On January 4th, VREBC is hosting its all-day, “FREE” 2nd Edition of the Virtual Real Estate Bar Camp.  This is most definitely a “must attend” event for all real estate professionals who want to add social media skills to their repertoire.

Who Should Come?

RE BarCamp welcomes real estate industry related people, including real estate agents, real estate brokers, lenders, inspectors, home-stagers, title reps, attorneys, coaches, geeks, non-geeks, geek wannabes and anyone who is interested in learning and sharing knowledge in a freely collaborative environment.

The Calendar is most impressive – 28 webinars addressing each of the major social networks and how to incorporate them into your real estate business.  Some of the topics include:

• 7 Secrets to Facebook Page Success
• Twitter Essentials for 2010
• Seven Serious Social Media Mistakes Agents Make
• Mortgage Professionals: Learn Seven Strategies for Connecting With Agents
• Blogging Tips for Beginners
• Next Generation Brokerage
• Social Media Heresies
• and much more!!!

So click on the image to the right and I hope to “see” you all there!!!

Related posts:

1. Nick the Webguy: Real Estate Websites
2. The Twitter Craze – How to Jump In and Start Tweeting!

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Any real estate professional, who engages in short sale negotiations, is fully aware of just how frustrating the process can be or even downright impossible. There are financial incentives for mortgage servicers to drag out the process as long as possible. It takes weeks, sometimes months, to get a response from the banks, who often misplace packages and request that they be faxed over and over again.  This past Monday, however, the U.S. Treasury has issued guidance in its new Home Affordable Foreclosure Alternatives Program (HAFA) which takes effect April 5 , 2010 (supposedly, many servicers are already modifying their programs to be compliant). In short,  HAFA provides incentives in accepting a short sale or a deed-in-lieu of foreclosure (DIL) on a loan eligible for modification under the HAMP program. HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac (they will be implementing their own versions of HAFA shortly).

Highlights of the HAFA program are as follows:

• Servicers have 10 days to approve or disapprove a request for short sale.
• Uses borrower financials and other documents already submitted for a loan modification.
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibits servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standard processes, documents, and timeframes/deadlines.
• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors (note holders).
• Caps proceeds to second lien holders at $3,000.00. (interesting but I wonder at how those lien holders in the second position feel about this)

Requirements:

• Loan must be HAMP eligible – Services must evaluate a buyer for a HAMP modification first before giving any consideration for a HAFA short sale or Deed in Lieu (DIL);
• Property is borrower’s principal residence;
• the mortgage is a first lien and was originated before January 1, 2009;
• the loan must be delinquent or default reasonably foreseeable;
• loan amount limit is 729,750 (on 1 family units);
• borrower’s total monthly payment exceeds 31 percent of the home owner’s income and attested to by affidavit;
• Sale must be an arm’s length agreement and the buyer must agree not to sell the property for 90 days (problematic and I believe will diminish the potential of this program);
• Requires property to be listed with a real estate broker (I wonder who lobbied for this…so this has to be added on to the  servicer’s Minimum Net Proceeds and thus increases the cost to Purchaser)

While I admire the government’s attempt at allieviating the short sale log jam, as usual, they overstep their bounds. The American people are being asked to yet again foot the bill for the banks’ irresponsible lending practices to the tune of $3,000 per closing.  Further, mandating that properties be listed with a real estate broker across the board is excessive and will, in effect, add to the purchase price paid by the prospective buyer.  The arm’s length rule eliminates family attempting to save the home and the 90 day prohibition against resale will chill real estate investor participation which plays a major role in moving houses (I find this restraint on alienation to be disturbing as well and question its enforceability). Lastly, I question how many second lienholders are going to participate with their payments limited to $3,000.00.  Without their participation, it will be an exercise in futility as many of these homeowners have 2 loans.

Related posts:

1. Treasury Department’s “Making Home Affordable” Program Attempts to Tackle 2nd Lien Dilemna
2. PropertyShark University – Short Sales Class – Tues June 17, 2008 – Don’t Miss It!!!

My son, Matt Desio, is a 4th Grader at Meadow School in Baldwin, NY.  He is participating in a fundraising Math-A-Thon to make it possible for St. Jude to treat childhood cancer patients regardless of a family’s ability to pay.

The benefits of Math-A-Thon add up to help a good cause. Matt will:

• improve math and comprehension skills
• solve age-appropriate math problems
• understand the importance of helping others

This all equals help for St. Jude patients battling cancer and other catastrophic childhood diseases.

Under the direction of Scholastic, the Math-A-Thon Funbook has designed a new curriculum of math activities to meet national standards in education and challenge today’s K – 8 students with age-appropriate math problems. The work the students will do as part of Math-A-Thon will also be subjects that must be covered in each grade level by the time the student leaves his or her current grade. The subjects are broken down into focal points, which will be covered in the new Funbook.

This exciting new addition expands the benefits of the Math-A-Thon program from the St. Jude campus to the classroom to school districts themselves. Not only does the new Funbook allow students to raise funds for St. Jude and help them practice their math skills, but it also serves as preparation for the standardized tests at the end of the school year.

I am asking you to sponsor Matt in the Math-A-Thon and encourage him to complete the Math Fun-Book for a worthy cause.  The event ends on December 4th so please make your sponsorship donations as soon as possible:

Thank you so much for supporting my son & such a worthy cause and Happy Holidays!!!

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It is Thanksgiving Eve, I am at a beautiful resort in Turks & Caicos with my family and I wanted to take a moment to reflect on what I am thankful for.

I am thankful for my husband, Danny, who has shown me this year that I can lean on him and he will not only hold me up but will carry me when I cannot go on; for my children for making me smile even when I want to cry; for my sister-in-law, Donna, for all her support this year – you have no idea how much I needed it, for my mother-in-law and father-in-law for all their love, help and support, for the girls in my office keeping everything running like a machine when I was MIA and believing in me, for the good people in my profession and in our industry who stood by me because they know the truth and for God for giving me so many good people in my life, for showing me that there would always be a light at the end of the tunnel although it might not be the result I had expected and for giving me strength beyond measure so I could be “the titanium dolphin among sharks”.

God bless you all and may you have a wonderful Thanksgiving!

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There appears to be a buzz going around about short-sale flipping and the FBI adding this genre to its list of mortgage fraud.  However, not all short-sale flips are fraudulent.  This bears repeating: NOT ALL SHORT SALE FLIPS ARE FRAUDULENT.  There are many real estate professionals out there closing back to back transactions in a perfectly legitimate way. It is often how they get paid for the long, arduous task of negotiating a short sale as many short sale lenders refuse to pay a loss mitigation fee.  If the investor does not have a real estate license, they are out of luck.  Further, there is nothing inherently illegal about flipping properties.  It is the fraudulent activities that often accompany flip transactions that are problematic.

The first story I saw on short sale flipping yesterday was reported by the Sarasota Herald Tribune.  In typical fashion, using strong words such as “schemes” and “scams” (I despise those words by the way) which clearly demonstrate the bias of the author, theyappear to  imply that short sale flips, in and of themselves, are fraudulent.  I believe the Home Equity Theft Reporter has a better take on the subject, as indicated by their post title: “Short Sale Flipping Fraud: Use of Inflated Appraisals, Straw Buyers, Sale Terms Undisclosed to Lenders All Indicate that Scammers Are Still At It“. I recommend reading it.  I would also add to that short list of fraudulent activities, non-arms length transactions and realtor fraud.  Also, read the FBI Press Release on Operation Bad Deeds and more specifically, the US v. Bills case (page 4-5 of the Press Release) for a description of short sale fraud.  Note the use of straw buyers, the lies to the homeowners etc.

There is nothing wrong with flipping properties as long as you do not engage in the fraudulent activities enumerated above.  If you disclose, in writing, in your Contract of Sale that 1) you are a real estate investor and 2) you intend to immediately resell the property for profit, you have satisfied the disclosure requirement.  As far as the allegations that investors are “fooling” or “tricking” the short sale bank in accepting a “low-ball” offer, that is pure rubbish.  The short sale lender is free (and usually does) to order an independent appraisal or BPO to determine value and based upon that report, among other information, makes a business decision as to what it will accept as a short payoff. This is a business decision based purely on economics.

Personally, I think inflated appraisals is a non-issue in this age of the Home Valuation Code of Conduct (HVCC).  Mortgage brokers can no longer order their own appraisals and as such, the sphere of influence is greatly reduced if not eliminated. The other fraudulent activities have been discussed ad nauseum throughout the blogosphere and if you don’t know by now you shouldn’t include straw buyers in the mix, or have side  agreements, well, you should stay far away from real estate investing.

As for non-arms length transactions, this one is easy: 1) Don’t involve yourself in any sort of transaction whereby the homeowner is going to keep possession of the property and 2) Realtors: if you are the listing agent you cannot be the investor.  These two roles are diametrically opposed.  Your fiduciary duty is to get the highest price possible for your client, the homeowner.  If you make a low offer and set up a second transaction at a higher price, that is prima facie proof that you have violated your duty.

Some other suggestions: Structure your transaction so that every document you submit is legitimate.  No back dating deeds or title, no fake HUD-1s, etc. If you are going to sign a HUD-1, there had better be a real estate transaction to support it.  Make sure each transaction can stand on it own – use transactional funding and do not fund the first transaction with funds from the 2nd.  In my opinion, this is an issue of “appearances” not law, but in the current market, a wise choice. Make sure that you have a good team behind you with experience and a working knowledge of the law in this area.

Related posts:

1. Buyer $5,000 Short – How to Close the Gap…from a NY Point of View
2. Seasoning and FHA’s Time Restrictions on Resales – a Legal Analysis
3. PropertyShark University – Short Sales Class – Tues June 17, 2008 – Don’t Miss It!!!

Inman columnist Bernice Ross posted an excellent article, in response to a Seller’s question, on what to do if your buyer is $5,000 short for the deal.   As a New York real estate lawyer, I wanted to add my two cents as to a rather innovative way to close that gap.

New York is one of the only states that imposes a mortgage tax upon a purchaser.  Depending on the county and the size of the mortgage, this tax can range anywhere from .8% to 2.8% of the purchase price.  This tax can be fairly substantial and severely impact a purchaser’s buying ability.  However, there is an exception to the implication of this mortgage tax and that is for continuing liens.  Most real estate industry professionals are aware of this exception and refer to it by the document name, CEMA or MECA, which is a necessary part of the process.  Also, they are often under the mistaken impression that it is only available in a refinance.  Not so…you can effect a CEMA transaction on a purchase.  The procedure is as follows: the Seller’s current Lender assigns the Note to the Purchaser’s new Lender and the remaining principal balance (”old money”) is combined with the “new” money, advanced by the Buyer’s Lender, to form a new mortgage in favor of the Purchaser’s Lender.  There is no mortgage tax due on the “old money”.  So, for example:

Buyer needs a mortgage of $400,000.00 to purchase a home in New York City for $450,000.00.  Seller’s remaining principal balance is $300,000.00.

With CEMA Without CEMA

$100,000 x 1.8%=                               $400,000.00 x 1.8% =

$1,800 mortgage tax                          $7,200 mortgage tax                 Savings of $5,400.00!

Also, not only is a Purchaser exempt from paying mortgage tax on the continuing lien, the Seller is exempt from paying transfer tax on that amount as well for a net savings of $4,200.00 to Seller based on the example above.

Total monies saved in our example – a whopping $9,600.00!!! Now, the caveats: not every mortgage lender will assign the note, many charge a fee and there is a fee to prepare the CEMA documents and record them.  However, these fees are often miniscule compared to the amount of potential savings.  Also, it can take some time to get the assignment documents from the Seller’s Lender so this option needs to be investigated at the outset.

A CEMA is an excellent way to reduce substantial closing costs on both sides and make a deal happen, without other parties taking a cut in their hard-earned fees and commissions.  It just takes a little knowhow and some time.

Related posts:

1. Seasoning and FHA’s Time Restrictions on Resales – a Legal Analysis

It is that time of year, when the trees are stripped bare, there is a nip in the air and we are reminded that winter is almost here.  Thanksgiving is right around the corner and the planning is already underway in most American homes for a turkey dinner with all the trimmings (well, for most, but not us as we are going to be in Turks & Caicos this Thanksgiving!).  However, it is also a time to remember those who have lost their jobs, their homes – everything.  With unemployment  up to a staggering 10%, the ranks of those who are less fortunate are swelling with no end in sight.

Lets give them a hand this Thanksgiving:  LITweetup is sponsoring 3 events beginning this weekend and they are asking for donations of cash, supermarket gift cards & non perishable items.  Become a fan of their Facebook page, follow LITweetup on Twitter as @LITweetup and join in the  Twitter conversation by using the hashtag, #LITweetup.

Many churches and schools, including my kids’ elementary school, Baldwin Meadow School, are collecting non-perishable items as well.

Lastly, please remember that those who need help need it all year long – not just winter.

Related posts:

1. The Twitter Craze – How to Jump In and Start Tweeting!

Banks, Servicers & the Government continue to try to stave off the growing tide of foreclosures.  They are devastating our citizens, neighborhoods and economy.  News is buzzing about Fannie Mae’s new policy, announced this past Thursday, to rent homes instead of foreclosing.  Loan Audit Blog reports that Fannie Mae, through its new “Deed for Lease” program, will allow borrowers to transfer ownership to Fannie Mae and sign a one-year lease, with month-to-month extensions after that… The next major wave of defaults is predicted to come from the Option Arm loans.  Wall Street Journal reports that  Wells Fargo has decided to attempt to modify Option ARMs to interest-only in a recovery bet.  I can’t fathom how an interest-only modification could possibly prevent a default without principal and interest rate reductions…

The urgency to halt the advancing tide of foreclosures boils down to pure dollars and cents. Foreclosure Fish recently posted a report that$60,000 is the average cost of a single foreclosure.   “Mortgage giant Freddie Mac has estimated that the average cost to a lender of foreclosing on a property is close to $60,000, with other estimates placing the total cost to the homeowner, lender, surrounding community, and local government close to $80,000.”

There are incentives to homeowners to avoid foreclosure as well.  As every person who has tried to open a credit card account, lease a car or buy a house is painfully aware, credit scores are more important now more than ever.  Housing Wire reports that mortgage modifications are ‘Insignificant’ to credit scores as per Vantagescore. Davies, a representative of Vantagescore, stated, “Delinquency on a mortgage account has a far greater negative impact to credit scores than loan modifications.”  Seems obvious but worth restating.  Also, avoids the spectre of a possible deficiency judgment in those jurisdictions where it is permissible for the foreclosing lender to seek such a judgment.

Enjoy your Monday!

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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.

Related posts:

1. Seasoning and FHA’s Time Restrictions on Resales – a Legal Analysis