, Spencer Nate Lieb.

Born December 7th, 2013

Weighing 6 Pounds 14 Ounces

Measuring 20 Inches

Mortgage Changes less than a Month Away – What to expect on January 10, 2014

A whole new world of getting a mortgage is coming in the beginning of 2014. You should get familiar now!!!

To remind you, in the years before 2008, financial institutions were subject to little regulation in the United States. Many lenders did not even bother to verify income or debt before handing over adjustable-rate mortgages (ARMs) to consumers who could not afford them. High risk lending was the norm and mortgage fraud was rampant. These practices caused the subprime mortgage crisis and the worst recession that the country has experienced since the 1930s. Thousands of homes were foreclosed on and over one hundred mortgage lenders went bankrupt as more and more people could no longer afford their monthly mortgage payments.

As a result, The Consumer Financial Protection Bureau is issuing a final rule that prohibits high risk lending and implements the Truth in Lending Act and sections 1411, 1412, and 1414 of the Dodd-Frank Act. This rule will take effect on January 10, 2014, and will require mortgage lenders to verify consumers’ income and debt. Prepayment penalties that punish borrowers if they sell or refinance their home within a certain time frame are now generally prohibited. Qualified mortgages, which are less likely to end up in default, are defined in great detail and cannot have terms longer than 30 years or fees exceeding 3% of the total loan amount.  Lender are also encouraged to refinance adjustable-rate mortgages (ARMs) and must maintain documentation of compliance for three years after the loan is given to the consumer.

To remain in the real estate game, you must understand these rules and what a qualified mortgage is as that will drive the industry. Please read the rule for yourself!

Will We See an Extension of the Mortgage Forgiveness Debt Relief Act through 2014?

The Mortgage Forgiveness Debt Relief Act of 2007 has provided relief to thousands of borrowers who have completed short sales or obtained loan modifications with mortgage principal reductions. Before this law was enacted, any forgiven mortgage debt was taxable by the government. For example, if a lender reduced a borrower’s principal balance by $100,000.00, then the borrower would have to report that forgiven debt as ordinary income and pay taxes on it.  This was, of course, impractical and unreasonable for borrowers who were already experiencing financial hardship and were relying on modifications or short sales to save them from foreclosure. Most borrowers could not afford their tax bills and were stuck in the same situation as they were in before they had requested help from their lenders.

Under The Mortgage Forgiveness Debt Relief Act of 2007, borrowers do not have to pay taxes on cancelled mortgage debt as a result of a modification or foreclosure of their primary residence. This act was originally supposed to end at the end of 2012, but it was granted an extension through 2013 on the third day of the new year.

An extension may be granted through 2014, but it is unlikely. Both H.R. 2788 and H.R. 2994 are bills that will extend The Mortgage Forgiveness Debt Relief Act for at least another year, but they were each referred to committee over the summer and have received no attention since. There are 44 cosponsors for H.R. 2994, but it is already now the middle of December and time is running out. In order for this bill to be enacted, it still needs to pass the House and Senate and it must get signed by the President before December 31, 2013. It is improbable that an extension will be granted, but not impossible; especially with the economy rebounding and many forgetting the plight of those left behind. It’s important to not forget these individuals that still need relief and who have often spent years trying to get a modification or a short sale approved only to now be taxed when they finally get the relief that they have hoped for.

So for them, please tell your local representative how important it is that these Bills are passed and The Mortgage Forgiveness Debt Relief Act of 2007 is extended for another year.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Hotel Occupancy Tax on Expedia, are brokers next to be taxed for their rentals?

Last week, the Court of Appeals, NY's highest court, ruled that "Local Law 43, a hotel room occupancy tax applicable to online travel companies", is constitutional.

At issue before the Court was the legality of the City's "authority to tax the fees they collect from their customers" in Expedia v. City of NY Dept. of Finance where this fee represents an amount, which is larger than the amount actually paid the hotel for the actual occupancy of the room.

So the question before the Court was whether the brokerage fee, on hotel occupancy, was taxable? 

This decision is most interesting to real estate professionals because they always wonder why there are rules for transient (short-term) rentals of housing. As they can see from this decision, there are rules for establishments that offer transient housing such as hotels, motels & inns in the form of the imposition of a tax, among other rules. Further there are rules for companies that "broker" those deals whereas those "brokers" have to pay a tax on their commission, among other rules. Aren’t these websites, called “room remarketers” in the applicable tax, analogous to real estate brokerage companies for landlord / tenant rentals that aren’t transient? At the least, aren’t they analogous to Airbnb in the transient setting?

In opposition, the online travel companies argued that the City was taxing “a service fee under the guise of a tax on hotel rent” and therefore the tax was improper. The Court explained that the online travel companies were incorrect. The Court stated: “[u]nder the statute, the City may tax a ‘rent or charge,’ and it may collect the tax from a hotel ‘owner . . . or . . . person entitled to be paid the rent or charge’".  Further, “the City may tax any service fee that is a ‘condition of occupancy.’”

Aren’t brokerage fees on landlord / tenant a condition of occupancy? Maybe, but maybe not. Doesn’t a condition mean that its failure prevents the result? Can a broker prevent the result? No, therein is the difference between brokerage companies and travel sites. Real estate brokers often are cut out of deals and cannot prevent occupancy in order to get paid, but instead have a claim for commission that is separate from occupancy. In fact, no Lis Pendens is available to brokers and a mechanic’s lien is only available for a lease with a term of more than 3 years for non-residential property.

However, doesn’t Airbnb do just the same as Expedia? So, will companies like Expedia try to level the playing field next by lobbying that this tax is imposed on Airbnb as well? Right now, the cost of doing business for Airbnb just got cheaper and they now have a strategic financial advantage in the City of New York. What happens next is tantalizing.  

Movements in LGBT Discrimination Laws

In the wake of the U.S. Supreme Court's June 26 same-sex marriage decisions, pressure has increased to expand protections under federal, state and local legislation regarding sexual orientation, gender identity and gender expression in the context of employment and housing. In the employment area, the Senate Health, Education, Labor and Pensions ("HELP") Committee has approved a bill, ENDA (the Employment Non-Discrimination Act), that would prohibit employers from discriminating against employees on the basis of sexual orientation or gender identity.

Learn more about employment and housing regulations and see the full published article here

Get Out Girlfriend - Evicting Your Significant Other

Guess what? If you are trying to evict a family member and you resort to a summary proceeding, it will likely be dismissed. Instead, you will end up in a prolonged ejectment proceeding in Supreme Court or in the appropriate matrimonial / family part depending on your precise circumstances. This jurisdictional result is
because Family Member Evictions are typically not available in a summary proceeding. However, should an unrelated paramour be considered a family member after all?

See the full published article here...

Find a housing counselor - Consumer Financial Protection Bureau approves list

Learn if a mortgage is good for you, your clients &/or customers.

Housing counselors provide advice on buying a home, renting, defaults, foreclosures, and credit issues.

In NY, 2 nationally approved housing counselors are:

1. National Federation of Community Development Credit Unions
2. National Urban League

However, there are many local housing counselors that can be found through this tool.

After, January 10, 2014 lenders will be required to provide a list of ten (10) housing counselors to all applicants for federally-related loans.

The list will also include this warning:
"The counseling agencies on this list are approved by the U.S. Department of Housing and Urban Development (HUD), and they can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you. This list shows you several approved agencies in your area. You can find other approved counseling agencies at the Consumer Financial Protection Bureau’s (CFPB) website: consumerfinance.gov/mortgagehelp or by calling 1-855-411-CFPB (2372). You can also access a list of nationwide HUD-approved counseling intermediaries at http://portal.hud.gov/hudportal/HUD?src=/ohc_nint.”

No need to wait until January 10th - real estate professionals should start directing consumers to this list today.

Lieb School's Final 2013 Continuing Education Class is Now Open for Enrollment!

Storm Front: Resiliency to Forces of Nature

Instructor: Andrew M. Lieb, Esq., MPH

Storms strike New York more frequently with each passing year. Out of nowhere your smooth transaction might be blown apart through forces of nature. So, be prepared. An agent should know the nuances between different terms appearing within a Risk of Loss Clause in a contract of sale and how prepossession agreements change the playing field. An agent should understand the varying property insurance endorsements that are available for floods and windstorms. And, unfortunately, an agent must be prepared to guide their client’s relocation should their commercial property experience a total loss. In this instance, familiarity with Industrial Development Agencies and their tax saving function is required, especially if the client wishes a helping-hand in navigating land use regulations, construction and the varying municipal agencies that must approve a new development or rental. This course will drive real estate agent’s understanding of resiliency. The storm front is coming. 

VISIT www.liebschool.com for class details

This will be Lieb School's last CE class of 2013. 

CE classes will resume in March of 2014. 

Sign up quickly, before the class is full. 

If there are no seats left when you try to register, login to your account to join the waiting list.

Real Estate Brokerage Law: Is AirBnB engaging in the unauthorized practice of real estate brokerage?

There has been a lot said about AirBnB these days. It's been called a disruptive technology (a compliment in the technology world) as a result of its leveraging the international sharing culture in real estate, by Gigaom, Fastcompany, and Techcrunch, among others. Yet, it has also been labeled as an illegal hotel site, which doesn't sufficiently warn its customers that their participation may be illegal as a violation of local transient laws. The latter appears to be the sentiments of New York State, as evidenced by the recent subpoena issued by the state's attorney general, Eric Schneiderman, seeking data on AirBnB's hosts. In response, AirBnB seems to be crafting a public relations campaign defending its business model by proposing that legislation be introduced at the state level requiring its users to pay taxes incident to their rentals. 

However, taxes and labels are neither here nor there. The real question is if AirBnB's business model is legal in the first instance, as their practice is quite similar to that of a licensed real estate brokerage in the state of New York, but without AirBnB having such licensing, according to the eAccessNY Occupational Licensing Management System......

See full published article by Andrew Lieb, Esq., MPH at the New York Real Estate Journal:  http://nyrej.com/66975#sthash.hltxB4mB.dpuf

Team Name Change - Brokerage Advertising Regulations

We are continuously receiving questions if a Team needs to create a new entity under the Advertising Regulations, at 19 NYCRR 175.25, for Real Estate Brokerages, which are effective January 2, 2014.

No, a team can continue to own an old entity that does not comply with the regulations for names so long as the team does not promote or solicit related to licensed real estate activity under that name.

So, the brokers ask us - wouldn't we always promote or solicit under our name.

Well, you can simply file a Certificate of Assumed Name with New York State that does comply, operate under that Assumed Name, but continue the entity structure that has the non-complying name, which is a much less expensive and time consuming solution than establishing a new entity.

To accomplish this Assumed name, read the Instructions for Completing the Certificate of Assumed Name first, then, fill out the form, pay the appropriate fee and file.

However, the form does state: "All documents should be prepared under the guidance of
an attorney". So, if you need help, hire an attorney.

Best of luck.

Supplemental Directive 13-09 to the Making Homes Affordable Handbook will speed up the loss mitigation process

Are you sick of the unnecessarily long HAMP application process? Do you have countless loss mitigation initial packages sitting on your desk at home? Well, good news! Supplemental Directive 13-09 to the Making Homes Affordable Handbook, issued on October 18^th, 2013, makes the loss mitigation process more efficient.

Under Section 2.2.2 of Chapter II of the Making Homes Affordable Handbook, “Right Party Contact” is established when the Lender successfully communicates with the borrower regarding loss mitigation options. After these options are discussed and the borrower decides to apply for the Home Affordable Modification Program (HAMP), the servicer must submit to the borrower an initial loss mitigation package that would allow the borrower to apply for HAMP. This package, at a minimum, must include the Request for Mortgage Assistance form, which asks the borrower to outline his income, expenses, assets, real estate, and reason for delinquency.  The package, however, can also include documents such as 4506-T, which grants the servicer access to the borrower’s tax returns, and the Dodd-Frank Certification form, which requires that a person is ineligible for any MHA program if that person has been convicted of felony, larceny, theft, fraud, forgery, money laundering, or tax evasion in the last ten years.

Before Supplemental Directive 13-09 was issued, if the borrower did not at least complete and submit the Request for Mortgage Assistance, the servicer had to re-submit the entire initial package to the borrower.

However, under Supplemental Directive 13-09, if the borrower submits any documents of an initial package, such as the 4506-T, RMA, or Dodd-Frank Certification, the servicer must now confirm receipt of the documents and submit an “Incomplete Information Notice.” No longer does the servicer need to re-submit the entire initial package if the borrower only completes a 4506-T.  An Incomplete Information Notice is sufficient. The only time the servicer must re-submit the initial package is when the borrower does not submit any documents whatsoever.

In Section 4.5 of Chapter II of the MHA Handbook, before Supplemental Directive 13-09 was issued, servicers confirmed receipt of initial package within 10 business days and had to make a decision regarding the borrower’s request for HAMP within 30 days. The servicer was not required to respond immediately to requests and this was one of the biggest problems when applying for HAMP or other loss mitigation options. The process dragged on and the borrower sometimes had to wait an entire month before hearing from his or her servicer regarding the loan modification application.

However, under Supplemental Directive 13-09, the servicers must now confirm receipt of the initial package within 5, not 10, business days and must also inform the borrowers at this time whether or not additional documents are needed to complete the loan modification application. This amendment to the MHA Handbook will speed up with loan modification application process. Servicers must confirm receipt of documents and inform of additional document requests within 5 business days.

Also, under the Supplemental Directive 13-09, if the application remains incomplete for a long period of time and the servicer has diligently attempted to obtain the requested documents from the borrowers, then the borrower can be deemed as ineligible for HAMP. If this happens, the servicer must submit to the borrower a “Non-Approval Notice” that informs the borrower why he or she is ineligible for HAMP at this time. This does not mean, however, that the borrower will be forever ineligible for HAMP. If there is a change in circumstances, for example, a new application for HAMP may be submitted to the servicer.

Once a complete loan modification application is submitted to the servicer, the review process begins and takes up to thirty (30) days.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Cracking Down on Strategic Defaulters

Do you know someone who purposely defaulted on his mortgage even though he had the ability to pay it? Perhaps this person did not want to waste his hard-earned income on mortgage payments but instead saved up for a cruise to the Bahamas. Or maybe this person owed more than he originally paid for the home and did not want to continue paying it any longer. Whatever the reason, this person is not alone. There are thousands of these “strategic defaulters” in the United States, many of whom get away with not paying deficiencies because Fannie Mae and Freddie Mac have been lax in pursuing them.

Fannie Mae and Freddie Mac are supposed to evaluate every defaulter’s ability to repay the past due amount on their mortgages. Even after foreclosure, these two government-sponsored enterprises and many other lenders can still go after borrowers with deficiency judgments.

However, according to the recent report from the Office of the Inspector General at the Federal Housing Finance Agency (FHFA), Freddie Mac did not evaluate nearly 58,000 foreclosures for deficiency collectability. That is $4.6 billion that went unchecked and could have at least partially been recovered by Freddie Mac. Thousands of strategic defaulters were set free of the past due amounts that they owed on their mortgages.

The Office of the Inspector General is rightfully horrified by these numbers and is fiercely recommending the FHFA to oversee Freddie Mac’s deficiency recovery strategies to ensure that these strategies become efficient and effective in the near future. The fact that so many have gotten away with this practice in the past few years only encourages more to do so.

No longer should strategic defaulters get away with robbery.

In a separate recent report, the Office of the Inspector General recommends the FHFA to closely oversee Fannie Mae’s deficiency recovery strategies as well. From January 2010 to June 2012, Fannie Mae did not pursue deficiencies in 29,692 foreclosures because the states’ statutes of limitation for pursuing these deficiencies had expired or were about to expire. Fannie Mae is in a better position than Freddie Mac in terms of collecting on deficient judgments, but it can still drastically improve its methods so that it can obtain deficiencies even in states with short deadlines for filing claims.

If you have a loan insured by Fannie Mae or Freddie Mac and you strategically defaulted on your mortgage, watch out. The two enterprises will not be lax any longer.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information. 

Crowdfunding in Real Estate is Alive - Welcome GroundBreaker

On May 14, 2012 we predicted that crowdfunding would be implemented to create the next real estate tycoon.

Now, GroundBreaker has launched and the future is now. As the site states "Our real estate fundraising platform is now available to entrepreneurs of all sizes. We make it possible for you to efficiently fundraise from your extended network or the world".

So, entrepreneurs, its time to leverage the digital world to make brick and mortar rise!

Tune into 88.3 FM (Peconic Broadcasting) 10/11 and 10/12 at 5:30pm - Real Life

Tune into 88.3 FM (Peconic Broadcasting) Real Life with John Christopher at 5:30pm tonight and tomorrow night. 

Andrew Lieb will be on at 5:50pm discussing the latest real estate issues facing the east end of Long Island.

http://peconicpublicbroadcasting.org/

Making Home Affordable Program: Supplemental Directive 13-08

Are you currently applying for a HAMP loan modification? Then good news! If you are granted a HAMP trial period or permanent loan modification on or after March 1, 2014, you may have access to free financial counseling from your servicer!

Currently, Section 6.7 of Chapter II of the MHA Handbook, only borrowers with a total debt-to-income ratio of 55 percent are required to obtain HUD-approved financial counseling when they are approved for a Home Affordable Modification Program (HAMP) modification. These borrowers are at high risk of defaulting because they use over half of income just to satisfy their debts and have little income left over every month. It makes sense that these high-risk borrowers are required to speak with a counselor, but under this Section of the MHA Handbook, they are the only ones required to receive such counseling.

Now, under the Supplemental Directive 13-08, servicers must offer financial counseling to borrowers who have been granted a HAMP trial period plan or permanent modification regardless of the total debt-to-income ratio. More borrowers than ever before will now have access to free financial counseling from their servicers, provided that their servicers participate in HAMP, and either have enough money for HAMP ($75 million or more) or voluntarily choose to follow Supplemental Directive 13-08. This Supplemental Directive is effective March 1, 2014 and does not apply to loans that are owned, insured, or guaranteed by Fannie Mae, Freddie Mac, Veterans Administration, the Department of Agriculture’s Rural Housing Service (RHS), or the Federal Housing Administration (FHA). Even so, this Supplemental Directive will apply to many mortgage loans and affect millions of people who have been approved of a HAMP trial period or HAMP permanent modification.

The purpose of the financial counseling is to ensure that the borrowers are able to successfully complete their trial period plans and afford their permanent modified payments. Even borrowers who have already received a HAMP permanent modification before March 1, 2014 can receive financial counseling if they are at a high risk of default or believe they will be at risk in the future. It is an exciting opportunity for borrowers to receive free financial counseling from their servicers and for servicers to receive consistent monthly payments from every borrower who has received a HAMP modification.

Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information.