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.

Real Estate Law Update: New York State Decisions of Interest

JOHNSON v. MELNIKOFF, 2008-08857 [2d Dept 8-4-2009] 2008-08857

Decided on August 4, 2009.

In an action, inter alia, pursuant to RPAPL article 15 to determine title to real property, the defendant Bank of New York Trust Company, N.A., appeals, as limited by its notice of appeal and brief, from so much of an order of the Supreme Court, Kings County (Demarest, J.), dated September 11, 2008, as granted that branch of the plaintiff's motion which was for summary judgment declaring that its mortgage on the subject property is null and void, and denied that branch of its cross motion which was for ...

DECISION & ORDER In December 1998, the plaintiff purchased the subject property. She financed her purchase with a mortgage loan. In April 2004, the plaintiff had certain discussions with representatives of a company allegedly offering services for refinancing mortgage loans. Two months later, the plaintiff, believing that she was signing documents that would effectuate a refinancing of her mortgage loan, unwittingly executed a deed conveying title to the subject property to ...

MAIORINO v. GALINDO, 2008-06047 [2d Dept 8-4-2009] 2008-06047

Decided on August 4, 2009.

In an action, inter alia, to impose a constructive trust on certain real property, the defendants Steve Galindo, Michael Madia, James Napolitano, Demo Works, Inc., Kitchen Designs by Dependable, Inc., and "ABC Corp.," as successor in interest to Kitchen Designs by Dependable, Inc., appeal, as limited by their notice of appeal and brief, from so much of an order of the Supreme Court, Nassau County (Warshawsky, J.), dated May 22, 2008, as denied those branches of the defendants' motion which were to ...

DECISION & ORDER The plaintiff, Edward Maiorino, who was a 50% shareholder in the defendant Demo Works, Inc. (hereinafter Demo), alleged, inter alia, that the defendant Steve Galindo, who was also a 50% shareholder in Demo, improperly diverted assets of Demo to improve real property in Bethpage (hereinafter the Bethpage property). The defendant Michael Madia had purchased the Bethpage property in his own name and financed the purchase by obtaining mortgages for the full purchase ...

BYRON v. HAAS, 2008-01977 [2d Dept 7-28-2009] 2008-01977

Decided on July 28, 2009.

In an action to recover damages for fraud and breach of contract, the plaintiff appeals, as limited by her brief, from so much of an undated order of the Supreme Court, Kings County (Schmidt, J.), as granted that branch of the cross motion of the defendant John Spanakos pursuant to CPLR 3211(a)(7) which was to dismiss the complaint insofar as asserted against him and, in effect, upon searching the record, dismissed the complaint in its entirety insofar as asserted against the defendants Michelle Haas, ...

The plaintiff commenced the instant action to recover her commission asserting fraud and breach of contract theories of liability, and the defendant John Spanakos counterclaimed against her to recover damages for libel per se and malicious prosecution. The plaintiff moved, pursuant to CPLR 3211(a)(7) and CPLR 3016(a), to dismiss the counterclaims, and Spanakos cross-moved, pursuant to CPLR 3211(a)(7), to dismiss the complaint insofar as asserted against him. The Supreme Court ...

LEIST v. TUGENDHAFT, 2009-03562 [2d Dept 7-21-2009] 2009-03562

Decided on July 21, 2009.

DECISION & ORDER The plaintiff commenced this action, inter alia, for specific performance of a purported contract for the sale of real property and filed a notice of pendency against the defendants' beachfront property located in Westhampton, New York. The purported contract consisted of a "Memo of Sale," subscribed by no one, sent as an attachment to an e-mail from the defendants'"listing agent" to the plaintiff's attorney. The plaintiff wrote on the memo of sale that he unconditionally accepted ... General Obligations Law ' 5-703(2) states that a contract for the sale of real property "is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing." Assuming, arguendo, that an e-mail is sufficient to comply with the statute of frauds with respect to contracts for the conveyance of real property (see General Obligations Law ' 5-703[ 2]; ...

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!

Some Legal Humor This Morning

via Courtoons:

Courtoons » Blog Archive » Monday, May 4, 2009

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Tags: criminallaw, humor, cartoons, lawyers

Washington Mutual to end 2 complex mortgage types

YouNewsTV™Story Published: Jun 18, 2008 at 8:36 PM MDTStory Updated: Jun 18, 2008 at 8:36 PM MDTBy Associated Press SEATTLE (AP) - Washington Mutual Inc. said Wednesday it would stop offering two types of complex mortgage products as part of a shift in its mortgage business, as it works to deal with the fallout from the subprime mortgage mess.The nation's largest thrift said it would no longer offer negative amortizing loan products, and will also end its WaMu Mortgage Plus loan.

Negative amortization happens when a payment on a loan does not cover the interest due, and the amount of interest owed is added to the principal balance, increasing the size of the loan.WaMu Mortgage Plus loans were mortgages with built-in lines of credit and flexible payments.Washington Mutual also said it is adding $1 billion to its borrowers' assistance program, developed in 2007 to help people with subprime mortgage loans stabilize their finances and avoid foreclosure.In aftermarket electronic trading, Washington Mutual shares fell 10 cents to $6.16, from their regular session close at $6.26.

Washington Mutual to end 2 complex mortgage types

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Tags: subprime, mortgage, Washington Mutual, WAMU, negative amortization

The New York Law Journal - Free Breaking News: Chief Judge Unveils Program to Deal With Dramatic Rise in Foreclosures

Free Breaking News: Chief Judge Unveils Program to Deal With Dramatic Rise in Foreclosures By Mark Fass June 19, 2008

Chief Judge Judith S. Kaye responded today to the dramatic rise in residential foreclosure filings throughout New York by announcing a new statewide program intended to educate homeowners and facilitate early negotiations and settlements.

The Residential Foreclosure Program will begin with a trial run this summer in Queens, the epicenter of the state's foreclosure crisis, and spread to the rest of the state's courts this fall. The key components of the plan will be notifying parties as soon as practicable of community resources, holding early conferences before a hearing officer to develop a settlement or case management plan and hiring dedicated, specialized court personnel.

"Like so many other problems that affect society, the courts end up dealing with the fallout" from foreclosures, the chief judge said today at a news conference at the offices of Chief Administrative Judge Ann Pfau. "We are here this morning because we believe the court system can be part of the solution." Chief Judge Kaye was joined by leaders of associations on all sides of the foreclosure process, including Michael P. Smith of the New York Bankers Association; Lynn Armentrout of the Lawyers Foreclosure Intervention Network; and Michael Hickey of the Center for New York City Neighborhoods.

Although Manhattan has had relatively few foreclosures, the rest of the state has mirrored the national epidemic. Over the last 31/2 years, foreclosures have risen by 150 percent throughout the state , with another 40 percent jump expected by the end of this year. The state's hardest hit regions include southeast Queens, in particular the area surrounding John F.Kennedy International Airport, and Suffolk County.

For example, Queens saw a 70 percent jump in foreclosures to 1,243 in 2007 from 731 in 2006.

The state courts have experienced numerous problems in processing the onslaught of foreclosure filings, chief among them long delays and high default rates. As Judge Pfau repeatedly noted at today's news conference, the state's 90 percent default rate in foreclosure cases calls into question the number of homeowners who may not know they are losing their houses.

The Residential Foreclosure Program will be a multi-pronged approach at attempting to better educate homeowners while also facilitating discussions and negotiations that can speed and ease the complex foreclosure process. Homeowners facing foreclosure will first come into contact with the new changes when they receive two notices?one from the plaintiff, a second from the court?describing the early conference program and available community resources.

The nonprofit Center for New York City Neighborhoods will play a lead role in selecting the resources, or service providers, Judge Pfau said.  The center's director, Mr. Hickey, said providers will be selected either at the center's discretion or via a request-for-proposal process. The center already has working relationships with many community providers, he added. "It's not like we're creating this system from scratch," Mr. Hickey said. The court's notice also will include a "request for early conference" form, which represents a partial accommodation of Governor David Patterson's proposal that early settlement conferences be held before judges in all residential foreclosure proceedings.

Judge Pfau had testified at legislative hearings last month that it was unrealistic to expect that property owners who have fallen behind on their house payments could afford legal counsel (NYLJ, May 13).Under the new program, only those who have sought counseling, on their own or from the court-provided resources, may schedule the early conferences. "It's not the best use court resources to be scheduling and calendaring conferences that will never take place," Judge Pfau said, noting the 90 percent default rate. "We think more meaningful conferences will take place when you have a defendant who is actually present and has had access to legal and financial counseling." After the form is returned to the courts, a case manager assigned to the conference part will contact the parties and schedule the conference.Overseen by either a judicial hearing officer or a referee, the conferences will allow the parties to settle the case or, in the alternative, develop a case management plan intended to streamline the proceedings, which at present can stretch out as long as a year and a half."Early resolution," Judge Pfau said, "is in everyone's interest."

The New York Law Journal - Free Breaking News: Chief Judge Unveils Program to Deal With Dramatic Rise in Foreclosures

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Tags: Foreclosure, counseling, New York, Settlement, program, mortgage, subprime, real estate

HUD News Release 08-082 FHA Temporarily Lifts Anti-Flipping Rule (Don't get all excited yet though!)

FHA EXTENDS FINANCING FOR IMMEDIATE PURCHASE OF FORECLOSED HOMES Measure seen to bring stability to home values and accelerate sale of vacant properties
WASHINGTON - In an effort to stabilize declining home values in certain neighborhoods, the Bush Administration today announced a temporary policy that will extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties.For one year, the Federal Housing Administration (FHA) will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period."A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community's recovery," said Brian D. Montgomery, Assistant Secretary of Housing-Federal Housing Commissioner. "The action we take today will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes in neighborhoods across the country."FHA's new temporary policy will help stabilize neighborhoods experiencing high rates of foreclosure by reducing the inventory of unsold properties. Many foreclosed properties remain vacant for months, inviting vandalism and reducing values of surrounding homes. To address that sizeable inventory, lenders have hired companies that specialize in the marketing and disposition of foreclosed homes. It's reasonable and appropriate that these firms have the ability to sell the properties to borrowers using FHA financing.With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This prohibition is intended to prevent property "flipping," a predatory practice that strips a home of its equity before being quickly resold at an inflated price to an unsuspecting buyer. FHA's new policy will permit the immediate sale of foreclosed properties to legitimate borrowers wishing to use FHA-insured financing.

HUD News Release 08-082

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Tags: FHA, REO, foreclosure, flipping, resale, property, mortgages

PropertyShark University - Short Sales Class - Tues June 17, 2008 - Don't Miss It!!!

I will be teaching the following seminar, hosted by PropertyShark.com this upcoming Tuesday:

Short Sales

As the foreclosure rate rises, everyone involved in real estate is being forced to evolve. The short sale is a tool that helps all the members of the foreclosure market. The bank benefits by eliminating the possibility of a repossession. The borrower benefits by solving his foreclosure problem. The investor benefits by creating a transaction that can net larger profits that normal. Be part of this class, taught by Kathleen Scanlon, Esq, an expert in the field of real estate law, particularly, short sales.

Topics covered will include:
* What is a "Short Sale" exactly?
* How does a short sale help the bank?
* How does a short sale help the borrower?
* Working with the bank.
* Working with the borrower
* The Short Sale Package
* The Bank's Response
* Accepting or Rejecting Your Offer
* Exit Strategies

Additionally, participants of this course will find the answers to these following questions:
* Why invest in distressed properties using short sales?
* How do I find properties for short sales?
* How do I choose a target area for short sale prospects?
* How can I finance my short sales?
* Where can I find advice and support throughout my investment endeavors?

Notes: Attendees must pre-register, no registration at the event - Class limited to 30 attendees.

Date: Tuesday, June 17 6PM - 9PM
Location: Kaplan Financial, 61 Broadway, Suite 700, New York, NY 10006

PropertyShark University Class Description

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Tags: shortsales, propertyshark, land trusts, distressed properties, real estate, mortgage, foreclosure

A Major Bank Brought to its Knees: LaSalle Bank NA v. Shearon

The New York Supreme Court recently found in favor of the defendant homeowner on a Motion for Summary Judgment in a foreclosure action, brought by LaSalle Bank, N.A., the successor in interest to WMC Mortgage. LaSalle Bank, NA v. Shearon (N.Y. Sup. Ct., 850 N.Y.S.2d 871)  The court considered both mortgages to be "high cost loans" within the meaning of the New York Banking Law statute Section 6-L based solely on the fact that the Lender provided high cost disclosures to the borrower and failed to apply any sort of statutory test to see whether or not the loans met the thresholds in said statute.

Once the court found the loans to be high cost loans, the statutory violations were numerous, including the financing of more than 3% of the principal loan amounts for closing costs.  NY Banking law limits closing cost financing to 3% when the loan is considered a high cost loan.  Further, the court found the Lender's due diligence to be inadequate to determine whether or not the Shearons had the ability to repay the loan, that certain documents were forged and the disclosures were inadequate.  The penalties for violation of NY's Anti-Predatory statute are severe - the entire mortgage can be forgiven, all monies paid by the homeowner refunded plus damages. (see extended post for text of entire NY Slip Opinion)

While this decision is sure to be appealed, it sends a message to the Lenders and the Secondary Mortgage market that they will be held accountable.  It provides an invaluable tool also to those of us representing these homeowners who might have been coerced and tricked into these types of loan programs who are seeking modifications and short sales from these lenders. However, I do not recall closing any high cost loans and if the fees were excessive, most Lenders required the mortgage broker to reduce their fees so as not to fall within this category and trigger the onerous compliance requirements.  But, I am sure that there were mortgage brokers and lenders out there who didn't quite care and flew in the face of caution - GO GET 'EM!