Where is Blackacre anyway???

Pt II: So You're a Distressed Property Consultant: How to Stay Compliant with NY's Foreclosure Prevention & Responsible Lending Act of 2008

Back on July 29, 2009, I authored a discussion on what activities and/or circumstances would cause a service provider to be labeled a Distressed Property Consultant under New York's Foreclosure Prevention & Responsible Lending Act of 2008.  Please review that discussion and keep in mind the exceptions when it comes to the Homeowner as well as the Consultant. I promised a Part II to review compliance if you are a Distressed Property Consultant and, well, better late than never! If you know me personally, you are aware of the circumstances of the past few months and as such, I am sure understand the delay.

Section 265-b enumerates which activities are forbidden to Distressed Property Consultants:

1. Providing services without a written, fully signed contract with a homeowner;

2. Charging or collecting payment from a homeowner before completion of services;

3. Taking a Power of Attorney from a homeowner;

4. Keeping any original Loan Documents or any original documents relating to the distressed home loan;and

5. Inducing a Homeowner to executing a Contract that does not comply with the provisions of the Act.

The Contract

Section 265-b lists very specific requirements when it comes to the Contract for Distressed Consultant Services.  First, it must be in writing and must contain the entire agreement of the parties.  Therefore, oral agreements pre- and post-contract are not enforceable and the agreement is enforceable only as to those provisions contained within the four corners of the written Contract.  Also, the proposed Contract must be provided to the homeowner, in advance, for his review. 

Content & Form

The NY legislature laid out very specific requirements as to the form and content of the Distressed Consultant Contract.  First, as to the font, it must be in at least 12 point type and in the same language that was used between the Consultant and the Homeowner to discuss the Consultant's services.  For example, if the parties conversed in Spanish about the proposed services, then the resulting written contract must be in Spanish.

The Contract must provide full disclosure.  It must include:

1. the exact nature of the services to be provided by the Consultant and anyone who is associated with the consultant;

2. the total amount and terms of compensation for such services;

3. the name, business address, and telephone number of the distressed property consultant and the address (if different), phone & fax number or email address of the distressed property consultant where the homeowner can send communications to the consultant;

4. it must be dated and personally signed by the homeowner and the distressed property consultant before a Notary Public;

5. It cannot limit the liability of the Distressed Property Consultant nor waive any provisions under this Statute and cannot require arbitration of any dispute arising under the Contract;

6. it must contain a specific Right to Cancel:

    a. 14 point boldface type;

    b. Containing the following language with the Distressed Property Consultant accurately entering the date the right to cancel ends and his name -

NOTICE REQUIRED BY LAW

YOU MAY CANCEL THIS CONTRACT, WITHOUT ANY PENALTY OR OBLIGATION AT ANYTIME BEFORE MIDNIGHT OF _________________________ (FIFTH BUSINESS DAY AFTER EXECUTION).

_______________________________________ (THE"CONSULTANT") OR ANYONE WORKING FOR THE CONSULTANT, MAY NOT TAKE ANY MONEY FROM YOU OR ASK YOU FOR MONEY UNTIL THE CONSULTANT HAS COMPLETELY FINISHED DOING EVERYTHING THIS CONTRACT SAYS THE CONSULTANT WILL DO.

YOU SHOULD CONSIDER CONSULTING AN ATTORNEY OR A GOVERNMENT-APPROVED HOUSING COUNSELOR BEFORE SIGNING ANY LEGAL DOCUMENT CONCERNING YOUR HOME. IT IS ADVISABLE THAT YOU FIND YOUR OWN ATTORNEY, AND NOT CONSULT WITH AN ATTORNEY RECOMMENDED OR PROVIDED TO YOU BY THE CONSULTANT. A LIST OF HOUSING COUNSELORS MAY BE FOUND ON A THE WEBSITE OF THE NEW YORK STATE BANKING DEPARTMENT, www.banking.state.ny.us OR BY CALLING THE BANKING DEPARTMENT TOLL FREE AT 1-877-BANK-NYS (1-877-226-5697).  THE LAW REQUIRES THAT THIS CONTRACT CONTAIN THE ENTIRE AGREEMENT BETWEEN YOU AND THE CONSULTANT. YOU SHOULD NOT RELY ON ANY ORAL AGREEMENT OR PROMISE.

    c. The date for the Right to Cancel: it is midnight of the 5th business day following the day the Contract was executed by both parties.

    d. Notice of Cancellation:

        1. must be in writing and delivered by the homeowner or the homeowner's representative, to the Property Consultant to the address, fax or email address specified in the notice.

        2. The Contract must include (2) copies of a Notice of Cancellation in the following form:

NOTICE OF CANCELLATION

YOU MAY CANCEL THIS CONTRACT, WITHOUT ANY PENALTY OR OBLIGATION, AT ANY TIME BEFORE MIDNIGHT OF _____________________________ (ENTER DATE).

TO CANCEL THIS CONTRACT, SIGN AND DATE BOTH COPIES OF THIS CANCELLATION NOTICE AND PERSONALLY DELIVER ONE COPY OR SEND IT BY FACSIMILE, UNITED STATES MAIL OR ANY ESTABLISHED COMMERCIAL LETTER DELIVERY SERVICE, INDICATING CANCELLATION TO THE DISTRESSED PROPERTY CONSULTANT AT ONE OF THE FOLLOWING:

NAME OF CONTRACTOR: ________________________________
STREET ADDRESS:______________________________________
CITY, STATE, ZIP:______________________________________
FACSIMILE:___________________________________________

I HEREBY CANCEL THIS CONTRACT

Name of Homeowner: ___________________________________________

Signature of Homeowner:________________________________________

Date:_________________________________________________________

    e. Compliance with Notice of Cancellation: If a Distressed Property Consultant receives the Notice of Cancellation within the proscribed time frame, the Consultant must, within (10) days, return the original Contract and any other documents signed by the Homeowner to the Homeowner.  Cancellation, of course, releases the homeowner from any obligation to pay the Distressed Property Consultant.

PENALTIES FOR VIOLATION

If a Distressed Property Consultant violates this Statute, the legislature has crafted the following penalties:

1. Court can declare Contract to be null and void;

2. If the homeowner incurs damages because of the violation, the homeowner can recover actual and consequential damages, as well as costs, from the Consultant;

3. If the Consultant intentionally or recklessly violates the provisions of this Statute, the Court can award to the homeowner treble (3x) damages, attorney's fees and costs;

4. An application can be made by the Attorney General to issue an injunction forcing the Consultant to cease and desist from engaging in future distressed consulting activities without requiring proof that any person has been injured or damaged and also can require restitution; and

5. The court can fine the Consultant not more than $10,000 for each violation.

There you have it - if you are offering any type of services to a Homeowner who is behind on their mortgage, real estate taxes etc., first determine if you are a Distressed Property Consultant (and not a member of an exempt category) and if your Homeowner and their financial distress is covered by the Statute.  If so, make sure you are in compliance by following the tenets outlined above.  The penalties can be severe but at least now, you have an outline for a plan of compliance.

New FHA Making Home Affordable Loan Modification Guidelines Announced by HUD Secretary Donovan Today

Evidently the government is serious about getting these delinquent mortgages modified - here is another positive change to HAMP:


Press Release from HUD:

WASHINGTON - U.S. Department of Housing and Urban Development Secretary Shaun Donovan today announced the Federal Housing Administration (FHA) has implemented changes to its loan modification program to ensure consistency with the Obama Administration's Home Affordable Modification Program. By August 15th, FHA borrowers will be able to significantly reduce their monthly mortgage payments by seeking a loan modification through their current mortgage company or loan servicer under the new FHA-Home Affordable Modification Program (FHA-HAMP).

"Today, we're bringing another important tool to the table to help struggling families who are desperate to keep their homes," said Donovan. "Tens of thousands of FHA borrowers will now be able to modify their mortgages in the same manner as so many others who are taking advantage of the Administration''s Making Home Affordable program. This is just the latest tool we are providing to help homeowners prevent foreclosures through the Making Home Affordable program. Earlier this month we announced an expansion of the Home Affordable Refinance Program to borrowers who are up to 125 percent underwater. Together, these actions will significantly increase the help available to homeowners.

"The Helping Families Save Their Homes Act of 2009, signed into law on May 20, allows FHA to give qualified FHA-insured borrowers the opportunity to reduce their monthly mortgage payment by modifying the mortgage through FHA-HAMP. FHA released the program's implementation guidelines today. FHA expects all servicers to implement the changes by August 15. The program permanently reduces a family's monthly mortgage payment through the use of a partial claim, which defers the repayment of mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off.

FHA has used the partial claim option in the past, which allows a lender to advance funds on behalf of a borrower, to reinstate a delinquent loan that was up to 12 months delinquent. Now, this program will allow HUD to bring the borrower's payment down to an affordable level. This will be accomplished by bringing the mortgage current, buying down the loan by up to 30 percent of the unpaid principal balance and deferring these amounts in a partial claim.

FHA will pay an incentive to loan servicers for each FHA loan modified under this program. A Mortgagee Letter, along with detailed requirements for the FHA-Home Affordable Modification Program, was distributed to all FHA lenders today. The implementation of this program will further the Obama Administration's efforts to stabilize the housing market by helping homeowners to stay current on their mortgages and stay in their homes, therefore preventing the destructive impact of foreclosures on families and communities.

Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Obama Administration on February 18. More than 200,000 trial loan modifications are already underway, tens of thousands of refinancings have closed, and informational mailings about the program have been sent to more than one million borrowers who may be eligible.

FHA borrowers who are experiencing difficulty making their mortgage payments should contact their loan servicer or HUD's National Servicing Center at (888) 297-8685 to determine if they qualify for the FHA-Home Affordable Modification Program. The Mortgagee Letter, with detailed information about the program, is available on the HUD website. Non-FHA borrowers can find information about the Obama Administration's Making Home Affordable program at www.makinghomeaffordable.gov.

HUD News Release 09-137

Pt I: Are You A Distressed Property Consultant? Don't Run Afoul of NY's "Foreclosure Prevention and Responsible Lending Act of 2008"

I had an instant messenger conversation last night with a good mortgage broker friend of mine who was very upset. Her client's home was due to be auctioned shortly, even though there was a loan modification in progress. The consultants,retained by the homeowner to assist in filing an Order to Show Cause to stop the sale, refused to supply any documents without a $500 weekly payment (they had already collected a decent sum up front). After a heated discussion with the consultants, my friend threatened to file a complaint with the authorities to which the consultant promptly replied that he had a lawyer, he didn't do anything wrong and he wasn't concerned. I realized at this moment that this gentleman had no idea that he was violating the law but he most certainly was and there are serious consequences involved. New York enacted the "Foreclosure Prevention and Responsible Lending Act of 2008 effective September 1, 2008 but utterly failed to properly educate members of the real estate industry in its application and proper compliance. To obtain the pertinent provisions of the law, I did a quick google search but failed to turn up the actual statutes themselves (This Act amended NY's Banking Law, Real Property Law (RPL) and Real Property and Proceedings Law (RPAPL). I was only able to find interpretations of the Act which did not fully provide the definitions and rules pertaining to Real Property Consultants. As a member of the New York State Bar Association, Real Property Section, I am subscribed to their email listserve. Anyone who knows me can attest to my practice of keeping every email so I was able to do a quick search and find the text of the law. In this post, I will provide the tools to assist you in understanding and complying with the law so that you don't end up with a visit from the NY Attorney General's office. Those who have actually heard of the Act think it only applies to loan modification companies. The statute is far broader in its definition of Distressed Property Consultants and the services they provide. The Act amended NY's Real Property Law by adding Section 265-b which defines certain terms including "distressed homeowners", "distressed property consultants", and "distressed home loans" among others.

Distressed Home Owners
The Act defines in Sec 265-b(1)(a) the "Distressed Home Owner" as a natural person who is the mortgagor with respect to a distressed home loan or who is in danger of losing a home for nonpayment of taxes. Therefore, if your client is a corporation, LLC, Trust etc., they are not natural persons and therefore not Distressed Home Owners under this Act. In conjunction with this definition, it is imperative to view same in light of the definition of "distressed home loan" in subsection (d) which defines it as a home loan that is in danger of being foreclosed because the homeowner has one or more defaults under the mortgage that entitle the lender to accelerate full payment of the mortgage and repossess the property, or a home loan where the lender has commenced a foreclosure action. To be a Distressed Home Owner, your client must be in default under the terms of their Note and Mortgage which entitles the Lender to accelerate the loan. You must examine the Mortgage, discern the acts that constitute a default as well as under what circumstances allow the Lender to accelerate the loan.   Further, the act defines a "home loan" as a loan in which the debt is incurred by the homeowner primarily for personal, family or household purposes, and the loan is secured by a mortgage or deed of trust on property upon which there is located or there is to be located a structure or structures intended principally for occupancy of from one to four families which is or will be occupied by the homeowner as the homeowner's principal dwelling. The loan must be secured by your client's principal residence and have been originated as a residential loan to be covered by this Act.

Distressed Property Consultants & Consulting Services

Section 265-b(1)(c) Defines the nature of the consulting services covered by the statute. Such definition is very broad and encompasses far more than loan modification:

(c) "Consulting services" means services provided by a distressed property consultant to a homeowner that the consultant represents will help to achieve any of the following:
(i) stop, enjoin, delay, void, set aside, annul, stay or postpone foreclosure filing, a foreclosure sale or the loss of a home for nonpayment of taxes;
(ii) obtain forbearance from any servicer, beneficiary or mortgagee or relief with respect to the potential loss of the home for nonpayment of taxes;
(iii) assist the homeowner to exercise a right of reinstatement or similar right provided in the mortgage documents or any law or to refinance a distressed home loan;
(iv) obtain any extension of the period within which the homeowner may reinstate or otherwise restore his or her rights with respect to the property;
(v) obtain a waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a property in foreclosure;
(vi) assist the homeowner to obtain a loan or advance of funds;
(vii) assist the homeowner in answering or responding to a summons and complaint, or otherwise providing information regarding the foreclosure complaint and process;
(viii) avoid or ameliorate the impairment of the homeowner's credit resulting from the commencement of a foreclosure proceeding or tax sale; or
(ix) save the homeowner's property from foreclosure or loss for non-payment of taxes.

Therefore, if you perform loan modifications and/or workouts, short sales, credit repair your services are covered.  If you assist a distressed home owner with obtaining financing, including refinancing or any type of loan or advance, your services are covered (Note exception below for licensed mortgage bankers & brokers).  If you provide "consulting" services wherein you assist a distressed home owner in defending a foreclosure defense action, your serviced are covered.  Or, if you do anything whatsoever that will result in "saving" the home owner's property from foreclosure or loss from non-payment of taxes, your services are covered.  Paragraph (ix) is extremely broad and ambiguous - what constitutes "saving"? That will require clarification by the courts in the future.

What is a Distressed Property Consultant?
While you may have determined that your client is a distressed homeowner who has a distressed home loan and your services are covered by the Act, but the question remains - are you a Distressed Property Consultant?

The Act defines "Distressed Property Consultants" as an individual or a corporation, partnership, limited liability company or other business entity that, directly or indirectly, solicits or undertakes employment to provide consulting services to a homeowner for compensation or promise of compensation with respect to a distressed home loan or a potential loss of the home for nonpayment of taxes.
Note: A consultant does not include the following:
(i) an attorney admitted to practice in the state of New York;
(ii) a person or entity who holds or is owed an obligation secured by a lien on any property in foreclosure while the person or entity performs services in connection with the obligation or lien;
(iii) a bank, trust company, private banker, bank holding company,savings bank, savings and loan association, thrift holding company, credit union or insurance company organized under the laws of this state, another state or the United States, or a subsidiary or affiliate of such entity or a foreign banking corporation licensed by the superintendent of banks or the comptroller of the currency;
(iv) a federal Department of Housing and Urban Development approved mortgagee and any subsidiary or affiliate of such mortgagee, and any agent or employee of these persons while engaged in the business of such mortgagee;
(v) a judgment creditor of the homeowner, if the judgment creditor's claim accrued before the written notice of foreclosure sale is sent;
(vi) a title insurer authorized to do business in this state, while performing title insurance and settlement services;
(vii) a person licensed as a mortgage banker or registered as a mortgage broker or registered as a mortgage loan servicer as defined in article twelve-D of the banking law;
(viii) a bona fide not-for-profit organization that offers counseling or advice to homeowners in foreclosure or loan default; or
(ix) a person licensed or registered in the state to engage in the practice of other professions that the superintendent of banks has determined should not be subject to this section.
Therefore, a Distressed Property Consultant does not necessarily have to be a natural person.  Further, if you are an attorney, a Lender, Servicer, Mortgage Banker, Mortgage Broker, Judgment Creditor, Title Insurer, or a Non-Profit you are exempt.

In my next post, I'll discuss Distressed Property Consultant compliance, proscribed activities and more. Stay tuned!

Sovereign Wealth Funds to Buy Up $29 Billion in Foreclosed Homes

Published 08/13/08 Jeff Bennett

The great American sell-off continues. For sale this time: foreclosed homes throughout the United States with depreciating values. These pieces of real estate are tempting foreign big-money sovereign wealth funds to purchase them at an incredible value. Nothing can be truly considered sacred or American when everything is now for sale at discount prices.

According to a report from the New York Post, an undisclosed sovereign wealth fund has allocated $29 billion to begin purchasing foreclosed homes along the West Coast. American home values and the dollar are both plummeting in value, attracting foreign oil money to invest in the nation’s houses. Abu Dhabi, known for its recent purchases of the Chrysler and GM Buildings, is preparing to announce next month what failing American real estate it will soon invest in.America is defenseless against foreign takeovers of realty and big business as long as it remains addicted to oil. The nations that are buying up America with zeal are rich with American dollars from the purchase of oil. Petro-dollars have allowed Abu Dhabi to amass $875 billion in sovereign wealth fund assets, while Norway has $391 billion, Singapore $303 billion and Kuwait with $264. The U.S. remains subservient to each of these nation’s oil, and their wealth funds are growing large enough to dismantle America bit-by-bit.

Perhaps the dollars recent success of reaching 15-month highs can be attributed to the massive influx of foreign capital; America’s abysmal lack of manufacturing is not contributing to the greenback’s gains. The nation’s industries and real estate are selling at the fastest rate ever witnessed, $121 billion in assets sold so far this year. The exuberant amount of foreign money entering the states is artificially inflating the dollar, providing the nation with some short-lived relief by driving down oil prices and other commodities. But this is only a false illusion that will not last.

If this practice continues, nothing will remain American. No industries to manufacture and sell goods and no national real estate. The influx of foreign capital will be spent and America will have no assets left to sell and nothing to produce to dig itself out of the insurmountable debt it is accruing. There will be no prosperous future for the upcoming generations if America continues to sell every vital industry and remain dependent on foreign banks to purchase debt and artificially inflate the dollar.

Source: New York Post:  Foreign money, which up to now has focused its attention on investing in iconic commercial real estate - like Barneys New York and the Chrysler Building - is now moving to scoop up tens of thousands of discounted foreclosed homes across the country.…A sovereign fund would have two distinct advantages over other investors - the depressed value of the US dollar makes the homes a bargain, and sovereign funds have deeper pockets.The sovereign fund of Abu Dhabi, for example, has a reported $875 billion in assets, while Norway has $391 billion, Singapore has $303 billion and Kuwait has $264 billion in their sovereign funds, which are funded by proceeds from oil sales.

Economyincrisis.org - America's Economic Report - Daily

Blogged with the Flock Browser

Tags: sovereignfunds, foreclosure, assets, dollar, real estate, subprime crisis, mortgage