Home Repairs & the Law - New York State Home Improvement Contract Law

If you had damage in the storm & plan to hire a contractor in New York, we will be providing you with some tips & laws to get you on your way.

Lets start with General Business Law 771, which contains the requirements for home improvement contracts as follows:

1. Every home improvement contract subject to the provisions of this article, and all amendments thereto, shall be evidenced by a writing and shall be signed by all the parties to the contract. The writing shall contain the following:

(a) The name, address, telephone number and license number, if applicable, of the contractor.

(b) The approximate dates, or estimated dates, when the work will begin and be substantially completed, including a statement of any contingencies that would materially change the approximate or estimated completion date. In addition to the estimated or approximate dates, the contract shall also specify whether or not the contractor and the owner have determined a definite completion date to be of the essence.

(c) A description of the work to be performed, the materials to be provided to the owner, including make, model number or any other identifying information, and the agreed upon consideration for the work and materials.

(d) A notice to the owner purchasing the home improvement that the contractor or subcontractor who performs on the contract or the materialman who provides home improvement goods or services and is not paid may have a claim against the owner which may be enforced against the property in accordance with the applicable lien laws. Such home improvement contract shall also contain the following notice to the owner in clear and conspicuous bold face type:

“Any contractor, subcontractor, or materialman who provides home improvement goods or services pursuant to your home improvement contract and who is not paid may have a valid legal claim against your property known as a mechanic's lien. Any mechanic's lien filed against your property may be discharged. Payment of the agreed-upon price under the home improvement contract prior to filing of a mechanic's lien may invalidate such lien. The owner may contact an attorney to determine his rights to discharge a mechanic's lien”.

(e) A notice to the owner purchasing the home improvement that, except as otherwise provided in paragraph (g) of this subdivision, the home improvement contractor is legally required to deposit all payments received prior to completion in accordance withsubdivision four of section seventy-one-a of the lien law and that, in lieu of such deposit, the home improvement contractor may post a bond, contract of indemnity or irrevocable letter of credit with the owner guaranteeing the return or proper application of such payments to the purposes of the contract.

(f) If the contract provides for one or more progress payments to be paid to the home improvement contractor by the owner before substantial completion of the work, a schedule of such progress payments showing the amount of each payment, as a sum in dollars and cents, and specifically identifying the state of completion of the work or services to be performed, including any materials to be supplied before each such progress payment is due. The amount of any such progress payments shall bear a reasonable relationship to the amount of work to be performed, materials to be purchased, or expenses for which the contractor would be obligated at the time of payment.

(g) If the contract provides that the home improvement contractor will be paid on a specified hourly or time basis for work that has been performed or charges for materials that have been supplied prior to the time that payment is due, such payments for such work or materials shall not be deemed to be progress payments for the purposes of paragraph (f) of this subdivision, and shall not be required to be deposited in accordance with the provisions of paragraph (e) of this subdivision.

(h) A notice to the owner that, in addition to any right otherwise to revoke an offer, the owner may cancel the home improvement contract until midnight of the third business day after the day on which the owner has signed an agreement or offer to purchase relating to such contract. Cancellation occurs when written notice of cancellation is given to the home improvement contractor. Notice of cancellation, if given by mail, shall be deemed given when deposited in a mailbox properly addressed and postage prepaid. Notice of cancellation shall be sufficient if it indicates the intention of the owner not to be bound. Notwithstanding the foregoing, this paragraph shall not apply to a transaction in which the owner has initiated the contact and the home improvement is needed to meet a bona fide emergency of the owner, and the owner furnishes the home improvement contractor with a separate dated and signed personal statement in the owner's handwriting describing the situation requiring immediate remedy and expressly acknowledging and waiving the right to cancel the home improvement contract within three business days. For the purposes of this paragraph the term “owner” shall mean an owner or any representative of an owner.

2. The writing shall be legible, in plain English, and shall be in such form to describe clearly any other document which is to be incorporated into the contract. Before any work is done, the owner shall be furnished a copy of the written agreement, signed by the contractor. The writing may also contain other matters agreed to by the parties to the contract.

Commercial Landlord Liability - Hurricane Sandy

Commercial landlords secure your property as soon as the storm passes. While a property owner is not liable for injuries occurring on their premises during a storm in progress, the landlord only has an objective reasonable time to remedy the situation or face liability thereafter.

So, landlords, its your job tomorrow, following the storm, to inspect your properties and immediately institute corrective measures. If the dangerous condition existing on your premises will take time to remedy, you are charged with providing adequate warnings and barriers to protect those who are to be rightfully in and on the premises. 

Good luck and be safe. 

Homeowners Insurance Storm Tip

Back on August 28, 2011 I blogged about homeowners insurance in the wake of Hurricane Irene. Click here to read that article as its still applicable.

TIP: If you have an opportunity, take your cell phone out & take pictures of your home before damage occurs, both inside and out. Therefore, if you do have coverage, you can prove the damage.

More legal tips will be posted throughout the day, so stay tuned.

Trees are down - stay safe - Hurricane Sandy

I originally blogged about tree law back in 2010, but will provide you with a refresher in the face of Hurricane Sandy. Here is the law on trees in NY:

• If a property owner has no knowledge that a tree is decaying or unsafe and it simply falls from wind or storm onto his neighbors’ property, he has no liability & the neighbor where it fell is responsible for removal for the portion on his property.
• If a property owner knows of a tree's dangerous condition; that the tree is unsound and/or decaying, regardless if wind contributes to its fall onto his neighbors' property, he is liable. 

The issue is if the tree was sound before it fell. 

• If so, removal is charged to the property owner in which it lies after it falls. 
• If not, removal & liability for damage is charged to the property owner from which it fell.

To be clear, there is no duty to inspect your trees to determine if they are sound, instead only where there are indicia of decay or disease does such a burden fall upon a homeowner. The standard is if a defect in the tree is "readily observable" to an ordinary landowner upon reasonable inspection.

However, if your tree falls on a highway, the law is as follows: (see Highway Law 325)

If any tree shall fall, or be fallen by any person from any inclosed land into any highway, any person may give notice to the occupant of the land from which the tree shall have fallen, to remove the same within two days; if such tree shall not be removed within that time, but shall continue in the highway, the occupant of the land shall forfeit the sum of fifty cents for every day thereafter, until the tree shall be removed. 

Stay safe. 

Tankless Water Heaters Explained

At our continuing education class on Thursday of last week, To be Green or Not to be Green, a student inquired about historic tankless water heaters v. their modern efficient & green cousins that are now promoted by the energy efficiency movement. While I was sure about the effect of the difference, that the modern electric tankless models are quite more efficient, I was not sure about the specifics. So I researched until I found this article, which I think is quite informative. Click here to learn more.

Basically, the historic version included boiler-integrated tankless coils, which uses a home's space heating system to heat water as explained here whereas the modern cousin is an on-demand tankless model that only provides water when needed as explained here.

The most lucrative shopping mall in the world

As reported on Business Insider, Bal Harbour Shops in Miami is #1.

To read the article, click here. 

Real estate agents seeking to niche in shopping centers should definitely take an excursion to Miami and learn what sets this shopping center apart in order to benchmark their concepts for your local clients. 

Broker's Agent Confusion

There appears to be a lot of confusion about a Broker's Agent among real estate agents.

The license law defines such an agent at RPL 443(1)(k) as follows:

“Broker’s agent” means an agent that cooperates or is engaged by a listing agent, buyer’s agent or tenant’s agent (but does not work for the same firm as the listing agent, buyer’s agent or tenant’s agent) to assist the listing agent, buyer’s agent or tenant’s agent in locating a property to sell, buy or lease respectively, for the listing agent’s seller or landlord, the buyer agent’s buyer or the tenant’s agent tenant. The broker’s agent does not have a direct relationship with the seller, buyer, landlord or tenant and the seller, buyer, landlord or tenant can not provide instructions or direction directly to the broker’s agent. Therefore, the seller, buyer, landlord or tenant do not have vicarious liability for the acts of the broker’s agent. The listing agent, buyer’s agent or tenant’s agent do provide direction and instruction to the broker’s agent and therefore the listing agent, buyer’s agent or tenant’s agent will have liability for the broker’s agent.

Interestingly, a broker's agent should not have a client, but only a customer as the term customer is commonly utilized in the industry, albeit not defined by License Law.

The license law defines a client as follows:

Client - The one by whom a broker is employed.

As a result, the definition of Broker's Agent does not permit for a client because it states that a broker's agent is "engaged by" (otherwise known as employed) the "listing agent, buyer’s agent or tenant’s agent" and not by a vendor or vendee. Yes, technically the agent who employs is the client, but DOS Opinions clearly state that a real estate agent needn't make a formal disclosure by way of the form to another real estate agent working on the same matter. Therefore, the agency disclosure form is only necessary to customers (those who the broker's agent is attempting to procure for the deal).

Moreover, the definition of Broker's Agent mentions "vicarious liability", but agents misinterpret this to be their liability and specifically, their insulation from liability. It is not. Instead its the "seller, buyer, landlord or tenant"('s) liability is at issue, not the real estate agents. To be clear, if you are a broker's agent, you can be liable for your wrongs. If you are a seller's agent or buyer's agent who engages a broker's agent, you can be liable for their acts. All the statute states is that a client who has a broker's agent working on their matter in addition to their own real estate agent is not liable for that broker's agent's misconduct.

Making Home Affordable - Performance Report

MHA recently posted their performance report through August 2012. This is the Federal Program that oversees mortgage modifications, short sales, and deeds in lieu of foreclosure. The most interesting statistic was that "81% of eligible non-GSE borrowers entering HAMP in August have received some form of principal reduction with their modification".

To read the report, click here.

Douglas Elliman Reinvent - Thank You

This is our first day back from the excellent convention hosted by Douglas Elliman at the Borgata in Atlantic City. The event was spectacular and the real estate agents at Elliman should be proud. At the event we launched our newest continuing education course, Deal Killers and taught agents how to avoid deal killers in order to save their deals. We also taught Conflicts of Interest, which fulfills NAR's ethics requirement for members of HANFRA, LIBOR, and HGAR. There were many other terrific speakers who attended the event and I had the opportunity to see Bette Midler and Randi Zuckerberg. All in all it was a great experience. Thanks.

Court of Appeals hears brokerage agency case

On October 9, 2012, New York's highest Court heard the case of Douglas Elliman LLC v. Tretter.

To watch the Court's oral arguments, click here and click on the button for webcast.

During the arguments, the Court was faced with the issue of the extent of a broker's fiduciary duty when working as an exclusive agent for a seller and concurrently trying to have potential customers become customers or clients of the broker on different homes / apartments.

The Tretters argument was that if you have an exclusive a broker can't show prospective purchasers another property, especially not one that is not an exclusive listing at your brokerage house.

Douglas Elliman suggested the following rule to the Court: "A broker can show a buyer other properties, the broker can be informative, can be honest, can be straightforward, but cannot prefer the property over the property of their principal". As restated by counsel to Douglas Elliman, the rule is: "The broker can be informative and honest about the unit, but cannot sell the unit over their principal".

While hearing the arguments, the Court focused greatly on a case that they heard back in 2001, called Sonnenschein v. Douglas Elliman. To read the prior case, click here.
The precedent discussed in Tretter from the Sonnenschein decision is as follows:
This Court has not addressed the parameters of a real estate broker's duty under these circumstances. Other jurisdictions have held that, in the absence of an agreement with a principal to the contrary, a broker owes no duty to refrain from “offering the properties of all [its] principals to a prospective customer” (Coldwell Banker Commercial Group v. Camelback Off. Park, 156 Ariz. 226, 230, 751 P.2d 542, 546; *376 McEvoy v. Ginsberg, 345 Mass. 733, 737, 189 N.E.2d 546, 547; see generally, Foley v. Mathias, 211 Iowa 160, 233 N.W. 106; Lemon v. Macklem, 157 Mich. 475, 122 N.W. 77). We find this approach to be consistent with the nature and fundamental requirements of the real estate marketplace in New York. Unless a broker and principal specifically agree otherwise, a broker cannot be expected to decline a prospective purchaser's request to see another property listed for sale with that broker. Any other rule would unreasonably restrain a broker from simultaneously representing two or more principals with similar properties for fear of ***67 **862 violating a fiduciary obligation in the event a buyer chose the property of one principal over that of another. Similarly, such a limitation would frustrate the interests of sellers, who benefit from the opportunity to market their properties to as many potential purchasers as possible, as well as the interests of potential buyers, who often request exposure to a number of properties in order to select the one most suitable to their needs and budget. For these reasons, we decline to impose upon all broker/principal relationships the restrictive view of broker duty that plaintiffs espouse. Of course, a principal remains free to enter into an explicit agreement with a broker to achieve such an exclusive arrangement.

We will stay focused on the decision, but the oral arguments are terrific and both attorneys represented their clients well.

Rich Dad, Poor Dad - Bankruptcy Dad

Robert Kiyosaki's Rich Global company filed for Chapter 7 bankruptcy as a result of a judgment obtained by The Learning Annex for $24M. Kiyosaki is the famed author of "Rich Dad, Poor Dad". While many are reporting this in a mocking manner in that Kiyosaki is famed for telling people how to make money, I believe its yet another example of Kiyosaki's message in a positive light.

The message is to separate your assets into different entities that are independent of each other. As a result of Kiyosaki's entity structures, its reported that he is still worth around $80M after the bankruptcy without any of the money being in jeopardy. Now, that is a good benchmark for success.

To read more about Kiyosaki's bankruptcy, go to a great article by businessinsider.com by clicking here.

Nation's largest lender of home mortgages sued by US Government

Wells Fargo was sued yesterday by the US Attorney's office for mortgage fraud because it allegedly certified loans improperly. The lawsuit seeks hundreds of millions of dollars in damages. The lawsuit was brought under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.  The lawsuit deals specifically with the lender's participation in the FHA's Direct Endorsement Lender Program. 

Basically, the lawsuit says that FHA had to pay millions in insurance for defaulted loans based upon receiving inaccurate information by Wells.

This is yet another example about how the days of the smoke in the mirror test are over & lenders are now required to perform necessary due diligence to ensure that borrowers should be given loans.   

To read the US Attorney's Press Release concerning this lawsuit, click here. 

The Suffolk Lawyer - Focus on Real Property

I am delighted to share a link to this month's The Suffolk Lawyer, which is the official publication of the Suffolk County Bar Association.

This month's edition Focuses on Real Property. Click here to read the publication.

Inside, you can read articles such as "Accommodating Companion Animals" written by the leading experts on the topic over at Jackson Lewis; or you can learn to "Avoid Non-Payment" by the likes of Alicia M. Menechino; and don't every forget the need for a Buyer's Real Estate Agent in  a terrific article by Denise Langweber and her daughter Rebecca entitled "Buyer Beware"; or there is "The Diligence That is Due" by Lance Pomerantz; and lastly everything you need to know about transactions for "Residential Waterfront Properties" by the refined Heather Wright.

I owe a debt of gratitude to these authors for making my task as the Special Section Editor for Real Property  one of the best experiences of my professional life.

Green Guides - FTC's Regulations for Marking

The Federal Trade Commission has promulgated regulations to "help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act, 15 U.S.C. [section] 45".

To read the FTC's press release concerning the Green Guides, click here.

For a Summary of the Green Guides, click here.

For the complete Green Guides, click here.

To learn more about these Green Guides and how they relate to Long Island Real Estate, register for our upcoming continuing education course, "To be Green or not to be Green" by clicking here.

The National Mortgage Settlement Takes Effect: An Update to “Robosigning Settlements” from February 9, 2012

The National Mortgage Settlement between the Attorney Generals of 49 States and five banks and mortgage servicers (Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo) takes full effect today.

For Borrowers that are eligible under this Settlement, it provides sweeping changes in the modification process, servicing of loans, payments to the States and possible payments to borrowers who have already lost their homes in foreclosure.

Perhaps, one of the most important changes for borrowers attempting to modify their mortgage at the same time as being in active foreclosure, the settlement agreement will greatly inhibit “dual tracking” of borrowers. “Dual Tracking” occurs when a borrower is in active foreclosure litigation at the same time as attempting to modify their loan.

Prior to today, the foreclosure litigation continued in earnest, at the same time borrowers were being evaluated for a loan modification. In the past, many borrowers submitted loan modification applications but lost their homes to foreclosure before their applications were reviewed by the lender.

Although the Directives under the Home Affordable Modification Program (HAMP), specifically states that “Foreclosure sales may not be conducted while the loan is being considered for a modification or during the trial period”, this was of no assistance to borrowers with lenders and/or servicers, that did not participate in HAMP.

As delineated in the “Servicing Standards Highlights” on the New York State Attorney General’s National Mortgage Settlement webpage, some of the key features of the Dual Track restrictions are as follows:

C. Dual track restricted

1. Pre-foreclosure referral

*            If bank/servicer receives a complete loan modification application by day 120 of delinquency, bank/servicer must review and make a determination on the application prior to referring the loan to foreclosure.

*            If bank/servicer receives a substantially complete loan modification application by day 120 of delinquency, bank/servicer must provide borrower an additional 10 days in which to complete the application.  If bank/servicer receives a complete application by the end of the 10-day extension, bank/servicer must review and make a determination on the application prior to referring the loan to foreclosure.

2. Post Foreclosure Referral

*            Once a loan has been referred to foreclosure, if the borrower submits a complete loan modification application within 30 days after the attorney letter is sent to the borrower, the bank/servicer must not move for a foreclosure judgment or seek a foreclosure sale until it has completed its review and determination of the application.  If servicer offers the borrower a loan modification, the servicer must continue to delay any action in the foreclosure proceeding until the borrower accepts or denies the offer.  If the borrower accepts the offer, the foreclosure proceeding is suspended unless the borrower fails to perform on the loan modification. The borrower may accept verbally, in writing or by making the first trial payment.

*            If borrower submits a complete loan modification at any time after 30 days following the mailing of the attorney letter but prior to 37 days before a scheduled foreclosure sale, the servicer must complete its review of the application prior to going to foreclosure sale.  If the servicer offers the borrower a loan modification, servicer must delay the sale if necessary to provide the borrower 14 days in which to accept or deny the offer, and, if the borrower accepts, must continue to delay the sale unless the borrower fails to perform on the modification.

*            If borrower submits a complete loan modification with 37 to 15 days before a scheduled foreclosure sale, the servicer shall conduct an expedited review.  If the servicer offers the borrower a loan modification, servicer must delay the sale to provide the borrower 14 days in which to accept or deny the offer, and, if the borrower accepts, must continue to delay the sale until the borrower fails to perform on the modification.

There are many more details and assistance to borrowers in this monumental Settlement. The impact the Settlement has on the struggling housing market, remains to be seen. With actual oversight of lender compliance, enforcement of the Settlement Agreement and assistance to borrowers by providing contact information about organizations to aid borrowers, through the Office of Mortgage Settlement Oversight and the National Mortgage Settlement Administrator and State Attorney General’s Offices, perhaps this is a step in the right direction. Hopefully, other lenders, that are not parties to the Settlement,will voluntarily adopt similar Servicing Rules. Such a voluntary act would certainly assist the entire Industry and create uniformity, which would positively impact the struggling housing market.

For more information please visit:

The New York State Attorney General’s Settlement info at:

http://www.nysmortgagesettlement.com/

The National Mortgage Settlement Administrator:

http://www.nationalmortgagesettlement.com/

The Office of Mortgage Settlement Oversight:

https://www.mortgageoversight.com/

What should my Cap Rate be on my commercial space?

During our recent class on Property Management I was asked about Capitalization Rates for property in Long Island. A great website to get this type of information and other commercial real estate statistics is ReisReports. Click here to visit their site.

Organizations and Clubs for Long Island Commercial Real Estate

I am often asked how someone can get into commercial real estate. My general response is that a first step is to read literature on financial statements so that you can understand the money driver behind the industry. I suggest watching talks from leading developers, which can be found at i Tunes U. Its also important to read a form lease and to look up all of the terms so that you can gain a basic understanding of the language of the industry. Yet, what can be done that takes less self-discipline to get someone motivated, kind of a jump start?

I suggest joining one of these five (5) regional organizations to meet, network and discuss your passions and you can see if commercial real estate is really right for you.

Website	Name	Topic
www.lireia.com	Long Island Real Estate Investment Association	Real estate investment club for brokers
www.lireg.org	Long Island Real Estate Group	Provides the real estate industry and allied trades a platform for real estate-related charitable giving and networking
www.licommercialnetwork.org	Long Island Commercial Network	Commercial Division of the Long Island Board of Realtors
www.cibs-li.org	Commercial Industrial Brokers Society of Long Island	Where Nassau and Suffolk commercial dealmakers meet and build relationships
www.bomali.org	Building Owners’ and Managers’ Association	The leading advocacy group for the commercial real estate industry

Go to the website, look up when a meeting is happening, drive to the meeting, introduce yourself around the room and you are half way there. You will gain mentors and friends that can help you along the way.

Also, keep your eyes open for this year's Long Island Commercial Real Estate Convention and come experience the leading service providers to the industry and take a seminar or two to sharpen your skills.

Eminent Domain & Foreclosure: States take a look, our Federal Government has a position on this

A few posts back we discussed the technique of government utilizing its Eminent Domain power to force mortgage restructuring by taking mortgages at their current fair market value (not face value) and thrn having investors push money into government in order to modify the terms of the borrower's payments.

Thereafter, the Real Property Committee to the Suffolk Bar Association discussed this topic at our monthly meeting and addressed the issue of if Eminent Domain could force the taking at the depressed value or if instead, the taking should be had at the pre-depressed value as Eminent Domain takings had occurred during the Great Depression - our most similar reference in case law. To be clear, there are Eminent Domain cases that dispute the value at which property should be taken during a depressed market and it is unclear if, in NY, Eminent Domain could even be utilized to take mortgages at their current market value instead of their pre-depressed value.

Well our Congress now has a bill, HR 5397, Defending American Taxpayers from Abusive Government Taking Act of 2012, which basically prohibits Federal Agencies from partaking in such restructuring through Eminent Domain. So even if local government did utilize Eminent Domain, if this bill passes, many many mortgages would be off limits.

Your author doubts the bill will pass because there has been so much push back on the use of Eminent Domain in the first place throughout our Country, the issue of valuation in the second place within NY and other States, and the history of not much really getting done in Congress these days.

Regardless, to view & track the bill, as it is intellectually interesting, click here.

Consumer Financial Protection Bureau seeks to amend both Regulation X of RESPA & Regulation Z of the Truth in Lending Act

Following up on previous blog posts about Regulation X & RESPA our latest chapter brings you a proposal by the CFPB to add new mortgage servicing rules. To be clear, servicing refers to the business of managing the billing, accounts & management of a note and mortgage.

Here are the proposed rules:

• Monthly mortgage statements
  Servicers would be required to provide clear billing statements including information on the loan, amount due, and application of past payments.
• Warnings before interest rate adjustments
  Servicers would be required to provide consumers with a new notice 6 to 7 months before the first rate adjustment, as well as earlier and improved notices before rate adjustments causing an increase in a consumer’s mortgage payments.
• Force-placed insurance
  Servicers can only charge borrowers for buying insurance on the property when they have a reasonable basis to believe that the borrowers have let their own insurance lapse and have given borrowers two notices estimating the cost of the “force-placed insurance.”
• Early outreach for delinquent borrowers
  Getting a delinquent borrower back on track requires early intervention and information about options available.
• Prompt crediting of payments
  Payments must be applied as of the day they are received, and the handling of partial payments is clarified.
• Accurate information management
  Servicers must have reasonable policies to ensure that when borrowers provide documents and information the servicers can find and use them.
• Error resolution and information requests
  Mistakes happen, but they need to get fixed. Servicers must address borrower concerns about possible errors within certain timeframes and provide the information they request.
• Direct and ongoing access to servicer personnel
  Delinquent borrowers will be able to contact the right people at their servicer to get information and take steps to avoid foreclosure.
• Evaluation for alternatives to foreclosure
  Servicers would be required to appropriately review borrower applications for loan modifications or other options to avoid foreclosure.

Make your voice heard - Comment by October 9:
For Regulation Z, click here
For Regulation X, click here

Brokerage Fee Disputes DON'T Belong in the Commercial Division

In New York State Courts there are distinct Judges that sit to hear commercial cases. These Judges seek to better serve the needs of the business community and our State's economy. To accomplish this goal, there are distinct rules (202.70) in place to provide for earlier assignment of cases and uniform and more thorough procedures for expert discovery. To learn more about the purpose of the commercial division, read the Chief Judge's Task Force report by clicking here. 

Yet, Real Estate Agents are Professionals, not business people. They are licensed by the Department of State and have certain ethical requirements to maintain their status as a professional. These professionals consist of Brokers and Salespersons. As a result, when these professionals aren't paid and they bring suit to collect their professional fees, they should not sue in the commercial division. 

Here is why. Rule 202.70(c) of the Uniform Civil Rules for the Supreme Court & the County Court states that "Non-commercial cases The following will not be heard int he Commercial Division even if the monetary threshold is met: "(1) Suits to collect professional fees". Therefore, real estate brokerage fee disputes are relegated to a non-commercial part where the litigation is typically over a longer duration, without as precise rules and the parties are not pushed as eagerly to settlement. It seems being a professional is distinct from being a business person and our job as professionals is to uphold the nobility of the profession beyond merely making a profit. The Court System's Rules echo this fact and we should take these rules into our assessments of collectibility of our fees when clients refuse to pay. 

Being a professional changes things. 

Foreclosure and the Economy - Some helpful links

Yesterday, we had a wonderful group of real estate agents attend our continuing education course, Foreclosure and the Economy.

During the class, we warned real estate agents not to negotiate with lenders directly unless they comply with the rules for Mortgage Assistance Relief Services and Distressed Property Consultant Contracts.

Here are some helpful links to comply:

Mortgage Assistance Relief Services: http://www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf
Distressed Property Consultants:  http://codes.lp.findlaw.com/nycode/RPP/8/265-b

The end of Fannie Mae and Freddie Mac is Coming

Over a year ago, on February 11, 2011 the Obama Administration first announced the winding down of Fannie Mae and Freddie Mac in its Housing Report. The Long Island Education Board's blog on the report can be found by clicking here.

Now, the process continues as Treasury just announced steps its undertaking to expedite the process by modifying its Preferred Stock Purchase Agreement with the Federal Housing Finance Agency, the conservator of Fannie and Freddie. To read Treasury's Press Report, click here.

According to Treasury, new steps are being implemented to prevent Fannie and Freddie from retaining a profit and reentering the market in their prior form.

The takeaway is that the decentralization of mortgages is no joke and is coming. Get ready.

Fannie Mae Selling Guide Updated

Just this past week, Fannie Mae issued its Selling Guide with other updates. To see the guide, click here.

Two highlights from the Guide are as follows:

1. Maximum LTV for ARMS are reduced from 97% to 90% with Desktop Underwriting & from 95% to 90% for Manual Underwriting. 
2. Minimum credit score requirement is increased from 620 to 640 for manually written loans. 

These changes become effective on 10/20/12. 

If you are a mortgage banker, mortgage broker, or real estate salesperson; this guide is a must read.

LEGAL real estate INTERNSHIP OPPORTUNITY - attention Law Student's

Lieb at Law is Hiring! Excellent opportunity to learn the residential real estate practice first-hand while managing files under the guidance of experienced attorneys. 

Law student responsibilities include daily file updates to clients and real estate brokers in acting as the firms liaison from retention to attending closings. Issue spotting is a must. Be prepared to manage expectations and learn everything that can go wrong in a sale or purchase of residential real estate. To get this position, you must be ready to succeed, work in a team environment and process quickly. Must embrace education and technology. 

Those that succeed in this role will have the opportunity to advance. Can lead to Junior Associate Position. 

TO APPLY: Email Cover Letter and Resume to careers@liebatlaw.com 

*No Phone Calls or Faxes.
*Paid and Part Time (flexible to class schedule)
*Position is in Center Moriches Office

Politics - Eminent Domain to address Foreclosures

First, San Bernardino County, California, sought to seize upside-down mortgages and restructure them with more favorable terms to borrowers utilizing the government's compulsory sale powers by way of Eminent Domain.

Next, the idea was floated in Chicago.

Now, there is talk about its utilization in New York.

But, what are all of these politicians actually talking about?

As the advocates would put it, private investors will provide a municipality with the requisite funds to seize the underwater properties at market value, discounted from the loan amount as the properties are upside-down, and than purchase the restructured loans back from the government. Yet, there are many secondary effects as the introduction of this new approach to mortgage modifications adjusts the risks inherent in making loans and will likely change future loan terms for all.

Traditionally, Eminent Domain is utilized by municipalities for roads, schools and to facilitate up-zoning efforts in redeveloping districts. The concept being floated is to utilize Eminent Domain instead to force mortgagees to sell their notes and mortgages to the government for less than what is owed and to allow the government to flip the loan, at market value for the real estate, not based upon the agreed upon terms between mortgagor / mortgagee, to a new investor who will provide better terms to the borrower/mortgagor.

Can this be done in New York?

Looking at the applicable New York Statute, which is the Eminent Domain Procedure Law, Section 103 defines Real Property as follows: includes all land and improvements, lands under water, waterfront property, the water of any lake, pond or stream, all easements and hereditaments, corporeal or incorporeal, and every estate, interest and right, legal or equitable, in lands or water, and right, interest, privilege, easement and franchise relating to the same, including terms for years and liens by way of mortgage or otherwise.

As can be seen, a lien / mortgage is included. So, technically it appears on first glance that this is possible.

If it is, how much must the government pay for these underwater loans?
According to In re Public Park in City of New York, the Appellate Division held that the amount should be determined as follows:
If the portion of the land taken which is subject to the ... mortgage has a value in excess of the amount of the mortgage, then his interest is measured by the face of his mortgage and interest. If the value of the land is less than the face of the mortgage, then his interest is the value of the land, less, of course, a proper apportionment of taxes and assessments.

So there you have it, its the value of the land (at the time of the Eminent Domain) minus taxes and assessments.

Yet, interestingly, the statutory purpose for Eminent Domain in New York contains a wrinkle, which states, in pertinent part, as follows: to give due regard to the need to acquire property for public use as well as the legitimate interests of private property owners, local communities and the quality of the environment, and to that end to promote and facilitate recognition and careful consideration of those interests; 

So the question becomes, is this proposed utilization of Eminent Domain a "public use" at all or is it instead, a public purpose, which is not written as the statutory purpose for Eminent Domain?
You see the public isn't using the land at all. Instead, the public is trying to fulfill the purpose of helping homeowners in distress. Therefore, the utilization of Eminent Domain to rescue underwater homeowners in New York state appears questionable at best.

Comment on Federal Regulations on Servicing of Mortgage Loans

The Consumer Financial Protection Bureau is asking for your help in reviewing proposals at Regulation Room and reacting to them concerning regulating the mortgage industry. Click here to help make a difference in how mortgages are serviced into the future.

Regulation Room is a place where people talk to people talking to government. Each issue has its own summary for reading, discussing and commenting to the agencies that make the regulations.

Don't complain about the future of your industry, shape it.

Be careful when adding your spouse to a deed in only your name

Gifting your spouse a half interest in your separate real estate creates a presumption that the property is marital and subject to equitable distribution, so says the Third Judicial Department in Campfield v. Campfield, which can be read by clicking here. 

More strikingly is the fact that the Court refused to Order a credit to the original owner spouse for the value of her contribution of separate property to the acquisition of a marital asset. This is the traditional approach that most matrimonial attorneys are familiar with.

The Third Department distinguished the scenario of inheriting money and purchasing marital property where a credit would be given from the situation before it when a party already owned property and than added a spouse's name to the property. 

The Third Department controls from the Canadian border in the north to the lower Catskills in the south and from the Vermont and Massachusetts borders in the east to the Finger Lakes in the west.  The Third Department includes just over half of New York's land area and contains about one seventh of the State's population.

Making Home Affordable - New Handbook Available - Version 4.0

To access the new Handbook for MHA, inclusive of HAMP and HAFA, click here. While reviewing the Handbook you should be aware of the case of Flagstar Bank v. Walker wherein the Court held that the statutory good faith standard for a CPLR 3408 Foreclosure Settlement Conference is compliance with the Handbook. To review the case, click here.

This Handbook is the rules for banks / servicers to modify mortgages, so pay careful attention to detail and make sure that they comply.

Architectural Work is not only protected in copyright by the Architectural Works Copyright Protection Act

In an interesting appeal before the Second Circuit Court of Appeals, captioned as Scholz Design, Inc. v. Sard Custom Homes, LLC, Prudential Connecticut Realty, & Coldwell Banker Residential Real Estate, LLC, the Court held that the Copyright Act's protection of 'pictorial, graphic, and sculptural works' also protects architectural works from infringement. Therefore, graphical renditions of architectural work, before they are made into final construction drawings, which  have sufficient detail to enable constructions of homes based upon them, also contain protected expression.

The pictures at issue in this case were front elevation drawings showing the appearance of the front of the houses surrounded by lawn, bushes, and trees.

This decision is huge for the architectural industry as it greatly expands our understanding of protected works for architects. Moreover, the decision highlights the risks that real estate companies face by promoting protected works on their sites without express permission. All brokerage houses should carefully perform due diligence on the sketches of buildings that they post on their websites before approving such a posting.

To read a copy of the decision, click here.

Follow Up to Last Night's CE Course Mortgage Mania at Newsday

We had a great course last night at Newsday for our local real estate agents called Mortgage Mania, where the students each earned 3 continuing education credits. While the slideshow was visible on the projected screen, some students inquired if I could re-post the links onto the blog as they couldn't see them on the handout.

So here goes:

Credit Scores- 3 Bureaus:

WWW.EQUIFAX.COM

WWW.EXPERIAN.COM

WWW.TRANSUNION.COM

FHA: RULES

http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee

For HUD’s Latest Rate Update:

http://portal.hud.gov/hudportal/documents/huddoc?id=11-39ml.pdf

I also wanted to thank Todd Triolo, our friend and mortgage expert, for his insights that he shared with the class as we learned. 

Todd can be reached at DE Capital Mortgage, LLC | 124 E Main St | Babylon, NY 11702
MAC M6652-011 Phone (631)422-8288| Cell 631-834-9283| Fax 866-917-0776 

Building is Up Nationally, Down Locally

Confidence for "newly built, single-family homes improved for a fourth consecutive month" says the National Association of Home Builders/Wells Fargo Housing Market Index when discussing the national trend.

To read the NAHB's press release, click here.

Unfortunately, the Northeast did see a significant decline in the same period. So we are left with mixed news at the Long Island Education Board. Let's hope that the national growth trend comes to town.

Water Recycling Showers - Wow - What's Next?

A great article on Business Insider about the future of showers, click here, to read. This shower cuts water consumption by 70% by automatically filtering the used water. It is estimated that the shower's cost can be recouped in 3 to 4 years of savings on your water bill. Real estate professionals who are interested in being green should read this article as this technology is estimated to be less than a year away from stores & now is the time to start talking about this great advancement. Soon home purchasers will want to know if the listing has such a shower. What's next?

Suffolk Bar - Real Property Committee Meeting - 8/15/12 - 6:30pm

For all those interested, the Suffolk Bar's Real Property Committee will be joined by Peter Johnson, Esq., the Town of Smithtown Town Assessor to discuss the tax grievance process within the Town.

Suffolk County's Economic Recovery is in the Sewer

As a real estate professional I am often faced with many people in foreclosure. I experienced the housing market slump live and in person. I know of the decline in the real estate industry in Main Street and I have a few thoughts about Wall Street. So, as you can tell, I have spent a lot of time thinking about how a recovery can be achieved and I have realized that the answer lies in the sewers. No, not as a metaphor for failure or as a depository for a magic bullet, but instead, I believe that the answer actually lies within the sewers. You see many businesses would like to open throughout Suffolk County, but they are stopped because of our lack of sewers. Just across the street from my law firm is vacant space that would make a perfect Starbucks or Hamptons Coffee Shop, but for the fact that the lack of waste water permits will prevent their opening. To solve this problem and enable economic growth locally we as a County need more sewers. In fact, to protect the water supply and to provide for generations to come we need more sewers. So, I point you all to the Suffolk County Sewer Study, click here, to learn more about the development of sewers in our County. I ask you all to contact your legislator and support the increase of sewers. I charge you with checking out the Village of Patchogue's model of development where sewers are ever expanding and to ask yourself, is the answer to our economic recovery in the sewers?

NYC LOCAL LAW – FORECLOSURE FILINGS

Effective June 15, 2012, pursuant to Local Law 4 of 2012 a lender foreclosing a mortgage on residential real property must notice the New York City Department of Housing Preservation and Development within fifteen (15) days from commencement of suit, discontinuance of action, entry of judgment, and the transfer of title by Referee to purchaser at sale. Here is a link to the same:

http://www.nyc.gov/html/hpd/downloads/pdf/Foreclosure-Notification-Rules-Proposed.pdf

We will continue to monitor if other jurisdictions follow suit, but for now, be guided accordingly.

Bad Faith Negotiations = $200K Exemplary Damages Principal Reduction

In Bank of America v. Lucido, Justice Spinner, Supreme Court, Suffolk County found in his equitable powers that the bank's bad faith misrepresentations on their appraisal, ability to offer a principal reduction pursuant to the pooling and servicing agreement in the face of their denial of the same, inability to have an individual with settlement authority appear at the conference, prior counsel's inappropriate conduct, and 34 months of bad faith negotiations should result in punitive damages.

The decision is particularly interesting because Justice Spinner had previously been reversed on appeal when he cancelled a mortgage following similar conduct in Indymac Bank v. Yano-Horoski. It appears the Judge is  testing the authority of the Supreme Court to impact settlement conferences pursuant to CPLR 3408. This is a very important measure for all settlement conferences in the macro because it gives practitioners a clearer idea of what the ramifications for bad faith negotiations can be. Now lets see if the decision is modified on appeal.

To read the Lucido decision, click here.

Open meeting with Town of Southold Supervisor Scott Russell

Forwarded email from my friend Joan Bischoff:

---

To all owners/managers of RE companies on the North Fork

Dear colleagues,

Town of Southold Supervisor Scott Russell and Phillip Beltz asked me to make you aware of the following meeting:

Please attend a meeting between Real Estate professionals and Town of Southold Supervisor Scott Russell, the Town's Economic Advisory Council and the Town's new business liaison John Stype.

Meeting is scheduled for Thursday, August 9^th at 7:00 p.m. at the Peconic Lane Community Center (next to the Recreation Center.)

All attendees are requested to fill out a business questionnaire:
  tiny.cc/southold. 

I encourage you to send this invite to all your agents and look forward to seeing you there.
For details please see attached invite.

Sincerely,

Joan Bischoff van Heemskerck
Managing Director North Fork & Shelter Island
Associate Broker, Town and Country Real Estate
O: 631 765 0500 C: 631 948 0234 F 631 765 0400
jbischoff@1townandcountry.com

Loan Modifications: HARP & Principal Reduction Alternative = Denied

Yesterday, the Federal Housing Finance Agency (FHFA), which administers both Fannie & Freddie, issued a statement that HARP modifications will not include principal reductions. To review the statement, click here.

The Principal Reduction Alternative (PRA) is a program under the Making Home Affordable umbrella designed for assisting homeowners whose home values are less than the amount they owe on their mortgages. PRA was launched in 2010 for loan-to-value ratios above 115%, in which principal forgiveness was the first step in the modification process to lower the loan payment, before reducing the interest rate or extending the term.

According to FHFA, PRA "would not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers". In fact, FHFA was concerned with the moral hazard that PRA would cause in furthering strategic default by borrowers who sought to obtain a principal reduction.

To read the Acting Director, Edward J. DeMarco's letter to Congress explaining this announcement, click here.

It appears that this announcement will kill most principal reductions offered by non-GSEs (not Fannie / Freddie loans) as well. The analysis is thorough and Fannie / Freddie have always set the benchmark for the mortgage industry. The takeaway from this announcement is that modifications are going to focus on reducing interest rate and extending the loan term as opposed to reducing principal, which was the way the programs worked prior to the implementation of the PRA option in 2010. To be clear, the reason that the 2010 program was just analyzed by FHFA is that Fannie & Freddie were only recently requested to follow a program utilized by non-GSEs. Yet, this announcement has given lenders an iron wall to hide behind should they also not wish to follow the program, but they were following the program anyway because they were worried about having a public relations backlash.

Do you think that principal reduction should be part of helping struggling homeowners? Or better yet, as Mr. DeMarco's letter states do you think that principal reduction will create more artificial struggling homeowners? I guess we will never know if the chicken or the egg came first when it comes to principal reduction.

Suffolk County's First Time Homeownership Down Payment Assistance Funds

Applications must be submitted by September 30, 2012

To read the program guidelines, click here.

The program provides a zero-interest deferred loan of $10,000 to assist with the down payment toward the purchase of an owner occupied, single family residence.

To qualify, the applicant, must not have owned a home during the 3-year period immediately prior to this purchase; have annual income <= 80% of the area median income; have annual household income of >= $30,000; attend mortgage counseling; occupy the property as a principal residence; among others.

Maximum FMV of residence bought under this program must be <= $362,790.

A great program that is worth taking a look at.

Suffolk Bar Meeting - Ronkonkoma HUB Discussion - 7/18/12

Reminder

Tonight, the Suffolk Bar Association is hosting representatives from the Town of Brookhaven, including Tullio Bertoli, Commissioner of Planning, and Robert Quinlan, Town Attorney, who will both comment on Brookhaven's aspects of the HUB. If you are a member of the Bar Association, please attend at 6:30pm in the Board Room. 


Andrew M. Lieb
Real Property Committee Chair 

Residential Landlord's Duty to Mitigate Damages

In an issue often debated and recently re-visited by the Civil Court, Kings County, a residential landlord does not have a duty to mitigate damages when a tenant breaches the lease by vacating the premises prior to the expiration of the term.  See Kings Holding, LLC v. Terrick, 2012 NY Slip OP 51153U. The Court cited to the previous holding of Holy Properties v. Cole Products, which found that the duty to mitigate does not exist concerning commercial premises, and additionally cited to Rios v. Carrillo, which subsequently adopted the holding of Holy Properties by finding that the duty to mitigate does not exist concerning residential premises. It is important to note that in Holy Properties and Rios, both holdings of the Second Department, the leases governing each respective premises specifically provided that the landlord was under no duty to mitigate damages or that the tenant remained liable to landlord for rent upon the cancellation of the lease except as provided by law.
Furthermore,  the landlord is not entitled to rent until the lease term has expired and there is a surrender of the premises by operation of law. In Kings, the surrender occurred after the landlord had submitted a "move out form" to the tenant after the tenant had moved out without notice, notified the tenant of the amount owed in arrears and informed the tenant that it was withholding the security deposit. This date of surrender actually occurred one month after the tenant physically left the premises. The date of surrender will be case specific, but may be interpreted from the conduct of the parties, the abandonment of the premises by tenant and the landlord's acceptance of tenant's surrender.

2 Bills to Protect Homeowners in Foreclosure Die

We previously blogged about 2 proposed items of legislation that were designed to both ensure proper paperwork in foreclosures and to eliminate the shadow docket of foreclosures that have been commenced, but have not moved past the foreclosure settlement conference stage of a residential foreclosure action. 

The first proposal would require that attorneys for the lenders submit a "certificate of merit" at the start of the action, which would swear that all paperwork was proper at that time instead of just requiring such a sworn statement post settlement conferences, as is now most common. This would have been beneficial because now lenders and borrowers are engaged in a lawsuit that often is put on hold as the lenders' attorneys attempt to verify the propriety of documents without success and borrowers are stuck in limbo while they await if the lender was even the proper party to the action. 

The second proposal would have created a criminal penalty for the submission of fraudulent foreclosure documents, such as robo-signed assignments of the note and mortgage. This proposal would have heightened the level of caution applied to lenders submissions of foreclosures and also would have prevented the incorrect lender from prosecuting a foreclosure action.

While both proposals are not moving forward, the importance of these proposals having had been made should not be lost on the reader. The key is that many eyes are watching the unscrupulous conduct of lenders and that this fact, alone, puts the banks in check when attempting to foreclose on a homeowner's residence. Yes, lenders of defaulted loans have a right and should be permitted to obtain the security for the payment of their loan; the house. Yet, taking someone's home should be only undertaken under a proper legally defensible claim as the impact is far reaching and devastating to the homeowner. 

These results may have done more good than one may think. Now, all borrowers' attorneys are on notice that they should be even more vigilant in forcing a lender to prove their case in foreclosure. Do not just accept that the lender is in the right. Instead, question their claims and tactics before waiving the white flag of defeat. Only than is justice served. 

Does a real estate brokerage firm's due diligence reports entitle them to a commission when they are not the procuring cause?

A brokerage commission is generally due when a real estate broker procures a ready, willing and able purchaser for a transaction. Nonetheless, it is often the case that real estate brokerages work very hard to procure a purchaser just to have their work-product utilized by a competitor to procure the purchaser and earn the commission. This is the situation that the NYS Court of Appeals recently faced when deciding Malone v. Ralph Rieder, which can be read here.

The issue presented to the Court was if the procuring brokerage was unjustly enriched at the expense of the due diligence brokerage and hence, did the procuring brokerage owe the due diligence brokerage a portion of their commissions? 

The Court answered the question with a striking NO. The rationale says the Court is that there was no business relationship or connection between the 2 brokerage companies. Therefore, the relationship between the 2 brokerage companies was too attenuated to justify the claim and the case was dismissed. 

The lesson here is that one needn't be concerned about the acts of unknown parties and one can protect oneself by acting as a good-faith purchaser for value. To illustrate, here, the defendant purchased the due diligence reports from the seller and therefore was an innocent party and consequently not liable for unjust enrichment to the due diligence brokerage.

Real estate brokers should take comfort in the Court's decision because they needn't probe the underlying relationships between the businesses with whom they contract and other entities tangentially involved but with whom they have no direct connection.

The Court did state however that the claims against the first procured purchaser who did not proceed with the transaction and the seller remain pending - so this remains as the best route for the due diligence brokerage to obtain recourse for its loss. 

E-Recording at the County Clerk - Proposed Regulation

For all of you who are as happy as we are about E-Recording coming to your local County Clerk's Office in September of this year, you should take some time to read the Proposed Regulations that will govern the process by clicking here.

Stay tuned for the proposal to be filed in the State Register in order to make your comments and to help shape this important Regulation.

The Origin of the name Lieb at Law, P.C...

Andrew Lieb, reveals how he came up with the name "Lieb at Law, P.C." as featured in CEO Blog Nation answering the question:  " HOW DID YOU COME UP WITH YOUR BUSINESS NAME?"

We Chose Something Catchy, Unique & Ethical

I operate a law firm in NY and names for firms in my State cannot be fictitious under ethics rules. Yet, who can remember all of the partners name for a firm? The list is often 3 pages long and says very little to the consumers except that each partner is self-important. So, I decided that we needed something catchy and unique, that said what type of business we are to the consumer, but that also complied with the restrictive ethics rules. Lieb at Law, P.C. is just that and has been approved by an ethics committee opinion letter and all of our clients. Why did you start your business? In my family you only have 1  choice of professions so I became an attorney. Yet, I am very entrepreneurial and wanted to carve my own niche. Therefore, I started a teaching law firm where we are a licensed school in our State with our attorneys serving as the school’s instructors. Just like a teaching hospital, my firm is on the cutting-edge of developments in our field because we teach the topics that we practice in a free educational setting for both attorneys and real estate agents. Our philosophy is that if every student passes on 1 lesson and educates 10 people in their community we have really achieved positive change for society and reduced unnecessary litigation.

Click Here to learn how other Entrepreneurs came up with their business name. 

HAFA EXTENDED THROUGH 2013

The Home Affordable Foreclosure Alternatives (“HAFA”) Program has been extended through 2013 pursuant to Supplemental Directive 12-02. This extension is coupled with many changes to the Policies governing HAFA, effective June 1, 2012, which servicers shall implement immediately. They are, including but not limited to, the following:

1 )      Occupancy Requirements: None, although the following conditions exist: Borrower(s) must not have purchased another residential property in the previous twelve (12) months, nor can the property be owned or secured by a business entity.

      2 )      Relocation Assistance: $3,000.00 is limited to the primary occupant of the premises at the time of execution of the agreement (short-sale or deed-in-lieu). Occupants must vacate on or before closing. Vacant properties are ineligible for this option.
3 )      Second Lien Maximum: Increased from $6,000.00 to $8,500.00.

      4 )      Debt to Income Ratio: A borrower’s monthly mortgage payments are now permitted to exceed 31% of a borrower’s grossly monthly income, allowing a servicer to accept full payment to keep the borrower current on their mortgage.
5 )      Credit Bureau: If a deficiency is forgiven as a result of a short-sale or deed-in-lieu, the following Base Segment fields may be reported as follows, if applicable: Account Status Codes amended to 13 (Paid or closed account/zero balance) OR 65 (Account paid in full/foreclosure started).

The following amendments to HAFA should greatly improve its goal of assisting borrowers in need. Supplemental Directive 12-02 in its entirety can be found here:  https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1202.pdf .

Modify Rental Property Mortgages - HAMP Tier 2

Under the Making Home Affordable Program, Rental Property is a property that is used by the borrower for rental purposes only and not occupied by the borrower, whether as a principal residence, second home, vacation home or otherwise.

For rental property to qualify for HAMP, the following conditions must be met as well as many of the prior HAMP conditions:

• >=2 mortgage payments must be due & unpaid;
• Borrower owns <= 5 single family properties; 
• Rental property at issue is currently occupied by tenant as a principal residence or is vacant; & 
• Borrower certifies intent to rent property to tenant(s) for >=5 years following effective date of the permanent modification.

Interestingly, where a property is occupied as a principal residence by a legal dependent, parent or grandparent of the borrower but the borrower does not charge or collect rent, the property is nonetheless considered a "rental property". 

Also, there are no longer any occupancy / principal residency requirements under the HAFA Short Sale Program. 

These are fabulous additions to the Making Home Affordable Program.

Landlords, be sure to ask your rental home's lender about a possible modification if you are behind on your mortgage. Help is out there.