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.
Thursday, December 19, 2013
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.
Thursday, December 12, 2013
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!
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.