In the November 2010 press release, FTC Chairman Jon Leibowitz said, “By banning providers of these services from collecting fees until the customer is satisfied with the results, this rule will protect consumers from being victimized by these scams.”

The MARS rule has a three-prong approach – it bans advance fees, requires certain disclosures and prohibits certain claims:

Advance Fees

Mortgage Relief companies may not collect any fee until they have provided the homeowner with:

• a written offer from their lender or servicer that the consumer decides is acceptable; and
• a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer.

Required Disclosures

In any advertising and in communications directed at individual consumers (such as telemarketing calls), the mortgage relief companies must make the following disclosures:

• they are not associated with the government, and their services have not been approved by the government or the consumer’s lender;
• the lender may not agree to change the consumer’s loan; and
• if companies tell consumers to stop paying their mortgage, they must also tell them that they could lose their home and damage their credit rating.

Further, these companies must also disclose in their communications to consumers that

• they can stop doing business with the company at any time,
• can accept or reject any offer the company obtains from the lender or servicer, and
• if they reject the offer, they don’t have to pay the company’s fee – said fee must also be disclosed

Prohibited Claims

The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:

• the likelihood of consumers getting the results they seek;
• the company’s affiliation with government or private entities;
• the consumer’s payment and other mortgage obligations;
• the company’s refund and cancellation policies;
• whether the company has performed the services it promised;
• whether the company will provide legal representation to consumers;
• the availability or cost of any alternative to for-profit mortgage assistance relief services;
• the amount of money a consumer will save by using their services; or
• the cost of the services.

In addition, the rule prohibits mortgage relief companies from telling homeowners to stop communicating with their lenders or their representatives.   Further, these companies must also have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.

Lastly, it is a violation of the MARS Rule for any person to provide substantial assistance or support to a MARS Provider when that person knows or consciously avoids knowing that the MARS Provider is engaged in any act or practice that violates this Final Rule. (16 CFR Section 322.6).

Q&A:

What Exactly Are Mortgage Relief Services?

Mortgage Assistance Relief Services (MARS) are services offered or provided to a Consumer for consideration that are intended directly or indirectly to assist the Consumer with regard to:

1. Stopping or postponing a foreclosure sale;
2. Negotiating or arranging a Modification of a Dwelling Loan;
3. Obtaining a forbearance in the timing of payments due on a Dwelling Loan;
4. Negotiating or arranging any extension of the time period for curing a default or reinstating the Dwelling Loan;
5. Obtaining a waiver of an acceleration clause or balloon payment in a Dwelling Loan;
6. Negotiating or arranging a short sale, deed-in-lieu of foreclosure, title reconveyance, sale/leaseback or any other disposition of the Dwelling other than a sale to a third-party purchaser;
7. Offering or conducting a Forensic Loan Audit which is a legal analysis of mortgage loan documents for the purpose of finding compliance violations under federal and/or state law or regulation for the alleged purpose of helping Consumers acquire leverage over their Servicers;
8. Marketing of services to assist consumers in selling a   Dwelling to a third party if the intent of the sale is to enable the Consumer to avoid foreclosure; and
9. Marketing of refinancing options by Mortgage Brokers if offered to avoid a foreclosure.

Does MARS Apply to Attorneys?

Attorneys are fully exempt if they:

1. Provide mortgage assistance relief as part of the practice of law;
2. Are licensed to practice law in the state in which the consumer for whom the attorney is providing mortgage assistance relief services resides or in which the consumer’s dwelling is located;
3. Comply with state laws and regulations that cover the same type of conduct the rule requires;
4. Deposit any funds received from the consumer prior to performing legal services in a client trust account and withdraw fees only as they are earned; and
5. Comply with all state laws and regulations, including licensing regulations, applicable to client trust accounts.

Does MARS Apply to Real Estate Agents?

It appears from examination of the language contained in the Supplementary Information in the Federal Register that the intent was to avoid including real estate brokers and agents handling sales of real property in the definition of MARS.  However, it is certainly clear that real estate agents and brokers handling short sales, title re-conveyance or any other sale or endeavor undertaken in an effort to stop a foreclosure sale would be covered by the MARS definition.

The Supplementary Information states that the FTC does not consider the typical functions of real estate brokers, including showing homes, finding homes for Borrowers and listing homes for sale, to be MARS functions.  Nonetheless, any endeavor undertaken by a real estate agent or broker in an effort to prevent a foreclosure other than these typical functions, such as negotiating with a Servicer the terms of a short sale,WILL be considered a MARS activity.

The MARS rule is something with which everyone involved in, either directly or indirectly, assisting consumers avoid foreclosure will need to understand and be in compliance with.  It is broad and far reaching. The penalties for non-compliance with the FTC’s new MARS rule are $11,000 a day.

Related posts:

1. DON’T SAY I DIDN’T WARN YOU! NY Attorney General’s Crackdown on the Loan Modification Industry
2. Mortgage Assignments are Not the Real Estate Investor’s Dream!
3. Short Sales & No-Flip Clauses in the Approval Letter – Removing a Roadblock

In the highly publicized choice, Judge Spinner had not only vacated the Judgment of Foreclosure, but ordered that the mortgage and note be cancelled in their entirety. Spinner blisteringly castigated the plaintiff and characterized its course of conduct as “wholly unsupportable at law or in equity, greatly egregious and so completely devoid of excellent faith that equity cannot be permitted to intervene on its behalf. Indeed, plaintiff’s actions toward defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned”.

The Appellate Division held that the such a severe sanction was “not authorized by statute or rule” and the bank was not given “honest warning that such a sanction was even under consideration”.  Further, the court held that the trial court’s equity powers did not include the “authority to cancel the note and mortgage since there was no acceptable basis for relieving the homeowner of her contractual obligations to the bank” noting that a judgement had already been entered in the bank’s favor.  The court’s opinion can be found here.

Judge Spinner has gotten the attention of the banks in a huge way – his three recent decisions, Indymac Bank v. Yano-Horoski (cancelling note and mortgage), Wells Fargo v. Tyson (awarded $155,000 in hurts to the homeowner) and Emigrant Mortgage v. Corcione (awarded $100,000 in hurts to the homeowner) has made him the hero of the foreclosure defense community and a fearsome figure to the foreclosure plaintiffs.  Spinner just issued another crushing choice on December 1st in U.S. Bank v. Mathon 2010 NY Slip Op 52082(U) granting Defendant’s Order to Show Cause, staying all proceedings and scheduling a hearing for possible sanctions against the Plaintiff and other possible remedial relief based on the bank’s appalling terrible faith dealings on a loan modification.  The Banks’ attorneys no longer entrust their cases to junior associate,s when appearing in his courtroom at mandatory settlement conferences, because apparently, the risks are too fantastic.

Am I shocked at the Appellate Division’s reversal? Not at all – I really predicted this would be the outcome.  As you get higher up the food chain, it gets to be more about policy than law sometimes.  The Yano-Horoski trial court choice would have set a perilous precedent and sent shock waves through the mortgage credit industry.  A mortgage is a debt security and should a judge just cancel such a debt based upon broad powers of equity, what bank would lend on a home in such a climate?  And if the bank were willing to risk it, at what cost to the consumer?  The banks would need to insulate themselves against the risk of mortgage cancellation and the way they do that is by increasing the profit margin dramatically.  Also, lets look to the every day people who are paying their mortgage every day, even if their house is underwater – what would be their reaction if all of sudden, homeowners left and right were given free houses? The outrage would start to build (if it hasn’t already) – and they would start to wonder why should they pay their mortgages?

I believe that the parties will quietly come to a settlement, probably sealed of course, and the Horoskis will receive a nicely, modified loan with a stout principal reduction and the bank has a stellar precedent on the appellate record.

Related posts:

1. Mortgage Assignments are Not the Real Estate Investor’s Dream!
2. Short Sales & No-Flip Clauses in the Approval Letter – Removing a Roadblock
3. NY Governor Looking to Expand Protections for Defaulting HomeOwners, Tenants

Events:

In person networking is vital – online networking often starts the relationship but in-person cements it.  I posted several events in the NY metro area that are not be missed including the NYC Business Networking Event – Luxury Series (7/27) and Queens Real Estate Group Summer Soiree (7/28) among others.  Extend your knowledge by taking a class – Dealing with Banks: REOs and Small Sales or  a webinar such as Understanding Titles & Closings for Real Estate Investors .

Small Sales

Small Sales are now the focus of the real estate loss mitigation community and the banks have finally realized that a small sale is the premier solution as the return, dollar for dollar, is far superior to foreclosure and REO.  Check out the webinar, Understanding Fannie Mae, Freddie Mac HAFA Small Sale Rules to make sure you are abreast of the new rules.  Watch some of the new videos, like Internal Bank Form Gives Insight Into Small Sales vs Foreclosure or Citimortgage Changes Small Sale Policy Again! as the banks are constantly changing how the game is played. Visit the forums as some of our own gurus post their tips and experiences.

Remember, the S&P Real Estate Networking Site is a "members-only" site so apply for membership now (it is free!) for exclusive access.

Delight in your summer!

Related posts:

1. Landlord/Tenant Law Resources on Scanlon & Pinto, PLLC Networking Site
2. Mortgage Assignments are Not the Real Estate Investor’s Dream!
3. DON’T SAY I DIDN’T WARN YOU! NY Attorney General’s Crackdown on the Loan Modification Industry

The New York Court of Appeal recently opined in NYCTL 1999-1 Trust v. 573 Jackson Avenue Realty Corp., 13.N.Y.3d 573 (December 15, 2009) that the definitive requirement for redeeming real property during foreclosure proceedings  is the “unconditional tender [to the foreclosing party] of the full amount due” before auction.  This general rule in mortgage foreclosure proceedings also applies to the foreclosure of a tax lien.

But, note that the Courts will exercise their broad equitable powers to void judgments and even set aside sales (extending the homeowner's right of redemption), where homeowners are seeking to modify or reinstate their mortgages while the lender continues with the foreclosure action. Jimmy Lathrop, Esq., the Director of Foreclosure Intervention at the Brooklyn Bar Association Volunteer Lawyers Project, recently discussed in his blog post,  three cases where the court found that the homeowner's excellent faith negotiations mandated an equitable solution and a possible complete bypass of RPAPL §1341 which defines the requirements and time frame of the borrower's right of redemption.

Related posts:

1. Mortgage Assignments are Not the Real Estate Investor’s Dream!
2. DON’T SAY I DIDN’T WARN YOU! NY Attorney General’s Crackdown on the Loan Modification Industry
3. NY Governor Looking to Expand Protections for Defaulting HomeOwners, Tenants

“In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.”

The online real estate community was buzzing yesterday as news of this waiver spread quickly. The investor “gurus” are, of course, rejoicing and spreading the news far and wide, without a careful read of the Waiver itself.  The intent of this temporary policy change is to allow investors to take title to a property, rehab it and sell it quickly. It is not a panacea for those investors who pick up a property at a discount, seeking to flip it for a profit in a “back to back” or “double” closing.  For those types of transactions, the 90 day seasoning rule is a non-issue if you utilize a land trust correctly.

HUD’s Mortgagee Letter 2006-14 clarified the Rule and Regulations set forth in 24 CFR 203.37a concerning the eligibility of properties for FHA insurance and the rules governing sales of property.  As I have discussed in a previous blog post,  Legal Analysis of FHA’s Seasoning Requirements, the real estate and mortgage industry routinely misunderstands and applies these eligibility rules incorrectly and it appears that the trend is continuing with this new Waiver.

FAQS:

1. Does it have to be a property bought through a small sale, bank auction or an REO to be eligible under the Waiver?

No. There are no requirements in the Waiver concerning the status of the property itself.  It is not necessary to demonstrate the distressed nature of the property.

2. So I can get a property under contract, do a contract with a potential FHA buyer and close with my FHA buyer the same day or the day after I buy the property?

No this transaction would not be eligible for FHA insurance. The waiver is really of the requirement that the real estate contract be executed on the 91st day after the investor takes title to the property. The requirement that the investor own the property is still in effect and therefore Contract Vendees and Assignments of contract are still prohibited.  Further, an application for an FHA mortgage cannot be submitted to a Lender for consideration without a fully executed Contract.  Therefore, Back to Back Closings will be impossible.

3. So I can close a week after I take title?

Virtually impossible for several reasons. I venture that there are nearly no Lenders in this post-bubble market that will take an application for an FHA mortgage and be in a position to close a week later.  I am going to stretch that to probably 30 days.  This is certain if your sale price to your FHA buyer is 20% or more higher than your acquisition price (do the math – its not that hard to hit that number – especially in certain areas of the country where housing prices are below $50,000). If the sale price exceeds the 20% threshhold, the investor will have to document the increase in value with supporting documentation and/or a second appraisal and the Lender will have to obtain a Property Inspection Report (see paragraph 2 of the Waiver).  This report will not be ordered prior to application submittal and as discussed previously, that doesn’t take place until there is a fully executed Contract of Sale.

4. I found this fantastic property that my buddy picked up 2 months ago for $120,000.00.  He rehabbed it and I am in contract to buy it from him for $220,000.  I want to flip it to an FHA buyer for $250,000.00 can I do it?

You will have to wait until the 91st day after you close title to enter into a Contract of Sale with the FHA buyer. The Waiver will not apply if there is a history of prior flipping activity in the 12 month chain of title (see paragraph 1(c) of the Waiver).

5. In April, the Treasury’s Small Sale Program goes into effect and there should be a lot of distressed properties coming on to the market. The Waiver is going to be a huge help in moving those properties!

No, it isn’t.  Apparently, government offices do not communicate with each other before issuing rulings – one of the requirements under the Treasury small sale program is that the Contract include a representation that the Purchaser will hold the property for 90 days post-closing.  Perhaps the Treasury will revise its Directive and remove this offending language (which, as I had discussed previously, is extremely small-sighted).

Conclusion

Investors should rejoice as finally they are receiving the recognition they deserve: properties are moving because of their hard work and without the proper incentive, it wouldn’t happen. Instead of being the black sheep of the real estate community, investors are a major part of the solution.  This Waiver is what investors need to get the properties rehabbed, sold and occupied to ameliorate the problem of abandoned and blighted homes. It is not a license to flip and should you wish to engage in that type of activity, you will not be able to use this Waiver to accomplish your goals.

Related posts:

1. Mortgage Assignments are Not the Real Estate Investor’s Dream!
2. Seasoning and FHA’s Time Restrictions on Resales – a Legal Analysis
3. Short Sales & No-Flip Clauses in the Approval Letter – Removing a Roadblock

Highlights of the HAFA program are as follows:

• Servicers have 10 days to approve or disapprove a request for small sale.
• Uses borrower financials and other documents already submitted for a loan modification.
• Allows borrowers to receive pre-approved small 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 help; $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. (fascinating 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 small 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 small sale log jam, as usual, they overstep their bounds. The American people are being questioned 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 buy 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. Short Sales & No-Flip Clauses in the Approval Letter – Removing a Roadblock
2. Treasury Department’s “Making Home Affordable” Program Attempts to Tackle 2nd Lien Dilemna
3. Mortgage Assignments are Not the Real Estate Investor’s Dream!

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 QUESTION 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 hurts because of the violation, the homeowner can recover actual and consequential hurts, 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) hurts, attorney’s fees and costs;

4. An application can be made by the Attorney General to issue an injunction forcing the Consultant to stop and desist from engaging in future distressed consulting activities without requiring proof that any person has been injured or hurt 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 plot of compliance.

Related posts:

1. DON’T SAY I DIDN’T WARN YOU! NY Attorney General’s Crackdown on the Loan Modification Industry
2. Mortgage Assignments are Not the Real Estate Investor’s Dream!
3. Seasoning and FHA’s Time Restrictions on Resales – a Legal Analysis

Those engaged in foreclosure defense should take a closer look at loans originated by TBW  when structuring their defense strategy…

Florida Company Reaches Multi-state Agreement Over Non-traditional Loans

Carrie Bay | 06.25.09

Taylor Bean & Whitaker Mortgage Corp. (TBW), a wholesale lender based in Ocala, Florida, has agreed to pay 13 states and the District of Columbia $9 million in fines after regulators took a closer look at the company’s nontraditional mortgage loans made in 2006.The examination alleged TBW, currently one of the 10 largest wholesale mortgage lenders in the United States, altered borrowers’ income and asset information in order to qualify applicants for mortgage loans they couldn’t afford and place them into so-called exotic loans, such as interest-only mortgages, payment option adjustable-rate mortgages, and stated income loans.

DSNews.Com Default Servicing In Print and Online – Formerly REO Magazine

Tags: TBW, subprime, mortgage, forensic, foreclosure, default, realestate, loan, loanmodification, shortsale

Related posts:

1. DON’T SAY I DIDN’T WARN YOU! NY Attorney General’s Crackdown on the Loan Modification Industry
2. Washington Mutual to end 2 complex mortgage types
3. NY Governor Looking to Expand Protections for Defaulting HomeOwners, Tenants

This investigation comes as no surprise – I have been speaking with clients and those who wanted to jump on the loan mod bandwagon about the New York Foreclosure and Lender Responsibility Act of 2008 and its effect on them, but often to deaf ears.  Most people weren’t even aware of the Act or just shrugged their shoulders and continued with business as usual.

NEW YORK, NY (June 9, 2009) – Attorney General Andrew M. Cuomo today announced his office is taking legal action against a leading New York foreclosure rescue company for charging illegal up-front fees and engaging in consumer fraud. The company targets homeowners facing foreclosure by claiming that it can save their homes, but often fails to provide the services promised.

The Attorney General’s Office served a notice of intent to sue on American Modification Agency, Inc. (“Amerimod”) and its owner and President Salvatore Pane, Jr. Amerimod is headquartered in Uniondale, NY and claims to operate in all 50 states, servicing thousands of consumers nationwide.Today’s notice is part of Cuomo’s investigation into the so-called “foreclosure rescue” industry. Cuomo’s Office also has also served subpoenas on fourteen other companies in New York and across the country that offer loan modification services.

Capitalizing on the current economic downturn and housing crisis, these companies scour foreclosure notices and filings and prey on consumers desperate to save their homes from being foreclosed. The companies promise that they will negotiate with the consumers’ banks to lower mortgage interest rates, lock in fixed rates, get late fees and past due payments forgiven, and even reduce principal balances. The Attorney General’s investigation is in response to complaints from homeowners across New York that these companies fail to deliver as promised, charge illegal, up-front fees and use misleading advertising to lure consumers into services that oftentimes leave them further in debt, facing a worsened threat of foreclosure.

“This economic climate has bred an environment in which scam artists and opportunists are able to prey on vulnerable consumers on the brink of losing their most valuable possession – their home,” said Attorney General Cuomo. “Companies that charge homeowners up front fees for loan modification services, place homeowners into contracts that don’t tell cancellation rights, or lure consumers with misleading claims violate not only our trust but the law. Today’s notice and the subpoenas issued nationwide are part of my Office’s multi-tiered effort to stamp out this kind of abuse and protect homeowners across the country.

”The Attorney General’s investigation into Amerimod found that the company charged homeowners heavy, up-front fees in advance of providing any services, a violation of New York law. In addition, the company uses misleading advertising full of unsubstantiated claims that it has success rates of 90 to 100 percent and that it is fully licensed. Amerimod also fails to provide contracts that include required notice of right to cancel, and fails to provide Spanish-speaking consumers with Spanish contracts, also in violation of New York law.

CUOMO ANNOUNCES INTENT TO SUE ‘AMERIMOD’ LOAN MODIFICATION COMPANY IN INVESTIGATION OF FORECLOSURE RESCUE SCAMS TARGETING HOMEOWNERS NATIONWIDE

Tags: loanmodification, mortgage, scam, Cuomo

Related posts:

1. Foreclosure Defense Bar: Heads Up! Forensic Exam of TBW Mortgage Corp Loan Docs Could Be Fruitful
2. NY Governor Looking to Expand Protections for Defaulting HomeOwners, Tenants
3. Real Estate Law Update: New York State Decisions of Interest

The IRS's willingness to subordinate or even release Tax Liens is monumental and will provide relief to those homeowners trying to refinance or sell their properties to get out from under their often bone-crushing debt.  I cannot tell you how many closings have been postponed or adjourned indefinitely because of an IRS Tax Lien popping up in title. 
- Kathleen

IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell
Carrie Bay | 12.17.08
The Internal Revenue Service (IRS) yesterday announced an expedited process that will help prevent a federal tax lien block on the refinancing of mortgages or the sale of a home by financially distressed homeowners.

If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options, the IRS said in a press statement. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien subordinate to the claim by the lending institution that is refinancing or restructuring a loan. Or, under certain circumstances, taxpayers or their lender representatives can petition the IRS to fully dismiss its claim if the home is being sold for less than the amount of the mortgage lien, the IRS clarified.

The process to request a subordination or dismissal of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS said it will work to speed those requests in the wake of the economic and housing downturn.
“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our choice-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner.

“We realize these are hard times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.
”Typically, a federal tax lien is an involuntary lien on real estate for nonpayment of income or property taxes, and takes priority over bank liens securing the same property, placing the lender at a less than advantageous position in attempting to collect a debt from a delinquent borrower who also owes taxes. In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that doing so will ultimately help with the collection of the tax debt – a process called subordination.

Taxpayers or their lender representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring the mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments, the IRS clarified, since lending institutions generally want their lien to have priority on the home being used as collateral.
Taxpayers or their representatives can also apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien. The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in separate assets, can substitute other assets, or is able to pay the IRS its equity in the property. Without a tax lien discharge, the borrower may be unable to complete the homeownership change and the ownership title will remain clouded.
The IRS also urges people to contact the agency’s Collection Advisory Group early in the home sale or refinancing process so that it can start work on their requests. People sometimes delay informing lenders of the tax liens, which only serves to delay the transaction, the IRS said.

Currently, there are more than 1 million federal tax liens outstanding tied to both real and personal property. The IRS issues more than 600,000 federal tax lien notices annually.

For additional information on the IRS' lien relief for homeowners and their lenders, click here.

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Tags: taxlien, refinance, mortgage, refinance, small sale, real estate, closing, subordination, release, claim, IRS, Internal Revenue Service, tax

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