Criminal defendants are guaranteed legal counsel be provided for them if they cannot afford to hire their own attorney.  Unfortunately, this does not apply to civil matters such as foreclosures… but this may soon change for homeowners in New York.  New York’s Chief  Judge, Jonathan Lippman, would like all homeowners facing foreclosure in New York to have legal representation.

In 2008, at the start of the housing crisis, New York State experienced a sharp increase in foreclosures.  A pilot project was developed to bring homeowners and lenders together to participate in settlement conferences.  The 2010 report of the Chief Administrator of the Courts estimates that (prior to this pilot program) as many as 90% of homeowners lost their homes to foreclosure by default, meaning that they never participated in any of the proceedings or appeared before a judge.

After it was discovered that several major banks had used improper and in some cases forged documents to speed foreclosures, Judge Lippman ordered attorneys representing banks and lenders to personally guarantee all paperwork filed before proceedings.

The latest effort to staunch the flood of foreclosures comes in the form of Judge Lippman’s latest initiative to ensure homeowners get their fair day in court.  The new program was detailed in a recent article in the New York Times, quoting Judge Lippman as saying:

“It’s such an uneven playing field.  Banks wind up with the property and the homeowner winds up over the cliff, on the street. It doesn’t serve anyone’s interest, including the banks.”

A lawyer for every defendant will also serve the courts’ interests, the judge said, by making proceedings more efficient.

Judge Lippman announced this new initiative in his annual State of the Judiciary address in Albany, saying he hoped that lawyers would reach out to defendants before they appear in court.

The program will be deployed in two counties, Queens and Orange counties, in the next few weeks, and statewide by the end of the year.

Some expect that the recent actions in New York will change the way foreclosures are handled across the nation.  Judge Lippman’s efforts are being closely monitored by other states, and more importantly, homeowners are beginning to question their rights and make efforts to save their homes rather than walking away without a fight.

Proper legal representation can make the difference between losing your home to foreclosure or not.  If you have any questions please contact me, I am here to help.

Popularity: 8% [?]

With the ongoing recession and housing crisis, many homeowners are facing foreclosure.  The financial and emotional stress of facing the possible loss of one’s home can be overwhelming, as can the seemingly never-ending stream of mail, collections calls and general paperwork from banks, collection agencies and foreclosure processors.  Most people assume that lenders and their attorneys have come to foreclosure with all their legal t’s crossed and that they have no further recourse. But recent news has some questioning the legality of foreclosures over the past few years.

Legal scandals in 2010 put tens of thousands of judiciary foreclosures on hold in the 23 states where the process is handled by the courts, including New York. The first cases were tried in the Massachusetts highest courts, finding that Wells Fargo and US Bancorp did not prove they had the legal right to evict borrowers from their homes.  In both cases, ownership was restored to the borrowers.  This opened the door to other foreclosure do-overs in the state as well as investigations into foreclosure practices across the nation.

The impact of the ruling is not limited to Massachusetts; according to a recent article in Bloomberg, “Claims of wrongdoing by banks and loan servicers triggered a 50-state investigation last year into whether hundreds of thousands of foreclosures were properly documented as the housing market collapsed.” What this means is that New York mortgage owners must be on the lookout, and New York homeowners should be aware of their options.

Lenders and Wall Street firms have bundled thousands of mortgages into securities, and banks often failed to record each link in the chain of ownership.  Foreclosure improprieties have been found to include many dubious practices to patch up holes in loan documentation, including forged signatures on legal documents.

New York’s judicial system is taking a close look at approximately 80,000 pending foreclosures currently in process to ensure that all paperwork is accurate.  Attorneys representing lenders in such cases are being held accountable as well.

Lawyers have been accused of poorly processed or even fabricated paperwork in the foreclosure actions they represent.  In some states, including New York, lawyers in foreclosure cases must now vouch for the accuracy of the documents they present.

In a recent article in the New York Times, Professor Gillard, an expert in legal ethics at New York University, had this to say: “When the consequence of a lawyer plying his trade is the loss of someone’s home, and it turns out there are documents being given to the courts that have no basis in reality, the profession gets a very big black eye,”

In 27 states (such as California, Nevada and Arizona which have 3 of the top 4 foreclosure rates) foreclosures are processed without court intervention.  A Notice of Default is the first letter that a mortgage lender or servicer sends to a homeowner who has fallen behind on payments.  Several lawsuits have been filed claiming that the Notice of Default process was flawed, thus making even more foreclosures invalid.

In this era of financial crisis, questionable home foreclosure practices and legal loopholes, it is more important than ever to consult an attorney you can trust to make sure all your legal recourses have truly been explored and that your rights are protected.

Please call my office for more information about your legal rights as a homeowner, or if you are currently in foreclosure and need legal advice.  I am here to help.

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As you probably know, short sales in New York can be confusing transactions. Most people who enter into a short-sale agreement with their lenders assume that they are getting rid of their problem as well as their property, and are financially free and clear after the closing of a bank approved short-sale.  Unfortunately, this is not always true.

The short sale usually results in a “release” of the lien of the mortgage but not always a “cancellation” or “satisfaction” of the promissory note.  Unless a release or satisfaction of the entire promissory note is obtained, there remains the ability of the bank to sue the borrower for the balance of the unpaid promissory note.  In the case of a 2nd mortgage, this might be the entire amount of that loan if the 2nd mortgage bank took very little or nothing so the short sale could succeed.

The documentation regarding a short sale is important.  The borrower needs to know what further obligations could be in the future as a result of the short sale.  Although we’ve heard this doesn’t happened often, if the unpaid balance of the promissory note is enforced by the bank, then it can file a lawsuit against the borrower and the result will likely be a deficiency judgment for the payment of money in the amount of the unpaid portion of the promissory note.

For example, if you owe $200,000.00 on your first mortgage and enter into a short sale agreement for $150,000.00, you may still be responsible for the remaining $50,000.00.  Even though the lender accepted $150,000.00 and released the mortgage lien to enable the short sale, if the deficiency balance isn’t waived then the lender may be able to pursue a judgment against you for the remaining $50,000.00 owed on your original promissory note.  The secured debt is simply transformed into an unsecured debt, and I have read that some lenders will sell the unsecured debt for pennies on the dollar to collection agencies whose primary objective is to recoup their investment and collect on the debt.

In California, a new bill (SB 931) has recently been signed by Governor Schwarzenegger which aims to disallow lenders from pursuing deficiency judgments after a short sale. It comes into effect on January 1, 2011 and it forces primary lenders to consider short sale yields as settlement in full of the seller’s debt.  Lenders waive all right to come after the borrowers for any deficiencies in the future, and the borrower can be sure that he is released from all obligation.  New York law, in contrast to the new California law, still does not protect the borrower to this extent.

In New York, many factors need to be examined to determine if the short sale will be a release of liability under the promissory note. First, does the letter state that the remaining liability for payment of any deficiency or of the promissory note is being released or forgiven? Second, does the letter specifically state that the mortgage is being “satisfied”?  Satisfaction of a mortgage usually (but does not necessarily) includes language that the underlying obligation (the promissory note) is paid in full. Better language in the letter would be the “mortgage and note are being satisfied”.

In summary, it is important to read and question the short sale approval letter you get.  A “release and satisfaction” of a mortgage is NOT necessarily a cancellation of the promissory note (forgiveness of deficiency).  The letter from the lender should be clear and unequivocal and not subject to supposition or interpretation.  If you are uncertain, ask the lender for clarification and get it in writing.

For more information on the short sale process, or if you are currently involved in a short sale and need advice, feel free to call me anytime, I can help.

This article is for information purposes and is not specific advice to any one reader.

Popularity: 86% [?]

As the economy declines so do housing prices, which over the past few years has meant that the number of real estate short-sales has increased (i.e. transactions in which the sales proceeds fall short of the balance owed on the property’s loan). Unfortunately, as the volume of short sales increases so does the incidence of alleged short sale fraud.

This article in Bloomberg Business Week reports on two Connecticut real estate agents arrested in June for short sale fraud, or house “flopping”.  The recent trend towards short sales (and short sale fraud) means that it is getting quite a bit of attention as of late; both from the FBI (as with Operation Stolen Dreams) and in the media, including this story in the New York Times and this one from the Freddie Mac website. Furthermore, I just read on Inman News that “Lenders who originate 70 percent of U.S. mortgages are now participating in a loan monitoring program operated by data aggregator CoreLogic to help detect short-sale ‘property flops’ and other mortgage fraud.” (To read the entire article click here.)

All this being said, let me be clear that there is nothing wrong with making a profit buying and selling short sales; and short sales, if done correctly, are perfectly legal and ethical.  If the bank or lender knows up front that a flip is taking place then you are not committing mortgage fraud. However, because of the rise in short sale fraud allegations it is no longer enough to strive for a great price and terms on your transaction, care must be taken to ensure you are staying within the law. The following guidelines from The Fund can help:

1. Be sure your transaction does not violate any restrictions listed in the short sale payoff letter or closing instructions.
2. There should be no misrepresentations to the lenders or the purchasers regarding the ownership or value of the property.
3. All disbursements must be made exactly as stated on the HUD-1 settlement statement, and only to the parties involved in the transaction.
4. Each half of the simultaneous closing must be kept separate and stand on its own. The sale from A to B must be fully funded and dispersed with money coming from and going to all appropriate parties, likewise the sale from B to C. The money from C’s lender must not be used to fund any portion of the A to B transaction.
5. The investor’s “right to sell for profit” should be appropriately disclosed in the purchase contract.

If you want to ensure that you’re not committing fraud with your short sale then you as a buyer should disclose your intent to re-sell for a profit. To further ensure the legality of your transaction you can enlist the involvement of a knowledgeable and experienced real estate attorney. Having a real estate attorney to help draft and review contracts, and keep an eye on the process itself can be an invaluable safety net.  The laws are vague on the subject of short sale fraud, and with so much paperwork going back and forth you may be unaware that some part of your transaction could be considered fraudulent.  Your real estate attorney, however, will be able to advise you, and notify you if something begins to go south.

For more information on the short sale process, or if you are currently involved in a short sale and need advice, please contact my office.

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I recently came across this article in the New York Times which suggests that the housing boom is over—not only for now, but forever—and that the days of making money with real estate are over as well.  “People shouldn’t look at a home as a way to make money,” quotes the article, “because it won’t.”

Respectfully, I disagree.

It is certainly true that with real estate in such a depressed state, now is not the time to buy property and simply hope the value increases; however, now is the perfect time to purchase “rental” property that will pay for itself in the short-term, and increase in value over the long haul.

A few years ago real estate was skyrocketing and it seemed that everyone’s advice was to invest.  But the time to invest is not when everyone is buying and prices are high.  The best time to invest is when prices are low… so long as you have the time and the resources to hold onto under-valued property until the market recovers—which, as David Streitfeld mentions in his article, may take years. The question you need to ask yourself is not “Is now a good time to invest in real estate?” but “Can I afford to put the time and money that may be required into this investment to see it through?”

According to Andy Louis-Charles of The Motley Fool, the true key to real estate investing is rental value, not appreciation, “this is the only tried-and-true metric that ensures a worthy real estate purchase.” Everything else “is either speculation or indulgence.” The question of whether or not real estate is a good investment now becomes a matter not of luck but of strategy.

The key to success in the investment of rental properties is five-fold:

1. Know Your Timeline (or at least have a good idea). How long you plan keep your rental property will be a large factor in determining how much you’ll need to invest above and beyond the initial cost of purchase. Improvements, maintenance and repairs will have to be considered as part of your overall plan.
2. Have Your Financial Ducks in a Row. Owning a rental property means you’ll be dealing with people… some of whom will miss a month’s rent or leave you with unexpected vacancies.  Have enough money in reserve to comfortably deal with these crises.
3. Find the Right Location. Everybody knows that it’s all about location.  Of course some locations will be more profitable than others, but many non-traditional locations can be profitable if you know who your target rental audience will be.
4. Have Good Advisors. Agent, Mortgage Broker, Attorney, CPA, Management Company… these are just a few of the people who will be invaluable in helping you make the right moves and decisions along the way.
5. Get the Right Price. According to the old adage, “You make your profit when you buy a property, not when you sell it.” And now is definitely the time to get the right price. July of 2010 saw 325,000 foreclosure filings, that’s “the 17th month in a row total filings exceeded 300,000” according to RealtyTrac’s CEO, James Saccacio. Although this is a disheartening statistic for the economy in general, what it means for investors is that the cost of property is low and there is a higher rental demand.

The NY Times article rightfully suggests that investing in property now isn’t likely to make the quick profit it might have a decade ago, but that doesn’t mean we should throw the baby out with the bathwater.  Remember, rental property is often referred to as the “IDEAL” investment:

I: Income/Cash flow
D: Depreciation and tax deduction
E: Equity buildup from mortgage paydown
A: Appreciation in property value over time
L: Leverage; using a small amount of your own money to control a large value asset

Land is still land. People still need a place to live and a place to house their business. You can be a part of that, and my firm can help.

Popularity: 13% [?]